PEZA-accredited firms in Makati to start paying local fees

REPORT FROM BUSINESSWORLD The city government of Makati will now require all tax-exempt information technology (IT) companies under its jurisdiction to start paying local government dues every year. The city government on Thursday signed a memorandum of agreement (MoA) on this concern with the Philippine Economic Zone Authority (PEZA), the country’s largest incentive giving body. This is part of the city government’s effort to assert its authority over the PEZA-registered companies operating in Makati. PEZA-registered firms are exempted from paying national and local government taxes, equivalent to 3% and 2%, respectively, of these companies’ annual gross revenues. Prior to the agreement on Thrusday, there was confusion on whether PEZA-registered firms are also exempted from paying "regulatory charges" to the local government. Regulatory charges are additional fees like mayor’s permit, sanitary and garbage, as well as engineering services. "An ecozone developer or operator shall -- to the extent of its construction and operation -- be exempt from payment of all national internal revenue taxes and all local government impost, fees, licenses of taxes," read part of the implementing rules and regulations of the Republic Act. No 8748, or the amended Special Economic Zone Act of 1995 which formed PEZA. The MoA now states explicitly that PEZA companies are also required to pay these regulatory fees, at least for those operating in Makati City. Regulatory fees vary from one city to another. In Makati City, regulatory fee of a company starts at P10,000 while Quezon City levies just a one-time regulatory fee of P5,000 to cover the next four to six years of operation of a company. Specifically, Makati City will ask companies to pay for: - mayor’s permit -- P5,000 per year; - garbage fee which starts at P300 per quarter for those located in a facility measuring less than 25 square meters, to P1,500 per quarter for those located in facilities sized at least 1,000 sq.m.; - mayor’s permit on exercise of profession -- P50 per person/year; - health certificate fees -- P100 per person/year for managerial and supervisory personnel, and P50 per person/year for office personnel and staff; - as well as sanitary inspection fee, which starts at P90 per year for facilities measuring less than 25 square meters, to P1,200 per year for facilities sized at least 1,000 square meters. The agreement said payment should be made within the next 30 days, and for succeeding years payment date is on or before January 20 each year to avoid penalties. For companies that will register with PEZA, the agreement said that payment should be made within 30 days from date of start of their commercial operations. Roger Marasigan, city council secretary, said in an interview that the fees are necessary since these companies also benefit from services provided by the city government. Mr. Marasigan admitted that the local government has no record of all IT companies operating in the city. To date, there are only 40 IT companies registered with the city government, despite the fact that the city hosts the bulk of the industry, at least 50% of all 200 IT companies registered with PEZA. Under the agreement, PEZA will provide the city government a complete list of all the registered IT companies operating within the city, including updated annual data. -- Maricel E. Estavillo/BusinessWorld