THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
(5 Qir 1 j p z  :: 
Third Regular Session 
) 
Introduced by Senator Juan Ponce Enrile 
EXPLANATORY NOTE 
Past and present administrations have endeavored to spur economic 
,development in the countryside. Through the creation of industrial centers in 
the rural and underdeveloped areas, the government hopes to encourage 
investors and stimulate activities that will result in job creation and enhanced 
productivity that will redound to the benefit not only of the residents within 
these areas, but also of nearby provinces and regions as well. 
The province of Surigao del Sur in the CARAGA Region in Mindanao is 
an area that boasts of vast natural and human resources. It is strategically 
located as it serves as an entry and exit point for trade and other activities 
coming from the nearby provinces of Surigao Del Norte, Davao Oriental and 
Agusan del Sur. It has a total population of 501,808 residents, based on the 2UOO 
Census, approximately 63.97% of which serves as the province’s labor force. 
While the agriculture sector remains the major provider of employment, 35% of 
the labor force aIso devote their efforts on various industries and services. 
It is in view of the potentials of this province that this representation 
proposes to create a special economic zone and free port in the province of 
Surigao del Sur, covering the municipalities of Carrascal, Cantilan, Madrid, 
Carmen, and Lanuza. The location of the proposed special economic zone is 
ideal as the seaport in Cantilan can be further developed to serve the needs of the 
entire coastline of Surigao del Sur. 
The bill proposes to create the Surigao del Sur Special Economic Zone and 
Freeport Authority which will oversee the operations and activities within the 
zone, with the end in view of facilitating its development into a self-sustaining 
industrial, commercial, financial and investment center and free port. Hopefully, 
this economic zone wilI serve as an engine of growth in the southern region of 
the country. 
In view of the foregoing, approval of the bill is earnestly requeste 


THIRTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
-. 
r 1 -  . . 
Third Regular Session 
1 
6 
SENATE BILL NO. 
2485 
Introduced by Sen. Juan Ponce Enrile 
AN ACT 
ESTABLISHING THE SURIGAO DEL SUR SPECIAL ECONOMIC ZONE 
AND FREEPORT IN THE MUNICIPALITIES OF CARRASCAL, CANTILAN, 
MADRID, CARMEN, AND LANUZA, PROVINCE OF SURIGAO DEL SUR, 
PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES 
Be in enacted by the Senate and the House of Representatives of the Philippines in the 
Congress assembled: 
SECTION 1. Short Title. - This Act shall be known as the "Surigao del Sur 
Special Economic Zone and Free Port Act of2006." 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the 
State to actively encourage, promote, induce and accelerate the sound and 
balanced industrial, economic and social development of the country in order to 
provide jobs to the people especially those in the rural areas, increase 
productivity and individual family income, and thereby improve the level and 
quality of living conditions through the establishment, among others, of special 
economic zones and freeports in suitable and strategic locations in the country 
and through measures that wilI attract legitimate and productive foreign 
investments. 
SEC. 3. Creation of the Surigao del Sur Special Economic Zone and 
Freeport. - In accordance with the foregoing declared policy and subject to the 
concurrence of the concerned local government units (LGUs) in the Province of 
Surigao del Sur affected by the zone, there is hereby established a Special 
Economic Zone and Freeport in the Municipalities of Carrascal, Cantilan, 
Madrid, Carmen, and Lanuza in the Province of Surigao del Sur to be known as 
the Surigao del Sur Special Economic Zone and Freeport, hereinafter referred to 
as the Surigao del Sur Ecozone. The specific metes and bounds of the Surigao del 
Sur Ecozone shall be more particularly defined in a presidential proclamation 
that shall be issued for this purpose. 
SEC. 4. Governing Principles. - The Surigao del Sur Ecozone shall be 
managed and operated by the Surigao del Sur Special Economic Zone and Free 
Port Authority, herein referred to as the SDSEZA, created under Section 11 of 
this Act, under the following principles: 
(a) Within the framework and limitations of the Constitution and applicable 
provisions of the Local Government Code, the Surigao del Sur Ecozone 
shall be developed into and operated as a decentralized, self-reliant and 


