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Importance Of A PEZA Accreditation

August 26, 2020 | By Ronnie Salonga
Importance Of A PEZA Accreditation
    August 26, 2020

What is the importance of a PEZA accreditation?

  1. Non-fiscal incentives make foreign ownership easier 
  2. Fiscal incentives provide tax-related incentives 
  3. Stimulates the economy 

Any business planning to establish its presence in the Philippines would want a seamless transition experience. When you are ready to reap the advantages of a highly skilled labor pool and strategic geographic location, the last thing you want to worry about is the piles of permit paperwork. This is where the importance of PEZA accreditation comes into the picture.

PEZA, which stands for Philippine Economic Zone Authority, is associated with the Department of Trade and Industry (DTI). It was created to help promote investments in the country’s export-oriented manufacturing industry. PEZA is in charge of assisting investors that want to register and facilitate their business operations in the country. There are “Special Economic Zones” within selected areas of the Philippines, and PEZA-accredited businesses located in these zones are entitled to fiscal and non-fiscal incentives. If you did not already know, an industrial estate in the Philippines like SPPI industrial parks are accredited as a Special Economic Zone. 

Continue reading to learn more about the importance of PEZA accreditation and how it can boost your business development.  

Non-Fiscal Incentives Make Foreign Ownership Easier

Similar to other countries, registering and facilitating business operations in the Philippines can be complex. There is numerous paperwork needed for ownership proofs, which can be especially burdensome for foreign investors. Acquiring the permits and clearances typically takes a long period of time to complete as well. 

These problems can be addressed if your business is PEZA-accredited because of non-fiscal incentives. The following non-fiscal incentives can be enjoyed by business locators that are PEZA-accredited:  

  • Simplified Procedures For Importation and Exportation – Aided through the use of the PEZA Electronic Import Permit System (e-IPS) and Expanded Automated Export Documentation System (E-AEDS)  
  • Foreign National Employment – Non-residents of the Philippines can be employed in PEZA-accredited economic zones for advisory, supervisory, and technical job positions.
  • Special Non-Immigrant Visa Entry Privileges – Investors, officers, and employees in advisory, supervisory, and technical job positions are provided the special non-immigrant visa entry. This visa assistance privilege extends to their spouses and unmarried children under 21 years old. 

Non-fiscal incentives can fast-track the needs of investors who want to establish operations in the Philippines. For example, if you are a foreign investor, you would find importing and exporting materials easier because there are customs clearance facilities built in some special economic zones. On top of that, it is easier to secure the necessary custom permits. This is the key to making business processes more productive and efficient. 

Fiscal Incentives Provide Tax-Related Advantages
Fiscal Incentives Provide Tax-Related Advantages

Many foreign business owners and investors choose to establish their presence in the Philippines in an attempt to cut operational costs. For a good reason, there is low labor cost in the country. This fact is further enhanced through the fiscal incentives that come with PEZA accreditation. 

Here are the fiscal incentives that PEZA-accredited locators can take advantage of:

  • Income Tax Holidays (ITH) – Exemption from corporate tax income for a specific time period. Take note that an ITH extension can be granted if the project does not exceed 8 years, the average net foreign exchange earning of the project for the 3 years is US$500,000.00, the capital equipment to labor ratio of the project does not surpass US$10,000.00 for the year before the extension, and the average cost of the indigenous raw materials are at least 50% of the total raw material cost for the prior years of the extension.
    • 4 years ITH for non-pioneer projects
    • 6 years ITH for pioneer projects
  • Option For 5% Special Tax on Gross Income
  • Exemption From Payment Of Local Taxes, National Taxes, Licenses, Imposts, And Fees (except real estate taxes)
  • Tax And Duty-Free Importation of Raw Materials, Capital Equipment, Machineries, and Spare Parts
  • Exemption From Wharfage Dues, Export Tax, Impost, or Fees
  • Exemption From The Expanded Withholding Tax

All the PEZA-accredited business locators can benefit from fiscal incentives. Many investors find these incentives highly attractive because it saves more money as well as increases investment value. 

Stimulates The Economy 

Special economic zones are designed with highly developed infrastructure and an abundant supply of resources needed for daily operations (e.g., water, electricity, security, etc). Industrial parks are examples of special economic zones that are master-planned to be conducive for foreign direct investment.  

Tax incentives are also well-established for stimulating economies because they offer citizens more disposable income. They promote local investment and create more high-paying jobs. The incentives that come with special economic zones attract foreign direct investment. As the major corporations make significant capital investments in their operations, the money circulates in the local economy. 

When it comes to hindrances to economic growth, few match the level of slow bureaucratic processes because it is a barrier to entry for new businesses. Simply put, PEZA accreditation is important because it stimulates economic growth drastically in numerous ways. 

Key Takeaway

In this article, we delved deeper into the importance of PEZA accreditation. Relocating a business in a PEZA-accredited Special Economic Zone is one of the smartest long-term investment moves. 

If you’re looking for a PEZA-accredited Special Economic Zone, check out the industrial parks of SPPI. 

The Light Industry & Science Park IV (LISP IV) has been officially proclaimed as a Special Economic Zone by PEZA and is entitled to fiscal and non-fiscal incentives due to its environmentally attuned design, strategic location, reliable power and water supply, 24/7 security and in-house fire fighting teams and equipment, telecommunications facilities, centralized wastewater treatment plant, state-of-the-art drainage and stormwater management system, on-site park and management team, bank services, freight forwarding service, and PEZA and customs office. 

Click here to learn more about the SPPI’s industrial parks across the Philippines.  

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