Tax incentives in Asia-Pacific

Philippines

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Incentives are granted to encourage the entry of foreign direct investments in the Philippines’ priority areas of development. Incentives are provided to accelerate development in less developed regions, channel investments into locations with strong potential for economic growth, and provide significant employment opportunities in the country. In line with this, the 2017 Investment Priorities Plan (IPP) has broadened its coverage to expand job opportunities for more segments of the population and bring more firms into the global and local value chains.

Although several challenges persist in the implementation of the 2017 IPP, it is hoped that the broadened coverage of the priority list of investments will drive progress across regions, especially in provinces, strengthen various industry sectors, improve unemployment levels, and achieve sustainable and inclusive growth that can directly impact all participants in the administration’s industrial and economic strategy.

Philippines incentive regime overview

The Philippine Government has enacted a number of incentive laws to encourage the placement of investments in the country. The major incentive laws are implemented by the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA).

Discretionary: Income Tax Holiday (ITH) and/or 5% Gross Income Tax (GIT)

Incentive administering body

Various investment promotion agencies (IPAs) based on the location of investment

  • BOI for areas outside of the special economic zones
  • PEZA for areas within special economic zones

General application process

The general application process involves the:

  • Preparation and submission of an application form
  • Evaluation of documents and site visits
  • Negotiations on the incentive conditions
  • Presentation of application for board approval
  • Agreement on incentive conditions

The registration agreement should be signed prior to the commencement of the company’s operations.

Incentive application timeline

Between one to six months

Things to note

For BOI registration, the activity must be listed in the 2017 IPP.

For PEZA registration, the enterprise must engage in eligible activities and physically locate within a special economic zone.

Statutory: Special tax rates for Regional Operating Headquarters (ROHQ)

Incentive administering body

BOI

General application process

Secure a BOI endorsement validating the establishment of the ROHQ.

Incentive application timeline

Between one to two weeks to secure the BOI endorsement

Things to note

Incentives can be claimed by all ROHQs through the filing of the tax returns.

Statutory: Deductibility of R&D expenses from gross income and exemption from donor’s tax

Incentive administering body

Bureau of Internal Revenue (BIR)

General application process

  • For deduction of R&D expense, the expense is simply claimed as deduction in the income tax return.
  • The donor’s tax exemption is claimed by filing with the BIR a Notice of Donation.

Incentive application timeline

No prior application is required.

Things to note

Incentives can be claimed through the filing of the tax returns and submission of a Notice of Donation and/or Certificate of Donation, in case of exemption from donor’s tax with the donor’s tax return.

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