Philippine Special Economic Zones:

A Special Economic Zone (SEZ) is a geographical region that has economic and other laws
that are more free-market-oriented than a country's typical or national laws. "Nationwide"
laws may be suspended inside a special economic zone.

The category 'SEZ' covers a broad range of more specific zone types, including Free Trade
Zones (FTZ), Export Processing Zones (EPZ),Free Zones (FZ), Industrial parks or Industrial
Estates (IE), Free Ports, Urban Enterprise Zones and others.

Usually the goal of a structure is to increase foreign direct investment by foreign investors,
typically an international business or amultinational corporation (MNC).

Activities Eligible for PEZA Registration and Incentives

1. Export Manufacturing - manufacturing, assembly or processing activity resulting in the

exportation of at least 70% of production. (“Manufacturing / Processing” shall mean the
process by which raw materials or semi-finished materials are converted into a new product
through a change in their physical, mechanical or electro-magnetic characteristics and/or
chemical properties. “Assembly” shall mean the process by which semi-finished parts or
materials are put together or combined to form a distinct product without substantially
changing its physical or mechanical characteristics or electro-magnetic and/or chemical
properties.) Eligible firms shall qualify for registration as “Economic Zone Export
Manufacturing Enterprise.”

2. IT (Information Technology) Service Export - IT service activities, of which 70% of total

revenues is derived from clients abroad. (“IT Service Activities” are activities which involve
the use of any IT software and/or system for value addition). Among the IT Service activities
eligible for incentives are: IT-enabled services such as business process outsourcing, call
centers, data encoding, transcribing and processing, etc.; software development and
application, including programming and adaptation of system softwares and middlewares;
for business, media, e-commerce, education, entertainment, etc.; content development for
multi-media or internet purposes; and others. Eligible firms shall qualify for registration as
“IT Enterprise.”

Please see “Guidelines on the Registration of Information Technology (IT) Enterprises and
the Establishment and Operation of IT Parks / Buildings.”

3. Tourism – establishment and operation within PEZA Tourism Special Economic Zones of
sports and recreation centers, accommodation, convention, and cultural facilities and their
special interest attraction activities / establishments, with foreign tourists as primary
clientele. Eligible firms shall qualify for registration as “Tourism Economic Zone Locator
Enterprise.”

Please see "Guidelines for the Registration and Administration of Incentives to Tourism
Economic Zone Developers / Operators and Locators.”

4. Medical Tourism – medical health services, endorsed by the Department of Health, with
foreign patients as primary clientele. Eligible firms shall qualify for registration as “Medical
Tourism Enterprise” in a Medical Tourism Special Economic Zone Park or Center.

Please see "Guidelines for the Registration of Medical Tourism Special Economic Zones
(Medial Tourism Parks / Centers) and Medical Tourism Locator-Enterprises.”

5. Agro-industrial Export Manufacturing – processing and or manufacturing of agricultural

products resulting in the exportation of its production. (“Processing” shall mean the
conversion of any agricultural and marine products from its raw state into intermediate or
final product which undergo physical and/or chemical change through mechanical and/or
chemical process.) Eligible firms shall qualify for registration as “Agro-Industrial Economic
Zone Export Enterprise.”

Please see “Guidelines for the Registration and Administration of Incentives to Agro-
Industrial Economic Zone Developers/Operators and Locators.”

6. Agro-industrial Bio-Fuel Manufacturing – specialized manufacturing of agricultural crops

and eventual commercial processing which shall result in the production of clean energy
such as bio-fuels and the like. Eligible firms shall qualify for registration as “Agro-Industrial
Economic Zone Enterprise.”
Please see "Guidelines for the Registration and Administration of Incentives to Agro-
Industrial Economic Zone Developers/Operators and Locators."

7. Logistics and Warehousing Services - (a) operation of a warehouse facility for the
storage, deposit, safekeeping of goods for PEZA-registered Economic Zone Export
Manufacturing Enterprises, and or (b) importation or local sourcing of raw materials, semi-
finished goods for resale to - or for packing / covering (including marking / labeling) cutting
or altering to customers’ specification, mounting and/ or packaging into kits or marketable
lots for subsequent sale to - PEZA-registered Export Manufacturing Enterprises for use in
their export manufacturing activities, or for direct export, or for consignment to PEZA-
registered Export Manufacturing Enterprises and eventual export. Eligible firms shall qualify
for registration as “Economic Zone Logistics Services Enterprise.”

Please see “Guidelines for Economic Zone Logistics Services Enterprises.”

8. Economic Zone Development and Operation :

8.a. Manufacturing Economic Zone Development / Operation - development,

operation and maintenance of an economic zone for export manufacturing
enterprises, inclusive of the required infrastructure, facilities and utilities such as
light and power system, water supply and distribution system, sewerage and
drainage system, pollution control devices, communication facilities, paved road
network, administration building. Eligible firms shall qualify for registration as
“Manufacturing Economic Zone Developer / Operator.”

