Home | Databases | WorldLII | Search | Feedback Palau Sessional Legislation

National Capitol Tax Free Zone Act, RPPL 8-20 2010

PALAU

RPPL NO. 8-20 ___
(Intro. as House Bill No. 8-10-1, HD2, SD2, CD1)

AN ACT

To promote existing businesses and to encourage the establishment of new businesses in the area surrounding the National Capitol Complex through the creation of a tax free zone in the State of Melekeok; and for other related purposes.

THE PEOPLE OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:

Section 1. Short title. This Act may be cited as the ANational Capitol Complex Tax Free Zone Act@.

Section 2. Findings and purpose. The Olbiil Era Kelulau finds that it is in the best interests of the Republic to create a tax free zone in the area surrounding the National Capitol Complex at Ngerulmud, Melekeok State. As the Palau National Government relocates its employees to the National Capitol Complex, it is vitally important that new businesses be established and located nearby to spur the economic development of Babeldaob and to conveniently provide goods and services to that expanding population. The creation of a tax free zone will serve as an economic development tool to encourage and promote existing businesses and the establishment of new business and commercial activities to provide those goods and services. The Olbiil Era Kelulau a finds that it is in the best interests of the Republic to provide incentives in the form of tax relief to the owners of existing businesses and to persons establishing new businesses, located within the tax free zone. The Republic will benefit economically through the jobs created and provided by the existing businesses and by the new businesses established to take advantage of the tax free zone, and by other means.

Section 3. Tax free zone created. There is hereby created a tax free zone (the ACapitol TFZ@) delimited as the area extending two miles in all directions from the center point of the dome on the Olbiil Era Kelulau at the National Capitol Complex.

Section 4. Incentives to persons owning existing business or establishing new businesses within the Capitol TFZ.
(a) Notwithstanding any other provision of law, any person who owns a business within the boundaries of the Capitol TFZ on the effective date of this Act (such a business hereafter referred to as a ACapitol TFZ Enterprise@), shall be, for a period of two (2) years from the commencement date or dates stated by the Certificate of Qualification issued to the Capitol TFZ Enterprise, exempt from the payment of the taxes specified below in subsection (b).

(b) Notwithstanding any other provision of law, any person who establishes a new business within the boundaries of the Capitol TFZ (such a business hereafter also referred to as a ACapitol TFZ Enterprise@) within three (3) years of the effective date of this Act, shall be, for a period of five (5) years from the commencement date or dates stated by the Certificate of Qualification issued to the Capitol TFZ Enterprise, exempt from the payment of the taxes specified below.

(1) All gross revenue and net income taxes imposed by the laws of the Republic on income or revenue derived from or generated by business conducted at the Capitol TFZ Enterprise;

(2) All import taxes imposed by the laws of the Republic on building materials imported by the Capitol TFZ Enterprise, and exclusively used in the construction or renovation of the building or buildings from which the Capitol TFZ Enterprise is or will be conducting its business; and

(3) All import taxes imposed by the laws of the Republic on capital equipment, fixtures, furnishings, and machinery, imported by the Capitol TFZ Enterprise, and exclusively used at the Capitol TFZ Enterprise; and

(4) All export taxes imposed by the laws of the Republic on the exportation of any product manufactured at the Capitol TFZ Enterprise.

Section 5. Certificate of Qualification; application fee, criteria for issuance.
(a) Any person desiring to take advantage of the tax exemptions set forth in this Act may submit an application to the Minister for the issuance of a Certificate of Qualification, accompanied by an application fee in the amount of U.S. $100.00.

(b) The Minister shall promptly review the application and, if the application complies with the criteria set forth in Section 6 below, and the Minister determines that all information set forth in the application is true and accurate, the Minister shall promptly issue a Certificate of

Qualification:

(1) stating the name of the Capitol TFZ Enterprise and the person owning it;

(2) stating the location of the Capitol TFZ Enterprise;

(3) stating that the owner of the Capitol TFZ Enterprise is entitled to the benefit of the tax exemptions provided in this Act; and

(4) stating the respective date or dates on which the respective tax exemptions shall commence and expire (for new businesses the date the import tax exemption commences and expires may predate the date the gross revenue, net income, or export tax exemptions will commence and expire), provided that the commencement date or dates shall in no event predate the application or be later than three (3) years after the effective date of this Act.

(c) A person who owns more than one existing business or who establishes more than one new business with the Capitol TFZ shall obtain a separate Certificate of Qualification for each Capitol TFZ Enterprise.

(d) A Certificate of Qualification shall not be transferrable.

Section 6. Criteria for the issuance of a Certificate of Qualification. The criteria for the issuance of a Certificate of Qualification are as follows:

(a) For an existing business, the applicant shall be a business in existence on the effective date of this Act and possessing current business licences issued by the State of Melekeok and the Republic; and for new businesses, the applicant shall be a business that is established after the effective date of this Act.

(b) The applicant business=s physical presence shall be located completely and only within the boundaries of the TFZ.

(c) For an existing business, the applicant shall agree to remain open for a period of at least one (1) year after the date of issuance of the Certificate of Qualification; and for a new business, the applicant shall agree to open to the general public and begin conducting business within three (3) years of the effective date of this Act, and after the date of opening, to remain open for business to the general public for a period of at least two (2) years.

