Investment Incentives

National Incentives

Provincial incentives

Municipal/City Incentives

National Incentives

Board of Investments (BOI) Incentives

Overview

Under Book I of the Omnibus Investments Code, an investor may enjoy certain benefits and incentives, provided he invests in preferred areas of investments found in the current Investment Priorities Plan (IPP).

The IPP, issued annually by the Board of Investments (BOI), is a list of promoted areas of investments eligible for government incentives in consultation with related government agencies and the private sector.

An enterprise may still be entitled to incentives even if the activity is not listed in the IPP so long as:
1. at least 50% of production is for exports if Filipino-owned enterprise,; and
2. at least 70% of production is for exports if majority foreign-owned enterprise (more than 40% foreign equity),

The BOI in certain instances as indicated in the IPP may completely or partially limit the incentives available to export products.

Under Book I of the Omnibus Investments Code, BOI-registered enterprises are given a number of incentives in the form of tax exemptions and concessions. These are:
   a. Fiscal Incentives
   b. Non-Fiscal Incentives
   c. Incentives for Regional Headquarters and Regional Operating Headquarters in the Philippines

Investment Priorities Plan

The 2007 Investment Priorities Plan (IPP) shall continuously support the Administration's vision of "Propelling the Nation to 1st World Country Status in 20 Years". It shall remain in representing the development thrust of the government for sustained and equitable economic growth as espoused in the 10-point agenda of the Macapagal-Arroyo administration. The IPP was prepared by the Board of Investments (BOI), as the national lead agency in promoting investments, in cooperation with concerned government agencies.

The 2007 IPP shall continue to focus on sustaining the economic momentum the country has attained while persistently pushing towards a strong, stable and sustainable republic. It shall carry on the task of fulfilling the realization of the Administration's goal of generating jobs, providing food and delivering basic services to the people.

This year's IPP contains the following list of priority areas:
The Preferred Activities covers the identified eleven (11) investment areas that were recommended by the concerned agencies and private sector to support their respective programs.
The Mandatory Inclusions covers all areas/activities where the inclusion in the IPP and/or the grant of incentives under E.O. 226 is mandated by law.
The Export Activities covers the manufacture of non-traditional export products and activities in support of Exporters.
The Project under the Retention, Expansion, and Diversification (R.E.D.) The program refers to activities of existing investors either considered as global players or engaged in strategic industries that are encouraged for retention, expansion or diversification of their operations in the country.
In general, activities under these lists shall be eligible to incentives prescribed under E.O. 226, as amended, subject to the General Policies and Specific Guidelines issued by the BOI.
This year's IPP will continue to utilize the Industry Cluster Approach to enhance industrial competitiveness, promote investments in the countryside, develop micro, small and medium enterprises (MSMEs) and support the One Town, One Product (OTOP) Program as it applies to the activities listed in the IPP. The modernization of existing activities, as well as the establishment and operation of Centers of Excellence and Training Institutions to support the human resources requirements of the preferred activities, are also encouraged.

Finally, the ARMM List covers priority areas that have been independently determined by the Regional Board of Investments (RBOI) of the Autonomous Region of Muslim Mindanao (ARMM) in accordance with E.O. 458. The economic activities listed in the ARMM shall be entitled to incentives only when said activities are undertaken within the ARMM region. However, the economic activities listed in the Preferred Activities, Mandatory Inclusions, Export Activities, and Projects under the R.E.D. Program, may also be undertaken within the ARMM.

The preparation and formulation of the 2007 IPP was undertaken through the concerted efforts of the IPP Inter-Agency Working Group headed by the Board of Investments (BOI), in coordination with the BOI-Autonomous Region of Muslim Mindanao (BOI-ARMM), Presidential Management Staff (PMS), the National Economic Development Authority (NEDA), the Departments of Finance (DOF), Agriculture (DA), Environment and Natural Resources (DENR), Transportation and Communications (DOTC), Tourism (DOT), Energy (DOE), Science and Technology (DOST), National Telecommunications Commission (NTC), Housing and Urban Development Coordinating Council (HUDCC), Education (DepED), National Book Development Board (NBDB), Philippine Retirement Authority (PRA), Export Development Council (EDC), and Trade and Industry (DTI). Consultative meetings with various government agencies were held including Public hearings attended by representatives from various sectors in Manila, Cebu, and Davao.

