BOI vs. PEZA: The Foreign Investor's Registration Guide for 2026

Introduction

Foreign investors entering the Philippine market frequently encounter two acronyms that will shape their entire tax and incentive strategy: BOI and PEZA. The Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) are the Philippines’ two principal investment promotion agencies, each offering fiscal incentives to registered enterprises. Choosing between them — or determining whether to register with either at all — is one of the earliest and most consequential decisions a foreign investor will make.

This article provides a detailed, practical comparison designed specifically for foreign investors. It covers the legal basis for each agency, the incentive packages available as of 2026, the eligibility requirements, the application processes, and — most importantly — the strategic considerations that should guide your decision. It also accounts for the significant legislative changes introduced by Republic Act No. 12066, otherwise known as the CREATE MORE Act, which amended and enhanced the incentives framework established by its predecessor, RA 11534 (CREATE Act), and took effect in November 2024.

The goal is not to declare a winner. The goal is to give you the analytical framework to determine which registration pathway — or combination of pathways — best fits your business model, sector, and investment scale.

Legal Foundations: Understanding the Two Agencies

The Board of Investments (BOI)

The BOI operates primarily under Executive Order No. 226 of 1987, also known as the Omnibus Investments Code of 1987. This decree consolidated various investment incentive laws and established the BOI as the primary government agency responsible for granting incentives to registered enterprises engaged in preferred areas of investment.

Under the CREATE Act (RA 11534, effective April 2021) and its amendatory CREATE MORE Act (RA 12066, effective November 2024), the BOI’s role was strengthened and expanded. The BOI now administers incentives for registered business enterprises (RBEs) under the Strategic Investment Priorities Plan (SIPP), which is updated periodically. The most recent version, the 2026 SIPP, was approved by President Ferdinand R. Marcos Jr. through Memorandum Order No. 47 on June 2, 2026, and formally published in the Official Gazette.

The SIPP organizes eligible activities into a three-tier framework. Tier I covers activities aligned with immediate economic and social priorities, including modern agriculture, state-of-the-art construction, mobile healthcare, ecological zones, and climate-related initiatives such as carbon capture, waste-to-value, circular economy projects, and forest management for carbon credits. Tier II targets strategic industries including defense services, desalination, electric vehicle infrastructure, sustainable aviation fuel, and processing of critical minerals. Tier III focuses on frontier technologies — artificial intelligence, quantum computing, cybersecurity, hydrogen and nuclear energy, and advanced R&D — marking the Philippines’ deliberate entry into the industries of the future.

The Philippine Economic Zone Authority (PEZA)

PEZA was created by Republic Act No. 7916, the Special Economic Zone Act of 1995, as an attached agency of the Department of Trade and Industry. PEZA’s mandate is to register, promote, and facilitate investments in designated Special Economic Zones (SEZs), also known as ecozones, throughout the Philippines.

PEZA does not operate only in Metro Manila. It has established ecozones across the country, including IT parks and buildings in major business districts (Bonifacio Global City, Ortigas, Makati, Cebu, Davao), manufacturing ecozones in provincial areas, and tourism economic zones. The key point for foreign investors is this: PEZA incentives are only available to enterprises operating physically within a PEZA-registered economic zone, IT park, or tourism zone. A company cannot simply register with PEZA and operate from a standalone office outside these designated areas and receive incentives.

PEZA’s legal framework was also significantly shaped by RA 11534 (CREATE Act) and RA 12066 (CREATE MORE Act), which gave PEZA authority to approve or disapprove the grant of incentives to enterprises within its ecozones, while subjecting larger investments to Fiscal Incentives Review Board (FIRB) oversight.

The Incentive Packages: BOI vs. PEZA in 2026

BOI Incentives

A BOI-registered enterprise is entitled to the following fiscal incentives, subject to the activity’s classification under the current SIPP and the applicable regime under RA 12066:

Income Tax Holiday (ITH): BOI-registered new projects with pioneer status enjoy a six-year ITH. New projects without pioneer status receive a four-year ITH. Expansion projects are entitled to a three-year ITH, generally limited to the incremental sales revenue or volume. Projects located in less developed areas (LDAs) receive a six-year ITH regardless of their pioneer or non-pioneer status. Modernization projects also receive a three-year ITH, typically limited to the incremental volume.