Section 7. Effect of a Certificate of Qualification. Notwithstanding the tax exemptions granted by the provisions of this Act, the owner of the Capitol TFZ Enterprise shall:

(a) with respect to gross revenue or net income taxes imposed by the laws of the Republic, keep and maintain the business records that all other taxpayers in the Republic are required by law and regulation to keep and maintain, and complete and file on a timely basis tax returns that all other taxpayers in the Republic are required by law and regulation to keep and maintain, provided that in lieu of remitting a payment covering the full amount of tax liability evidenced by the return, the owner of the Capitol TFZ Enterprise shall attach a copy of the Certificate of Qualification establishing his or her exemption from the payment of such tax liability; and

(b) with respect to import or export taxes imposed by the laws of the Republic, complete and present all entry and exit documents and forms that all other taxpayers in the Republic are required by law and regulation to complete and present, provided that in lieu of remitting a payment covering the full amount of the import or export tax liability that would otherwise be payable, the owner of the Capitol TFZ Enterprise shall attach a copy of the Certificate of Qualification establishing his or her exemption from the payment of such import and export taxes, and a sworn statement that the items being imported or exported are, appropriately as the case may be, to be used exclusively in the construction or renovation of the Capitol TFZ Enterprise, or are to be exclusively used at the Capitol TFZ Enterprise, or were manufactured at the Capitol TFZ Enterprise.

Section 8. Liability for other taxes; compliance laws of the Republic. Except for the tax exemptions granted by this Act, the owner of the Capitol TFZ Enterprise shall be liable for all other taxes imposed by the laws of the Republic, and nothing herein shall be construed to allow a person to engage in business without complying with all applicable laws of the Republic and of the State of Melekeok, particularly but without limitation, to engage in a business prohibited by the laws of the Republic or of the State of Melekeok.

Section 9. Business licenses; delegation of authority to State of Melekeok.
(a) In lieu of any other National Government business licenses required by the laws of the Republic, a Certificate of Qualification issued pursuant hereto shall serve as the Capitol TFZ Enterprise=s National Government business license until the end of the calendar year during which the Certificate of Qualification was issued. Thereafter, in lieu of any other National Government business licenses required by the laws of the Republic, the Capitol TFZ Enterprise annually shall pay a fee of $100.00 and obtain from the Minister, or his designee, a renewal of the Certificate of Qualification, provided that the dates the various tax exemptions commence and expire will remain the same as those stated in the original Certificate of Qualification.

(b) Each State in the Capitol TFZ is hereby authorized to enact a state law providing for a business license fee for a Capitol TFZ Enterprise of no more than $500.00 per year.

Section 10. Regulations. Pursuant to the provisions of Chapter 1, Title 6 of the Palau National Code, the AAdministrative Procedure Act,@ subject to the direction and approval of the President, and after consultation with the the[sic] Melekeok State Government, the Minister may promulgate such rules and regulations as are consistent with, and as the Minister deems necessary to carry out the provisions of this Act.

Section 11. Termination of Certificate of Qualification; recapture of taxes.
(a) For a Certificate of Qualification issued to an existing business, in the event the Capitol TFZ Enterprise does not remain open for a period of at least one (1) year after the date of issuance of the Certificate of Qualification; and for a Certificate of Qualification issued to a new business, in the event the Capitol TFZ Enterprise does not open to the general public and begin conducting business within three (3) years of the effective date of this Act, and after the date of opening, remain open for business to the general public for a period of at least two (2) years; or

(b) If the owner of the Capitol TFZ Enterprise improperly utilizes the import tax exemptions extended by this Act in any manner, including without limitation by:

(1) using import tax free building materials for any other purpose than in the construction or renovation of the building or buildings from which the Capitol TFZ Enterprise is conducting its business; or by

(2) using import tax free capital equipment, fixtures, furnishings, and machinery, at any place other than the Capitol TFZ Enterprise, in any such event, the Certificate of Qualification for the Capitol TFZ Enterprise shall automatically be deemed void ab initio and the owner of the Capitol TFZ Enterprise shall be liable for and shall reimburse the Republic for any gross revenue, net income, import or export taxes that he or she would otherwise have been required to pay were it not for the tax exemptions extended by this Act.

Section 12. Definitions. As used in this Act, unless the context requires otherwise:

(a) AApplicant@ means a person applying for the issuance of a Certificate of Qualification;

(b) ABusiness@ means, as the case may be:

(1) any type of commerce or trade; any activity engaged in, or caused to be engaged in, with the object of commercial gain or profit, either directly or indirectly; or

(2) the building or buildings from which the commerce, trade, or activity is conducted.

(c) ABusiness license@ means the permission granted by the National Government or any state government of the Republic, under the authority of law, to engage in a business or to practice a trade or profession.

(d) ACapitol TFZ Enterprise@ means, as the case may be:

(1) a business existing on or established after the effective date of this Act and located totally within the boundaries of the Capitol TFZ; or

(2) the building or buildings from which the Capitol TFZ Enterprise is conducting its business.

(e) AConduct@ means to direct in action or course; manage; carry on.

(f) [Reserved]

(g) AEstablish@ means to build, bring into being, create or start.

(h) AExisting business@ means a business in existence on the effective date of this Act and possessing current business licenses issued by the State of Melekeok and the Republic.

(I) AImport@ means to bring into the Republic from a foreign country for use, sale, processing, or re-export.

(j) AManufacture@ means the making, preparing or producing of anything.

(k) ANew business@ means a business established after the effective date of this Act.

(l) AOwner@ means a person who owns; possessor; proprietor; a person having a legal right or title to real or personal property.

(m) APerson@ means both individuals and any cognizable legal entity.

(n) APresident@ means the President of the Republic of Palau.

(o) AMinister@ means the Minister of Finance.

(p) ARepublic@ means the Republic of Palau as its territory is defined in Section 1 of Article I of the Palau Constitution.

Section 13. Effective date. This Act shall take effect upon its approval by the President or upon its becoming law without such approval, except as otherwise provided by law.

PASSED: November 12, 2010

Approved this 29th day of November , 2010.

/s/
His Excellency Johnson Toribiong
President, Republic of Palau