CLARK FREEPORT ZONE Investor’s Guide

PARTICULARS PAGE NO.

Procedures in Approving Project Proposals under
1
Direct Lease
Tax and Duty Free Incentives 2
Allowable Deductions by Industry 3
Lease Rates 5
Business Permits 6
Salient Features on the Terms and Conditions of a
7
Standard Lease Agreement
Utilities Rate 9
Manpower Rate and Philippine Labor Standards 11
Letter Of Intent sample 12
Attachments:
Application for Registration (4 pages)
Annexes
A. Business Model
B. Timetable of the Project
C. Utility Requirements
D. Affidavit (with Undertaking)
E. Clark Investment Priority List CY 2017
Fees And Charges
10th Foreign Investment Negative List
Policy on the Grant of Fiscal and Non-Fiscal
Incentives in the CFZ and Memorandum Circular No.
IPD2 17-11-27 (Supplementary Circular on Fiscal &
Non-Fiscal Incentives Policy)
Primer on Applications for:
 Alien Employment Permit (AEP)
 Subic-Clark Working Visa (SCWV)
 Subic-Clark Investor’s Visa (SCIV)
CLARK FREEPORT ZONE Investor’s Guide

PROCEDURES IN APPROVING PROJECT PROPOSALS

UNDER DIRECT LEASE

1
Investor submits
Required Documentation
detailing Company Profile,
Project Features, and Project
Requirements

2
CDC identifies potential project
site/s and provides Terms of
Contract
for review of Investor

3
If the agreed Terms of
Contract is approved by CDC,
a Lease Agreement
is signed and a
Certificate of Registration
of Tax Exemption (CRTE) is
issued

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 CLARK FREEPORT ZONE Investor’s Guide

TAX AND DUTY FREE INCENTIVES*

Investors in the Clark Freeport Zone enjoy investment incentives designed to be highly
competitive with the Freeport zones around the world.

1. 5% tax on Gross Income Earned

In lieu of all national and local taxes, a qualified Ecozone or Freeport
enterprise may avail of the special tax rate of five percent (5%) based on
Gross Income Earned (Gross Sales less allowable deductions) provided
that seventy percent (70%) of the gross income earned was generated
from foreign sources consisting of direct and constructive export.

2. Customs Duties and taxes

Entitlement to tax-exemption and duty Free importation of capital
equipment and raw materials

3. Other Incentives
a) Exemption from Real Property Tax
b) Free flow or movement of goods and capital equipment within, into,
and exported from the Ecozone or Freeport
c) A Qualified Registered Ecozone or Freeport Enterprise may generate
income from sources within the Customs Territory of up to thirty
percent (30%) of its total income from all sources.
d) Special Visas for Foreign Nationals
e) Up to 100% foreign ownership, as may be allowed under the 9 th
Foreign Investment Negative List (See “Annex D”)

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 CLARK FREEPORT ZONE Investor’s Guide

ALLOWABLE DEDUCTIONS BY INDUSTRY

Gross Income Earned (GIE) shall refer to gross sales or gross revenues derived
from business activities within the subject Ecozone or Freeport, net of sales discounts,
sales returns and allowances minus cost of sales or direct costs but before any
deduction for administrative, marketing, selling, and/or operating expenses or incidental
losses during a given taxable year. Provided, that, in the case of financial enterprises
within Freeports, gross income shall include interest income, gains from sales, and
other income, net of costs of funds.

The following cost of sales/direct cost shall be allowed as deductions for purposes of
calculating the GIE earned for the following Ecozone or Freeport Enterprises/industries,
to wit:

TRADING ENTERPRISES

 Costs of Sales (beginning inventory plus purchases, minus ending

inventory of goods).

MANUFACTURING ENTERPRISES

 Direct salaries, wages, or labor expenses, inclusive of training directly

related to the registered activity;
 Production supervision salaries
 Raw materials used in the manufacture of products;
 Decrease in goods in process account (intermediate goods);
 Decrease in finished goods account;
 Supplies and fuels used in production;
 Depreciation of machinery and equipment used in production, and of
that portion of the building owned or constructed by the registered
enterprise that is used exclusively in the production of goods;
 Rent and utility charges associated with building, equipment and
warehouses used in production; and
 Financing charges associated with fixed assets used in production, the
amount of which was not previously capitalized.

