PEZA Registration in the Philippines

Many foreign companies setting up export enterprises in the Philippines such as outsourcing and offshoring operations may opt to register with PEZA for tax incentives. K&C’s tax lawyers and accountants will assist in determining eligibility for PEZA registration and organize all financial documents to be processed.

PEZA – Philippine Economic Zone Authority
Enterprises registered with the Philippine Economic Zone Authority (PEZA) may be entitled to income tax holidays of four, six, 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 and cannot avail of tax holidays. Qualified entities registered with the Clark Development Corporation and located in the Clark Freeport Zone are entitled to similar incentives.

To obtain tax breaks and incentives offered by PEZA, an enterprise must register with PEZA and locate their operation in one of the PEZA zones, buildings, IT Parks, or Technology Parks. PEZA registrants must generally be export-oriented. Enterprises located inside the zones are required to export 100% of their production. In some cases, PEZA may approve the sale of up to 30% of production in the domestic market. 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 granted are 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 can expect a fast turn-around once the application is submitted.

Our Tax Lawyers will perform the following:

  • Determine eligibility for PEZA
  • Process all required documents for PEZA
  • Identify a PEZA building for you
  • Register your new company with PEZA

Documentary Requirements

  1. Project brief – the completion of the project brief entails the submission of additional documents relating to the statements made therein
  2. Anti-graft certificate
  3. Board Resolution authorizing the filing and designation of a representative
  4. SEC Certificate of Registration, Articles of Incorporation and By-Laws (if not yet available, submit draft of Articles of Incorporation)
  5. Project Feasibility Study – information and documents necessary in the preparation of the project feasibility study

General and Technical Data and Document Requirements

  • Parent company and product brochures
  • Description of the new project (include description and uses of the service)
  • Detailed organizational chart
  • Project timetable
  • Potential market, marketing costs, marketing program
  • Service process and flowchart
  • List of equipment, country of equipment origin, rated capacity, and corresponding costs
  • Materials, their sources and prices; supply contracts, if any; ratio of imported to local materials, if applicable
  • Area requirement, office lay-out
  • Equipment lay-out
  • Electricity and water requirements
  • Types and volume of wastes and waste disposal system
  • Bio-data of principal officers
  • Certificate of registration with the Securities and Exchange Commission; and
  • Articles of incorporation

Financial Data and Document Requirements

  • Number of employees, position and salary rates, training to be provided and length of training, classification of employees as to a) skilled, semi-skilled, and unskilled, b) direct, indirect, and administrative
  • Number of foreign experts to be hired, positions, salary rates, length of stay
  • Projected volume of sales, selling price, and unit of measure
  • Breakdown of other dollar costs (interest on loans, salaries of foreign personnel)
  • Number of workdays per year, number of shifts per day
  • Sources of financing (please indicate whether loans to be obtained are foreign-currency-denominated or not)
  • Latest audited financial statements, if any; and
  • Parent company’s latest volume and value of sales, net income, total assets, and number of total employees, if applicable

PEZA Reportorial Requirements

“An ECOZONE Enterprise shall maintain distinct and separate books of accounts for its operations inside the ECOZONE and shall submit financial and other reports/ documents to PEZA on or before their respective due dates…” Rule XXI, Section 4 of the PEZA Rules and Regulations to Implement R.A. No. 7916, as Amended

Where to Submit Reports: Enterprise Services Division

Report Type Due Date
Economic Zone Monthly Performance Report (EZMPR) Every 20th day of the following month
Annual Report 90 Days after the end of the accounting period
* Audited Financial Statement (AFS) 30 Days after filing with BIR
Quarterly Income Tax Returns (Including copy of O.R. of payment of 3% of the 5% GIT to the BIR and the O.R. of payment of 2% of the 5% GIT to the LGU) 15 Days after filing with BIR
Annual Income Tax Return (ITR)  (Including copy of O.R. of payment of 3% of the 5% GIT to the BIR and the O.R. of payment of 2% of the 5% GIT to the LGU)Breakdown/ Schedule of sales per activity    Breakdown and schedule of other income, data on revenues and taxes paid   (Together with the AFS & Annual ITR) 30 Days after filing with BIR
COA Annual Audit Report
Notice of Start of Commercial Operations 7 days after date
Replacement of Director/Member or Board officer 30 days after date
Amendment of Articles or By Laws 30 days after registration
Change of Name or equity ownership 30 days after change

