Understanding Philippine Tax Incentives to Maximize Business Opportunities

The Philippines is a dynamic business hub with attractive tax incentives, making it an appealing destination for foreign investors. In addition, The Philippine government authorizes PEZA and BOI to offer incentives like tax holidays, exemptions, credits, and duty-free importation to qualified foreign businesses.

Tax Incentives in the Philippines

Below are the tax incentives foreign nationals can avail of when investing in the Philippines:

• Philippine Economic Zone Authority (PEZA)
  • Requirements for PEZA Registration
• Board of Investments (BOI)
  • Requirements for BOI Registration
• Clark Freeport Zone and Clark Development Corporation (CDC)
  • Requirements for CDC Registration
• Tourism Infrastructure and Enterprise Zone Authority (TIEZA)
  • Requirements for TIEZA Registration
• Frequently Asked Questions

Philippine Economic Zone Authority (PEZA)

Foreign entities looking to excel in manufacturing, tourism, and similar industries can strategically position themselves for success by registering with the Philippine Economic Zone Authority (PEZA). Setting up operations within PEZA’s special economic zones offers a competitive edge, providing a gateway to an array of exclusive tax incentives that can significantly enhance business growth and profitability.

PEZA offers numerous tax incentives, and these include the following:

• Income tax holiday (ITH) of four to seven years
• Enhanced Deductions or Special Corporate Income Tax Rate of 5% of gross income in lieu of all national and local taxes (after the ITH period)
• Tax and duty-free importation of capital equipment, spare parts, and accessories
• Exemption from expanded withholding tax
• Additional deduction for labor expenses
• Employment of foreign nationals in supervisory, technical, or advisory positions

Requirements for PEZA Registration

Foreign companies aiming to register with the Philippine Economic Zone Authority (PEZA) must ensure they are well-prepared with the essential documents to streamline the registration process. Below are the documentary prerequisites needed for PEZA registration:

• Submission of Application through Electronic Application through Registration System (EARS)
• SEC Certificate of Registration
• Articles of Incorporation and By-Laws
• Secretary’s Certificate Authorizing Registration with PEZA
• Board Resolution of a duly authorized company representative/signatory
• Applicant’s Notarized Undertaking
• Project Brief
• Anti-Graft Certificate
• Project Feasibility Study

Board of Investments (BOI)

Fully foreign-owned entities involved in 70-100% export-oriented activities, such as offshoring and outsourcing, can register with the Board of Investments (BOI). Additionally, other industries can register if their business falls under the BOI’s Strategic Investment Priorities Plan (SIPP)

Companies registering with the BOI can benefit from the following incentives:

• ITH of four to seven years
• Duty exemption on imported capital equipment, spare parts, and accessories
• Exemption from wharfage dues and export tax, duty, impost, and fees
• Tax credits on imported raw materials
• Tax and duty-free importation of consigned equipment
• Additional deduction for labor expenses
• Employment of foreign nationals in supervisory, technical, or advisory positions

Requirements for BOI Registration

To acquire the following incentives, enterprises must prepare and submit the required documents to the BOI:

• SEC Certificate of Registration
• Articles of Incorporation and By-Laws
• Audited Financial Statement (feasibility report that contains projected financial reports for the next five years)
• Income Tax Return for the past three years (if applicable)
• Board Resolution of a duly authorized company representative/signatory
• Project Report (a report that contains activities listed or is related to those listed in the IPP)

Clark Freeport Zone and Clark Development Corporation

Clark is rapidly emerging as a vital economic hub in the Philippines, driven by transformative infrastructure projects such as road expansions, improved railway connections, and the expansion of the Clark International Airport Complex. These enhancements are designed to boost local businesses, attract international tourists, and improve connectivity across Central Luzon, Mega Manila, and Northern Luzon, positioning Clark as a key player in global logistics and aviation networks. The Clark Development Corporation (CDC), a subsidiary of the Bases Conversion and Development Authority (BCDA), plays an instrumental role in managing and developing the Clark Freeport Zone, promoting it as a prime investment destination. Under the CREATE Law, CDC offers various fiscal and non-fiscal incentives, including tax exemptions and deductions, to attract both local and international investors. Additionally, CDC provides extensive support for business development, assisting with permits, regulatory compliance, and operational needs, thereby streamlining the investment process and fostering a conducive environment for growth. With its strategic location, well-planned development area, and robust utilities, Clark is an ideal choice for foreign investors looking to capitalize on these opportunities.

Requirements for CDC Registration

Before applying for CDC incentives, enterprises must submit the required documents:

• Letter of Intent
• Application for Registration (FM-CDC-MD-01) including applicable Annexes (provide link for such document)
• Resume and photocopies of passports and/or any valid ID of key Officers;
• 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 the total project cost
• Proposed Organizational Chart;
• 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;
• Board Resolution Authorizing the Lease/Sub-Lease Agreement and Signatory thereof (disregard if Sub-Lessee is a Single Proprietorship);
• Latest photo of proposed area for lease or sub-lease;
• In case of Sub Lease, Sub Lessor’s Letter Endorsement;
• Other required attachments
  • Company profile and brochures, if any;
  • Conceptual Development Plan and Business Process Flow

Tourism Infrastructure and Enterprise Zone Authority (TIEZA)

Foreign entities operating in tourism-related sectors like travel and tour agencies, restaurants, and theme parks within the Tourism Enterprise Zone (TEZ) can register with the Tourism Infrastructure and Enterprise Zone Authority (TIEZA). To qualify for TIEZA registration, the enterprise must aim to attract both local and international tourists to the Philippines.

TIEZA-registered companies are eligible for PEZA incentives, along with the following additional benefits:

• Tax deduction equivalent to a reasonable percentage (not exceeding 50% of the cost of environmental protection or cultural heritage preservation activities, sustainable livelihood programs for local communities, and other similar services)
• Protection from requisition of property in cases of war or national emergency
• Repatriation of investment (in the currency in which the investment was originally made)
• Entitlement to avail of a work visa or a Special Investor’s Resident Visa

Requirements for TIEZA Registration

To qualify for TIEZA tax incentives, foreign tourism companies must provide the necessary documents:

• SEC Certificate of Registration
• Articles of Incorporation and By-Laws
• Company Profile (containing basic data/information on its technical, financial, marketing, and management capability to undertake the proposed project)
• Board Resolution of a duly authorized company representative/signatory
• Vicinity Map
• Proof of Land Ownership and/or Long-Term Lease Agreement/s for a period of not less than 25 years in the area of the proposed TEZ
• Endorsement Letter from the National Historical Institute (NHI) in the case of Cultural and Heritage Tourism Zone, from the Department of Health (DOH) in the case of Health and Wellness Tourism Zone; or from the Philippine Retirement Authority (PRA) in the case of retirement villages/communities