self-sustaining industrial, commercial/trading, agro-industrial, tourist, 
banking, financial and investment center with suitable residential areas. 
(b) The Surigao del Sur Ecozone shall be provided with transportation, 
telecommunications and other facilities needed to attract legitimate and 
productive investments, generate linkage industries and employment 
opportunities for the people of the Municipalities of, Carrascal, Cantilan, 
Madrid, Carmen, and Lanuza and its neighboring towns and cities. 
(c) The Surigao del Sur Ecozone may establish a mutually beneficial 
economic relation with other entities or enterprises within the country or, 
subject to the administrative guidance of the Department of Foreign 
Affairs (DFA), the Philippine Economic Zone Authority (PEZA) and/or 
the Department of Trade and Industry (DTI), with foreign entities or 
enterprises. 
(d) Foreign citizens and companies owned by non-Filipinos in whatever 
proportion may set up enterprises in the Surigao del Sur Ecozone, either 
by themselves or in a joint venture with Filipinos in any sector of industry, 
international trade and commerce within the Surigao del Sur Ecozone. 
(e) The Surigao del Sur Ecozone shall be managed and operated as a separate 
customs territory thereby ensuring the free flow or movement of goods 
and capital within, into and out of its territory, and shall likewise provide 
incentives such as tax and duty-free importations of raw materials, and 
capital equipment to registered enterprises located therein. However, 
exportation or removal of goods from the territory of the Surigao del Sur 
Ecozone to the other parts of the Philippine territory shall be subject to 
customs duties and taxes under the Customs and Tariff Code of the 
Philippines, as amended, and the National Internal Revenue Code of 1997, 
as amended. 
(9 The areas comprising the Surigao del Sur Ecozone may be expanded or 
reduced when necessary. For this purpose, the SDSEZA, in consultation 
with the LGUs, shall have the power to acquire either by purchase, 
negotiation or condemnation proceedings, any private land within or 
adjacent to the Surigao del Sur Ecozone for the following purposes: (1) 
consolidation of lands for Surigao del Sur Ecozone development; (2) 
acquisition of right-of-way to the Surigao del Sur Ecozone; and (3) the 
protection of watershed areas and natural assets valuable to the prosperity 
of the Surigao del Sur Ecozone. 
(g) Goods manufactured by a Surigao del Sur Ecozone enterprise shall be 
made available for immediate retail sale in the domestic market, subject to 
the payment of corresponding taxes on raw materials and other 
regulations that may be formulated by the SDSEZA, together with the 
PEZA, the Bureau of Customs and the DTI in accordance with the 
National Internal Revenue Code of 1997, as amended, and the Tariff and 
Customs Code of the Philippines, as amended. However, in order to 
protect domestic industries, a Negative List of industries shall be drawn 
up and regularly updated by PEZA. Enterprises engaged in industries 
included in such Negative List shall not be allowed to sell their products 
locally. 


(h)The defense of the Surigao del Sur Ecozone and the security of its 
perimeter fence shall be the responsibility of the national government 
(NG) in coordination with the Surigao del Sur Ecozone and the LGUs. 
SEC. 5. Incentives To Registered Enterprises - The Surigao del Sur Special 
Economic Zone and Freeport Authority (SDSEZA) may administer the following 
incentives to the registered enterprises located therein to the extent of the 
activity/ project: 
(A)Income Tux Holiday (ITH) - Registered enterprises shall be entitled to an 
income tax holiday from the start of their commercial operations to the 
extent of their activity under the following categories: 
(1) Category A - registered domestic enterprise located in highly 
developed areas, as determined by the Board of Investments (BOI), 
shall be entitled to a four-year income tax holiday. 
(2) Category B - registered domestic enterprise on the following shall 
be entitled to a six -year income tax holiday: 
(a) Located in less developed areas as defined by the BOI; or 
(b) Producing/rendering new products/services or having strong 
(3) Category C - Registered export enterprise shall be entitled to a six- 
year income tax holiday: Provided, ho7t~ezier, That if the export 
enterprise complies with the following: 
(a) large capital 
investments or sizeable employment generation, or (b) use high 
level of technology or (c) located outside Metro-Manila, it shall be 
entitled to an eight-year income tax holiday. 
backward or forward linkages 
Registered enterprises embarking on new investments that are 
listed in the current Investment Priorities PIan (IPP) shall be entitled to 
incentives provided herein pertaining to the new investments and subject 
to such terms and conditions as the BO1 may determine. 
Additional investments in the project shall be entitled to the income 
tax holiday corresponding to such investments as may be determined by 
the BOI. Additional income tax holiday may be granted for as long as the 
investment is made on the same project. Prwoided, That the project is listed 
in the IPP at the same time the additional investment in the project is 
made: Provided, firtlzer, That the entitlement period for additional 
investments shall not exceed three times the period provided under this 
subsection: Provided, however, That the total ITH period for an export 
enterprise availing of an eight-year ITH shall not exceed twenty (20) years. 
Any unused incentives shall therefore be deemed for€eited if not used 
during the incentive period. 
Enterprises registered with SDSEZA are required to share in the 
special development fund of the BO1 for investment promotion projects of 
the government equivalent to one percent (1%) of the ITH granted for 
every application. 
The Bureau of Internal Revenue (BIR) shall require a registered 
enterprise availing of the ITH or the net operating loss carryover 


