Foreigners who want to set up a business in the Philippines can enjoy special incentives if their firm has pioneering status.
Typically, businesses with more than 40% foreign ownership can only qualify for these incentives if 70% of their products are exported. However, foreign-owned firms may engage in domestic oriented activities and still enjoy special incentives if they have pioneering status.
What is pioneering status and how can a business acquire one? Read on to find out.
Definition of pioneering status
According to the Department of Trade and Industry (DTI), pioneering status is given to businesses and investments that meet the following criteria:
Benefits for firms with pioneer status
Businesses with pioneer status can enjoy the following benefits and incentives:
As of 2017, businesses within Metro Manila, even with pioneer status, can no longer enjoy income tax holidays except:
The application process for a pioneering business
To enjoy the incentives offered to pioneering businesses, the firm must first be registered with the Board of Investments (BOI), PEZA (Philippine Economic Zone Authority), or other IPAs (Investment Promotion Agencies), such as the Bases Conversion and Development Authority, the Subic Bay Metropolitan Authority, and Clark Development Corporation.
The BOI is an agency attached to the DTI, and has been given the authority to provide tax incentives to qualified firms. PEZA and other IPAs are also attached to the DTI and functions similarly as the DTI but cover businesses operating within their designated ecozones and development areas. Additional incentives or benefits may also be enjoyed by accredited businesses in these specially designated areas.
Registering your business with the BOI, PEZA, or any other IPA is an additional process you have to take after registering with the DTI or SEC. It’s best to decide whether to set up your business in a PEZA ecozone or any other IPA before registration, but you may also relocate to one in the future.
Part of the application process is a technical evaluation to be conducted by the Department of Science and Technology to determine if your project qualifies for pioneering status.
The steps in the evaluation process are as follows:
Once your project is deemed eligible for pioneering status and you have complied with other application requirements, you can expect to receive approval in about 15 to 30 working days.
The process for acquiring pioneering status requires detailed attention and a considerable amount of time. We can take the burden off your shoulder while providing the guidance you need for a successful application. Contact us today to find out more.