Investors FAQs

Part 3: Special Economic Zone Act

Special Economic Zone Act of 1995 (Republic Act No. 7916)

General Overview

Q1 What is the Special Economic Zone Act of 1995?
Republic Act No. 7916 is a Philippine law that promotes economic growth by establishing special economic zones (Ecozones) to attract investment, create jobs, and develop industries and tourist centers.
Q3 What different types of Ecozones did the Act establish?
The Act established various types of zones, including:
  • Industrial Estates (IEs)
  • Export Processing Zones (EPZs)
  • Free Trade Zones
  • Tourist and Recreational Centers

Administration and Incentives

Q4 Which agency is responsible for overseeing the Ecozones?
The Philippine Economic Zone Authority (PEZA) is the primary government agency responsible for planning, monitoring, and implementing Ecozone policies.
Q6 How do Ecozone enterprises pay taxes?
In lieu of standard national and local taxes, businesses within the Ecozone remit five percent (5%) of their gross income earned to the national government.

Major Amendments (R.A. No. 8748)

The 1999 amendment (RA 8748) streamlined PEZA’s structure and solidified tax exemptions for zone establishments.
Q9 How did RA 8748 affect tax exemptions?
Except for real property taxes on land owned by developers, no national or local taxes are imposed on Ecozone businesses. They instead fulfill their tax obligations through the 5% gross income tax.

5% Gross Income Tax Distribution

Q10 How is the 5% tax distributed under the amended law?
The distribution formula was simplified under RA 8748:
  • Three percent (3%) is remitted to the National Government.
  • Two percent (2%) is directly remitted to the treasurer’s office of the municipality or city where the enterprise is located.