Why Do Export-Oriented Manufacturers Register With PEZA?

By Starlight Business Consulting Services, Inc. | Information current as of November 2026

If you manufacture goods mainly for foreign buyers, your cost structure is shaped by three things: income tax, import duties and VAT on your inputs, and the time it takes to get set up and compliant. Registration with the Philippine Economic Zone Authority (PEZA) is designed to address all three. This article explains what PEZA registration offers export-oriented manufacturers, what it requires in return, and how to judge whether it fits your project.

What PEZA Registration Is

PEZA is the government agency, attached to the Department of Trade and Industry, that registers, regulates and supervises enterprises operating inside special economic zones (ecozones) under Republic Act No. 7916, the Special Economic Zone Act of 1995. An ecozone is operated as a separate customs territory, which is the reason goods and equipment can move in and out of it on different terms from the rest of the country.

PEZA is one of several investment promotion agencies (IPAs) recognized under the Tax Code. Since the CREATE Act (Republic Act No. 11534) and the CREATE MORE Act (Republic Act No. 12066), all IPAs grant incentives from the same menu, and only for projects or activities listed in the Strategic Investment Priority Plan (SIPP). The current plan, the 2026 SIPP, was approved through Memorandum Order No. 47 (signed May 21, 2026, and published in the Official Gazette on June 2, 2026), and it took effect 15 days after publication. The Board of Investments (BOI) has said the detailed policies and guidelines that accompany the plan are issued separately, so confirm which guidelines currently apply to your product line before relying on any listing.

Who Counts As an Export Enterprise

Under the Tax Code, an export enterprise is a registered business engaged in manufacturing, assembling or processing that exports at least 70% of its total production or output. The 70% can be met by direct exports or by selling your product to another registered export enterprise whose final export product includes it. This test matters throughout the rest of this article, because several incentives depend on it. The 2026 SIPP lists the production and manufacture of export products, with an export requirement of at least 70% of output, as a priority export activity. It also lists activities in support of exporters, including the manufacture of parts, components, materials and supplies directly or reasonably needed to produce export products. Export activities fall under Tier I unless they meet the Tier II or Tier III qualification requirements.

The Main Reason: A Tax Package Built for Exporters

1. Income tax relief for up to 17 years

A registered export enterprise may be granted an income tax holiday (ITH) of four to seven years, depending on the location of the project and its industry tier in the SIPP. The ITH is followed by ten years under either of two regimes, covered in the next section. The Tax Code sets the following ITH periods for exporters:

The law also adds two years of income tax-based incentives for projects in areas recovering from armed conflict or a major disaster, and three additional years for registered projects that completely relocate out of the NCR during their incentive period.

2. A Choice After the Holiday: 5% On Gross Income Or Enhanced Deductions

An export enterprise can pick one of three paths: an ITH followed by either regime below; the 5% regime from the start of commercial operations; or the enhanced deductions regime from the start. The choice is irrevocable for the whole entitlement period, so it deserves a proper financial model before you commit.

•         Special Corporate Income Tax (SCIT). A 5% tax on gross income earned, in lieu of all national and local taxes and local fees and charges. It suits businesses with healthy margins and a high local-tax burden.

•         Enhanced Deductions Regime (EDR). Income tax at 20% on the taxable income of the registered activity, together with additional deductions. CREATE MORE raised the additional deduction on power expense to 100% and added an enhanced deduction for expenses on trade fairs, exhibitions and trade missions (50%). The regime also keeps the CREATE Act deductions, including additional depreciation on buildings and on machinery and equipment, additional deductions for labor, research and development, training and domestic inputs, and an enhanced net operating loss carry-over. A reinvestment allowance for manufacturers lets a business deduct up to 50% of reinvested profits, but it can only be availed of until December 31, 2034.

For power-intensive factories with large payrolls and capital spending, the EDR can compare favorably with SCIT. For leaner, high-margin operations, SCIT is often simpler. The right answer depends on your numbers.

3. Duty-free Imports of equipment and materials

Registered enterprises are exempt from customs duties on capital equipment, raw materials, spare parts and accessories directly attributable to the registered project, including goods used for administrative purposes. Two conditions apply: the PEZA must approve the importation before the goods arrive, and the items must not be produced domestically in sufficient quantity, of comparable quality and at reasonable prices. Duty-free equipment is also restricted during its first five years: selling or transferring it requires prior PEZA approval, and doing so without approval makes both seller and buyer jointly liable for twice the duties that were waived.

4. VAT exemption on imports and zero-rating on local purchases

Importations directly attributable to the registered activity are VAT-exempt, and local purchases of goods and services directly attributable to it are zero-rated. Under CREATE MORE, “directly attributable” covers goods and services that are incidental to and reasonably necessary for the registered activity, including janitorial, security, financial, consultancy, marketing and promotion services, and administrative services such as human resources, legal and accounting work. PEZA itself lists utilities such as power, water and telecommunications among the covered purchases. The IPA decides what is directly attributable.

