BIR Ruling [DA-135-97]

March 31, 1997 BIR RULING [DA-135-97] The Chairman Committee on Ways and Means House of Representatives Attention: Mr . Mauricio R . Pulhin Committee Secretary S i r : This refers to the proposed House Bill No. 214, entitled "An Act Creating the Sangley Point Development Authority, transferring the Sangley Point Base Military facilities, and vesting the authority with the power to administer, operate and develop the Sangley Point Special Economic Zone, appropriating funds therefore, and for other purposes", which seeks to grant the following tax incentives, viz: cdta "SEC. 12. Sangley Point Special Economic Zone . xxx xxx xxx (c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national shall be imposed within the Sangley Point Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Sangley Point Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the City of Cavite and the Province of Cavite. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all business and enterprises within the Sangley Point Special Economic Zone to be utilized for the development of the municipalities outside the City of Cavite, with priority given those municipalities contiguous to the zone area". In case of conflict between national and local laws with respect to tax exemption privileges in the Sangley Point Economic Zone, the same shall be resolved in favor of the latter;" Comment Since the foregoing incentive provision is more advantageous than the tax incentives grant to PEZA and SBMA registered/accredited enterprise which are subject to the preferential tax rate of 5% based on the gross income earned, the abovecited provision in Section 12 of the HB No. 214 should be reconciled with those provided for in R.A. No. 7227 and R.A. No. 7916, so as not to create a disparity in privileges among ECOZONE registered enterprise. Considering that the establishment of a special economic zone in Sangley Point is a national policy concern, this Office support the laudable object as in the grant of tax incentives similar to those enjoyed by PEZA and SBMA enterprise, to encourage the entry of foreign investors in the country. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue