Special Economic Zone Incentives to Continue Until 2014

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Aug. 30 – Special economic zone incentives will be exempted from the new direct tax code (DTC) until 2014 although there is a proposed 20 percent minimum alternative tax based on a version approved by the Cabinet last Thursday.

Despite the assurance, investors are still nervous about the changes and developers are unsure whether zones will attract enough investors despite the changes made to the DTC. The bill may still undergo revisions when it reaches Parliament for approval.

Regulations on special economic zones have been constantly changing  since 2006. “The instability in the policy regime is the main reason we have not been able to attract many foreign investors,” said a commerce department official.

Currently, SEZ units are qualified for a full tax exemption for profits earned in the first five years of operation and a 50 percent exemption for the preceding five years, in addition to a 50 percent exemption for re-invested profits also in the next five years.

Incentives are also available for SEZ developers including 100 percent tax exemption on profits for the next 10 years.