PEZA and the Board of Investments register export-oriented and priority businesses for incentives that can include an income tax holiday, a later reduced tax or enhanced deductions, and favourable VAT treatment. The benefits depend on staying within the terms of your registration, so keep accurate invoices and records.
The Philippines encourages exports and priority investments through investment promotion agencies. PEZA registers locators in economic zones, IT parks and registered buildings, which is where most IT-BPM companies are found. The Board of Investments registers projects in activities listed in its Strategic Investment Priority Plan, and other agencies run zones such as Clark and Subic.
Which agency fits depends on the activity, location and whether you export. A call centre in an IT park will normally look to PEZA. A manufacturer of a priority product on a standalone site may look to the BOI. A mistake in the choice can cost a year of benefits.
The CREATE law, Republic Act 11534, reorganised corporate incentives. Registered projects can receive an income tax holiday for a set number of years depending on the tier and location, followed by either a special rate on gross income earned or enhanced deductions for a defined period. The law has been amended since by the CREATE MORE law, so rely on the current text for the exact terms.
Registered enterprises may also enjoy VAT treatment suited to exporters, such as zero-rating on qualifying local purchases and exemption on certain imports, within conditions. These benefits are conditional, not automatic, and each depends on the registration certificate.
Incentives are tied to commitments in your registration. These typically include export performance, employment numbers, investment levels and the specific activity registered. The authority can ask for periodic reports and audited financial statements, and can suspend or withdraw benefits if commitments lapse.
A BPO that registers for ten seats of dedicated work and then switches to domestic customers without telling PEZA risks the whole incentive. Keep a short compliance matrix that lists each condition, the evidence and the date of the last check.
Invoices to foreign clients should identify the sale as zero-rated and be consistent with the registered activity. Purchases from local suppliers should carry the supplier's correct VAT treatment, and you should give each supplier the document that supports a zero-rated or exempt sale to you.
A registered company that pays 12 percent VAT to suppliers who should have zero-rated the sale ties up cash and creates credits it will have to claim later. Maintain a supplier list marked with whether the supplier knows your status and holds the documents.
The investment promotion agencies and the BIR can examine registered firms. Keep copies of the registration certificate, annual reports, audited statements, export documentation and a ledger that separates registered from non-registered activity. A company with both registered and domestic revenue should keep those streams apart in its books.
Plan for leadership changes too. A new finance head should receive a briefing on which benefits the company enjoys and which conditions apply.
For an IT-BPM firm the location can decide eligibility. Registered buildings and IT parks accredited by PEZA offer the framework within which locators register, while an unaccredited office is outside it. Check the building's accreditation status in writing before you commit, and include a clause that lets you exit if registration is refused.
Think about the lease term too. Incentive periods run for years, and moving to another site may require a new registration, so a short lease can leave you without benefits when the building changes hands.
Assume a registered BPO earns PHP 120,000,000 of taxable income in a year during its income tax holiday. Without the holiday and at the regular corporate rate of 25 percent, income tax would be PHP 30,000,000. During the holiday the income tax on registered activity is nil, and the cash freed pays for equipment, hiring and training.
After the holiday, the business moves to the regime the law provides, which may be a special rate on gross income or enhanced deductions. The better option depends on the cost structure, so model both before the holiday ends.
The incentive framework has changed with the CREATE law and again with the CREATE MORE law, and agencies have issued implementing rules and transition arrangements for enterprises registered under earlier terms. Companies registered a few years ago may sit under different rules from companies registered today.
Ask the agency which regime your certificate falls under and diarise the date on which each benefit ends. Brief the board at least a year before an expiry, so that the budget reflects the higher tax rate that follows.
Incentives can be affected by a sale of the business, a merger, a change of activity or a move to another zone. Before any such step, ask the agency in writing whether the registration continues, needs amendment or must be re-applied for, and what happens to the remaining holiday period.
Buyers in an acquisition should ask for the registration certificate, the latest compliance reports and any correspondence with the agency, because the value of the target often depends on the incentive that remains.
4invoices.net issues PDF invoices and an archive. You add your PEZA registration reference and zero-rate treatment yourself when your adviser confirms it applies, because the product has no buyer PEZA status and does not add reference codes automatically. 4softerp.net is a multi-company financial ERP that can hold separate records for a registered entity and an unregistered affiliate.
Neither product files reports with PEZA or the BOI, monitors incentive expiry or applies VAT rules for you. Use them as record keepers, and leave determinations to your adviser and the agency.
PEZA-registered companies are issuing supply invoices without the required PEZA registration reference to local non-PEZA vendors — who then charge standard 12 % VAT, foregoing the zero-rating that should apply.
Enter your PEZA registration reference and the zero-rate treatment yourself when your adviser confirms it applies. 4invoices does not add PEZA references or zero-rate codes automatically and has no buyer PEZA status.
The finance team cannot quickly identify which purchase invoices qualify for zero-rated input VAT under the PEZA status and which are standard-rated — leading to overpayment of VAT to domestic suppliers.
Track which suppliers are PEZA-registered in your own records and check VAT treatment on each purchase yourself. 4softerp has no supplier PEZA flag or automatic VAT-treatment rules.
A registered company changes its activity or moves floor space without telling the authority, and the incentive is questioned at renewal.
Review any change of location, product line or ownership with the investment promotion agency before you act, and obtain its written confirmation.
PEZA, the Philippine Economic Zone Authority, registers locators in economic zones and IT parks, many in export manufacturing and IT-BPM. The Board of Investments registers projects in priority activities under the investment priorities plan. Both are investment promotion agencies, and the incentives available depend on the law under which you register. Ask each agency which route suits your activity and location.
It is a period when a registered business is exempt from income tax on income from the registered activity. Under the CREATE law, the length of the holiday varies by tier and project, and afterwards the business may choose between a special reduced rate on gross income and enhanced deductions, within the terms of the law. Check the current terms, which were revised again by later legislation.
A registered export enterprise may enjoy VAT zero-rating or exemption on certain purchases and importations used in the registered activity, within conditions and transition rules under the law. Suppliers need to know your status and the documents to rely on. Confirm the exact treatment for your registration with PEZA or your adviser before instructing suppliers to drop VAT.
Registered enterprises submit periodic reports and audited financial statements to the investment promotion agency, showing production, exports, employment and investments against the commitments in the registration. The deadlines and forms are set by the agency. Treat the report as a compliance requirement, because incentives can be suspended or withdrawn when commitments are not met.
A BPO that serves foreign clients and registers with PEZA as an IT-BPM export enterprise can access the incentives available to that category. A BPO that is not registered pays regular taxes. The choice of location, whether inside an ecozone or in a registered building, affects eligibility, so ask PEZA to confirm before you sign a long lease.
PDF invoices and an archive. PEZA and BOI entitlements are managed with the authorities and your adviser.
