PEZA Incentives: Unlocking Opportunities for Foreign Investors Under the CREATE MORE Act

March 27, 2025

The Philippine Economic Zone Authority (PEZA) has long been a cornerstone of the country’s strategy to attract foreign investment. It offers a suite of tax incentives and benefits within its special economic zones to bolster economic growth. With the recent passage of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, signed into law in late 2024, these PEZA incentives have been recalibrated to entice global businesses further while aligning with fiscal sustainability goals. For foreign investors eyeing the Philippines as a strategic hub in Southeast Asia, understanding how these updated tax benefits under the CREATE MORE Act enhance the appeal of PEZA zones is crucial. This article explores the intricacies of PEZA incentives, their evolution under the CREATE Law Philippines, and the tangible advantages they offer to international firms seeking to capitalize on the country’s vibrant market.

Understanding Eligibility for PEZA Incentives

Qualifying for PEZA incentives requires foreign investors to meet specific criteria to promote export-oriented and high-value industries. The CREATE MORE Act builds on the foundational framework of the CREATE Act of 2021, refining eligibility to balance investor appeal with national economic priorities. Here’s a list of key qualifications:

Export Commitment: Businesses must derive at least 70% of their output from exports to enjoy full tax exemptions.
PEZA Zone Location: Operations must be established within designated PEZA zones or special economic zones.
Approved Activities: Eligible sectors include manufacturing, IT-BPO, agribusiness, and renewable energy projects.
Registration with PEZA: Companies must secure PEZA registration and comply with its operational guidelines.
Minimum Investment: Certain thresholds for capital infusion may apply, depending on the project scale and industry.

Failure to align with these conditions can disqualify firms from accessing PEZA’s tax benefits, making early compliance planning essential for foreign investors.

Key Tax Benefits Under PEZA Incentives

The allure of PEZA incentives lies in their robust tax advantages, which the CREATE MORE Act has fine-tuned to remain competitive globally. These benefits reduce operational costs and enhance profitability for businesses in PEZA zones. Below are the primary tax incentives available:

Income Tax Holiday (ITH): Qualified firms enjoy a 100% exemption from corporate income tax for four to seven years, depending on project type.
Special Corporate Income Tax (SCIT): Post-ITH, a reduced 5% tax rate on gross income replaces the standard 25% corporate tax.
VAT Exemption: Zero-rated value-added tax applies to local purchases and importations of capital equipment and raw materials.
Duty-Free Imports: No customs duties on imported machinery, spare parts, and inputs critical to production.
Local Tax Relief: Exemption from local government taxes, fees, and licenses, barring real property taxes on certain assets.

Philippines-style tax incentives provide a compelling financial edge, particularly for capital-intensive industries like manufacturing and technology.

How the CREATE MORE Act Enhances PEZA Incentives

The CREATE MORE Act introduces pivotal changes to the PEZA framework, addressing gaps in the original CREATE Act while amplifying benefits for foreign investors. This legislation reflects a strategic pivot to sustain the Philippines’ status as a top foreign investment destination. Here’s how it impacts PEZA incentives:

Extended ITH Periods: High-impact projects, such as those in green technology, may qualify for up to eight years of ITH.
Streamlined Approvals: Simplified processes for PEZA incentive applications reduce bureaucratic delays.
Enhanced SCIT Flexibility: The 5% tax rate now applies more broadly, with transitional relief for existing registrants.
Work-from-Home Provisions: IT-BPO firms can retain tax benefits even with up to 50% remote work arrangements.
Investment Deductions: Additional deductions for power costs and workforce training bolster cost savings.

These updates ensure that PEZA’s tax exemption and rate structures remain attractive amidst global competition, offering foreign investors greater operational flexibility.

Comparing PEZA Incentives Under CREATE Act vs. CREATE MORE Act

To appreciate the CREATE MORE Act’s impact, a comparison with the original CREATE Act highlights its evolution in supporting PEZA zones. The earlier law rationalized incentives but faced criticism for reducing their generosity—prompting refinements in the new legislation. Here’s a side-by-side look:

ITH Duration: The CREATE Act capped ITH at four to seven years; CREATE MORE extends it for strategic sectors.
Tax Rate Post-ITH: Both offer the 5% SCIT, but CREATE MORE eases the transition for legacy firms.
Remote Work: CREATE Act limited tax benefits for off-site work; CREATE MORE adapts to hybrid models.
Approval Process: CREATE MORE cuts red tape compared to the CREATE Act’s more rigid framework.
Sector Focus: CREATE MORE prioritizes emerging industries like AI and renewables, expanding beyond CREATE’s scope.

This comparison underscores how the CREATE MORE Act benefits foreign investors by restoring and enhancing PEZA’s competitive edge.

Steps and Challenges in Securing PEZA Incentives with Triple i Consulting’s Expertise

Applying for PEZA incentives under the CREATE MORE Act involves a multi-step process fraught with complexities that can deter unprepared investors. Professional guidance is critical to navigate this terrain effectively. Here’s the application process and why Triple i Consulting matters:

Feasibility Study: Prepare a detailed project proposal outlining economic contributions and compliance with PEZA rules.
PEZA Registration: Submit the application, including business plans and financial projections, to the PEZA board.
Document Submission: Provide incorporation papers, environmental permits, and proof of capital investment.
Evaluation and Approval: Undergo PEZA’s review, which may take 30 to 60 days, depending on project complexity.
Compliance Setup: Establish operations within a PEZA zone and meet export or output targets post-approval.

The intricate requirements and potential delays or rejections make this process daunting. Triple i Consulting, a trusted PEZA incentives application services provider, simplifies these steps. Our experts ensure seamless compliance, expedite approvals and mitigate risks, making us indispensable for foreign investors who are tackling this sophisticated system.

Key Takeaways

PEZA incentives under the CREATE MORE Act represent a golden opportunity for foreign investors in the Philippines, blending generous tax benefits with a forward-looking legislative framework. From extended income tax holidays to duty-free imports and streamlined approvals, these advantages position PEZA zones as a magnet for global capital in manufacturing and IT industries. The CREATE MORE Act’s enhancements—building on the CREATE Law Philippines—demonstrate the government’s commitment to fostering a competitive business climate while adapting to modern economic trends. The benefits of PEZA incentives are clear for foreign firms, but unlocking them demands meticulous planning and execution in a landscape of regulatory nuance.

Is Assistance Available?

Yes, Triple i Consulting stands ready to guide investors through the complexities of PEZA incentives. Contact us today to schedule an initial consultation with one of our experts: