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 team of experts and consultants 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 consultants 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
- Project brief – the completion of the project brief entails the submission of additional documents relating to the statements made therein
- Anti-graft certificate
- Board Resolution authorizing the filing and designation of a representative
- SEC Certificate of Registration, Articles of Incorporation and By-Laws (if not yet available, submit draft of Articles of Incorporation)
- 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|
|Basic Fine||Daily Fine|
|1st Violation||P 500.00||P 50.00|
Incentives may be withdrawn for non-compliance- basis of the incentives is PEZA registration agreement
- 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:
- 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
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
- 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.
- 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.
- Cancellation / Revocation – Registration, permit and / or franchise of an ECOZONE enterprise may be cancelled for any of the following grounds:
- Failure to maintain the qualifications of registration / permit / franchise as required.
- Violation of any pertinent provision of the Act / Code and / or Decree; and
- 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.
PEZA Registration in the Philippines FAQs
What are the requirements for PEZA registration in the Philippines?
The requirements for PEZA registration in the Philippines are as follows:
- SEC Certificate of Registration
- Articles of Incorporation and Bylaws
- Board Resolution of a duly authorized company representative/signatory
- Anti-Graft Certificate
- Project Feasibility Study
How can startups/businesses benefit from PEZA registration in the Philippines?
Startups and other types of businesses can benefit from PEZA registration in the Philippines through the following:
- Income tax holidays of six, four or three years
- Zero Value-Added Tax (VAT) on local purchases
- Tax and duty-free importation of raw materials, capital equipment, machineries, and spare parts
- Exemption from wharfage dues and export tax, impost or fees
- Exemption from payment of any and all local government imposts, fees, licenses or taxes
- Exemption from expanded withholding taxes; and many others depending on industry to engage in.
Who are eligible for PEZA registration for tax incentives in the Philippines?
The eligibility criteria for PEZA registration in the Philippines are as follows: a) must locate business in any of PEZA’s economic zones or b) engage in the list of activities that are qualified for PEZA incentives; such as the following: export manufacturing, IT service export, tourism, medical tourism, logistics and warehousing, facilities provider, agro-industrial export manufacturing, and agro-industrial bio-fuel manufacturing.