Preferential Tax Rate (Post-ITH): After the ITH period expires, registered business enterprises may elect one of two regimes under RA 12066:

Special Corporate Income Tax (SCIT): A flat 5% tax on Gross Income Earned (GIE), in lieu of all national and local taxes. This is available for a period of up to 10 years under the original CREATE Act, extended to 17 to 27 years under the CREATE MORE Act for qualifying enterprises.
Enhanced Deductions Regime (EDR): A reduced Corporate Income Tax (CIT) rate of 20% (down from the standard 25% under the TRAIN Law amendments to the Tax Code), plus 100% additional deduction on power expenses (increased from 50%) and other enhanced deductions. The EDR is particularly valuable for enterprises that anticipate high operating expenses relative to gross income.

Tax Credits: Export producers may claim tax credits on raw materials, supplies, and semi-manufactured products.

Duty-Free Importation: BOI-registered export-oriented enterprises may import capital equipment, spare parts, and accessories at zero percent (0%) duty. Domestic-oriented enterprises receive a preferential one percent (1%) duty rate on such imports, pursuant to E.O. No. 528 and relevant Tariff Code chapters (Chapters 40, 59, 68–73, 76, 82–96).

Additional Deductions: Enterprises may elect either an additional deduction from taxable income for labor expenses or an additional deduction for necessary and major infrastructure works. These cannot be simultaneously enjoyed with the ITH.

Exemption from Wharfage Dues and Export Tax: BOI-registered enterprises are exempt from wharfage dues and export taxes, imposts, and fees.

Non-Fiscal Incentives: BOI-registered enterprises also enjoy the right to employ foreign nationals (subject to applicable visa requirements), guaranteed repatriation of foreign investments and earnings, and the ability to import consigned equipment for an unlimited period subject to the posting of a re-export bond.

PEZA Incentives

A PEZA-registered enterprise operating within an ecozone, IT park, or tourism zone is entitled to the following incentives:

Income Tax Holiday (ITH): PEZA follows a similar ITH structure to BOI, with some variations based on the type of enterprise and its location:

New registered pioneer firms: Six (6) years from commercial operation.
New registered non-pioneer firms: Four (4) years from commercial operation.
Expanding firms: Three (3) years from commercial operation of the expansion.
New firms in less developed areas (LDAs): Six (6) years, regardless of pioneer status.
IT parks and buildings located outside Metro Manila: Four (4) years of ITH.
Manufacturing firms in LDAs: Six (6) years.

Post-ITH: 5% Gross Income Earned (GIE) Tax: After the ITH period, PEZA enterprises may elect to pay a special 5% tax on Gross Income Earned, in lieu of all national and local taxes. Under CREATE MORE (RA 12066), this option remains available and has been extended for longer periods for qualifying enterprises. This is effectively the same SCIT available to BOI enterprises.

Duty and Tax Exemption on Imports: PEZA enterprises enjoy exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials — a significant benefit for manufacturing and export-oriented operations.

Tax Credit on Domestic Purchases: Ecozone export enterprises that purchase breeding stocks, genetic materials, or other inputs from domestic producers are entitled to a tax credit equivalent to 100% of the national internal revenue taxes and customs duties that would have been waived had the items been imported.

Domestic Sales Allowance: PEZA export enterprises are permitted to make local (domestic) sales equivalent to up to 30% of total sales, which provides flexibility for enterprises that produce primarily for export but also serve the domestic market.

Exemption from Wharfage Dues and Export Taxes: Similar to BOI, PEZA enterprises are exempt from wharfage dues and export taxes, imposts, and fees.

Employment of Foreign Nationals: PEZA enterprises may employ foreign nationals in executive, technical, or proprietary positions, subject to applicable immigration regulations.

Simplified Import and Export Procedures: PEZA provides a more streamlined customs process for its registered enterprises, reducing administrative burden at the Bureau of Customs.

Permanent Resident Status (PR) for Foreign Investors: Perhaps PEZA’s most distinctive non-fiscal benefit: a foreign investor in a PEZA-registered enterprise may apply for permanent resident status within the ecozone, not just the standard visa extensions available to other foreign nationals. This is a significant advantage for foreign investors who intend to reside in the Philippines long-term. This is granted by the Bureau of Immigration upon the recommendation of PEZA, pursuant to RA 7916.

Key Comparison Points

1. Geographic Scope and Operational Reality

The most fundamental difference between BOI and PEZA is geographic flexibility versus location lock-in.

BOI registration does not tie your enterprise to any specific geographic location. You may establish operations anywhere in the Philippines — in Metro Manila, in a provincial city, or in a rural area. This matters significantly for foreign investors whose business model requires proximity to particular markets, suppliers, talent pools, or logistics infrastructure.

