Philippine Economic Zone Authority (PEZA)

PEZA is a government agency in the Philippines attached to the Department of Trade and Industry created to help promote
investments in the export-oriented manufacturing industry into the country by assisting investors in registering and facilitating
their business operations and providing tax incentives. PEZA also assists investors who locate in service facilities inside
selected areas in the country (areas are called PEZA Special Economic Zones) which are usually business process outsourcing
and knowledge process outsourcing firms. Other activities also eligible for PEZA registration and incentives include
establishment and operation within special economic zones for tourism, medical tourism, logistics and warehousing services,
economic zone development and operation and facilities providers.

PEZA was enacted under Republic Act 7916 and was passed by the House of Representatives and the Senate and approved by
former Philippine President Fidel V. Ramos on the 21st of February, 1995. As provided in the Special Economic Zone Act, the
PEZA Board is chaired by the Secretary of the Department of Trade and Industry. Vice-Chair is the Director General (Chief
Executive Officer) of PEZA. Members of the Board are Undersecretaries representing nine (9) key government Departments,
to ensure efficient coordination between PEZA and their respective Departments on matters pertaining to investors’
operations inside the Special Economic Zones.

PEZA offers both fiscal and non-fiscal incentives as well as ready-to-occupy business locations in world-class economic zones
and IT parks or buildings. Fiscal incentives include: income tax holiday for a certain number of years, which translates to 100%
exemption from corporate income tax; tax and duty-free importation of raw materials, capital equipment, machineries and
spare parts; exemption from wharfage dues and export tax, impost or fees; VAT zero-rating of local purchases subject to
compliance with BIR and PEZA requirements; exemption from payment of any and all local government imposts, fees, licenses
or taxes; and exemption from expanded withholding tax. Non-fiscal incentives, on the other hand include simplified import-
export procedures, extended visa facilitation assistance to foreign nationals and spouses and dependents; special visa multiple
entry privileges; and more.

As of January 2014, PEZA has over 300 fully operating economic zones that are spread across the country. Aside from central
business districts in Bonifacio Global City, Makati, Ortigas and Quezon City, there are also economic zones in other next-wave
cities such as Batangas, Cebu, Baguio, Subic, Iloilo, Dumaguete, Pampanga and more. Currently, PEZA-accredited buildings and
office spaces are mostly in Makati with over 35 operating economic zones including Glorietta 1 and 2 BPO, PBCom Tower, and
the Zuellig Building.[6] In Fort Bonifacio or Bonifacio Global City, there are 17 operating economic zones, including Bonifacio
Technology Center, Sun Life Centre, Picadilly Star, World Plaza and EcoTower.[7] In Quezon City, there are 18 operating
economic zones including the ELJ Communications Center in Diliman. In Pampanga, there is one economic zone, Alviera
Industrial Park.

PEZA - attached to the Department of Trade and Industry - is the Philippine government agency tasked to promote
investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in export-
oriented manufacturing and service facilities inside selected areas throughout the country proclaimed by the President of the
Philippines as PEZA Special Economic Zones. It oversees and administers incentives to developers/operators of and locators in
world-class, ready-to-occupy, environment-friendly, secured and competitively priced Special Economic Zones.

PEZA’s dynamic, responsive and client-oriented ethics have earned the trust and confidence of investors in its Special
Economic Zones, the local business sector, and the foreign chambers of commerce in the Philippines. All Industrial Economic
Zones are manned by a PEZA officer and staff to immediately attend to stakeholders' needs and concerns. Information
Technology companies are attended to by Head Office.

PEZA is ISO 9001:2008 certified.

The creation of PEZA, the development of Special Economic Zones throughout the country, and the very competitive
incentives available to investments inside PEZA Special Economic Zones are embodied in the Special Economic Zone Act of
1995, a law passed by the Philippine Congress.
Enterprises registered with the Philippine Economic Zone Authority (PEZA) may be entitled to income tax holidays of four, six,
or eight years. After that, they are subject to 5% tax on gross income (sales less direct costs) in lieu of all local and national
taxes. Enterprises that are registered with the Subic Bay Metropolitan Authority (SBMA) or Subic Bay Freeport Zone, which
administers the economic zone established by the conversion of the former United States military base in Subic, are also
subject to the special 5% tax and cannot avail of tax holidays. Qualified entities registered with the Clark Development
Corporation and located in the Clark Freeport Zone are entitled to similar incentives.

