Aurora Pacific Economic Zone Freeport Act of 2007 (RA 9490, as amended by RA 10083) and

Freeport Area of Bataan (FAB) Act of 2009 (Republic Act No. 9728)

Declaration of Policy

It is hereby declared the policy of the State to actively encourage, promote, induce and accelerate a sound
and balanced industrial, economic and social development of the country in order to provide jobs to the people
especially those in the rural areas, increase productivity and individual and family income, and thereby improve
the level and quality of living condition through the establishment, among others, of special economic zones in
suitable and strategic locations in the country and through measures that will attract legitimate and productive
foreign investments.

Governing Principles

(a) Within the framework and limitations of the Constitution and applicable provisions of the Local
Government Code, the Ecozones shall be developed into and operated as a decentralized, self-reliant and
self-sustaining industrial, commercial/trading, agro-industrial, tourist, banking, financial and investment
center with suitable residential areas.
(b) It shall be provided with transportation, telecommunications and other facilities needed to attract
legitimate and productive investments, generate linkage industries and employment opportunities for the
people and its neighboring towns and cities.
(c) It may establish mutually beneficial economic relations with other entities or enterprises within the
country or, subject to the administrative guidance of the Department of Foreign Affairs (DFA), the
Philippine Economic Zone Authority (PEZA) and/or the Department of Trade and Industry (DTI), with
foreign entities or enterprises.
(d) Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up enterprises in
the Ecozones, either by themselves or in joint venture with Filipinos in any sector of industry,
international trade and commerce within the Ecozones.
(e) It shall be managed and operated as a separate customs and taxation territory ensuring free flow or
movement of goods and capital within, into and out of its territory.
(f) It may provide incentives such as tax and duty-free importations of raw materials, capital and equipment
to registered enterprises located therein. However, exportation or removal of goods from the territory of
the Aurora Ecozone to the other parts of the Philippine territory shall be subject to customs duties and
taxes under the Tariff and Customs Code of the Philippines, as amended, and the National Internal
Revenue Code (NIRC) of 1997, as amended.
(g) The areas comprising the Ecozones may be expanded or reduced when necessary. For this purpose, the
management, in consultation with the LGUs, shall have the power to acquire either by purchase,
negotiation or condemnation proceedings, any private land within or adjacent to the Ecozones for the
following purposes:
(1) consolidation of lands for Ecozones development;
(2) acquisition of right of way to the Ecozones; and
(3) the protection of watershed areas and natural assets valuable to the prosperity of the Ecozones.
(h) Goods manufactured by an Ecozone enterprise shall be made available for immediate retail sale in the
domestic market, subject to the payment of corresponding taxes on raw materials and other regulations
that may be formulated by the management, in consultation with the PEZA, the Department of Finance
(DOF), and the DTI. However, in order to protect domestic industries, a negative list of industries shall be
drawn up and regularly updated by the PEZA and the Board of Investments (BOI). Enterprises engaged in
industries included in such negative list shall not be allowed to sell their products locally.
(i) The defense and the security of its perimeter fence shall be the responsibility of the National Government
in coordination with the governing authority and the LGUs.

Incentives available to locators in these ecozones

Firms registered with and located within the territorial boundaries of these ecozones shall be entitled to fiscal and
non-fiscal benefits similar to those available to PEZA-registered enterprises.

Aurora Pacific Economic Zone Freeport Act of 2007

(RA 9490, as amended by RA 10083)

The Aurora Pacific Economic Zone and Freeport, also known as APECO, was established by virtue of
Republic Act No. 9490, otherwise known as the Aurora Special Economic Zone Act of 2007.

Creation

 In pursuit of the foregoing declared policy and subject to the concurrence of the concerned local government
units (LGUs) of Aurora affected by the zone.
 APECO is located in the municipality of Casiguran in the province of Aurora.
 The Aurora Ecozone covers two (2) parcels of land, namely, parcel 1 and parcel 2.
It is esteemed as the only Economic Zone facing the Pacific Ocean, an ideal starting point for the inflow of
commerce in the Northeastern quadrangle of Luzon.
 APECO has a total of 496 hectares in the mainland of Casiguran and an additional 12,000 hectares in the San
Ildefonso, Peninsula.

