Operating and Investing

In the PEZA-Zones

In a Time of Pandemic

September 11, 2020

Joint Bilateral Chambers Webinar

Status of Operationnationwide

Total Number of Companies Total Number of Workers

OPERATING

Operational companiesnationwide

*including skeletal force (with operations and WFH)

NON-OPERATING

No Production/ No Operation

475

15%

381,587

24%

2,633 1,176,389

76%

IT/BPO 77%

MANUFACTURING 90%

BREAKDOWN OF OPERATING SECTORS NATIONWIDE

85%

Zone Reports On Operations for the Period of August 23-27, 2020

o

86%

76%

90%

14%

24%

10%

OPERATIONAL NON-OPERATIONAL

*2,205 out of 2,557 companies

in LUZON

*385 out of 503 companies

in VISAYAS

*43 out of 48 companies in MINDANAO

Zone Reports On Operations for the Period August 23-27, 2020

LUZON VISAYAS MINDANAO

INCREASING DOMESTIC

MARKET SALES

THRESHOLDS FOR

LOCATORS

Increasing Domestic Market Sales Thresholds for Locators

• PEZA has initiated this policy recommending higher local sales allowance (LSA) forecozone locators, particularly for foreign-owned companies to put them on equal footingwith Filipino-owned locator companies (following the principle of MFN treatment andreciprocity in trade). By increasing the LSA for foreign locator companies from 30% to50%, this will benefit not just the export producers with their expanded sales andincreased access to the domestic market but also the local economy through theecozones’ enhanced forward and backward linkages, and local consumers’ access toquality export products.

• As a COVID-19-19 management measure, increasing the LSA is one-way PEZA can assistthe locators survive the pandemic by enabling them to operate and manufactureproducts for sale more to the local market while global demand for their export productsis down. In the process, PEZA is able to keep the locators afloat as well as the economy byensuring the continuous operations of locators and thereby, sustaining the created jobs,livelihood and other economic opportunities. The Lower House Committee on EconomicAffairs is supportive of this policy measure for inclusion in the proposed Stimulus Act.

Increasing Domestic Market Sales Thresholds for Locators

• Moreover, PEZA is proposing to lower the export threshold forforeign-owned companies from 70% to 50% as a key amendmentto the PEZA law. In the CREATE bill, however, it favors the increasein export threshold from 70% to 90% to benefit the locators with90% + export sales by way of exemption from the VAT refundsystem.

• On the immediate term, PEZA may allow locators to go beyondtheir annual local sales threshold for 3 consecutive years subject toissuance of a LOA.

EXTENSION ON THE

PAYMENT OF RENT FOR

PEZA LOCATORS

Extension on the Payment of Rent for PEZA Locators

• Under the guidelines issued by IATF and DTI, itprovides for a 30-day deferment of payment of rentby lessees to the lessors. In the case of PEZA, itapproved the grant of 90-day extension (maximum)on public ecozone locators’ payment of rental duesfor land and/or building owned by PEZA. PEZA canonly encourage (not compel) the private ecozonedevelopers and facilities providers to extend thesame reprieve to their respective tenant-locators.

TAX DEDUCTIONS ON

TRAININGS

Extension on the Payment of Rent for PEZA Locators

• The PEZA law allows for additional deduction for training expenses equivalent to 50%of the value of training expenses incurred in developing skilled or unskilled labor orfor managerial or other management development programs incurred by ecozonelocators (or as much as 100% if locators are operating in ecozones located in lessdeveloped areas). The same shall be deductible from the national government’sshare of 3% from the 5% GIT payments of ecozone locators. However, PEZA is unableto extend this particular incentive to the locators in the absence of guidelines fromthe DOF and DOLE.

• Incidentally, the tax deductions on trainings is not among those allowed by PEZA forinclusion in the allowable deductions as a COVID-19 management measure (note:COVID-19-related expenses allowed for tax deductions from the 5% GIT includelocators’ expenses for PPEs, housing, food, transportation and port congestioncharges).

• CREATE bill has included this incentive on tax deductions on trainings among the newincentives to be offered to new investors.

ADDITIONAL GRANT OF

INCOME TAX HOLIDAYS

Extension on the Payment of Rent for PEZA Locators

• This will require a new legislation or amendment of thePEZA law.

• The CREATE bill proposes 2-3-4 years of ITH + 10-11-12 years of 5% GIE, including 40 years of ITH for big ticketand strategic projects.

TRAVEL BAN

EXEMPTION

Source: https://www.voanews.com/science-health/coronavirus-outbreak/philippine-president-says-those-violating-anti-virus-measures

https://www.facebook.com/MIAAGovPh/posts/1506467339519038

Extension on the Payment of Rent for PEZA Locators

• While GCQ is still in effect, the travel ban on inboundforeign nationals cannot be lifted yet pursuant to thedirective of the IATF and DFA. However, PEZA has astanding arrangement with the DFA where PEZA mayendorse to the DFA for issuance of travel ban exemptionfor ecozone locator expats arriving in the Philippinesunder essential travels.

ASSISTANCE TO

LOCATORS FOR WFH

ARRANGEMENTS

Extension on the Payment of Rent for PEZA Locators

• PEZA has extended the WFH LOAs until December 31, 2020, and wherelocators may avail of WFH arrangement for their workers provided thatthe revenues derived from WFH shall not exceed 90% (originally peggedat 30% of revenues under the old guidelines). PEZA will also write BOCfor the waiver of the surety bond requirement (representing the valueof VAT due on computer items to be brought out from the zone) for ITcompany-owned computer equipment to be lent to its employeesunder WFH arrangement.

• Moreover, in support of the WFH scheme as a COVID-19 preventionmeasure, the Bayanihan Act recognizes the homes of workers underWFH as extension of the workplace while the country is underpandemic.

WHAT IS

PEZA’S

DOLLAR

PROGRAM?

PEZA’s Dollar Program forms part of PEZA’s New Ten Point Agenda. In

support of Administrative Order No. 18, “Accelerating Rural Progress

through the Robust Development of Special Economic Zones” in the

Countryside and respond to herein directive to provide interventions to

strengthen ecozones in the countryside and hasten human capital and

infrastructure development.

•

•

•

•

•

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Innovation & Livelihood Expo:

Locators and other PEZA-registered enterprises need project-based suppliers which can be

outsourced from our entrepreneurs and small and single proprietor business owners.

Import and Export Expo:

This expo provides the matching of our local produce and raw materials with that of the need of

our exporters.

Logistics, Transportation, Utilities and Supply Chain Expo:

Through Joint Ventures and PPP, this aims to accelerate rural progress and build eco-towns,

mega ecozones, eco-cities, food terminals in every region, utility providers for ecozones,

construction of dormitories & shuttle services providers for workers, and new metropolitan areas

in every region.

“Made in the Philippines is Best,

The Philippines isBest to Invest in”

PHILIPPINE ECONOMIC ZONE AUTHORITY10th Flr. DoubleDragon Center WEST Bldg., DD Meridian Park,

Macapagal Avenue, Pasay City, 1302, Metro Manila

www.peza.gov.ph

www.facebook.com/PEZAPH