Tax Incentives: Opportunities for Foreign Companies in the Philippines

January 29, 2026

Foreign companies eyeing the Philippines face a mix of opportunities and hurdles, from foreign ownership limits to competitive labor costs. One of the biggest draws, however, is the range of tax incentives designed to attract investment in priority sectors like manufacturing, IT-BPO, tourism, and green energy.

Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act or RA 11534, these incentives have been streamlined and modernized, offering income tax holidays (ITH), duty-free imports, and special tax rates to qualified registered business enterprises (RBEs). Agencies like PEZA, BOI, CEZA, and TIEZA administer them, helping foreign investors offset setup costs and boost competitiveness in ASEAN.

The Strategic Value of Tax Incentives

Tax incentives play a pivotal role in leveling the playing field for foreign entrants in the Philippine market. With corporate income tax at 25% for domestic firms (20% for small ones) and VAT at 12%, exemptions can save millions over the years, especially for capital-intensive projects. A 2025 BOI report notes that incentive-registered firms contribute over 60% of exports, driving job creation and technology transfer.

For foreign companies, these perks address key pain points like high upfront capital for equipment imports and ongoing local taxes. They also signal government commitment to sectors in the annual Investment Priorities Plan (IPP), covering everything from EV assembly to biotech R&D. Getting incentives right isn’t just about savings—it’s about faster ROI and sustainable expansion.

Navigating the CREATE Act Landscape

The CREATE Act, effective since 2021, overhauled incentives under a single menu managed by the Fiscal Incentives Review Board (FIRB), with Investment Promotion Agencies (IPAs) like BOI and PEZA handling approvals. Core offerings include 4-7 year ITH depending on location (longer in Less Developed Areas or disaster zones), followed by a 5% Special Corporate Income Tax (SCIT) on gross income instead of all national/local taxes. Total incentive periods cap at 17 years for strategic projects, up to 40 with FIRB approval.

Relocations from NCR add 3 years ITH, while pioneers in green tech or health get enhanced deductions (e.g., 200% for R&D/training). Duty/VAT exemptions on imports and zero-rating on local purchases further reduce costs. Foreign firms must commit to export ratios (70%+ for some) or priority alignment, but compliance unlocks these benefits seamlessly.

PEZA Incentives for Export-Oriented Firms

PEZA tax incentives stand out for foreign companies in special economic zones (SEZs), targeting export manufacturing, IT-BPO, tourism facilities, and logistics. Registering requires locating in a PEZA zone and proving 70%+ export orientation, ideal for electronics assembly or call centers.

Key PEZA perks include:

ITH 4-7 years (extendable)
5% SCIT post-ITH for 10 years
Duty-free capital equipment/raw materials imports
VAT zero-rating on local purchases/power/water
50% reinvestment allowance deduction

Additional boosts: 150% labor expense deduction, foreign national employment (up to 5%), and EWT exemption. A mid-sized IT-BPO firm might save ₱50M+ in taxes over 10 years. Triple i Consulting streamlines PEZA applications from SEC registration onward.

BOI Support for Priority Sectors

Board of Investments (BOI) tax incentives cater to projects anywhere in the Philippines aligned with the IPP, from agro-processing and renewables to AI and medical devices. Foreign firms qualify if 70% of their operations are export-focused or if they are in Less Developed Areas (LDAs), covering non-zone manufacturing or services.

BOI mirrors PEZA with:

ITH 4-7 years based on pioneer status/location
Duty exemptions on imports/consigned equipment
Tax credits on raw materials (RA 7844)
Labor/power deductions, foreign experts allowed

2026 IPP emphasizes green ecosystems (EV parts, recycling), health (vaccines, hospitals), and Industry 4.0 (robotics, biotech). Submit feasibility studies showing 5-year projections—BOI approval takes 30-60 days. This suits firms that avoid zones but want nationwide flexibility.

CEZA and Regional Zone Options

CEZA oversees tax incentives for the Cagayan Special Economic Zone, appealing to gaming, tourism, and recreation with PEZA-like incentives and online gaming licenses. Benefits match national standards: ITH/SCIT, import exemptions, 10-200% deductions for buildings/machinery/labor/R&D/training.

Freeport authorities, such as SBMA (Subic) or CDC (Clark), offer similar packages for logistics-intensive ops. Foreign gaming firms leverage CEZA’s regulatory edge, while tourism players gain from integrated perks. Requirements mirror PEZA but emphasize proof of zone location.

TIEZA for Tourism Enterprises

Tourism Infrastructure and Enterprise Zone Authority (TIEZA) targets tourism in designated zones (TEZs), perfect for hotels, spas, theme parks, or travel agencies drawing local/foreign visitors. Incentives align with CREATE: ITH, SCIT, duty-free imports, plus VAT zero-rating.

Eligibility needs:

25-year+ land lease/ownership in TEZ
Endorsements from DOH (wellness), NHI (heritage), or PRA (retirement)
Company profile and project brief

Post-ITH, 5% gross income tax sustains profitability in high-capex hospitality. Ideal for foreign chains expanding ASEAN footprints.

Challenges in Securing Incentives

Foreign companies often stumble on documentation, pioneer classification, or post-registration compliance, like annual reports/export targets. CREATE sunset rules limit durations, and FIRB audits non-performers. Multi-agency overlap confuses—PEZA for zones, BOI for IPP anywhere. Currency fluctuations and ownership caps (40% foreign in some sectors) add layers.

Strategies for Maximizing Incentives

Success demands proactive planning across registration, operations, and compliance. Here’s how:

Align Early with IPP Priorities: Review annual lists for pioneers (e.g., EV, biotech)—position your project to qualify for max ITH. Use feasibility studies to project export volumes and jobs.
Choose the Right IPA: PEZA for exports/zones; BOI for domestic priority; TIEZA for tourism. Hybrid models (e.g., BOI + PEZA sub-zone) are possible with FIRB nod.
Prepare Robust Documentation: Gather SEC docs, feasibility (5-year financials), anti-graft certs, and board resolutions upfront. Triple i handles from incorporation to submission.
Leverage Post-ITH Options: Opt for SCIT over enhanced deductions if margins are high; reinvest to avail of 50% allowances.
Ensure Ongoing Compliance: File annual performance reports and maintain export ratios; non-compliance revokes perks.
Monitor CREATE Updates: FIRB oversees; 2026 may extend green incentives. Partner locally for audits.

Technology and Tools for Incentive Management

Cloud platforms track compliance, simulate tax savings, and auto-generate reports for IPAs. AI forecasts IPP alignment; blockchain secures import docs. Integrate with ERP for real-time export monitoring, which is essential for PEZA audits.

Final Insights

Tax incentives transform the Philippines from a promising market into a high-ROI hub for foreign companies in exports, tech, tourism, and green industries. CREATE’s unified menu simplifies access, but success hinges on strategic IPA choice, solid documentation, and sustained compliance amid evolving IPP priorities.

Foreign investors who treat incentives as a core pillar of expansion—not an add-on—unlock savings, employ locals, and scale regionally. In a post-pandemic economy prioritizing recovery and sustainability, these perks position the Philippines as ASEAN’s next investment hotspot.

Is Assistance Available?

Yes. Triple i Consulting specializes in guiding foreign companies through Philippine tax incentives, from BOI/PEZA applications to ongoing compliance. Our team handles feasibility studies, SEC registration, and performance reporting, ensuring you maximize CREATE benefits without delays.