Group 7
Roselle T. Bachiller
Michelle Ceras
Important Terms

Registered enterprise shall be defined as any person, natural or juridical, licensed to do business in the
Philippines and registered with the Aurora Pacific Economic Zone Freeport (APECO) to transact business within
the APECO.

Registered export enterprise shall be defined as any registered enterprise engaged directly or indirectly in the
production, manufacture or trade of products or services which earns at least seventy percent (70%) of its normal
operating revenues from the sale of its products or services abroad for foreign currency.

Registered domestic enterprise, shall be deemed as any registered enterprise not falling under the
delineation of a registered export enterprise.

Incentives to Registered Enterprises

The APECO may administer the following incentives to the registered enterprises located therein to the extent of
the activity/project:

1) Income Tax Holiday (ITH)

2) Net Operating Loss Carry Over (NOLCO)
3) Imposition of a tax rate of five percent (5%)
4) Accelerated Depreciation
5) Capital Equipment Incentives
6) The importation of source documents by information technology-registered enterprises shall be eligible
for tax and duty free importation
7) Raw materials incentives
8) Incentives on Breeding Stocks and Genetic Materials
9) Exemption from Wharfage Dues
10) Deferred Imposition of the Minimum Corporate Income Tax
11) Tax Treatment of Merchandise in the Aurora Ecozone
12) Tax Treatment of Merchandise in Free Trade/Freeport Zone
13) Tax Treatment of Services in the Aurora Ecozone
14) Deferred Imposition of the Minimum Corporate Income Tax.
15) Other Incentives

Income Tax Holiday (ITH)

Registered enterprises shall be entitled to an income tax holiday from the start of their commercial operations to
the extent of their activity under the following categories:

Category A - Registered domestic enterprise located in highly developed areas, as determined by the Board of
Investments (BOI), shall be entitled to a four-year income tax holiday.

Category B -Registered domestic enterprise on the following shall be entitled to a six-year income tax holiday:
(1) Located in less developed areas as defined by the BOI;
(2) Producing/rendering new products/services or having strong backward or forward linkages.

Category C - Registered export enterprise shall be entitled to a six-year income tax holiday:
Provided, however, that if the export enterprise complies with the following:
(1) large capital investments or sizeable employment generation; or
(2) use high level of technology; or
(3) located outside Metro Manila, it shall be entitled to an eight-year income tax holiday.
Note: Registered enterprises embarking on new investments that are listed in the current Investment Priorities
Plan (IPP) shall be entitled to incentives provided herein pertaining to the new investments and subject to such
terms and conditions as the BOI may determine.

Net Operating Loss Carryover (NOLCO)

Net operating loss of the business or enterprise during the first three years from the start of commercial
operations which have not been previously offset as deduction from gross income shall be carried over as a
deduction from gross income for the next five consecutive years immediately following the year of such loss:
Provided, however, That operating loss resulting from availment of incentives provided in this Act shall not be
entitled to NOLCO.
Note: Registered enterprises availing of the ITH as herein provided shall not be entitled to avail of the NOLCO.

Accelerated Depreciation

Accelerated depreciation of plant, machinery and equipment that are reasonably needed and actually used for the
production and transport of goods and services may be allowed using a rate not exceeding twice the rate which
would have been used had the annual allowance been computed in accordance with the rules and regulations
prescribed by the Secretary of Finance and the provisions of the National Internal Revenue Code of 1997, as
amended.

Capital Equipment Incentives

Importations of capital equipment, spare parts, tools and dye, or those required for pollution abatement and
control, cleaner production and waste reduction including consignment thereof by registered enterprises, shall be
exempted to the extent of one hundred percent (100%) of the taxes and customs duties:
Provided, That the imported items thereof shall be used exclusively by the registered enterprise in its registered
activity:
Provided, further, That the importation of machinery and equipment and accompanying parts shall comply with
some conditions:
(i) They are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices;
(ii) They are reasonably needed and will be used exclusively by the registered enterprise in the manufacture of its
products;
(iii) Approval of the APECO was obtained by the registered enterprise for the importation of such machinery,
equipment and spareparts.

