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Lesson 10

PEZA and BOI Registered Entities

Lesson Objectives:

At the end of this lesson, the students should be able to:

a. Determine what are PEZA and BOI registered enterprises
b. Identify the fiscal and non-fiscal incentives available to PEZA and BOI
registered enterprises

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Discussion:
Declaration of Policy
It is the declared policy of the government to translate into practical realities the following State policies and
mandates in the 1987 Constitution, namely:
(a) "The State recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments." (Sec. 20, Art II)
(b) "The State shall promote the preferential use of Filipino labor, domestic materials and locally produced
goods and adopt measures that help make them competitive." (Sec. 12, Art XII)

In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate a
sound and balanced industrial, economic and social development of the country in order to provide jobs to
the people especially those in the rural areas, increase their productivity and their individual and family
income, and thereby improve the level and quality of their living condition through the establishment,
among others, of special economic zones in suitable and strategic locations in the country and through
measures that shall effectively attract legitimate and productive foreign investments.

Definition of Terms
Special Economic hereinafter referred to as the ECOZONES, are selected areas with highly developed or
Zones which have the potential to be developed into agro-industrial, Industrial
tourist/recreational, commercial, banking, investment and financial centers. An
ECOZONE may contain any or all of the following: Industrial Estates (IEs), Export
Processing Zones (EPZs), Free Trade Zones, and Tourist/Recreational Centers.
Industrial Estate refers to a tract of land subdivided and developed according to a comprehensive
plan under a unified continuous management and with provisions for basic
infrastructure and utilities, with or without pre-built standard factory buildings and
community facilities for the use of the community of industries.
Export Processing a specialized industrial estate located physically and/or administratively outside
Zone customs territory, predominantly oriented to export production. Enterprises located in
export processing zones are allowed to import capital equipment and raw materials
free from duties, taxes and other import restrictions.
Free Trade Zone an isolated policed area adjacent to a port of entry (as a seaport) and/or airport
where imported goods may be unloaded for immediate transshipment or stored,
repacked, sorted, mixed, or otherwise manipulated without being subject to import
duties. However, movement of these imported goods from the free-trade area to a
non-free-trade area in the country shall be subject to import duties.
Enterprises within the zone are granted preferential tax treatment and immigration laws are
more lenient.

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Taxation of PEZA Registered Enterprises

Generally, PEZA registered enterprises are taxable as follows:
Income Tax Holiday PEZA registered enterprise shall be exempt from the payment of income taxes
reckoned from the scheduled start of commercial operations, as follows:
 New projects with a pioneer status for six (6) years (may be extended up to
eight [8] years)
 New projects with a non-pioneer status for four (4) years
 Expansion projects for three (3) years

Scope of ITH (applicable only to income from unregistered activities)

Exemption from
 Regular corporate income tax (RCIT)
 Minimum corporate income tax (MCIT)
 Improperly accumulated earning tax (IAET)

Firm under ITH is not exempt from:

 RCIT and MCIT on income from unregistered activities
 Final income tax on passive income
 IAET on income from unregistered activities
 Documentary stamp taxes (DST). The PEZA registered entity is exempt,
however, the transacting party shall pay for the DST
 Liability as withholding agent
 Real estate taxes (machineries are exempt for the first three years of
operation)

Start of Commercial Operations (SCO)

For the purpose of establishing the starting date of a PEZA registered economic zone
export enterprise’s availment if its ITH incentive, the date of the SCO shall be,
whichever comes first:
 The date of specified in its Registration Agreement (RA) with PEZA, or
 The verified actual date when it begins commercial production of its
registered product

Cancellation/Re-instatement
 PEZA shall automatically cancel the registration of an economic zone export
enterprise which has not started actual commercial operations after one (1)
year from the SCO date indicated in its Registration Agreement, or the
adjusted / new SCO which it has formally informed PEZA of.
 PEZA Board may re-instate said registration, provided the export enterprise files
a written request for re-instatement with PEZA and, provided further, that it is
able to establish that project Implementation has actually commenced, as
may be evidenced by any of the following:
1. importation of production equipment and machinery;
2. payment of lease rentals on the project site or acquisition of land for the
project site; and / or
3. such other undertakings that will indicate that the economic zone export

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enterprise is intent on implementing its PEZA-registered project.

Pioneer Enterprise  engaged in the manufacture, processing or production, and not merely in the
shall mean a assembly or packaging of goods, products, commodities or raw materials that
registered enterprise have not been or are not being produced in the Philippines on a commercial
scale or
 which uses a design, formula, scheme, method, process or system of
production or transformation of any element, substance or raw materials into
another raw material or finished goods which is new and untried in the
Philippines or
 engaged in the pursuit of agricultural, forestry and mining activities and/or
services including the industrial aspects of food processing whenever
appropriate, pre-determined by the Board, in consultation with the
appropriate Department, to be feasible and highly essential to the attainment
of the national goal, in relation to a declared specific national food and
agricultural program for self-sufficiency and other social benefits of the project
or
 which produces non-conventional fuels or manufactures equipment which
utilize non-conventional sources of energy or uses or converts to coal or other
non-conventional fuels or sources of energy in its production, manufacturing
or processing operations. Provided, That the final product in any of the
foregoing instances, involves or will involve substantial use and processing of
domestic raw materials, whenever available; taking into account the risks and
magnitude of investment: Provided, further, That the foregoing definitions shall
not in any way limit the rights and incentives granted to less-developed-area
enterprises provided under Title V, Book I, hereof.
Non-pioneer enterprise shall include all registered producer enterprises other than
pioneer enterprises
5% gross income tax After the ITH period, PEZA registered enterprises are subject to:
5% tax on gross income earned, in lieu of all national and local taxes, except real
property taxes on land owned by developers
5% on gross income from business activities within the ECOZONE in lieu of all taxes
The 5% GIT is income tax in nature and a national internal revenue tax in character
“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
National taxes National taxes shall refer to all internal revenue taxes, such as:
 Regular Corporate Income Taxes
 Minimum Corporate Income Taxes
 Transfer Taxes
 VAT and other percentage taxes
 Excise taxes
 Customs duties
 Import charges under the Tariff and Customs Code
Excluded, however, are the following:
 Withholding taxes on salaries of employees

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 Withholding taxes on income payments to persons other than a registered

ECOZONE enterprise, subject to withholding tax at source under Section 50(b)
of the Tax Code, as amended
PEZA registered companies are exempt from creditable withholding tax, except for
unregistered operations. However, PEZA registered companies are not exempted
from being a withholding agent. There may be deficiency withholding tax to be
assessed by BIR, if there will be failure to withhold on the part of PEZA registered
enterprise.
Refund/credit of Under the law, the 5% GIT shall be split as follows: 3% to the national government, and
erroneously paid 5% 2% to the Local Government Unit (LGU) where the enterprise is located.
GIT
Allowable 1. ECOZONE Export Enterprises, Free Trade Enterprises and Domestic Market
deductions from Enterprises:
Gross Income - Direct salaries, wages or labor expenses
Earned for Purposes - Production supervision salaries
of Computing the - Raw materials used in the manufacture of products
5% tax - Decrease in Goods in Process Account (Intermediate goods)
- Decrease in Finished Goods Account
- Supplies and fuels used in production
- Depreciation of machinery and equipment used in production, and of that portion
of the building owned or constructed that is used exclusively in the production of
goods
- Rent and utility charges associated with building, equipment and warehouses used
in production
- Financing charges associated with fixed assets used in production the amount of
which were not previously capitalized

