BIR Ruling [DA-022-05]

January 20, 2005 BIR RULING [DA-022-05] Bases Conversion and Development Authority BCDA Corporate Center, Gozar corner Lucas Streets Villamor Air Base, Pasay City Attention: Arnel Paciano D. Casanova General Counsel Gentlemen : This has reference to your letter dated April 2, 2004 requesting for confirmation of your opinion that the John Hay Special Economic Zone (JHSEZ) still enjoys the investments and tax incentives notwithstanding the nullification by the Supreme Court of the second sentence of Section 3, Proclamation 420 ( Creating and Designating a Portion of the Area Covered by the Former Camp John Hay Special Economic Zone Pursuant to Republic Act No. 7227 ), in SC G.R. No. 119775 (October 24, 2003). AcTDaH Section 3 of Proclamation No. 420, provides: SEC. 3. Investment Climate in John Hay Special Economic Zone . Pursuant to Section 5(m) Section 15 of Republic Act No. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulations governing the zone, including investment incentives, in consultation with pertinent government departments. Among others, the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No . 7227 and those applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of 1987, the Foreign Investment Act of 1991, and new investment laws that may hereinafter be enacted . (Emphasis supplied) The constitutionality of the aforestated provision was questioned before the Supreme Court by the Sangguniang Panglunsod ng Baguio. The Court, in its decision dated October 24, 2003, declared that: "WHEREFORE, the second sentence of Section 3 of Proclamation No. 420 is declared NULL AND VOID and is accordingly declared of no legal force and effect." With the foregoing pronouncement, you now submit the view that since the first sentence of Section 3 of Proclamation No. 420 was not declared unconstitutional, the first sentence which remained to be a valid portion can be enforced. As such, JHSEZ can enjoy the tax immunity and financial incentives enunciated therein. It is worth mentioning that the characteristic of your request for confirmation and the issue that has been "initially" resolved by the Court is the tax incentive particularly the tax exemption of the JHSEZ which is still under a Motion for Reconsideration. Thus, whether JHSEZ enjoys the tax exemption granted to Special Economic Zones under R.A. 7227 is still for the Court to decide. Considering the similarity of the matter which is the subject for discussion, this Office hereby suspends its authority to act on your request since the issue is sub judice . Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group