In PEZA-registered SEZs, qualified companies located inside the SEZ get a 100% tax exemption via a 4-6 year initial income tax holiday. Upon expiration of the tax holiday, companies will only receive a 5% special tax on gross income. PEZAs are also exempted from local and national taxes. In non-PEZAs, companies are required to pay a 30% income tax and have a 0.5% Local Business Tax and 2% Real Property Tax.
- VAT Zero-rating of local purchases
PEZAs offer a VAT Zero-Rating for all local purchases. In non-PEZAs, the price of goods would likely be more expensive because of the Philippines’ Value-Added Tax of 12%
- Payment exemption
Because PEZAs have their own set of laws for agro industrial designed for boosting economic development, those who are in PEZAs are exempted from paying for local government imports, fees, licenses, and/or taxes. Whereas in non-PEZAs, fees for government applications and fees for government permits are required before you can move ahead with industrial estate development.
Aside from the above-stated fiscal incentives, there are also non-fiscal incentives that are beneficial to those who want to become PEZA-registered companies, such as:
- Non-resident foreign nationals may be employed by PEZA- registered companies – Foreigners may be hired in PEZA-Registered companies in supervisory, technical, or advisory positions.
- Simplified import-export procedures – Electronic Import Permit System and Automated Export Documentation Systems are available.
- Special non-immigrant visa with multiple entry privileges – These special visas are available for non-resident foreigners in a PEZA-Registered Economic Zone Enterprise who are investors, officers, and employees in supervisory, technical, or advisory positions, along with their spouses and unmarried children.
Eligible Activities in PEZAs
If you are now convinced that you want your company to be PEZA-Registered, here are some of the activities that can be applied for registration in PEZAs:
- Export manufacturing
- Information Technology (IT) Service Export
- Medical Tourism
- Agro-Industrial Export Manufacturing
- Agro-Industrial Biofuel Manufacturing
- Logistics and Warehousing Services
- Economic Zone Development and Operations
- Facilities Provider, and;
CREATE Law and How it Affects PEZA Incentives
The passage of the CREATE law on March 26, 2021, was a welcomed development by many business groups in the Philippines, including the Philippine Economic Zone Authority or PEZA.
How does the newly signed CREATE Law affect PEZA Incentives? Here are some points that you should take note of:
- Greater flexibility is given to the Fiscal Incentives Review Board (FIRB) and the President in granting incentives.
The CREATE law grants more power to the President and the FIRB on the issuance of incentives. Previously, the FIRB was tasked to grant tax incentives to government-owned or controlled corporations (GOCCs) only, now the FIRB also has the authority to approve tax incentives for private corporations.
- New PEZA rules for newly registered businesses.
Before the CREATE law was passed, PEZA and other investment promotion agencies (IPA) had greater autonomy in creating and granting incentives to qualified enterprises. The CREATE law centralizes tax incentives via the Title of the Tax Code provision, making tax incentives uniform regardless of the IPA.
This levels the playing field in comparison to the existing PEZA rules (RA7196) and IRR, which has a distinct duration or sunset period for income tax holiday incentives between pioneer and non-pioneer enterprises and expanding firms.
With the CREATE law, the duration of tax holidays is now between four to seven years. The duration is also determined by the tier of the registered business enterprise. The tiers are determined by their location, among other factors. Priority is also given to activities outside the Philippines’ capital, NCR.
- ‘Sunset period’ for 5% Gross Income Tax (GIT) incentive.
According to PEZA rules before the CREATE Law, registered enterprises can enjoy a 5% Gross Income Tax (GIT) incentive at the expiration of their income tax holidays. Instead of paying regular corporate taxes, they are taxed only 5% of their gross income, computed by deducting their direct costs from gross sales.
CREATE introduces a sunset period of four to seven years for the 5% incentive, depending on location and activity type. Registered enterprises are levied the same tax rate as other corporations at the end of the sunset period.
Scale Your Business Through PEZA-Registered Economic Zone
PEZA has over 300 fully operating Economic Zones in the entire country giving a massive impact on businesses from North to South.
This includes one from the south, Anflo Industrial Estate, a 63-hectare Agro-Industrial Hub strategically located between two major hubs, Davao City and Tagum City.
If your business is eligible in PEZA-registered Economic Zone, locating here would certainly make a difference.
See how Anflo Industrial Estate can help.