PEZA to include separate incentives for exporters in Separate Incentives Regime for Exporters as part of PEZA’s upcoming bill amendments

The Philippine Economic Zone Authority (PEZA) is looking to amend Republic
Act 7916, also known as the Special Economic Zone Act of 1995. The draft
proposal they intend to file in Congress contains several significant changes,
most notably the establishment of a different set of incentives for exporters.

The Special Economic Zone Act of 1995, now on its 24 th year, establishes eco
zones in strategic locations and introduces various ways to attract foreign
investment to these zones.

The activities that qualify for a PEZA registration and incentives include export
manufacturing, information technology (IT), tourism, medical tourism, agro-
industrial export and bio-fuel manufacturing, logistics and warehousing services,
and utilities.

Proposed amendments

PEZA, a government agencythe agency in charge of promoting investments and
facilitating business operations in the country, has several amendments laid out
in the draft proposal. In an interview with Business World last April , PEZA
Director General Charito B. Plaza was mum about the rest of provisions. Here’s
what we know about the proposed changes.

  • Separate incentives for exporters and domestic-market firms
    First, PEZA wants to clearly establish different incentives for exporters and
    firms that serve the domestic market. Sincegranting incentives, and
    providing foreign organizations with assistance in their business
    operations.
  • Recently, PEZA has made several moves to amend Republic Act 7916 or the
    Special Economic Zone Act of 1995. This law, which is already on its 24 th year,
    establishes eco zones in strategic locations and introduces various ways to attract
    foreign investment to these zones.
  • The activities that qualify for a PEZA registration and incentives include export manufacturing, information technology (IT), tourism, medical tourism, agro-
    industrial export and bio-fuel manufacturing, logistics and warehousing services,
    and utilities.
  • manufacturing, information technology (IT), tourism, medical tourism, agro-
    industrial export and bio-fuel manufacturing, logistics and warehousing services,
    and utilities.
  • manufacturing, information technology (IT), tourism, medical tourism, agro-
    industrial export and bio-fuel manufacturing, logistics and warehousing services,
    and utilities.
  • manufacturing, information technology (IT), tourism, medical tourism, agro-
    industrial export and bio-fuel manufacturing, logistics and warehousing services,
    and utilities. This will balance out the proposed tax reforms in the TRABAHO (Tax
    Reform for Attracting Better and Higher Opportunities) Bill , which aims to
    cut the corporate income tax rate from 30 percent to 20 percent, among
    other changes.
  • Authority to recommend subsidies
  • The proposed amendment aims for exporters and domestic firms to have separate incentives package. According to Charito B. Plaza, PEZA’s current Director General, other countries have different separateincentives for exporters and domestic-market firms,Ms. Plaza believes this will which will attract more investors and create more competition in the regioncountry.Ms. Plaza also stated that having a separate incentivespackage will enable businesses in the country to have their needs addressed properly.

    This will balance out the proposed tax reforms in the TRABAHO (Tax Reform for Attracting Better and Higher Opportunities) Bill, which aims to cut the corporate income tax rate from 30 percent to 20 percent, among other changes.

Authority to recommend subsidies

With the separate incentives package, various types of businesses in the Philippines can see that their needs are addressed. These packages will make up for the affected exporters in the TRABAHO bill, the second tax reform package (after the TRAIN law).

This bill aims to phase out the 5% gross income earned (GIE) tax that companies in economic zone pay instead of local and national taxes. The removal of this fiscal incentive will end up discouraging investors and force them to pull out of the country.

The new packages created by PEZA will be built on the Department of Finance’s (DOF) four-point criteria which aretransparent, targeted, performance-based, and time-bound.

Authority to recommend subsidies
  • The PEZA boardPEZA is also pushing to be given authority to recommend subsidies for approval to the President. These subsidies will be given to PEZA-registered economic zone locatorsthat bring new technology to the country, invest at least US1 billion, and create a minimum of 5,000 jobs.,

    particularly to those who pledge to provide at least $1 billion. With the power to grant subsidies, PEZA will be able to suggest more incentives, including allowances to be given to key industries for electricity, lease, and other real estate costs.

PEZA as a government-owned and controlled corporation
  • The proposed amendment alsoThe proposed amendments may also include the transfer of PEZA from the Department of Trade and Industry (DTI) to the Office of the President, where it will function as a government-owned and controlled corporation.

“We are proposing an amendment to the PEZA law because the PEZA law is now 23 years old. There are so many weaknesses and [provisions are] lacking, like, for example, we want [the] PEZA to be directly under the OP already as a GOCC,” Ms. Plaza said in a news briefing last year.

“Right now, we are attached to the DTI and we don’t know our personality. Some say we are a GOCC, others say we are just a government instrumentality.”

This proposal, however, was met with considerable resistance from the DTI Trade Secretary and the chairman of the Philippine Chamber of Commerce.recommendsplacing PEZA under the Office of the President instead of the Department of Trade and Industry (DTI) where it is currently under. This move comes after the impending formation of the Fiscal Incentives Regulatory Board (FIRB), a new agency to be created under the Comprehensive Tax Reform Program (CTRP).

However, this proposal, which was discussed last July 2018, was met with considerable resistance by the DTI Trade Secretary and the chairman of the Philippine Chamber of Commerce.

Plaza announced that the agency already has a draft proposal for the amendment. However, she did not provide other details of the draft. PEZA plans to file the proposed bill amendment in the next Congress.PEZA aims to submit the draft proposal in Congress, although no further details were divulged.

To learn more about relevant Philippine laws and policies on tax incentives in the Philippines, get in touch with Duran & Duran-Schulze Law . Call (+632) 478 5826 or email info@duranschulze.com for inquiries.

References:

PEZA wants separate incentives regime for exporters in upcoming bill

DTI, business groups oppose transfer of Peza to OP

PEZA


http://www.peza.gov.ph/index.php/about-peza
https://www.rappler.com/newsbreak/iq/210783-things-to-know-trabaho-bill-tax-reform

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