The importation of source documents by information technology-registered enterprises shall be eligible for tax
and duty free importation.

Raw Materials Incentives

Every registered export- oriented enterprise shall enjoy a tax credit equivalent to the internal revenue taxes
and customs duties paid on the supplies, raw materials and semi-manufactured products provided the same are
not sufficient in quantity, quality or are not competitively priced in the Philippines and which are used in the
manufacture, processing or production of its export products forming part thereof, exported directly and
indirectly by the registered export-oriented enterprise, based on the actual taxes and duties paid for such
materials/supplies/semi-manufactured products by the registered enterprise.

Note: It shall be deemed waived if application for tax credit under this subsection was not Filed within one year
from the date of exportation of the final product.

Incentives on Breeding Stocks and Genetic Materials

Importation of breeding stocks and genetic materials within ten (10) years from the date of registration of
commercial operation of the enterprise shall be exempt from all taxes and duties.

The availment of the incentives by the registered enterprise shall be subject to:
(a) that said breeding stocks and genetic materials would have been qualified for tax and duty-free importation.
(b) that the breeding stocks and genetic materials are reasonably needed in the registered activity;
(c) that approval of the APECO has been obtained by the registered enterprise; and
(d) that the purchase is made within ten (10) years from the date of registration of commercial operation of the
registered enterprise.

Note: It shall be deemed waived if application for tax credit under this subsection is not filed within one year
from the date of delivery.

Exemption from Wharfage Dues

The provisions of law to the contrary notwithstanding, exports by a registered enterprise shall be exempted from
wharfage dues.

Deferred Imposition of the Minimum Corporate Income Tax

The Minimum Corporate Income Tax (MCIT) of two percent (2%) of the gross income as of the end of the taxable
year shall be imposed when the MCIT is greater than the income tax computed under the NIRC of 1997, as
amended, for the taxable year: Provided, however, That said MCIT shall be imposed only after the enterprise's
entitlement period to the income tax-based incentives has expired.

Imposition of a tax rate of five percent (5%) on Gross Income Earned (GIE)

Except for real property tax on land, no local and national taxes as prescribed under Republic Act No. 8424, also
known as "The National Internal Revenue Code of 1997, as Amended" such as income tax, excise tax and franchise
taxes, shall be imposed on registered enterprises operating within the Aurora Ecozone. In lieu thereof, five percent
(5%) of the gross income earned shall be paid as follows:

(a) Three percent (3%) to the national government;

(b) One percent (1%) shall be remitted by the business establishments in equal shares to the respective
treasurer's office of the province and the municipality where the enterprise is located; and
(c) One percent (1%) shall be remitted by the registered enterprises to the APECO.

Group 7
Roselle T. Bachiller
Michelle Ceras
All persons and service establishments in the Aurora Ecozone shall be subject to national and local taxes under the
National Internal Revenue Code of 1997, as amended, and the Local Government Code.

