SEVENTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
)
Third Regular Session 
)
S E N A T E
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COMMITTEE REPORT NO. 
B 5 3
Submitted by the Committees on Government Corporations and Public Enterprises;
h B  -  4 2019
and Ways and Means o n ____________ .
Re: Senate Bill No. 
P P Q 7
Recommending its approval in substitution of Senate Bill No. 660 taking into 
consideration House Bill No. 8720.
Sponsor: Senator Gordon
MR. PRESIDENT:
The Committees on Government Corporations and Public Enterprises; and 
Ways and Means to which was referred Senate Bill No. 660, introduced by 
Senator Paulo Benigno "Bam" A. Aquino IV, entitled:
"AN ACT
AMENDING REPUBLIC ACT NO. 7227, AS AMENDED BY REPUBLIC 
ACT NO. 9400, OTHERWISE KNOWN AS THE BASES CONVERSION 
AND DEVELOPMENT ACT OF 1992.


taking into consideration House Bill No. 8720, introduced by Representatives 
Geraldine B. Roman, Gloria Macapagal-Arroyo, Emi G. Calixto-Rubiano. Federico 
Sandoval, Emi A. De Jesus, Vicente "Ching" S.E. Veloso, Maria Vida E. Bravo, 
Magnolia C. Antonino, John Marvin "Yul Servo" C. Nieto, Gus S. Tambunting, 
Amihilda J. Sangcopan, Ciriaco S. Calalang, Eric L. Olivarez, Jose T. Panganiban, Jr., 
Linabelle Ruth R. Villarica, Mark 0. Go, Pablo C. Ortega, and Maria Lourdes R. 
Aggabao. entitled:
"AN ACT
REVITALIZING THE 
BASES CONVERSION 
DEVELOPMENT, 
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7227, 
OTHERWISE KNOWN AS THE "BASES CONVERSION AND 
DEVELOPMENT ACT OF 1992", AS AMENDED"
have considered the same and have the honor to report it back to the Senate with
0 9 0 7
the recommendation that the attached Senate Bill No. 
w * 
prepared by the 
Committees, entitled:
"AN ACT
REVITALIZING 
THE 
BASES 
CONVERSION 
DEVELOPMENT, 
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7227, 
OTHERWISE KNOWN AS THE "BASES CONVERSION AND 
DEVELOPMENT ACT OF 1992", AS AMENDED"
be approved in substitution of Senate Bill No. 660, taking into consideration
House Bill No. 8720, with Senators Aquino, Gordon and Angara as authors
thereof.


SONNY ANGARA
Committee on Ways a nd Means
Respectfully submitted: 
Chairpersons
[CHARD>-60RD0N
lommttTee on Government Corporations and 
/Public Enterprises; and 
Member, Committee on Ways a nd Means
Vice Chairmen
LOREN LEGARD>
Committee on Ways a nd Means
FRANCIS "KIKO" PANGILINAN
Committee on Governm ent Corporations 
and Public Enterprises;
Member, Committee on Ways and Means
JOEL VaUVNUEVA
C o m m it^  on Ways and Means 
Member, Committee on Government 
Corporations and Public Enterprises
PAOLO BENIGNO "BAM" AQUINO IV
Committee on Ways and Means
Members
CYNTHIA A. VILLAR
Committee on Government Corporations 
A nd Public Enterprises
FRANCIS "CHIZ" G. ESCUDERO
Committees on Governm ent Corporations and 
Public Enterprises; Ways and Means
PANFILO M. LACSON
Committee on Ways a nd Means
JOSEPH VICTOR G. EJERCITO
Committee on Ways and Means


RISA HONTIVEROS 
V
Committees on Government 
Corporations and Public Enterprises; 
Ways and Means
'4
^
MARIA LOURDpS "NANCY" BINAY
Committees on Governm ent Corporations and 
Public Enterprises; and Ways and Means
yGRACE POE
Committee on Ways a nd Means
PAN FI IX) M. LACSON
Comrpittee on Ways and Means
a nd Means
EMMANUEL "MANNY" D. PACQUIAO
Committee on Governm ent Corporations and 
Public Enterprises
AQUILINO "KOKO" PIMENTEL I I I
Committees on Government Corporations and 
Public Enterprises; and Ways and Means
ANTONIO "SONNY" F. TRILLANES IV
Committee on Ways a nd Means
Ex Officio 
Members
RALPH G. RECTO
President Pro Tempore
EL "MIGZ" F. ZUBIRI
Majority Leader
FRANKLIN M. DRILON
M inority Leader
SENATOR VICENTE C. SOTTO I I I
Senate President


SEVENTEENTH CONGRESS OF 
REPUBLIC OF THE PHILIPPINES 
Third Regular Session
}
S E N A T E
SENATE BILL NO. 
2 2 0 7
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REL;.
Prepared jo in tly  b y the Committees on Government Corporations a nd Public Enterprises, and Ways and 
Means, with Senators Aquino, Gordon a nd Angara as authors thereof.
AN ACT
REVITALIZING THE BASES CONVERSION DEVELOPMENT, AMENDING 
FOR THE PURPOSE REPUBLIC ACT NO. 7227, OTHERWISE KNOWN AS 
THE "BASES CONVERSION AND DEVELOPMENT ACT OF 1992", AS 
AMENDED
Be it  enacted b y the Senate and House o f Representatives o f the Philippines in Congress assembled:
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SECTION 1. 
Section 12 of Republic Act No. 7227, as amended, is hereby further
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amended to read as follows:
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"SEC. 12. Subic Special Economic Zone. -  Subject to the concurrence by
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resolution of the sangguniang panlungsod of the City of Olongapo and the
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Sangguniang Bayan of the Municipalities of Subic, Morong and Hermosa, there
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is hereby created a Special Economic and Free-port Zone consisting of the City
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of Olongapo and the Municipality of Subic, Province of Zambales, the lands
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occupied by the Subic Naval Base and its contiguous extensions as embraced,
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covered, and defined by the 1947 Military Bases Agreement between the
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Philippines and the United States of America as amended, and within the
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territorial jurisdiction of the Municipalities of Morong and Hermosa, Province
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of Bataan, hereinafter referred to as the Subic Special Economic Zone whose
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metes and bounds shall be delineated in a proclamation to be issued by the
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President of the Philippines. Within thirty (30) days after the approval of this


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Act, each local government unit shall submit its resolution of concurrence to 
join the Subic Special Economic Zone to the Office of the President. 
Thereafter, the President of the Philippines shall issue a proclamation defining 
the metes and bounds of the zone as provided herein.
"THE MUNICIPALITY OF SAN ANTONIO OF THE PROVINCE OF 
ZAMBALES AND THE MUNICIPALITIES OF MORONG, HERMOSA AND 
DINALUPIHAN 
OF 
THE 
PROVINCE 
OF 
BATAAN 
MAY, 
BY 
RESOLUTION 
OF 
THEIR 
RESPECTIVE 
SANGGUNIANG BAYAN, 
CHOOSE TO HAVE THEIR WHOLE MUNICIPAL TERRITORY OR A 
PORTION THEREOF BE A PART OF THE EXTENDED TERRITORY OF 
THE SUBIC SPECIAL ECONOMIC ZONE, FOR A PERIOD OF NOT LESS 
THAN FIFTY (50) YEARS.
THE 
SBMA 
BOARD 
OF 
DIRECTORS 
SHALL 
PROVIDE 
A 
MASTERPLAN FOR THE PHASED EXPANSION OF THE FREE PORT 
ZONE EVERY TWO YEARS TO AREAS IN THE CITY OF OLONGAPO, 
MUNICIPALITY OF SUBIC IN THE PROVINCE OF ZAMBALES, AND IN 
THE MUNICIPALITIES OF DINALUPIHAN, HERMOSA AND MORONG 
IN THE PROVINCE OF BATAAN, AS MAY BE DETERMINED BY THE 
SBMA BOARD OF DIRECTORS.
"[The abovementioned] SUBIC SPECIAL ECONOMIC zone shall be 
subject to the following policies:
"(a) Within the framework and subject to the mandate and limitations of 
the Constitution and the pertinent provisions of the Local Government Code, 
the Subic Special Economic Zone shall be developed into a self-sustaining.


