Setting Up a Factory in the Philippines: A Taiwanese Manufacturer's Location and Permit Guide

Six Decisions in Order: Export Share First, Location Second

The first decision for a Taiwanese manufacturer entering the Philippines is not where the plant goes — it is what share of output will be exported. That single number drives whether foreign investors can hold 100%, whether the US$200,000 paid-in capital requirement applies, and which incentive regime is open to you. Reverse the order and you finish site selection only to discover the shareholding has to change, which unwinds everything negotiated so far.

Steps 1 and 3 are coupled: export-oriented projects sit most naturally inside PEZA zones or a freeport, while domestic-market projects usually go through BOI and must confront equity and capital rules head-on. Entity form, Taiwan-side filings and document authentication are covered separately in setting up a Philippine company as a Taiwanese investor; this article stays on the manufacturing path.

One scheduling note: these six are not sequential. Name reservation, incorporation, letters of intent to industrial estates, site visits and environmental category screening can all run in parallel, and running them in series adds months.

The 60% Line: Full Foreign Ownership, or a US$200,000 Cheque

An export enterprise — one exporting at least 60% of output — can generally be 100% foreign-owned and is not subject to the US$200,000 paid-in capital requirement that applies to foreign-owned domestic market enterprises. The basis is the Foreign Investments Act, RA 7042, as amended by RA 8179 and by RA 11647 in 2022.

Three traps. The export ratio is continuing, not declaratory — it is assessed against your project plan at registration and evidenced in periodic reports; falling below it affects incentive eligibility and possibly equity compliance. Do not use nominee shareholders to work around equity limits; the Anti-Dummy Law can void the arrangement and expose both the investor and the nominee. US$200,000 is paid-in, not subscribed — the money has to arrive with bank evidence, and that same record underpins later profit repatriation. On what full foreign ownership actually permits, see where 100% foreign ownership is possible.

Note also that the SEC's general minimum paid-up capital under the Revised Corporation Code (RA 11232) and the foreign investment thresholds are two separate figures — do not net them against each other. Confirm current amounts and reduction conditions with the Philippine investment authorities.

CALABARZON, Clark, Subic: Three Systems, Not Three Addresses

CALABARZON has the deepest supplier base, Clark has air freight and land, Subic has a deepwater port. They also sit under different statutes and different agencies, so the choice changes your entire registration and incentive framework, not just your address.

Two variables travel with the location. The promotion agency: PEZA suits export manufacturing inside a zone, BOI suits projects outside zones or aimed at the domestic market that fall within the strategic investment priority plan, and Clark and Subic register locators through CDC and SBMA respectively. The labour radius: the same project in different regions faces a different wage order, a different depth of labour pool and a different commuting radius, and those three together usually outweigh land price differences — see Philippine labour cost structure.

Sequence site visits as: promotion agency and estate marketing first, specific buildings second, suppliers and manpower agencies last. Doing it the other way round lets a single broker's inventory frame the whole decision. For how to run the estate visits themselves, see visiting CALABARZON industrial parks.

You Cannot Buy the Land: 50 Plus 25 Years, and the Ready-Built Trade-Off

Foreign nationals and foreign-controlled companies cannot acquire private land in the Philippines — a constitutional restriction. Manufacturing works around it with long leases under the Investors' Lease Act, RA 7652: up to 50 years, renewable for another 25. The building and the machinery can be owned by a foreign-owned company; it is the ground underneath that is restricted.

• Lease a ready-built factory in an estate. Fastest to production, with utilities, fire protection and effluent handling usually in place and some permits handled by the estate. The trade-off is fixed layout and floor loading, which may not suit heavy equipment or unusual processes.
• Lease land from the estate developer and build. Free layout and phased expansion, but you own the building permit, environmental clearance and fire inspection process, and time to production is measured in quarters. Lock the term and renewal mechanics in the contract.
• Joint venture that holds land. Requires 60% Filipino equity, and the control and governance arrangements must be genuine and defensible.

