In recent years, an increasing number of Chinese enterprises have chosen to establish operations in the Philippine Economic Zone Authority (PEZA) to benefit from tax incentives and policy support. However, enjoying incentives is only the beginning. The real key to long-term, stable growth lies in ensuring compliance—avoiding disqualification or penalties due to reporting lapses.
This article provides a structured overview of PEZA registration advantages, compliance reporting requirements, and penalty mechanisms, offering practical guidance for enterprises operating in the Philippines.
01｜What Are the Advantages of Registering with PEZA?
PEZA, under the Department of Trade and Industry (DTI), is tasked with promoting investments, providing assistance, registering enterprises, granting incentives, and facilitating operations within special economic zones established by presidential proclamation.
Created under the Special Economic Zone Act (RA 7916, amended by RA 8748), PEZA’s primary role is to regulate and implement incentives for ecozone developers, operators, and locators.
Eligible activities for PEZA registration include: export-oriented manufacturing, processing, and assembly, as well as support services such as IT/BPO, tourism, medical tourism, agro-industry, and public utilities. Depending on business type, PEZA-registered companies may enjoy:
1. Fiscal Incentives
Export-oriented enterprises: 4–7 years of Income Tax Holiday (ITH), followed by 10 years of either 5% Special Corporate Income Tax (SCIT) or Enhanced Deductions (ED).
Domestic-oriented enterprises: 4–7 years ITH, followed by 5 years ED.
2. Non-Fiscal Incentives
Duty-free importation of equipment and raw materials
Up to 30% of total sales allowed for domestic market
Local purchases at zero VAT (including utilities: electricity, water, telecom)
Exemption from national and local taxes during SCIT period
Flexibility in hiring foreign nationals
Land lease terms of up to 75 years
PEZA visas (2 years renewable) for foreign employees and dependents
02｜PEZA Compliance & Reporting Requirements
PEZA enterprises must not only comply with BIR tax filings, but also submit multiple reports to PEZA and SEC.
1. Regular Reporting Obligations
(standard financial, operational, and annual filings)
2. Additional Requirements under the CREATE Act
As per RA 11534 and its implementing rules, companies must submit to PEZA within 30 days of the statutory tax filing deadline:
Annual Tax Incentives Report (ATIR): detailing income tax holidays, VAT exemptions, duty reductions, etc.
Annual Benefits Report (ABR): covering investments, employment, exports/imports, profits, and tax contributions.
👉 Commonly used forms include: ATIR and ABR templates issued by PEZA.
3. Other New Requirements
Under RMC No. 28-2022, companies must apply for a Certificate of Entitlement to Tax Incentives (CETI) within 30 days after filing their annual income tax return. PEZA also requires enterprises to maintain separate books of accounts for ecozone operations and to file tax returns via BIR’s eFPS electronic system.
03｜PEZA Penalties and Compliance Strategies
PEZA enforces strict compliance. Penalties are structured as follows:
Late filing:
1st offense: PHP 500 + PHP 50/day late fee
2nd offense: PHP 1,000 + PHP 150/day late fee
3rd offense: PHP 2,000 + PHP 200/day late fee
Failure to file ATIR or ABR:
1st offense: PHP 100,000
2nd offense: PHP 500,000
3rd offense: revocation of PEZA registration
For most enterprises, the real risk is not the fines but the loss of PEZA accreditation, which would mean the immediate cancellation of all incentives.
Recommended compliance strategies:
Build a compliance calendar: Map out monthly, quarterly, and annual deadlines to avoid missed filings.
Maintain bilingual records: For multi-agency filings (SEC, BIR, PEZA), create a unified documentation archive in English & Chinese to ensure consistency.
Assign dedicated compliance officers: Either internal staff or local consultants, to avoid delays caused by policy changes.
Prioritize the ABR: As a key indicator of an enterprise’s actual contribution, it directly affects the continuation of incentive eligibility.
Conclusion
For Chinese enterprises in PEZA zones, incentives are a major enabler of entry and expansion. But the compliance burden is equally complex. Timely, accurate, and complete reporting is not only the prerequisite for maintaining incentives but also essential for building a stable corporate reputation.
We will continue to monitor PEZA policy updates and provide the latest compliance interpretations and operational guidance. If you are preparing or already operating a factory in the Philippines, feel free to contact us for a customized PEZA compliance calendar and reporting checklist—helping your business sustain incentives while minimizing compliance risks.
services1 