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industrial, 
commercial, 
financial 
and 
investment 
center 
to 
generate 
employment opportunities in and around the zone and to attract and promote 
productive foreign AND DOMESTIC investments;
"(B) THE SUBIC BAY METROPOLITAN AUTHORITY (SBMA) 
REFERRED TO IN SECTION 13 OF THIS ACT SHALL BE SUBJECT TO 
TAX UNDER THE NATIONAL INTERNAL REVENUE CODE AS A 
REGULAR CORPORATE ENTITY BUT SHALL BE EXEMPT FROM 
REMITTING DIVIDENDS TO THE NATIONAL GOVERNMENT.
"[(b )] (C) THE PROVISION OF EXISTING LAWS, RULES AND 
REGULATIONS TO THE CONTRARY NOTWITHSTANDING, [T ]th e  Subic 
Special Economic Zone shall be operated and managed as a separate customs 
territory ensuring free flow or movement of goods and capital within, into and 
exported out of the Subic Special Economic Zone, as well as provide incentives 
such as tax and duty-free importations of raw materials, capital and equipment. 
However, exportation or removal of goods from the territory of the Subic 
Special Economic Zone to the other parts of the Philippine territory shall be 
subject to customs duties and taxes under [the Tariff and Customs Code of 
the Philippines, as amended,] REPUBLIC ACT NO. 10863, OTHERWISE 
KNOWN AS THE 'CUSTOMS MODERNIZATION AND TARIFF ACT', the 
National Internal Revenue Code of 1997, as amended, and other relevant tax 
laws of the Philippines;
" ( D) [(c) The provision of existing laws, rules and regulations to the 
contrary notwithstanding, no national and local taxes shall be imposed within 
the Subic Special Economic Zone. In lieu of said taxes, a five percent (5% ) tax


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on gross income earned shall be paid by [all business enterprises within the 
Subic Special Economic Zone and shall be remitted as follows: three percent 
(3% ) to the National Government, and two percent (2% ) to the Subic Bay 
Metropolitan 
Authority (SBMA) for distribution to the local government units 
affected by the declaration of and contiguous to the zone, namely: the City of 
Olongapo and the municipalities of Subic, San Antonio, San Marcelino and 
Castillejos of the Province of Zambales; and the municipalities of Morong, 
Hermosa and Dinalupihan of the Province of Bataan, on the basis of population 
(50% ), land area (25% ), and equal sharing (25% ).] SUBIC SPECIAL 
ECONOMIC ZONE SHALL BE TAXED IN THE FOLLOWING MANNER, 
PROVISIONS OF EXISTING LAWS, RULES AND REGULATIONS TO THE 
CONTRARY NOTWITHSTANDING:
1. 
NO NATIONAL AND LOCAL TAXES SHALL BE IMPOSED IN THE 
SECURED AND FENCED AREAS OF THE SUBIC SPECIAL 
ECONOMIC 
ZONE 
CLASSIFIED 
AS A 
FREE-PORT ZONE, 
COMPOSED MAINLY OF THE LANDS OCCUPIED BY THE 
FORMER SUBIC NAVAL BASE AND SUCH AREAS AS MAY 
THEREAFTER BE DECLARED A FREE-PORT ZONE BY THE SBMA. 
IN LIEU OF SAID TAXES, A FIVE PERCENT (5% ) TAX ON 
GROSS INCOME SHALL BE PAID ON GROSS INCOME EARNED 
BY ALL BUSINESS ENTERPRISES WITHIN THE FREE-PORT 
ZONE AND SHALL BE REMITTED AS FOLLOWS: TWO PERCENT 
(2% ) TO THE NATIONAL GOVERNMENT; ONE PERCENT (1% ) 
TO THE SUBIC BAY METROPOLITAN AUTHORITY (SBMA)


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REFERRED TO IN SECTION 13 OF THIS ACT; TWO PERCENT 
(2% ) TO THE SBMA FOR DISTRIBUTION TO THE LOCAL 
GOVERNMENT UNITS COVERED BY THE FREE-PORT ZONE, 
NAMELY: THE CITY OF OLONGAPO AND THE MUNICIPALITIES 
OF SUBIC AND SAN ANTONIO OF THE 
PROVINCE OF 
ZAMBALES; 
AND 
THE 
MUNICIPALITIES 
OF 
MORONG, 
HERMOSA AND DINALUPIHAN OF THE PROVINCE OF BATAAN, 
ON THE BASIS OF POPULATION SEVENTY PERCENT (70% ), 
LAND AREA FIFTEEN PERCENT (15% ), AND EQUAL SHARING 
FIFTEEN PERCENT (15% );
2. NO NATIONAL TAXES SHALL BE IMPOSED IN OTHER AREAS 
OF THE SUBIC SPECIAL ECONOMIC ZONE THAT ARE NOT 
CLASSIFIED AS A FREE-PORT ZONE. IN LIEU OF SAID TAXES, 
A FIVE PERCENT (5% ) TAX ON GROSS INCOME EARNED 
SHALL BE 
PAID ON 
GROSS INCOME 
EARNED 
BY ALL 
BUSINESS ENTERPRISES WITHIN THE SPECIAL ECONOMIC 
ZONE AND SHALL BE REMITTED AS FOLLOWS: TWO PERCENT 
(2% ) TO THE NATIONAL GOVERNMENT; ONE PERCENT (1% ) 
TO THE SUBIC BAY METROPOLITAN AUTHORITY (SBMA) 
REFERRED TO IN SECTION 13 OF THIS ACT; TWO PERCENT 
(2% ) TO THE SBMA FOR DISTRIBUTION TO THE LOCAL 
GOVERNMENT 
WHERE 
THE 
BUSINESS 
ENTERPRISE 
IS 
LOCATED. 
ALL 
REGISTERED 
BUSINESS 
ENTERPRISES 
THEREIN 
SHALL 
CONTINUE 
TO 
PAY 
ONLY THE 
REAL


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PROPERTY TAX AND LOCAL TAXES IMPOSED BY THE LOCAL 
GOVERNMENT UNIT IN WHICH THEY ARE SITUATED;
"FOR PURPOSES OF THIS ACT, GROSS INCOME EARNED 
REFERS TO GROSS SALES OR GROSS REVENUES DERIVED FROM ANY 
BUSINESS 
ACTIVITY, 
NET 
OF 
RETURNS, 
DISCOUNTS 
AND 
ALLOWANCES, LESS COSTS OF SALES, COST OF PRODUCTION OR 
DIRECT COSTS OF SERVICES (DEPENDING ON THE NATURE OF 
BUSINESS).
"IN  ARRIVING AT THE BASE FOR WHICH THE FIVE (5% ) 
PERCENT FINAL TAX STATED IN THIS SECTION SHALL BE APPLIED, 
THE 
FOLLOWING 
DEDUCTIONS 
SHALL 
BE
ALLOWABLE/UNALLOWABLE:
1. FOR MANUFACTURING, TRADING AND INFRASTRUCTURE 
DEVELOPMENT ENTERPRISES:
ALLOWABLE DEDUCTIONS
a) 
DIRECT SALARIES, WAGES OR LABOR EXPENSE
b) 
TRAINING EXPENSE RELATING TO PRODUCTION AND 
PRODUCTION SUPERVISION
C)
d)
e) 
0
g)
h)
PRODUCTION SUPERVISION SALARIES
RESEARCH AND DEVELOPMENT
RAW MATERIALS
INTERMEDIATE GOODS
FINISHED GOODS
SUPPLIES AND FUELS USED IN PRODUCTION