This incentive has a performance condition. If an export enterprise falls below 70% export sales in the preceding year, it loses duty exemption and the VAT benefits in the following year.

5. A single, capped local tax

A local government may impose a registered business enterprise local tax of no more than 2% of gross income during the ITH and EDR periods, in place of other local taxes, fees and charges. Enterprises under SCIT do not pay this tax, because the 5% rate already replaces local taxes.

Operating advantages beyond tax

•         A one-stop shop. IPAs are required to maintain a one-stop action center to help registered enterprises set up and operate, including coordination with local governments and national agencies, and PEZA may accept and submit documentary requirements for permits on the enterprise’s behalf.

•         Foreign ownership. The Special Economic Zone Act allows foreign citizens and companies owned by non-Filipinos in any proportion to set up enterprises in an ecozone, alone or in a joint venture with Filipinos, subject to PEZA’s requirements, which may include a minimum investment.

•         Profit remittance. After-tax profits of foreign investments in ecozone enterprises may be remitted outward in foreign exchange without prior Bangko Sentral approval, provided the investment was previously registered with the Bangko Sentral.

•         Long-term land lease. Under the Investors’ Lease Act as amended by Republic Act No. 12252 (2025), a foreign investor with an approved and registered investment may lease private land for an aggregate period of up to 99 years. The leased area must be used solely for the registered investment, and the lease must be registered with the Registry of Deeds. The President may impose a shorter period for investors in critical infrastructure.

•         Hiring and visas. PEZA lists employment of foreign nationals and the issuance of a two-year PEZA visa for foreign nationals employed by registered companies, and their dependents, among its incentives.

•         Some local sales are allowed. PEZA allows domestic sales of up to 30% of total sales, which is consistent with the 70% export test. Local sales of a registered enterprise are subject to 12% VAT, with the buyer liable to remit it.

What you must give in return

The incentives come with obligations, and a business case that ignores them is incomplete.

•         Stay inside the zone. A project registered with an IPA that administers an ecozone must be conducted inside the zone’s boundaries. Activities outside it do not earn the incentives, although registered enterprises may adopt a telecommuting program covering up to 50% of their workforce.

•         Keep to the SIPP. IPAs may only accept projects listed in the SIPP. Each registered project needs its own certificate of registration, and income from non-registered activities is taxed normally.

•         Maintain the 70% export ratio to keep your duty and VAT incentives.

•         Keep clean books and report on time. Registered enterprises must file tax returns electronically and submit annual tax incentive and benefits reports to their IPA. Fines are P100,000 for a first violation and P500,000 for a second, and the third violation can lead to cancellation of the registration.

•         Comply with labor standards. Employees must receive salaries, benefits and working conditions not less than those required by the Labor Code, and foreign nationals in supervisory, technical or advisory roles are capped at 5% of the workforce without the express authorization of the Secretary of Labor and Employment.

•         Be accurate with the IPA. Willful and material misrepresentation to obtain more incentives than allowed can lead to cancellation, suspension and a refund of incentives, with interest and penalties.

Is PEZA right for your project?

PEZA registration tends to suit manufacturers that:

•         export at least 70% of their output;

•         can locate their plant, or lease a factory, inside a PEZA-administered zone;

•         import a meaningful share of their equipment and materials; and

•         expect a long operating horizon, so that the multi-year income tax relief pays off.

It may suit you less if you plan to sell mostly in the Philippine market, or if your plant must be located outside an ecozone. In those cases, compare the options with another investment promotion agency before you decide.

Frequently asked questions

Does an export manufacturer have to export 100% of its production?

For tax incentive purposes, the test in the Tax Code is at least 70% of total production or output. PEZA allows domestic sales of up to 30% of total sales.

Can a foreign company own 100% of a PEZA-registered manufacturer?

The Special Economic Zone Act allows foreign ownership in any proportion for ecozone enterprises, subject to PEZA’s requirements and other applicable laws.

How long does the IPA take to decide on incentives?

The Tax Code requires the IPA to decide on a tax incentive application within 20 working days from receipt of all required documents, with one extension of no more than 20 additional working days.

Can I register a factory located outside an ecozone with PEZA?

No. A project registered with an IPA that administers an ecozone must be conducted within that zone’s boundaries to earn the incentives.

Planning your PEZA registration

The real value of PEZA registration depends on choices made early: the corporate structure, the location, the incentive regime, and the accounting systems that will support your reports. Starlight Business Consulting Services, Inc. assists businesses with incorporation, tax and accounting compliance, and permits, and can help you assess whether PEZA registration fits your manufacturing project.

This article is for general information only and is not legal or tax advice. Incentive eligibility depends on the facts of each project and on current rules, so confirm the details with PEZA and a qualified professional before making a decision.