Ecozone firms subject to 5% tax, says BIR

Enterprises operating in the country’s economic zones are subject to a five-percent preferential tax based on their gross income, the Bureau of Internal Revenue (BIR) said during the weekend as it clarified the tax incentives granted to locators in these tax-free zones.

The five-percent preferential tax is in lieu of all taxes, except real property tax, the BIR said.

In a memorandum circular, the agency also reiterated that no local or national taxes shall be imposed on business establishments operating within economic zones.

The BIR said that in lieu thereof, the five percent of the gross income earned by all business enterprises within the ecozone shall be paid and remitted to the National Government (three percent) and to the treasurer’s office of the municipality where the enterprise is located (two percent).

However, the tax agency said that this tax incentive only applies to the registered enterprise’s operations within the economic zone and to its registered activity.

“Correspondingly, income realized by such registered enterprise which is not in any way related to its registered activities shall be subjected to the regular internal revenue taxes,” the BIR said.

Income realized by these registered enterprises from businesses outside their registered activity should be subject to the regular tax rates imposed by the Tax Code, the BIR said.

These taxes may be the 20-percent final tax on interest from Philippine Currency bank deposits and yield or any other monetary benefit from deposit substitutes, and from trust funds and similar arrangements, the 7.5-percent tax on foreign currency deposits and the five percent and 10-percent capital gains tax.

The BIR, the government’s main revenue agency, is tasked to collect P845 billion this year.

Last year, its collections stood at P711 billion or short of its P765-billion revenue goal.