To obtain tax breaks and incentives offered by PEZA, an enterprise must register with PEZA and locate their operation in one
of the PEZA zones, buildings, IT Parks, or Technology Parks. PEZA registrants must generally be export-oriented. Enterprises
located inside the zones are required to export 100% of their production. In some cases, PEZA may approve the sale of up to
30% of production in the domestic market. Full foreign ownership of a PEZA enterprise is allowed, provided they are not
engaged in activities that appear on the Foreign Investment Negative List. PEZA approval and specific incentives granted are
on a case by case basis. Applicants must supply an application for providing information on capital structure, nationality of
investors, and a feasibility report in accordance with a PEZA-prescribed format. Applicants can expect a fast turn-around once
the application is submitted.

Documentary Requirements:

-Project brief – the completion of the project brief entails Area requirement, office lay-out
the submission of additional documents relating to the
statements made therein Equipment lay-out

-Anti-graft certificate Electricity and water requirements

-Board Resolution authorizing the filing and designation of
a representative
-SEC Certificate of Registration, Articles of Incorporation
and By-Laws (if not yet available, submit draft of Articles of
Incorporation)
-Project Feasibility Study – information and documents
necessary in the preparation of the project feasibility study
Types and volume of wastes and waste disposal system
Bio-data of principal officers
Certificate of registration with the Securities and Exchange
Commission; and
Articles of incorporation
Financial Data and Document Requirements

-General and Technical Data and Document Requirements
-Parent company and product brochures
-Description of the new project (include description and
uses of the service)
-Detailed organizational chart
Number of employees, position and salary rates, training
to be provided and length of training, classification of
employees as to a) skilled, semi-skilled, and unskilled, b)
direct, indirect, and administrative
-Number of foreign experts to be hired, positions, salary
rates, length of stay

-Project timetable -Projected volume of sales, selling price, and unit of

measure
-Potential market, marketing costs, marketing program
-Breakdown of other dollar costs (interest on loans,
-Service process and flowchart salaries of foreign personnel)

List of equipment, country of equipment origin, rated
capacity, and corresponding costs
Materials, their sources and prices; supply contracts, if any;
ratio of imported to local materials, if applicable
Number of workdays per year, number of shifts per day
Sources of financing (please indicate whether loans to be
obtained are foreign-currency-denominated or not)
Latest audited financial statements, if any; and Parent company’s latest volume and value of sales, net
income, total assets, and number of total employees, if
applicable

PEZA Reportorial Requirements

“An ECOZONE Enterprise shall maintain distinct and separate books of accounts for its operations inside the ECOZONE and
shall submit financial and other reports/ documents to PEZA on or before their respective due dates…” Rule XXI, Section 4 of
the PEZA Rules and Regulations to Implement R.A. No. 7916, as Amended

Where to Submit Reports: Enterprise Services Division

Report Type Due Date

Economic Zone Monthly Performance Report (EZMPR) Every 20th day of the following month

Annual Report 90 Days after the end of the accounting period

* Audited Financial Statement (AFS) 30 Days after filing with BIR

Quarterly Income Tax Returns (Including copy of O.R. of payment of 3% of the 5% GIT to the BIR and the O.R. of payment of 2%
of the 5% GIT to the LGU) 15 Days after filing with BIR

Annual Income Tax Return (ITR) (Including copy of O.R. of payment of 3% of the 5% GIT to the BIR and the O.R. of payment of
2% of the 5% GIT to the LGU)Breakdown/ Schedule of sales per activity Breakdown and schedule of other income, data on
revenues and taxes paid (Together with the AFS & Annual ITR) 30 Days after filing with BIR

COA Annual Audit Report

Notice of Start of Commercial Operations 7 days after date

Replacement of Director/Member or Board officer 30 days after date

Amendment of Articles or By Laws 30 days after registration

Change of Name or equity ownership 30 days after change

Incentives may be withdrawn for non-compliance- basis of the incentives is PEZA registration agreement

Penalties
Administrative Fines – The following schedule of fines and / or administrative sanctions shall apply to all ECOZONE Enterprises
and / or to any person or group of persons who have committed violations of these Rules and pertinent circulars /
memoranda issued thereunder:

Suspension of Permits – The PEZA may suspend, withhold, disapprove or revoke import or export permits, authority to engage
in local sale, authority to farm-out, to avail of any incentive or privilege being administered by the PEZA for failure to comply
with these Rules, any provision of the Registration Agreement between the PEZA and the ECOZONE Enterprise, the terms and
conditions of the permits / franchises issued by the PEZA and / or for violation of the Act and the pertinent provisions of the
Code and the Decree within a stipulated or reasonable period of time.

