PEZA ( PHILIPPINE ECONOMIC ZONE AUTHORITY )

Registration with the Philippine Economic Zone Authority (PEZA) entitles the enterprise to income tax holidays four, six, or eight years depending on whether it is a pioneer project or a non-pioneer project. Upon the expiration of the tax holiday, the PEZA registered enterprise is subject to 5% Special Tax on Gross Income in lieu of all local and national taxes. In addition to the registration with PEZA, the operations of the enterprise must be located in one or any of the PEZA zones, buildings, IT Parks or Technology Parks. Additional requirements may be mandated depending on the kind of industry or business activity.

PEZA registration will usually take 3 weeks or approximately 21 working days from the date of submission of all documentary requirements. The processing however would be largely dependent on the availability of the PEZA board and the compliance with the required documents, including additional requirements which may be given, and provided that the PEZA board is duly satisfied with the contents thereof upon evaluation.

BOI (BOARD OF INVESTMENTS)

The Board of Investments (BOI) provides tax breaks and other incentives registered entities that engage in activities identified as investment priorities or those which promote the general economic development of the Philippines and those that are exported oriented (where export is more than 50% of production or 70% if the enterprise is more than 40% owned by foreign investors). The BOI, in consultation with the public sector comes up with an Investment Priorities Plan listing these industries.

The main advantage for an eligible BOI registered firm are 4-8 year income tax holidays and 4-6 year exemption from local business taxes for pioneer and non-pioneer industries. To be eligible for BOI incentives foreign investors will need to have an equity investment in a Philippine corporation.

Pioneer and Non pioneer projects have different requirements. 100% foreign owned enterprises may avail of incentives if they engage in pioneer projects, export at least 70% of their total production or undertake projects less-developed areas of the country as identified by the BOI. These enterprises are obliged to attain 60% Filipino ownership within 30 years from registration unless they export or will be exporting 100% of their production. For enterprises engaged in non-pioneer projects, foreign ownership is limited 40%, unless the enterprise will export more than 70% of its annual production.

Applying for BOI requires submission of a notarized application indicating the type of projects, how the activity relates to those listed in the Investment Priorities Plan, the production capacity geared to export, the capital structure of the enterprise, and the nationality of its investors. In addition, the company must submit a feasibility report, containing five-year projected financial statements.