BOI and PEZA Incentives for Foreign Investors in the Philippines: A Complete Guide to the CREATE and CREATE MORE Acts

The Philippines has built one of the most structured investment incentive frameworks in Southeast Asia. If you are a foreign investor evaluating where to locate your next manufacturing plant, IT services hub, or export operation, the fiscal incentives available through the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) can significantly reduce your effective tax burden — in some cases to zero for the first several years of operation.

This guide walks through the incentive system as it stands in 2026, following the passage of the Corporate Recovery and Tax Incentives for Enterprises Act (Republic Act No. 11534, the "CREATE Act") signed on March 26, 2021, and its successor amendment, the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act (Republic Act No. 12066, the "CREATE MORE Act") signed on November 11, 2024.

The Legal Framework: From CREATE to CREATE MORE

Before the CREATE Act, the Philippine incentive system was fragmented. Various Investment Promotion Agencies (IPAs) — PEZA, BOI, the Clark Development Corporation, the Subic Bay Metropolitan Authority, and others — each offered their own incentive packages under different statutes. The result was an opaque system where incentives varied wildly depending on which agency registered your enterprise.

The CREATE Act rationalized this by introducing a unified incentive framework under Title XIII of the National Internal Revenue Code (NIRC). All Registered Business Enterprises (RBEs), regardless of which IPA registered them, now draw from the same menu of fiscal incentives. The law also established the Fiscal Incentives Review Board (FIRB) under the Department of Finance as the central body overseeing the grant, modification, and cancellation of tax incentives.

The CREATE MORE Act, signed roughly three years later, expanded on this foundation. It increased the generosity of certain incentives — particularly enhanced deductions — broadened eligibility criteria, and clarified operational rules that had caused confusion in the CREATE Act's initial implementation. Notably, RA 12066 extended the maximum total incentive period to 40 years for highly desirable projects.

Understanding the Two Main Agencies: BOI and PEZA

Board of Investments (BOI)

The BOI is the primary government agency mandated to promote and facilitate investments in the Philippines. Established under Executive Order No. 226 (the Omnibus Investments Code of 1987), the BOI registers enterprises whose activities fall within the Strategic Investment Priority Plan (SIPP). Foreign-owned enterprises can register with the BOI if they are:

• Export-oriented — committing to export at least 70% of their total production or services
• Engaged in activities listed in the current SIPP, even if serving the domestic market
• Located in Less Developed Areas (LDAs) as designated by the National Economic and Development Authority (NEDA)

BOI registration is not limited to enterprises located within economic zones. You can set up anywhere in the Philippines — Manila, Cebu, Davao, a provincial industrial lot — and still qualify for BOI incentives, provided your activity is SIPP-listed.

Philippine Economic Zone Authority (PEZA)

PEZA was created under Republic Act No. 7916, the Special Economic Zone Act of 1995, as amended by RA 8748. It administers Special Economic Zones (SEZs) — designated areas where PEZA-registered enterprises enjoy a distinct regulatory and fiscal environment.

The critical difference: PEZA-registered enterprises must physically locate within a PEZA-designated economic zone. As of 2026, there are over 400 PEZA zones across the country, including manufacturing zones, IT parks and centers, agro-industrial zones, tourism zones, and medical tourism zones. Foreign companies registering with PEZA must generally be export-oriented, with at least 70% of production designated for export. PEZA may authorize domestic sales of up to 30% under specific conditions.

Fiscal Incentives Available Under the CREATE and CREATE MORE Acts

Both BOI- and PEZA-registered enterprises access the same unified incentive menu. The specific incentives granted depend on the enterprise's tier classification, location, and the nature of its registered activity. Here is what is available:

1. Income Tax Holiday (ITH)

The ITH is the most powerful incentive — a complete exemption from corporate income tax on income derived from the registered activity. Under the CREATE Act framework, the ITH period ranges from four to seven years, depending on several factors:

• Location: Enterprises located outside the National Capital Region (NCR) and metropolitan areas receive longer ITH periods. Those in LDAs receive the maximum.
• Tier classification: Activities under Tier I (export activities and activities in the SIPP) receive four to seven years. Tier II (activities for a competitive economy — healthcare, defense, food security, industrial value chain) and Tier III (research and development, innovation) may receive enhanced periods.
• Project type: New projects, expansion projects, and pioneer projects have different ITH durations. Pioneer enterprises — those engaged in the manufacture or processing of goods not yet produced in the Philippines, or employing a technology new to the country — receive the longest ITH.

