21-B Rufino Pacific Tower, 6784
Ayala Avenue cor. Rufino St.,
Makati, Metro-Manila, Philippines
Tax Incentives & Tax Holidays in the Philippines
K&C tax lawyers are committed to addressing risks and identifying opportunities and will assist you in choosing a tax effective structure for your business, planning your inbound investment and market entry strategy in the Philippines, and help determine your eligibility for investment incentives granted under Philippine law.
Our tax lawyers will identify Special Economic Zones, IT Parks, Technology Parks and IT buildings where businesses and individuals are allowed to avail of special tax breaks in Makati, Manila, Ortigas, Eastwood, Cebu, Subic, Clark, Cagayan, Davao and Fort Bonifacio, Philippines.
Tax Incentive Registration:
- PEZA - Philippine Economic Zone Authority
- BOI - Board of Investments
- CEZA - Cagayan Economic Zone Authority
- BCDA - Bases Conversion and Development Authority
- SBMA - Subic Bay Metropolitan Authority
- CDC - Clark Development Corporation
Tax Lawyers and Tax Consultants will perform the following:
- Determine eligibility for PEZA, BOI or other incentive programs
- Process all required documents for PEZA, BOI and other incentive programs
- Identify tax risks
- Choose effective tax structure
- Address international & double taxation issues
Enterprises registered with the Philippine Economic Zone Authority (PEZA) are entitled to a holiday from income tax and local taxes for three or eight years. After that, they are subject to 5% tax on gross income (sales less direct costs) in lieu of all local and national taxes. Enterprises that are registered with the Subic Bay Metropolitan Authority (SBMA) or Subic Bay Freeport Zone , which administers the economic zone established by the conversion of the former United States military base in Subic, are also subject to the special 5% tax, but are not entitled to tax holidays. The same benefits are accorded to qualified industries registered with the Clark Development Corporation and located in the Clark Freeport Zone .
To avail of the tax breaks and incentives offered by PEZA an enterprise must register with PEZA and locate their operations in one of the PEZA zones, buildings, IT Parks or Technology Parks. PEZA registrants must generally be export-oriented, with enterprises located inside the zones required to export at least 70% of their production. PEZA may approve the sale of up to 30% of production in the domestic market but 100% export is preferred. Full foreign ownership of a PEZA enterprise is allowed provided they are not engaged in activities that appear on the Foreign Investment Negative List . PEZA approval and specific incentives are granted on a case by case basis. Applicants must supply an application for providing information on capital structure, nationality of investors and a feasibility report in accordance with a PEZA prescribed format. Applicants should expect a fast turn around once the application is submitted.
The Board of Investments (BOI) provides tax breaks and other incentives to 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 3-8 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.
K&C will assist companies involved in all forms of online gaming to register with CEZA and avail of tax incentives.
CEZA (Cagayan Economic Zone Authority) Tax and Fiscal
CEZA offers tax or fiscal incentives/breaks such as four to six-year income tax holiday, tax and duty-free importation of capital equipment, a special tax rate of 5 percent of gross income in lieu of all local and national taxes, tax credits for foreign corporations and effective zero-rating for articles admitted to the zone from the customs territory under proper permit.
Philippines Taxes for Businesses
The Philippine government imposes income tax, VAT (value added tax), estate and donor's tax, excise taxes, documentary stamp tax, and percentage taxes in the Philippines. Local governments impose local business taxes and real property taxes as well.
Foreign and local businesses in the Philippines that qualify and are registered for tax incentives can avail of income tax holidays and this may be followed by a special tax rate of 5% in lieu of any and all taxes if the business is located in a Philippine Special Economic Zone (PEZA).
Contact Kittelson & Carpo Consulting