PEZA, by contrast, requires your enterprise to be physically located within a PEZA-registered ecozone. If your operations are in a building or location that is not a PEZA-accredited IT park, ecozone, or tourism zone, you cannot claim PEZA incentives — even if your business activity would otherwise qualify. This creates a real estate constraint: you must find suitable office, factory, or facility space within a PEZA zone, which may limit your options and affect your operational costs.

Practical implication for foreign investors: If your industry naturally gravitates toward PEZA-accredited zones — such as business process outsourcing (BPO), IT services, or export-oriented manufacturing — PEZA’s geographic constraint may be no constraint at all. Many PEZA zones are purpose-built for these industries. If your business is retail, professional services, construction, healthcare, or agriculture, the geographic restriction may make PEZA impractical, and BOI becomes the default choice.

2. Sector Eligibility

Both agencies tie incentives to activities listed in their respective frameworks. Under the 2026 SIPP, the BOI’s eligibility list has been substantially expanded and modernized, with Tier III covering frontier technologies that were not previously prioritized.

BOI’s 2026 SIPP sectors include:

Modern agriculture and agribusiness
State-of-the-art construction and infrastructure
Mobile and digital healthcare
Climate change mitigation (carbon capture, waste-to-value, circular economy)
Forest management for carbon credits
Defense and security services
Desalination and water treatment
Electric vehicle infrastructure and components
Sustainable aviation fuel
Critical minerals processing
Artificial intelligence, quantum computing, cybersecurity
Hydrogen and nuclear energy
Advanced R&D facilities

PEZA’s eligible sectors are anchored in RA 7916’s framework and encompass:

Export manufacturing and processing
IT and IT-enabled services (ITES), including BPO
Tourism enterprises within tourism ecozones
Logistics and supply chain enterprises within ecozones
agro-industrial enterprises within designated economic zones

Practical implication: If your sector falls squarely within PEZA’s traditional strengths (BPO, IT, export manufacturing), PEZA registration is well-established and has a proven track record with the Bureau of Customs and other government agencies. If your sector is newer or more diversified — such as renewable energy, electric vehicles, or advanced manufacturing — BOI registration under the 2026 SIPP may offer more targeted and comprehensive incentives, including longer ITH periods for pioneer-status projects.

3. Foreign Ownership and the Minimum Capital Requirement

This is a critical consideration for many foreign investors.

Under the Foreign Investments Act (RA 11647, amending RA 7042), a foreign-owned domestic enterprise generally requires a minimum paid-in capital of USD 200,000 if it is engaged in a sector not specifically listed in the 13th Foreign Investment Negative List (FINL). However, this minimum capital requirement has important exceptions.

PEZA export enterprises — meaning enterprises where at least 70% of production is destined for export — are exempt from the USD 200,000 minimum paid-in capital requirement for 100% foreign-owned companies. This is a significant advantage for foreign investors who wish to establish a fully foreign-owned subsidiary without committing large capital upfront.

BOI registration does not automatically exempt an enterprise from the USD 200,000 minimum capital requirement. However, if the activity is listed in the FINL as allowing foreign ownership above 40%, and the enterprise meets the SIPP criteria, the minimum capital rules apply as they would to any domestic corporation.

Practical implication: For a foreign investor planning a 100% wholly-owned subsidiary with export-oriented operations — particularly in the IT/BPO sector — PEZA’s capital exemption can be a decisive factor. It lowers the barrier to entry substantially.

4. Tax Rate Comparison

Both BOI and PEZA ultimately converge on the 5% SCIT on Gross Income Earned as the preferred post-ITH tax regime for many enterprises. However, there are nuances:

Regime	Standard Corporate Income Tax	5% SCIT on GIE	Enhanced Deductions
BOI (Post-ITH, standard)	25% (20% under EDR)	5% (in lieu of all national and local taxes)	CIT reduced to 20% + enhanced deductions
PEZA (Post-ITH)	25%	5% (in lieu of all national and local taxes)	N/A (PEZA’s equivalent is the 5% GIE option)

Under RA 12066 (CREATE MORE Act), both BOI and PEZA enterprises can now enjoy the SCIT or EDR for extended periods — up to 17 to 27 years depending on the investment size and sector. For strategic projects exceeding PHP 15 billion in investment capital and meeting additional thresholds (import-substituting or export sales of at least USD 100 million in the preceding year), the incentives are even more generous.

5. FIRB Oversight and Application Process

Under RA 12066, the Fiscal Incentives Review Board (FIRB) has enhanced oversight over incentive grants. The FIRB is chaired by the Department of Finance and includes representatives from DTI, DBM, NEDA, and the Office of the President.

For most standard BOI and PEZA registrations, the agencies themselves retain approval authority. However, for large-scale strategic projects — defined as investments exceeding PHP 15 billion — the FIRB must approve or disapprove the grant of incentives within 20 working days from receipt of all requirements.

