Philippines free zones
The Philippines authorities provide special economic zones (SEZs) in which larger foreign investment projects can be registered in order to benefit from multiple incentives. Investment projects are selected by the Philippines Economic Zone Authority (PEZA), according to multiple criteria including i) the nature of the business of the applicant ii) the expected customers (export oriented businesses are favored) iii) the existence of technologies transfers and iv) the size of the project in terms of initial investment and job creations. Kindly find below an overview of the main considerations for company registration in a Philippines free zone and a comparison of the characteristics of the most popular SEZs.
Main benefits of registering a company in a Philippines free zone
- Projects registered in a Philippines SEZ benefit from tax holidays of up to i) six years for export oriented manufacturing and IT technologies businesses and ii) four years for tourism, medical tourism and agro industrial businesses. These tax holidays can be extended by up to eight years according to i) the nature and size of the project (minimum investment of US$500,000) and ii) whether the company uses indigenous raw materials;
- Companies registered in a Philippines SEZ will also receive the following tax benefits: i) exemption from VAT on entrants purchased locally ii) duty free imports on raw material and equipment and iii) exemption from withholding tax on dividends distributed to overseas shareholders;
- Non fiscal advantages also include: i) simplified import/export procedures for products manufactured within the Philippines export processing zones and ii) simplified procedures to obtain work permits for foreign employees working within the zones.
Requirements to register business within a Philippines free zone
- Investment projects are assessed on a case by case basis by PEZA (or another relevant free zone authority when applicable). While there is no official investment threshold, Healy Consultants recommends our Clients to seek registration only if their investment project is likely to reach a minimum investment level of US$250,000;
- See also this page for additional information regarding eligible activities.
Comparison of free zones
|Special Economic Zone||Subay Bay Freeport Zone||Clark Freeport Zone||Zamboanga Ecozone and Free Port||Cagayan Economic Zone|
|Average annual Industrial space rent per 1000 sq. m.||US$2,800||US$3,600||US$2,500||US$4,800|
|Timelines for company formation?||8 weeks||8 weeks||8 weeks||8 weeks|
|How long to open company bank account?||4 weeks||4 weeks||4 weeks||4 weeks|
|Quality of utilities?||Fair||Excellent||Excellent||Good|
|Allowed to sign sales contracts with Philippines Clients?||Yes||Yes||Yes||Yes|
|Allowed to invoice Philippines Clients?||Yes||Yes||Yes||Yes|
|Corporate tax payable in Philippines?||Yes||Yes||Yes||Yes|
|Corporate bank account?||Maybank Philippines||Standard Chartered||Deutsche Bank||JP Morgan Chase|
|Physical office space required?||Yes||Yes||Yes||Yes|
|Industrial space availability?||Many||Limited||Many||Many|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes|
|Allowed to export goods?||Yes||Yes||Yes||Yes|
|Wholly foreign owned?||Yes||Yes||Yes||Yes|
|Can the entity hire expatriate staff in Philippines?||Yes||Yes||Yes||Yes|
|Do you visit Philippines for company incorporation?||No||No||No||No|
|Minimum number of directors?||5||5||5||5|
|Resident director required?||Yes, 3||Yes, 3||Yes, 3||Yes, 3|
|Minimum number of shareholders?||5||5||5||5|
|Tax registration required?||Yes||Yes||Yes||Yes|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors?||Yes||Yes||Yes||Yes|
|LLC company allowed?||Yes||Yes||Yes||Yes|
|Can apply for immigration visas?||Yes||Yes||Yes||Yes|
|Annual audited financial statements?||Yes||Yes||Yes||Yes|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes|
Frequently asked questions
Will I need a resident director for business incorporation in Philippines free zone?Yes, our Clients will need resident directors to setup a business in Philippines’ free zones.
Why incorporate in Philippines free zone?There are several incentives for companies in Philippines free zones including i) 100% corporate tax exemption for 4-8 years ii) custom duties exemption iii) no foreign exchange controls iv) simplified import-export procedures.
What are the investment priority areas for free trade zones in the Philippines?The priority investment areas include i) export manufacturing ii) IT service export iii) tourism iv) agro-industrial export manufacturing v) logistics and warehousing services vi) economic zone development and operation vii) facilities providers and viii) utilities.