[Ask the Tax Whiz] Key tax incentives for investors in the Philippines

As the Philippines strengthens its position as a regional investment hub, the government continues to refine its tax incentives framework to attract high-value industries and export-oriented businesses. The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy or CREATE MORE Act enhances the country’s incentive system by offering more competitive tax benefits, clearer rules, and improved support for strategic sectors. [Ask the Tax Whiz] FAQs on the CREATE MORE Act

Below are key questions investors should understand when considering investments in the Philippines.

What is the CREATE MORE Act?

The CREATE MORE Act strengthens the Philippines’ tax incentives regime by enhancing benefits for qualified investments and improving the administration of fiscal incentives.

Registered Business Enterprises (RBEs) engaged in priority activities may qualify for:

• Income Tax Holiday (ITH) – temporary exemption from corporate income tax
• 5% Special Corporate Income Tax (SCIT) based on gross income earned
• Enhanced Deduction Regime (EDR) with additional tax deductions
• Customs duty exemptions on qualified importations
• VAT zero-rating or exemption on purchases directly related to registered activities

These incentives help reduce operating costs and support businesses during the early stages of investment.

Which businesses may qualify for incentives?

Tax incentives are available to RBEs operating in priority sectors identified under the Strategic Investment Priorities Plan (SIPP) and registered with an Investment Promotion Agency (IPA).

Typical qualifying industries include:

• Export-oriented manufacturing
• IT-BPM and digital services
• Renewable energy and clean technology
• Agro-industrial and infrastructure projects
• Innovation and advanced technology activities

Export enterprises generally must generate at least 70% of revenues from exports to qualify for export-related incentives.

How does PEZA registration complement CREATE MORE incentives?

One of the most common ways for export-oriented investors to access incentives is through registration with the Philippine Economic Zone Authority (PEZA).

PEZA administers economic zones that host export-driven industries such as:

• Manufacturing and export processing
• IT-BPM and shared service centers
• Logistics and support facilities for exporters
• Agro-industrial processing

Companies registered with PEZA are considered Registered Business Enterprises (RBEs) and may avail of the income tax incentives provided under CREATE MORE, including the Income Tax Holiday (ITH) followed by either the 5% Special Corporate Income Tax (SCIT) or the Enhanced Deduction Regime (EDR).

In addition, PEZA locators benefit from streamlined customs procedures, simplified importation rules, and a more efficient regulatory environment within economic zones.

Tip for investors: Export-oriented manufacturers and IT-BPM companies often choose PEZA registration because it provides both fiscal incentives and operational support for global operations.

What income tax incentive options are available?

CREATE MORE allows RBEs to elect among different income tax incentive packages depending on the nature of their activity.

For Registered Export Enterprises (REEs), options include:

• ITH followed by 5% SCIT
• ITH followed by Enhanced Deduction Regime (EDR)
• Immediate 5% SCIT, or
• Immediate EDR

For Domestic Market Enterprises (DMEs):

• ITH followed by EDR, or
• Immediate EDR

The 5% SCIT, available to export enterprises, is imposed on gross income earned from the registered activity and replaces most national and local taxes.

The chosen incentive package is irrevocable for the duration of the incentive period, making proper tax planning essential.

What additional tax benefits are available under the Enhanced Deduction Regime?

Under the EDR, businesses may claim additional deductions that lower taxable income, including:

RBEs may also enjoy customs duty exemptions on imported capital equipment and raw materials, as well as VAT zero-rating on qualified local purchases and importations directly attributable to the registered project.

What should investors consider before entering the Philippine market?

The Philippines offers strong investment potential supported by a young workforce, expanding infrastructure, and a growing digital economy. With enhanced incentives under the CREATE MORE Act, investors can benefit from reduced tax exposure while expanding in priority sectors.

However, businesses should carefully assess foreign ownership restrictions, minimum capital requirements, and investment registration procedures before entering the market.

Because in international investment strategy, understanding tax incentives can make the difference between a viable investment and a missed opportunity. – Rappler.com

Mon Abrea is a Global Tax Policy Expert and Chief Tax Advisor of the Asian Consulting Group (ACG), the Philippines’ premier tax advisory and investment consulting firm—providing tax strategy, compliance, and policy advisory services to multinational corporations, foreign investors, and government institutions. For strategic tax advisory, CONSULT ACG, or you may also send an email to [e-mail] to host investment and tax briefing in key cities across Asia, Middle East, Oceania, Europe and North America.

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