IPAs in the Philippines: How to avail tax incentives as a foreign investor

Investment Promotion Agencies (IPAs) are defined as government agencies whose goal is to create awareness of the current investment opportunities in the country to attract investors with the means to provide job opportunities and increased productivity in the economy.  

To help promote foreign investment in the country, the Philippine government gives regulatory powers to IPAs like the Board of Investments (BOI), Philippine Economic Zone Authority (PEZA), Tourism Infrastructure and Enterprise Zone Authority (TIEZA), Cagayan Economic Zone Authority (CEZA), and many more. The government allows them to implement tax incentives to registered business enterprises that meet their requirements.  

There are 19 IPAs in the Philippines, each with unique requirements and tax incentives; while some of its benefits align, they differ in specific ways. To help choose which agency suits your business, we have listed down the requirements and services of the IPAs mentioned earlier, highlighting incentives such as tax exemptions, tax holidays, and tax credits, among others. Additionally, some IPAs, like PEZA, require foreign companies to locate their office in their Special Economic Zones (SEZs) to become eligible for their tax incentives.  

Understanding each of these IPAs is sure to help simplify doing business in the Philippines, along with making investments in the Philippines more straightforward and worthwhile as well.    

IPA Agencies 

1.) Board of Investments (BOI)  
This agency requires fully foreign-owned companies to be heavily engaged with export-oriented activities, including offshoring and outsourcing. However, other businesses can register with the BOI if their business plans are part of the priority area for government development or are within the BOI’s own investment priorities plan (IPP). 
Additionally, foreign enterprises can receive BOI incentives if their Philippine branch office is found in an area it defines as a Less Developed Area (LDA).  
BOI’s tax incentives and requirements are observed to be like those of PEZA: 

• BOI Tax Incentives 

• • tax and duty-free importation of consigned equipment 
  • ITH of 4 to 7 years (as provided under RA 11534) 
  • exemption from wharfage dues and export, tax, duty, impost, and fees 
  • Further deduction on labour expenses 
  • tax credits on imported raw materials 
  • duty exemption on imported capital equipment, spare parts, and accessories 
  • employment of foreign nationals in supervisory, technical, or advisory positions.  
• BOI Registration Requirements 
  To apply for an incentive, eligible foreign enterprises must submit the following: 
  • Articles of Incorporation and By-Laws 
  • Audited financial statement (feasibility study that contains projected financial reports for the next five years) 
  • SEC Certificate of Registration 
  • Income tax return for the past three years (if applicable) 
  • Board resolution of a duly authorised company representative/signatory 
  • Project report (defined as a report noting down activities that were listed or related to those within the IPP)

Philippine Economic Zone Authority (PEZA)

 PEZA allows foreign enterprises involved in various exports such as manufacturing, IT services, and even tourism. Among their most important requirements for foreign enterprises is to find one of their business branches in any of their SEZs while being classified as an export-oriented enterprise.  

Additionally, PEZA can approve the sale of products or services for up to 30% towards the domestic market if the conditions allow it.  

• PEZA tax incentives
    
  Enterprises registered to PEZA can avail many of substantial tax incentives, which include the following:  
  • Export enterprises may be granted an Income Tax Holiday (ITH) of four (4) to seven (7) years depending on the location and industry priorities 
  • After ITH, export enterprises can avail a 5% Special Corporate Income Tax OR Enhanced Deductions for ten years. 
  • Tax-and-duty-free importation of capital equipment, raw materials, spare parts, or accessories. 
  • VAT exemption on importation and VAT zero-rating on local purchases for goods and services directly or exclusively used in the registered project or activity of export enterprise for the period of registration of the said project or activity. 
  • Domestic sales allowance of up to 30% of total sales. 
  • Exemption from payment of local government taxes and fees for the duration of the period of availment of the 5% SCIT incentive. 
• PEZA registration requirements  
  The following requirements are necessary for registering with PEZA: 
  • SEC Certificate of Registration 
  • Articles of Incorporation and By-Laws 
  • The Board Resolution of a duly authorised company representative/signatory 
  • Project Brief 
  • An Anti-Graft Certificate 
  • Project Feasibility Study 
    Additionally, if a foreign company is engaged with a Foreign Investments Negative List (FINL) economic activity, it cannot register with PEZA. The agency will base its approval of the application and its specific incentives on a case-to-case basis. 

3.) Cagayan Economic Zone Authority (CEZA) 

Foreign businesses providing services like gaming, recreational and tourism-related activities (such as gambling, amusement, online gaming, and sports facilities) can register their business with CEZA. 
Establishments registered to CEZA can avail of the tax incentives given by PEZA, including CEZA admitted article with zero-rating following the legal permit. The Philippine law states that CEZA is authorised to issue online gaming licenses to qualified enterprises. 

• CEZA registration requirements 
  The following documents are necessary to apply for CEZA tax incentives  
  • Articles of Incorporation and By-Laws 
  • List of assets and other properties 
  • SEC Certificate of Registration 
  • Project Feasibility Study 
  • Evidence of intended enterprise’s physical location within the Cagayan Special Economic Zone and Freeport 

4.) Tourism Infrastructure and Enterprise Zone Authority (TIEZA) 

The TIEZA agency aims to register foreign businesses providing tourism-related services (examples include restaurants, travel and tour agencies, spas, galleries, and theme parks) found in the Tourism Enterprise Zone (TEZ). The business needs to attract local and foreign tourists to be eligible for the tax incentives.  

However, other tourism-based businesses can still avail of the TIEZA incentives if their tourism services and activities are part of the IPP.  

• TIEZA tax incentives  
  Business enterprises registered to TIEZA can obtain the following incentives:  
  • Protects from requisition of property during a war or national emergency 
  • Gives repatriation of investment following the currency used during the original investment 
  • Tax deduction equivalent to a reasonable percentage (not exceeding 50% of the cost of environmental protection or cultural heritage preservation activities, sustainable livelihood programs for local communities, and other similar services) 
  • Entitlement to avail a work visa or a Special Investor’s Resident Visa 

• TIEZA registration requirements 
  Foreign-owned businesses must submit the following documents to be eligible for TIEZA incentives:  
  • Proof of land ownership with a long-term lease agreement/s for a time no less than 25 years in the proposed TEZ 
  • SEC Certificate of Registration 
  • An endorsement letter from the National Historical Institute (NHI) within the Cultural and Heritage Tourism Zone, from the Department of Health (DOH) in the case of Health and Wellness Tourism Zone; or Philippine Retirement Authority (PRA) in the case of retirement villages/communities 
  • Articles of Incorporation and By-Laws 
  • Company Profile (containing basic data/information on its technical, financial, marketing, and management capability to undertake the proposed project) 
  • Board resolution of a duly authorised company representative/signatory 
  • Vicinity map