Classification of PEZA Registered Enterprises in the Philippines

An ecozone registered enterprise in the Philippines refers to any person, firm, association, partnership, corporation, or any other form of business organization, registered with the Philippine Economic Zone Authority as such based on its qualifications. In simple and plain language, the ecozone registered enterprise in the Philippines is the PEZA registered entity – by activity and by location.

PEZA registered entity are classified based on the nature of the registered activity as follows:

Ecozone Export Enterprise in the Philippines

Ecozone export enterprise refers to an individual, association, partnership, corporation or other form of business organization which has been registered with the PEZA to engaged in manufacturing, assembling or processing activity falling within the purview of the Act and resulting in the exportation of 100% of its production, unless a lower percentage of its production for exportation is prescribed by the PEZA Board subject to such terms and conditions as the latter may determine.

Ecozone Domestic Market Enterprise in the Philippines

Ecozone Domestic Market Enterprise refers to an individual, association, partnership, corporation or other form of business organization which has been registered with the PEZA to engaged in manufacturing, assembling or processing activity falling within the purview of the Act and resulting in the sale of its finished products in the customs territory or in the non-restricted or authorized areas in which the ecozone in its entirety or it exporting a portion of its production output, it continually fails to export at least fifty percent (50%) thereof for a period of three (3) years without any justifiable reason in case at least 60% of its working capital is owned by Philippine nationals or in case more than 40% of its working capital is owned by foreign nationals, it continually fails to export at lease seventy percent (70%) of its production output for a period of three (3) years without any justifiable reason.

Ecozone Free Trade Enterprise in the Philippines

Econzone Free Trade Enterprise refers to an individual, association, partnership, corporation or other form of business organization which has been registered with the PEZA to engage in the importation of goods or merchandise within the restricted or free trade area in the ecozone tax and duty-free for immediate transhipment or for storage, repacking, sorting, mixing or manipulation and subsequent exportation unless the Board allows the sale thereof in the customs territory subject to the payment of customs duties and internal revenue taxes to such other terms and conditions as it may determine.

Ecozone Utilities Enterprise in the Philippines

Ecozone ulitilies enterprise shall refer to a business entity or concern within the ecozone duly registered with and/or franchised / licensed by the PEZA with or without the incentives provided under Republic Act No. 6957, as amended, (the Build-Operate-Transfer Law) and / or with or without financial exposure on the part of PEZA, such as contractors / operators of light and power systems, water supply and distribution systems, communications and transportation systems within the ecozone and other similar ancillary activities as may be determined by the Board.

Ecozone Facilities Enterprise in the Philippines

Ecozone facilities enterprise shall refer to a business entity or concern within the ecozone duly registered with and/ or franchised / license by the PEZA with or without incentives provided under Republic Act No 6957, as amended, (the Build-Operate-Transfer Law) and / or with or without financial exposure on the part of the PEZA such as contractors / operators of buildings, structures, warehouses, site development and road network, ports, sewerage and drainage systems and other facilities for the development, operation and maintenance of the ecozone and other similar or ancillary activities as may be determined by the Board.

Ecozone Developer / Operator in the Philippines

Ecozone developer or operator refers to a business entity or concerns duly registered with and / or licensed by the PEZA to develop, operate and maintain an ecozone or nay or all of the components of industrial estate (IE), export processing zone (EPZ), free trade zone or tourist / recreational center and the required infrastructure facilities and utilities such as light and power system, water supply and distribution system, sewerage and drainage system, pollution control devices, communication facilities, paved road network, administration building and other facilities as may be required by the PEZA. The term shall include the PEZA and / or the Local Government Unit when by themselves or in joint venture with a qualified private entity, shall act as the Developer / Operator of the ecozones. As such, they shall be entitled to the same incentives under Rule XIV of the PEZA implementing Rules and Regulations in accordance with the pertinent provisions of the Act and the Code.

Ecozone Service Enterprises in the Philippines

Ecozone service enterprise shall refer to a business entity or concern within the ecozone such as but not limited to those engaged in customs brokerage, trucking / forwarding services, parcel services, janitorial services, security services, insurance, and / or banking services, consultancy services, restaurants or such other services, within the ecozone as may be determined by the Board, duly registered and / or licensed by the PEZA whose income derived within the ecozone shall be subject to taxes under the National Internal Revenue Code, as amended, pursuant to Section 15 of the Republic Act No. 7915, as amended.

