ECOZONE TAXATION

Charles C. Onda, CPA
Assistant Professorial Lecturer, Accountancy Department
College of Business Administration, DLSU-Dasmariñas
Dasmariñas, Cavite

1.0 Introduction

Ecozones are areas designated by the government for development into balanced agricultural, industrial, commercial, and tourist/recreational regions. Each Ecozone is to be developed as an independent community with minimum government interference. It shall administer its own economic, financial, industrial and tourism development without help from the national government. It shall also provide adequate facilities to establish linkages with surrounding communities and other entities within the country.

Ecozones are among the measures adopted by the Government to implement its policy of promoting the preferential use of Filipino labor, domestic materials and locally produced goods, and to help them make them internationally competitive. They are established in strategic locations in the country designed to effectively attract legitimate and productive foreign investments.

Ecozones are created by virtue of EO 226 otherwise known as Omnibus Investment Code which becomes effective on July 1997 and by Presidential Decree No. 66 otherwise known as PEZA law. The present laws affecting ecozones includes RA 7916 or the Special Economic Zone Act of 1995 which was signed into law on February 24, 1995 which was later amended by RA 8748. An ecozones are managed and operated by the Philippine Economic Zone Authority (PEZA) " as a separate customs territory."

2.0 Nature and type of ECOZONES

Ecozones are divided into the following types :

{Private}1. Industrial Estates (IEs) are tracts of land developed for the use of industries. They have basic infrastructure such as roads, water and sewage systems, pre-built factory buildings, and residential housing for the use of the community.
2. Export Processing Zones (EPZs) are special IEs whose locator companies are mainly export-oriented. EPZ incentives include tax- and duty-free importation of capital equipment, raw materials and spare parts. The government has designated 4 EPZs; Bataan, Cavite, Baguio City and Mactan Island in the Visayas. There are about 250 registered companies in the EPZs, most of which are involved in the manufacture and export of electronics, garments, rubber products, fabricated metals, plastics, electrical machinery, transport equipment and industrial chemicals.
3. Free Trade Zones are areas nearby ports of entry, such as seaports and airports. Imported goods may be unloaded, repacked, sorted and manipulated without being subjected to import duties. However, if these goods are moved into a non-free trade zone, they will be subjected to customs duties. ASEAN has agreed to create an Free Trade Zones by 2003.
4. Tourist & Recreational Centers contain establishments that cater to both local and foreign visitors to the Ecozones. Such businesses include hotels, resorts, apartments and sports facilities.

Business establishments located and operating inside ecozones are referred to as "ecozone enterprises." An enterprise maybe operated by an individual, association, partnership or a corporation.

The brief descriptions of each type of Ecozone Enterprise follows:

{Private}- Export Enterprise - manufactures, assembles, or processes products which are 100% exported, unless a lower percentage is approved by PEZA.

- Free Trade Enterprise - imports and markets tax- and duty- free goods within the free trade area in the Ecozone. Goods brought outside the free trade area will be subject to customs and tariff duties.

- Service Enterprise - is engaged in any one or a combination of the following activities : customs brokerage, trucking/forwarding, janitorial, security, insurance and/or banking, consulting or any such service approved by PEZA.

- Domestic Market Enterprise - manufacturer, assembler or processor if goods that cannot export at least 50% of their output for a period of three years if majority-owned by Filipinos and at least 70% if majority-owned by foreign nationals.

-Pioneer Enterprise, with any of the following conditions:

- Manufactures, processes or produces goods not produced in a Commercial scale in the country;
- Uses a design, formula, scheme, method or process which is new and Untried in the Philippines;
- produces non-conventional fuels or manufactures equipment that utilizes non-conventional sources of energy ;
- develops areas for agri-export processing development; or
- given such a status under the Investment Priorities Plan.

- Utilities Enterprise - contracted to provide light and power, water supply and distribution, communications and transportation systems in the Ecozone.

- Facilities Enterprise - contracted to build and maintain necessary infrastructure such as warehouses, buildings, road networks, ports, sewerage and drainage systems, and other facilities considered as necessary by PEZA in the development and operations of the Ecozone.

- Tourism Enterprise - operates tourist accommodation facilities, restaurants, and sports and recreational facilities in the Ecozone.

- Ecozone Developer/Operator - develops, operates, and maintains the Ecozone, all component sectors (i.e. IEs, EPZs, Free Trade Zones, and Tourist/Recreational Centers) and all related infrastructure (roads, light and power systems, drainage facilities, etc.)

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