Assurances of Tax Incentives and Some Guidelines from CDC/CILA Meeting
CLARK FREEPORT Thurday March 27, 2008 – At a meeting of the Clark Investors and Locators Association (CILA) on Thursday in the Clark Freeport Zone, the Clark Development Corporation (CDC) told the locators that they are not in danger of loosing their tax incentives, until the contracts which were entered into prior to the Republic Act (RA) 9400 expire.
The meeting specifically addressed Implementing Rules and Regulation (IRR) of RA 9400 -- "An act amending RA 7227, otherwise known as the Bases Conversion and Development Act of 1992.”
The following six provisions of IRR or RA 9400 were highlighted:
1. Operation and management of the Freeport and special economic zones (CSEZ)..
2. Administration of tax incentives.
3. Payment disbursement of the five percent tax on gross income earned (GIE).
4. Bookkeeping requirements.
5. Tax incentives as applied to currently registered enterprises.
6. The exceptions of incentives as personified in the law. The Clark Freeport Zone (CFZ) will cover a total area of 4,400 hectares; commonly referred to as the Main Zone, the remaining 27,600 hectares is considered the Clark Special Economic Zone (CSEZ).
As provided by the RA 9400 IRR, the Clark Freeport, administered by the BCDA, through a agreement with CDC, is to manage the businesses located within the Main Freeport Zone (CFZ). The Freeport is to be maintained as a separate and self-sustained “customs-territory” ensuring the free movement of goods and capital equipment to and from the zone.
Additionally, the following tax incentives apply to the Freeport Zone. A tax of only 5 percent on GIE is to be paid and remitted by Freeport enterprises, with three percent going to the National Government and two percent to the local government units.
Whereas the Philippine Economic Zone Authority (PEZA), through an agreement entered with CDC, is to serve as the administrative authority of incentives for business entities located within the CSEZ.
Most importantly, ecozone and freeport companies will have to keep regular and accurate records of their transactions, including importations, and maintain books of accounts and allied documents in accordance with the bookkeeping rules and regulations prescribed by the Bureau of Internal Revenue (BIR).
Also, these bookkeeping documents must be made accessible to inspection and verification by authorized officers of the individual authorized agency managing the specific zone, be it the Freeport Zone or the economic zone authority.
The BIR, in close harmony with CDC, during normal office hours, is authorized to conduct an audit, check, or inventory count for verification purposes, and to reconcile records with the inventory of articles in the Freeport.
Each incentives administration authorities in the ecozones and freeports will be required to submit annual tax expenditures, in four quarterly reports during the year, to the Department of Finance.