Perhaps you are trying to decide which country to locate your company in, or, you have already decided to locate in the Philippines and would like to know if there are any special perks or incentives that you might as well avail of to get an even higher return on your investment.

If that is your concern, then this article is for you.

The most common incentives that investors look for and can generally expect are the following:

Income Tax Holiday. – Essentially, you will not need to pay income taxes for a specific number of years. Please note that the exemption under this incentive is for income tax only. Thus, taxes that are in the nature of transfer taxes, excise taxes, document taxes, and of course government fees (which are not taxes) are excluded.

5% Gross Income Taxation. – While this is legally classified as an "incentive", it is really just a matter of computing how you pay your tax. Essentially, instead of having to go through the tedious process of determining your net taxable income by compiling all expenses (and most likely having to go through an extensive audit process to validate these expenses), you can simply opt to be taxed on your gross income instead thereby simplifying the process substantially. Furthermore, this gross income tax amount will be in lieu of all other taxes charged by the national government. This means that there will be no more transfer taxes, excise taxes, or documentary taxes provided that the transaction subject to tax is directly related to the registered activity of your company.

Tax-Free Importation of Raw Materials and Equipment. – Please note that this is also qualified by the requirement that these equipment and raw materials must be directly related to your registered activity when you made your application.

Value-Added Tax Zero Rating on Domestic Purchases. – Sale of local goods and services is normally subject to a 12% value-added tax. If you have this particular incentive, you can essentially avail of a 12% discount on the local purchase of goods or services because there will be no value-added tax applied by the seller. Please note that, once again, the purchase must be directly related to your registered activity.

Enhanced Expense Deductions. – These are basically deductions from your income tax. The reason why they are "enhanced" is because you can increase the amount of the deduction to sometimes even more than double the actual amount paid out. For example, expenses for research and development, depreciation, and labor can be the subject of enhanced deductions. Not all expenses can be subject to an enhanced deduction but a few priority ones are.

Special Visas and Simplified Visa Processing. – Special types of visas can be granted for investors with simplified processing. In addition, these visas are usually granted not just in favor of the investor, but also in favor of their direct family members all of which are tied to the visa validity of the investor.

The above are the most common incentives for foreign investors. It will be worth your while to check if your particular industry is within the investment priority list of the government to which these incentives apply.

Previously, different sets of incentives were offered by different government bodies, e.g. Department of Trade and Industry (DTI) via its Board of Investments (BOI) arm, the Philippine Export Zone Authority (PEZA), the Tourism Infrastructure Enterprise Zone Authority (TIEZA), and the like.

A recent law rationalized these incentives and assigned a unified governing body, specifically the Fiscal Incentives Review Board (FIRB), to issue and regulate them. Thus, one now only needs to look in one place thereby radically simplifying research into the matter.

The website of the said Fiscal Incentives Review Board can be accessed here.

For the Matrix and Comparison of the Incentives, you may click here.

Finally, please note that unlike in the previous laws where certain incentives such as the 5% incentive on gross income taxation were available indefinitely, these types of incentives under the new law have a definite stop date.

Essentially, the incentives under the new law are intended merely as a jump-start mechanism for your company but not to be enjoyed in perpetuity.

We will be producing a separate article on how to manage taxes with valid workarounds to optimize the financial aspect of your operations once these incentives expire. Please stay tuned for that.

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