Tax Treatment of Merchandise in the Aurora Ecozone

(a) Except as otherwise provided in this Act, foreign and domestic merchandise, raw materials, supplies,
articles, equipment, machineries, spare parts and wares of every description, except those prohibited by
law, brought into the Aurora Ecozone to be sold, stored, broken up, repacked, assembled, installed,
sorted, cleaned, graded, or otherwise processed, manufactured, mixed with foreign or domestic
merchandise whether directly or indirectly related in such activity, shall not be subject to customs and
internal revenue laws and regulations nor to local tax ordinances, any provision of law to the contrary
notwithstanding.
(b) Merchandise purchased by a registered enterprise, from the customs territory and subsequently brought
into the export processing zone, shall be considered as export sales and exportation thereof shall be
entitled to the benefits allowed by law for such transaction.
(c) Domestic merchandise sent from the Aurora Ecozone to areas outside the said ecozone shall, whether or
not combined with or made part of other articles likewise of local origin or manufactured in the
Philippines while in the export processing zone, be subject to internal revenue laws of the Philippines as
domestic goods sold, transferred or disposed of for local consumption.
(d) Merchandise sent from the Aurora Ecozone to areas outside the said ecozone shall, whether or not
combined with or made part of other articles while in the zone, be subject to rules and regulations
governing imported merchandise. The duties and taxes shall be based on the value of said imported
materials (except when the final product is exempt).
(e) Domestic merchandise on which all internal revenue taxes have been paid, if subject thereto, and foreign
merchandise previously imported on which has been paid, or which has been admitted free of duty and
tax, may be taken into the Aurora Ecozone from the customs territory of the Philippines and be brought
back thereto free of quotas, duty or tax.
(f) Subject to such regulations respecting identity and safeguarding of the revenue as the Aurora Ecozone
may deem necessary when the identity of an article entered into the export processing zone under the
immediately preceding paragraph has been lost, such article when removed from the zone and taken to
the customs territory shall be treated as foreign merchandise entering the country for the first time, under
the provisions of the Tariff and Customs Code of the Philippines, as amended.
(g) Articles produced or manufactured in the Aurora Ecozone and exported therefrom shall, on subsequent
importation into the customs territory, be subject to the import laws applicable to like articles
manufactured in a foreign country.
(h) Unless the contrary is shown, merchandise taken out of the Aurora Ecozone shall be considered for tax
purposes to have been sent to customs territory.

Tax Treatment of Merchandise in Free Trade/Freeport Zone

The Aurora Ecozone shall be operated and managed as a separate customs territory ensuring free flow or
movement of goods within, into and exported out of the free trade/freeport zone. Importations of raw materials
and capital equipment are tax and duty free. However, exportations or removal of goods from the free
trade/freeport zones to the other parts of the Philippine territory shall be subject to customs and internal revenue
regulations.

Tax Treatment of Services in the Aurora Ecozone

(a) Sale of service by an entity from the customs territory to a registered ecozone or free trade enterprise, or
by a registered ecozone or freeport enterprise to another ecozone or freeport enterprise shall be treated as
indirect export, and hence, entitled to the benefits allowed by law for such transaction.

(b) Sale or service by a registered ecozone or freeport enterprise to the customs territory shall be subject to
applicable internal revenue laws and regulations.

Non-profit Character of the APECO

The APECO shall be non-profit and shall use its one percent (1%) share as provided in Section 5(C) of this Act for
its operations, development, improvement, maintenance and other related expenditures in furtherance and
effective implementation of the policy provided in this Act.

In consonance with this, the APECO is hereby declared exempt from the payment of all taxes, duties,
fees, imposts, charges, costs and service fees in any court or administrative proceedings in which it may be a party.
Furthermore, all donations made by any person or entity in favor of the APECO shall be exempt from the payment
of the donor's tax and the same shall be considered as deductible from the gross income of the donor, pursuant to
the NIRC of 1997, as amended.

Provided,That from the shares of the national government from the five percent (5%) tax, one hundred percent
(100%) shall be appropriated over a ten (10)-year period to an infrastructure development trust fund to be created
by the Bureau of Treasury for the purpose of financing the infrastructure requirements of the Aurora Pacific
Economic Zone and Freeport.
Enjoyment of Benefits of Other Ecozones and Freeport

The APECO shall enjoy, receive and benefit from the same privileges, licenses or concessions granted or to be
granted to other ecozones and free trade zones, such as the Subic Special Economic and Freeport Zone, the Clark
Special Economic and Freeport Zone, the Zamboanga City Special Economic and Freeport Zone and the Cagayan
Special Economic and Freeport Zone.

