INCENTIVES FOR INVESTORS

Projects Registered with the Board of Investments

The BOI, an agency under the Department ofTrade and Industry, is the lead investments promotion agency of the country. As such, it is at the forefront of government efforts to attract direct investments into the country to contribute to economic growth and jobs creation, to help uplift the general economic welfare of the Filipinos.

The agency is designed to promote inward investments and assist local and foreign investors in their venture of the desirable areas of business, defined in the annually-prepared Investment Priorities Plan (IPP).

The BOI is mandated through the Omnibus Investments Code (or Executive Order 226) to encourage investments through tax exemption and other benefits in preferred areas of economic activity specified by the BOI in IPP.

The IPP, formulated annually by the BOI, through an inter-agency committee, and approved by the President, lists the priority activities for investments. It contains a listing of specific activities that can qualify for incentives under Book 1 of this Code.

A Filipino enterprise can register its activity with the BOI if their project is listed as a preferred project in the current IPP. Said enterprise may engage in domesticai??sAi??Ai??oriented activities listed in the IPP whether classified as pioneer or non-pioneer.

However, an activity which is not listed, may also be entitled to incentives if the following conditions are met :

  • At least 50% of the production is for export (for 60% Filipino-40% Foreign-owned enterprises); or
  • At least 70% of production is for export (for more than 40% foreign owned enterprises)

For foreign-owned firms or those whose foreign participation exceeds 40% of the outstanding capital stock who intend to engage in domestic-oriented activities, they can only be registered with BOI if they propose to engage in an activity listed or classified in the IPP as pioneer. However, if it fails to meet the pioneer classification, it can likewise opt to be an export-oriented firm to qualify for BOI registration. However, this time, the export requirement is at least 70% of actual production.

FISCAL INCENTIVES

  1. BOI-registered enterprise shall be exempt from payment of the income taxes reckoned from the scheduled start of commercial operations, as follows:
    1. New projects with a pioneer status for six (6) years;
    2. New projects with a non-pioneer status for four (4) years;
    3. Expansion projects for three (3) years. As a general rule, exemptionis limited to incremental sales revenue/volume;
    4. New or expansion projects in less developed areas for six (6) years,regardless of status; and
    5. Modernization projects for three (3) years. As a general rule,exemption is limited to incremental sales revenue/volume.
  2. New registered pioneer and non-pioneer enterprises and those located in the less developed areas (LDAs) may avail 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; orb. Compliance with the Board prescribed ratio of total imported and domestic capital equipment to the number of workers for the project

    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 a registered pioneer firm avail of this incentive for a period exceeding eight (8) years.

  1. A registered enterprise with a bonded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes on its importation of required supplies/spare parts for consigned equipment or those imported with incentives.
  1. All enterprises registered under the IPP will be given a ten (10) year period from date of registration to avail of the exemption from wharfage dues and any export tax, impost and fees on its non-traditional export products.
  1. Effective June 17, 2006, BOI-registered enterprises of good standing with project registered as new or expanding under Executive Order 226, otherwise known as the Omnibus Investments Code of 1987, may import machinery, equipment, spare parts and accessories subject to zero percent (0%) duty for BOI-registered enterprises, classified under AHTN Chapters 40, 59, 68, 69, 70, 73, 76, 82, 83, 84, 85, 87, 89, 90, 91 and 96 of the Tariff and Customs Code of the Philippines.The capital equipment incentive provided under the E.O. 528 shall be availed of by the registered enterprise for a period of five (5) years from its effectivity or until 17 June 2011.
Agricultural producers will be exempt 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.
  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 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.
  1. Additionaldeductionforlaborexpense(ADLE).Forthefirstfive(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 of simultaneously with the 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 their 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

A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from date of registration, extendible for limited periods at the discretion of the Board. The positions of President, General Manager and Treasurer of foreign-owned registered enterprises (more than 40%) or their equivalent shall, however, not be subject to the foregoing limitations.

B. Projects Registered at the Regional Board of Investments Autonomous Region in Muslim Mindanao (RBOI-ARMM)

The Regional Board of Investments (RBOI) of the Autonomous Region in Muslim Mindanao (ARMM) was created by virtue of Executive Order No. 458 which devolves the powers and functions of BOI National over investmentsin the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government. The RBOI-ARMM Board is mandated to regulate and exercise authority over investments within its jurisdiction in accordance with its goal and objectives, subject, however, to the Constitution and national policies.