2. ECOZONE Developer/Operator, Facilities, Utilities and Tourism Enterprises:

- Direct salaries, wages or labor expense
- Service supervision salaries
- Direct materials, supplies used
- Depreciation of machineries and equipment used in the rendition of registered
services, and of that portion of the building owned or constructed that is used
exclusively in the rendition of registered service
- Rent and utility charges for buildings and capital equipment used in the rendition of
registered services
- Financing charges associated with fixed assets used in the registered service
business the amount of which were not previously capitalized
Sharing of 5% Gross Enterprises shall, in lieu of all taxes (except real property tax on land owned by
income Tax developers), pay a tax equivalent to 5% based on gross income earned. Said tax shall
be shared and distributed to the national government (3%) and to the treasurer's
office where the registered enterprise is located (2%). In case the Special Economic
Zone (ECOZONE) is situated and encompasses the territorial jurisdiction of more than
one (1) city or municipality, the share of each city or municipality from the 2% special
tax paid by ECOZONE enterprises shall be determined in accordance with the
implementing PEZA regulations on the subject. The Philippine Economic Zone

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Authority (PEZA) shall issue certification as to the exact share of the concerned cities
or municipalities from the 2% tax allocated under the implementing rules of PEZA.
Every ECOZONE registered enterprise subject to the 5% special income tax shall file a
quarterly income tax return within sixty (60) days after the close of each of the first
three (3) quarters and a final adjustment income tax return covering the entire
taxable year, not later than the fifteenth (15th) day of the fourth month following the
close of its taxable year
Returns and Quarterly and final adjustment income tax returns shall be accomplished in five (5)
payment of the Tax copies showing among others:
1. Gross income for the period
2. Amount showing the five percent (5%) tax on such gross income earned
3. Amount representing the two percent (2%) share if the city/municipality
Tax examination The power to audit and assess the herein five percent (5%) special income tax, as well
as the power to abate, cancel, or compromise the payment of the said tax, including
the power to implement special voluntary payment program/s for last priority in audit,
shall be under the exclusive jurisdiction of the Commissioner of Internal Revenue or his
duly authorized representative, subject to the approval of the Secretary of Finance in
cases where such approval is necessary.
Exemption of PEZA All PEZA registered ecozone locator enterprises, which are entitled to any or all three
registered fiscal incentives [ITH, 5% GIT in lieu of national and local taxes except real property tax
enterprises from LGU owned by developers, and/or tax and duty-free importation of machinery and
permits and local equipment, raw materials, supplies, spare parts and other production inputs],
taxes, licenses and including logistics facilities enterprises, are exempted from having to secure all LGU
fees permits.
PEZA registered enterprises, availing of ITH incentive are exempted from payment of
all local taxes, licenses, imposts and fees, except real estate taxes; provided that
these enterprises shall also be exempted from payment of real property taxes on
machineries and equipment they acquired for use in their production operations
during the first 3 years of use of such machinery and equipment
PEZA registered enterprises, availing the 5% GIT incentive are exempted from
payment of all national and local taxes, except real property tax owned by
developers
Tax Treatment of a. Tax Treatment of Sales Made by A VAT Registered Supplier from The Customs
Sales of Goods, Territory, To A PEZA Registered Enterprise
Property and 1. If the Buyer is a PEZA registered enterprise which is subject to the 5% special
Services Made by a tax regime, in lieu of all taxes, except real property tax, pursuant to R.A. No.
Supplier from the 7916, as amended:
Customs Territory to (a) Sale of goods (i.e., merchandise). — This shall be treated as indirect export
a PEZA Registered hence, considered subject to zero percent (0%) VAT, pursuant to Sec.
Enterprise; and Sale 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916, in relation to ART. 77(2) of
Transactions Made the Omnibus Investments Code.
by PEZA Registered (b) Sale of service. — This shall be treated subject to zero percent (0%) VAT
Enterprises Within under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling
and Without the No. 032-98 dated Nov. 5, 1998.
ECOZONE 2. If Buyer is a PEZA registered enterprise which is not embraced by the 5%
special tax regime, hence, subject to taxes under the NIRC, e.g., Service