The application process for both BOI and PEZA requires prior SEC registration of the domestic corporation. The sequence is:

Incorporate with the SEC (choose between stock corporation, partnership, or branch office)
Apply with BOI or PEZA (depending on chosen pathway)
Comply with post-registration requirements (annual reports, investment commitments, inspection by the IPA)

Practical Scenarios: How Foreign Investors Should Decide

Scenario 1: The IT/BPO Investor

A foreign investor from the United States wants to establish a 100% owned subsidiary to provide IT services and BPO services to global clients, with 90% of revenue coming from overseas clients.

Recommendation: PEZA

The IT/BPO sector is PEZA’s core strength. The investor should locate within a PEZA-accredited IT park or building (e.g., in BGC, Ortigas, or Cebu). The enterprise will qualify as an export enterprise, exempting it from the USD 200,000 minimum capital requirement. The investor can enjoy the ITH period, followed by the 5% GIE tax option. Additionally, the investor and qualifying family members may apply for permanent resident status within the ecozone.

Key benefit: PEZA’s streamlined relationship with the Bureau of Customs and established track record with IT/BPO operations makes the operational day-to-day significantly smoother than an unregistered or BOI-only pathway.

Scenario 2: The Renewable Energy Developer

A European renewable energy company wants to establish a subsidiary to develop solar and wind energy projects across the Philippines, supplying power to the national grid and to private off-takers.

Recommendation: BOI (potentially also availing of the Green Energy Option Program under separate regulations)

Renewable energy development is explicitly listed in the 2026 SIPP as a Tier I priority activity (climate-related initiatives) and potentially Tier II (electric vehicle infrastructure intersects with clean energy). BOI registration provides the ITH, the 5% SCIT or EDR option, and does not restrict the geographic location of project sites. The investor should note, however, that the Energy Regulatory Commission (ERC) and the Department of Energy (DOE) have separate regulatory requirements for energy projects, and BOI/PEZA registration is complementary to, not a substitute for, energy sector compliance.

Scenario 3: The Retail Franchisor

A foreign company from South Korea wants to establish a subsidiary to operate a fast-food franchise network across the Philippines, with plans to eventually sub-franchise to local operators.

Recommendation: BOI, with careful analysis

The food service and retail sector presents a more nuanced picture. A purely domestic retail operation may not qualify for PEZA (unless located within a tourism ecozone with applicable activities). BOI registration under the 2026 SIPP may be available if the activity aligns with listed priorities — however, standard retail food service is not automatically a preferred activity. The investor should carefully examine whether their specific business model, investment scale, and operational characteristics meet the SIPP criteria.

Additionally, foreign investment in retail trade is governed by the Retail Trade Liberalization Act (RA 11595), which was amended in 2021 to allow 100% foreign ownership in retail trade enterprises with a paid-up capital of USD 10 million or more. This is a separate regulatory layer that must be addressed regardless of BOI or PEZA registration.

Scenario 4: The Manufacturing Exporter

A Japanese company wants to set up a factory in Luzon to manufacture electronic components, with 85% of output destined for export to Japan and other Asian markets.

Recommendation: PEZA (preferred) or BOI — either is viable, PEZA generally preferred for export manufacturing

PEZA’s manufacturing ecozones are purpose-built for export-oriented manufacturing. The enterprise will benefit from duty-free importation of capital equipment and raw materials, exemption from export taxes, and the post-ITH 5% GIE tax option. The geographic constraint is manageable — PEZA has accredited manufacturing ecozones across Luzon, Visayas, and Mindanao.

BOI is also a viable alternative, particularly if the factory is not within a PEZA ecozone or if the investment size qualifies for enhanced incentives under FIRB oversight. For large-scale manufacturing projects exceeding PHP 15 billion, both agencies will compete for the investment, and the investor should negotiate for the most favorable incentive package.

