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Peza offers relief to ecozone firms

Affected enterprises can have income tax holidays extended

Each productive day lost because of the Taal Volcano eruption can be offset by another day of income tax holiday, the Philippine Economic Zone Authority said, as economic zones closer to the heart of the disaster luckily survived the past few days.

The sudden disruption brought about by the natural disaster has prompted Peza to open to companies an option to effectively extend their income tax holidays to make up for days lost, according to the Peza.

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Under the Peza law, export operations in an economic zone can enjoy an income tax holiday (ITH) of four years, or eight if the company is a pioneer in the industry.

These tax breaks are only beneficial to a company when it is earning since this essentially means it won’t have to pay any tax for its profit made within that period. Otherwise, an unproductive company would just waste the potential of the tax break.

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However, since the situation is already beyond the control of the company, also known in legal terms as a case of force majeure, Peza can choose to apply the tax break at a time when the company finally recovers, although this will be done in a case-to-case basis.

Technically, it’s called a suspension of the running time of the tax break, according to Peza Deputy Director General Tereso Panga. But in effect, this will extend the ITH to offset the unproductive days, so that 20 days of no profit, for example, will equal another 20 days of ITH extension.

“You would imagine every day they are exporting millions of dollars. So how can they recover it if they are not able to operate because of the calamity?” he said on the sideline of the press briefing.

Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon) parts of which have been affected by the eruption that began last Sunday, is an important region for the Peza.

It has 60 ecozones hosting 1,962 locator companies, or more than 43 percent of Peza’s locators nationwide. It also accounts for around 33 percent of ecozone jobs or 523,898 workers.

Companies located in two economic zones in Batangas stood closest to imminent danger – Lima Technology Center and First Philippine Industrial Park Inc. — since they are within a 20 kilometer radius from Taal Volcano.

They have not yet resumed full operations because of power interruptions. In some cases, the companies could not be fully operational because their workers have already evacuated.

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Peza officials, however, said in a press briefing on Friday that these ecozones were about 90 percent operational.

These economic zones hired a combined total of nearly 100,000 workers who were employed in more than 200 companies, according to Peza data as of September last year.

The other economic zone is Laguna Technopark Inc., although it was not clear how many companies or workers were there since the data were not made available as of press time.

Peza Director General Charito Plaza said on Friday that “because of this experience, we will require new ecozone developer applicants to get a geohazard clearance that the location of their ecozones is away from the danger zones or the disaster-prone areas.”

Another takeaway from the experience was that Peza was now working on having a so-called Incident Command System and Center, at the request of the locators, Plaza added.

It is still not clear until when the situation at Taal will be back to normal. In the 1750s, the volcano erupted for nearly seven months, a long and agonizing wait for people and businesses who just wanted to resume normal everyday life.

For now, however, no one has asked for their tax breaks to be suspended yet, according to Panga.

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TAGS: income tax holidays, Peza, Taal Volcano eruption
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