AMENDING PRESIDENTIAL DECREE NO. 66 DATED NOVEMBER 20, 1972, ENTITLED "CREATING THE EXPORT PROCESSING ZONE AUTHORITY AND REVISING REPUBLIC ACT NO. 5490."

• Number: Presidential Decree No. 1449
• Sections: 9

Preamble

WHEREAS, there is imperative need to restructure the

provisions of Presidential Decree No. 66 in order to make it more responsive to

the requirements of investments in export processing zones, and to insure the

effectiveness of the Export Processing Zone Authority in the performance of its

duties and responsibilities and in the attainment of the national policy

enunciated in the law;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution, do hereby

decree and promulgate the following amendments to Presidential Decree No. 66

dated November 20, 1972, which are hereby approved, adopted and made part of the

law of the land:

Section 1

SECTION 1. Section four of Presidential Decree No. 66 is

hereby amended by adding two new paragraphs after paragraph (k) thereof to read

as follows:

"SEC. 4. Purpose and Specific Powers.—The purposes

and specific powers of the Authority are as follows:

To invest in, acquire or otherwise deal in real estate, or any interest

therein, as well as in personal property of every kind and description; and in

meritorious cases and upon prior approval of the National Economic and

Development Authority, to grant loans and advances for the operation or

expansion of zone registered enterprises upon such terms and conditions as the

Board may prescribe;

By itself or in cooperation with private persons or entities, to organize,

finance, invest in or operate subsidiary corporations when such an arrangement

is necessary to provide utilities and other amenities which cannot be reasonably

provided by existing entities. All other investments in zone registered

enterprises shall need prior approval of the NEDA."

Section 2

SEC. 2. Section five of the same Decree is hereby amended to

read as follows:

"SECTION 5. Capitalization.—The capital of the

Authority shall consist of (1) its existing assets and such other properties as

may be contributed to the Authority by the Government to form part of capital,

(2) all capitalized surplus, and (3) cash contribution by the Government in the

amount of one billion pesos, which is hereby appropriated out of any fund in the

National Treasury not otherwise appropriated, be they collection from any or all

taxes accruing to the general fund or proceeds from loans, the issue of bonds,

treasury bills or notes, or derived from any other sources of income, by or of

the National Government, which amount shall be programmed and released by the

Budget Commission with approval of the President, in accordance with the

schedule of development and expenditure to be prepared and submitted by the

Authority: Provided, however, That any budgetary outlay allocated and

released in favor of the Export Processing Zone Authority and/or Foreign Trade

Zone Authority shall be correspondingly credited to the authorized

capitalization herein provided."

Section 3

SEC. 3. Paragraph (d) of Section eleven of the same Decree

is hereby amended to read as follows:

"SECTION 11. Powers and Duties of the Board.—The

Board shall have the following powers and duties:

Upon the recommendation of the Administrator, to determine the

organizational structure, the number, salaries and other fringe benefits of the

officers, employees and consultants of the Authority and its subsidiaries. As

far as practicable, the remunerations and allowances shall be competitive with

rates prevailing in the private sector as shall be determined by the Board."

Section 4

SEC. 4. Section eighteen of the same Decree is hereby

amended by adding three new paragraphs after paragraph (f) thereof and amending

paragraph (f) to read as follows:

Exemption from Local Taxes and Licenses.—Notwithstanding the

provisions of law to the contrary, zone registered enterprises shall, to the

extent of their construction, operation or production inside the zone be exempt

from the payment of any and all local government imposts, fees, licenses or

taxes except real estate taxes which shall be collected by the Municipality

responsible for the collection thereof under the provisions of the Real Property

Tax Code: Provided, That machineried owned by zone registered

enterprises which are actually installed and operated in the Zone for

manufacturing, processing or for industrial purposes shall not be subject to the

payment of real estate taxes for the first three (3) years of operation of such

machineries: Provided, further, That fifty percent of the proceeds of

the real estate taxes collected from all real properties located in the Zone and

such other areas owned or administered by the Authority shall be remitted to the

Authority by the municipality responsible for the collection of such taxes under

the provisions of the Real Property Tax Code. All real estate taxes accruing to

the Authority as herein provided shall be expended for such community

facilities, utilities and/or services as the Board may determine.