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Establishments which are subject to taxes under the NIRC rather than the 5%
special tax regime:
(a) Sale of goods (i.e., merchandise). — This shall be treated as indirect export
hence, considered subject to zero percent (0%) VAT, pursuant to Sec.
106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in relation to ART. 77(2) of
the Omnibus Investments Code.
(b) Sale of Service. — This shall be treated subject to zero percent (0%) VAT
under the "cross border doctrine" of the VAT System, pursuant to VAT Ruling
No. 032-98 dated Nov. 5, 1998.
b. Tax Treatment of Sales Made by A VAT-Exempt Supplier from The Customs Territory,
To A PEZA Registered Enterprise.
Sale of goods, property and services by VAT-Exempt Supplier from the
Customs Territory, to a PEZA-registered enterprise shall be treated exempt from
VAT, pursuant to Sec. 109, in relation to Sec. 236, NIRC, regardless of whether
or not the PEZA registered buyer is subject to taxes under the NIRC, or enjoying
the 5% special tax regime, or a registered manufacturer-exporter the "Cross
Border Doctrine" of the VAT System to the contrary notwithstanding.
c. Tax Treatment of Sales Made by A PEZA Registered Enterprise
1. Sale of goods (i.e., merchandise), by a PEZA-registered enterprise, to a buyer
from the Customs Territory (i.e., domestic sales). — This case shall be treated as
a technical importation made by the Buyer. Such Buyer shall be treated as an
importer thereof and shall be imposed with the corresponding import tax/es
(i.e., VAT or VAT plus excise tax, as the case may be), pursuant to Sec. 107,
Title IV and Title VI, NIRC, in relation to Sec. 26, R.A. No. 7916, as implemented
by Sec. 2, Rule VIII, PART V of the PEZA rules and regulations entitled "Rules and
Regulations to Implement Republic Act No. 7916." The registered enterprise's
"gross income earned" therefrom shall be subject to the 5% special tax
pursuant to Sec. 24 of R.A. No. 7916: Provided, however, that its sales in the
Customs Territory do not exceed the threshold allowed or permitted for such
sales, pursuant to the pertinent provisions of the PEZA rules and regulations:
Provided, further, that for income tax purposes, if such sales should exceed the
aforesaid threshold, its income derived from such excess sales shall be
imposed with the normal income tax pursuant to the provisions of Title II, NIRC:
Provided, further, that in computing for the income tax due on such excess
sales, its net income from such excess sales shall be determined in
accordance with the method of general apportionment pursuant to the
provisions of Sec. 50, NIRC, (i.e., compute its total net income from total sales,
then, compute its net income from such excess sales by general
apportionment, as follows: Excess sales divided by total sales times total net
income from total sales equals net income from excess sales).
2. Sale of Services by a PEZA Registered Enterprise to a Buyer from the Customs
Territory. — This type of transaction is not embraced by the 5% special tax
regime governing PEZA-registered enterprises pursuant to R.A. No. 7916, as
implemented by the PEZA rules and regulations hence, such seller shall be
subject to the 12% VAT, pursuant to Section 108 or to the percentage tax,
pursuant to Title V, whichever is applicable, and to the normal income tax on

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income derived therefrom, pursuant to Title II, NIRC. Such income tax shall be
computed in accordance with the method of general apportionment
provided in the immediately preceding paragraph.
3. Sale of Goods, by a PEZA Registered Enterprise, to Another PEZA CD
Technologies Asia, Inc. © 2016 cdasiaonline.comRegistered Enterprise (i.e.,
Intra ECOZONE Sales of Goods). — Its sale of goods or property to another
zone enterprise shall be exempt from VAT, pursuant to Sec. 109(q), NIRC, in
relation to Sec. 24, R.A. 7916, as implemented by Sec. 1, Rule VIII, PART V, of
the PEZA implementing rules and regulations.
4. Sale of Service by ECOZONE Enterprise, to Another ECOZONE Enterprise (Intra
ECOZONE Enterprise Sale of Service): (a) If PEZA-Registered Seller is Subject to
the 5% Special Tax Regime. — Exempt from VAT or any percentage tax,
pursuant to Sec. 24, R.A. 7916. (b) If PEZA-Registered Seller is Subject to Taxes
Under the NIRC . — Subject to zero percent (0%) VAT pursuant to the "Cross
Border Doctrine" of the VAT system, regardless of the type or class of PEZA
registration of the PEZA enterprise. Buyer, since the use for or benefit from such
purchase of service shall eventually be translated to actual export of goods
(i.e., shipment of goods to a foreign country, which is subject to zero percent
(0%) VAT, or translated into technical export of goods (i.e., sale of goods to a
buyer from the Customs Territory, which is treated as importation by such
buyer, hence, subject to 12% VAT against the said buyer).
Fiscal Incentives 1. Economic Zone Export Manufacturing Enterprise
 Income Tax Holiday (ITH) – 100% exemption from corporate income tax
o 4 years ITH for Non-pioneer Project
o 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 are 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 per cent (50%) of the total cost of raw materials for
the preceding years prior to the ITH extension year.
 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and
exemption from all national and local taxes
 Tax- and duty-free importation of raw materials, capital equipment,
machineries and spare parts.
 Exemption from wharfage dues and export tax, impost or fees
 VAT zero-rating of local purchases subject to compliance with BIR and PEZA

