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Tax Incentives Application Services in the Philippines for Foreign Entities

The Philippine government grants regulatory power to the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI) to incentivize qualified foreign establishments. These incentives include tax holidays, tax exemptions, tax credits, and tax and duty-free importation of capital equipment.

The Philippine government grants regulatory power to the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI) to incentivize qualified foreign establishments. These incentives include tax holidays, tax exemptions, tax credits, and tax and duty-free importation of capital equipment.

Tax Incentives in the Philippines

Several government agencies provide tax incentives to eligible companies. These include the following:

Philippine Economic Zone Authority (PEZA)

For foreign entities wishing to export manufacturing, tourism, and similar business activities can register with PEZA, given that their office location is within the PEZA’s special economic zones.

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

  • Income tax holiday (ITH) of three to six years
  • A preferential final tax 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
  • Tax credits for exporters using local materials (as provided under RA 7844)
  • 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 that seek to register with PEZA must prepare the following documentary requirements:

  • SEC Certificate of Registration
  • Articles of Incorporation and By-Laws
  • Board Resolution of a duly authorized company representative/signatory
  • Project Brief
  • Anti-Graft Certificate
  • Project Feasibility Study

Additional documents may be asked for other industries depending on the pre-requisite PEZA would require.

Board of Investments (BOI)

On the other hand, fully foreign-owned entities that are engaging in 70-100 percent export-oriented activities, including offshoring and outsourcing, can register with the Board of Investments (BOI). Other industries can also register with this agency, given that their business is among BOI’s investment priorities plan (IPP).

Moreover, foreign businesses can have access to BOI’s incentives if they will set up their office in one of the areas included in BOI’s list of Less Developed Areas (LDAs).

Companies who seek to register with BOI can obtain the following incentives:

  • ITH of three to six 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

Enterprises who seek to acquire the following incentives must prepare the following documentary prerequisite and submit it to 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)

Cagayan Economic Zone Authority (CEZA)

Foreign companies seeking to establish a tourism-related business such as online and offline gaming, amusement, sports facilities, and gambling activities can register their entity with CEZA.

Under Philippine laws, CEZA is authorized to issue online gaming licenses to eligible entities. In addition, CEZA-registered companies are also entitled to acquire all PEZA incentives,  including zero-rating for articles admitted by CEZA under a legal permit.

Prior to applying for CEZA incentives, enterprises must submit the following documentary prerequisites:

  • SEC Certificate of Registration
  • Articles of Incorporation and By-Laws
  • Project Feasibility Study
  • Evidence of the intended enterprise’s physical location within the Cagayan Special Economic Zone and Freeport
  • List of assets and other properties

Tourism Infrastructure and Enterprise Zone Authority (TIEZA)

Lastly, foreign entities engaged in tourism-related activities, such as travel and tour agencies, restaurants, theme parks, etc., within the  Tourism Enterprise Zone (TEZ) can register with TIEZA.

In order for the entity to be eligible with TIEZA, the enterprise’s purpose must be to attract local and foreign tourists to travel to and from the Philippines. TIEZA-registered companies are entitled to PEZA incentives along with the following:

  • 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

For a foreign tourism company to obtain the following tax incentives by TIEZA, they are required to submit the following 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

Acquire Tax Incentives for Your Company

As the Philippines progresses into a great business hub, foreign entities have more reason to invest and start building their enterprises. Aside from that, the country also offers tax incentives that foreign entities can maximize. If you need assistance learning more about tax incentives and how to apply them, you may seek help from business consulting firms to assist you with your inquiries and concerns.

Frequently Asked Questions

What is the purpose of tax incentives in the Philippines?

The main purpose of tax incentives in the Philippines is to attract foreign investors to set up operations in the Philippines and generate local jobs in key areas of development.

What are the different tax incentives available to foreign companies in the Philippines?

Depending on the type of business to register, foreign entities seeking to set up operations in the Philippines can avail of tax incentives from several special government agencies, including:

  1. Philippine Economic Zone Authority (PEZA)
  2. Board of Investments (BOI)
  3. Cagayan Economic Zone Authority (CEZA);
  4. Tourism Infrastructure and Enterprise Zone Authority (TIEZA); and many others.

Who is eligible for tax incentives in the Philippines?

The eligibility criteria for availing tax incentives in the Philippines depends on the agency administering the incentives, i.e., for PEZA, foreign investors must locate their business in a PEZA-accredited zone to be eligible; for BOI, foreign investors must engage in business in any of the priority areas of development of the government to be eligible.

Maximize Tax Incentives for Your Business

Our team of experienced business consultants can assist you with building your business and availing appropriate tax incentives.