Read six clauses line by line: term and renewal mechanics, rent escalation, deposit and advance rental, common area charges, who bears real property tax, and what happens to improvements at expiry including any obligation to restore. Escalation and the fate of improvements are the two that bite in years 8 to 15, by which time the production line cannot easily move. A full lease checklist is in leasing a factory or industrial land in the Philippines.

One more: rent typically attracts 12% VAT and a 5% withholding tax on rentals. Whether a quoted figure is inclusive, and who absorbs the withholding, must be settled at letter-of-intent stage rather than discovered at signing.

Five Parallel Tracks, and the One Sequence You Cannot Reorder

Setting up a plant means running five administrative tracks — incorporation, promotion agency registration, local permits, tax registration, and construction and environmental clearance. Most can run in parallel, but environmental clearance, building permit and fire inspection have a hard sequence, and getting it wrong stops work.

Start the environmental track early. The Philippine environmental impact statement system rests on PD 1586, and a project's category determines whether it needs an environmental compliance certificate or a certificate of non-coverage — misclassify it and the application restarts. Building permits follow the National Building Code (PD 1096), and fire safety follows RA 9514 and its implementing rules, with a fire safety inspection certificate required before operations begin.

The most expensive sequencing error looks like this: construction is underway and the machinery is already on the water when the project turns out to require a full environmental impact assessment. While the paperwork catches up, the equipment sits at the port accruing demurrage and the production start slips a full quarter. Have Yixing screen your environmental category before construction is sequenced →

On timing: processing depends on project category, filing completeness, agency board schedules and local practice, and varies widely. This article gives no day counts — they differ by office and by period, so rely on each agency's current issuances and your filing receipts. Plan milestones in quarters rather than weeks, and keep buffer on the critical path.

Labour: Catchment, Wage Orders and Permits for Your Own Staff

Site selection carries three labour questions: can you hire operators here, which wage order applies, and how do the Taiwanese managers you send get their permits. The third is the one most often underestimated on the critical path.

• Local hiring. Established manufacturing belts offer skilled labour and technical schools but also wage competition and higher attrition; remoter estates are cheaper but shallower, and the commuting radius constrains shift patterns. Ask estate marketing three numbers on your visit: commutable population, average attrition among existing locators, and the nearest technical training institution.
• Wage orders. There is no national minimum wage. Under RA 6727, 17 regional boards each issue their own. Metro Manila currently operates under Wage Order No. NCR-26, effective 18 July 2025, which raised the non-agriculture daily floor to PHP 695; CALABARZON, Central Luzon and the rest each have their own order, effectivity and generally lower rates. Verify against the current wage orders on the NWPC site.
• Permits for expatriates. Employing a foreign national requires an alien employment permit under Labor Code Art. 40 and the DOLE's current department order, plus a work visa, and the two interlock. Some positions carry labour market and notification requirements, so confirm the role is eligible before designing it. Official fees and processing times vary by office and period — rely on the agency's latest issuance.

Two more statutory burdens belong in the budget: occupational safety and health under RA 11058 and DOLE Department Order 198-18, which requires qualified safety personnel, training and records in a factory setting; and the restrictions on contracting under Department Order 174-17, which prohibits labour-only contracting and makes agency structures a poor way to avoid regular employment status.

Importing Equipment and the Pilot Run

Inside a PEZA zone or freeport, machinery imported for a registered activity generally enters free of duty and VAT; outside, ordinary duty and 12% VAT apply, with possible capital equipment relief under the CREATE regime. The capex effect of that difference typically exceeds the rent differential between sites.

• Can Taiwanese-origin machinery use a trade agreement rate? Generally no. There is no operative free trade agreement between Taiwan and the Philippines, and Taiwan is not an RCEP party, so ASEAN-family certificates of origin do not cover Taiwanese-origin goods and most-favoured-nation rates usually apply. Equipment actually exported from mainland China or an ASEAN member is assessed under that agreement's origin rules instead.
• Can used equipment be imported? It depends on the category. Some used machinery and vehicles are regulated or need prior clearance, so check the tariff heading's regulatory status before shipping, not after arrival.
• Can duty-free equipment be sold or moved later? Equipment admitted under an incentive typically carries use and disposal conditions, and transfer, relocation or change of use can trigger back duties. Build that into asset planning.