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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 be exempt
from real estate taxes for the first three (3) years of operation of such
machineries. Production equipment not attached to real estate shall be
exempt from real property taxes
 Exemption from expanded withholding tax

2. Information Technology Enterprise:

 Income Tax Holiday (ITH) – 100% exemption from corporate income tax:
o 4 years ITH for Non-pioneer project
o 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 are 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.
 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and
exemption from all national and local taxes.
 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.

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3. Tourism Economic Zone Locator Enterprise

 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
 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
4. Medical Tourism Enterprise
 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.
 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

5. Agro-Industrial Economic Zone Enterprise

 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.
 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’s Permit,
Business Permit, permit on the Exercise of profession/Occupation/Calling,
Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee

6. Economic Zone Logistics Services Enterprise

 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-

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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. Economic Zone Developer / Operator
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.
 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.
 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.
 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.
 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.
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

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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.
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

8. Facilities Enterprises
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.
 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.
 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.
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

9. Economic Zone Utilities Enterprise

 Special 5% Tax on Gross Income and exemption from all national and local
taxes, except real property tax on land owned by developers.
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax
Non-fiscal incentives  Simplified Import – 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

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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.

Summary of Business Activities that are Eligible for PEZA Tax Incentives as of October 31,2016
 Export Manufacturing
 Information Technology Service Export
 Tourism
 Medical Tourism
 Agro-Industrial Export Manufacturing
 Agro-Industrial Biofuel Manufacturing
 Logistics and Warehousing Services
 Economic Zone Development and Operation
 Facilities Providers
 Utilities

Operating Economic Zone Map as of October 31 2016

 73 Manufacturing Economic Zone
 243 Information Technology Parks/Centers
 21 Agro-Industrial Economic Zone
 19 Tourism Economic Zones
 2 Medical Tourism Parks/Centers

Bureau of Investment (BOI) Registered Enterprises

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Fiscal Incentives A. Income Tax Holiday (ITH)

 BOI-registered enterprise shall be exempt from payment of the income
taxes reckoned from the scheduled start of commercial operations, as
follows:
– New projects with a pioneer status for 6 years;
– New projects with a non-pioneer status for 4 years;
– Expansion projects for 3 years. As a general rule, exemption is limited to
incremental sales revenue/volume;
– New or expansion projects in less developed areas for 6 years, regardless
of status; and
– Modernization projects for 3 years. As a general rule, exemption is limited
to incremental sales revenue/volume.
 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:
– The indigenous raw materials used in the manufacture of the registered
product must at least be 50% of the total cost of raw materials for the
preceding years prior to the extension unless the Board prescribes a higher
percentage; or
– The ratio of total imported and domestic capital equipment to the
number of workers for the project does not exceed US$10,000 to 1 worker;
or
– The net foreign exchange savings or earnings amount to at least
US$500,000 annually during the first 3 years of operation.
In no case shall a registered pioneer firm avail of this incentive for a period exceeding
8 years.
B. Exemption from Taxes and Duties on Imported Spare Parts
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.
C. Exemption from Wharfage Dues and Export Tax, Duty, Impost and
Fees
All enterprises registered under the IPP will be given a 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.
D. Reduction of the Rates of Duty on Capital Equipment, Spare Parts and
Accessories by virtue by Virtue of E.O. 528
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 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 5 years from its effectivity or until 17 June 2011.
E. Tax Exemption on Breeding Stocks and Genetic Materials