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 CLARK FREEPORT ZONE Investor’s Guide

SERVICE ENTERPRISES

 Direct salaries, wages, or labor expenses, inclusive of training directly

related to the registered activity;
 Service supervision salaries;
 Direct materials, supplied used;
 Depreciation of machinery, equipment used in the rendition of
registered services, and of that portion of the building owned or
constructed by the registered enterprise that is used exclusively in the
rendition of the registered service;
 Rent and utility charges for buildings and capital equipment used in
the rendition of registered services;
 Financing charges associated with fixed assets used in the registered
service business the amount of which was not previously capitalized.

FINANCIAL INSTITUTIONS
 None

PAYMENT AND REMITTANCE OF THE 5% TAX ON GROSS INCOME

EARNED

The 5% Tax on Gross Income Earned shall be paid and remitted by Ecozone Enterprises
and Freeport Enterprises as follows;

a) 3% to the National Government

b) 2% to the Local Government Units (LGUs) through the Treasurer’s Office of the
Municipality or City where the Ecozone Enterprise or Freeport Enterprise is
located.

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 CLARK FREEPORT ZONE Investor’s Guide
LEASE RATES*
Lease Rates applicable for Industrial, ICT, Commercial, Institutional, and Tourism
industries shall be on the best offer for Land/Open Space and Building/Structure

Escalation : Fixed for the first three (3) years with ten percent
(10%) compounded increase starting on the fourth
year and every three (3) years thereafter.

Note: Rate shall depend on its location, available infrastructure, committed

investment and employment

* Subject to CDC Board Approval

 Rental Scheme for Industrial projects: Straight Lease Only or

Monthly Minimum Guaranteed Lease (MGL) for land and building

 Rental Scheme for Commercial and Tourism Related

Projects: Monthly MGL for land and building PLUS Percentage of Gross
Revenues PLUS Percentage of Gross Rental Revenues from sub-lease, if
applicable.

CDC SHARE ON GROSS REVENUES

FROM OPERATIONS FROM RENTAL REVENUES
Year 1–5 3% For Industrial Estate Developers:
Year 6 – 10 5% Year 1 – 5 3%
Year 11- 15 7% Year 6 – 10 5%
Year 16 onwards 10% Year 11- 15 7%
Year 16 onwards 10%
Others:
Year 1 – 7 5%
Year 8 – 15 7%
Year 16 onwards 10%

*** Prices and conditions subject to change without prior notice

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 CLARK FREEPORT ZONE Investor’s Guide
BUSINESS PERMITS

With Incentives No Incentives

(Certificate of Registration and Tax Exemption) (Certificate of Registration)

1 1
Locator’s Submission & Locator’s Submission &
Completion of Requirements Completion of Requirements

2 2
CDC- Marketing Department’s CDC- Marketing Department’s
Evaluation & Verification Evaluation & Verification

3 3
CDC Management’s
Deliberation & Approval Processing & Release of Permit

4
Processing & Release of Permit

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CLARK FREEPORT ZONE Investor’s Guide
SALIENT FEATURES ON THE TERMS AND CONDITIONS
OF A STANDARD CDC LEASE AGREEMENT
(UNDER DIRECT LEASE ONLY)

1. "AS IS" Basis - The LESSOR leases the leased property to the LESSEE on an
"AS IS" basis. Further, the demolition, clearing and disposition of scrap and
debris will be the responsibility and to the account of the LESSEE.

2. Performance Security - non-interest bearing, equivalent to 6 – 12 months

rental, depending on the lease term and in the form of a manager’s check,
cashier’s check, wire transfer, bank draft/guarantee confirmed by a local bank,
irrevocable letter of credit issued by a universal bank, or a surety bond callable
upon demand issued by the Government Service Insurance System (GSIS);
refundable upon the expiration of the Lease Agreement and the Lessee has fully
and faithfully performed or complied with any and all of its obligations in the
Agreement

3. Security Deposit - non-interest bearing deposit payable upon signing of the

Lease Agreement, which is equivalent to 3 - 6 months rental, depending on the
lease term, in the form of cash, manager’s check, bank draft/guarantee
confirmed by a local bank or wire transfer only and is refundable at the time of
termination of the Lease Agreement less payment of unpaid utility bills, rentals,
damages, and others.