Fiscal Incentives

Fiscal incentives include the following:

A) Income Tax Holiday;
B) Exemption From Taxes And Duties On Imported Spare Parts;
C) Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees;
D) Tax Exemption On BreedingStocks And Genetic Materials;
E) Tax Credits; and
F) Additional Deductions from Taxable Income.

A) Income Tax Holiday (ITH)

1) The BOI-registered enterprise shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial operations, as follows:

a) New projects with a pioneer status for six (6) years;
b) New projects with a non-pioneer status for four (4) years;
c) Expansion projects for three (3) years. As a general rule, the exemption is limited to incremental sales revenue/volume;
d) New or expansion projects in less developed areas (LDAs) for six (6) years, regardless of status;
e) Modernization projects for three (3) years. As a general rule, the exemption is limited to incremental sales revenue/volume.

2) The ITH is limited in the following cases:

a) Export traders may be entitled to the ITH only on their income derived from the following:
i) Export of new products, i.e. those which have not been exported in excess of US$100,000 in any of the two (2) years preceding the filing of an application for registration, or
ii) Export to new markets, i.e., to a country where there have been no recorded import of a specific export product in any of the two (2) years preceding the filing of the application for registration.

b) Mining Activities
i) The exploration and development of mineral resources are not entitled to an ITH;
ii) Mining and/or quarrying without mineral processing is not entitled to an ITH;

iii) Mining and processing of aggregates are not entitled to ITH.

3) Newly registered pioneer and non-pioneer enterprises and those located in LDAs may avail themselves of a bonus year in each of the following cases:

a) the indigenous raw materials used in the manufacture of the registered product must at least be fifty percent (50%) of the total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage;
b) the ratio of total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one (1) worker; or
c) the net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three (3) years of operation. In no case shall the registered pioneer firm avail of the ITH for a period exceeding eight (8) years.

B) Exemption From Taxes And Duties On Imported Spare Parts
C) Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees
All enterprises registered under the IPP will be given a ten (10) year period from the date of registration to avail of the exemption from wharfage dues and any export tax, impost, and fees on its non-traditional export products.
D) Tax Exemption On BreedingStocks And Genetic Materials
Agricultural producers will be exempted from the payment of all taxes and duties on their importation of breeding stocks and genetic materials within ten (10) years from the date of registration or commercial operation.
E) Tax Credits

1) Tax credit on tax and duty portion of domestic breeding stocks and genetic materials. A tax credit equivalent to one hundred percent (100%) of the value of national internal revenue taxes and customs duties on local breeding stocks within ten (10) years from the date of registration or commercial operation for agricultural producers.

2) Tax credit on raw materials and supplies A tax credit equivalent to the national internal revenue taxes and duties paid on raw materials, supplies, and semi-manufacture of export products and forming part thereof shall be granted to a registered enterprise.

F) Additional Deductions from Taxable Income

1) Additional deduction for labor expense (ADLE) For the first five (5) years from registration, a registered enterprise shall be allowed an additional deduction from taxable income equivalent to fifty percent (50%) of the wages of additional skilled and unskilled workers in the direct labor force. The incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio and shall not be availed simultaneously with ITH. This additional deduction shall be doubled if the activity is located in an LDA.

2) Additional deduction for necessary and major infrastructure works. Registered enterprises locating in LDAs or in areas deficient in infrastructure, public utilities, and other facilities may deduct from taxable income an amount equivalent to the expenses incurred in the development of necessary and major infrastructure works. The privilege, however, is not granted to mining and forestry-related projects as they would naturally be located in certain areas to be near their sources of raw materials.