 

Fines

Basic Fine Daily Fine
1st Violation P 500.00 P 50.00
2nd Violation 1,000.00 150.00
3rd Violation 2,000.00 200.00

Incentives may be withdrawn for non-compliance- basis of the incentives is PEZA registration agreement

Penalties

  1. Administrative Fines – The following schedule of fines and / or administrative sanctions shall apply to all ECOZONE Enterprises and / or to any person or group of persons who have committed violations of these Rules and pertinent circulars / memoranda issued thereunder:
  2. For late filing of financial statements, income tax returns, performance reports, annual reports and all other reports / documents as specifically enumerated under Section 4 Rule XXI or required under existing circulars of the PEZA:

Basic Fine Daily Fine

1st Violation P 500.00 P 50.00 
2nd Violation 1,000.00 150.00 
3rd Violation 2,000.00 200.00


2. Failure to wear or display openly the prescribed ECOZONE identification cards / passes:

1st Violation – Reprimand

2nd Violation – Confiscation of ECOZONE identification cards / passes with denial of access to specific areas in the ECOZONE for ten (10) days

3rd Violation – Permanent confiscation of identification cards / zone passes with perpetual denial of access to specific areas in the ECOZONE

  1. For violation of Rules X and XI of these Rules: Inventory of Goods, Finished Products, Materials and other assets/Entry and Exit of Goods)

1st Violation – a fine ranging from 50% to 100% of the value of the goods or merchandise

2nd Violation – a fine ranging from 101% to 150% of the value of goods or merchandise

3rd Violation – a fine ranging from 151% to 200% of the value of the goods or merchandise

For purposes of this rule, the value of the goods shall mean the average valuation appearing in the invoices, commercial documents or records on file with the PEZA for the same or similar goods or merchandise for the last three (3) years reckoned from the date of violation or in the absence thereof, the latest CIF valuation of the Bureau of Customs on the subject goods or merchandise.

  1. Suspension of Permits – The PEZA may suspend, withhold, disapprove or revoke import or export permits, authority to engage in local sale, authority to farm-out, to avail of any incentive or privilege being administered by the PEZA for failure to comply with these Rules, any provision of the Registration Agreement between the PEZA and the ECOZONE Enterprise, the terms and conditions of the permits / franchises issued by the PEZA and / or for violation of the Act and the pertinent provisions of the Code and the Decree within a stipulated or reasonable period of time.
  2. Cancellation / Revocation – Registration, permit and / or franchise of an ECOZONE enterprise may be cancelled for any of the following grounds:
  3. Failure to maintain the qualifications of registration / permit / franchise as required.
  4. Violation of any pertinent provision of the Act / Code and / or Decree; and
  5. Violation of any of these Rules and Regulations, the corresponding implementing memoranda or circulars or any of the general and specific terms and conditions of the Registration Agreement between the PEZA and the ECOZONE enterprise or violation of the terms and conditions of the permit / franchise issued by PEZA.

However, delay by the ECOZONE enterprise in the implementation of the timetable of its project as set by the PEZA shall result in the automatic cancellation of the certificate of registration / permit / franchise unless extended or a different period is set by the PEZA or these Rules.

The imposition of the above penalties shall be without prejudice to the assessment and collection of customs duties and taxes and/or forfeiture in accordance with the applicable provisions of the Tariff and Customs Code of the Philippines.