PEZA Registration in the Philippines: Requirements for Locators

Registration with the Philippine Economic Zone Authority (PEZA) is the process by which an enterprise becomes a PEZA-registered locator entitled to operate inside an economic zone and to avail of the incentives attached to that status. Under Republic Act No. 7916 (the Special Economic Zone Act of 1995), PEZA is mandated "to register, regulate and supervise the enterprises in the ECOZONE." Registration is open to both Filipino and foreign-owned enterprises. The practical path is: identify or develop a zone location, prepare the corporate and project documents, file the registration application with PEZA, secure the Certificate of Registration, then comply with customs, import permit, and reporting requirements.

Who May Register as a PEZA Locator

Under Section 7 of Republic Act No. 7916, foreign citizens and companies owned by non-Filipinos in whatever proportion may set up enterprises in an ECOZONE, either by themselves or in joint venture with Filipinos, in any sector of industry, international trade and commerce within the zone. Their assets, profits, and other legitimate interests are protected.

PEZA may, however, require a minimum investment for any ECOZONE enterprise in freely convertible currencies, and the new investment must fall under the priorities, thrusts, and limits provided for in the law. Registration is therefore not automatic — the enterprise and its proposed activity must fit the zone's development strategy, which PEZA formulates in coordination with the Department of Trade and Industry and the National Economic and Development Authority under Section 21.

Where a Locator Can Operate

A special economic zone, or ECOZONE, is a selected area with highly developed or developable potential as an agro-industrial, industrial, tourist, commercial, banking, investment, or financial center. Under Section 4 of Republic Act No. 7916, an ECOZONE may contain industrial estates, export processing zones, free trade zones, and tourist or recreational centers.

Enterprises in an export processing zone are allowed to import capital equipment and raw materials free from duties, taxes, and other import restrictions. Free trade zones, in turn, grant preferential tax treatment and more lenient immigration rules. The zone is managed and operated by PEZA as a separate customs territory under Section 8.

The Core Requirements to Prepare

The law itself does not list a single checklist; the requirements flow from PEZA's registration and regulation mandate and from the customs rules for locators. In practice, an applicant should be ready with the following:

• A qualified enterprise. The applicant must be a business enterprise — Filipino or foreign-owned — proposing an activity within the priorities and limits set for the zone.
• A zone location. The enterprise must locate within an ECOZONE, whether an existing zone or one established under the schemes in Section 5 or the criteria in Section 6.
• Import permit capability. PEZA-registered enterprises importing raw materials for production of export goods apply for an Import Permit through PEZA's Electronic Import Permit System, stating the volume, value, and description of the materials.
• Customs transit compliance. Under Joint BOC-PEZA Memorandum Order No. 02-2005, locators lodge Transit-Import Entries and Internal Revenue Declarations with the Customs-PEZA Clearance Office and post a General Transportation Bond to cover duties and taxes while shipments move in transit.
• Ownership confirmation and enrollment. Locators must enroll authorized e-mail addresses and cellular phone numbers with the Bureau of Customs and PEZA so they can confirm ownership of import shipments through the electronic broadcasting system.
• Reportorial compliance. The CPCO maintains lists of registered PEZA enterprises, their profiles, and accredited representatives and truckers, so locators should expect to submit and update these details.

Incentives That Come With Registration

Business establishments operating within the ECOZONES are entitled to the fiscal incentives under Presidential Decree No. 66 or under Book VI of Executive Order No. 226, the Omnibus Investment Code of 1987, as provided in Section 23 of Republic Act No. 7916. Tax credits for exporters using local materials as inputs enjoy the same benefits under the Export Development Act of 1994.

Under Section 24, no taxes, local or national, shall be imposed on business establishments operating within the ECOZONE. In lieu of taxes, five percent (5%) of gross income earned is remitted to the national government, shared as follows: three percent (3%) to the national government, one percent (1%) to the affected local government units, and one percent (1%) for a development fund for municipalities outside and contiguous to each ECOZONE.

Immigration and Visa Considerations

Section 10 of Republic Act No. 7916 provides that an investor within the ECOZONE whose initial investment is not less than One hundred fifty thousand dollars ($150,000), together with the spouse and dependent children under twenty-one (21) years of age, shall be granted permanent resident status within the ECOZONE, with freedom of ingress and egress without special authorization from the Bureau of Immigration.

PEZA also issues working visas renewable every two (2) years to foreign executives and other aliens possessing highly technical skills that no Filipino within the ECOZONE possesses, as certified by the Department of Labor and Employment. The names of aliens granted permanent resident status and working visas are reported to the Bureau of Immigration within thirty (30) days after issuance.

Frequently asked questions

Can a foreign-owned company register with PEZA? Yes. Under Section 7 of Republic Act No. 7916, foreign citizens and companies owned by non-Filipinos in whatever proportion may set up enterprises in an ECOZONE, either alone or in joint venture with Filipinos, subject to any minimum investment PEZA may require and to the priorities and limits set by law.

What taxes does a PEZA locator pay? Under Section 24 of Republic Act No. 7916, no local or national taxes are imposed on business establishments operating within the ECOZONE. Instead, five percent (5%) of gross income earned is remitted to the national government and shared among the national government, local government units, and a development fund.

How long is a PEZA working visa valid? Under Section 10 of Republic Act No. 7916, PEZA issues working visas to qualified foreign executives and highly technical aliens, renewable every two (2) years.

Practical takeaways

• Registration is available to Filipino and foreign-owned enterprises alike, subject to PEZA's minimum investment requirement and the zone's priorities.
• The enterprise must operate within an ECOZONE, which PEZA manages as a separate customs territory.
• Locators should prepare for import permit applications, customs transit documentation, a General Transportation Bond, and enrollment in the electronic ownership confirmation system.
• Registered locators enjoy fiscal incentives and, in lieu of taxes, remit five percent (5%) of gross income.
• Qualified foreign investors and technical personnel may avail of permanent resident status or renewable working visas under the conditions in the law.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 7916 - AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CREATION, OPERATION, ADMINISTRATION, AND COORDINATION OF SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), AND FOR OTHER PURPOSES

• REPUBLIC ACT NO. 11999 - AN ACT ESTABLISHING THE BULACAN SPECIAL ECONOMIC ZONE AND FREEPORT IN THE PROVINCE OF BULACAN, CREATING FOR THE PURPOSE THE BULACAN SPECIAL ECONOMIC ZONE AND FREEPORT AUTHORITY, AND APPROPRIATING FUNDS THEREFOR

• JOINT BOC-PEZA MEMORANDUM ORDER NO. 02-2005, June 10, 2005

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