Under the CREATE MORE Act, the FIRB can approve a total incentive period (combining ITH and post-ITH incentives) of up to 40 years for projects that either invest at least PHP 50 billion in capital or generate at least 10,000 direct local employment within three years from commercial operations.

2. Special Corporate Income Tax (SCIT)

After the ITH expires, export-oriented enterprises may avail of the SCIT — a preferential tax rate of 5% on gross income earned in lieu of all national and local taxes. This is a significant benefit because gross income (revenue minus direct costs) is typically much lower than taxable income under the regular corporate tax system.

The SCIT is available for up to 10 years after the ITH period, and in exceptional cases (for highly desirable projects), the total ITH + SCIT period can extend to 40 years. It applies exclusively to export enterprises — domestic market enterprises use the Enhanced Deductions regime instead.

3. Enhanced Deductions (ED)

For domestic market enterprises and export enterprises that opt out of the SCIT, the Enhanced Deductions regime allows additional deductions on top of regular allowable deductions under the Tax Code. Under the CREATE MORE Act, these enhanced deductions were expanded to include:

• Additional 50% deduction on direct labor expenses
• Additional 50% deduction on domestic input expenses
• Additional 100% deduction on research and development expenses
• Additional 100% deduction on training and employee development expenses
• Additional 50% deduction on infrastructure and logistics expenses
• Depreciation allowance — an additional 10% for buildings and 20% for machinery and equipment
• Additional 50% deduction on reinvestment allowance for manufacturing enterprises

The ED regime is available for five to ten years after the ITH period, depending on the tier classification and location of the enterprise.

4. Duty-Free Importation

Registered enterprises enjoy tax- and duty-free importation of:

• Capital equipment
• Raw materials, spare parts, and accessories
• Goods directly attributable to the registered project or activity

This exemption covers both customs duties and value-added tax (VAT) on importation. For manufacturers bringing in machinery and production equipment, this alone can represent savings of 12% VAT plus applicable customs duties (which range from 0% to 30% depending on the tariff classification).

5. VAT Exemptions and Zero-Rating

Under the CREATE MORE Act, the following VAT benefits apply to RBEs:

• VAT exemption on importation of goods directly and exclusively used in the registered activity
• VAT zero-rating on local purchases of goods and services directly attributable to the registered project

The CREATE MORE Act clarified that these VAT benefits apply to goods and services directly attributable to the registered project, tightening the scope from the broader language of the original CREATE Act to prevent abuse while still providing meaningful relief.

The Strategic Investment Priority Plan (SIPP)

The SIPP is the gatekeeper. Your registered activity must be listed in the current SIPP to qualify for investment incentives. The SIPP is a three-year plan prepared by the BOI in consultation with other government agencies, the private sector, and other stakeholders. The current plan, the 2025-2028 SIPP, was issued pursuant to the CREATE MORE Act and the BOI's mandate under FIRB oversight.

The Three Tiers

The SIPP categorizes eligible activities into three tiers, each with different incentive periods:

Tier I — Export Activities and Activities in the SIPP

• Production and manufacture of export products
• Services exports (IT-BPM, creative services, engineering services)
• Activities in support of exports
• Activities provided by special laws: industrial tree plantation, mining, renewable energy, tourism, petroleum refining, and others

Tier II — Activities for a Competitive and Resilient Economy

• Industrial value chain activities (upstream and downstream manufacturing)
• Healthcare and pharmaceutical manufacturing
• Defense-related industries
• Food security and agricultural modernization
• Mass housing and infrastructure
• Disaster resilience-related activities

Tier III — Research, Innovation, and Technology

• Research and development activities
• Establishment of innovation centers
• Startup ventures engaged in science and technology
• IT-BPM services involving advanced technologies (AI, blockchain, cybersecurity)

Tier III activities generally receive the most generous incentive periods, reflecting the government's priority on building a technology-driven economy.