Non-Fiscal Incentives

Non-fiscal incentives are as follows:

1) Employment Of Foreign Nationals
A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from the date of registration. The position of President, General Manager and Treasurer of foreign-owned registered enterprises or their equivalent shall however not be subject to the foregoing limitations;

2) Simplification of customs procedures for the importation of equipment, spare parts, raw materials and supplies and exports of processed products;

3) Importation of consigned equipment for a period of 10 years from the date of registration, subject to posting of a re-export bond; or

4) The privilege to operate a bonded manufacturing/trading warehouse subject to Customs rules and regulations.

Incentives for Regional Headquarters (RHQ) and Regional Operating Headquarters (ROHQ) in the Philippines

RHQ is entitled to the following incentives:

1) Exemption on the Payment of Corporate Income Tax. An annual information return of a tax-exempt corporation shall be filed with the Bureau of Internal Revenue (BIR) to effect exemption;

2) Exemption on the Payment of Value-Added Tax. The exemption includes the sale or lease of goods and property including the rendition of services to RHQ.

ROHQ can avail of the following incentives:

1) Payment of Corporate Income Tax. Income derived by the ROHQ from performing qualifying activities shall be subject to a preferential rate of 10% on taxable income.

2) Payment of Branch Profit Remittance Tax. Any income derived from the Philippines when remitted to the parent company shall be subject to the tax on branch profit remittances.

3) On the Payment of Value-Added Tax. ROHQ shall be subject to the ten percent (10%) value-added tax unless otherwise provided under the National Internal Revenue Code.

Exemptions common for both RHQ and ROHQ:

1) Exemption on the Payment of All Kinds of Local Taxes, Fees, or Charges. The payment, however, shall be made for real property tax on land improvements and equipment.

2) Tax and Duty-Free Importation of Training Materials and Equipment. Applicable to materials not locally available, subject to prior approval from the Board of Investments (BOI).
The sale or disposition of equipment within two years after importation entered tax and duty-free, shall require prior approval from the BOI and prior payment of applicable taxes and duties.

3) Entitlement to the Importation of New Motor Vehicles. The importation shall be subjected to the payment of the corresponding taxes and duties.

Under RA 8756, the following incentives are given to the expatriates of a registered RHQ/ROHQ in the Philippines:

1) Multiple Entry Visa. Issued to the expatriates, their respective spouses and unmarried children under 21 years old. A non-immigrant visa shall be issued within 72 hours upon submission of all required documents.
The multiple entry visa is be valid for a period of three (3) years and extendable for another three years upon submission to the Bureau of Immigration of a sworn certification by a responsible officer of the RHQ/ROHQ that its license to operate remains valid and that it complied with all requirements stipulated under relevant Philippine laws.

2) Withholding Tax of 15% on Compensation Income. Applied to both alien and Filipino executives holding managerial or technical positions.

3) Tax and Duty-Free Importation of Personal and Household Effects. Applicable on imports made within ninety (90) days before or after conversion of the alien executive's admission category to multiple entry visas.

4) Travel Tax Exemption. Issued by the Philippine Tourism Authority (PTA) upon recommendation by the BOI during the period of the expatriate's assignment in the country.

Board of Investments (BOI)
Industry & Investments Bldg.
385 Sen. Gil Puyat Avenue
Makati City 1200, Philippines
Tel No.: (632) 897-6682; 890-1332; 895-3641

Contacts:
Ms. Celestina B. Ilagan, Executive Director
INVESTMENTS PROMOTION GROUP
Phone Number : (632)896-9212
Fax Number : (632) 897-2181
E-mail: [email protected]

Ms. Maria Teresita S. Santiago, Director
ONE-STOP ACTION CENTER
Phone Number : (632) 895-8322
Fax Number : (632) 895-8322
E-mail: [email protected]

Ms. Ma. Corazon Halili-Dichosa, Director
INTERNATIONAL MARKETING DEPT.
Phone Number : (632) 896-8907
Fax Number : (632) 895-3521
E-mail: [email protected]

