Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 1-95)
The primary policy is to develop the Subic Special Economic Zone into a self-sustaining industrial, commercial, financial, and investment center to generate employment and attract productive foreign investments.
The Secured Area refers to the presently fenced-in former Subic Naval Base, which is the only completely tax and duty-free area in the Zone and has a Customs checkpoint for the flow of goods and merchandise.
Residents are individuals who are registered and authorized by the SBMA to establish and maintain a personal residence in the Secured Area of the Zone.
They are exempt from customs and import duties, national internal revenue taxes on importations of raw materials, capital goods, equipment needed for business, and internal revenue taxes on their sales of goods and services. They also enjoy exemptions from franchise, common carrier or VAT and other percentage taxes on public and service utilities within the Secured Area.
Registered enterprises may generate income from sources within the Customs Territory up to 30% of their total income from all sources. Exceeding this will subject all income to the internal revenue laws of the Customs Territory.
They are given preferential income tax treatment on income earned or derived from business operations within the Secured Area or from foreign sources, subject to specific conditions based on the type of enterprise like telecommunications or common carriers.
They must pay a total of 5% of their gross income earned: 3% to the National Government, 1% to local government units affected by the zone's declaration, and 1% to a Special Development Fund for municipalities outside Olongapo and Subic.
Foreign articles removed from the Secured Area to the Customs Territory are subject to customs duties and internal revenue taxes as ordinary importations. Unauthorized removal exposes them to seizure and forfeiture.
The 5% tax must be paid and remitted quarterly to the Commissioner of Internal Revenue or an authorized agent on or before the 15th day of the fourth month following the close of the taxable year.
They must keep regular and accurate records of transactions, maintain books and allied documents as prescribed by the BIR or SBMA, and allow inspection and audit by authorized officers. These requirements have the same force as the regulations themselves.