Wednesday, August 6, 2014

PEZA Zones - What You Need to Know About Them

PEZA, which stands for Philippine Economic Zone Authority, is the implementing agency established in helping promote investments in the manufacturing industry. The agency assists investors from the registration to facilitation of the business. It also provides tax incentives for businesses that will embrace the establishment of a presence here in the Philippines specifically on PEZA zones. We’ll dig deeper on what PEZA is, its features and benefits.


Overview


The basic philosophy behind import and export is import is inward and export is outward. The Philippines is a customs territory that imports and exports goods. In eco-zones, anything going outside of the zones are considered as exports and anything going inside are imports.

Nonetheless, the philosophy behind PEZA eco-zones is not just merely about encouraging foreign direct investments. Instead, the eco-zones are created to reflect sustainable development in the Philippines like that of Lakeside EvoZone in Laguna. Operating on PEZA zones are not only about reducing operating costs, it is also about improving occupant productivity, enhancing asset, boosting profits and optimizing economic performance lifecycle.

Aside from PEZA zones, there are also PEZA approved companies and PEZA approved buildings. The companies and buildings go through a rigorous process of accreditation before it can be declared as PEZA approved. The President is the one to proclaim if an area (or zone) is an eco-zone, but the agency will declare if the company or building is approved. As of June 30, 2013, there are 289 economic zones in the country:

  • 2 medical tourism parks/centers
  • 17 tourism economic zones
  • 18 agroindustrial economic zones
  • 65 manufacturing economic zones
  • 187 IT parks/centers

Evidently, not all kinds of businesses are registrable. PEZA chooses which among the business operations may register as an eco-zone. If your business falls in any of these categories, then you should consider registering with PEZA and reap the benefits of doing such.


Prior registration


The establishment of the business operations is not automatic. There are two ways a business by which a business can register. First, it can file application papers during incorporation with SEC (Securities and Exchange Commission) and second, after SEC registration. Upon registration, various documents will be required depending on the nature of operation and approval. Aside from SEC documents, business plans and maps may be required. The business must establish its operation in a PEZA zone or PEZA building to qualify.

Upon registration, the business activities that an entity engages into are registered and not necessarily the entity. If a firm engages in more than one business activity, separate registrations for each activity are required. This means the firm will not qualify to the incentives for its non-registered business activities.


One-stop and non-stop shops


As a one-stop shop, PEZA issues:

  1. Building and occupancy permit
  2. Import and export permit
  3. Non-immigrant visa
  4. Environment clearance

PEZA also employs harmonized customs processes since it has a memorandum of agreement with the Bureau of Customs. It also has a memorandum of agreement with the Department of Environment and Natural Resources. Business permits are waived for companies operating in PEZA zones.
As a non-stop shop, PEZA provides 24/7 continuous service to companies. All officials are on-call 24/7.


Fiscal and non-fiscal incentives


A certificate of registration will be provided by PEZA for those business activities that are deemed compliant with the requirements. The terms and conditions including the incentives are detailed on the certificate. Fiscal incentives include:

  • Income tax holiday

Tax holidays are provided in specific durations such as 3, 4 and 6 years. The tax holiday is also subject to extension under specific circumstances. PEZA registered companies are not liable to pay 30% income tax.

  • Special income tax

Upon the tax holiday expiration, PEZA registered companies are liable to pay 5% special income tax. The percentage is based on the company’s defined gross income wherein only specific expenses (as enumerated) are deductible from gross sales.

  • Value added tax

Purchases of goods and services required for the utility of the registered activities receive 0% VAT.

  • Exemptions

PEZA registered companies are exempted from withholding taxes on payments of the local buyers from the otherwise customs territory. These are also exempted from paying government fees including permits and licenses.

  • Duty free import

Further, the non-fiscal incentives include simplified import-export procedures, employment of foreign nationals and issuance of special non-immigrant visas to the employees. Apart from state-of-the-art building and facilities, the eco-zones are fully-secured and with adequate, un-interrupted power and water supplies.


Economic growth and development has a huge impact on the natural environment. The Earth’s ecosystem is now approaching a critical stage if it is not at it already. Our government, including all of us, must do its share. Urbanization is challenging, but we can always look for ways to conserve our resources. If it means operating businesses on eco-zones where consumption is strictly regulated, then so be it.

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