The Philippine government has several initiatives in place to entice both local and foreign entrepreneurs to start a business in the country. If you recently opened or is currently in the process of opening a business in the Philippines, you’ve probably heard of PEZA, which stands for Philippine Economic Zone Authority.
PEZA is the government agency responsible for promoting the registration of new business and increasing investments in the Philippines. Its relation to the Department of Trade and Industry (DTI) means it also extends help to entrepreneurs to improve their business operations or kick-start one such as securing business permits.
PEZA also grants incentives to those who wish to open a new business in the country. More importantly, PEZA oversees the development of “environment-friendly and world-class” business zones in the Philippines.
There are several existing and upcoming economic zones in the country. These are Manufacturing Economic Zone, Information Technology Parks or Centers, Agro-Industrial Economic Zone, Tourism Economic Zones, and Medical Tourism Parks or Centers. The development of these zones encourages investors to veer away from the already congested Metro Manila. Opening a business in areas other than the Philippine capital means a boost in the local economy, as well as tourism.
The businesses who open in these special zones are provided with not just assistance, but also special privileges and benefits. If you are in the process of investing or opening an establishment or starting operations in these zones, here’s how to qualify for the PEZA incentives.
PEZA-qualified Business Incentives
PEZA Eligibility
Registering for the PEZA incentives can take up to 21 days. Applying for one means you have already secured the necessary requirements to open a business in the Philippines such as completing a BIR online registration. Here are the requirements you need to qualify for PEZA incentives.
1. A notarized PEZA Application Form, which can be downloaded from the PEZA website.
2. A Corporate Profile, which includes information about both the current company that is applying for the PEZA incentives, and the parent company if any. It outlines the company or companies’ history, business projects, and activities that are currently in operations or proposal.
A Corporate Profile also includes a list of the affiliated companies that are already registered with PEZA and the Board of Investments (BOI). Copies of the Certificates of Registration (COR), along with the Terms and Conditions should also be included in the Corporate Profile.
If the company or companies have annual reports and audited financial statements available, these should also be submitted to PEZA. A Corporate Profile also includes the profiles of the company or companies’ principal officers.
1. Certificate of Registration with the Securities and Exchange Commission (SEC).
2. Updated Articles of Incorporation.
3. Board Resolution that authorizes the PEZA application. This also includes the designation of the company’s authorized representative or representatives who are responsible for the PEZA registration.
4. A Project Brief, which details the technical, managerial, and financial information of the project or business that is applying for the PEZA incentives.
Who Can Apply For the PEZA Incentives?
Below is the list of business activities that are eligible to apply for the PEZA incentives.
1. Export Manufacturing
2. Information Technology (IT) Service Export
3. Tourism
4. Medical Tourism
5. Agro-industrial Export Manufacturing
6. Agro-industrial Bio-Fuel Manufacturing
7. Logistics and Warehousing Services
8. Economic Zone Development and Operation
9. Facilities Provider
10. Utilities
What Are The Specific PEZA Incentives?
Here are the PEZA incentives businesses can enjoy upon successful application.
1. PEZA-qualified businesses can enjoy an Income Tax Holiday (ITH), which means a 100 percent corporate income tax exemption. Pioneer businesses or projects can enjoy a 6-year ITH, while non-pioneers can enjoy a 4-year ITH.
2. When the ITH expires, a business can avail of the 5 percent Special Tax on Gross Income and exemption from all taxes, both national and local.
3. The PEZA-qualified business also enjoys tax- and duty-free imports of their capital equipment and raw materials. This also includes their machines and its corresponding spare parts.
4. The businesses are given exemption from wharfage dues, as well as export tax, fees, and impost.
5. If the companies have local purchases, these are subjected to VAT zero-rating as long as it complies with both PEZA and BIR requirements.
6. PEZA-qualified businesses are also exempted from expanded withholding tax.
These PEZA incentives allow new businesses to focus on what’s important – growing their business without worrying about the extra expenses that come with it.
If you’re a newly minted entrepreneur, these benefits are great in dipping your toes into the world of business. The tax exemption alone is a huge deal for business people who have a small capital to work with.
Consider starting a company or opening a branch in the Philippines’ special economic zones to enjoy these huge fiscal benefits.