Cancellation / Revocation – Registration, permit and / or franchise of an ECOZONE enterprise may be cancelled for any of the
following grounds:

Failure to maintain the qualifications of registration / permit / franchise as required.

Violation of any pertinent provision of the Act / Code and / or Decree; and

Violation of any of these Rules and Regulations, the corresponding implementing memoranda or circulars or any of the
general and specific terms and conditions of the Registration Agreement between the PEZA and the ECOZONE enterprise or
violation of the terms and conditions of the permit / franchise issued by PEZA.

However, delay by the ECOZONE enterprise in the implementation of the timetable of its project as set by the PEZA shall
result in the automatic cancellation of the certificate of registration / permit / franchise unless extended or a different period
is set by the PEZA or these Rules.

Export enterprises in the Philippines such as outsourcing and offshoring operations that are owned by foreign companies can
opt to register with PEZA. The Philippine government offers benefits and incentives in the form of tax holidays and
exemptions to encourage investment. Tax incentives typically depend on the geographic location of a business.PEZA
registration usually takes 21 days from the submission of documentary requirements. However, it depends on the availability
of the board and if all the required and necessary documents were provided.

Not every kind of business is entitled to registration. The following are the types of enterprises that are eligible for incentives
under RA 7916:

Export Manufacturing Agro-industrial Bio-fuel Manufacturing

IT Service Export Logistics and Warehouse Services

Tourism Ecozone Development/Operation

Medical Tourism Facilities Providers

Agro-industrial Export Manufacturing Utilities

The following industries are supported by PEZA:

IT Research and Development Garments and Textiles

Business Process Outsourcing Health and Social Work

Call Centers Manufacturing, N.E.C.

Coke, Refined Petroleum and Other Fuel Products Hotels and Restaurants

Computer and Related Activities Postal and Telecommunications Services

Construction Private Education Services

Data Encoding, Transcribing and Related Service Real Estate Activities

Electricity, Gas, Steam and Hot Water Supply Software Development

Food Products and Beverages

The process of application:

1. Filing of application 4. Submission of documents

2. Processing and evaluation 5. Registration

3. Approval process
The agency is authorized to provide its member companies the following fiscal and non-fiscal incentives:

Fiscal Incentives

Income Tax Holiday (ITH) 100% exemption from corporate income tax;

Upon expiry of the Income Tax Holiday 5% Special Tax on Gross Income and exemption from all national and local taxes;

Gross Income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns
and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or
incidental losses during a given taxable period.

Tax and duty free importation of raw materials, capital equipment, machineries and spare parts;

Exemption from wharfage dues and export tax, impost or fees;

Tax and duty free importation of raw materials, capital equipment, machineries and spare parts;

VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements;

Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while under Income Tax
Holiday, no exemption from real estate tax, but machineries installed and operated in the economic zone for manufacturing,
processing or for industrial purposes shall be exempt from real estate taxes for the first three (3) years of operation of such
machineries. Production equipment not attached to real estate shall be exempt from real property taxes.

Non-Fiscal Incentives

Simplified Import – Export Procedures (Electronic Import Permit System and Automated Export Documentation System);

Special Non-Immigrant Visa with Multiple Entry Privileges for the following non-resident Foreign Nationals in a PEZA-
registered Economic Zone Enterprise: Investor/s, officers, and employees in supervisory, technical or advisory position, and
their spouses and unmarried children under twenty-one years of age.

PEZA extends Visa Facilitation Assistance to foreign nationals their spouses and dependents;

Non-resident Foreign Nationals may be employed by PEZA-registered Economic Zone Enterprises in supervisory, technical or
advisory positions.

Barangay Micro Business Enterprise (BMBE)

A BMBE is defined under the BMBE Law, RA. 9178 Act of 2002 as “any business enterprise engaged in production, processing,
or manufacturing of products, including agro-processing, as well as trading and services, with total assets of not more than P3
million. Such assets shall include those arising from loans but not the land on which the plant and equipment are located.”

President Gloria Macapagal-Arroyo signed the Act into law on November 13, 2002, to encourage the formation and growth of
BMBEs by granting them incentives and other benefits.