(NOLCO) to secure a certificate of eligibility from the SDSEZA before 
submitting its income tax return (ITR) with SDSEZA for validation. 
Failure to secure certification and/or to file the ITH or NOLCO 
availment for validation by the SDSEZA within forty-five (45) days from 
the last day of statutory filing date for ITR shall cause the forfeiture of the 
availrnent for the taxable period. 
(B) Net Operating Loss Carryover (NOLCO) - Net operating loss of the business 
or enterprise during the first three years from start of commercial 
operations which have not been previously offset as deduction from gross 
income shall be carried over as a deduction from gross income for the next 
five consecutive years immediately following the year of such loss: 
Provided, honiever, That operating loss resulting from availment of 
incentives provided in this Code shall not be entitled to NOLCO. 
Registered enterprises availing of the ITH as herein provided shall 
not be entitled to avail of the NOLCO. 
(C) Imposition of a tax rate of five percent (5%) on Gross Income Earned (GIE) - 
Except for real property tax on land, no local and national taxes as 
prescribed under Republic Act No. 8424, also known as "The National 
Internal Revenue Code of 1997, As Amended" such as the income tax, the 
excise tax, the franchise taxes, shall be imposed on business 
establishments operating within the Surigao del Sur Ecozone. In lieu 
thereof, five percent (5%) of the gross income earned shall be paid as 
follows: 
1. Three percent (3%) to the national government; 
2. Two percent (2%) shall be remitted by the business establishments 
to the treasurer's office of the municipality or city where the 
enterprise is located. 
All persons and service establishments in the Surigao del Sur Ecozone 
shall be subject to national and local taxes under the NIRC of 1997, as 
amended, and the Local Government Code. 
(D) Accelerated Depreciation - Accelerated depreciation of plant, machinery 
and equipment that are reasonably needed and actually used for the 
production and transport of goods and services may be allowed using a 
rate not exceeding twice the rate which would have been used had the 
annual allowance been computed in accordance with the rules and 
regulations prescribed by the Secretary of Finance and the provisions of 
the National Internal Revenue Code (NIRC) of 1997, as amended. 
(E) Capital Equipment Incentives - 
(1) Importations of capital equipment, spare parts, tools and dye, or 
those required for pollution abatement and control, cleaner 
production and waste reduction including consignment thereof by 
registered enterprises upon the effectivity of this law, shall be 
exempted to the extent of one hundred percent (100%) of the taxes 
and customs duties: Provided, That the importation thereof shall be 
used exclusively by the registered enterprises in their registered 
activity: Provided, further, That the importation of machinery and 


equipment and accompanying parts shall comply with the 
following conditions: 
(a) They are not manufactured domestically in sufficient quantity, 
of comparable quality and at reasonable prices; 
(b) They are reasonably needed and will be used exclusively by the 
registered enterprise in the manufacture of its products, unless 
prior approval of the SDSEZA is secured for the part time 
utilization of said equipment in a non-registered activity to 
maximize usage thereof or the proportionate taxes and duties 
are paid on a specific equipment and machinery being 
permanently used for non-registered activities; and, 
(c) Approval of the SDSEZA was obtained by the registered 
enterprise for the importation of such machinery, equipment 
and spare parts. 
Approval of the SDSEZA must be secured before any sale, 
transfer or disposition of the imported capital equipment, 
machinery or spare parts is made: Provided, That if such sale, 
transfer or disposition is made within the first five years from date 
of importation, any of the following conditions must be present: 
(i) If made to another enterprise enjoying tax and duty exemption 
on imported capital equipment; 
(ii) If made to another enterprise, upon the payment of any taxes 
and duties on the net book value of the capital equipment to be 
sold; 
Exportation of the capital equipment, machinery, spare parts 
or source documents or those required for pollution abatement 
and control; and 
(iii) 
(iv) 
For reasons of proven technical obsolescence. 
When the aforementioned sale, transfer or disposition is 
made under any of the conditions provided for in the foregoing 
paragraphs other than paragraph (ii), the registered firm shall not 
pay the taxes and duties waived on such items: Provided, further, 
That if the registered enterprise sells, transfers or disposes the 
aforementioned imported items without prior approval within five 
years from the date of importation, the registered enterprise and 
the vendee, transferee, or assignee shall be solidarily liable to pay 
twice the amount of the tax and duty exemption given it: Provided, 
findy, That even if the sale, transfer or disposition of the capital 
equipment, machinery or spare parts is approved after five years 
from the date of importation, the registered enterprise is still liable 
to pay the taxes and duties based on the net book value of the 
capital equipment, machinery or spare parts if it has violated any of 
its registration terms and conditions. Otherwise, they shall no 
longer be subject to the payment of the taxes and duties waived 
thereon. 
(2) The purchase of machinery, capital equipment, raw materials, 
supplies, parts and semi-finished products to be used in the 
fabrication of machinery and capital equipment by a registered 
export-oriented enterprise from a domestic manufacturer shall be 
subject to zero percent (0%) value-added tax. 