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i)
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j)
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k)
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1)
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m)
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n)
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0)
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P)
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q)
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UNy
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a)
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b)
i) 
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER 
EXPENDITURES ON BUILDINGS AND EQUIPMENT 
FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED 
ASSETS
RENT AND 
UTILITY CHARGES ASSOCIATED WITH 
BUILDINGS 
AND 
EQUIPMENT, 
WAREHOUSING 
OR 
HANDLING OF GOODS
DIRECT EXPENSE ON THE DELIVERY, DISTRIBUTION, 
STORAGE 
AND 
HANDLING 
OF 
MATERIALS, 
INTERMEDIATE GOODS AND FINISHED GOODS 
INSURANCE 
CHARGES ASSOCIATED WITH 
ASSETS 
USED IN THE CONDUCT OF BUSINESS 
REPAIRS AND MAINTENANCE OF MACHINERIES AND 
EQUIPMENT USED IN PRODUCTION, DISTRIBUTION, 
STORAGE AND HANDLING, INCLUDING BUILDING AND 
OTHER LAND IMPROVEMENTS
EMANATING FROM THE CONDUCT OF REGISTERED 
BUSINESS ACTIVITIES 
q) 
SALES RETURNS AND DISCOUNTS 
UNALLOWABLE DEDUCTIONS


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C) 
MARKETING AND SALES SALARIES
d) 
INTEREST AND FINANCIAL CHARGES ON WORKING 
CAPITAL
e) 
LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
f) 
LOSS/GAIN ON DISPOSAL OF ASSETS
g) 
ADVERTISING
h) 
OTHER INSURANCE EXPENSES
i) 
MISCELLANEOUS SUPPLIES AND EXPENSES
j)  
ENTERTAINMENT EXPENSE 
2. FOR SERVICES ENTERPRISES
ALLOWABLE DEDUCTIONS
a) 
DIRECT SALARIES, WAGES OR LABOR EXPENSE
b) 
SERVICES SUPERVISION SALARIES 
C) 
TRAINING EXPENSE
d) 
RAW MATERIALS, GOODS IN PROCESS OR FINISHED 
GOODS USED OR RESOLD
e) 
SUPPLIES AND FUELS USED IN RENDERING SERVICES
f) 
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER 
EXPENDITURES ON BUILDINGS AND EQUIPMENT
g) FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED 
ASSETS
h) RENT AND UTILITY CHARGES ASSOCIATED WITH 
BUILDINGS AND EQUIPMENT


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i) 
INSURANCE 
CHARGES ASSOCIATED WITH 
ASSETS 
USED IN THE CONDUCT OF BUSINESS
j)  REPAIRS AND MAINTENANCE OF MACHINERIES AND 
EQUIPMENT, 
BUILDING 
AND 
OTHER 
LAND 
IMPROVEMENTS
k) MARKETING AND ADVERTISING COSTS
l) 
BAD DEBTS FROM ACCOUNTS RECEIVABLE EMANATING 
FROM 
THE 
CONDUCT OF 
REGISTERED 
BUSINESS 
ACTIVITIES
m) RESEARCH AND DEVELOPMENT
n) SALES DISCOUNTS
UNALLOWABLE DEDUCTIONS
a) ADMINISTRATIVE SALARIES
b) CORPORATE MANAGEMENT SALARIES
c) MARKETING AND SALES SALARIES
d) INTEREST AND FINANCIAL CHARGES ON WORKING 
CAPITAL
e) LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
f) 
LOSS/GAIN ON DISPOSAL OF ASSETS
g) OTHER INSURANCE EXPENSES
h) ADVERTISING
i) 
MISCELLANEOUS SUPPLIES AND EXPENSES
j)  
ENTERTAINMENT EXPENSE
3. FOR FINANCIAL ENTERPRISES


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a)
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER
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EXPENDITURES ON BUILDINGS AND EQUIPMENT
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b)
FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED
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ASSETS
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c)
RENT AND UTILITY CHARGES
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d)
MARKETING AND ADVERTISING COSTS
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e)
BAD DEBTS FROM ACCOUNTS RECEIVABLE EMANATING
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FROM REGISTERED BUSINESS ACTIVITIES
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f)
LOAN LOSSES
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g )
INTERESTS AND FINANCIAL CHARGES
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UNALLOWABLE DEDUCTIONS
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a)
DIRECT SALARIES
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b)
MATERIALS AND SUPPLIES USED
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c)
DEPRECIATION
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d)
EQUIPMENT LEASE PAYMENTS
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e)
RENT AND UTILITIES
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0
ADVERTISING
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g )
INTEREST PAID
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h)
COST OF SECURITIES
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i)
LOAN LOSSES
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j)
MARKETING AND SALES SALARIES
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k)
EQUIPMENT LEASE PAYMENTS
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1)
INTEREST AND FINANCIAL CHARGES
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m) 
LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
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n) 
CORPORATE MANAGEMENT SALARIES
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o) 
LOSS/GAIN ON DISPOSAL OF ASSETS
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p) 
INSURANCE
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q) 
MISCELLANEOUS SUPPLIES AND EXPENSES
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r) 
ENTERTAINMENT EXPENSE
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"REGISTERED BUSINESS ENTERPRISES OF THE SUBIC SPECIAL
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ECONOMIC ZONE MAY GENERATE INCOME FROM SOURCES WITHIN
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THE CUSTOMS TERRITORY OF UP TO ONE HUNDRED PERCENT OF
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THEIR TOTAL INCOME.
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"THE PROVISIONS OF THE ABOVE NOTWITHSTANDING, THE
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PRESIDENT OF THE PHILIPPINES MAY, IN AN EXECUTIVE ORDER,
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IMPOSE EXCISE TAXES ON ALCOHOL AND TOBACCO ENTERING THE
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SUBIC SPECIAL ECONOMIC ZONE
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"UPON THE DETERMINATION AND APPROVAL BY THE SBMA
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BOARD OF DIRECTORS, NEWLY REGISTERED BUSINESS ENTERPRISES
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MAY AVAIL OF AN EXEMPTION FROM THE FIVE PERCENT (5% ) TAX ON
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GROSS INCOME EARNED FOR A PERIOD NOT EXCEEDING FOUR (4)
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YEARS FOR NON-PIONEER PROJECTS AND SIX (6) YEARS FOR
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PIONEER PROJECTS.
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"In case of conflict between national and local laws with respect to
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tax exemption privileges in the Subic Special Economic Zone, the same shall be
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resolved in fa vo r o f th e  la tte r;


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(d)No exchange control policy shall be applied and free markets for 
foreign exchange, gold, securities and futures shall be allowed and maintained 
in the Subic Special Economic Zone;
"(e) The Central Bank, through the Monetary Board, shall supervise and 
regulate the operations of banks and other financial institutions within the 
Subic Special Economic Zone;
"(f) Banking and finance shall be liberalized with the establishment of 
foreign currency depository units of local commercial banks and offshore 
banking units of foreign banks with minimum Central Bank regulation;
"(g) Any investor within the Subic Special 
Economic Zone whose 
continuing investment shall not be less than Two hundred fifty thousand 
dollars ($250,000), [his/her] THE INVESTOR'S spouse and dependent 
children under twenty-one (21) years of age, shall be granted permanent 
resident status within the Subic Special Economic Zone. They shall have 
freedom of ingress and egress to and from the Subic Special Economic Zone 
without any need of special authorization from the Bureau of Immigration 
[and Deportation]. 
The [Subic Bay Metropolitan Authority referred to in 
Section 13 of this Act] SBMA may also issue working visas renewable every 
THREE (3) [tw o (2 )] years to foreign executives and other aliens possessing 
highly-technical skills which no Filipino within the Subic Special Economic Zone 
possesses, as certified by the Department of Labor and Employment. The 
names of aliens granted permanent residence status and working visas by the 
[Subic Bay Metropolitan Authority] SBMA shall be reported to the Bureau of 
Immigration [and Deportation] within thirty (30) days after issuance thereof;
12


