To attract investors to our economic zones, the Philippine Economic Zone Authority (PEZA) recently launched the PEZA Electronic Application for Registration System (e-ARS). This system can be accessed thru the PEZA Web site (www.peza.gov.ph) by clicking the icon “e-ARS” or going directly to the URL http://ears.peza.gov.ph.
With the implementation of this new system, applications with PEZA may now be filed electronically. Completed application forms with the required attachments (including proof of payment of the application fee) can be scanned and sent via e-mail to eddapps@peza.gov.phfor Ecozone Developers and erdapps@peza.gov.ph for Ecozone Enterprises.
The following PEZA applications may be filed through this new system:
1. New and Existing Registered Ecozone Developers -- for all types of Ecozones, including applications for Existing Registered Ecozone Developers for inclusion of additional areas to an existing ecozone.
2. New and Existing Registered Ecozone Enterprises -- for Export; Information Technology; Agro-Industrial; Logistics Services; Tourism; and Medical Tourism Enterprises, including applications of such existing registered Ecozone Enterprises for “New Project”, “Expansion Project” and “Amendment of Registered Activity.”
Electronic filing of the PEZA application does not, however, guarantee its approval. Similar to the previous manual filing system, electronic applications will undergo preliminary screening by the concerned PEZA office, but feedback on the application will be communicated via e-mail. In case changes to the application/project brief are required, the applicant will have to re-file the application following the same procedure.
Upon approval of the application, applicants must submit the hard copies of the documents which were submitted via e-mail within thirty (30) days from the date of approval of the application by the PEZA Board for Ecozone Developers, and prior to the signing of the company’s Registration/Supplemental Agreement with PEZA for Ecozone Enterprises.
Whether the application is manual or electronic, however, a company’s PEZA registration does not end here. Neither should a company assume its initial four (4) year income tax holiday (ITH) on the basis of a signed Registration/Supplemental Agreement and a PEZA Certificate of Registration.
The Registration/Supplemental Agreement of a PEZA-registered company provides guidelines on the conditions to follow to maintain its registration and to ultimately avail of the incentives accorded to its registration with PEZA.
For purposes of availing ITH, the relevant date will be the start of commercial operations (SCO) which is the date that the applicant has committed in its project brief. The SCO date should not be assumed either. A validation or attestation process must be observed before a company can use its SCO date. SCO attestation is proven thru the issuance of the company’s first commercial invoice to a third party customer. The first commercial invoice will have to be accompanied by an Affidavit which is then attested to and validated by the PEZA-Enterprise Operations Division and PEZA-Incentives Department. The SCO attestation application should be submitted to PEZA at least seven (7) days after the committed SCO date.
Within forty five (45) days after its first year of commercial operations, the company has to prove or validate the equipment investment it committed for its project. Validation of the investment is done through the submission of a PEZA prescribed form (PEZA Form: ERD.2.F.003) where the company will have to enumerate all the equipment it has purchased during its first year of operations. This includes pre-operating investments or equipment purchased before the SCO date. For contact centers, there is an additional requirement of proving an investment of at least $5,000 per seat based on the Investment Priorities Plan issued in December 2013. However, contact centers registered prior to December 2013 need only to prove an investment per seat of $2,500. This investment amount covers the cost of equipment (hardware and software), office furniture and fixture, building improvements and renovation, and other assets such as land, buildings and working capital.
For most PEZA companies, this is where the challenge kicks in. Not only is the investment validation complied with belatedly, more often than not, the supporting documentation, such as the invoices and PEZA form 8105 of the equipment purchased, can no longer be located. As such, companies who wish to avail of bonus years in their ITH face delays with their ITH applications.
Recently, the PEZA started withholding the issuance of the annual Certificates of Available Incentives and VAT Zero Rating to registrants that are unable to show compliance with the investment validation. This is apart from proving the compliance and proper completion of the data required in the monthly performance reports, PEZA annual reports and tax returns (Audited Financial Statements, Annual Income Tax Returns and Quarterly Income Tax Returns).
Apart from the initial registration, the investment validation process is the most crucial application that a registrant has with PEZA. This determines the company’s entitlement to a 4-year ITH or to the 5% gross income tax. Applicants should thus give more attention to this application than an application for bonus ITH years.
While there are efforts to streamline the registration process by introducing the e-ARS, the challenge remains for PEZA to rationalize its operational processes for availing incentives. Whether the delay in the ITH applications may be attributable to the applicants or to PEZA, efforts must make headway to address the problem if we expect more investors to catch on. An economic climate that provides hassle-free applications is always an investment attraction. The bottom line is that functionality far outweighs formalities.
Larissa C. Dalistan-Levosada is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network. Readers may send inquiries or feedback to larissa.c.dalistan@ph.pwc.com.
source: Businessworld
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