The CREATE MORE Act (RA 12066): What Changed in 2024 and 2026

For foreign investors, RA 12066 introduced several important enhancements that affect both BOI and PEZA registration:

Extended Incentive Periods: The SCIT (5% GIE) and EDR periods were extended from a maximum of 10 years to 17 to 27 years for qualifying enterprises. This is particularly significant for large-scale investors making long-term capital commitments.
Immediate Regime Choice: Under the original CREATE Act, enterprises had to complete their ITH before choosing between SCIT and EDR. Under CREATE MORE, RBEs may now choose between SCIT and EDR from the start of commercial operations, providing greater planning flexibility.
Enhanced Deductions Regime Improvements: The EDR now provides a CIT rate of 20% (reduced from 25%), a 100% additional deduction on power expenses (up from 50%), and a 50% additional deduction for trade fair and tourism reinvestment expenses (available until 2034).
NOLCO Enhancement: The Net Operating Loss Carry-Over (NOLCO) period has been changed from “year of loss” to the “last year of the project’s ITH entitlement period.” This means startups and enterprises in their initial growth phase can carry forward losses more strategically.
RBELT: An optional Registered Business Enterprise Local Tax (RBELT) of not more than 2% of gross income may be imposed in lieu of all local taxes, fees, and charges during the ITH or EDR period — simplifying local tax compliance.
Flexible Work Arrangements: For PEZA enterprises operating within economic zones and freeports, flexible work arrangements (including remote and hybrid setups) are now institutionalized without compromising tax incentives — a recognition of evolving business models, particularly relevant for BPO and IT enterprises.

Registration Process: A Step-by-Step Overview

Regardless of whether you choose BOI or PEZA, the foundational step is the same: incorporate with the Securities and Exchange Commission (SEC). For foreign investors, this means establishing a domestic corporation (for subsidiaries) or registering a branch/representative office (for foreign corporations).

The typical sequence is:

SEC Pre-Registration: Reserve your corporate name with the SEC via the SEC Express System.
Execute Articles of Incorporation and By-Laws: These must comply with the Corporation Code (Batas Pambansa Blg. 68) and applicable foreign ownership rules.
File with the SEC: Submit articles of incorporation, by-laws, and supporting documents. Pay the filing fees. The SEC will issue a Certificate of Incorporation.
Obtain BIR Registration: Register with the Bureau of Internal Revenue (BIR) for your Tax Identification Number (TIN) and register your books of accounts.
Apply with BOI or PEZA: Prepare the project brief, financial projections, and supporting documents. The application is filed with the respective agency’s One-Stop Processing Center.
Post-Registration Compliance: Both BOI and PEZA require annual reporting, compliance with investment commitments, and periodic inspection. Failure to comply may result in the revocation of incentives and assessment of the deferred taxes.

Key Takeaways for Foreign Investors

1. Neither agency is universally superior. The right choice depends on your sector, geographic needs, ownership structure, investment size, and long-term tax strategy.

2. Geographic constraints are real. If PEZA’s zone requirement does not fit your operations, PEZA registration is not an option regardless of how attractive the incentives appear.

3. Export orientation unlocks PEZA’s capital advantage. If your business is export-dominant, PEZA’s exemption from the USD 200,000 minimum capital requirement for 100% foreign-owned enterprises is a material benefit.

4. The 2026 SIPP has significantly expanded BOI’s reach. If your sector is newer or more specialized — AI, quantum computing, critical minerals processing, sustainable aviation fuel — BOI’s 2026 SIPP offers targeted incentives that may exceed PEZA’s offerings.

5. CREATE MORE has made both pathways more generous. Extended ITH-to-SCIT/EDR periods, immediate regime choice, and enhanced deductions benefit enterprises registered with either agency.

6. FIRB oversight increases with investment size. Large-scale projects (above PHP 15 billion) will face additional scrutiny and a 20-working-day FIRB review period.

7. PEZA’s permanent resident status is unique. No other IPA offers this benefit. If long-term Philippine residency for the foreign investor and family is a priority, PEZA has no equivalent.

8. Do not double-dip. Enterprises may only avail of one set of incentives at a time. Registering with both BOI and PEZA for the same enterprise is not permitted. Choose deliberately.

Conclusion

The choice between BOI and PEZA registration is not a simple binary. It requires a careful analysis of your business model, sector classification, geographic constraints, capital structure, and long-term growth strategy in the Philippines. Both agencies offer substantial fiscal benefits — and under the CREATE MORE Act, those benefits are more generous and more flexible than ever before.

For most foreign investors, the starting point is honest self-assessment: Where will my operations be located? What percentage of my revenue will be export-driven? How large is my committed investment? Do I need Philippine permanent residency for myself and my family?

Answer those questions honestly, and the choice between BOI and PEZA will become considerably clearer.

At Tungol & Tan Law Firm, we regularly advise foreign investors on IPA registration strategy as part of our broader corporate and commercial law practice. If you are considering establishing or expanding your presence in the Philippines, we invite you to schedule a consultation to discuss the approach that best fits your investment objectives.

This article is for general informational purposes only and does not constitute legal advice. The laws and regulations discussed are subject to change. Foreign investors should consult with a qualified Philippine-licensed attorney before making any business registration decisions.