INCENTIVES FOR INVESTORS
The Philippines presents many opportunities for foreign participation especially with its continuing focus on rapid industrialization and infrastructure development as vital economic drivers. It attracts and boosts investor confidence through fiscal and non-fiscal incentives for qualified enterprises including BOI-registered enterprises through the Omnibus Investments Code, Philippine Economic Zone Authority (PEZA) enterprises, and export and domestic market enterprises through the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
Subject to certain conditions, BOI-registered enterprises may enjoy the following fiscal and non-fiscal incentives:
- Income tax holiday for 6 years from the start of commercial operations for pioneer firms and 4 years for non-pioneer firms
- Exemption from any wharfage due, and export tax, duty, impose, and fees of exports by a registered enterprise of its non-traditional export products
- Exemption from local business taxes for 6 years from registration for pioneer firms and 4 years in the case of non-pioneer firms
- Tax- and duty-free importation of capital equipment and accompanying spare parts of new and expanding BOI-registered enterprise
- Tax- and duty-free importation of breeding stocks and genetic materials within 10 years from the date of registration or commercial operation of the enterprise
- Additional deduction from taxable income of 50% of the wages corresponding to the increment in the number of direct labors for skilled and unskilled worker, for the first 5 years from registration
- Tax credit equal to the national internal revenue taxes and customs duties paid on the supplies, raw materials, and semi-manufactured products used in the manufacture, processing, or production of its export products and forming part thereof
- Simplified customs procedures
- Access to the utilization of the bonded warehousing system in all areas required by the project
- Employment of foreign nationals
For PEZA-registered export-oriented enterprises, the following fiscal and non-fiscal incentives are available:
- Corporate income tax holiday for 6 years from the start of commercial operations for newly-registered pioneer firms and 4 years for non-pioneer firms
- Upon the expiration of the initial income tax holiday, a special tax rate of 5% on gross income in lieu of all local and national taxes
- Exemption from wharfage dues and any export tax-imposed fees
- VAT zero-rating on local purchases
- Tax- and duty-free importation of raw materials, supplies, capital equipment, machineries, spare parts, breeding stocks, and genetic materials
- Tax credit on domestic capital equipment, spare parts, breeding stocks, and genetic materials
- Tax credit for import substitution
- Deduction from taxable income of training expenses for both labor and management
- Simplified customs procedures
- Unrestricted use of consigned equipment
- Employment of foreign nationals
Through the CREATE Law, export enterprises and domestic market enterprises are also entitled to the following enhanced deductions:
- Additional 10% for buildings and 20% for machineries and equipment depreciation allowance of the assets acquired for the production of goods and services (qualified capital expenditure)
- Additional 50% deduction on labor expenses
- Additional 100% deduction on research and development expenses
- Additional 100% deduction on training expenses
- Additional 50% deduction on domestic input expenses
- Additional 50% deduction on power expenses
- Up to 50% deduction for reinvestment allowance for manufacturing enterprises
- Enhanced net operating loss carry-over (NOLCO)