Freeport Area of Bataan (FAB) Act of 2009

Republic Act No. 9728

AN ACT CONVERTING THE BATAAN ECONOMIC ZONE LOCATED IN THE MUNICIPALITY OF

MARIVELES. PROVINCE OF BATAAN, INTO THE FREEPORT AREA OF BATAAN (FAB),
CREATING FOR THIS PURPOSE THE AUTHORITY OF THE FREEPORT AREA OF BATAAN
(AFAB), APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES

PROCEDURES FOR REGISTRATION OF FREEPORT AREA OF BATAAN ENTERPRISES &

RESIDENTS

Registration Office

The AFAB has two offices to register all business enterprises or concerns applying to be FAB Enterprises as well as
natural persons applying to be FAB Residents. These offices shall be the FAB Enterprise Department and the
FAB Residents Department, which shall in turn consist of two (2) divisions each, to wit: the Evaluation
Division and the Follow-up Division.

The above departments issues standard application forms and require submission of pertinent documents to the
proper department which shall act thereon in the most expeditious manner possible. If warranted, the
Registration Office shall approve the application and register qualified enterprises and residents, after which it
shall issue certificates attesting to their registration and residency, respectively. After issuance of the certificates,
the Registration Office shall periodically monitor the status of all FAB Enterprises and Residents.

Who are Eligible

Application for FAB registration shall be open to nationals and business enterprises of any country in any area of
economic activity, except only as is specifically limited by the Constitution of the Philippines.

Condition for Registration

A FAB Enterprise shall be a constituted business enterprise organized or domiciled in the Philippines or any
foreign country. The enterprise must name a representative or agent who is a legal resident of the FAB. If affiliated
with an existing enterprise in the Philippines outside of the FAB, the FAB Enterprise must establish a separate
business organization to conduct business exclusively within the FAB which shall be a separate taxable entity.

Criteria for Issuance of Certificates

The AFAB shall issue the Certificates of Registration or Residency to a FAB Enterprise or Resident, respectively, if
qualified and if in the AFAB's discretion such issuance will promote the policies set forth in the Act.

Period for Issuance of Certificate

Should the application(s) merit approval, the AFAB shall issue the certificates applied for no later than thirty (30)
days following receipt of the completed application and all required supporting documents.

Effect of Issuance of Certificates

Issuance of the Certificate of Registration or Residency to a FA Enterprise or Resident, entitle and subject the
business enterprise or resident to all the benefits and obligations under the Act and other regulations that may be
promulgated by the AFAB.

Simultaneous Issuance of Certificates of Registration and Residency

Issuance of the Certificate of Registration shall be accompanied by the issuance of a Certificate(s) of Residency to
qualified enterprises and residents, respectively, when all required supporting documents are included in the
applications.

Validity

All certificates issued by the AFAB shall be valid for a period of one (1) year from issuance and shall be deemed
automatically renewed every year (i) upon payment of the prescribed fees at least ten (10) days prior to the
expiration of the said one (1) year period for the particular year involved, and (ii) for as long as the FAB Enterprise
or Resident remains qualified to continue its business operations or reside within the FAB under similar terms
and conditions for which the original certificate(s) was/were issued.

Group 7
Roselle T. Bachiller
Michelle Ceras
Preferred Industries

1) Manufacturing
 strong capability to host manufacturing industries producing a wide range of products with its
infrastracture and trainable workpool
2) Logistics
 the only port in the Manila Bay area which is the country’s center of trade, within the vicinity of 2
freeports in Region III
3) Energy
 the potential for tapping other sources of renewable energy such as hydroelectric power, biomass and
solar energy application
4) Electronics
 with its highly trained workforce, capable of hosting electronics/semiconductor industries. Aside from
the available technical professionals, it also has links to training institutions to labor requirements
5) Tourism
 rich in natural resources as Mariveles possesses virgin forests, clean beaches, mountain ranges and
flat lands suitable for ecotourism projects
6) Shipbuilding
 capability and the facility for shipbuilding industry as BASEE, the country’s main shipbuilding in the
late 70’s and 80’s was based here.
7) BPO/IT Services
 Ready for world-class telecommunications network, BPO workplace facilities and trainable workpool,
set to be a Business Process Outsourcing site in the country
8) Infrastructure