  • Products or activities must be listed in the Investment Priorities Plan (IPP).
  • Organized under Philippine laws; at least 60% of capital stocks outstanding is owned and controlled by Filipino citizens.
  • Pioneer projects and projects targeting 70-100% of their production for export are, however, exempted from the minimum Filipino requirement. But, in the case of garments, production to be exported should be one hundred percent (100%).
  • Income Tax Holiday 6 years for both pioneer and non-pioneer enterprises
  • Reduced duty on Importation of Capital Equipment
  • Exemption from Taxes and Duties on Imported Spare Parts
  • Exemption from Wharfage Dues and Export Tax, Duty, Impost and Fees
  • Tax Exemption on Breeding Stocks and Genetic Materials
  • Additional Deduction from Taxable Income
  • Tax Credit on Domestic Capital Equipment
  • Tax Credit on Duty Portion of Domestic Breeding Stocks and Genetic Materials
  • Tax Credit for Taxes and Duties on Raw Materials
  • Incentives for Necessary and Major Infrastructure and Public Utilities
  • Employment of Foreign Nationals
  • Simplification of Customs Procedures
  • Importation of Consigned Equipment
  • The privilege to Operate a Bonded Manufacturing Warehouse

C. Projects Registered at the Economic Zones & Freeport Authorities

Philippine Economic Zone Authority (PEZA) RA 7916

PEZA, an attached to the Department of Trade and Industry, is the Philippine government agency tasked to promote investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities inside selected areas throughout the country proclaimed by the President of the Philippines as PEZA Special Economic Zones.

It oversees and administers incentives to developers/operators of and locators in world-class, ready-to-occupy, environment-friendly, secured and competitively priced Special Economic Zones.

PEZA’s dynamic, responsive and client-oriented ethics have earned the trust and confidence of investors in its Special Economic Zones, the local business sector, and the foreign chambers of commerce in the Philippines.

PEZA is ISO 9001:2000 certified.

All Industrial Economic Zones are manned by a PEZA officer and staff to immediately attend to stakeholders needs and concerns. Information Technology companies are attended to by Head Office. The creation of PEZA, the development of Special Economic Zones throughout the country, and the very competitive incentives available to investments inside PEZA Special Economic Zones are embodied in the Special Economic Zone Act of 1995 (Republic Act No. 7916).

As provided in the Special Economic Zone Act, the PEZA Board is chaired by the Secretary of the Department of Trade and Industry. Vice-Chair is the Director General (Chief Executive Officer) of PEZA. Members of the Board are Undersecretaries representing nine (9) key government Departments, to ensure efficient coordination between PEZA and their respective Departments on matters pertaining to investors operations inside the Special Economic Zones.

Export-oriented enterprises that locate in any of PEZA economic zone.

FISCAL INCENTIVES

Income Tax Holiday (ITH) 100% exemption from corporateAi??income tax

  • with 4 years ITH for Non-pioneer Project
  • with 6 years ITH for Pioneer Project

ITH Extension years may be granted if Project complies with theAi??following criteria, (one criterion is equivalent to one ITH extensionAi??year), provided that the total ITH entitlement period shall notAi??exceed eight (8) years:

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

> The capital equipment to labor ratio of the project does notAi??exceed US$10,000.00 to 1 for the year immediately precedingAi??the ITH extension year being applied for.

> The average cost of indigenous raw materials used in theAi??manufacture of the registered product is at least fifty per centAi??(50%) of the total cost of raw materials for the preceding yearsAi??prior to the ITH extension year.

with 3 years ITH for Expansion project (ITH applies to incremental

sales)

Upon expiry of the Income Tax Holiday – 5% Special Tax on GrossAi??Income and exemption from all national and local taxes (GrossAi??Income refers to gross sales or gross revenues derived from theAi??registered activity , net of sales discounts, sales returns and allowancesAi??and minus cost of sales or direct costs but before any deduction isAi??made for administrative expenses or incidental losses during a givenAi??taxable period)

Tax and duty free importation of raw materials, capital equipment,Ai??machineries and spare parts.

Exemption from wharfage dues and export tax, impost or feesAi??VAT zero-rating of local purchases subject to compliance with BIRAi??and PEZA requirementsAi??Exemption from payment of any and all local government imposts,Ai??fees, licenses or taxes. However, while under Income Tax Holiday,Ai??no exemption from real estate tax, but machineries installed andAi??operated in the economic zone for manufacturing, processing or forAi??industrial purposes shall be exempt from real estate taxes for theAi??first three (3) years of operation of such machineries. ProductionAi??equipment not attached to real estate shall be exempt from realAi??property taxes

Exemption from expanded withholding tax

Income Tax Holiday (ITH) ai??sAi??Ai?? 100% exemption from corporate

income tax:

w 4 years ITH for Non-pioneer project

w 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.

w 3 years ITH for Expansion project (ITH applies to incremental

sales)

Upon expiry of the Income Tax Holiday – 5% Special Tax on Gross

Income and exemption from all national and local taxes. (Gross

Incomeai??sAi??A? 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)

Tax and duty free importation of equipment and parts.