Ecozone Tourism Enterprise in the Philippines

Ecozone tourism enterprise shall refer to an individual, association, partnership, corporation or other business organization duly registered with PEZA to engage in the establishment of tourist-oriented accommodations, restaurants operated as an integral part of a tourism facility (e.g. hotels, resorts, recreational centers) sports and recreational facilities within the ecozone.

Summary

The above classifications refers to registered business entities based on their nature of operations registered with the PEZA in the Philippines. In registering a business entity, documentary requirements would vary based on the classification of ecozone enterprise intended to be established. Likewise, incentives attaches to such registered activity of the registered enterprise and not necessarily to the entire ecozone enterprise itself.

References:

• Republic Act No. 7916 – Special Economic Zone Act
• Implementing Rules and Regulations of RA No. 7916

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.

Under Republic Act No. 7916, as amended, otherwise known as “The Special Economic Zone Act 0f 1995” administered by the Philippine Economic Zone Authority (PEZA), ECOZONES or “special economic zones” (SEZ) are established as a separate customs territory to promote flow of local and foreign investments that would generate employment opportunities, simulate the repatriation of Filipino capital by providing attractive climate and incentives for business activity,  and for other purposes.

What are Ecozones in the Philippines or “special economic zones” (SEZ)?

Ecozones in the Philippines or “special economic zones” (SEZ) are selected areas of highly developed or which have the potential to be developed into agri-industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamation.

How are ecozones in the Philippines classified?

Ecozones in the Philippines or “special economic zones” (SEZ) may contain any or all of the following classifications of economic zones in the Philippines:

• Industrial Estates in the Philippines

Industrial Estates in the Philippines refers to a tract of land subdivided and developed according to a comprehensive plan under a unified continuous management and with provisions for basic infrastructure and utilities, with or without pre-built standard factory buildings and community facilities for the use of a community if industries.

• Export processing Zones in the Philippines

Export processing Zones in the Philippines (EPZ) refers to a specialized industrial estate located physically and/or administratively outside the customs territory and predominantly oriented to export production. Enterprises located in export processing zones are allowed to import capital equipment and raw materials free from duties, taxes and other import restrictions.

• Free trade zones in the Philippines

Free trade zones in the Philippines refers to an isolated policed area adjacent to a port of entry (such as a seaport) and/or airport where imported goods may be unloaded for immediate transhipment or stored, repacked, sorted, mixed, or otherwise manipulated. However, movement of these imported goods from the free-trade area to a non-free trade area in the territory shall be subject to customs and internal revenue rules and regulations.

• Tourist / Recreational Centers in the Philippines

Tourist or Recreational Center in the Philippine refers to an area within the ECOZONE where tourist accommodation facilities such as hotels, apartelles, tourist inns, pension houses, resorts, sports and/or recreational facilities are provided to render tourism services for both local and foreign tourists, travellers and investors in accordance with guidelines issued by PEZA.

Is there a criteria in establishing an ecozone in the Philippines?

The Implementing Rules and Regulations of Republic Act No. 7916 provides specific general criteria in Rule IV to ensure their viability and geographical dispersal such as the following, and other specific criteria may be provided in line with other laws and regulations upon application:

1. Identification of the proposed areas as a regional growth center in th Medium-Term Philippine Development Plan or by the Regional Development Council;
2. The existence of required infrastructure in the proposed ECOZONE, such as roads, railways, telephones, ports, airports, etc., and the suitability and capacity of the proposed site to absorb such improvements;
3. The availability of water source and electric power supply for use of the ecozone in the Philippines;
4. The extent of vacant lands available for industrial and commercial development and future expansion of the ecozone in the Philippines as well as of lands adjacent to the ecozone available for development of residential areas for the ecozone workers;
5. The area must have significant incremental advantage over the existing ecozone and its potential profitability can be established;
6. Strategic location of the area for economic zone in the Philippines;
7. The area must be situated where controls can easily be established to curtail smuggling activities.

How many economic zones are there in the country?

According to PEZA, there are two hundred seventy seven (277) operating economic zones all throughout the Philippines as of December 31, 2012 broken down as follows:

• 17 Agro-industrial Economic Zones
• 178 IT Parks / Centers
• 65 Manufacturing Economic Zone
• 2 Medical Tourism Parks / Centers
• 15 Tourism Economic Zones

References:

• Republic Act No. 7916 – Special Economic Zone Act
• Implementing Rules and Regulations of RA No. 7916
• Philippine Economic Zone Act Website (www.peza.gov.ph)

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.