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"(h)The defense of the zone and the security of its perimeters shall be 
the responsibility of the National Government in coordination with the [Subic 
Bay Metropolitan Authority] SBMA. [The Subic Bay Metropolitan Authority 
shall provide and establish its own internal security and firefighting forces;
and] 
IN THE EVENT THAT AN ASSISTANCE OF THE MILITARY IS 
NECESSARY, THE EXPENSES SHALL BE BORNE BY THE NATIONAL 
GOVERNMENT. THE MILITARY SHALL NOT INTERFERE IN THE 
INTERNAL AFFAIRS OF SBMA EXCEPT TO PROVIDE THE NECESSARY 
SECURITY AND DEFENSE.
"THE SBMA SHALL PROVIDE AND ESTABLISH ITS OWN LAW 
ENFORCEMENT 
DEPARTMENT 
WHICH 
SHALL 
EXERCISE 
THE 
FOLLOWING 
POLICE 
AUTHORITY 
WITHIN 
THE 
SUBIC 
BAY 
FREEPORT ZONE:
"(1) MAINTAIN PEACE AND ORDER, ENSURE PUBLIC SAFETY 
AND IMPLEMENT ALL LAWS, AND RULES AND REGULATIONS OF THE 
SBMA;
"(2) REGULATE THE INGRESS AND EGRESS TO, FROM AND 
WITHIN THE SUBIC BAY FREEPORT ZONE;
"(3)EXERCISE THE GENERAL POWERS TO CONDUCT SEARCH 
AND SEIZURE WITHIN THE SUBIC BAY FREEPORT ZONE IN 
ACCORDANCE WITH THE CONSTITUTION AND PERTINENT LAWS; 
AND
"(4) 
EFFECT 
THE 
ARREST 
OF 
CRIMINAL 
OFFENDERS, 
INVESTIGATE AND PREVENT CRIMES OCCURRING WITHIN THE
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SUBIC BAY FREEPORT ZONE AND ASSIST IN THE PROSECUTION
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THEREOF.
"THE SBMA SHALL ALSO PROVIDE AND ESTABLISH ITS OWN 
FIREFIGHTING FORCE WHICH SHALL HAVE THE SAME FUNCTIONS 
AS THE BUREAU OF FIRE PROTECTION WITHIN THE SUBIC BAY 
FREEPORT ZONE;
"(i) Except as herein provided, the local government units comprising the 
Subic Special Economic Zone shall retain their basic autonomy and identity. 
The cities shall be governed by their respective charters and the municipalities 
shall operate and function in accordance with Republic Act No. 7160, 
otherwise known as the Local Government Code of 1991."
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SEC. 2. Section 13 of Republic Act No. 7227, as amended, is hereby further
13 
amended to read as follows:
"SEC. 13. The Subic Bay Metropolitan Authority. -  
"(a) Creation o f the Subic Bay Metropolitan Authority. -  A body corporate 
to be known as the Subic Bay Metropolitan Authority (SBMA) is hereby 
created as an operating and implementing arm of the Conversion Authority.
"(b) Powers and Functions o f the [Subic Bay Metropolitan Authority] 
SBMA. 
-  [The Subic Bay Metropolitan Authority, otherwise known as the 
Subic Authority, shall have the following powers and functions:] EXCEPT AS 
OTHERWISE 
PROVIDED 
HEREIN, 
THE 
SBMA 
SHALL 
HAVE 
AUTHORITY AND JURISDICTION OVER ALL ECONOMIC ACTIVITIES 
WITHIN THE SUBIC SPECIAL ECONOMIC ZONE. IT SHALL EXERCISE 
THE FOLLOWING POWERS AND FUNCTIONS:
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" (l)T o  operate, administer, manage and develop the ship repair and ship 
building facility, container port, oil storage and refueling facility and Cubi Air 
Base within the Subic Special Economic and Free-port Zone as a free market in 
accordance with the policies set forth in Section 12 of this Act;
"(2) TO INSPECT AND REGISTER, UNDER THE FLAG OF THE 
REPUBLIC OF THE PHILIPPINES, LEISURE SHIPS AND PLEASURE 
YACHTS OF ANY SHIP OWNER, WHETHER A NATURAL OR JURIDICAL 
PERSON, AND IRRESPECTIVE OF NATIONALITY OR DOMICILE. FOR 
THIS PURPOSE, THE SBMA SHALL ADMINISTER AND MAINTAIN AN 
OPEN 
REGISTER OF LEISURE SHIPS AND PLEASURE YACHTS 
SUBJECT ONLY TO SUCH RULES 
AND REGULATIONS TO BE 
PROMULGATED BY THE SBMA IN CONSULTATION WITH THE 
DEPARTMENT OF TRANSPORTATION WITHOUT PREJUDICE TO THE 
REQUIREMENTS OF THE CONSTITUTION;
''[( 2 ) ]( 3 ) T o accept any local or foreign investment, 
business or 
enterprise AND ADMINISTER AND IMPLEMENT INCENTIVES GRANTED 
TO ITS REGISTERED BUSINESS ENTERPRISES, subject only to such 
rules and regulations to be promulgated by the [Subic Authority] SBMA [in 
conformity with the policies of the Conversion Authority] without prejudice to 
the nationalization requirements provided for in the Constitution;
” [( 3 )](4 ) To undertake and regulate the establishment, operation and 
maintenance of utilities, [other services, other services and infrastructure in 
the Subic Special Economic Zone including shipping and related business, 
stevedoring and port terminal services or concessions, incidental thereto and
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airport operations in coordination with the Civil Aeronautics Board] SUCH AS 
ELECTRICITY, 
WATER 
SUPPLY 
AND 
DISTRIBUTION 
AND 
SEWERAGE, 
RADIO, 
TELEVISION, 
TELECOMMUNICATIONS, 
ELECTRONIC, WEB AND CLOUD DATA OPERATIONS, PROVIDED, 
THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION SHALL 
CONTINUE 
TO 
EXERCISE 
ITS 
POWER TO 
REGULATE 
AND 
SUPERVISE 
THE 
QUALITY, 
SAFETY, 
RELIABILITY, 
SECURITY, 
COMPATIBILITY 
AND 
INTER-OPERABILITY 
OF 
PUBLIC 
TELECOMMUNICATIONS, RADIO STATIONS FOR BOTH PRIVATE 
AND PUBLIC USE, RADIO SPECTRUM, RADIO AND TELEVISION 
BROADCAST 
STATIONS, 
CABLE 
TELEVISIONS 
AND 
PAY 
TELEVISIONS WITHIN THE SUBIC SPECIAL ECONOMIC ZONE, and to 
fix just and reasonable rates, fares, charges and other prices therefor;
"[(3 )](5 ) 
TO 
UNDERTAKE 
AND 
REGULATE 
THE 
ESTABLISHMENT, OPERATION AND MAINTENANCE OF ALL OTHER 
FACILITIES, 
INFRASTRUCTURE, 
SERVICES, 
BUSINESSES, 
ACTIVITIES AND CONCESSIONS INSIDE THE SUBIC SPECIAL 
ECONOMIC ZONE 
INCLUDING 
LAND TRANSPORTATION, TOLL 
ROADS AND 
BRIDGES, 
SHIPPING 
AND 
RELATED 
BUSINESS, 
STEVEDORING AND PORT TERMINAL SERVICES OR CONCESSIONS, 
INCIDENTAL THERETO: PROVIDED, THAT THE MARITIME INDUSTRY 
AUTHORITY SHALL CONTINUE TO EXERCISE ITS POWER TO 
REGULATE AND SUPERVISE THE SHIPBUILDING AND SHIP REPAIR 
OF ANY MERCHANT MARINE VESSEL OPERATED OR TO 
BE
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OPERATED 
IN 
THE 
DOMESTIC TRADE 
AND 
THE 
DOMESTIC 
SHIPPING INDUSTRY WITHIN THE SUBIC SPECIAL ECONOMIC 
ZONE; AND AIRPORT OPERATIONS: PROVIDED, THAT THE CIVIL 
AVIATION AUTHORITY OF THE PHILIPPINES SHALL CONTINUE TO 
EXERCISE ITS POWER TO REGULATE AND SUPERVISE THE SAFETY, 
QUALITY, RELIABILITY AND AFFORDABILITY OF AIR TRANSPORT 
SERVICES FOR THE RIDING PUBLIC WITHIN THE SUBIC SPECIAL 
ECONOMIC ZONE, AND TO FIX JUST AND REASONABLE RATES, 
FARES, CHARGES AND OTHER PRICES THEREFOR;
''[(^^)] (6 ) To construct, acquire, own, lease, operate and maintain on 
its own or through contract, franchise, license permits bulk purchase from the 
private sector and build-operate-transfer scheme or joint-venture the required 
utilities and infrastructure in coordination with local government units and 
appropriate government agencies concerned and in conformity with existing 
applicable laws therefor;
” [(5 )] (7)T o adopt, alter and use a corporate seal; to contract, lease, 
sell, dispose, acquire and own properties; to sue and be sued in order to 
carry out its duties and functions as provided for in this Act and to exercise 
the power of eminent domain for public use and public purpose;
” [(6 )] (8 ) Within the limitation provided by law, to raise and/or borrow 
the necessary funds from local and international financial institutions and to 
issue bonds, promissory notes and other securities for that purpose and to 
secure the same guarantee, pledge, mortgage, deed of trust, or assignment 
of its properties held by the [Subic Authority] SBMA for the purpose of
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financing its projects and programs within the framework and limitations of 
this Act.
” [( 7 ) ] (9)T o operate directly or indirectly or ISSUE licenses TO 
OPERATE tourism-related INFRASTRUCTURE AND activities, [subject to 
priorities and standards set by the Subic Authority] including games, [and] 
amusements, [except] RECREATIONAL AND SPORTS FACILITIES SUCH
AS horse racing, dog racing, [and] casino [gambling which shall continue to 
be licensed by the Philippine Amusement and Gaming Corporation (PAGCOR) 
upon 
recommendation 
of the 
Conversion 
Authority;] AND ONLINE 
GAMING, GOLF COURSES, DUTY FREE STORES, AND OTHERS, 
WITHIN THE SUBIC SPECIAL ECONOMIC ZONE AND UNDER 
PRIORITIES AND STANDARDS SET BY THE SBMA 
[to  maintain and 
preserve the forested areas as a national park];
” [(8 )] (lO )T o  [authorize the establishment of appropriate educational 
and 
medical 
institutions] UNDERTAKE AND REGULATE THROUGH 
[FRANCHISE,] LICENSE OR PERMIT, AND SET OR FIX JUST, 
REASONABLE AND COMPETITIVE RATES, FARES, AND CHARGES FOR 
THE ESTABLISHMENT, OPERATION AND MAINTENANCE OF OTHER 
SERVICES, 
INCLUDING 
EDUCATIONAL 
AND 
MEDICAL 
INSTITUTIONS 
SUBJECT 
TO 
COMPLIANCE 
WITH 
THE 
REQUIREMENTS 
OF 
THE 
DEPARTMENT 
OF 
EDUCATION, 
COMMISSION ON HIGHER EDUCATION AND THE DEPARTMENT OF 
HEALTH; 
AND TO 
ESTABLISH 
AND 
CONDUCT FORMAL AND 
INFORMAL TRAINING OR EDUCATIONAL COURSES: PROVIDED,
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THAT FORMAL COURSES SHALL BE SUBJECT TO ACCREDITATION OR 
APPROVAL BY THE APPROPRIATE GOVERNMENT AGENCY FOR 
RECOGNITION OF CREDITS[.];
" [( 9 ) ] (11) To protect, PRESERVE, maintain and develop the virgin 
forests within the baselands which will be proclaimed AND MAINTAINED as 
a national park and subject to a permanent total log ban, and for this 
purpose, the rules and regulations of the Department of Environment and 
Natural Resources and other government agencies directly involved in the 
above functions shall be implemented by the [Subic Authority] SBMA;
"[(1 0 )] (12) To adopt and implement measures and standards for 
environmental pollution control of all areas within its territory, including, [but 
not lim ited] to all bodies of water and to enforce the same. 
For which 
purpose the [Subic Authority] SBMA shall create an Ecology Center [, and] 
THAT 
SHALL 
ISSUE 
THE 
ENVIRONMENTAL 
COMPLIANCE 
CERTIFICATE 
FOR 
ALL 
NON-ENVIRONMENTALLY 
CRITICAL 
ACTIVITIES AND PROJECTS, TREE CUTTING PERMIT, DISCHARGE 
PERMIT AND PERMIT TO OPERATE AIR POLLUTION SOURCE AND 
INSTALLATION IN THE SUBIC SPECIAL ECONOMIC ZONE;
"(13)TO RECLAIM LANDS IN THE SUBIC SPECIAL ECONOMIC 
ZONE, NOT LIMITED TO FORESHORE AND SUBMERGED AREAS, BY 
DREDGING, FILLING OR OTHER MEANS, WITHOUT NEED OF THE 
NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY (NEDA) 
APPROVAL, IN COMPLIANCE WITH ALL ENVIRONMENTAL LAWS 
AND 
GUIDELINES, 
AND 
TO 
ACQUIRE, 
DEVELOP, 
IMPROVE,
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ADMINISTER, DEAL-IN, SUBDIVIDE AND LEASE RECLAIMED LANDS 
INSIDE THE SUBIC SPECIAL ECONOMIC ZONE;
"(14)TO PROVIDE FOR, OPERATE, OR ADMINISTER SUCH 
SERVICES, 
AS 
MAY 
BE 
NECESSARY 
FOR 
THE 
EFFICIENT, 
ECONOMICAL AND BENEFICIAL UTILIZATION OF THE RECLAIMED 
AREAS IN THE SUBIC SPECIAL ECONOMIC ZONE;
"(15)UNLESS OTHERWISE PROVIDED IN THIS ACT, TO BE THE 
SINGLE AUTHORITY RESPONSIBLE FOR THE IMPLEMENTATION 
AND ENFORCEMENT OF THIS ACT, ITS IMPLEMENTING RULES AND 
REGULATIONS (IRR) AND OTHER ISSUANCES PROMULGATED BY 
THE SBMA BOARD OF DIRECTORS; THE NATIONAL BUILDING CODE 
OF THE PHILIPPINES AND ITS IRR; AND THE FIRE CODE OF THE 
PHILIPPINES AND ITS IRR; INSOFAR AS THESE LAWS, RULES AND 
REGULATIONS ARE APPLICABLE TO THE SBMA, THE SUBIC SPECIAL 
ECONOMIC 
ZONE 
AND 
SUBIC 
BAY 
FREEPORT 
BUSINESS 
ENTERPRISES, LOCATORS, RESIDENTS AND STAKEHOLDERS;
"(16) TO ESTABLISH AND MAINTAIN A HUB FOR LOCAL AND 
INTERNATIONAL DISASTER RELIEF OPERATIONS TO BE MANAGED 
AND OPERATED BY THE PHILIPPINE RED CROSS; AND
"[(1 1 )] (17)T o exercise such powers as may be essential, necessary or 
incidental to the powers granted to it hereunder as well as to carry out the 
policies and objectives of this Act."
"(c) Board o f Directors. -  The powers of the [Subic Authority] SBMA 
shall be vested in and exercised by a Board of Directors[, hereinafter referred
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to as the Board, which shall be] composed of fifteen (15) REGULAR AND 
TWO (2) EX OFFICIO members, [to  w it] AS FOLLOWS;
"(1) Representatives of the local government units that concur to join 
the Subic Special Economic Zone
"(2 ) A PROFESSIONAL MANAGER AS FULL-TIME CHAIRPERSON 
WHO SHALL ALSO BE THE ADMINISTRATOR AND CHIEF EXECUTIVE 
OFFICER 
OF 
THE 
SBMA. 
THE 
COMPENSATION 
OF 
THE 
ADMINISTRATOR AND CHIEF EXECUTIVE SHALL BE DETERMINED 
BY THE SBMA BOARD OF DIRECTORS SUBJECT TO THE APPROVAL 
OF THE SECRETARY OF BUDGET AND MANAGEMENT;
” [(2 )] (3)Tw o (2) representatives from the National Government WHO 
SHALL SERVE AS EXO/^F/C/O MEMBERS;
” [(3 )] (4) Five (5) representatives from the private sector [coming from 
the present naval stations, public works center, ship repair facility, naval 
supply depot and naval air station]; [and]
"(5 ) 
ONE 
(1) 
REPRESENTATIVE 
FROM 
THE 
ORIGINAL 
VOLUNTEERS WHO ASSISTED IN THE ESTABLISHMENT OF SUBIC 
BAY ECONOMIC ZONE AS IDENTIFIED IN THE 
ROSTER OF 
VOLUNTEERS IN THE SUBIC MEMORIAL;
” [(4 )] (6 ) The remaining balance to complete the Board shall be 
composed of representatives from the business and investment sectors.
"The [chairman and the] members of the Board OF DIRECTORS shall 
be appointed by the President to serve for a FIXED term of six (6) years, 
unless sooner removed for cause except for the representatives of the local
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government units who shall serve for a FIXED term of three (3) years. In 
case of removal for cause, the replacement shall serve only the unexpired 
portion of the term. 
IN THE EXIGENCY OF THE SERVICE, THE 
MEMBERS OF THE BOARD OF DIRECTORS SHALL CONTINUE TO 
SERVE IN A HOLD-OVER CAPACITY UPON THE EXPIRATION OF 
THEIR RESPECTIVE TERMS UNTIL THEIR REPLACEMENTS SHALL 
HAVE BEEN APPOINTED AND QUALIFIED.
"No person shall be appointed as a member of 
the Board OF 
DIRECTORS unless [he] THE MEMBER is a Filipino citizen, of good moral 
character, AT LEAST A COLLEGE GRADUATE, and 
of recognized 
competence in relevant fields including, but not limited to, economics, 
FINANCE, management, international relations, law, [o r] engineering[.], 
ENVIRONMENT AND ECOLOGY CONCERNS. 
Preference 
in 
the 
appointment of the members of the Board shall be given to residents within 
the Subic Special Economic Zone.
"[Members of the Board shall receive a per diem of not more than Five 
thousand pesos (P5,000) for every board meeting: Provided, however, That 
the per diem collected per month does not exceed the equivalent of four (4) 
meetings: Provided, further. That the amount of per diem for every board 
meeting may be increased 
by the President: 
Provided, finaiiy. That the
amount of per diem shall not be increased within two (2) years after its last 
increase.] EXCEPT THE CHAIRPERSON, THE MEMBERS OF THE BOARD 
OF DIRECTORS SHALL BE ENTITLED TO PER DIEMS, ALLOWANCES 
AND 
OTHER 
BENEFITS 
IN 
ACCORDANCE 
WITH 
EXISTING
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POLICIES, 
PRINCIPLES 
AND 
RULES 
GOVERNING 
THE
COMPENSATION OF 
MEMBERS OF 
THE
BOARD
OF
DIRECTORS 
IN 
GOVERNMENT-OWNED 
AND 
-CONTROLLED 
CORPORATIONS AS MAY BE FORMULATED BY THE GOVERNANCE 
COMMISSION 
FOR 
GOVERNMENT-OWNED 
OR-CONTROLLED 
CORPORATIONS."
"[(d ) 
Chairman/Administrator. -  
The 
President 
shall 
appoint 
a 
professional manager as administrator of the Subic Authority with a 
compensation to be determined by the Board subject to the approval of the 
Secretary of Budget, who shall be the ex officio chairman of the Board and 
who shall serve as the chief executive officer of the Subic Authority: Provided^ 
however, That for the first year of its operations from the effectivity of this 
Act, the mayor of the City of Olongapo shall be appointed as the chairman 
and chief executive officer of the Subic Authority.]
” [( e)] ( D) Capitalization. -  The [Subic Authority] SBMA shall have an 
authorized capital stock of Twenty billion pesos (P20,000,000,000.00) divided 
into twenty thousand (20,000) no-par shares fully subscribed and paid up by 
the Republic of the Philippines with;
"X X 
X
"(2) All other assets which the President may transfer to the [Subic 
Authority] SBMA as part of the equity contribution of the Government; and 
"x X X."
23 
SEC. 3. Section 14 of Republic Act No. 7227, as amended, is hereby further
24 
amended to read as follows:
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"SEC. 14. Relationship with the Conversion Authority and the Local 
Government Units. -
"(a) The provisions of existing \aws, rules and regulations to the 
contrary notwithstanding, the [Subic Authority] SBMA shall 
exercise 
administrative powers, rule-making and disbursement of funds over the 
Subic Special Economic Zone in conformity with the oversight function of the 
Conversion Authority.
"(b)In case of conflict between the [Subic Authority] SBMA and the 
local government units concerned on matters affecting the Subic Special 
Economic Zone other than defense and security, the decision of the [Subic 
Authority] SBMA shall prevail."
SEC. 4. 
A new Section 15 of Republic Act No. 7227, as amended, is hereby 
inserted to read as follows:
"SEC. 15. THE SUPREME COURT SHALL DESIGNATE A
15 
BRANCH OF THE REGIONAL TRIAL COURT AND/OR MUNICIPAL
16 
TRIAL COURT IN EACH OF THE LOCAL GOVERNMENT UNITS
COMPRISING 
THE 
SUBIC 
SPECIAL 
ECONOMIC 
ZONE TO 
HANDLE CASES FILED BY OR INVOLVING THE SBMA OR ITS 
RESIDENTS OR REGISTERED BUSINESS ENTERPRISES ON ANY 
MATTER OR INCIDENT OCCURRING WITHIN THE SUBIC
SPECIAL ECONOMIC ZONE.'
22 
SEC. 5. Section 15 of Republic Act No. 7227, as amended, is hereby further amended
23 
and renumbered as Section 16, to read as follows:
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"SEC. [1 5 ] 16. Clark and Other Special Economic Zones (CSEZ) [and 
Clark Freeport Zone (CFZ)J. Subject to the concurrence by resolution of the 
local government units directly affected, the President is hereby authorized 
to create by executive proclamation a Special Economic Zone covering the 
lands occupied by the Clark military reservations and its contiguous 
extensions as embraced, covered and defined by the 1947 Military Bases 
Agreement between the Philippines and the United States of America, as 
amended, 
located 
within 
the 
territorial jurisdiction 
of Angeles 
City, 
municipalities of Mabalacat and Porac, Province of Pampanga, and the 
municipalities of Capas and Bamban, Province of Tarlac, in accordance with 
the provision as herein provided insofar as applied to the Clark military 
reservations. [The Clark Air Base proper with an area of not more than four 
thousand four hundred hectares (4,400 has.), with the exception of the 
twenty-two-hectare commercial area situated near the main gate and the 
Bayanihan Park consisting of seven and a half hectares (7.5 has.) located 
outside the main gate of the Clark Special Economic Zone, is herey declared 
a freeport zone]. THE CSEZ WITH AN AREA OF APPROXIMATELY 
THIRTY-FIVE THOUSAND FOUR HUNDRED HECTARES (35,400 
HAS.)/ ARE HEREBY DECLARED FREEPORT ZONES.
'The [CFZ] CSEZ shall be operated and managed as a separate 
customs territory ensuring free flow or movement of goods and capital 
equipment within, into and exported out of the [CFZ] CSEZ, as well as 
provide incentives such as tax and duty-free importation of raw materials 
and capital equipment. However, exportation or removal of goods from
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the CSEZ to the other parts of the Philippine territory shall be subject to 
customs duties and taxes under the Customs Modernization and Tariff Act, 
the National Internal Revenue Code of 1997, as amended, and other 
relevant tax laws of the Philippines.
"The provisions of existing laws, rules and regulations to the 
contrary notwithstanding, no [national] TAXES, [and] local [taxes] AND
n a t io n a l, 
in c l u d in g  
b u t 
n o t 
l im it e d  
to  
b u s in e s s 
p e r m it s a n d  r eal pr o p e r ty t a x  shall be imposed [on registered 
business enterprises within CFZ] WITHIN THE CLARK SPECIAL 
ECONOMIC ZONE (CSEZ). 
In lieu of [said taxes] ALL OTHER 
n a t io n a l a n d  lo c al t a x e s, a five percent (5% ) tax on gross 
income earned shall be paid by all registered business enterprises within 
the [CFZ] CSEZ and shall be directly remitted as follows: [three percent 
(3 % )] ONE PERCENT (1% ) PERCENT SHALL BE REMITTED to the 
National Government, ONE PERCENT (lo /0) TO THE PROVINCIAL 
g o v e r n m e n t, one per cent (lo/o) TO THE LOCAL GOVERNMENT 
UNITS (LGUS) [to ] THROUGH the treasurer's office of the municipality 
or city where [they are] THE FREEPORT ENTERPRISE IS located AND 
TWO PERCENT (2% ) TO THE GOVERNING BODY OF THE CSEZ.
"GROSS INCOME EARNED" FOR PURPOSES OF THIS ACT 
REFERS TO GROSS SALES OR GROSS REVENUES DERIVED FROM 
ANY BUSINESS ACTIVITY, NET OF RETURNS, DISCOUNTS AND 
ALLOWANCES, LESS COSTS OF SALES, COST OF PRODUCTION OR 
DIRECT COSTS OF SERVICES (DEPENDING ON THE NATURE OF
26


