Unlocking opportunities through PEZA accreditation

Scattered around the archipelago are more than 400 economic zones in selected areas with highly developed infrastructure and an abundant supply of resources needed for daily operations. Enterprises ready to take advantage of the country’s massive labor pool and locations are keen to establish their businesses in these areas facilitated by the Philippine Economic Zone Authority (PEZA).

PEZA ecozones are thriving regions in the country focused on varying sectors from the manufacturing, information technology, tourism, agro-industrial, and medical tourism industries. However, to establish a business in one of these special districts, businesses must navigate a multifaceted accreditation process by PEZA, encompassing application, evaluation, and compliance.

To earn PEZA accreditation, local and foreign businesses can apply through their PEZA Electronic Application Registration System (eARS) as required by the agency under Memorandum Circular (MC) No. 2021-47. According to the PEZA website, only a filled-out application form is needed for evaluation. However, foreign enterprises are mandated under Section 4, Rule 6 of the CREATE Law’s Implementing Rules and Regulations to submit basic documents such as a Department of Trade and Industry registration, Bureau of Internal Revenue’s Certificate of Registration, and general company information.

The approval for a company’s PEZA accreditation is usually discussed during the government agency’s board meetings that occur on the second and fourth weeks of each month. Generally, if a company files its application three days before a board meeting, its application will be included in the agenda for approval.

Obtaining PEZA accreditation opens the doors to several incentives and benefits tailored to strengthen the country’s economy and enhance the competitiveness of businesses within their specific economic zones.

The primary advantage of establishing a presence inside a PEZA Economic Zone is the streamlining of what usually are slow bureaucratic processes outside of these areas. Businesses operating in these designated areas enjoy an Ease-of-Doing-Business initiative which includes a One-Stop-Shop; Non-Stop-Shop; No Red-Tape, Only Red-Carpet Treatment for Investors; and No Graft and Corruption, providing investors with a seamless experience.

PEZA-accredited businesses also enjoy a conducive operating environment within meticulously planned economic zones, complete with state-of-the-art infrastructure, reliable utilities, and robust security measures. This not only augments operational efficiency but also instills investor confidence, attracting both domestic and foreign capital.

Registered businesses enjoy both fiscal and non-fiscal incentives through their PEZA accreditation as well. Depending on their location and industry, accredited enterprises can avail of benefits ranging from tax exemptions to simplified procedures.

Fiscal incentives for export-oriented enterprises include eligibility for an Income Tax Holiday granted for a duration ranging from four to seven years. They can also choose between taking advantage of a Special Corporate Income Tax (SCIT) rate of 5% and opting for Enhanced Deductions for 10 years.

Meanwhile, domestic market enterprises accredited by PEZA enjoy similar fiscal incentives. They are entitled to an Income Tax Holiday spanning four to seven years as well, granting them the opportunity to expand their operations within the local market. Furthermore, these enterprises also have the opportunity to avail of Enhanced Deductions for a still favorable, albeit shorter, five years.

These fiscal incentives provide significant tax advantages, allowing these businesses to reinvest their earnings and bolster their position in the global market.

The first of the non-fiscal incentives include duty-free and tax-exempt importation privileges for capital equipment, raw materials, spare parts, and accessories, thereby reducing operational costs. Registered enterprises also receive a domestic sale allowance of up to 30% of all sales, promoting local market engagement alongside their export-oriented activities.

Additionally, PEZA grants Value-Added Tax (VAT) exemptions on importation and zero-rating on local purchases for goods and other invoices directly relevant to their registered activity, such as telecommunications, power, and water bills, easing financial burdens. Businesses availing of the 5% SCIT incentive are also exempted from national and local government taxes and fees throughout their eligibility.

Moreover, PEZA permits the employment of foreign nationals and offers long-term land lease options to registered enterprises for up to 75 years, ensuring stability and flexibility in business operations. Additionally, foreign nationals employed by PEZA-registered companies are eligible for a two-year PEZA Visa, along with their dependents.

These non-fiscal incentives show the country’s hospitality and commitment to not only fostering a conducive environment for business growth and investment but also facilitating the integration of foreign investors into the local economy.

In the middle of the Philippines’ developing economy, PEZA accreditation emerges as one of its most potent catalysts for growth, offering businesses a competitive edge and a pathway to sustainable and streamlined success. By taking advantage of the opportunities from the PEZA accreditation, enterprises can unlock their full potential, driving innovation, creating employment opportunities, and contributing to Philippine economic development. — Jomarc Angelo M. Corpuz