Exemption from wharfage dues on import shipments of equipment.

VAT zero-rating of local purchases of goods and services, including

land-based telecommunications, electrical power, water bills, and

lease on the building, subject to compliance with Bureau of Internal

Revenues and PEZA requirements

Exemption from payment of any and all local government imposts,

fees, licenses or taxes. However, while under Income Tax Holiday,

no exemption from real estate tax, but machineries 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 machineries.

Production equipment not attached to the real estate shall be

exempt from real property taxes.

Exemption from expanded withholding tax.

Four (4) years of Income Tax Holiday ITH (as qualified under the

National Investment Priorities Plan)

Upon expiry of the Income Tax Holiday – 5% Special Tax on Gross

Income and exemption from all national and local taxes (Gross

Incomeai??sAi??A? 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)

Tax and duty-free importation of capital equipment

VAT Zero Rating on local purchases of goods and services, including

land-based telecommunications, electric power, and water bills

Exemption from expanded withholding tax

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

foreign patients

Upon expiry of the Income Tax Holiday – 5% Special tax on Gross

Income upon in lieu of all national and local taxes. (Gross Incomeai??sAi??A?

refers to gross sales or gross revenues derived from the registered

activity, net of sales discounts, sales returns and allowances

minus cost of sales or direct costs but before any deduction is

made for administrative expenses or incidental losses during a given

taxable period)

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.

VAT Zero Rating on local purchases of goods and services, including

land-based telecommunications, electric power, and water bills

Exemption from expanded withholding tax

Four (4) years of Income Tax Holiday

Upon expiry of the Income Tax Holiday – 5% Special tax on Gross

Income and exemption from all national and local taxes. (Gross

Incomeai??sAi??A? 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)

Tax and duty free importation of production equipment and

machineries, breeding stocks, farm implements including spare parts

and supplies of the equipment and machineries

Exemption from export taxes, wharfage dues, impost and fees

VAT Zero Rating on local purchases of goods and services, including

land-based telecommunications, electric power, and water bills

Exemption from payment of local government fees such as Mayor

Permit, Business Permit, permit on the Exercise of profession/

Occupation/Calling, Health Certificate Fee, Sanitary Inspection Fee,

and Garbage Fee

Exemption from duties and taxes on raw materials, semi-finished

goods for re-sale to – or for packing/covering, cutting, altering

for subsequent sale to PEZA-registered Export Manufacturing

Enterprises, for direct export or for consignment to PEZA-registered

export enterprise.

VAT Zero Rating on raw materials for checking, packing, visual

inspection, storage and shipping to be sourced locally

7.a. 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 Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

7.b. IT Park 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

IT Park Developer. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

7.c. Tourism 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

Tourism Economic Zone Developer. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

7.d. Medical Tourism 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 Medical Tourism Zone Developer. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

7.e. Agro-Industrial 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 Agro-Industrial Economic Zone Developer. (Gross

Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

7.f. Retirement 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

Retirement Economic Zone Developer. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

8.a. Economic Zone Facilities Enterprise

Special 5% Tax on Gross Income and exemption from all

national and local taxes, except real property tax on land

owned by developers. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

8.b. IT Park Facilities Enterprise

Special 5% Tax on Gross Income and exemption from all

national and local taxes, except real property tax on land

owned by developers. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

8.c. Retirement Economic Zone Facilities Enterprise

Special 5% Tax on Gross Income and exemption from all

national and local taxes, except real property tax on land

owned by developers. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

Special 5% Tax on Gross Income and exemption from all

national and local taxes, except real property tax on land

owned by developers. (Gross Incomeai??sAi??A? 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)

VAT Zero rating of local purchases

Exemption from expanded withholding tax

NON-FISCAL INCENTIVES

Simplified Import ai??sAi??Ai?? Export Procedures (Electronic Import Permit System

and Automated Export Documentation System).

Non-resident Foreign Nationals may be employed by PEZA-registered

Economic Zone Enterprises in supervisory, technical or advisory positions.

Special Non-Immigrant Visa with Multiple Entry Privileges for the

following non-resident Foreign Nationals in a PEZA-registered Economic

Zone Enterprise: Investor/s, officers, and employees in supervisory,

technical or advisory position, and their spouses and unmarried children

under twenty-one years of age. PEZA extends Visa Facilitation Assistance

to foreign nationals their spouses and dependents.

