FIRB Approval of Tax Incentives in the Philippines: How Registered Enterprises Qualify

The Fiscal Incentives Review Board (FIRB) does not grant tax incentives to just any applicant. Under the incentives framework now found in the National Internal Revenue Code, as amended by Republic Act No. 12066 (the CREATE MORE Act), incentives are granted only to the extent of a registered project or activity that has been approved under the Strategic Investment Priority Plan (SIPP). In practice, the enterprise first registers with an Investment Promotion Agency (IPA) such as the Board of Investments or PEZA, and the FIRB or the IPA grants the corresponding incentives within the bounds of that approval. The approval is therefore project-specific, not company-wide.

Who grants the incentives: the FIRB and the IPAs

Section 292 of the National Internal Revenue Code, as amended, states that the Fiscal Incentives Review Board or the Investment Promotion Agency shall grant the appropriate tax incentives to registered business enterprises only to the extent of their approved registered project or activity under the SIPP.

This means the grant of incentives follows the registration. The law also requires the grant to take into account the infusion of investment capital, the generation of direct local employment — which considers Republic Act No. 11962, the Trabaho Para sa Bayan Act — and other standard and project-specific performance metrics that the FIRB or the concerned IPA may impose.

What counts as an Investment Promotion Agency

(L) of the same Code defines Investment Promotion Agencies as government entities created by law, executive order, decree, or other issuances that are in charge of promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of the different economic zones and freeports under their respective special laws.

The list includes the Board of Investments, the Philippine Economic Zone Authority, the Bases Conversion and Development Authority, the Subic Bay Metropolitan Authority, the Clark Development Corporation, the Cagayan Special Economic Zone Authority, the Authority of the Freeport Area of Bataan, the Tourism Infrastructure and Enterprise Zone Authority, and other similar existing authorities or those that may be created by law, unless specifically exempted from the coverage of the Code.

Registration documents and the scope of approval

(C) defines the certificate of registration as the document evidencing registration with an IPA and entitlement to tax incentives. Each registered project or activity of a registered business enterprise must be supported by a separate certificate of registration.

A related document is the certificate of authority to import, defined under (B) as the document issued by the IPA as proof of entitlement to exemption from value-added tax and/or duty-free importation. It must contain a list of the capital equipment, raw materials, spare parts, or accessories to be imported that are directly attributable to the production of goods and services, including goods used for administrative purposes.

The directly attributable test

The law ties the incentives to what is genuinely connected to the registered activity. (D) defines directly attributable as goods and services that are incidental to and reasonably necessary for the registered project or activity, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting.

Importantly, the determination of what is directly attributable to the registered project or activity is made by the relevant Investment Promotion Agency. This is a common source of dispute during audit, so the enterprise's records should track the link between each claimed item and the registered activity.

How the approval affects the tax rate

The approval has a direct effect on income tax. Section 27(A) of the Code, as amended, provides that registered business enterprises under the enhanced deductions regime as provided in (C) shall be taxed at a rate equivalent to twenty percent on their taxable income derived from registered projects or activities during each taxable year. Section 28(A)(1) provides the same twenty percent rate for resident foreign corporations that are registered business enterprises under the enhanced deductions regime, on income derived from registered projects or activities.

The benefit attaches to income from the registered project or activity. Income from activities outside the scope of the approval does not enjoy the same treatment.

Frequently asked questions

Does the FIRB approve tax incentives directly?

The grant may come from the FIRB or from the Investment Promotion Agency, but in both cases it is limited to the approved registered project or activity under the SIPP.

What is the SIPP in relation to FIRB approval?

The SIPP is the priority plan against which the registered project or activity is measured. Section 292 ties the grant of incentives to the approved project or activity under the SIPP.

Can one company hold several registrations?

Yes. Under (C), each registered project or activity of a registered business enterprise should be supported by a separate certificate of registration.

Practical takeaways

• Incentives are granted only to the extent of the approved registered project or activity under the SIPP, not to the enterprise as a whole.
• Registration with an IPA is the anchor of the approval; the certificate of registration is the evidence of entitlement.
• Each registered project or activity needs its own certificate of registration.
• Items claimed as incentives must be directly attributable to the registered activity, and the IPA makes that determination.
• The twenty percent income tax rate for registered business enterprises under the enhanced deductions regime applies to income derived from registered projects or activities.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

RR No. 18-2024 — Implementing Section 32(B)(5) of the National Internal Revenue Code of 1997, as amended by Republic Act 12066, or the CREATE MORE Act (Date posted: December 17, 2024) Digest | Full Text | Annex AOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 12066 - AN ACT AMENDING SECTIONS 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, AND 311, AND ADDING NEW SECTIONS 135-A, 295-A, 296-A, AND 297-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

• REPUBLIC ACT NO. 5186 - AN ACT PRESCRIBING INCENTIVES AND GUARANTEES TO INVESTMENTS IN THE PHILIPPINES, CREATING A BOARD OF INVESTMENTS, APPROPRIATING THE NECESSARY FUNDS THEREFOR AND FOR OTHER PURPOSES.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.