The Philippines continues to attract foreign and local investors due to its young, English-speaking workforce, improving infrastructure, and government incentives for businesses. For investors undergoing company registration in the Philippines, choosing between BOI (Board of Investments) and PEZA (Philippine Economic Zone Authority) registration is a crucial decision that impacts tax incentives, operational requirements, and business location.
This guide provides a comprehensive comparison between BOI and PEZA to help you determine which is more suitable for your business. Whether you're preparing for Philippines company registration or planning to expand operations, understanding these two investment promotion agencies will ensure your company benefits from the appropriate fiscal and non-fiscal incentives.
Understanding BOI and PEZA
What is BOI?
The Board of Investments (BOI) is a government agency under the Department of Trade and Industry (DTI). It promotes investments in preferred sectors identified in the Philippine Investment Priorities Plan (IPP). BOI registration is available to both foreign and domestic companies and does not require a business to be located within a specific zone.
What is PEZA?
The Philippine Economic Zone Authority (PEZA) is a government agency that oversees and regulates businesses operating within designated special economic zones (eco-zones). PEZA-accredited companies enjoy both fiscal and non-fiscal incentives, but they must operate within a PEZA-registered IT park, industrial zone, or export processing zone.
Key Differences Between BOI and PEZA
1. Location Requirements
BOI: No location restriction. BOI-registered companies can operate anywhere in the Philippines.
PEZA: Must be located within a PEZA-accredited ecozone or building.
Implication: If your business cannot operate from a PEZA zone or if no suitable location is available, BOI may be the better choice.
2. Eligible Activities
BOI: Focuses on industries prioritized in the IPP, such as manufacturing, agriculture, IT-BPM, infrastructure, energy, and more. Foreign ownership of up to 100% is allowed for export-oriented enterprises or those in pioneer areas.
PEZA: Primarily for export-oriented businesses. To qualify, 70% of your output must be exported.
Implication: If you are targeting the local market, BOI is usually more flexible. PEZA is ideal if you plan to export most of your goods or services.
3. Tax Incentives
Both BOI and PEZA offer fiscal incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. These may include:
- Income Tax Holiday (ITH)
- Special Corporate Income Tax (SCIT) rate or enhanced deductions after ITH
- Duty exemption on imported capital equipment
- VAT exemption on importation and local purchases
Differences:
BOI: Offers ITH and enhanced deductions. SCIT is not available for BOI firms.
PEZA: After ITH, companies can choose between SCIT (5% of gross income) or enhanced deductions.
Implication: PEZA’s SCIT can be more favorable for businesses with high margins and low deductions. BOI is suitable for firms that benefit more from actual expense-based deductions.
4. Import and Export Procedures
PEZA: Offers a streamlined process for the import and export of raw materials, equipment, and finished products through its One-Stop-Shop center. Customs procedures are typically faster due to PEZA privileges.
BOI: Uses regular Bureau of Customs procedures, which can be more time-consuming.
Implication: PEZA is advantageous for companies heavily involved in import-export operations.
5. Foreign Ownership Rules
BOI: Allows up to 100% foreign ownership for export enterprises or those involved in pioneer industries. Domestic market enterprises are generally restricted to 40% foreign equity unless they meet certain conditions.
PEZA: Also allows 100% foreign ownership for export enterprises.
Implication: For fully foreign-owned businesses focusing on exports, both BOI and PEZA are viable. For domestic market focus, BOI has more nuanced guidelines depending on the industry.
6. Regulatory Oversight and Administration
BOI: Fewer operational restrictions; companies are regulated under general business laws.
PEZA: More structured compliance framework, including audits, regular reporting, and physical inspection of PEZA facilities.
Implication: While PEZA provides more incentives, it also requires more rigorous administrative compliance.
Also Read: List of Documents Required for Company Formation in Singapore
Which Registration Is Best for You?
Choose BOI If:
- You cannot or do not wish to locate in an ecozone.
- Your business targets the Philippine domestic market.
- You fall under a priority industry in the IPP.
- You are seeking more flexibility in operations.
Choose PEZA If:
- Your company exports at least 70% of its output.
- You prefer simplified customs and logistics procedures.
- You want to operate in a controlled zone with built-in infrastructure.
- You are interested in the SCIT after ITH.
How to Register a Company with BOI or PEZA
Before you can apply for BOI or PEZA incentives, you must complete your company registration in the Philippines through the following agencies:
Securities and Exchange Commission (SEC) – for corporate entities
Bureau of Internal Revenue (BIR) – for tax registration
Social Security System (SSS), Pag-IBIG, PhilHealth – for employee benefits
Local Government Unit (LGU) – for business permits
Once you register your company in the Philippines, you can proceed with either BOI or PEZA registration by submitting the required documents, including:
- Business plan
- Financial projections
- Proof of registration (SEC, BIR, etc.)
- Lease agreement or title of office location
Pros and Cons Summary Table
| Criteria | BOI | PEZA |
|---|---|---|
| Location Requirement | No | Must be in PEZA zone |
| Export Requirement | None (unless foreign-owned) | Must export at least 70% |
| Tax Incentives | ITH + Enhanced Deductions | ITH + SCIT or Enhanced Deductions |
| Admin Requirements | Moderate | High |
| Import/Export Efficiency | Standard | Streamlined through One-Stop-Shop |
| Ideal For | Domestic and export-focused firms | Export-oriented firms |
Also Read: Capital Requirement for Money Changer License in Singapore
Conclusion
The choice between BOI and PEZA registration ultimately depends on your business model, target market, and operational needs. While both offer robust incentives, the conditions for eligibility, location, and compliance differ significantly.
For businesses aiming to cater to the local market or not operating in an economic zone, BOI is typically the more flexible and accessible route. On the other hand, for export-heavy enterprises seeking maximum tax incentives and simplified logistics, PEZA offers a well-structured environment with competitive advantages.
Understanding your goals and aligning them with the right agency is essential for a successful and sustainable Philippines company registration. Always consult professionals familiar with local compliance to ensure the correct approach.
FAQs
1. Can a foreigner register a company in the Philippines?
Yes, foreigners can register a company in the Philippines, particularly for export enterprises or businesses in pioneer industries. However, some sectors are restricted or require a Filipino majority partner for domestic market businesses.
2. Is it possible to change from BOI to PEZA registration later?
Yes, but the process involves significant adjustments, including relocation to a PEZA zone, compliance reassessment, and approval of a new set of documents. It’s best to evaluate your long-term goals early in the Philippines company registration process.
3. How long does it take to get BOI or PEZA approval?
The process typically takes 2 to 4 weeks after company registration. However, timelines can vary depending on the complexity of your application and the responsiveness in submitting complete documents.