The registered export-oriented enterprise shall be granted a 
tax credit equivalent to the amount of duties that would have been 
waived on the machinery, capital equipment and raw materials, 
supplies, parts and semi-finished products used in the fabrication 
of machinery and capital equipment, had these items been 
imported, upon its submission to the Department of Finance (DOF) 
of the bill of materials evidencing the transaction value of such and 
other 
pertinent 
documents, 
for 
verification and 
proper 
endorsement. 
The availment of the incentives by a registered export 
enterprise provided under the immediately preceding two 
paragraphs shall be subject to the following conditions: (a) that said 
capital equipment, machinery and spare parts will be used 
exclusively by the registered enterprise in its registered activity; (b) 
that the capital equipment or machinery where the raw materials, 
supplies, parts and semi-finished products were used would have 
qualified for tax and duty-free importation; and (c) That the 
approval of the SDSEZA is obtained by the registered enterprise. If 
the registered enterprise sells, transfers or disposes of these 
machineries, capital equipment and spare parts, the provision in 
the preceding paragraphs for such disposition shaIl apply. 
This incentive shall be deemed waived if application for tax 
credit under this subsection was not filed within one year from date 
of delivery. 
The importation of source documents by information technology- 
(F) 
registered enterprises shall be eligible for tax and duty free importation. 
(G) Raw Materials Incentives - Every registered export-oriented enterprise shall 
enjoy a tax credit equivalent to the internal revenue taxes and customs 
duties paid on the supplies, raw materials and semi-manufactured 
products provided the same are not sufficient in quantity, quality or are 
not competitively priced which are used in the manufacture, processing or 
production of its export products forming part thereof, exported directly 
and indirectly by the registered export-oriented enterprise, based on the 
actual taxes and duties paid for such materials/supplies/semi- 
manufactured products by the registered enterprise. 
This incentive shall be deemed waived if application for tax credit under 
this subsection is not filed within one year from date of exportation of the 
final product. 
(H)lncentives on Breeding Stocks and Genetic Materials - 
Importation of 
breeding stocks and genetic materials within ten (10) years from the date 
of registration of commercial operation of the enterprise shall be exempt 
from all taxes and duties: Provided, That such breeding stocks and genetic 
materials are reasonably needed in the registered activity; and approved 
by the SDSEZA. 
Availment of the incentives by a registered enterprise shall be subject to 
the following: (1) that said breeding stocks and genetic materials would 


have been qualified for tax and duty-free importation under the preceding 
paragraph; (2) that the breeding stocks and genetic materials are 
reasonably needed in the registered activity; (3) that approval of the 
SDSEZA has been obtained by the registered enterprise; and (4) that the 
purchase is made within ten (10) years from the date of registration of 
commercial operation of the registered enterprise. 
This incentive shall be deemed waived if application for tax credit 
under this subsection is not filed within one year from date of delivery. 
(I) Exemption from Wzurfuge Dues - The provisions of law to the contrary 
notwithstanding, exports by a registered enterprise shall be exempted 
from wharfage dues. 
U) Dejkrred lrnposition of the Minimum Corporate Income Tux - The Minimum 
Corporate Income Tax (MCIT) of two percent (2%) of the gross income as 
of the end of the taxable year shall be imposed when the MCIT is greater 
than the income tax computed under the NIRC of 1997, as amended, for 
the taxable year: Provided, however, That said MCIT shall be imposed only 
after the enterprise’ entitlement period to the income tax-based incentives. 
(K) (1) Tux treatment of merchandise in the Suriguo del Sur Ecozone - 
(a) Except as otherwise provided in this Act, foreign and domestic 
merchandise, 
raw 
materials, 
supplies, 
articles, 
equipment, 
machineries, spare parts and wares of every description, except those 
prohibited by law, brought into the zone to be sold, stored, broken up, 
repacked, assembled, installed, sorted, cleaned, graded, or otherwise 
processed, 
manufactured, 
mixed 
with 
foreign 
or 
domestic 
merchandise whether directly or indirectly related in such activity, 
shall not be subject to customs and internal revenue laws and 
regulations nor to IocaI tax ordinances, any provision of law to the 
contrary notwithstanding. 
(b) Merchandise purchased by a registered Surigao del Sur Ecozone 
enterprise, from the customs territory and subsequently brought into 
the export processing zone, shall be considered as export sales and 
exportation thereof shall be entitled to the benefits allowed by law for 
such transaction. 
(c) Domestic merchandise sent from the Surigao del Sur Ecozone to the 
customs territory shall, whether or not combined with or made part of 
other articles likewise of local origin or manufactured in the 
Philippines while in the export processing zone, be subject to internal 
revenue laws of the Philippines as domestic goods sold, transferred or 
disposed of for local consumption. 
(d) Merchandise sent from the Surigao del Sur Ecozone to the customs 
territory shall, whether or not combined with or made part of other 
articles while in the zone, be subject to rules and regulations governing 
imported merchandise. The duties and taxes shall be based on the 
value of said imported materials (except when the final product is 
exempt). 
(e) Domestic merchandise on which all internal revenue taxes have been 
paid, if subject thereto, and foreign merchandise previously imported 
on which has been paid, or which have been admitted free of duty and 
tax, may be taken into the Surigao del Sur Ecozone from the customs 