4. Advance Payment – Non-interest bearing, equivalent to 3 - 6 months rental,

depending on the lease term, and in the form of cash, manager’s check, bank
draft/guarantee confirmed by a local bank or wire transfer only, and shall be
applied to the remaining months prior to expiration of this Agreement.

5. Grace Period – A Lessee is generally entitled to the non-payment of rent of up

to 12 months, in consideration to the construction period.

6. Sub-lease – As a general rule, subleasing is not allowed unless necessary to its

business activity. If allowed, it requires the prior written consent of the LESSOR
and with purposes substantially similar to that in the original Lease Agreement.

7. Grounds for Cancellation - The LESSOR shall have the right to pre-terminate
the Lease Agreement for any of the following reasons:

 Failure of the LESSEE to pay its monthly rent;

 Use of the Leased Property other than agreed upon;
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CLARK FREEPORT ZONE Investor’s Guide

 Failure of the LESSEE to generate employment and commence its

business activities within the specified time;
 Violation of any of the provisions of the Lease Agreement; or
 Declaration by the LESSEE of bankruptcy;

8. Insurance - The LESSEE shall obtain insurance coverage for the leased
property in the amount equal to the maximum insurable cost from the
Government Service Insurance System (GSIS) or any GSIS accredited insurance
agency with the LESSOR as the beneficiary. In case of loss or damage, the
LESSOR shall use insurance proceeds to reconstruct/restore the damaged
properties for the continued lease and use by the LESSEE.

9. Assignment or Transfer of Rights - The LESSEE and SUBLESSEE, if any, shall

have no right to sell, mortgage, assign, transfer or otherwise encumber its
leasehold rights, interests and/or obligations under this Agreement without the
prior written consent of the LESSOR.

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 CLARK FREEPORT ZONE Investor’s Guide
UTILITIES RATE
POWER
Clark’s power supply is sourced directly from the Luzon Grid thru San Miguel Energy
Corporation (SMEC) via the National Grid Corporation of the Philippines (NGCP)
connected at 69KV level in Mexico Pampanga’s Grid substation, with the capacity of 80
MW, and a Mexico-Clark line with a capacity of 230 KV.

TELECOMMUNICATIONS
Telecommunication facilities are kept at the highest efficiency level by creating liberal
business environment open to telecom providers that can extend the best information
communication services including dual fiber optic backbone and digital exchange
system for advanced telephony, cellular and internet connectivity. Our service
providers have an extensive network infrastructure, connecting to more than 200
countries and territories worldwide through their international gateway facilities and
major cable systems.

WATER AND SEWERAGE SYSTEM

Clark has a well-maintained water infrastructure system, which is being provided by an
Ayala-led subsidiary, Clark Water Corporation. Water supply facilities consist of 25 deep
wells that can produce 35 million liters per day (MLD), 5 reservoirs that can store 12
million liters, ensuring the supply of safe and reliable water. At present, the Used
Water Treatment plant with a production capacity of 27MLD, is processing only 18MLD,
and is therefore capable of accommodating future requirements.

WASTE DISPOSAL SYSTEM

The CDC, through a service contract with the Metro Clark Waste Management Corp.,
manages and operates the Clark Integrated Solid Waste Management Facility for CFZ.
The project is the first and only real sanitary landfill in the Philippines to date. All
investors in Clark are assured of proper management and safe disposal of their garbage
and can boast of full compliance to the national environmental regulatory and
international certification requirements.

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 CLARK FREEPORT ZONE Investor’s Guide
MANPOWER RATE*
 For non-agricultural firms (Manufacturing Firms, Commercial
establishments, Hotels and Recreational-related)

 Minimum of Php 380.00 per day for those employed in establishments

with total assets of P30 Million or more

 Minimum of Php 373.00 per day for those employed in establishments

with total assets of less than P30 Million.

 For retail/service establishments (Small Firms Only)

 Minimum of Php 369.00 per day for those employed in
establishments with 16 or more employees

 Minimum of Php 355.00 per day for those employed in

establishments with less than 16 employees.

