PEZA or Philippine Economic Zone Authority is an agency set up by the Department of Trade to encourage and promote foreign investments, as well as export and special service-oriented businesses in the country. These businesses include foreign companies who seek to outsource part of their operations offshore to save on costs.
Established in 1995, PEZA has developed widespread programs, offering incentives and facilitating the establishment and operations of BPO (business processes outsourcing) companies and other qualified businesses. The agency has overseen the development of PEZA Special Economic Zones or ecozones where accredited businesses can operate and enjoy the many benefits of the PEZA programs.
What are the perks and advantages that you can get from a PEZA accreditation?
Here’s a look at the most significant ones.
- Fiscal incentives
- 4 years income tax holiday (ITH) for non-pioneer businesses, specifically those engaged in manufacturing, IT, agro-industrial, tourism, and medical tourism activities
- 6 years income tax holiday for pioneer businesses in manufacturing and IT
- Upon expiry of the ITH, 5% special tax on gross income and exemption from all local and national taxes
- Exemption from duties and taxes on imported raw materials, parts, capital equipment, and machinery
- Zero VAT on locally purchased goods and services
- Exemption from fees for permits, licenses, and local business taxes
- Exemption from local real property taxes
- Non-fiscal incentives
- Simplified procedures for imports and exports
- Special non-immigrant visas with multiple entry privileges for non-resident foreign nationals, their spouses, and their children below 21 years. The nationals must be any of the following:
- Investor
- Officer
- Supervisor
- Technical advisor or consultant
- Assistance in visa facilitation for foreign investors and employees, their spouses, and their children below 21 years
- Employment of non-resident foreign nationals in supervisory, advisory, or technical positions
What business activities may qualify for PEZA accreditation?
As detailed in the PEZA website, the following business activities are eligible:
- Export manufacturing – Manufacturing, processing, or assembly activities where at least 70% of the finished products are exported
- IT (Information Technology) service export – IT service activities, of which 70% of the total revenues are earned from foreign clients
- Tourism – Activities within PEZA Tourism Special Economic Zones with foreign nationals as main clientele. These include sports and recreation centers, lodging, convention facilities, cultural facilities, and special interests and attractions
- Medical tourism – Businesses classified as “medical tourism enterprises” operating in a Medical Tourism Special Economic Zone Park or Center. These medical health services must be endorsed by the Department of Health
- Agro-industrial export manufacturing – Activities involving the processing of raw natural materials into agricultural products for export
- Agro-industrial bio-fuel manufacturing – Activities specializing in the production of clean energy, such as bio-fuels
- Logistics and warehousing services – Warehouse and logistics facilities operating within PEZA ecozones
- Economic zone development and operation – Businesses engaged in the development, operation, and maintenance of PEZA ecozones
- Facilities providers – Owners and operators of buildings within ecozones
- Utilities providers – Businesses engaged in establishing, operating, and maintaining utilities in ecozones, including power and water supply
Duran & Duran-Schulze has helped many businesses acquire PEZA accreditation and establish their operations within PEZA ecozones. If you need more information about PEZA and its benefits, get in touch with the attorneys at Duran & Duran-Schulze here.