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Agricultural producers will be exempt from the payment of all taxes and duties on their
importation of breeding stocks and genetic materials within 10 years from the date of
registration or commercial operation.
F. Tax Credits
 Tax credit on tax and duty portion of domestic breeding stocks and genetic
materials; a tax credit equivalent to 100% of the value of national internal
revenue taxes and customs duties on local breeding stocks within 10 years
from date of registration or commercial operation for agricultural
producers.
 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.
G. Additional Deductions from Taxable Income
 Additional deduction for labor expense (ADLE). For the first 5 years from
registration, a registered enterprise shall be allowed an additional
deduction from taxable income equivalent to 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.
 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 A. Employment of Foreign Nationals
Incentives A registered enterprise may be allowed to employ foreign nationals in supervisory,
technical or advisory positions for 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. Simplification of Customs Procedures
This applies for the importation of equipment, spare parts, raw materials and supplies
and exports of processed products.
C. Privilege to Operate a Bonded Manufacturing/Trading Warehouse
Incentive is subject to Customs rules and regulations.

INVESTMENT PRIORITIES PLAN

Investment Priorities Not later than the end of March of every year, the Board of Investments, after
Plan consultation with the appropriate government agencies and the private sector, shall
submit to the President an Investment Priorities Plan: Provided, however, that the
deadline for submission, may be extended by the President.
No economic activity shall be included in the Investment Priorities Plan unless it is

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shown to be economically, technically and financially sound after thorough

investigation and analysis by the Board. The determination of preferred areas of
investment to be listed in the Investment Priorities Plan shall be based on long-run
comparative advantage, taking into account the value of social objectives and
employing economic criteria along with market, technical, and financial analyses. The
Board shall take into account the following: (a) Primarily, the economic soundness of
the specific activity as shown by its economic internal rate of return; (b) The extent of
contribution of an activity to a specific development goal; (c) Other indicators or
comparative advantage; (d) Measured capacity as defined in Article 20; and (e) The
market and technical aspects and considerations of the activity proposed to be
included. In any of the declared preferred areas of investment, the Board may
designate as pioneer areas the specific products and commodities that meet the
requirements of Article 17 of this Code and review yearly whether such activity, as
determined by the Board, shall continue as pioneer, otherwise, it shall be considered
as non-pioneer and accordingly listed as such in the Investment Priorities Plan or
removed from the Investment Priorities Plan.
Approval of the The President shall proclaim the whole or part of such plan as in effect; or alternatively,
Investment Priorities return the whole or part of the plan to the Board of Investment for revision. Upon the
Plan effectivity of the plan or portions thereof, the President shall issue all necessary
directives to all departments, bureaus, agencies or instrumentalities of the government
to ensure the implementation of the plan by the agencies concerned in a
synchronized and integrated manner. No government body shall adopt any policy or
take any course of action contrary to or inconsistent with the plan.
Amendments Subject to publication requirements and the criteria for investment priority
determination, the Board of Investments may, at any time, add additional areas in the
plan, alter any of the terms of the declaration of an investment area or the
designation of measured capacities, or terminate the status of preference. In no case,
however, shall any amendment of the plan impair whatever rights may have already
been legally vested in qualified enterprises which shall continue to enjoy such rights to
the 13 full extent allowed under this Code. The Board shall not accept applications in
an area of investment prior to the approval of the same as a preferred area nor after
approval of its deletion as a preferred area of investment.
Publication Upon approval of the plan, in whole or in part, or upon approval of an amendment
thereof, the plan or the amendment, specifying and declaring the preferred areas of
investment and their corresponding measured capacity shall be published in at least
one (1) newspaper of general circulation and all such areas shall be open for
application until publication of an amendment or deletion thereof, or until the Board
approves registration of enterprises which fill the measured capacity.

