Bureau of Local Government Finance Opinion

August 24, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Leonardo B. Roman Provincial Governor Balanga, Bataan S i r : This refers to your letter dated January 25, 1999 requesting reconsideration of Revenue Regulations No. 12-97 dated August 7, 1997, implementing Sections 24(b) and (c) of Republic Act No. 7916, otherwise known as the Special Economic Zone Act of 1995. The assailed provision of the subject revenue regulations provides as follows: "Section 2. Definition of Terms . "xxx xxx xxx. "c. 'LGUs affected by the Declaration of the ECOZONES' refer to municipalities and cities within the metes and bounds of the ECOZONES as identified by PEZA in coordination with the Department of the Interior and Local Government (DILG) to receive a certain share in the amount equivalent to 1% of the 5% of gross income earned (GIE) paid by registered enterprises within and operating inside the secured area of the ECOZONES." Evidently, provinces have no share from the abovementioned 1% accruing to the affected LGUs. In this connection, please be informed that we are still in the process of reviewing the subject Revenue Regulations No. 12-97 and the possibility of amending the same to achieve the purpose for which it was promulgated is under consideration by this Department. Be informed further that Republic Act No. 8748, which amends Republic Act No. 7916, was signed into law on June 1, 1999. Section 24 thereof now provides as follows: "SEC. 24. Exemption from National and Local Taxes . Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONES. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the ECOZONES shall be paid and remitted as follows:" "(a) Three percent (3%) to the National Government; "(b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's office of the municipality or city where the enterprise is located." As it stands now, the aforestated provisions of the law has very little room for interpretation. The rule established is quite clear and explicit: that only lands owned by developers within the ECOZONEs are subject to real property taxes which provinces are authorized to levy under Section 232 of the Local Government Code of 1991, R.A. No. 7160. DACTSH Accordingly, provinces where ECOZONEs are situated shall, henceforth, enjoy some benefits in the form of real property taxes that could now be collected from lands owned by developers therein, considering that they share from the proceeds of the said tax. However, the two percent (2%) share from the five percent (5%) of the gross income earned by all business enterprises within an ECOZONE situated in a municipality or city shall still accrue exclusively to the municipal or city funds as the case may be. Very truly yours, (SGD.) EDGARDO B. ESPIRITU Secretary