BOI vs. PEZA: Choosing the Right Registration

For foreign investors, one of the first strategic decisions is whether to register with BOI or PEZA. The choice has practical implications beyond just tax incentives:

Location Flexibility

BOI registration allows you to operate anywhere in the Philippines. PEZA registration requires you to be physically located within a PEZA-designated zone. If your business model requires a specific location — near a port, near your supply chain, or in a particular city — BOI may offer more flexibility. If you are willing to locate in a PEZA zone, you gain access to the zone's existing infrastructure (roads, power, water, security) and the streamlined regulatory environment within the zone.

Work-from-Home Policies

This became a critical issue post-pandemic. Under the CREATE MORE Act, PEZA-registered enterprises must maintain at least 50% of their workforce within the economic zone to retain their incentives. BOI-registered enterprises, by contrast, can adopt 100% work-from-home arrangements without losing incentives. For IT-BPM companies and other knowledge-work enterprises, this distinction can be decisive.

Domestic Sales

PEZA-registered enterprises are primarily export-oriented and face restrictions on domestic sales (generally capped at 30% of production, subject to approval). BOI-registered enterprises can serve both export and domestic markets, making BOI more suitable for businesses that want to sell into the Philippine market while also exporting.

Regulatory Environment

PEZA zones operate as quasi-autonomous regulatory environments. Within a PEZA zone, you deal primarily with PEZA for permits, import/export processing, and compliance — a "one-stop shop" that can significantly simplify operations. BOI-registered enterprises outside economic zones must navigate the regular bureaucratic landscape of local government permits, Bureau of Customs procedures, and other agency requirements.

Application Process for Foreign Investors

The application process involves several stages. While the specifics vary between BOI and PEZA, the general flow is consistent:

Step 1: Determine Eligibility

Confirm that your proposed activity is listed in the current SIPP. Review the BOI website for the latest SIPP and PEZA's eligible activities list for zone-specific opportunities. If your activity is not listed, you may petition the BOI for inclusion, though this is a longer process.

Step 2: Prepare the Application

For BOI registration, you will need to submit:

• Application form (BOI Form 501 for new projects)
• Project feasibility study including market analysis, financial projections, and employment plan
• SEC Certificate of Registration (if the company is already incorporated in the Philippines)
• Proof of capitalization and source of funds
• Environmental Compliance Certificate (if applicable)

For PEZA registration, additional requirements include:

• Lease agreement or reservation within a PEZA-designated zone
• Building and facility plans
• Endorsement from the zone developer or operator

Step 3: Evaluation and Approval

The BOI evaluates applications based on the project's alignment with the SIPP, its potential economic contribution (employment, exports, technology transfer), and financial viability. The BOI Board typically acts on applications within 20 working days from completion of requirements.

PEZA applications follow a similar evaluation, with the PEZA Board exercising authority to approve or deny applications and determine the specific incentives to be granted. PEZA approvals are generally faster for activities clearly within its mandate.

Step 4: Registration and Compliance

Upon approval, the enterprise is issued a Certificate of Registration specifying the incentives granted and the conditions of availment. Key compliance requirements include:

• Maintaining a separate accounting system for the registered activity — revenues, costs, and profits from the registered project must be tracked separately from non-registered operations
• Submitting annual reports to the registering IPA and the FIRB
• Complying with performance commitments (employment targets, export volumes, investment timelines)
• Filing beneficial ownership reports as required under the CREATE MORE Act
• Adopting e-invoicing and e-receipting as mandated by the Bureau of Internal Revenue

The Fiscal Incentives Review Board (FIRB)

The FIRB is the oversight body that ensures tax incentives serve the national interest. Created under the CREATE Act and strengthened by CREATE MORE, the FIRB is chaired by the Secretary of Finance and includes representatives from the Department of Trade and Industry, the Department of Budget and Management, NEDA, and the Office of the President.

The FIRB's key functions include:

• Approving incentives for projects with investment capital exceeding PHP 1 billion or those seeking incentive periods beyond standard limits
• Reviewing and modifying incentives granted by IPAs to ensure they remain aligned with national development goals
• Monitoring compliance through annual reports submitted by RBEs
• Canceling incentives for enterprises that fail to meet performance commitments or violate the conditions of their registration

For foreign investors, the FIRB's existence provides an additional layer of certainty. Incentive grants are not arbitrary — they are governed by clear statutory criteria and subject to periodic review.

