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Investment Incentives
Investment Incentives
Under the Department of Trade and Industry (DTI), the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) provide separate incentives to investors.
Philippine Economic Zone Authority (PEZA)
The PEZA was established under Republic Act 7916 or the Special Economic Zone Act of 1995. Its main mission is to spur the growth and diversification of exports by attracting foreign investors to locate their manufacturing plants, their regional warehouses or their IT companies in the country's economic zones. Currently, there are 150 economic zone locations in different sites all over the country. The PEZA offers the following investment incentives:
For Ecozone Developers / Operators
1. Income tax holiday
2. Incentives under the Build-Operate-Transfer Law (BOT Law) including government support for accessing Official Development Assistance and other sources of financing
3. Provision of vital off-site infrastructure facilities;
4. Option to pay a special 5% gross income tax, in lieu of all national and local taxes
5. Permanent resident status for foreign investors and immediate family members
6. Employment of foreign nationals
7. Assistance in the promotion of economic zones to local and foreign locator enterprises
For Ecozone and Information Technology (IT) Locators
1. Income tax holiday (ITH) or exemption from corporate income tax for four years, extendable to a maximum of eight years; after the ITH period, there is an option to pay a special 5% tax on gross income, in lieu of all national and local taxes
2. Exemption from duties and taxes on imported capital equipment, spare parts, supplies, raw materials. Also breeding stocks and/or genetic materials or the equivalent tax credit on these items, when sourced locally
3. Domestic sales allowance equivalent to 30% of total sales
4. Exemption from wharfage dues and export taxes, imposts and fees
5. Permanent resident status for foreign investors and immediate family members
6. Employment of foreign nationals
7. Simplified import and export procedures
8. Other incentives under Executive Order 226 (Omnibus Investment Code of 1987), as may be determined by the PEZA Board
Board of Investments (BOI)
The BOI, the lead investment promotion agency of the government, issues the Investment Priority Plan (IPP) annually. Under Book I of the Omnibus Investments Code, an investor may enjoy certain benefits and incentives provided he invests in preferred areas of investments found in the current IPP. Incentives include tax exemptions and concessions. An enterprise may still be entitled to incentives even if its business activity is not listed in the IPP as long as it has:
At least 50% of its production is for exports, if Filipino owned
At least 70% of its production is for exports, if majority foreign-owned (or more than 40% equity)
Fiscal Incentives:
1. Income Tax Holiday
2. Exemption from Taxes and Duties On Imported Spare Parts
3. Exemption from Wharfage Dues and Export Tax, Duty, Impost and Fees
4. Tax Exemption on BreedingStocks and Genetic Materials
5. Tax Credits
6. Additional Deductions from Taxable Income
Non-Fiscal Incentives:
1. Employment of Foreign Nationals
A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from date of registration. The position of President, General Manager and Treasurer of foreign-owned registered enterprises or their equivalent shall however not be subject to the foregoing limitations.
2. Simplification of customs procedures for the importation of equipment, spare parts, raw materials and supplies and exports of processed products.
3. Importation of consigned equipment for a period of 10 years from date of registration, subject to posting of a re-export bond.
4. The privilege to operate a bonded manufacturing/trading warehouse subject to Customs rules and regulations.
Incentives for Regional Headquarters (RHQ) and Regional Operating Headquarters (ROHQ) in the Philippines:
1. Exemption on the Payment of Corporate Income Tax. An annual information return of a tax-exempt corporation shall be filed with the Bureau of Internal Revenue (BIR) to effect exemption.
2. Exemption on the Payment of Value-Added Tax. The exemption includes the sale or lease of goods and property including the rendition of services to RHQ.
Incentives for ROHQs:
1. Corporate Income Tax. Income derived by the ROHQ from performing qualifying activities shall be subject to a preferential rate of 10% on taxable income.
2. Branch Profit Remittance Tax. Any income derived from the Philippines when remitted to the parent company shall be subject to the tax on branch profit remittances.
3. Value-Added Tax. ROHQ shall be subject to the ten percent (10%) value-added tax unless otherwise provided under the National Internal Revenue Code.
Exemptions for RHQ and ROHQ:
1. Exemption from All Kinds of Local Taxes, Fees, or Charges. Payment however, shall be made for real property tax on land improvements and equipment.
2. Tax and Duty Free Importation of Training Materials and Equipment. Applicable to materials not locally available, subject to prior approval from the Board of Investments (BOI).
The sale or disposition of equipment within two years after importation, entered tax and duty free, shall require prior approval from the BOI and prior payment of applicable taxes and duties.
3. Entitlement to the Importation of New Motor Vehicles.The importation shall be subjected to the payment of the corresponding taxes and duties.
Incentives for expatriates of a registered RHQ/ROHQ in the Philippines:
1. Multiple Entry Visa. Issued to expatriates, their respective spouses and unmarried children under 21 years old. A non-immigrant visa shall be issued within 72 hours upon submission of all required documents.
The multiple entry visa is valid for a period of three (3) years and extendible for another three years upon submission to the Bureau of Immigration of a sworn certification by a responsible officer of the RHQ/ROHQ that its license to operate remains valid and that it has complied with all requirements stipulated under relevant Philippine laws.
2. Withholding Tax of 15% on Compensation Income. Applied to both alien and Filipino executives holding managerial or technical positions.
3. Tax and Duty Free Importation of Personal and Household Effects. Applicable on imports made within ninety (90) days before or after conversion of the alien executive's admission category to multiple entry visa.
4. Travel Tax Exemption. Issued by the Philippine Tourism Authority (PTA) upon recommendation by the BOI during the period of the expatriate's assignment in the country
(Taken from the Department of Trade and Industry or DTI www.dti.gov.ph)
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