8.b. IT Park Development / Operation – development, operation and

maintenance of an area as a complex capable of providing infrastructures and
other support facilities required by IT Enterprises, as well as amenities required
by professionals and workers involved in IT Enterprise, or easy access to such
amenities. Eligible firms shall qualify for registration as “IT Park Developer /
Operator.”

Please see “Guidelines on the Registration of Information Technology (IT)

Enterprises and the Establishment and Operation of IT Parks / Buildings.”

8.c. Tourism Economic Zone Development / Operation – development, operation

and maintenance of an integrated resort complex, with prescribed carrying
capacities of tourist facilities and activities, such as but not limited to, sports and
recreation centers, accommodations, convention and cultural facilities, food and
beverage outlets, commercial establishments and other special interest and
attraction activities / establishments, and provided with roads, water supply
facilities, power distribution facilities, drainage and sewage systems and other
necessary infrastructure and public utilities. Eligible firms shall qualify for
registration as “Tourism Economic Zone Developer / Operator.”

Please see "Guidelines for the Registration and Administration of Incentives to

Tourism Economic Zone Developers / Operators and Locators.”

8.d. Medical Tourism Economic Zone Development / Operation – development,

operation and maintenance of a Medical Tourism Park or Medical Tourism Center
which are planned and designed in accordance with the standards of the
Department of Health and the Department of Tourism to have support facilities
and services required for health and wellness, and provided with required
infrastructure facilities and utilities. Eligible firms shall qualify for registration as
“Medical Tourism Economic Zone Developer / Operator.”

Please see "Guidelines for the Registration of Medical Tourism Special Economic
Zones (Medial Turism Parks / Centers) and Medical Tourism Locator-
Enterprises.”

8.e. Agro-Industrial Economic Zone Development / Operation – development

operation and maintenance of an agro-industrial economic zone planned and
designed to have support facilities and services required for processing and agro-
based manufacturing facilities, and provided with the required infrastructure
facilities and utilities. Eligible firms shall qualify for registration as “Agro-Industrial
 Economic Zone Developer / Operator.”

Please see “Guidelines for the Registration and Administration of Incentives to

Agro-Industrial Economic Zone Developers/Operators and Locators.”

8.f. Retirement Economic Zone Development /Operation – development.

operation and maintenance of a Retirement Economic Zone Park or Center,
planned and designed in accordance with the accreditation standards of the
Philippine Retirement Authority, and provided with the required infrastructure
facilities and utilities. Eligible firms shall qualify for registration as “Retirement
Economic Zone Developer / Operator.”

Please see “Guidelines for the Registration of Retirement Economic Zones

(Retirement Economic Zone Parks / Centers) and Facilities Enterprises.”

9. Facilities Providers :

9.a. Facilities for Manufacturing Enterprises - construction as owner /operator of

factory buildings inside a PEZA Special Economic Zone for lease to PEZA-
registered Export Manufacturing Enterprises. Eligible firms shall qualify for
registration as “Economic Zone Facilities Enterprise.”

9.b. Facilities for IT Enterprises – construction as owner/operator of buildings

and other facilities inside IT Parks which are leased to PEZA-registered IT
Enterprises. Eligible firms shall qualify for registration as “IT Park Facilities
Enterprise.”

Please see “Guidelines on the Registration of Information Technology (IT)

Enterprises and the Establishment and Operation of IT Parks / Buildings.”

9.c. Retirement Facilities – establishment, operation and management of

retirement facilities and other related activities, with foreign retirees as primary
clientele, duly endorsed by the Philippine Retirement Authority, and located in a
 Retirement Economic Zone. Eligible firms shall qualify for registration as
“Retirement Economic Zone Facilities Enterprise.”

Pleas see “Guidelines for the Registration of Retirement Economic Zones

(Retirement Economic Zone Parks / Centers) and Facilities Enterprises.”

10. Utilities – establishment, operation and maintenance of light and power systems, water
supply and distribution systems inside Special Economic Zones. Eligible firms shall qualify
for registration as “Economic Zone Utilities Enterprise.”

Fiscal Incentives to PEZA-Registered Economic Zone Enterprises

1. Economic Zone Export Manufacturing Enterprise

• Income Tax Holiday (ITH) – 100% exemption from corporate income tax
• 4 years ITH for Non-pioneer Project
• 6 years ITH for Pioneer Project
ITH Extension years may be granted if Project complies with the
following criteria, (one criterion is equivalent to one ITH extension
year), provided that the total ITH entitlement period shall not exceed
eight (8) years:

> The average net foreign exchange earnings of the project for the first
three (3) years of operations is at least US$500,000.00 and,

> The capital equipment to labor ratio of the project does not exceed
US$10,000.00 to 1 for the year immediately preceding the ITH
extension year being applied for.

> The average cost of indigenous raw materials used in the

manufacture of the registered product is at least fifty per cent (50%) of
 the total cost of raw materials for the preceding years prior to the
ITH extension year.

o 3 years ITH for Expansion project (ITH applies to incremental sales)

• Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and excemption
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
• 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
• Exemption from expanded withholding tax

2. Information Technology Enterprise:

• Income Tax Holiday (ITH) – 100% exemption from corporate income tax:
• 4 years ITH for Non-pioneer project
• 6 years ITH for Pioneer project
ITH Extension year may be granted if Project complies with the
following criteria (one criterion is equivalent to one ITH extension
year,), provided that the total ITH entitlement period shall not exceed
eight (8) years:
 > The average net foreign exchange earnings of the project for the first
three (3) years of operations is at least US$500,000.00 and,

> The capital equipment to labor ratio of the project does not exceed
US$10,000.00 to 1 for the year immediately preceding the ITH
extension year being applied for.

o 3 years ITH for Expansion project (ITH applies to incremental sales)

• Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and excemption
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 equipment and parts.
• Exemption from wharfage dues on import shipments of equipment.
• VAT zero-rating of local purchases of goods and services, including land-based
telecommunications, electrical power, water bills, and lease on the building, subject to
compliance with Bureau of Internal Revenues 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 not be subject to payment of real estate taxes for the first
three (3) years of operation of such machineries. Production equipment not attached to the
real estate shall be exempt from real property taxes.
• Exemption from expanded withholding tax.

3. Tourism Economic Zone Locator Enterprise

• Four (4) years of Income Tax Holiday ITH (as qualified under the National Investment
Priorities Plan)
• 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 capital equipment
• VAT Zero Rating on local purchases of goods and services, including land-
based telecommunications, electric power, and water bills
• Exemption from expanded withholding tax

4. Medical Tourism Enterprise

• Four (4) years of Income Tax Holiday on income solely from servicing foreign patients
• Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income upon in lieu of 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 medical equipment, including spare parts and equipment
supplies, required for the technical viability and operation of the registered activity/ies of the
enterprise.
• VAT Zero Rating on local purchases of goods and services, including land-
based telecommunications, electric power, and water bills
• Exemption from expanded withholding tax

5. Agro-Industrial Economic Zone Enterprise

• Four (4) years of Income Tax Holiday

• 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 production equipment and machineries, breeding stocks,
farm implements including spare parts and supplies of the equipment and machineries
• Exemption from export taxes, wharfage dues, impost and fees
• VAT Zero Rating on local purchases of goods and services, including land-
based telecommunications, electric power, and water bills
• Exemption from payment of local government fees such as Mayor’s Permit, Business
Permit, permit on the Exercise of profession/Occupation/Calling, Health Certificate Fee,
Sanitary Inspection Fee, and Garbage Fee

6. Economic Zone Logistics Services Enterprise

• Exemption from duties and taxes on raw materials, semi-finished goods for re-sale to - or
for packing/covering, cutting, altering for subsequent sale to PEZA-registered Export
Manufacturing Enterprises, for direct export or for consignment to PEZA-registered export
enterprise.
• VAT Zero Rating on raw materials for checking, packing, visual inspection, storage and
shipping to be sourced locally

7. Economic Zone Developer / Operator

7.a. Manufacturing Economic Zone Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by the Econimic Zone Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

7.b. IT Park Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by the IT Park Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

7.c. Tourism Economic Zone Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by the Tourism Economic Zone Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

7.d. Medical Tourism Economic Zone Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by Medical Tourism Zone Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax
7.e. Agro-Industrial Economic Zone Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by the Agro-Industrial Economic Zone Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax
7.f. Retirement Economic Zone Developer / Operator

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by the Retirement Economic Zone Developer. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

8. Facilities Enterprises

8.a. Economic Zone Facilities Enterprise

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by developers. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax
8.b. IT Park Facilities Enterprise

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by developers. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

8.c. Retirement Economic Zone Facilities Enterprise

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by developers. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax

9. Economic Zone Utilities Enterprise

• Special 5% Tax on Gross Income and exemption from all national and local taxes, except
real property tax on land owned by developers. (“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)
• VAT Zero rating of local purchases
• Exemption from expanded withholding tax
Non-Fiscal Incentives to PEZA-Registered Economic Zone Enterprises

• Simplified Import – Export Procedures (Electronic Import Permit System and

Automated Export Documentation System).
• Non-resident Foreign Nationals may be employed by PEZA-registered Economic
Zone Enterprises in supervisory, technical or advisory positions.
• 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.