How Location Affects Tax Incentives for Investments in the Philippines

Where an investment is established in the Philippines can influence both its registration route and the tax incentives it can access. Projects in designated economic zones and freeports may fall under different Investment Promotion Agencies (IPAs), while location also affects the length of the income tax holiday available to qualifying investments. The 2026 Strategic Investment Priority Plan (SIPP), approved in June 2026, sets the current priority activities and industry tiers used to determine incentive eligibility.

Location determines which investment promotion agency can register the Project

The Board of Investments (BOI) provides the broadest geographic flexibility. BOI registration is not generally tied to locating within a specific economic zone, although the project’s activity and location must satisfy the applicable registration and SIPP requirements.

Philippine Economic Zone Authority (PEZA) registration is location-specific. The registered project must operate within a PEZA-registered economic zone or IT park. Other designated locations fall under their respective IPAs. Clark and Subic, for example, are administered through the Clark Development Corporation and Subic Bay Metropolitan Authority, while separate authorities govern other special economic zones and freeports.

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The fiscal incentives available through these IPAs are governed by the national framework established under the CREATE and CREATE MORE Acts. The significance of location at this stage is primarily jurisdictional: it determines which IPA can register the project rather than giving each economic zone an entirely separate corporate tax incentive system.

Location can extend the income tax holiday

Location has a direct effect on the duration of the income tax holiday (ITH). Qualifying registered projects can receive an ITH of four to seven years, with the period determined by both the project’s location and its industry tier under the SIPP.

The geographic advantage is largest for Tier I and Tier II projects. A qualifying project in the “all other areas” category can receive two additional years of ITH compared with an equivalent project in the National Capital Region (NCR). For Tier III projects, the difference between the NCR and the other location categories is one year.

This geographic differentiation applies to qualifying export and domestic market activities. The distinction between them becomes more significant after the ITH. Export enterprises can access either the 5 percent Special Corporate Income Tax (SCIT) or the Enhanced Deductions Regime (EDR) for 10 years, while domestic market enterprises can access the EDR for five years.

Location can provide additional ITH benefits in specific circumstances. A qualifying project relocating from the NCR can receive an additional three years of ITH, while a project located in an area recovering from disaster or conflict can receive an additional two years.

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For highly desirable projects or specific industrial activities, the President may, upon recommendation of the Fiscal Incentives Review Board (FIRB) and subject to statutory conditions, modify the incentive package. The ITH cannot exceed eight years, while the total incentive period cannot exceed 40 years.

Economic-zone location can affect VAT, customs, and local tax treatment

Location also has tax implications for investments that depend on imported equipment, raw materials, spare parts, or other production inputs.

Under the current incentive framework, customs duty exemption can be available for up to 17 years for export enterprises and 12 years for domestic market enterprises from registration, unless extended under the SIPP. VAT exemption and zero-rating for registered export enterprises can be available for up to 17 years from registration, also subject to possible extension under the SIPP.

CREATE MORE broadened the scope of transactions that can qualify for VAT incentives by moving from the previous “direct and exclusive use” standard to a “directly attributable” requirement. This can cover goods and services necessary for the registered project, subject to the applicable conditions.

Location within an economic zone can have a further consequence at the local-government level. CREATE MORE introduced the Registered Business Enterprise Local Tax (RBELT) for registered business enterprises availing of the ITH or EDR in economic zones. Where imposed by the relevant local government unit, the RBELT cannot exceed 2 percent of the gross income of the registered project or activity and applies instead of the local taxes, fees, and charges covered by the regime.

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The implementation of the RBELT was further clarified through Joint Memorandum Circular No. 01-2026, which took effect on March 30, 2026. The circular addresses its application within economic zones, including expansion areas, and the respective roles of local governments and IPAs.

For investors, this creates another measurable location-based tax difference. An economic-zone location can affect not only which IPA administers the investment but also the local tax treatment applicable while the registered enterprise is under the ITH or EDR.

How Dezan Shira & Associates can help

Dezan Shira & Associates can help foreign investors determine which location and registration structure provides the most suitable tax outcome for a proposed investment. Contact us to assess your options before committing to a Philippine location.

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