1 
BUSINESS) BUT BEFORE ANY DEDUCTION FOR ADMINISTRATIVE
2 
EXPENSES AND INCIDENTAL LOSSES DURING A GIVEN TAXABLE
3 
PERIOD. IN ARRIVING AT THE BASE FOR WHICH THE FIVE (5% )
4 
PERCENT FINAL TAX STATED IN THIS SECTION SHALL BE
5 
APPLIED, THE 
FOLLOWING 
DEDUCTIONS 
SHALL 
BE
6 
ALLOWABLE/UNALLOWABLE:
7 
1. FOR MANUFACTURING, TRADING AND INFRASTRUCTURE
8 
DEVELOPMENT ENTERPRISES:
9 
ALLOWABLE DEDUCTIONS
10 
a) 
DIRECT SALARIES, WAGES OR LABOR EXPENSE
11 
b) 
TRAINING EXPENSE RELATING TO PRODUCTION AND
12 
PRODUCTION SUPERVISION
13 
c) 
PRODUCTION SUPERVISION SALARIES
14 
d) 
RESEARCH AND DEVELOPMENT
15 
e) 
RAW MATERIALS
16 
f) 
INTERMEDIATE GOODS
17 
g) 
FINISHED GOODS
18 
h) 
SUPPLIES AND FUELS USED IN PRODUCTION
19 
i) 
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER
20 
EXPENDITURES ON BUILDINGS AND EQUIPMENT
21 
j)  
FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED
22 
ASSETS
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k)
2
3
4
1)
5
6
7
m]
8
9
n)
10
11
12
13
0)
14
P)
15
16
17
q)
18
UN
19
a)
20
b)
21
c)
22
d)
23
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e)
BUILDINGS 
AND 
EQUIPMENT, 
WAREHOUSING 
OR 
HANDLING OF GOODS
DIRECT EXPENSE ON THE DELIVERY, DISTRIBUTION, 
STORAGE 
AND 
HANDLING 
OF 
MATERIALS, 
INTERMEDIATE GOODS AND FINISHED GOODS 
INSURANCE 
CHARGES ASSOCIATED WITH 
ASSETS 
USED IN THE CONDUCT OF BUSINESS 
REPAIRS AND MAINTENANCE OF MACHINERIES AND 
EQUIPMENT USED IN PRODUCTION, DISTRIBUTION, 
STORAGE AND HANDLING, INCLUDING BUILDING AND 
OTHER LAND IMPROVEMENTS
EMANATING FROM THE CONDUCT OF REGISTERED 
BUSINESS ACTIVITIES
CAPITAL
e) 
LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
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f) 
LOSS/GAIN ON DISPOSAL OF ASSETS
g) 
ADVERTISING
h) 
OTHER INSURANCE EXPENSES
i) 
MISCELLANEOUS SUPPLIES AND EXPENSES
j)  
ENTERTAINMENT EXPENSE 
2. FOR SERVICES ENTERPRISES
ALLOWABLE DEDUCTIONS
a) 
DIRECT SALARIES, WAGES OR LABOR EXPENSE
b) 
SERVICES SUPERVISION SALARIES
C) 
TRAINING EXPENSE
d) 
RAW MATERIALS, GOODS IN PROCESS OR FINISHED 
GOODS USED OR RESOLD
e) 
SUPPLIES AND FUELS USED IN RENDERING SERVICES
f) 
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER 
EXPENDITURES ON BUILDINGS AND EQUIPMENT
g) 
FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED 
ASSETS
h) 
RENT AND 
UTILITY CHARGES ASSOCIATED WITH 
BUILDINGS AND EQUIPMENT
i) 
INSURANCE 
CHARGES ASSOCIATED WITH 
ASSETS 
USED IN THE CONDUCT OF BUSINESS
j) 
REPAIRS AND MAINTENANCE OF MACHINERIES AND 
EQUIPMENT, 
BUILDING 
AND 
OTHER 
LAND 
IMPROVEMENTS
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k) 
MARKETING AND ADVERTISING COSTS
l) 
BAD DEBTS FROM ACCOUNTS RECEIVABLE EMANATING 
FROM 
THE 
CONDUCT 
OF 
REGISTERED 
BUSINESS 
ACTIVITIES
m) 
RESEARCH AND DEVELOPMENT
n) 
SALES DISCOUNTS 
UNALLOWABLE DEDUCTIONS
a) ADMINISTRATIVE SALARIES
b) CORPORATE MANAGEMENT SALARIES
c) MARKETING AND SALES SALARIES
d) INTEREST AND FINANCIAL CHARGES ON WORKING 
CAPITAL
e) LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
f) LOSS/GAIN ON DISPOSAL OF ASSETS
g) OTHER INSURANCE EXPENSES
h) ADVERTISING
i) MISCELLANEOUS SUPPLIES AND EXPENSES
j)  ENTERTAINMENT EXPENSE 
3. FOR FINANCIAL ENTERPRISES
ALLOWABLE DEDUCTIONS
a) 
DEPRECIATION, 
LEASE 
PAYMENTS 
OR 
OTHER 
EXPENDITURES ON BUILDINGS AND EQUIPMENT
b) 
FINANCING 
CHARGES 
ASSOCIATED 
WITH 
FIXED 
ASSETS
30