territory of the Philippines and be brought back thereto free of quotas, 
duty or tax. 
(f) Subject to such regulations respecting identity and safeguarding of 
revenue as the SDSEZA may deem necessary, when the identity of an 
article entered into the export processing zone under the immediately 
preceding paragraph has been lost, such article when removed from 
the zone and taken to the customs territory shall be treated as foreign 
merchandise entering the country for the first time, under the 
provisions of the Tariff and Customs Code of the Philippines, as 
amended. 
(g) Articles produced or manufactured in the Surigao del Sur Ecozone and 
exported therefrom shall, on subsequent importation into the customs 
territory, be subject to the import laws applicable to like articles 
manufactured in a foreign country. 
(h) Unless the contrary is shown, merchandise taken out of the Surigao del 
Sur Ecozone shall be considered for tax purposes to have been sent to 
customs territory. 
(2) Tax treatment of Merchandise in the Surigao del Sur Ecozone - The 
Surigao del Sur Special Economic Zone and Freeport shall be operated 
and managed as a separate customs territory ensuring free flow or 
movement of goods within, into and exported out of the free 
trade/ freeport zone. 
Importations of raw materials, and capital 
equipment are tax and duty free. However, exportations or removal of 
goods from the Surigao del Sur Ecozone to the other parts of 
Philippine territory shall be subject to customs and internal revenue 
regulations. 
(3) Tax Treatment of Services in the Surigao del Sur Ecozone - (a) Sale of 
service by an entity from the customs territory to a registered ecozone 
or free trade enterprise, or by a registered ecozone or freeport 
enterprise to another ecozone or freeport enterprise shall be treated as 
indirect export, and hence, entitled to the benefits allowed by law for 
such transaction. 
(b) Sale or service by a registered ecozone or freeport enterprise to the 
customs territory shall be subject to applicable internal revenue 
laws and regulations. 
(L) Registered export oriented enterprise shall have access to the utilization of 
the bonded warehousing system in accordance with the rules and 
regulations of the Bureau of Customs. 
(M) 
Employment of Foreign Nationals - Subject to the provisions of 
Section 29 of Commonwealth Act No. 613, as amended, a registered 
enterprise may employ foreign nationals in supervisory or technical 
positions for a period not exceeding ten (10) years from its registration: 
Provided, That when the majority of the capital stock of a registered 
enterprise is owned by foreign investors, the positions of the president, 
treasurer and general manager or their equivalents may be retained by 
foreign nationals beyond the period set forth herein and such officers are 
the owners or stockholders owning at least ten percent (10%) of the 


outstanding capital stock of the registered enterprise and they remain the 
owner or maintain their stockholdings therein. 
Foreign nationals under employment contract within the purview 
of this incentive, their spouses and unmarried children under twenty-one 
(21) years of age, who are not excluded by Section 29 of Commonwealth 
Act No. 613, as amended, shall be permitted to enter and reside in the 
Philippines during the period of employment of such foreign nationals. 
They shall be issued a multiple entry visa, valid for a period of three 
years, and shall be allowed to enter and leave the Philippines without 
further documentary requirements other than valid passports or other 
travel documents in the nature of passports. The validity of the multiple 
entry visa shall be extendible yearIy. 
The foreign nationals admitted herein, as well as their respective 
spouses and dependents shall be exempt from: (1) obtaining Alien 
Certificate of Registration and Emigration Clearance Certificates; and (2) 
securing the Alien Employment Permit (AEP) and all types of clearances, 
permits, licenses or their equivalents required by any government 
department or agency. 
SEC. 6. Incentive to Investors. - Any foreign national covered under 
Subsection (M) of Section 5 of this Act, who invests an amount of US $ 
150,000.00, either in cash and/or equipment, in a registered enterprise shall be 
entitled to an investor’s visa: Provided, That, 
(a) He is at least eighteen (18) years of age; 
(b) He has not been convicted of a crime involving moral turpitude; 
(c) He is not afflicted with any loathsome, dangerous or contagious disease; 
(d) He has not been institutionalized for any mental disorder or disability. 
Provided, further, That in securing the investor’s visa, the alien-applicant shall 
be entitled to the same privileges provided for under Section 5 (M), last 
paragraph. 
As holder of investor’s visa, an alien shall be entitled to reside in the 
Philippines while his investment subsists. For this purpose, he should submit an 
annual report, in the form duly prescribed for the purpose, to prove that he has 
maintained his investment in the country. Should said alien withdraw his 
investments from the Philippines, then the investor’s visa issued to him shall 
automatically expire. 
SEC. 7. Administration, Implementation and Monitoring of Incentives. - 
The SDSEZA shall be responsible for the administration and implementation of 
the incentives granted to its respective registered enterprises: Provided, That any 
incentive administration policy adopted by the BO1 for registered enterprises 
shall be uniformly applied by SDSEZA. 
The following are the duties and responsibilities of the SDSEZA in the 
(a) To adopt consistent procedures of administering incentives in accordance 
administration of incentives: 
with the guidelines established by the BOI; 


