RMC No. 27-2007: Publishes the full text of RA No. 9400 entitled “An Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes”

Summary

RMC No. 27-2007 publishes the full text of Republic Act No. 9400, an Act amending Republic Act No. 7227, the Bases Conversion and Development Act of 1992. It covers tax treatment of the Subic, Clark, Poro Point, Morong and John Hay zones.

Key points

1. Subic Special Economic Zone. The SSEZ is run as a separate customs territory with tax and duty-free importation of raw materials, capital and equipment. Goods removed to other parts of the Philippines are subject to customs duties and taxes under the Tariff and Customs Code, the NIRC of 1997, as amended, and other tax laws. No national and local taxes are imposed within the SSEZ. Instead, business enterprises pay a 5% tax on gross income earned: 3% to the National Government and 2% to the SBMA for distribution to affected local government units.
2. Clark Freeport Zone. The Clark Air Base proper, of not more than 4,400 hectares, is declared a Freeport Zone, with the exception of the 22-hectare commercial area near the main gate and the 7.5-hectare Bayanihan Park. The CFZ is a separate customs territory with the same duty-free importation and removal rules. Registered enterprises pay a 5% tax on gross income earned in lieu of national and local taxes: 3% to the National Government and 2% to the treasurer’s office of the municipality or city where they are located.
3. Poro Point and Morong zones. New Section 15-A makes the 236.5-hectare secured area of the Poro Point zone a freeport and separate customs territory, with the same 5% gross income tax split 3% and 2%. New Section 15-B gives registered enterprises in the Morong Special Economic Zone tax and duty-free importation. They pay the 5% gross income tax in lieu of all national and local taxes except real property tax on land.
4. John Hay and new special economic zones. New Section 15-C gives registered enterprises operating in the John Hay Special Economic Zone after the Act takes effect the same incentives as Republic Act No. 7916, as amended, with PEZA registering, regulating and supervising them. The President may create special economic zones in listed areas of Pampanga, Tarlac, Bataan and Zambales by executive proclamation, subject to the concurrence of the local government units affected, with PEZA recommending for the Bataan and Zambales areas.
5. Conflicts and existing registrants. If national and local laws conflict on tax exemption privileges in the CFZ, PPFZ, JHSEZ and MSEZ, the conflict is resolved in favor of those zones. The CFZ and PPFZ remain subject to paragraphs (d) to (i) of Section 12 of RA No. 7227, as amended. Enterprises registered with the Clark Development Corporation, Poro Point Management Corporation, JHMC and Bataan Technological Park Incorporated keep their incentives until their contracts entered into before the effectivity of RA No. 9400 expire.
6. Monitoring and smuggling bar. The governing authorities submit to the Department of Finance their annual tax expenditures, and the DOF keeps a single database of all incentives and reports annually to the President. A registered business enterprise found guilty of smuggling by final judgment, as principal, accomplice or accessory, is perpetually barred from doing business in any freeport and special economic zone.

Who is affected

• Business enterprises in the Subic, Clark, Poro Point, Morong and John Hay zones
• Enterprises registered with CDC, PPMC, JHMC and BTPI

Deadlines and effectivity

• Issued April 16, 2007
• Existing registrants keep incentives until their contracts entered into before the effectivity of RA No. 9400 expire

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.