Subic Bay Metropolitan Authority and Clark Freeportzone (RA 7227, as amended by RA 9400)

Republic Act no. 7227 created the Bases Conversion DevelopmentAuthority (BCDA) and while carrying out its primary mission, went a stepfurther by accelerating the conversion and development of baselands as wellas promoting the social and economic development of Central Luzon viathe Subic Bay Metropolitan Authority (SBMA) and the Clark DevelopmentCorporation (CDC). These sites were former US military facilities.

In April 2007, RA 9400 was signed amending RA 7227, otherwiseknown as the Bases Conversion Act of 1992. The amendment declaredthe 4,400- hectare Clark Air Base Proper as a Freeport Zone. This placesClark on equal legal footing with the Subic Freeport Area, especially in theareas of tax and other fiscal incentives which can be offered to current andpotential locators.

Both SBMA and CDC grant essentially the same sets of incentivesto registered Subic Bay Freeport (SBF) and Clark Freeport Zone (CFZ)enterprises. They are managed as separate custom territories, ensuring freeflow of articles within the zones.

One hundred percent (100%) foreign equity is allowed for many types ofindustries including manufacturing, tourism and service-oriented businesses.

Preferential tax rate of five percent (5%) based on Gross Income Earned

provided that seventy percent (70%) of products are to be exported.

Income Tax Holiday (ITH) for six (6) years extendible up to a total of

eight (8) years may be availed through the Board of Investments (BOI).

Zero Value Added Tax (VAT) rating on local purchases.

Exemptions from Real Property Tax

Duty Free importation of capital equipment, raw materials and even

finished goods subject to seventy percent (70%) minimum export

requirement.

Free movement of finished goods within the Customs Territory

Special Visas for Investors

Unlimited purchase and consumption of tax and duty free goods within

the Freeport Zone

Research and Development (R & D) is allowable as deduction for

Manufacturing, Trading and Service Enterprises under RR 16-99

REGIONAL ENTERPRISES LOCATED IN THE ECONOMICAND FREEPORT ZONES

Revenue Regulations No. 16-99 issued September 27, 1999 amendsRevenue Regulations No. 1-95 and other related rules and regulationsrelative to the tax incentives granted to enterprises registered in theSubic Special Economic and Freeport Zone. Specifically, any multinationalcompany whose purpose is to engage in regional and/or international trade/services and business activities may establish in the Subic/Clark SpecialEconomic and Freeport Zone its seat of management and the situs of itsbusiness transactions, including the recording of its income, from some or allcountries in the Asia-Pacific region and or other parts of the world, includingthe Philippines

May generate revenues locally up to 50% of its total revenues with only

5% tax based on gross income earned

Allowable Deductions by Industry

- For Trading and Infrastructure Development Enterprises

- For Service Enterprises

- For Financial Enterprises

Additional Deductions

- For trading and Infrastructure Development Enterprises

- For Service Enterprises

- Financial Enterprises

3. Cagayan Ec onomic Zone Authority (CEZA ) RA 7922

The CEZA is mandated to supervise and manage the development ofthe Cagayan Special Economic Zone and Freeport (Cagayan Freeport) intoa self-sustaining industrial, commercial, financial, and tourism/recreationalcenter and Freeport with suitable retirement/ residential areas. This moveis aimed at creating employment opportunities in and around the CagayanFreeport, and to effectively encourage and attract legitimate and productivelocal and foreign investments.

The Cagayan Freeport was established by virtue of Republic Act No.7922, otherwise known as the Cagayan Economic Zone Act of 1995.

The applicant must meet the following conditions for registration:

(a) The applicant must infuse capital within the Cagayan Freeport, either in

the form of a lease agreement, joint venture or Build-Operate-Transfer

arrangements, or other methods of investment;

(b) A Cagayan Freeport enterprise shall be a duly constituted business

enterprise organized or domiciled in the Philippines or any foreign

country;

(c) The enterprise must name a representative or agent who is a legal

resident of the Philippines;

(d) If affiliated with an existing enterprise in the Philippines outside the

Cagayan Freeport, the enterprise must establish a separate business

organization to conduct business exclusively within the freeport which

shall be a separate taxable entity; and

(e) In meritorious cases, the CEZA may allow the non-establishment of

a separate business entity subject to such terms and conditions as

prescribed.

Four to six-year income tax holiday for qualifying industries (four years

for non-pioneer firms & six years for pioneers)

Tax and duty free importation of articles, raw materials, capital goods,

equipment & consumer items.

