Investing in the Philippines: Frequently Asked Questions Part 2
1. What relevant information should be noted in registering with the Board of Investments ("BOI") and the Philippine Economic Zone Authority ("PEZA")?
Board of Investments
To qualify for registration with the BOI, a company should be organized under Philippine laws as a domestic entity. An enterprise may register its activity if the same is listed in the current IPP. If not listed, the enterprise may also be entitled to BOI incentives for as long as the following conditions are met:
At least 50% of the production is for export (for enterprises with 60% Filipino/40% foreign ownership); or
At least 70% of production is for export (for enterprises with more than 40% of foreign ownership).
Foreign-owned firms, whose ownership exceeds 40% of the outstanding capital stock and which proposes to engage in domestic-oriented activities, may be entitled to incentives if the proposed activity is listed in the current IPP and qualifies under Pioneer status.
Philippine Economic Zone Authority
The Special Economic Zone Act of 1995, as amended, mandates the PEZA to operate, administer, manage and develop Special Economic Zones or Ecozones.
Enterprises that may qualify for registration with PEZA are domestic company, subsidiary and branch office that will manufacture and export 100% of their production and/or services.
Permission has to be sought if the enterprise located within the zone will export below 100%. In most cases, PEZA has allowed up to 30% of production for the domestic market.
So far, there are 98 proclaimed Special Economic Zones that are operating in the country.
2. What is a Pioneer status?
A preferred area of investments may be declared Pioneer if the activity:
Involves the manufacturing or processing (not merely assembly or packaging of goods or raw materials that have not been produced in the Philippines on a commercial scale; or
Uses a design, formula, scheme, method, process or system of production or transformation of any element or raw material or finished good which is new and untried; or
Engages in agricultural activities/services essential to the achievement of the country’s self-sufficiency program; or
Produces non-conventional fuels or manufactures equipment which utilize non-conventional sources of energy; or
Conforms to other specific criteria as provided for in the annually drawn IPP.
Source: Board of Investments Frequently Asked Questions Booklet
This article does not constitute and is not intended to be legal advice. If you have any question or need any assistance in setting up a business in the Philippines, please feel free to send us an email at roselle.jean@nonatolaw.com.
