With the country’s strategic location that allows enterprises to gain access to both the Western and Asian Markets, the Philippines has become the eye-candy and desired location for many foreign companies and individuals through the years. Moreover, the country has abundant natural resources and is home to many thriving industries, namely, aquatic industry, agriculture industry, mining industry, fruit export industry, BPO industry, Land development industry, and tourism industry. Most of all, the Filipinos are well-versed in English as it is the medium of instruction in schools.
Thus, in order to encourage more foreign investments, the nation’s Republic Act No. 8762, known as the Retail Trade Liberalization Act, and Republic Act 11032, or the Ease of Doing Business in the Philippines Act, provides certain opportunities, incentives, and advantages to interested foreign companies and individuals. The goal of providing these incentives is to not only boost the country’s economy but also to provide employment to Filipinos, drive the value of exports up, improve the utilization of resources, and further encourage the development of the country with knowledge and technology transfer.
If you are looking for a sign to tell you to invest in one of Asia’s rising tigers, this is it! Here is a list of the top incentives granted to foreign investors in the Philippines:
1. Tax Relief and Exemptions
Foreign investors willing to set up their companies in the Philippines may take advantage of tax incentives and tax breaks by registering with the Philippines Board of Investments (BOI). This includes a six-year income Tax Holiday for pioneer firms and a four-year tax holiday for non-pioneer firms. However, non-pioneer firms may avail of the six-year income tax holiday only if they are situated in an underdeveloped area of the Philippines. Further deductions are also included from taxable income for labor expenses and infrastructure expenses.
2. Philippine Economic Zone Authority (PEZA) Incentives
Incentives are granted to registered companies within the Philippine Economic Zones. These enterprises are not only eligible to avail of Board of Investments incentives, but they are also granted duty exemption on capital equipment, raw materials, and other merchandise that are necessary to carry out business operations.
3. Non-Fiscal Incentives
In addition to fiscal and tax incentives, enterprises engaging in business in the Philippines, foreign investors have secured the repatriation of foreign investment and earnings, remitted equipment imports, and employment of other foreign nationals (i.e., Expats).
4. Other Incentives (Relative to location)
Other incentives may be granted to foreign investors by the Local Government Unit in which it is registered. For example, the Cagayan Special Economic Zones as well as the Zamboanga City Special Economic Zone grant similar incentives as companies within the ecozone of the Philippine Economic Zone Authority.
Similarly, the Clark Special Economic Zone and Subic Bay Freeport permit enterprises to shell out a final tax of 5 percent of gross income annually so long as income from non-export sales does not make up more than 30% of income from all sources of the company.
To find out more about the incentives offered by different Philippine Barangays, Cities, and Localities, you may contact the local government zoning office of the place where you plan on putting up your business. Don’t forget to do this step so you can maximize your incentives and other privileges as a foreign investor.
5. Anti-Red Tape or “Ease of Doing Business in the Philippines Act”
The Ease of Doing Business in the Philippines Act has made business registration much easier. In addition, the Law enforces an Anti-Red Tape policy that streamlines the entire registration process, making it easier for enterprises to start up fast. With this, you can fast-track your way to starting your business and begin operating to earn profits as soon as possible.
The Final Wrap Up
There are many opportunities in the growing and bustling Philippine economy. With the added incentives granted to foreign investors, on top of the many expansion opportunities offered by the geography of the country, doing business in the Tiger of Asia is made much easier and more rewarding. It is now time to take advantage of the foreign exchange rates, as well as the many opportunities emerging in this developing nation.
If you are considering engaging in business in the country, give our team a call. We can help you with business registration and get your required papers in order at the fastest possible time. On top of that, we offer operations and business management support by providing bookkeeping, accounting, auditing, and payroll services. We can also help you with tax compliance requirements with the BIR. Call us for a free 30-minute consultation.