A special tax rate of 5% of gross income in lieu of all local and

national taxes;

Tax credits for foreign corporations;

Permanent resident status for foreign investors and their immediate

family, provided that the investor maintains a capital investment not less

than One Hundred Fifty Thousand US Dollars (US$150,000.00)

All applicable incentives under Omnibus Investment Code of 1987,

such as:

- Foreign nationals employed by the enterprise shall be issued a multiple

entry visa, valid for a period of three years

- Tax treatment of merchandise in the Zone

- Tax and duty-free importation of articles, raw materials, capital goods

- Tax credits

4. Z amboanga City Special Economic Zone Authority(ZCSEZA) RA 7903

Zamboanga City Special Economic Zone Authority, created by virtueof Republic Act 7903, is dubbed as an economic haven in this part of theregion. By nature of its operation, Zamboanga Freeport Authority is uniquebeing both an Economic Zone and Freeport and the only freeport in Visayasand Mindanao.

With the issuance by the Bureau of Customs of a special administrativeorder classifying the Zamboanga Freeport Authority as a separate Customsterritory, the free flow, entry and movement of machinery and other goodssans the imposition of local and national tariffs are guaranteed.

Both foreign and local investors with export and/or domestic marketcan apply for registration and availment of incentives.

Income Tax Holiday (ITH) – 6 years for pioneer projects, 4 years for

non-pioneer projects and 3 years expansion projects.

Tax- and duty-free importation of raw materials, equipment and

other articles;

5% flat tax rate from gross income earned after the ITH

Exemption from all local and national taxes

Permanent resident visas for foreign investors and immediate family

members with investment of at least US$150,000

Other incentives under the Presidential Decree No. 66 or those provided

under Book VI of the Omnibus Investment Code of 1987.

5. PHIVIDEC Industrial Authority (PIA) PD 538

The PHIVIDEC Industrial Authority (PIA), is a government-owned andcontrolled corporation, was established through Presidential Decree no. 538,as amended by PD 1491. It was mandated by its Charter to manage andsupervise the 3,000-hectare Phividec Industrial Estate in Misamis Oriental.

Both foreign and local investors with export and/or domestic marketcan apply for registration and availment of incentives.

Exemption from tariff, customs, duties and internal revenue taxes for raw

materials, supplies, articles, equipment, machinery, spare parts and wares

brought into the estate and utilized in the production, storing, packing

and shipment of goods meant for the foreign market

Exemption from local taxes and licenses, except Real Property Taxes

Continued availment of BOI privileges if Activity is BOI- registered

Exemption from wharfage dues if pier is constructed by investors

Employment of foreign nationals on technical and management levels

Availment of inexpensive electrical power rates

Availment of the lowest land lease rates in the country

6. AURORA SPECIAL ECONOMIC ZONE AUTHOR ITY (ASEZA)RA 9490

The ASEZA, also known as Aurora Pacific Economic Zone (APECO),was created by virtue of Republic Act 9490 in 2007. It is designed to bethe Philippinesai??sAi??A? gateway to the Pacific housing an airport and seaport -driven economic center.APECO is in the municipality of Casiguran, Province of Aurora, at thenortheastern quadrangle of Luzon. It is bounded by the provinces of Isabela,Quirino and Nueva Ecija.

Both foreign and local investors with export and/or domestic marketcan apply for registration and availment of incentives

Income Tax Holiday

Net Operating Loss Carryover (NOLCO) ai??sAi??Ai?? Net operating loss ofthe business or enterprise during the first three years from the startof commercial operations which have not been previously offset asdeduction from gross income shall be carried over as a deduction fromgross income for the next five consecutive years immediately followingthe year of such loss

Imposition of a tax rate of five percent (5%) on Gross IncomeEarned (GIE)

Accelerated Depreciation. – Accelerated depreciation of plant, machineryand equipment that are reasonably needed and actually used for theproduction and transport of goods and services

Capital Equipment Incentives

The importation of source documents by information technologyregistered

enterprises shall be eligible for tax and duty free importation.

Raw Materials Incentives.

Incentives on Breeding Stocks and Genetic Materials.

Exemption from Wharfage Dues.

Deferred Imposition of the Minimum Corporate Income Tax.

Other Incentives :

- Employment of Foreign Nationals.

- Investment amount of US$ 150,000.00 in there in cash and/or equipment, in a registered enterprise shall be entitled to an

investor Visa.

Note: For purposes of implementing the 5% tax on Gross Income Earned, inlieu of national and local taxes, granted to PEZA Ecozone Enterprises inCSEZ, CFZ, MSEZ and JHSEZ, the relevant provisions of R.A. 7916, itsimplementing Rules and Regulations, Circulars, Memoranda of Agreementwith other government agencies, and all other relevant issuances of PEZAand of other government agencies relative to the implementation of thetax incentives under R.A. 7916, shall apply.

