Taking Care of Business: PEZA’s Globally Competitive Environment

Competitiveness is key for the economy to grow and for businesses to flourish. In the 2018 Doing Business report of World Bank, however, the Philippines slipped to 113th from 99th across the 190 countries covered by the study. Among the indicators considered are ease of starting a business, dealing with construction permits, getting electricity, paying taxes, and enforcing contracts. To illustrate the comparative ease of doing business, a potential business owner only needs to undergo two procedures for about one and a half days in Canada, but must undergo 16 procedures for about 28 days in the Philippines.

This is the reason why economic zones offer the best business climate for potential investors in the country – upholding ease of doing business policies and at the same time providing competitive fiscal incentives.

For investors in export-oriented manufacturing and service facilities, setting up shop in special economic zones across the country is a must. These areas are under the Philippine Economic Zone Authority, an attached agency of the Department of Trade and Industry tasked to promote investments, extend assistance, grant incentives, and facilitate the business operations of its accredited firms.

PEZA locators enjoy not just a ready-to-occupy, secure, and competitively-prized ecozone but a whole range of fiscal incentives as well. It currently hosts over 4,202 locators in its 379 ecozones: 74 for manufacturing, 262 for information technology parks, 22 for agro-industrial, 19 for tourism, and two for medical tourism.

Who are eligible for PEZA accreditation?

  1. Export Manufacturing: Firms involved in manufacturing goods, of which 70 percent of total production is exported
  2. Information Technology Service: IT service activities, of which 70 percent of total revenues is derived from clients abroad
  3. Tourism: Sports and recreation centers, accommodation, convention, and cultural facilities with foreign tourists as primary clientele
  4. Medical Tourism: Medical health services, endorsed by the Department of Health, with foreign patients as primary clientele
  5. Agro-industrial: Processing or manufacturing of agricultural products for export
  6. Agro-industrial Bio-fuel Manufacturing: Specialized manufacturing of agricultural crops and eventual commercial processing for the production of clean energy such as bio-fuels
  7. Logistics and Warehousing Services: Operation of a warehouse facility for the storage of goods for PEZA-registered firms

What are the benefits of doing business in PEZA ecozones?

All PEZA-accredited locators enjoy a wide range of fiscal incentives, starting with a income tax holiday. Pioneer projects – those engaged in the manufacture, processing, or production and not merely in the assembly of packing goods – are fully exempted from paying corporate income tax for six years while non-pioneer projects can enjoy the tax holiday for four years. Upon expiration of the income tax holiday, PEZA-accredited firms are granted a five percent special tax and gross income as well as exemption from all national and local taxes, except real property tax.

Ecozone locators likewise enjoy tax and duty-free importation of raw materials, equipment, machinery, and spare parts; exemption from wharfage dues and export tax; and zero Valued Added Tax on local purchases provided that they meet the requirements of PEZA and the Bureau of Internal Revenue.

Where is PEZA headed now?

Unfortunately, the second package of an administration-backed tax reform measure threatens to erode the incentives offered by PEZA. The proposed second phase of the Tax Reform for Acceleration and Inclusion Law which seeks to rationalize investment incentives has some investors worried, PEZA Director General Charito Plaza said.

“Although the objective of TRAIN 2 is meaningful, it is subject to various interpretations especially when it touches on incentives,” Plaza said. She said the agency will recommend a freeze on the proposed changes on incentives so as not to disrupt businesses in ecozones.

Without doubt, PEZA ecozones will continue to give accredited locators the competitive advantage with its package of incentives while at the same time boosting the country’s bid to become an investment destination in Southeast Asia.

For more information on PEZA, visit www.higherheights.ph or contact  their team of trainers and researchers at +63-920-695-4183, +63-915-265-3153, +63-49-302-1944. They help organizations and individuals enhance their businesses and professions through continuous training and seminars.

SOURCES:
http://www.peza.gov.ph/index.php/eligible-activities-incentives/fiscal-incentives
www.bworldonline.com/peza-registered-investments-plunge-on-train-2-uncertainty/
http://www.bworldonline.com/peza-to-seek-gocc-status-to-fend-off-diminished-train-2-role/
http://business.inquirer.net/239704/philippines-ranking-world-bank-doing-business-2018
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