June 17, 2020
The Bureau of Internal Revenue (BIR) has taken out the mayor’s permit as one of the requirements in business registration.
Commissioner Cesar Dulay pointed out that the BIR aims to expedite the process of establishing businesses in the Philippines.
It is continuously making reforms to ease the burden of entrepreneurs in submitting required documents.
The Philippine government has several tax incentive programs depending on the nature of one’s business, with different incentive schemes available relative to the location and registration of the proposed business activity.
Although these government incentives are readily available, facilitating registration from individual offices are not always easy. There is also a large amount of post registration compliance necessary to maintain a valid tax exemption. The BGC Company can help your company prepare all the documentary requirements needed for acceptance, as well as monitor the compliance of the company in regard to the accepted practices of each organization.
THE MAIN FISCAL BENEFITS FOR INVESTORS ARE:
• Income Tax Holiday
• Reduction of the Rates of duty on capital equipment, spare-parts and accessories
• Exemption from wharf dues and export tax, duty, impost and fees
• Exemption from taxes and duties on imported spare parts
• Additional Deductions from Taxable Income
• VAT zero-rating
THE MAIN NON-FISCAL BENEFITS FOR INVESTORS ARE:
• Employment Of Foreign Nationals, allowing them to qualify for a special visa.
• Simplification of customs procedures for the importation
• Importation of consigned equipment
• The privilege to operate a bonded manufacturing/ trading warehouse subject to customs rules and regulations
PHILIPPINE TAX INCENTIVE PROGRAMS UNDER:
• Board of Investments (BOI)
BOI Registration in the Philippines
Many foreign companies setting up outsourcing operations (IT-BPO, call center, or IT companies) in the Philippines may opt to register with BOI for tax incentives. Many existing foreign-owned outsourcing companies are BOI-registered. Our team of experts and consultants will determine eligibility for BOI registration and organize all financial documents to be processed at BOI.
BOI – Board of Investments
The Board of Investments (BOI) provides tax breaks and other incentives to registered entities that engage in activities identified as investment priorities or those which promote the general economic development of the Philippines and those that are export-oriented (where export is more than 50% of production or 70% if the enterprise is more than 40% owned by foreign investors). The BOI, in consultation with the public sector, comes up with an Investment Priorities Plan listing these industries.
The main advantage for an eligible BOI-registered firm are 4 to 8 year income tax holidays and 4 to 6 year exemption from local business taxes for pioneer and non-pioneer industries. To be eligible for BOI incentives, foreign investors will need to have an equity investment in a Philippine corporation.
Pioneer and Non-pioneer projects have different requirements. 100% foreign-owned enterprises may avail of incentives if they engage in pioneer projects, export at least 70% of their total production, or undertake projects in less-developed areas of the country as identified by the BOI. These enterprises are obliged to attain 60% Filipino ownership within 30 years from registration unless they export or will be exporting 100% of their production. For enterprises engaged in non-pioneer projects, foreign ownership is limited to 40%, unless the enterprise will export more than 70% of its annual production.
Applying for BOI requires submission of a notarized application indicating the type of projects, how the activity relates to those listed in the Investment Priorities Plan, the production capacity geared to export, the capital structure of the enterprise, and the nationality of its investors. In addition, the company must submit a feasibility report, containing five-year projected financial statements.
• Regional Board of Investments in Autonomous Region in Muslim Mindanao (RBOI-ARMM)
• Regional Headquarters/Regional Operating Headquarters (RHQ/ROHQ)
PHILIPPINE TAX INCENTIVE ZONES:
• Philippine Economic Zone Authority (PEZA)
PEZA Registration in the Philippines
Many foreign companies setting up export enterprises in the Philippines such as outsourcing and offshoring operations may opt to register with PEZA for tax incentives. K&C’s team of experts and consultants will assist in determining eligibility for PEZA registration and organize all financial documents to be processed.
PEZA – Philippine Economic Zone Authority
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.