Deduction for Labor Training Expenses.—A deduction from taxable

income of one-half the value of labor training expenses incurred for upgrading

the productivity and efficiency of unskilled labor shall be granted to a zone

registered enterprise: Provided, That such training program is duly

approved by the appropriate government agency or in the absence thereof by the

Board: Provided, further, That such deduction shall not exceed ten

(10%) percent of the direct labor wage.

Deduction for Organizational and Pre-Operating Expenses.—All

capitalized organizational and pre-operating expenses attributable to the

establishment of a zone registered enterprise may be deducted from its taxable

income over a period of not more than ten (10) years beginning with the month

the enterprise indicated the desired amortization period at the time of the

filing of income tax returns for the first taxable year. For the purpose of this

provision, organizational and pre-operating expenses shall include expenses for

pre-investment studies, start-up costs, cost of initial recruitment and training

and similar expenses.

Tax Credit.—Every registered zone enterprise shall enjoy a tax

credit equivalent to the sales, compensating and specific taxes and duties on

supplies, raw materials and semi-manufacture products used in the manufacture,

processing or production of its export products and forming part thereof:

Provided, That the tax credit shall accrue to the registered zone

enterprise only after the final product has in fact been exported. The tax

credit shall be used by the Secretary of Finance, upon presentation of the

export documents, and shall be in lieu of refunds. It may be used to pay taxes,

duties, charges and fees due to the national government in connection with its

operations. A tax credit shall be non-transferable, except when such transfer is

by hereditary succession or occurs by operation of law; it may be use by the

person or entity to whom it is issued only for as long as its enjoys the

benefits and incentives provided for in this Decree; and may not be used so as

to result in a refund."

Section 5

SEC. 5. The second paragraph of Section nineteen of the same

Decree is hereby amended to read as follows:

"SECTION 19. Power to Issue Bond or Incur

Indebtedness.—x x x.

The total principal domestic indebtedness of the Authority payable in

Philippine currency shall not at any one time exceed seven hundred fifty million

pesos, while the total principal indebtedness of the Authority payable in

foreign currency shall not at any one time exceed one hundred million United

States dollar or the equivalent thereof in other foreign currencies qualified to

form part of the international reserves of the Central Bank: Provided,

That such foreign indebtedness may be contracted from foreign governments or any

public or private fund sources; and Provided, further, That such

borrowing shall be subject to approval by the President under such rules and

regulations as he may promulgate. The bonds and other instruments of

indebtedness which the authority is authorized to issue under this section and

any income derived therefrom shall, except those contracted with private

international banking and financial institutions, be exempt from the payment of

all taxes of whatever kind and nature including withholding taxes imposed by the

Republic of the Philippines, its agencies, instrumentalities or political

subdivisions, which fact may be expressed on the face thereof, and shall be

eligible as collateral in any transaction with the national or any local

government, its agencies and instrumentalities, including government-owned or

controlled corporations and government banking and financial institutions, in

which collateral is required. Any or all loans or instrument of indebtedness

which the authority is authorized to contract or issue under this section shall

be unconditionally guaranteed both as to principal and interest by the

Government of the Republic of the Philippines."

Section 6

SEC. 6. Section twenty-three of the same Decree is hereby

amended to read as follows:

"SECTION 23. Eminent Domain.—For the acquisition of

right of way, or for any property for the establishment of export processing

zones, low-cost housing projects, schools, hospitals, markets, playgrounds and

such other facilities and utilities as are normally required of a modern human

settlement, or for the protection of watershed areas, or for the construction of

dims, reservoirs, wharves, piers, docks, quays, warehouses and other terminal

facilities, structures and approaches thereto, the Authority shall have the

right and power to acquire the same by purchase, by negotiation, or by

condemnation proceedings. Should the Authority elect to exercise the right of

eminent domain, condemnation proceedings shall be maintained by and in the name

of the Authority and it may proceed in the manner provided by

law."

Section 7 Repealing Clause.

SEC. 7. Repealing Clause.—All laws, executive

orders, rules and regulations or part thereof inconsistent with this Decree are

hereby repealed and/or modified accordingly.

Section 8 Effectivity.

SEC. 8. Effectivity.—This Decree shall take effect

upon its approval.

Done in the City of Manila, this 11th day of June, in the year of Our Lord,

nineteen hundred and seventy-eight.

(Sgd.) FERDINAND E. MARCOS

President of the

Philippines

By the President:

(Sgd.) JACOBO C. CLAVE

Presidential Executive

Assistant