Before a foreign corporation can engage in business in the Philippines, it
must first secure the necessary licenses or registration certificates from the appropriate government agencies. Generally, the registration process starts with the Securities and Exchange Commission (SEC).

If the proposed project or activity qualifies for incentives, the foreign
investor may file its application with the appropriate government agency
depending on the project‚ location.

With the liberalization of the foreign investments law, 100% foreign equity
may be allowed in all areas of investment except financial institutions
and those included in the Ninth Regular Foreign Investment Negative List
which took effect on 29 October 2012. This list includes:

List A:

Areas reserved to Filipinos by mandate of the Constitution and special laws
such as but not limited to:
a. Mass media except recording, practice of licensed professions, retail
trade with paid-up capital of less than US$2.5 million, cooperatives,
and small scale mining, etc. where foreign ownership is prohibited; and

b. Private radio communications network, private recruitment,
advertising, ownership of land, operation and management of public
utilities, etc. where only minority foreign ownership is allowed.

List B
Areas that are security and defense related; those with adverse effects on
public health and morals; and for the protection of small-and medium scale enterprises, i.e., domestic market enterprises with paid-in capital of
less than the equivalent of US$200,000 and domestic market enterprises
which involve advanced technology or employ at least 50 Filipino direct
employees, with paid-in capital of less than the equivalent US$100,000.

The government encourages foreign investments which will provide
significant employment opportunities relative to the amount of the capital
being invested, improve productivity of resources, increase volume and
value of exports, and provide a foundation for the future development of
the economy.
Investment-related rules have been liberalized to facilitate entry of foreign
investments. This thrust is expected to continue.

A. BOI Incentives

An enterprise registered with the BOI pursuant to the 1987 Omnibus
Investments Code (Executive Order or EO 226) is entitled to, among
others, the following incentives subject to certain terms and conditions:

Fiscal Incentives

i. Income tax holiday (ITH) for six years for pioneer firms and generally
four years for non-pioneer firms. If a non-pioneer firm is located in a
less developed area, it shall generally be entitled to six years ITH. Firms
locating within Metro Manila shall not be granted ITH unless they are:

  • Within a government industrial estate;
  • Service-type projects with no manufacturing facilities;
  • Power generating plants; or
  • Exporters with expansion projects.

ii. Tax credit on raw materials, supplies, and semi-manufactured products
iii. Additional deduction from taxable income for labor expense (cannot
be simultaneously enjoyed with the ITH incentive)
iv. Duty-free importation of capital equipment, spare parts and
accessories until 10 May 2017
v. Additional deduction from taxable income for necessary and major
infrastructure works (cannot be simultaneously enjoyed with the ITH


Non-fiscal Incentives
Certain non-fiscal incentives are also available to registered enterprises,
among which are: employment of foreign nationals; guaranteed
repatriation of foreign investments and earnings thereon; and importation
of consigned equipment for an unlimited period subject to posting of a reexport bond.
B. PEZA Incentives
The Special Economic Zone Act of 1995, as amended, mandates the PEZA
to operate, administer, manage, and develop Special Economic Zones or
Business enterprises operating within ecozones shall be entitled to the ITH
incentives mentioned above. PEZA-registered exporters likewise enjoy tax
and duty exemption on importations of capital equipment, raw materials,
and other merchandise directly needed in their registered operations.
Moreover, after availment of the ITH incentive, PEZA-registered enterprises
shall be subject to a final tax at a preferential rate of 5% of their gross
income earned, in lieu of all other taxes, local and national. Information
Technology (IT) companies are entitled to similar incentives if they are
registered locators in an IT ecozone.
C. Other incentives
Three other special economic zones were created under three separate
special laws. These are the Cagayan Special Economic Zone, the
Zamboanga City Special Economic Zone, and the Aurora Special Economic
Zone. In 2009, Congress passed a law converting the previously established
Bataan Economic Zone to the Freeport Area of Bataan. In 2010, the Aurora
Economic Zone has been expanded and developed to become the Aurora
Pacific Economic and Freeport Zone. Business enterprises locating in these
ecozones are granted incentives similar to those granted to PEZA ecozone

Enterprises operating within declared freeports/special economic zones
under Republic Act (RA) 7227, as amended by RA 9400 (i.e., Subic Bay
Freeport, Clark Freeport, Morong Freeport, John Hay Freeport, and Poro
Point Freeport) shall, in lieu of paying other taxes, pay a final tax of 5% of
gross income provided their income from the domestic market, i.e., sales
to customers located within the customs territory or outside the ecozone,
shall not exceed 30% of their income from all sources.

In general, investment incentives are not transferable. However, investment incentives are attached to the registered project and subject to certain qualifications, may be carried over from one owner to the next, at the discretion of the incentives giving body. Tax credit certificates may be
transferred subject to certain conditions.