REGISTRATION OF ENTERPRISES
Qualifications of a To be entitled to registration under the Investment Priorities Plan, an applicant must
Registered satisfy the Board that:
Enterprise 1. He is a citizen of the Philippines, in case the applicant is a natural person, or in
case of a partnership or any other association, it is organized under Philippine
laws and that at least sixty percent (60%) of its capital is owned and controlled
by citizens of the Philippines; or in case of a corporation or a cooperative, it is

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organized under Philippine laws and that at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by Philippine
nationals as defined under Article 15 of this Code, and at least sixty percent
(60%) of the members of the Board of Directors are citizens of the Philippines.
2. The applicant is proposing to engage in a preferred project listed or authorized
in the current Investment Priorities Plan within a reasonable time to be fixed by
the Board or, if not so listed, at least fifty percent (50%) of its total production is
for export or it is an existing producer which will export part of production under
such conditions and/or limited incentives as the Board may determine; or that
the enterprise is engaged or proposing to engage in the sale abroad of export
products bought by it from one or more export producers; or the enterprise is
engaged or proposing to engage in rendering technical, professional or other
services or in exporting television and motion pictures and musical recordings
made or produced in the Philippines, either directly or through a registered
trader.
3. The applicant is capable of operating on a sound and efficient basis of
contributing to the national development of the preferred area in particular
and of the national economy in general; and
4. If the applicant is engaged or proposes to engage in undertakings or activities
other than preferred projects, it has installed or undertakes to install an
accounting system adequate to identify the investments, revenues, costs, and
profits or losses of each preferred project undertaken by the enterprise
separately from the aggregate investment, revenues, costs and profits or losses
of the whole enterprise or to establish a separate corporation for each
preferred project if the Board should so require to facilitate proper
implementation of this Code.
Application Applications shall be filed with the Board, recorded in a registration book and the date
appearing therein and stamped on the application shall be considered the date of
official acceptance. Whenever necessary, the Board, through the People's Economic
Councils, shall consult the communities affected on the acceptability of locating the
registered enterprise within their community.
Approval and The Board is authorized to adopt rules and regulations to facilitate action on
Registration applications filed with it; prescribe criteria for the evaluation of several applications
filed in one preferred area; devise standard forms for the use of applicants and
delegate to the regional offices of the Department of Trade and Industry the authority
to receive and process applications for enterprises to be located in their respective
regions. 15 Applications filed shall be considered automatically approved if not acted
upon by the Board within twenty (20) working days from official acceptance thereof.
Appeal from Any order or decision of the Board shall be final and executory after thirty (30) days
Board's Decision from its promulgation. Within the said period of thirty (30) days, said order or decision
may be appealed to the Office of the President. Where an appeal has been filed, said
order or decision shall be final and executory ninety (90) days after the perfection of
the appeal, unless reversed.
Certificate of A registered enterprise under this Code shall be issued a certificate of registration
Registration under the seal of the Board of Investments and the signature of its Chairman and/or
such other officer or employee of the Board as it may empower and designate for the

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purpose. The certificate shall be in such form and style as the Board may determine
and shall state, among other matters: 16 (a) The name of the registered enterprise; (b)
The preferred area of investment in which the registered enterprise is proposing to
engage; (c) The nature of the activity it is undertaking or proposing to undertake,
whether pioneer or non-pioneer, and the registered capacity of the enterprise; and (d)
The other terms and conditions to be observed by the registered enterprise by virtue of
the registration.

Summary:
The lesson discussed what are the PEZA and BOI Registered Enterprises. The lesson also
highlighted the fiscal and non-fiscal available to PEZA and BOI Registered Enterprises.

References:
TABAG, E.D. (2020). PEZA and BOI Registered Enterprises. CPA Reviewer in Taxation with
Special Topics and Properly Filled BIR Forms. EDT Bookshop

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