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c)
RENT AND UTILITY CHARGES
2
d )
MARKETING AND ADVERTISING COSTS
3
4
e )
BAD DEBTS FROM ACCOUNTS RECEIVABLE EMANATING 
FROM REGISTERED BUSINESS ACTIVITIES
5
f)
LOAN LOSSES
6
g )
INTERESTS AND FINANCIAL CHARGES
7
UNALLOWABLE DEDUCTIONS
8
a )
DIRECT SALARIES
9
b)
MATERIALS AND SUPPLIES USED
10
c)
DEPRECIATION
11
d )
EQUIPMENT LEASE PAYMENTS
12
e )
RENT AND UTILITIES
13
f)
ADVERTISING
14
g )
INTEREST PAID
15
h)
COST OF SECURITIES
16
i)
LOAN LOSSES
17
j )
MARKETING AND SALES SALARIES
18
k)
EQUIPMENT LEASE PAYMENTS
19
1)
INTEREST AND FINANCIAL CHARGES
20
m)
LOSS/GAIN ON FOREIGN EXCHANGE TRANSLATION
21
n)
CORPORATE MANAGEMENT SALARIES
22
0 )
LOSS/GAIN ON DISPOSAL OF ASSETS
23
P)
INSURANCE
24
q )
MISCELLANEOUS SUPPLIES AND EXPENSES
31