D. Projects registered at subsidiaries of BasesConversion and Development Authority(RA 7227 and its amendatory law, RA 9400)

The Bases Conversion and Development Authority (BCDA) was createdunder Republic Act (RA) 7227 or An Act Accelerating the Conversion ofMilitary Reservations into other Productive Uses, Creating the Bases Conversionand Development Authority for this Purpose, Providing Funds Therefore and forOther Purposesai??sAi??A?. It is also known as The Bases Conversion and DevelopmentAct of 1992ai??sAi??A? as amended by RA 9400.

BCDA mandate is three-fold (1) Accelerate the sound and balancedconversion into alternative productive uses of the Clark and Subic militaryreservations and their extensions; (2) Raise funds by the sale of portions ofMetro Manila camps and apply said funds for the development and conversion toproductive civilian use of the lands covered under the 1947 MBA between thePhilippines and the United States of America, as amended; and (3)To promote theeconomic and social development of Central Luzon in particular and the countryin general.

BCDA has implementing arms over its subsidiaries such as John HayManagement Corporation (JHMC) for John Hay Special Economic Zone(JHSEZ) and Poro Point Management Corporation (PPMC) for Poro PointFreeport Zone (PPFZ).

INCENTIVES

Tax and duty free importation of raw materials and capital equipment.

PPFZ shall be managed as a separate customs territory, ensuring free flow ofarticles within the Freeport

Unlimited purchase and consumption of tax and duty free consumer goodswithin the PPFZ

No local and national taxes. In lieu of taxes, PPFZ enterprise shall five percent(5%) of gross income earned.

Exemption from taxes under the National Revenue Code (NRC)

Exemption from local taxes except real property taxes

Transactions are zero-rated

Fiscal Incentives provided under PD 66

Fiscal Incentives provided under EO 266 (Omnibus Investment Code

of 1987)

Preferential Income Tax treatment on gross income earned within the

economic zone which is five percent (5%) of the gross income earned

in the following percentages: National Government (3%) and Local

Government Unit (2%)

E. Projects registered at TourismInfrastructureandEnterpriseZoneAuthority

The Tourism Infrastructure & Enterprise Zone Authority (TIEZA) wasAi??created by virtue of Republic Act No. 9593 dated May 12, 2009, otherwiseAi??known as Tourism Act of 2009, replacing the Philippine Tourism Authority.

The TIEZA, an attached agency to the Department of Tourism, is mandatedAi??to designate, regulate and supervise the Tourism Enterprise Zones (TEZs),Ai??particularly of cultural, economic and environmental sustainable developmentsAi??of TEZs to encourage investments. It will also develop, manage and superviseAi??tourism infrastructure projects in the country. Likewise, it will ensure strictAi??compliance of the TEZ operator/administrator with the approved developmentAi??plan. TIEZA has also the power to impose penalties for failure or refusal of theAi??tourism enterprises to comply with said plan.

DEFINITION OF TOURISM ENTERPRISE ZONES

Any geographic area with the following characteristics may be designated as a Tourism Enterprise Zone: a) The area of being defined into one contiguous territory; b) It has historical and cultural significance, environmental beauty, or existing or potential integrated leisure facilities within its bounds or within reasonable distance from it; c) It has, or it may have strategic access through transportation infrastructure, and reasonable connection with utilities infrastructure systems; d) It is sufficient in size, such that it may further utilized for bringing in new investments in tourism establishments and services; and e) It is in a strategic location such as to catalyze the socioeconomic development of neighboring communities.

QUALIFICATION

Tourism Enterprise Zone (TEZ) Operator An entity duly incorporated under Batas Pambansa Bldg. 68, otherwise known as The Corporation Code of the Philippines, and other relevant laws, unless the operator is a Local Government Unit or any other instrumentalities of the government in the pursuit of their mandate, where capital maybe provided by LGUs and/or jointly with private entities may qualify as an operator of a Tourism Enterprise Zone. Tourism Enterprise Any person, firm, association, partnership, corporation, or any other form of business organization may apply for registration as a tourism enterprise to avail of incentives and benefits. Applications for Enterprises shall comply with the applicable nationality, control and/or ownership requirements of the working capital thereof in accordance with the pertinent provisions of the Philippine Constitution, Foreign Investments Act of 1991 and other relevant existing laws and regulations.

FISCAL INCENTIVES

1. Income Tax Holiday

a) New enterprises in Greenfield and Brownfield Tourism Zones shall,Ai??from the start of business operations, be exempt from tax on income forAi??a period of six (6) years.

b) The income tax holiday may be extended if the enterprise undertakes aAi??substantial expansion or upgrade of its facilities prior to the expiration ofAi??the first six (6) years.

c) Existing enterprise in a Brownfield Tourism Zone shall be entitled to availAi??of a non-extendible income tax holiday if it undertakes an extensiveAi??expansion or upgrade of facilities. The cost of such expansion or upgradeAi??in relation to the original investment shall be considered in the grant ofAi??said incentive.

d) These enterprises shall be allowed to carryover as a deduction fromAi??the gross income for the next six (6) consecutive years immediatelyAi??following the year of the loss, their net operating losses for any taxableAi??year immediately preceding the current taxable year which had not beenAi??previously offset as deduction from gross income. Only such losses asAi??have been incurred after registration may be carried over.

2. Gross Income Taxation

a) Except real estate taxes and such fees as may be imposed by the TIEZA,Ai??a new enterprise shall be exempt from payment of all national and localAi??taxes and license fees, imposts and assessments.

b) In lieu thereof, it shall pay a tax of five percent (5%) on its gross incomeAi??earned which shall be distributed as follows:

i. One-third to be proportionally allocated among affected cities orAi??municipalities;

ii. One-third to the national government; and

iii. One-third to the TIEZA

3. Capital Investment and Equipment

A registered enterprises shall be entitled to an exemption of oneAi??hundred percent (100%) of all taxes and customs duties on importationAi??of capital investment and equipment provided that these are directlyAi??and actually needed and will be used exclusively by the enterprise in itsAi??registered activity.

4. Transportation and Spare Parts

Importation of transportation and the accompanying spare parts of newAi??and expanding registered enterprises shall be exempt from customs dutiesAi??and national taxes, provided that:

a) they are not manufactured domestically in sufficient quantity, of comparableAi??quality and at reasonable prices

b) they are reasonably needed; and

c) will be used exclusively by an accredited tourism enterprise.

5. Goods and Services

a) Importation of goods actually consumed in the course of services actuallyAi??rendered by or through registered enterprises within a TEZ shall enjoy oneAi??hundred percent (100%) exemption from all taxes and customs duties:

Provided, however, That no goods shall be imported for the purposeAi??of operating a wholesale or retail establishment in competition with theAi??DFPC; and

b) A tax credit shall be granted equivalent to all national internal revenueAi??taxes paid on all locally-sourced goods and services directly or indirectlyAi??used by the registered enterprise for services actually rendered withinAi??the TEZ.

6. Social Responsibility Incentive

A registered enterprise shall be entitled to a tax deduction equivalent to a reasonable percentage, not exceeding fifty percent (50%), of the cost of environmental protection or cultural heritage preservation activities, sustainable livelihood programs for local communities, and other similar activities

NON-FISCALI NCENTIVES

1. Employment of Foreign Nationals

A registered enterprise may employ foreign nationals in executive,Ai??supervisory, technical or advisory positions for such reasonable periods andAi??under such terms as may be provided by the TIEZA Board

2. Special Investorai??i??s Resident Visa

a) A foreign national who invests at least Two Hundred Thousand DollarsAi??($200,000.00) in a registered enterprise shall be entitled to a SpecialAi??Investorai??i??s Resident Visa enabling the foreign national to reside in theAi??Philippines while his or her investment subsists.

b) Subject to regulations to be issued by the Bureau of Immigration (BI),Ai??the TIEZA shall issue working visas renewable every two (2) years toAi??foreign personnel and other aliens possessing highly-technical skillsAi??which no Filipino within the TEZ possesses, after they have securedAi??Alien Employment Permits (AEP) from the Department of Labor andAi??Employment (DOLE).

3. Foreign Currency Transactions

Subject to the provisions of Section 72 of Republic Act No. 7653, as amended, otherwise known as the New Central Bank Act:

a) Repatriation of Investment In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investment in the currency in which the investment was originally made and at the exchange rate prevailing at the time of repatriation.

b) Remittance of Foreign Exchange The right to remit earnings from foreign investments in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.

c) Foreign Loans and Contracts The right to remit at the exchange rate prevailing at the time of remittance such sums as may be necessary to meet the payments of interest and principal on foreign loans and foreign obligations arising from technological assistance contracts.

4. Requisition of Investment

There shall be no requisition of the property of registered enterprises, except in the event of war or national emergency and only for the duration thereof. In such case, the affected person shall be entitled to just compensation, and shall have the right to repatriate such compensation as provided in Section 3 above.