(b) To adopt and implement systems and procedures affecting trade and 
customs policies in accordance with the requirements established by the 
Department of Finance (DOF) and the BOI; 
(c) To submit data and information to the DOF and the BO1 as required by 
any of these agencies to ascertain consistency of investment policies and 
incentives, including their implementation as provided in paragraph (a) 
herein, and to ensure proper implementation of systems and procedures 
affecting trade and customs policies as provided in paragraph (b) herein; 
and 
(d) To perform all other duties and responsibilities as may be required by the 
President of the Philippines. 
For proper monitoring, the BO1 shall create a single database of all 
incentives provided by all incentives granting agencies, including SDSEZA, and 
all information thereto. Double entry accounting shall be done by the BO1 in 
recording all incentives granted by the government for transparency purposes. 
SEC. 8. Extension of Period of Availment. - The availment period of the 
incentives provided herein may be extended by SDSEZA in the event that the 
registered enterprise suffers operational force majeure or any event equivalent 
thereto, impairing its viability. 
SEC. 9. Duration of Incentives. - Enterprises registered with SDSEZA 
may enjoy ITH or NOLCO granted by the latter prior to the availment of the five 
percent (5%) GIE. 
Fiscal incentives under this Act shall be terminated after a cumulative 
period of twenty (20) years from date of registration or start of commercial 
operation, whichever is applicable, except that it could be extended with regard 
to industries deemed indispensable to national development. 
The industries exempted from this provision shall be recommended by 
BOI, with the concurrence of the Secretaries of the Department of Finance and 
Trade and Industry. 
SEC. 10. Creation of the Surigao del Sur Special Economic Zone and 
Freeport Authority. - There is hereby created a body corporate to be known as 
the ”Surigao del Sur Special Economic Zone and Freeport Authority” hereinafter 
referred to as the SDSEZA, which shall manage and operate the Surigao del Sur 
Ecozone, in accordance with the provisions of this Act, This corporate franchise 
shall expire in fifty (50) years counted from the first year after the effectivity of 
this Act, unless otherwise extended by Congress. It shall be organized within one 
hundred eighty (180) days after the effectivity of this Act. 
SEC. 11. Principal Office of SDSEZA. - The SDSEZA shall maintain its 
principal office in the Municipality of Cantilan but it may establish branches 
within the Philippines as may be necessary for the proper conduct of its business. 
SEC. 12. Powers and Functions of the SDSEZA. - The Surigao del Sur 
Special Economic Zone and Freeport Authority shall have the following powers 
and functions: 


(a) To operate, administer, manage and develop the Surigao del Sur 
Ecozone according to the principles and provisions set forth in this 
Act; 
(b) To recommend to the President of the Philippines the issuance of a 
proclamation to fix and delimit the site of the Surigao del Sur Ecozone; 
(c) To register, regulate and supervise the enterprises in the Surigao del 
Sur Ecozone in an efficient and decentralized manner, subject to 
existing laws; 
(d) To coordinate with local government units and exercise general 
supervision over the development plans, activities and operation of 
ecozones: 
(e) To regulate and undertake the establishment, operation and 
maintenance of utilities, other services and infrastructure in the 
Surigao del Sur Ecozone such as but not limited to heat, light and 
power systems using indigenous and/or renewable, and other energy 
sources, water supply, telecommunications, transport, toll roads and 
bridges, port services, etc. The SDSEZA shall have the power to fix 
just, reasonable and competitive rates, fares, charges and prices 
thereof, notwithstanding the provisions of the Electric Power Industry 
Reform Act of 2001, and other pertinent laws. 
(f) To construct, acquire, own, lease, operate and maintain on its own or 
through contracts, franchise, licenses, bulk purchase from the private 
sector or permits under any of the schemes allowed in Republic Act 
No. 6957 (otherwise known as the Build-Operate-Transfer Law, as 
amended by RA 7718) or joint venture, adequate facilities and 
infrastructure required or needed for the operation and development 
of the Surigao del Sur Ecozone, in coordination with the appropriate 
national and local government authorities and in conformity with 
applicable laws thereon; 
(g) To operate on its own, either directly or indirectly or through a license 
to othler tourism-related activities, including games, amusements, 
recreational and sport facilities; 
(h) Subject to the approval of the President and the Monetary Board of the 
Bangko Sentral ng Pilipinas, upon the recommendation of the 
Department of Finance (DOF), to raise or borrow adequate and 
necessary funds from local or foreign sources to finance its projects 
and programs under this Act and for that purpose, to issue bonds, 
promissory notes and other forms of securities, and to secure the same 
by a guarantee, pledge, mortgage, deed of trust or an assignment of all 
or part of its property or assets; 
(i) To provide security for the Surigao del Sur Ecozone in coordination 
with the national and local governments. Military forces sent by the 
national government for the purpose of defense shall not interfere in 
the internal affairs of the ecozone and expenditures for these military 


