Philippine Economic Zone Authority (PEZA) is a sector of the Department of Trade and Industry involved in promoting investments and facilitating business operations among foreign investors in selected areas around the Philippines. These areas are known throughout the country as PEZA Special Economic Zones. As stated in the Special Economic Zone Act of 1995, the creation of PEZA aims to generate income and employment for the economy, creating opportunities for foreign investors to establish businesses in the Philippines. Thus, companies that opt for PEZA registration are entitled to numerous benefits, among them tax exemptions and incentives.
More and more call centers and other BPO companies in the Philippines are now opting for PEZA registration. Most of these companies are located at PEZA buildings in Makati, Fort Bonifacio, Ortigas, McKinley Hill, Eastwood, and other locations outside Metro-Manila.
Enterprises that are 100% foreign-owned and engaged in preferred areas of investment are entitled to tax incentives and exemptions from the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA). Businesses may only avail of one set of incentives at a time and will be required to comply with investment commitments and inspection by the relevant government agency. Under PEZA, the set of incentives actually received by a registered enterprise will depend on the registration agreement actually signed between the enterprise/locator and the PEZA.
Foreign ownership is restricted for enterprises that undertake activities listed in the Foreign Investment Negative List (FINL) of the Philippines.
PEZA offers the broadest set of incentives for export-oriented enterprises locating within identified economic zones. These are:
- Offshore profit remittances, not subject to remittance tax;
- Income Tax Holiday for four (4) years for Non-Pioneer IT Enterprises, or six (6) years for Pioneer IT Enterprises;
- After the ITH period, the option to pay a special 5% tax on gross income earned, in lieu of all national and local taxes, except real property taxes on land owned by developers;
- Exemption from payment of import duties and taxes on imported machinery and equipment and raw materials;
- Additional deduction equivalent to 50% of training expenses, chargeable against the 3% share of the national government in the special 5% tax on gross income;
- Permanent resident status for foreign investors with initial investments of US$ 150,000.00 or more;
- Special tax rate of 5% of gross income (measured as sales less direct costs) in lieu of all Philippine taxes after the ITH;
- Exemption from Branch Profit Remittance tax for PEZA-registered branches of foreign corporations; and
- Other incentives, as determined by the PEZA Board.
Enterprises locating in an ecozone, as well as the developers and operators of the zone, are entitled to these incentives available to BOI-registered enterprises, as well as to additional incentives available under the Act. Ecozones are essentially export-oriented. Enterprises located inside the zones are required to export 100% of their production but PEZA allows up to 30% of production in the Philippine domestic market.
Requirements for PEZA Registration
Below are some of the required documents for obtaining PEZA registration:
- Project brief- entails the submission of additional documents to confirm the statements made therein
- Anti-graft certificate
- Board Resolution Authorizing the designation of a representative
- SEC Certificate of Registration
- Project feasibility study – includes reference documents and other information used for the study