Renewal of business permits for PEZA-registered enterprises

Renewal of business permits for PEZA-registered enterprises by: Arnold P. Supilanas

Most businesses are busy applying for the renewal of their business permits with their respective local government units (LGU) to beat the January 20 deadline for the payment of business tax due. Philippine Economic Zone Authority (PEZA)-registered companies, on the other hand, are still in a dilemma on how to contest the LGU requirement to pay licenses, fees and charges in the renewal of their business permits.

Are these PEZA-registered enterprises really required to secure or renew their business permits?

To answer this question, it may be helpful to revisit the law granting incentives to these PEZA-registered entities.

Republic Act No. (R.A) 7916, otherwise known as the Special Economic Zone Act of 1995 (“PEZA Law”), provides that for companies paying the 5% gross income tax, no taxes, both local and national, shall be imposed on business establishments operating within the economic zone (Ecozone). Likewise, companies enjoying income tax holiday are also exempt from the payment of any and all local government imposts, fees, licenses or taxes except real property tax pursuant to Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987.

Therefore, in so far as local taxation is concerned, there is no distinction between a PEZA-registered entity enjoying an income tax holiday or paying the 5% tax on gross income. Both are exempt from the payment of any and all local government imposts, fees, licenses or taxes.

Does this incentive include the exemption from securing and/or renewing the required business permits from the LGU?

On September 24, 2004, PEZA issued Revenue Memorandum Circular No. (RMC) 2004-024 clarifying that PEZA-registered enterprises -- including those availing of the income tax holiday incentives -- are exempted from the payment of all local taxes, licenses, imposts, and fees, except real estate taxes.

The said RMC explicitly exempts PEZA-registered companies from securing the required local government permits. However, despite this pronouncement, there are still some cities and municipalities requiring PEZA-registered entities to obtain local government permits and pay the corresponding permit fees and other regulatory fees such as zoning fee, garbage fee, fire safety inspection fee, among others. This is imposed particularly to Ecozone IT enterprises located in IT parks and buildings wherein the said entities are availing of the basic services from the LGU such as garbage collection, police and fire safety, etc.

So if you are a locator within these cities and municipalities, you would still be required to obtain business permits and pay the corresponding permit fees and other regulatory fees, but not the local business tax.

The financial aspect of securing and renewing the business permits may not be an issue as these permit fees and other regulatory fees are immaterial. However, as we are all aware of, the process of securing or renewing business permits is quite tedious and burdensome.

While LGUs have the power to regulate businesses operating within their jurisdiction, they should grant PEZA-registered entities a shortened or special process. They are supposedly exempt from securing and renewing their business permits under a national law.

On the part of the PEZA-registered enterprises, they have no choice but to secure and renew their permits to be able to continue doing business.