The Government of the Philippines has put in place several incentive programs and tax breaks to attract foreign and local investors. The two main agencies implementing those incentives are BOI and PEZA. Dayanan Business Consultancy will assist you in choosing and registering with the correct agency for your business to receive the appropriate benefits. There are several things to take into consideration, such as whether your main activities will be export or domestic oriented, if they are part of the Investment Priorities Plan (IPP) in effect, and where your project will be located and operated.
Requirements and Registration Procedure
- Corporate Location:
In order to register with PEZA a company must be located in one of the PEZA assigned Ecozones, whereas the BOI does not have any location requirements (if not part of the IPP program).
- Registration :
- Required Documents part of PEZA application:
- Project brief
- Anti-graft certificate
- Board Resolution commissioning the designation of a representative
- SEC Certificate of Registration
- Project feasibility study
- Evaluation of Application, this step can be relatively quick depending on the availability of the the board.
- Presentation to PEZA for review by the board, which will decide on the exact incentives granted to the project.
- Required Documents part of BOI application:
- Three copies of the BOI application Form 501
- Three copies of the project report and supporting documents
- Feasibility Plan
- 5 year financial outline
- Preparation of Project Evaluation report by the Project Evaluation and Registration Department Project (PERD) and its presentation to the BOI management committee
- The registration procedure can take from 2 to 3 weeks depending on the project.
Required application fees:
- Application of a New Non-Pioneer Project P3,600.00
- Application of a New Pioneer Project P6,000.00
- Additional registration fee for all new projects P6,000.00
There are both an application and a registration fee to be paid, the amounts of which depend of the size of the initial investment for the project. Application fee summary:
- Project cost below P3 million P1,500.00
- Project cost exceeding P3 million (but not over P4million) P1,500.00
- Project cost exceeding P4 million (but not over P20 million) P3,000.00
- Project cost exceeding P20 million (but not over P50 million) P4,500.00
- Project cost exceeding P50 million P6,000.00
In order to register with the PEZA or BOI there are some specific export commitments to respect.
- For an IT company there is no export commitment required
- A company majority owned by Filipino citizens, must export a minimum of 50% of its total service/products annually
- A company majority owned by foreigners, must export a minimum of 70% of its services/products annually
- For Filipino owned companies there is no export commitment necessary
- A business that is majority foreign owned (40% and more), must export at a minimum of 70% of its services/products annually
- A business engaged in pioneer activities has no export commitment and hence may sell all of its services/products in the Philippines, as long as it complies with the Foreign Investment Act’s (FIA) requirements.
A company registering with the PEZA or the BOI can avail from a number of tax incentives and benefits.
- Offshore profit remittances, which is not subject to remittance tax.
- Income Tax Holiday (ITH) for 4 years for Non-Pioneer IT Enterprises, or 6 years for Pioneer IT Enterprises.
- After the ITH period is over, companies can opt to pay a special 5% tax on gross income instead of all national/local taxes.
- This does not apply to real property taxes for developers-owned land.
- Exemption on import duties/taxes on imported machinery, equipment and raw materials.
- Supplementary deduction equivalent to 50% of training expenses, which is chargeable against the 3% share of the national government of the special 5% tax on gross income;
- Permanent resident status is granted to foreign investors when they make an initial investments of US$50,000.00 or more.
- Exemption from Branch Profit Remittance tax for PEZA-registered branches of foreign firms.
- Other incentives can also be granted as determined by the PEZA Board.
- 3 to 8 years Income Tax Holiday (ITH)
- 4 to 6 years exemption from local business taxes for pioneer and non-pioneer industries
- Exemption from Taxes and Duties on imported spare parts
- Exemption from Wharf Dues, Export Tax, Duty, Impost and Fees
- Tax Exemption on Breeding Stocks and Genetic Materials
- Tax Credits
- Additional Deductions from Taxable Income
PEZA and BOI each want to attract investments from the following industries in order to expand the economic development of the Philippines.
The industries supported are :
- Software Development and Application
- IT-enabled Services (Call centers, Data Encoding, Transcribing and Processing, Directories…)
- Content Development for the Internet and other forms of media
- Knowledge Based and Computer Enabled Support Services (Engineering, Architectural design services, and Consultancies)
- Business Process Outsourcing (BPO)
- IT research and other IT related services
- Investment Priority Plan (IPP):
- Agriculture/Agribusiness and Fishery
- Manufactured Products
- Business Process Outsourcing (BPO)
- Creative Industries
- Strategic Activities
- Green Projects
- Disaster Prevention, Mitigation and Recovery Projects
- Research and Development and Innovation
- Mandatory List:
- Printing, Publication and Content Development of Books or Textbooks
- Downstream Oil Industry
- Ecological Solid Waste Management
- Clean Water
- Magna Carta for Disabled Persons
- Renewable Energy
- Export Activities:
- Production and Manufacture of Export Products
- Export Services
- Activities in Support of Exporters