Mr. Dennis R. Miralles, Director
MARKETING SERVICES DIVISION
Phone Number : (632) 896-4179
Fax. No : (632) 890-9307
E-mail: [email protected]

Philippine Economic Zone Authority (PEZA) Incentives

Economic Zone Export Manufacturing Enterprise

1) Income Tax Holiday (ITH) 100% exemption from corporate income tax

4 years ITH for Non-pioneer Project

6 years ITH for Pioneer Project ITH Extension years may be granted if Project complies with the following criteria, (one criterion is equivalent to one ITH extension year), provided that the total ITH entitlement period shall not exceed eight (8) years:

The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500,000.00 and,

The capital equipment to labor ratio of the project does not exceed US$10,000.00 to 1 for the year immediately preceding the ITH extension year being applied for.

The average cost of indigenous raw materials used in the manufacture of the registered product is at least fifty percent (50%) of the total cost of raw materials for the preceding years prior to the ITH extension year.

3 years ITH for Expansion project (ITH applies to incremental sales)

2) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national and local taxes(Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)

3) Tax and duty-free importation of raw materials, capital equipment, machinery, and spare parts.

4) Exemption from wharfage dues and export tax, impost or fees

5) VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements

6) Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while under Income Tax Holiday, no exemption from the real estate tax, but machinery installed and operated in the economic zone for manufacturing, processing or for industrial purposes shall be exempt from real estate taxes for the first three (3) years of operation of such machinery. Production equipment not attached to real estate shall be exempt from real property taxes

7) Exemption from expanded withholding tax

Information Technology Enterprise

1) Income Tax Holiday (ITH) 100% exemption from corporate income tax:

4 years ITH for Non-pioneer project

6 years ITH for Pioneer project ITH Extension year may be granted if Project complies with the following criteria (one criterion is equivalent to one ITH extension year,), provided that the total ITH entitlement period shall not exceed eight (8) years:

The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500,000.00 and,

The capital equipment to labor ratio of the project does not exceed US$10,000.00 to 1 for the year immediately preceding the ITH extension year being applied for.

3 years ITH for Expansion project (ITH applies to incremental sales)

2) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national and local taxes. (Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)

3) Tax and duty-free importation of equipment and parts.

4) Exemption from wharfage dues on import shipments of equipment.

5) Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while under Income Tax Holiday, no exemption from the real estate tax, but machinery installed and operated in the economic zone for manufacturing, processing or for industrial purposes shall not be subject to payment of real estate taxes for the first three (3) years of operation of such machinery. Production equipment not attached to the real estate shall be exempt from real property taxes.

6) Exemption from expanded withholding tax.

7) Simplified import and export procedures

8) Other incentives under Executive Order 226 (Omnibus Investment Code of 1987), as may be determined by the PEZA Board

Tourism Economic Zone Locator Enterprise

1) Four (4) years of Income Tax Holiday ITH (as qualified under the National Investment Priorities Plan)

2) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national and local taxes (Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)

3) Tax and duty-free importation of capital equipment

4) VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills

5) Exemption from expanded withholding tax

Medical Tourism Enterprise

1) Four (4) years of Income Tax Holiday on income solely from servicing foreign patients

2) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income upon in lieu of all national and local taxes. (Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)

3) Tax and duty-free importation of medical equipment, including spare parts and equipment supplies, required for the technical viability and operation of the registered activity/ies of the enterprise.

4) VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills

5) Exemption from expanded withholding tax

Agro-Industrial Economic Zone Enterprise

1) Four (4) years of Income Tax Holiday

2) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national and local taxes. (Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)

3) Tax and duty-free importation of production equipment and machinery, breeding stocks, farm implements including spare parts and supplies of the equipment and machinery

4) Exemption from export taxes, wharfage dues, impost and fees

5) VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills

6) Exemption from payment of local government fees such as Mayor's Permit, Business Permit, permit on the Exercise of profession/Occupation/Calling, Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee

Economic Zone Developer / Operator

1) Manufacturing Economic Zone Developer / Operator

Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by the Economic Zone Developer. (Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period)