Common Pitfalls and Practical Considerations

Based on our firm's experience advising foreign clients on investment incentive applications, several recurring issues deserve attention:

Timing the Application

Incentives are not retroactive. Your ITH begins from the date of commercial operations as specified in your registration certificate, not from the date you started spending on the project. It is therefore critical to file your application early — ideally before commencing construction or procurement — to maximize the incentive period.

Separate Entity Requirements

The CREATE Act requires that incentives apply only to income from the registered activity. If your Philippine entity engages in both registered and non-registered activities, you must maintain separate books. In practice, many foreign investors choose to incorporate a separate Philippine entity specifically for the registered project to simplify compliance.

Transfer Pricing Scrutiny

Enterprises enjoying tax incentives are subject to heightened scrutiny on intercompany transactions. The Bureau of Internal Revenue (BIR) closely examines transfer pricing arrangements between the Philippine RBE and its foreign parent or affiliates. Ensure your transfer pricing documentation complies with BIR Revenue Regulations and follows the arm's-length principle under Section 50 of the NIRC.

Sunset Provisions and Grandfathering

The CREATE Act imposed a sunset provision on pre-existing incentives. RBEs registered before the CREATE Act took effect were given a transition period during which their old incentives would be phased out and replaced by the CREATE framework. As of 2026, most enterprises have completed this transition. However, the CREATE MORE Act introduced additional grandfathering provisions for certain long-standing investments, so enterprises registered under older regimes should review their specific situation.

Compliance Deadlines

Failure to file annual reports, beneficial ownership disclosures, or performance compliance certificates can result in the suspension or cancellation of incentives. We have seen foreign enterprises lose their ITH because of missed administrative filings — not because their operations failed, but because their compliance teams did not prioritize the reporting requirements. This is entirely preventable with proper legal counsel.

Incentives Beyond Tax: Non-Fiscal Benefits

While fiscal incentives attract the most attention, BOI and PEZA registrations also provide valuable non-fiscal benefits:

• Employment of foreign nationals — RBEs may employ foreign nationals in supervisory, technical, or advisory positions, subject to a decreasing ratio over time. PEZA zones offer streamlined visa processing through the Special Non-Immigrant Visa (47(a)(2)) for economic zone workers.
• Simplified import/export — PEZA-registered enterprises benefit from PEZA's own customs processing, which is generally faster than the Bureau of Customs' regular channels.
• Access to PEZA infrastructure — economic zones provide reliable power, water, telecommunications, and security, which can be significant advantages in areas where public infrastructure is inconsistent.
• One-stop shop services — PEZA consolidates permits, licenses, and regulatory approvals within the zone, reducing the time and cost of dealing with multiple government agencies.

When to Engage Legal Counsel

The investment incentive application process is technical, and the stakes are high. A properly structured application can save a foreign enterprise tens of millions of pesos in taxes over the incentive period. A poorly structured one — or one filed after the wrong decisions have already been made — can leave significant value on the table.

We recommend engaging Philippine legal counsel before making key decisions about corporate structure, location, and project scope. The choice between BOI and PEZA registration, the classification of your activity under the SIPP tiers, and the timing of your application all have cascading effects on the incentives available to your enterprise.

At Tungol, Tan, Fordan and Campos, we regularly advise foreign investors on structuring their Philippine operations to maximize incentive eligibility while maintaining full compliance with Philippine law. If you are considering an investment in the Philippines, we can help you navigate the process from initial feasibility through registration, ongoing compliance, and — when the time comes — renewal or expansion of your incentive grants.

Key Takeaways

• The Philippine investment incentive framework under the CREATE Act (RA 11534) and CREATE MORE Act (RA 12066) provides a unified menu of fiscal incentives administered through IPAs like BOI and PEZA.
• Income Tax Holidays of four to seven years, Special Corporate Income Tax of 5% on gross income, and Enhanced Deductions are the primary fiscal incentives, with total incentive periods potentially reaching 40 years for highly desirable projects.
• Your activity must be listed in the Strategic Investment Priority Plan (SIPP) to qualify for incentives.
• BOI offers location flexibility and work-from-home allowances; PEZA offers a streamlined regulatory environment within designated economic zones.
• The FIRB oversees the entire incentive framework, ensuring consistency, transparency, and compliance.
• Apply early, maintain separate books for the registered activity, ensure transfer pricing compliance, and never miss a compliance filing deadline.