QuestionsQuestions (Republic Act No. 9728)
RA 9728 converts the existing Bataan Economic Zone (BEZ) in Mariveles, Bataan into the Freeport Area of Bataan (FAB), a special economic zone/freeport that covers the Municipality of Mariveles.
The FAB is to be managed as a decentralized, self-reliant industrial/commercial/agro-industrial/tourist/banking/financial/investment center, provided with necessary infrastructure, allowed mutually beneficial relations, permits foreign investment (including non-Filipino-owned enterprises), is treated as a separate customs territory, provides incentives (notably tax/duty-free importations for registered enterprises), may expand/reduce its area through AFAB power with LGU concurrence, includes mechanisms to address environmental harms, and places FAB defense/security of the perimeter fence under the National Government in coordination with AFAB and LGUs.
It provides that the FAB shall be managed and operated as a separate customs territory ensuring free flow/movement of goods and capital within, into, and out of its territory.
Registered enterprises may be entitled to existing pertinent fiscal incentives under RA 7916 (as amended by RA 8748) or those under EO 226 (Omnibus Investment Code of 1987), in addition to other incentives provided by the Act.
No taxes (local and national) are imposed on business establishments operating within the FAB; instead they pay 5% final tax on gross income earned: 1% to the National Government, 1% to the Province of Bataan, 1% to the Treasurer’s Office of Mariveles, and 2% to the Authority of the Freeport Area of Bataan (AFAB).
Goods manufactured by FAB enterprises may be made available for immediate retail sale in the domestic market, subject to payment of corresponding taxes on raw materials and applicable regulations; however, a negative list of industries is to be drawn and regularly updated by PEZA, and enterprises in industries included in the negative list are not allowed to sell locally.
Exportation or removal of goods from FAB to other parts of Philippine territory is subject to customs duties and taxes under the Tariff and Customs Code and the National Internal Revenue Code (NIRC), as amended.
A foreign national investing at least US$150,000 (cash and/or equipment) in a registered enterprise is entitled to an investor’s visa, subject to qualifications: at least 18 years old; not convicted of a crime involving moral turpitude; not afflicted with any loathsome/dangerous/contagious disease; and not institutionalized for mental disorder/disability. The visa allows residence while investment subsists and expires automatically if investment is withdrawn (with an annual report required).
AFAB administers and implements incentives and adopts systems/procedures affecting trade/customs policies; the Bureau of Customs (BOC) sets up a customs controlled area outside the FAB gate for payment of taxes entering the Philippine customs territory; AFAB submits annual tax expenditures to DOF, which creates a single incentives database, monitors incentives, and submits an annual report to the President.
The availment period may be extended by AFAB if the registered enterprise has suffered operational force majeure that impaired its viability, on an equivalent basis.
Fiscal incentives terminate after a cumulative period of 20 years from the date of registration or start of commercial operation, whichever is applicable. Exceptions: it may be extended for industries deemed indispensable to national development, with those exempted industries determined by AFAB.
Enterprises may enjoy the income tax holiday (ITH) or net operating loss carry over (NOLCO) granted by the authority prior to the availment of the 5% GIE.
AFAB is created as a body corporate to manage and operate the FAB. For policy direction and coordination, AFAB is under the direct control and supervision of the Office of the President.
Board powers are vested in a Board composed of: (1) chairman-administrator; (2) vice chairman from among members; (3) members including 2 reps from the National Government; 1 rep from the Province of Bataan; 1 rep from the district covering the FAB site; 1 rep from Mariveles; 1 rep from domestic investors; 1 rep from foreign investors; and 1 rep from workers in the FAB. The chairman and members are appointed by the President for 6-year terms. Except business and labor sector reps, appointees must be Filipino, of good moral character, probity/integrity, and have a degree in relevant fields with at least 10 years relevant experience (preferably management/public administration).
Except for defense and security matters, in case of conflict between AFAB and LGUs/NG on matters affecting the FAB, AFAB’s decision prevails.
Properties, assets, funds, rights, obligations, and liabilities are transferred to AFAB, except liabilities not properly accounted for per COA reports (retained by PEZA). AFAB assumes operations/administration/development. Qualified BEZ personnel are absorbed with no reduction/adverse effect on tenure/rank/salaries/privileges; those not retained get separation pay and retirement benefits under existing law, but not less than 1 month for every year of service. BEZ continues performing functions until AFAB actually assumes duties; BEZ is deemed abolished upon organization of AFAB.
It amends RA 5490 and PD 66, and repeals/amends inconsistent laws/executive orders/issuances. Also, it provides that certain accounting/liabilities are retained by PEZA for unaccounted liabilities per COA reports, and it incorporates applicability of certain sections of RA 7916 to FAB.