forces shall be borne by the national government. For this purpose, the 
SDSEZA may establish and maintain its security forces and firefighting 
capability or hire others to provide the same; 
(i) To protect, preserve, maintain and develop the virgin forests, beaches, 
coral and coral reefs and maintain ecological balance within the 
Surigao del Sur Ecozone; 
(k) To create, operate and/or contract to operate such functional units or 
offices of the SDSEZA as it may deem necessary; 
(1) To adopt, alter and use a corporate seal; make contracts, leases, own, 
or otherwise dispose of personal or real property; sue and be sued; and 
otherwise carry out its functions and duties as provided for in this Act; 
To issue certificates of origin for products manufactured or 
processed in the Surigao del Sur Ecozone in accordance with the 
prevailing rules of origin, and the pertinent regulations of the PEZA, 
DTI and/or the DOF; 
(m) 
(n)To issue working visas renewable every two (2) years for foreign 
executives and foreign technicians with highly specialized skills which 
no Filipinos possesses, as certified by the Department of Labor and 
Employment (DOLE); 
(0) To report to the Bureau of Immigration the names of the foreigners 
who have been granted permanent resident status and working visas 
within thirty (30) days after issuance of such grant; 
(p) To exercise such powers as may be essential, necessary or incidental to 
the powers granted to it hereunder, as well as those that shaII enable it 
to carry out, implement and accomplish the purposes, objectives and 
policies of this Act; and, 
(q) To issue rules and regulations consistent with the provisions of this 
Act as maybe necessary to accomplish and implement the purpose, 
objectives and policies provided herein. 
SEC. 13. Banking Rules and Regulations. - Existing banking laws and 
rules/regulations of the Bangko Sentml ng Pilipinas (BSP) shall apply to banks and 
financial institutions to be established in the Surigao del Sur Ecozone, such as 
those governing foreign exchange and other current account transactions (trade 
and non-trade), local and foreign borrowings, foreign investments, establishment 
and operation of local and foreign banks, foreign currency deposit units, offshore 
banking units and other financial institutions under the supervision of the ESP. 
SEC. 14. Remittance of Earnings. - In the case of foreign investments, a 
registered enterprise in the SDSEZA shall have the right to remit earnings from 
the investment in the currency in which the investment was originally made and 
at the exchange rate prevailing at the time of remittance, subject to the provisions 
of Section 74 of Republic Act No. 265, as amended, otherwise known as "the 
New Central Bank Act". 


SEC. 15. Board of Directors of the SDSEZA. - The powers of the SDSEZA 
shall be vested in and exercised by a board of directors, hereinafter referred to as 
the Board, which shall be composed of the following: 
(a) The chairman, who shall at the same time be the administrator of the 
(b) A vice-chairman, who shall come from among the members of the 
(c) The Congressional Representative of the district covering the site of the 
(d) One (1) representative of the Provincial Government of Surigao del 
(e) One (1) representative from the domestic investors; 
(f) One (1) representative from the foreign investors; and 
(g) One (1) representative from the workers working in the Surigao del 
SDSEZ A; 
Board; 
Surigao del Sur Ecozone; 
Sur; 
Sur Ecozone. 
The congressional representative and the representative of the Provincial 
Government shall serve as ex-oflcio members of the Board, whose term in the 
Board corresponds to their term as elected officials. 
The chairman and members of the Board, except the ex-officio members, 
shall be appointed by the President of the Philippines to serve for a term of six (6) 
years, unless sooner separated from service due to death, voluntary resignation 
or removal for cause. In case of death, resignation or removal for cause, the 
replacement shall serve only the unexpired portion of the term. 
Except for the representatives of the business and labor sectors, no person 
shall be appointed by the President of the Philippines as a member of the Board 
unless he is a Filipino citizen, of good moral character, of proven probity and 
integrity, and a degree-holder in any of the following fields: economics, business, 
public administration, law, management or their equivalent, and with at least ten 
(10) years relevant working experience preferably in the field of management or 
public administration. 
The members of the Board shall each receive per diem at rates to be 
determined by the Department of Budget and Management (DBM) in accordance 
with existing rules and regulations: Provided, lzort~ez~er, 
That the total per diem 
collected each month shall not exceed the equivalent per diem for four (4) 
meetings. Unless and until the President of the Philippines has fixed a higher per 
diem for the members of the Board, such per diem shall not be more than Ten 
thousand pesos (PlO,OOO.OO) for every Board meeting. 
SEC. 16. Powers and Duties of the Administrator. - The chairman- 
(a) To direct and manage the affairs of the SDSEZA in accordance with the 
policies of the Board; 
(b) To establish the internal organization of the SDSEZA under such 
conditions that the Board may prescribe; 
(c) To submit an annual budget and necessary supplemental budget to the 
Board for its approval; 
(d)To submit within thirty (30) days after the close of each fiscal year an 
annual report to the Board and such other reports as may be required; 
administrator shall have the following powers and duties: 