Objective of the BMBE Law The country recognizes that small businesses are essential to the economic development of the
country. Supporting the growth of BMBEs will increase jobs, provide livelihood, and a better quality of life for Filipinos. The Act
then aims to “integrate micro-enterprises in the informal sector into the mainstream of the economy.”

Incentives for BMBE Registration

• Income tax exemption from income arising from the operations of the enterprise;
• Exemption from the coverage of the Minimum Wage Law (BMBE employees will still receive the same social security and
health care benefits as other employees);

• Priority to a special credit window set up specifically for the financing of BMBEs; and

• Technology transfer, production and management training, and marketing assistance programs for BMBE beneficiaries.

• Aside from these, the LGUs may also reduce the amount of local taxes, fees, and charges imposed or exempt the BMBEs
from local taxes, fees, and charges.

Based on the BMBE Law, your business or activity is eligible to apply as a BMBE if it meets the following criteria:

• It is engaged in production, processing, or manufacturing of products, including agro-processing, as well as trading and
services

• It has total assets of not more than P 3 million, including those arising from loans but not the land on which the plant and
equipment are located.

• The business or service provider, in connection with the exercise of his or her profession, is not a professional duly licensed
by the government after having passed a government licensure examination, such as accountants, lawyers, doctors, and the
like.

• It is not a branch, subsidiary, division, or office of a large-scale enterprise and its policies and business modus operandi are
not determined by such enterprise or by persons who are not owners or employees of said enterprise, as mandated by the
Department of Finance Order No. 17-04.

Solopreneur Requirements for a BMBE Registration

Both your first-time BMBE registration and its renewal must take place at the Office of the Treasurer of the city or municipality
where your business is located.

The requirements for first-time registration differs depending on the value of your assets.

I. Basic requirements for new applicants and BMBEs applying for renewal of registration:

a. Duly filled out application form (BMBE Form 01) in triplicate, signed by the owner or manager of the entity applying for
registration; and,

b. Three passport size ID pictures.

II. Additional requirements for new applicants:

a. For those with assets worth three hundred thousand pesos (P300,000) and less

1. Registration as a business entity or enterprise from the appropriate government agency (e.g., Securities and Exchange
Commission (SEC) registration in the case of corporation, or association; Cooperative Development Authority (CDA)
registration in the case of cooperative; Department of Trade and Industry (DTI) business name registration in the case of sole
proprietorship); and

2. Mayor’s Permit or City/ Municipal Business Permit.

b. For those with assets worth more than three hundred thousand pesos (P300, 000) up to three million pesos (P3, 000,000.00)

1. Registration as a business entity as explained above in item no. II.a.1

2. Taxpayer Identification Number (TIN);

3. Certificate of Registration from the Bureau of Internal Revenue (BIR);

4. Mayor’s Permit or City/Municipal Business Permit;

5. Sworn affidavit executed by the sole proprietor or the President of the enterprise, as the case may be, that the enterprise is
barangay-based and micro-business in nature and scope;

6. Sworn Statement of Assets and Liabilities supported by pertinent documents;

7. Pictures of the place of business and its assets, other than cash, receivables and intangibles;

8. Copy of Loan Contract/s, if any, and duly-notarized Certification of Amortization Payments on the Loan; and

9. Income Tax Return (ITR).

III. Additional requirements for the renewal of BMBE registration:

a. For those with assets worth three hundred thousand pesos (P300,000) and less

1. Documents previously listed in item II.a.1 for new applicants with assets worth three hundred thousand pesos and less; and

2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed with the BIR, together
with its attachments.

b. those with assets worth more than three hundred thousand pesos (P300,000) up to three million pesos (P3,000,000.00)

1. Documents previously mentioned in item II.b (1-8); and

2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed with the BIR, together
with its attachments.

BMBE Registration Procedures

a. Accomplish BMBE Form 01 in triplicate and submit to the Office of the Municipal or City Treasurer.

b. The Municipal or City Treasurer evaluates the application. The application shall be processed within 15 working days upon
submission; otherwise, the BMBE shall be deemed registered.

c. A registered BMBE shall be issued a Certificate of Authority as proof of registration, effective for two years. The application
is renewable every two years.

Cost of BMBE Registration

The registration and issuance of the Certificate of Authority of the LGU is free and must be done promptly. However, LGUs are
allowed to charge a fee not exceeding P 1,000.00 to defray administrative costs.