The SBMA And CDC in the Philippines

Republic Act No. 7227, otherwise known as the Bases Conversion Act of 1992, created the Bases Conversion Development Authority (BCDA), and while carrying out its primary mission, also accelerated the conversion and development of baselands as well as promoting the social and economic development of Central Luzon via the Subic Bay Metropolitan Authority (SBMA) and the Clark Development Corporation (CDC), whose sites are former US military facilities.

In April 2007, R.A. 9400 was signed amending R.A. 7227, declaring the 4,400-hectare Clark Air Base Proper as a Freeport Zone. This places Clark on equal legal footing with the Subic Freeport Area, especially in the areas of tax and other fiscal incentives which can be offered to current and potential locators.

Both SBMA and CDC grant essentially the same sets of incentives to registered Subic Bay Freeport (SBF) and Clark Freeport Zone (CFZ) enterprises. They are managed as separate custom territories, ensuring free flow of articles within the zones.

Qualifications

100% foreign equity is allowed for many types of industries including manufacturing, tourism and service-oriented businesses. Business must be located within either zone to qualify.

Fiscal Incentives

• Income Tax Holiday (ITH) for 6 years, extendible up to 8 years
• 5% tax rate imposition on gross income, provided that 70% of products are to be exported
• Zero Value Added Tax (VAT) rating on local purchases
• Exemptions from Real Property Tax

Non-Fiscal Incentives

• Duty Free importation of capital equipment, raw materials and finished goods subject to 70% minimum export requirement
• Free movement of finished goods within the Customs Territory
• Special Visas for Investors
• Unlimited purchase and consumption of tax and duty free goods within the Freeport Zone
• Research and Development allowed as deduction for Manufacturing, Trading and Service Enterprises under RR 16-99

Requirements:

• Letter of Intent accompanied by Project Evaluation Form;
• Certified true copy of Business Registration (i.e., SEC Papers, License to Transact Business in the Philippines, DTI Registration), exclusively for handling Clark or Subic Operations;
• Letter of Endorsement of Lessee (Sub-lessor);
• Signed and notarized Sub-lease Agreement;
• Proof of Financial Capability (any or all of the following):
  – Latest audited financial statements (AFS) of applicant firm (or parent company, if applicable) stamped “Received” by BIR
  – Latest income tax return (ITR) of applicant firm (or parent company, if applicable)
  – Bank certification of deposits or approved loan or credit line (if equity financing is less than total project cost);
• Resume of stock holders and key management officers;
• Proposed site development plan (with perspective drawings), construction timetable, and financial schedule;
• Board Resolution of duly authorized company representative/signatory;
• Production process flow chart (i.e. Copy of Systems/Schematic Diagram or Basic Network configurations), if applicable;
• Company brochures, if any;
• Environmental Impact Statement (for environmentally-critical projects or those to be located in environmentally critical areas);
• Formalities (licenses, permits, etc.) with the National Telecommunications Commission (NTC); and
• Franchises from Congress, if applicable.

Procedure:

• Submit Letter of Intent, Company Profile, Project Features, and Project Requirements;
• Evaluate potential project sites and Terms of Contract provided by CDC;
• Present application to the SBMA board for approval;
• Complete necessary requirements upon approval of application; and
• Secure signed copy of Lease Agreement and Certification of Registration.

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