*Effective May 05, 2017 of DOLE-NWPC (Wage Order No. RBIII-20)

SUMMARY OF PHILIPPINE LABOR STANDARDS

Foreign Investors shall abide by the Philippine Labor Code and Labor Standards. A brief
summary of Philippine Labor Standards are as follows:

1) Working Hours
 Normal Hours of work per day is 8 hours (not including 1 hour break for
meals)
 Normal number of workdays per week is 6 days (24 hours rest required after
6 consecutive workdays
 Compulsory overtime/rest day work is allowed under certain circumstances
(ex. non-hazardous work, work with perishable goods, etc.)

2) Compressed Work Week

 The usual 6-day (48 hour) workweek may be compressed to a maximum of
12 hours/day without need to pay for overtime (upon approval of DOLE).
This is intended to reduce the number of workdays to save on utilities and
other operational costs.

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CLARK FREEPORT ZONE Investor’s Guide
3) Night Work Prohibition
 Female workers in hazardous industries may not be required to undergo night
work.

4) Child Labor Prohibition

 No child of schooling age shall be employed as worker in any establishment
without proper parental consent and DOLE permit and in no case shall a
minor be employed in a hazardous workplace.

5) Minimum wage (as mentioned on Manpower rate)

6) Minimum Wage Exemptions

 Qualified establishments may apply for exemption under Sec. 9 of Minimum
Wage Order No. RBIII-17 approved on 2012 September 11 through the
Regional Wage Board.

7) Apprentice Rates
 Apprentice rates of seventy five percent (75%) of the Minimum Wage may be
provided upon approval of the Apprenticeship Program by DOLE-TESDA

8) Overtime Premium Pay & Night Differential

 Overtime Pay for work beyond 8 hours per day is 25% of the daily rate or
30% during holidays and rest days
 Premium pay for rest day work is 30% of the daily rate
 Night Shift Differential of 10% of daily rate for work between 10:00PM to
6:00AM

9) Exemption from Overtime Pay & Premium Pay

 Managerial & Supervisory employees
 Piece-rate Workers (Piece Rate Order may be applied with DOLE)
 Field Workers

10) Holiday Pay

 100% of daily rate for Legal Holidays
 30 % of daily rate for Special Holidays
 Average salary for the last 7 days (for Piece-rate Workers)

11) Thirteenth Month Pay

 13th Month Pay equivalent 1/12 of the total earned basic salaries/year
 Due on or before December 24 of each year.
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 CLARK FREEPORT ZONE Investor’s Guide
LETTER OF INTENT
CDC Sample LOI Form

Note: The following suggested format may be modified to include additional relevant information.
Please submit this Letter of Intent with enclosures in three (3) sets to Records Management Division (RMD), G/F Bldg. 2127

(Company Letterhead)
_______________
(Date)
MR. NOEL F. MANANKIL
President and CEO
Office of the President & CEO
Bldg. 2122, E. Quirino Street
Clark Freeport Zone, Philippines
Fax No. (045) 599-2507

Sir:

Our company is interested in establishing a (please specify business proposal) project inside the
Clark Freeport Zone (CFZ).
We enclose with this Letter of Intent the following documents for your evaluation:
1. Notarized Application for Registration (FM-CDC-MD-01) including applicable Annexes
2. Resume and photocopies of passports and/or any valid ID of key Officers
3. Proof of Financial Capability/Assets: (any of all of the following)
 Latest Audited Financial Statements of applicant firm (parent/management company if
applicable)
 Verifiable Bank Certification of deposits or approved loan or credit line; if equity
financing is less than total project cost;
4. Proposed Organizational Chart;
5. Certified true copy of Business Registration (Securities and Exchange Commission Papers,
License to transact Business in the Philippines, DTI Registration) or a copy of SEC
Reservation Payment Confirmation
6. Board Resolution authorizing the Lease/Sub-Lease Agreement and Signatory thereof
(disregard if Sub-Lessee is a Single Proprietorship
7. Latest photo of proposed area for lease or sub-lease;
8. In case of Sub Lease, Sub Lessor’s Letter Endorsement
9. Other required attachments
i. Company Profile and brochures, if any
ii. Conceptual Development Plan and Business Process Flow

We look forward to your favorable consideration.

Very truly yours,

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