PEZA vs BOI Tax Incentives in the Philippines: Income Tax Holiday, 5% SCIT and CREATE MORE Explained

Why Philippine tax incentives are worth studying

The Philippines charges a regular corporate income tax (CIT) of 25% (20% for qualifying smaller firms). For export manufacturing, IT-BPO, logistics and government-priority industries, that burden is not fixed: through the official incentive regime, qualified projects can pay zero income tax for the first several years, then switch to a very low preferential rate, while also saving customs duties and VAT on imported machinery and raw materials.

Incentives are granted mainly by two agencies: PEZA (the Philippine Economic Zone Authority) and the BOI (Board of Investments). Under the CREATE Act and its upgrade CREATE MORE, the actual perks are now largely harmonized; the real question is which route suits your project. Getting this right belongs in the structuring stage, ideally alongside setting up your Philippine company.

PEZA: duty-free zones for export-oriented firms

PEZA targets export-oriented projects — typically manufacturing, IT-BPO, knowledge-process outsourcing, logistics and medical tourism. Two conditions are central: the project must sit inside a PEZA-accredited economic zone or registered building, and the business must be predominantly export (most categories require a high export share).

In return comes a full package: several years of income tax holiday (ITH); after the holiday, the option of a 5% special corporate income tax (SCIT); duty-free imports of machinery, equipment and raw materials; and zero-rated VAT on sales. For factories or outsourcing centers that earn mainly export revenue and import heavily, PEZA is usually the most tax-efficient choice, with one-stop permitting and customs facilitation inside the zone.

BOI: priority industries without a zone

The BOI serves priority industries on the Strategic Investment Priority Plan (SIPP) — strategic manufacturing, green energy, agri-processing, innovation and R&D, and more — and crucially some domestic-market projects qualify too. That is its biggest contrast with PEZA: BOI does not require you to locate inside an economic zone, so you are free to choose your site.

BOI projects can also secure an income tax holiday and duty-free imports, with tiers depending on industry, location and export share. Note that BOI approval has tightened in recent years — incentives are not guaranteed just by applying; the agency checks whether the project genuinely fits the priority list and meets employment and investment thresholds. If your business serves the domestic market and sits in an encouraged sector, BOI often fits better than PEZA. If your product also needs market clearance (food, drugs, cosmetics), see the FDA product registration process.

CREATE MORE: combining ITH, SCIT and enhanced deductions

Whether you go PEZA or BOI, the actual incentives sit under the CREATE / CREATE MORE framework and are granted at the agency's discretion per project. The main tools:

• Income Tax Holiday (ITH): roughly 4–7 years of zero corporate income tax, longer for strategic projects or those in less-developed areas.
• After ITH, pick one: the 5% special corporate income tax (SCIT), levied on gross income in lieu of almost all national and local taxes (simple and predictable); or the enhanced deduction regime (EDR), giving extra deductions for R&D, training, local sourcing and power — better for cost-heavy, reinvesting firms.
• Duty exemptions on imported machinery and raw materials, and zero-rated VAT on export sales.
• CREATE MORE relaxed two things: registered firms may run up to 50% work-from-home without losing incentives (vital for IT-BPO); and some domestic-oriented projects may enjoy a preferential income tax rate of about 20%.

In short, the same project can pay nothing under ITH early on, then stay at a low rate via SCIT or EDR — and designing that sequence is the heart of a good tax incentive application.

PEZA or BOI? Three yardsticks

Choosing the wrong channel means overpaying or getting rejected. Judge on three dimensions:

• Export share: mainly export revenue and want zero-rated VAT — lean PEZA; serving the domestic market — look at BOI.
• Industry and list: whether the project falls under a SIPP priority sector or a PEZA-approved zone activity determines eligibility.
• Location: willing (or required) to sit inside a PEZA zone — go PEZA; need flexible siting — go BOI.

The two are not mutually exclusive; different group entities can register separately. Either way, you must first become a Registered Business Enterprise (RBE) and file annual compliance reports — incentives are conditional and must be maintained, not granted forever in one shot. Planning company structure and incentives together up front saves detours.

Application and compliance: from registration to annual review

The rough path: confirm project eligibility → file the project application and business plan with PEZA or BOI → obtain approval and register as an RBE → receive the certificate of incentives → file annual compliance and performance reports with the agency and the BIR (Bureau of Internal Revenue). The process spans company registration, industry-list matching, investment and employment commitments, and downstream tax filing across several bodies.

Watch the details: the ITH runs from the start of commercial operations, not from registration; the holiday length, whether you may switch to SCIT, and any cap on domestic sales are written into your approval letter and must be followed. Failing to maintain the export ratio or compliance obligations can trigger retroactive cancellation of incentives. Treat compliance as an ongoing discipline, not a one-off formality — that is what keeps the tax breaks alive.