5. Lease and Ownership of Land

a) Without prejudice to existing laws regulating the ownership of land by individuals and corporations, and consistent with the provisions of Republic Act No. 7652, otherwise known as the Investorai??i??s Lease Act, lands and buildings in each TEZ may be leased to foreign investors for a period not exceeding fifty (50) years, renewable once for a period of not more than twenty-five (25) years.

b) The leasehold right acquired under long-term contracts may be sold, transferred or assigned, subject to the conditions set forth under the Investorai??i??s Lease Ac

INCENTIVES AVAILABLE TO TOURISM ENTERPRISE OUTSIDE TEZs

1. Upon compliance with the requirements provided by law, they shall be entitled to avail of any economic incentives found under existing laws, such as Executive Order No. 226 (1987), otherwise known as the Omnibus Investments Code, Republic Act No. 7042, as amended by Republic Act No. 8179, otherwise known as the Foreign Investments Act, the Special Economic Zone Act, and the Bases Conversion and Development Act, among others, subject to the last paragraph of Section 1 of Fiscal Incentives, at the option of the said enterprises.

2. An existing accommodation establishment not located within TEZ shall be entitled to:

a) Avail of income tax holiday for up to six (6) years for any significant expansion, renovation or upgrade in its facilities in relation to the amount of the original investment; and

b) Import capital equipment free of taxes and duties when necessary for such expansion, renovation or upgrade.

3. Tourism enterprise may avail of incentives under the Omnibus Investments Code, provided that:

a) Tourism activities shall always be included in the Investment Priorities Plan;

b) Rules and regulations concerning the grant of incentives to tourism enterprises shall be jointly formulated by the Board of Investments and the Department;

c) The income tax holiday provided under Section 39.1 of the Omnibus Investments Code shall also apply to existing accommodation enterprises undergoing substantial upgrade of facilities; and

d) Accredited tourism enterprises shall be entitled to import transportation and accompanying spare parts free of taxes and duties provided: i. it shall be exclusively used by the enterprise in its operations; and ii. they are not manufactured domestically in sufficient quantity, comparable quality and prices.

Note: As of third quarter of 2010, TIEZA is in the process of finalizing its rules and regulations on the designation of tourism enterprise zones, registration of tourism enterprises and the grant of incentives. For clarifications, please contact the Philippine Tourism Authority at (0632) 524-7141, mailing address at DOT Building, T.M. Kalaw St., Teodor F. Valencia Circle, Ermita, Manila, 1000.

F. Projects Registered as Regional HeadquartersAi??and Regional Operating Headquarters (RHQs/ROHQs)

Republic Act 8756 provides the terms and conditions and licensing requirementsAi??of the RHQ and ROHQ.

QUALIFICATIONS

ai??? It does not derive income from sources within the Philippines and does notAi??participate in any manner in the management of any subsidiary or branchAi??office it might have in the Philippines.

ai??? Required capital: US$50,000.00 annually to cover operating expenses.

ai??? May derive income in the Philippines

ai??? Required inward remmitance of US$200,000.00 one time remittance.

INCENTIVES

There are two sets of incentives given to:

a. Expatriates ; and

b. RHQs/ROHQs

i. Incentives to Expatriate (of both RHQs and ROHQs)

ai??? Multiple Entry Visa (Art. 60)

- Expatriates, including spouse and unmarried children below 21Ai??years old are entitled to this type of visa

- Valid for 3 years extendible for another 3 years

- Exempt from payment of fees except reasonable administrative costs

- Non-immigrant visa will be processed within 72 hours fromAi??submission of documents to the Bureau of Immigration

- Exempt from securing Alien Certificate of Registration

ai??? Withholding tax of 15% on compensation income applicable to bothAi??foreign and Filipino executives holding managerial and technical positions

ai??? Tax and duty free importation of used household goods and personalAi??effects

ai??? Travel tax exemption for Personnel and their dependents

ii. RHQs

ai??? Exemption from Corporate Income Tax but shall file an Annual

Information Return

ai??? Exemption from Value Added Tax and Sale or lease of goods and

property, and rendition of services to RHQ shall also be exempted

ai??? Exemption from all kinds of local taxes, fees or charges

ai??? Tax and duty-free importation of equipment and materials for training

and conferences

- Equipment and training materials not locally available

- Equipment disposed within 2 years after importation subject to

payment of taxes and duties

ai??? Importation of Brand New Motor Vehicles subject to payment of taxes

and duties

iii. ROHQs

ai??? Subject to 10% taxable income (Corporate Income Tax)

ai??? Subject to 10% Value Added Tax

ai??? Exemption from all kinds of local taxes, fees or charges

ai??? Tax and duty-free importation of equipment and materials for training

and conferences

ai??? Equipment and training materials not locally available

ai??? Equipment disposed within 2 years after importation subject to

payment of taxes and duties

ai??? Importation of Brand New Motor Vehicles subject to payment of taxes

and duties