To           : Economic Zone Developers and Locator Enterprises

          From      : Director General LILIA B. DE LIMA

         Subject :
Exemption of PEZA-Registered Economic Zone Enterprises Paying                             the Special 5% Tax on Gross Income from Paying the Power                             Distribution Franchise Tax

          Date      : 03 May 2004

Please be informed that PEZA-registered economic zone enterprises, which are paying the special 5% tax on gross income, are exempted from paying the Power Distribution Franchise Tax being collected by power distribution utilities, pursuant to the provisions of Republic Act No. 7916 (“The Special Economic Zone Act of 1995”), as amended by Republic Act No. 8748, and the National Internal Revenue Code, as follows:

     Republic Act No. 7916, as amended by Republic Act No. 8748

     “Section 24. Exemption from National and Local Taxes. - Except for real property     taxes on land owned by developers, no taxes, local and national, shall be imposed on     business establishments operating within the ECOZONE. In lieu thereof, five percent     (5%) of the gross income earned by all business enterprises within the ECOZONE shall     be paid and remitted as follows:

(a) Three percent (3%) to the National Government;
(b) Two percent (2%) which shall be directly remitted by the business esta-blishments to the treasure’s office of the municipality or city where the enterprise is located.”

     National Internal Revenue Code of 1997

     “Section. 119. Tax on Franchises. - Any provision of general or special law to the     contrary notwithstanding, there shall be levied, assessed and collected in respect to all     franchises on radio and / or television broadcasting companies whose annual gross     receipts of the preceding year does not exceed Ten million pesos (P10,000,000.00),     subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas     and water utilities, a tax of two percent (2%) on the gross receipts derived from the     business covered by the law granting the franchise: ...”

For the guidance of all concerned.