(e) To submit to the Board for its approval, policies, systems, procedures, 
rules and regulations that are essential to the operation of the Surigao del 
Sur Ecozone; 
(f) To create a mechanism in coordination with relevant agencies for the 
promotion of industrial peace, the protection of the environment, and the 
advancement of the quality of life in the Surigao del Sur Ecozone; and 
(g) To perform such other duties as may be assigned to him by the Board or 
which are necessary or incidental to his office. 
SEC. 17. Organization and Personnel. - The Board of Directors of the 
SDSEZA shall provide for an organization and staff of its officers and employees. 
Upon the recommendation of the chairman-administrator, with the approval of 
the Secretary of the DTI, the Board shall appoint and fix the remuneration and 
other emoluments of its officers and employees in accordance with existing laws 
on compensation and position classification: Provided, That the Board shall have 
exclusive and final authority to promote, transfer, assign or reassign officers of 
the SDSEZA, any provision of existing laws to the contrary notwithstanding: 
Provided, further, That the chairman-administrator may carry out removal of such 
officers and employees. 
The officers and employees of the SDSEZA, including all members of the 
Board, shall not engage directly or indirectly in partisan activities nor take part in 
any election except to vote. 
No officer or employee of the SDSEZA, subject to Civil Service laws and 
regulations, shall be removed or suspended except for cause, as provided by law. 
SEC. 18. Resolution of Labor Disputes. - The right of labor to form 
unions or associations shall be observed. However, strikes and lockouts shall be 
prohibited within the Surigao del Sur Ecozone, notwithstanding the provisions 
of the Labor Code and other pertinent laws. Labor disputes shall be resolved 
through mediation, conciliation and such other modes of dispute resolution 
authorized by law. 
SEC. 19. Applicability Clause. - The provisions of Sections 30 to 42 of 
Republic Act No. 7916, otherwise known as the Special Economic Zone Act of 
1995, as amended, on leases of lands and buildings, land conversion, shipping 
and shipping register, protection of enviroriment, termination of business, 
registration of business enterprise, one-stop shop center and on industrial 
harmony in ecozones, shall apply to the Surigao del Sur Ecozone. 
SEC. 20. Capitalization. - The Surigao del Sur Special Economic Zone 
and Free Port Authority shall have an authorized capital stock of Two Billion 
(2,000,000,000) no par shares with a minimum issue of Ten Pesos (P10.00) 
each, 
the majority shares of which shall be subscribed and paid for by the National 
Government and the Local Government Units (LGUs) embracing the Surigao del 
Sur Special Economic Zone and Free Port. The Board of Directors of the SDSEZA 
may, with the written concurrence of the Secretary of Finance, sell shares, 
representing not more than forty per centum (40%) of the capital stock of the 
SDSEZA to the general public under such policy as the Board and the Secretary 
of Finance may determine. The National Government and the LGUs shall in no 


case own less than sixty per centum (60%) of the total issued and outstanding 
capital of the Surigao del Sur Special Economic Zone and Freeport Authority. 
The amount necessary to subscribe and pay for the shares of the National 
Government to the capital stock of the SDSEZA shall be included in the Annual 
General Appropriations Act. For LGUs, the funds shall be taken from their 
Internal Revenue Allotment and other local funds. 
SEC. 21. Supervision and Coordination of Development Plans. - For 
purposes of policy direction and coordination, the Surigao del Sur Ecozone shall 
be under the direct control and supervision of the Office of the President of the 
Philippines. 
SEC. 22. Relationship with the Regional Development Council. - The 
Surigao del Sur Special Economic Zone and Freeport Authority shall determine 
the development goals for the Surigao del Sur Ecozone within the framework of 
national development plans, policies and goals. The Administrator shall, upon 
approval by the Board, submit the Surigao del Sur Ecozone plans, programs and 
projects to the RegionaI Development Council for inclusion and inputs for the 
overall regional development plan. 
SEC. 23. Relationship with Local Government Units. - Except as herein 
provided, the local government units comprising the Surigao del Sur Ecozone 
shall retain their basic autonomy and identity. The Municipalities of Carrascal, 
Cantilan, Madrid, Carmen, and Lanuza, shall operate and function in accordance 
with the Local Government Code of 1991. In case of any conflict between the 
SDSEZA and the Province of Surigao del Sur on matters affecting the Surigao del 
Sur Ecozone other than defense and security matters, the decision of the SDSEZA 
shall prevail. 
SEC. 24. Interpretation/Construction. - The powers, authorities and 
functions that are vested in the SDSEZA are intended to decentralize government 
functions and authority and promote an efficient and effective working 
relationship between the Surigao del Sur Ecozone, the national government and 
the LGUs. 
SEC. 25. Auditing. - The Commission on Audit shall appoint a 
representative who shall be a full time auditor of the SDSEZA and assign such 
number of personnel as may be necessary to assist said representative in the 
performance of his/her duties. The salaries and emoluments of the assigned 
auditor and personnel shall be in accordance with pertinent laws, rules and 
regulations. 
SEC. 26. SeparabiIity Clause. - If any provisions of this Act shall be held 
unconstitutional or invalid, the other provisions not otherwise affected shall 
remain in full force and effect. 
SEC. 27. Repealing Clause. - All laws, executive orders or issuances, or 
any parts thereof, which are inconsistent herewith are hereby repealed and 
amended accordingly. 


SEC. 28. 
Effectivity Clause. - This Act shall take effect upon its 
publication in at least one (1) newspaper of general circulation. 
Approved