Special Economic Zones Philippines: A Free Trade Zone for All

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The Special Economic Zones (SEZs) in the Philippines are designated areas that offer tax incentives and other benefits to business owners and investors. These zones provide an excellent option for business in the Philippines, whether you’re looking to set up shop or expand your operations. Let’s discuss what is economic zone or philippine economic zone?

What Is Economic Zone?

A Special Economic Zone (SEZ) is a specific geographic area designated by the Philippine government for economic development. These zones offer various tax incentives and other benefits to businesses, making them an attractive option for investment.

There are areas in the Philippines called “special economic zones” (SEZ). These areas have been chosen because they are highly developed or have the potential to be developed into essential areas like agriculture, tourism, and recreation. Presidential Proclamation sets the boundaries of these zones.

Special Economic Zones Philippines History And How It Has Evolved

The Philippine Special Economic Zone Authority (PSEZA) was created in 1995 to oversee the establishment of Special Economic Zones (SEZs) in the Philippines. These SEZs aim to attract foreign investment and promote economic activity in specific regions of the country.

Since their inception, SEZs have undergone several changes and expansions. In 2000, for example, it merged the Export Processing Zone Authority (EPZA) with PSEZA, and in 2006, it changed the name to the Philippine Economic Zone Authority (PEZA).

As of January 2022, 407 operating zones and an additional 144 zones were being developed. These zones are home to over 8,000 registered companies and have generated over US$20 billion in investments.

What Are The Benefits Of Special Economic Zones Philippines?

There are many benefits of setting up shop in a Special Economic Zone, including:

Tax incentives

Businesses in SEZs are eligible for income tax holidays, reduced rates on import duties, and other tax breaks.

Some of the tax incentives that are available to businesses include:

  • Tax rebates: getting back some of the taxpayer’s money after a decrease in taxes
  • Tax holidays: a temporary reduction, or even removal, of taxes on businesses for a set period
  • Exemption from excise duty (manufacturing tax) or value-added tax (consumption tax) on goods that are made in your country
  • Exemption from other taxes, such as import duty

Related: 25 Ways to Reduce Your Tax Burden as a Small Business in the Philippines

Ease of doing business

SEZ businesses can enjoy simplified customs procedures, streamlined application processes, and government support. Few things can cause as much frustration for businesses as slow bureaucratic processes. Permits, clearances, and other essential government documents usually take a long time. You can also lose money because of these delays.

This problem is addressed in special economic zones because there are specially assigned people who can help and particular infrastructure within the zone. This can help speed up some of the needs of the businesses there. For example, customs clearance facilities are built in some SEZs so that imports and other materials from outside the country don’t get stuck at customs.

Infrastructure

Many SEZs have excellent infrastructure, including good power and water supplies, as well as wide roads and highways. Additionally, these zones have excellent telecommunications infrastructure. This allows businesses within the SEZ to be more productive overall. The infrastructure that supplies necessary resources is also widely available. This includes communication towers, water pipes, power plants, and waste treatment facilities.

Labor pool

Special Economic Zones (SEZs) are usually established in locations with a large pool of skilled labor. This is particularly true in the case of the Special Economic Zones in the Philippines. Multinational corporations can find a highly educated and English-speaking workforce in these zones. Additionally, the Filipino government provides some tax incentives to SEZ companies. As a result, the Special Economic Zones of the Philippines have become some of the most popular destinations for foreign investment.

Classification Special Economic Zones Philippines

There are four types of Special Economic Zones (SEZs) in the Philippines:

Industrial Estates (IEs)

Industrial estates are places in the Philippines where they can build factories. Many lands have been set aside to be used for factories. This way, each factory will have its own space. The land also comes with basic infrastructure and utilities so the factories can get started immediately.

Free Trade Ecozones (FTEs)

Free Trade Ecozones are places where businesses can operate with very little regulation. These zones are usually located near ports so that companies can take advantage of the country’s strategic location. The government also provides several tax incentives to businesses that find in FTEs.

Science and Technology Parks (STPs)

Science and Technology Parks are places where high-tech companies can set up shop. These companies usually need to be engaged in research and development to be eligible for STP status. The government provides several benefits to companies located in STPs, including tax breaks and subsidies.

Information technology parks (ITPs)

Information technology parks are places where IT companies can set up their operations. The government provides several benefits to companies located in ITPs, including tax breaks and subsidies.

Export Processing Zones (EPZs)

An EPZ is a place where it can manufacture goods for export. Companies can sell products without processing them in the country where they will sell them. This allows companies to take advantage of lower labor and production costs in other countries. The government provides several benefits to companies located in EPZs, including tax breaks and subsidies.

Tourist or Recreational Centers (TRCs)

TRCs are places that have been developed for tourism purposes. They usually include hotels, resorts, and other amenities. The government provides several benefits to companies located in TRCs, including tax breaks and subsidies.

Incentives Special Economic Zones Philippines

How To Set Up And Operate A Business In A Philippine Economic Zone

  1. Choose Type Of Economic Zone:

The first step is to decide which Special Economic Zone is right for your business. Each SEZ has its advantages and disadvantages, so choosing the one that best suits your needs is essential.

  1. Get Approval:

Once you’ve decided on the type of SEZ you want to locate, you need approval from the Philippine government. You’ll need to submit a business plan and other required documents.

  1. Get A License:

After you’ve been approved, you’ll need to get a license from the Philippine Economic Zone Authority (PEZA). This license will allow you to operate your business in the SEZ.

  1. Get Registered:

After you’ve obtained your license, you’ll need to register your business with the Bureau of Internal Revenue (BIR). This is required for all companies in the Philippines.

  1. Get A Business Permit:

The next step is to get a business permit from the local government where your SEZ is located. This permit will allow you to operate your business in the SEZ.

Related: How to Register Your Business as Barangay Micro Business Enterprise (BMBEs)

Requirements To Start Special Economic Zone Philippines

Starting a business in a Special Economic Zone is relatively easy. The requirements are:

A business Plan

It would help if you had a business plan, including your company’s financial statements, marketing, and operations strategy.

BIR Registration

You must register your business with the Bureau of Internal Revenue (BIR).

Business Permit

You need to get a business permit from the local government where your Special Economic Zone is located.

PEZA Approval

You must get approval from the Philippine Economic Zone Authority (PEZA).

The Challenges Of Doing Business Ecozones In The Philippines

Despite the many advantages of locating in a Special Economic Zone, there are some challenges that you may face. These challenges include:

Infrastructure

One of the biggest challenges you may face is the lack of infrastructure in some SEZs. This can include things like roads, water, and electricity.

Talent

Another challenge you may face is the lack of qualified talent in some SEZs. This can make it challenging to find the right employees for your business.

Cost

Another challenge you may face is the cost of doing business in a Special Economic Zone. This includes the cost of rent, utilities, and other expenses.

Security

There may be security concerns in some Special Economic Zones. This is because these areas are often located in remote areas.

Conclusion

If you’re looking to invest in the Philippines, a Special Economic Zone is a great option. These zones offer tax incentives and other benefits that make doing business easier. However, there are some challenges that you may face when doing business in a Special Economic Zone. These challenges include the lack of infrastructure and qualified talent. Despite these challenges, Special Economic Zones are still an excellent option for businesses looking to invest in the Philippines. Need help processing? Contact us today!

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