Two pilot-stage items belong on the schedule: customer factory audits, since European, American and Japanese buyers commonly require quality and social compliance audits with preparation measured in months; and the documentation chain for the first shipment — invoice, packing list, certificate of origin and export declaration — which almost always takes longer the first time. Tariff rates, regulated lists and incentive conditions should be verified against current Bureau of Customs and agency rules.

Three Things the Taiwan Side Still Requires

Getting the Philippine company running does not close out the Taiwan side. Outbound investment made in a Taiwanese company's name carries a filing obligation, Taiwanese documents cannot be apostilled and must run the MECO chain, and controlled foreign company rules can tax undistributed Philippine profits in Taiwan.

• Outbound investment filing. Investment in the Philippines in a Taiwanese company's name is outbound investment, administered by the Department of Investment Review under the Ministry of Economic Affairs. The current line is NT$1.5 billion: above it, prior approval; below it, either prior approval or a post-implementation filing within the prescribed period. Most manufacturing projects fall below the line and use the filing route — but "after the fact" does not mean "not at all", and the deadline is firm.
• The MECO chain. Taiwan is outside the Hague system, so registration certificates, board resolutions, financial statements and powers of attorney cannot be apostilled. They run notarisation or original issuance, then authentication by Taiwan's Bureau of Consular Affairs, then authentication by the Manila Economic and Cultural Office. Filing an apostille with the SEC gets the package returned, and re-running the chain from Manila costs weeks.
• CFC and retained profits. The Philippines is generally not a low-tax jurisdiction, but routing through a third-jurisdiction holding company can bring CFC rules into play. Leaving profits undistributed in Manila does not automatically keep them out of Taiwanese tax.

Each of these is unpacked in setting up a Philippine company as a Taiwanese investor. Taiwan-side thresholds, deadlines and required documents have been revised frequently — rely on the Department of Investment Review's current issuances and confirm individual cases with a Taiwanese accountant or lawyer.

A small practical point with large consequences: the romanised name must match exactly across the passport, the corporate documents and the bank account opening file. A missing space or reversed name order counts as a mismatch and returns the filing. On factory projects the critical path usually breaks on paperwork, not on construction.

Six Recurring Misjudgements, and the Disclaimer

Almost every Taiwanese factory project we advise on contains one or two of these.

1. Choosing the building before fixing the export share. Shareholding and capital then have to be reverse-engineered, and the lease terms already negotiated get reopened.
2. Reading PEZA as permanent exemption. Incentives arrive in stages, a choice between a special rate and enhanced deductions follows the holiday, and eligibility must be maintained through periodic reporting.
3. Assuming land can be bought. The constitutional restriction stands; long lease and a Filipino-controlled joint venture are different roads with different costs and risks.
4. Importing the home-country roster and holiday calendar. Philippine regular holidays are paid when not worked and doubled when worked, and overtime and night premiums stack on top.
5. Underestimating environmental and fire lead times. Category screening, building permit and post-construction inspection have a hard order, and getting it wrong strands equipment at the port.
6. Leaving the Taiwan-side filings and authentication until last. The MECO chain runs through three offices in Taipei and the investment filing has a deadline; both should start in parallel with SEC name reservation.

This article is general information and is not legal, tax or investment advice. Statutory references, threshold amounts, agency names and process order reflect the general position at the time of writing; Philippine investment and tax rules change frequently, so rely on the current issuances of the SEC, PEZA, BOI, CDC, SBMA, DENR, BIR, DOLE and NWPC, and on the Department of Investment Review for the Taiwan side. For individual matters consult a licensed lawyer or accountant — this article does not replace professional advice. To sequence export share, location, building and permits into one executable schedule, start with a project pathway review from the Yixing company setup team.