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
r) 
ENTERTAINMENT EXPENSE
'The governing body of the [Clark Special Economic Zone] 
IS 
BCDA 
AND 
ITS 
IMPLEMENTING 
ARM 
IS 
CLARK 
DEVELOPMENT CORPORATION (CDC) [shall likewise be] AS 
established by [Executive proclamation with such powers and 
functions exercised 
by the Export Processing Zone Authority 
pursuant 
to 
Presidential 
Decree 
No. 
66, 
as 
amended]
PRESIDENTIAL PROCLAMATION NO. 163 SERIES OF 1993 
AND EXECUTIVE ORDER NO. 80, SERIES OF 1993: Provided, 
That, THEY [it shall] have no regulatory authority over public 
utilities, which authority pertains to the regulatory agencies created 
by law for the purpose, such as the Energy Regulatory Commission 
created 
under 
Republic 
Act 
No. 
9136 
and 
the 
National 
Telecommunications Commission created under Republic Act No. 
7925.
" x  X X
"Subject to the concurrence by resolution of the local 
government units directly affected and upon recommendation of the 
Philippine Economic Zone Authority (PEZA), the President is hereby 
authorized to create by executive proclamation Special Economic 
Zones covering the city of Balanga and the municipalities of Limay, 
Mariveles, Morong, Hermosa, and Dinalupihan, Province of Bataan.
"Subject to the concurrence by resolution of the local 
government units directly affected and upon recommendation of the
32