Superior Advantages

1) Natural Endowments

 Natural Deep Harbor – with the depth of 11-13 meters, the FAB harbour is ideal for national and
international port operations as it can accommodate big cargo vessels
 Human Capital – the biggest Technical Education Skills and Development Authority (TESDA)
manpower-training facility, thus locators assured of capable and well-equipped workers

2) Superior Business Facilitation Support System

 Immigration One Stop Shop

 The E-Konek
 The Labor Center

3) Superior Facilities

 Power – dedicated power supply, providing the most allowable electricity cost in the Philippines.
GN Power keeps the FAB running, operating a 600-MW clean coal-fired power plant.
 Dam – the only industrial zone in the country that has its own dam and water treatment plant.
The dam has a 2.4 billion galloon capacity while the water treatment plant is capable of delivering
14 million gallons of water everyday

4) Superior Location
 The only Freeport in Manila Bay, the Philippines center of trade. An ideal transhipment hub,
strategically located at a prime transit point for domestic, regional and global shipping.

5) Superior Incentives

FAB is the only Freeport where investors can own real property.

 Income Tax Holiday (ITH) from four years to eight years.

 5% tax in lieu of local and national taxes after ITH period.
 Duty Free Importation of capital equipment, raw materials, consumer goods, and personal items
 Exemption from wharfage dues, export taxes, impost and fees
 Domestic sales allowance of up to 30% of total sales
 Special visas for investors

The FAB also offers all incentives that the PEZA, BOI, and other Philippine freeports provide.

Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned

No taxes, local and national, shall be imposed on business establishments operating within the FAB. In lieu
thereof, said business establishments shall pay a five percent (5%) final tax on their gross income
earned in the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and
(d) Two per centum (2%) to the Authority of the Freeport of Area of Bataan.

Non-Fiscal Incentives

Incentive to Investors

Any foreign national who invests an amount of One hundred fifty thousand US dollars (US$150,000.00),
either in cash and/or equipment, in a registered enterprise shall be entitled to an investor's visa: Provided,that
he has the following qualifications:

(a) He is at least eighteen (18) years of age;

(b) He has not been convicted of a crime involving moral turpitude;
(c) He is not afflicted with any loathsome, dangerous or contagious disease; and
(d) He has not been institutionalized for any mental disorder or disability.

As a holder of investor's visa, an alien shall be entitled to reside in the Philippines while his investment subsists.
For this purpose, he should submit an annual report, in the form duly prescribed for the purpose, to prove that he
has maintained his investment in the country, should said alien withdraw his investments from the Philippines,
then the investor's visa issued to him shall automatically expire.

Extension of Period of Availment of Incentives

The availment period of the incentives provided herein may be extended by AFAB, in the event that the registered
enterprise has suffered operational force majeure that has impaired its viability, equivalent thereto.

Duration of Incentives

Enterprises registered with AFAB may enjoy the income tax holiday (ITH) or the net operating loss carryover
(NOLCO) granted by the authority prior to the availment of the five percent (5%) gross income earned (GIE).
Fiscal incentives under this Act shall be terminated after a cumulative period of twenty (20) years from date of
registration or start of commercial operation, whichever is applicable, except that it could be extended with regard
to industries deemed indispensable to national development. The industries exempted from this provision shall be
determined by the AFAB.

Capitalization

The AFAB shall have an authorized capital stock of Two billion pesos (Php2,000,000,000.00), with option to
increase capitalization upon the discretion of the AFAB, divided into twenty thousand (20,000) no-par shares
fully subscribed and paid up by the Republic of the Philippines with: (a) All lands embraced and covered by the
FAB, as well as permanent improvements and fixtures upon proper inventory not otherwise alienated, conveyed,
or transferred to another government agency; (b) All other assets which the President may transfer to the AFAB as
part of the equity contribution of the government; and (c) Cash contribution by the government in the amount of
Five hundred million pesos (Php500,000,000.00) a year for the next five (5) years, which is hereby appropriated
out of any fund in the National Treasury not otherwise appropriated.

Group 7
Roselle T. Bachiller
Michelle Ceras