What is PEZA and How Does it Work?

Businesses who are looking to invest or start a business in the Philippines often do so to take advantage of a highly skilled labor pool and its strategic geographic location. But the last thing they want to worry about is piles of permit paperwork and red tape. This is where the importance of PEZA comes in.

The Philippine Economic Zone Authority (PEZA) is a government agency linked to the Department of Trade and Industry.

The Purpose of PEZA:

Boost the Philippine economy through industrial development, export growth, and domestic investments 
Attract foreign and local investments by creating favorable business conditions through incentives and benefits 
Generate jobs for Filipinos by supporting industries like manufacturing, information technology, and logistics. 

Responsibilities of PEZA

Establish and Regulate Economic Zones (ecozones):

PEZA facilitates the creation of special economic zones, which include industrial estates, export processing zones, information technology parks, tourism / recreational economic zones, and others. The agency works with local governments and private developers to design these special economic zones with highly developed infrastructure and an abundant supply of resources needed for reliable daily operations (e.g., water, electricity, security, etc). This is particularly important in attracting technology-driven and export-oriented industries.

Each ecozone is developed as an independent community with minimum government interference. It administers its own economic, financial, industrial, and tourism development without help from the national government. It also provides adequate facilities to establish linkages with surrounding communities and other entities within the country. 

PEZA also monitors the performance of these ecozones to ensure that they align with national economic goals. That is why these zones are also areas where businesses can enjoy fiscal and non-fiscal incentives and privileges, depending on their location and industry priority. 

Tax Incentives for Ecozone Enterprises

Provide Incentives for Ecozone Enterprises

PEZA offers several fiscal and non-fiscal incentives, these include tax perks, duty-free importation, and simplified processes. 

Fiscal Incentives 

Export-oriented enterprises

• Income Tax Holiday (ITH) of 4-7 years, with potential extensions
• Special Corporate Income Tax (SCIT) rate of 5% or Enhanced Deductions (ED) for 10 years 
• VAT Zero-Rating on Local Purchases: Purchases of goods and services by PEZA enterprises from local suppliers are VAT zero-rated.
• Tax- and Duty-Free Importation: Companies can import capital equipment, raw materials, and other inputs tax- and duty-free.
• Exemption from export taxes and charges for exported goods or services 

Domestic market enterprises

• Income Tax Holiday (ITH) of 4-7 years
• Special Corporate Income Tax (SCIT) rate of 5% or Enhanced Deductions (ED) for 5 years 
• VAT Zero-Rating on Local Purchases: Purchases of goods and services by PEZA enterprises from local suppliers are VAT zero-rated, subject to conditions set by the Bureau of Internal Revenue (BIR) 
• Limited duty and VAT exemptions for important capital equipment and raw materials, provided these are not locally available

Non-Fiscal Incentives 

Streamlined Import- Export Procedures

PEZA streamlines the process for companies to register and operate businesses, set up and expand operations, or import and export materials and products. This can be done through the use of the PEZA Electronic Import Permit System (e-IPS) and the Expanded Automated Export Documentation System (E-AEDS)  and it goes a long way in making business processes more productive and efficient. 

Visa Assistance

PEZA offers assistance in obtaining special non-immigrant visas for foreign officers, employees in advisory, supervisory, and technical job positions, and investors of PEZA-registered companies. This visa assistance privilege extends to their spouses and unmarried children under 21 years old. This makes it easier for expatriates to work and stay in the Philippines. 

Protection of Investments 

The government guarantees against expropriation without proper compensation. PEZA also provides advocacy and liaison work with other government agencies to prevent any adverse policies or actions that might undermine investor confidence. It also monitors companies within the economic zones to ensure they adhere to Philippine laws and regulations by: 

• Conducting regular audits and inspections 
• Requiring compliance with environmental and labor laws 
• Enforcing rules on the proper use of tax and customs incentives 

Simplified Administrative Processes

PEZA supports businesses with one-stop-shop services for permits and licenses, reducing bureaucratic hurdles. By consolidating these services, it is simpler for companies to comply with regulations in one location, avoiding the need to deal with multiple government agencies. This is particularly important for businesses that rely on timely importation, exportation, and other essential functions. Faster permitting and licensing also allow companies to start or expand their operations, or even pivot strategies, with minimal delays.

In 2023, PEZA reported a significant increase in investment approvals, with a 147% increase compared to the previous year. PEZA accreditation is one of the ways to drastically stimulate economic growth by addressing the slow bureaucratic processes that serve as a barrier to entry for new businesses. Moreover, it fosters global partnerships and aligns its initiatives with the country’s economic policies to support both local and international businesses as they become part of the global value chain.

Indeed, PEZA plays a crucial role in making the Philippines a hub for investors. It creates a win-win situation: businesses thrive, Filipinos get jobs, and the economy grows. Whether you're an entrepreneur looking for investment opportunities or a job seeker eyeing better prospects, PEZA stands as a key driver of progress in the country.