1 
PEZA, the President is hereby authorized to create by Executive
2 
Proclamation Special Economic Zones covering the municipalities of
3 
Castillejos, San Marcelino, and San Antonio, Province of Zambales.
4 
"X  X X
5 
SEC. 6. Section 17 of RA 7227, is hereby amended and renumbered as Section 18, to
6 
read as follows;
7 
"Section [1 7 ] (18). Supervision. -The [Conversion Authority] BCDA
8 
AND ITS SUBSIDIARIES shall be under the direct control and supervision
9 
of the Office of the President for purposes of policy direction, coordination
10 
AND 
COVERAGE 
OF 
THE 
COMPENSATION 
AND 
POSITION
11 
CLASSIFICATION SYSTEM. IN ADDITION, THE POWERS AND
12 
FUNCTIONS 
OF 
THE 
GOVERNANCE 
COMMISSION 
FOR
13 
GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS (GCG)
14 
AS PROVIDED FOR IN SECTIONS 5 AND 8 OF REPUBLIC ACT NO.
15 
10149 SHALL NOW BE EXERCISED BY THE OFFICE OF THE
16 
PRESIDENT 
IN 
THE 
SUPERVISION 
OF 
BCDA 
AND 
ITS
17 
SUBSIDIARIES."
18 
SEC. 7. Sections 18, 19 and 20 of R.A. 7227, is hereby are hereby renumbered
19 
a c c o rd in g ly .
20
21
"xxx"
SEC. 8. PURSUANT TO THE COMPREHENSIVE MASTER DEVELOPMENT
22 
PLAN BY BCDA AS APPROVED BY THE PRESIDENT OF THE PHILIPPINES,
23 
RESIDENTIAL LAND WITHIN THE CSEZ SHALL BE DECLARED AS ALIENABLE
24 
AND DISPOSABLE LAND SUBJECT TO COMPLIANCE WITH THE NATIONALITY
33


1 
REQUIREMENTS UNDER THE PHILIPPINE CONSTITUTION AND EXISTING
2 
LAWS.
3 
SEC. 9. EXPORT ENTERPRISES SHALL BE DEFINED AS THOSE WHICH ARE
4 
INVOLVED IN 
MANUFACTURING, ASSEMBLY OR PROCESSING ACTIVITY
5 
RESULTING IN THE EXPORTATION OF AT LEAST 50%  OF PRODUCTION.
6 
("MANUFACTURING /  PROCESSING" SHALL MEAN THE PROCESS BY WHICH
7 
RAW MATERIALS OR SEMI-FINISHED MATERIALS ARE CONVERTED INTO A
8 
NEW PRODUCT THROUGH A CHANGE IN THEIR PHYSICAL, MECHANICAL OR
9 
ELECTRO MAGNETIC CHARACTERISTICS AND/OR CHEMICAL PROPERTIES.
10 
"ASSEMBLY" SHALL MEAN THE PROCESS BY WHICH SEMI-FINISHED PARTS OR
11 
MATERIALS ARE PUT TOGETHER OR COMBINED TO FORM A DISTINCT
12 
PRODUCT 
WITHOUT 
SUBSTANTIALLY 
CHANGING 
ITS 
PHYSICAL 
OR
13 
MECHANICAL CHARACTERISTICS OR ELECTRO-MAGNETIC AND/OR CHEMICAL
14 
PROPERTIES.)
15 
SEC. 
10. IMPLEMENTING RULES AND REGULATIONS. -WITHIN NINETY
16 
(90) DAYS FROM THE EFFECTIVITY OF THIS ACT, THE FOLLOWING SHALL
17 
PROMULGATE 
THE 
NECESSARY 
RULES 
AND 
REGULATIONS 
FOR 
THE
18 
IMPLEMENTATION OF THE SPECIFIC PROVISIONS OF THIS ACT:
19 
(a) 
THE DEPARTMENT OF FINANCE, IN COORDINATION WITH THE
20 
BUREAU OF INTERNAL REVENUE, AND IN CONSULTATION WITH THE SBMA
21 
AND CDC, FOR THE NECESSARY RULES AND REGULATIONS IMPLEMENTING
22 
SECTIONS 1 AND 4 OF THIS ACT BUT ONLY INSOFAR AS IT AMENDS SECTION
23 
12(C) AND SECTION 15 OF REPUBLIC ACT NO. 7227, AS AMENDED;
34


1 
(b) 
THE NATIONAL COMMISSION ON INDIGENOUS PEOPLES, IN
2 
COORDINATION AND CONSULTATION WITH THE SBMA, FOR THE NECESSARY
3 
RULES AND REGULATIONS IMPLEMENTING SECTION 3 OF THIS ACT BUT ONLY
4 
INSOFAR AS IT PROVIDES FOR THE DESIGNATION OF ONE (1) SEAT IN THE
5 
SBMA BOARD OF DIRECTORS TO REPRESENT THE INDIGENOUS PEOPLES
6 
RESIDING WITHIN THE SUBIC BAY FREEPORT ZONE; AND
7 
(c) 
THE SBMA FOR THE NECESSARY RULES AND REGULATIONS
8 
IMPLEMENTING ALL OTHER PROVISIONS OF THIS ACT.
9 
SEC. 
11. Separability Clause, if any provision of this act is subsequently declared
10 
unconstitutional, the validity of the remaining provisions hereof shall remain in full force
11 
and effect.
12 
SEC. 12. Repealing Clause. All laws, decrees, orders, proclamations, rules and
13 
regulations or other issuances or parts thereof inconsistent with the provisions of this act
14 
are hereby repealed or modified accordingly.
15 
SEC. 13.This Act shall take effect fifteen (15) days after its publication in the Official
16 
Gazette or in a newspaper of general circulation.
17 
Approved,
35