Maximizing Opportunities: PEZA and BOI Incentives Under the CREATE Act

The Philippines offers a competitive suite of fiscal and non-fiscal incentives designed to attract investors, particularly through the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI). These incentives, further streamlined by the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), are pivotal in driving economic growth and fostering a business-friendly environment. Below is an overview of the benefits available to enterprises and how CREATE reshapes the investment landscape.

PEZA Incentives: Empowering Export-Oriented Enterprises

PEZA focuses on promoting export-oriented industries within designated economic zones. Key incentives include:

Income Tax Holiday (ITH):

Non-pioneer enterprises can enjoy a 4-year ITH, while pioneer enterprises benefit from a 6-year ITH.
After the ITH period, enterprises may opt to pay a special 5% tax on gross income earned in lieu of all national and local taxes, except real property taxes.

2. Tax and Duty-Free Importation:

PEZA-registered enterprises are exempt from duties and taxes on capital equipment, raw materials, and supplies, reducing operational costs.

3. Exemption from Local Taxes:

Generally, PEZA enterprises are exempt from local taxes and licenses but remain liable for real property taxes.

4. Additional Deductions:

A 50% deduction on training expenses is allowed, enhancing workforce development.

5. Permanent Resident Status for Foreign Investors:

Foreign nationals investing at least $150,000 can obtain permanent resident status, simplifying relocation and long-term involvement.

BOI Incentives: Facilitating Broad-Sector Investments

The BOI caters to a wide range of industries, particularly those aligned with the Philippine Development Plan. Its key incentives include:

Income Tax Holiday (ITH): Up to 8 years of ITH is available, depending on whether the project is categorized as pioneer or non-pioneer.
Tax Exemptions: Duty-free importation of spare parts and raw materials.
Exemption from Wharfage Dues: Ten years of exemption from wharfage dues and export taxes to support cost-effective logistics.
Tax Credits: Tax credits on the purchase of domestic breeding stocks and genetic materials are provided.
Additional Benefits: BOI-registered enterprises also benefit from incentives for employing foreign nationals and other fiscal measures to attract foreign direct investment.

The CREATE Act: Redefining Incentives for Registered Enterprises

The CREATE Act significantly affects how incentives are administered, particularly for PEZA-registered enterprises. Here are the key changes:

Certificate of Entitlement to Tax Incentives (CETI):

Under CREATE, PEZA now issues CETIs, confirming an RBE’s entitlement to ITH or the 5% Special Corporate Income Tax (SCIT). This document must accompany the RBE’s Income Tax Return filed with the Bureau of Internal Revenue (BIR).

2. Enhanced Compliance Requirements:

Enterprises must meet stringent compliance conditions, including:

Verification of compliance with PEZA reporting requirements.

Confirmation of commercial operations.

Validation of performance metrics.

3. Structured Tax Regime:

The Act emphasizes a transparent, performance-based incentive framework, ensuring equitable benefits distribution while fostering accountability among enterprises.

4. Work-from-Home (WFH) Arrangements:

CREATE sets clear conditions under which PEZA-registered enterprises can maintain WFH setups without risking their tax incentives, aligning with evolving workplace trends.

Conclusion

Both PEZA and BOI remain instrumental in bolstering the Philippines’ competitiveness as a global investment hub. By aligning incentives with the CREATE Act, the government aims to create a balanced, performance-driven system that rewards compliance while attracting high-impact investments.

For businesses seeking to capitalize on these opportunities, understanding the nuances of PEZA and BOI incentives, as well as the implications of CREATE, is critical to maximizing benefits. Entrepreneurs and investors are encouraged to consult with experts or visit PEZA and BOI offices for tailored advice.

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