PEZA vs. BOI Registration: Tax Incentives for Philippine BPO Companies

by: Austin Shi

Foreign BPOs, call centers, and IT companies setting up business operations in the Philippines can opt for either PEZA or BOI registration. Registering with PEZA or BOI enables your company to avail of numerous tax incentives and exemptions, including but not limited to easier visa processing for expat employees, tax holidays of up to 4 years and other payment exemptions. In order to become eligible for these benefits, foreign companies must first comply with their respective registration agreements.

The Philippine Economic Zone Authority, PEZA for short, is a government agency that provides tax incentives and other forms of investment assistance to foreign investors interested in setting up business operations in the Philippines. PEZA supports businesses in the IT field, including software development and application, IT-enabled services, content-development for the Internet and other forms of media, Business Process Outsourcing (BPO) and IT research development. Companies that register with PEZA are eligible for a number of special benefits, including tax holidays of up to 4 years, a special 5% tax on gross income, permanent residency for foreign investors (upon an initial investment of Php 150,000 to any sustainable, local enterprise) and other payment exemptions. However, businesses that register with PEZA are required to relocate to special PEZA zones, and export 70% of their total production.

The Philippine Board of Investments (BOI), on the other hand, is a government agency attached to the Department of Trade and Industry (DTI) responsible for promoting any type of solid investment in the Philippines. BOI supports businesses in the IT field, including software and application development, IT-enabled and ICT support services, Business Process Outsourcing (BPO), Internet service provisions and other related fields. Registering with BOI enables companies to avail of the following incentives: income tax holidays, deduction of labor expenses, and the unrestricted use of consigned equipment. However, businesses that register with BOI are required to export 70% of their total production, and foreign-owned companies must obtain at least 40% Filipino-ownership after a given number of years.

Furthermore, approval of PEZA and BOI Registration is given on a case-to-case basis. Both have their own advantages and disadvantages. While registering with PEZA requires that you relocate your company to a PEZA building or IT Park, companies that register with BOI are free to set up business anywhere in the Philippines. Both PEZA and BOI offer similar tax incentives and exemptions but PEZA benefits are geared toward export manufacturing, IT, and Tourism enterprises, while BOI benefits are more focused on BPO Research and Development.

Says Philippines corporate lawyer Amanda Carpo of Manila Consulting firm Kittelson & Carpo Consulting, “Before registering with either PEZA or BOI, foreign companies setting up business here in the Philippines must first weigh their options carefully, and determine the most profitable business arrangement for their company. This will not only prevent unnecessary mistakes from being made, it will also ensure that your company receives the best possible benefits, under the best possible conditions.”

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