Our consultants will perform the following:
• Determine eligibility for PEZA
• Process all required documents for PEZA
• Identify a PEZA building for you
• Register your new company with PEZA
• Documentary Requirements
• Project brief – the completion of the project brief entails the submission of additional documents relating to the statements made therein
• Anti-graft certificate
• 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
• 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
• Project timetable
• Potential market, marketing costs, marketing program
• Service process and flowchart
• 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
• Area requirement, office lay-out
• Equipment lay-out
• Electricity and water requirements
• 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
• 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
• Projected volume of sales, selling price, and unit of measure
• Breakdown of other dollar costs (interest on loans, salaries of foreign personnel)
• 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
1st Violation : P 500.00(Basic Fine); P 50.00(Daily Fine)
2nd Violation : 1,000.00(Basic Fine); 150.00(Daily Fine)
3rd Violation : 2,000.00(Basic Fine); 200.00(Daily Fine)
*Incentives may be withdrawn for non-compliance- basis of the incentives is PEZA registration agreement*
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:
For late filing of financial statements, income tax returns, performance reports, annual reports and all other reports / documents as specifically enumerated under Section 4 Rule XXI or required under existing circulars of the PEZA:
1st Violation P 500.00(Basic Fine); P 50.00(Daily Fine)
2nd Violation 1,000.00(Basic Fine); 150.00(Daily Fine)
3rd Violation 2,000.00(Basic Fine); 200.00(Daily Fine)
Failure to wear or display openly the prescribed ECOZONE identification cards / passes:
1st Violation – Reprimand
2nd Violation – Confiscation of ECOZONE identification cards / passes with denial of access to specific areas in the ECOZONE for ten (10) days
3rd Violation – Permanent confiscation of identification cards / zone passes with perpetual denial of access to specific areas in the ECOZONE
For violation of Rules X and XI of these Rules: Inventory of Goods, Finished Products, Materials and other assets/Entry and Exit of Goods:
1st Violation – a fine ranging from 50% to 100% of the value of the goods or merchandise
2nd Violation – a fine ranging from 101% to 150% of the value of goods or merchandise
3rd Violation – a fine ranging from 151% to 200% of the value of the goods or merchandise
For purposes of this rule, the value of the goods shall mean the average valuation appearing in the invoices, commercial documents or records on file with the PEZA for the same or similar goods or merchandise for the last three (3) years reckoned from the date of violation or in the absence thereof, the latest CIF valuation of the Bureau of Customs on the subject goods or merchandise.
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.
The imposition of the above penalties shall be without prejudice to the assessment and collection of customs duties and taxes and/or forfeiture in accordance with the applicable provisions of the Tariff and Customs Code of the Philippines.
• Subic Bay Metropolitan Authority & Clark Development Corporation (SBMA & CDC)
• Cagayan Economic Zone Authority (CEZA)
CEZA (Cagayan Economic Zone Authority) Tax and Fiscal Incentives
Ceza offers tax or fiscal incentives such as four to six-year income tax holiday, tax and duty-free importation of capital equipment, a special tax rate of 5 percent of gross income in lieu of all local and national taxes, tax credits for foreign corporations, and effective zero-rating for articles admitted to the zone from the customs territory under proper permit.
CEZA is a government-owned and controlled corporation created under Republic Act No. 7922. CEZA is also known as Cagayan Freeport or Cagayan Cyber Park, and is located in the Northeast of the Philippines. CEZA possesses the power to operate on its own, either directly or through a subsidiary entity, or license to others. Tourism-related activities, including games, amusements, recreational and sports facilities such as horse racing, dog racing, gambling casinos, online casinos, golf courses, online gaming, and others are under priorities and standards set by the CEZA. CEZA is a government unit under the Office of the President that operates and manages the 50,000-hectare economic zone in Cagayan.
Online Gaming with CEZA in Cagayan Internet gaming is regulated by CEZA. To expedite the processing of gaming licenses, CEZA has the legal authority to independtly approve applications without the prior acceptance from a national government agency, including PAGCOR. In fact, 90% of the locators in Cagayan’s cyber park engage in gaming operations. Through virtual gaming or online gaming, clients may play the games through proxies without need of physical presence. CEZA issues internet gaming licenses targeted toward international players. This has become an attractive business model for online gaming operators in Asian markets and the international gaming community. A number of local and foreign-owned online gaming companies have registered with CEZA including online casinos, online gambling, online betting, and more.
Requirements for CEZA Registration
- Completed Application Form (CSEZFP Form 99-1)
- Fee for processing amounting to US$200 or its equivalent in Php
- Project Feasibility Study
- Copies of relevant documentation of legal status of business enterprise (articles of incorporation and by-laws/partnership agreement/SEC license to do business)
- Name and address of legal agent if not a corporation or the business organization established in the Philippines
- If there is foreign ownership, proof of inward remittance, and/or investment or other proof of financial capacity acceptable to CEZA
- Evidence of intended physical location of enterprise within the Cagayan Special Economic Zone and Freeport (CSEZFP)(i.e., Certificate of Title)
- If part of a larger business enterprise doing business outside the CSEZFP, evidence or restructuring which excludes from the operations of the CSEZFP enterprise all business operations taking outside the CSEZFP
- List of assets and other properties comprising the investment to be made
- Application Forms for Work Permits for any expatriate personnel
- List of references that may be contacted to verify the information included in the application, including a commercial bank, and/ or financial institutions and independent auditor
- Certificate under oath that the CSEZFP Enterprise applicant will comply with the Masterplan as maybe adopted and amended from time to time
- Undertaking that applicant shall not at all times conduct any unlawful activities
• Zamboanga Economic Zone Authority (ZEZA)
• PHIVIDEC Industrial Authority (PIA)
• Aurora Special Economic Zone Authority (ASEZA)
BGC Company registers companies to any of the government’s incentive programs quickly and effectively by applying our ISO certified operating principles, greatly reducing possible delays. With our expertise, we can help your company operate in the Philippines with the best incentives the country can offer.
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