If you are planning to serve overseas customers from a Philippine company, an export business can give foreign investors full ownership without the US$200,000 capital threshold that applies to many domestic-market operations.
Eligible projects can also qualify for tax incentives through PEZA, BOI, or another investment promotion agency. However, the export requirements for foreign ownership and tax incentives are different, so your sales model affects which benefits you can access.
In this article, we will walk you through the ownership and capital rules, CREATE MORE incentives, registration options, and ongoing export requirements.
What Is an Export Enterprise in the Philippines?
Philippine law uses different export thresholds for foreign investment and tax incentives. Meeting one threshold does not automatically mean you meet the other.
| Requirement | Foreign Investments Act | CREATE incentive framework, as amended by CREATE MORE |
|---|---|---|
| Main purpose | Determines export status for foreign-investment rules | Determines eligibility as a registered export enterprise for incentives |
| Export threshold | At least 60% of output; for traders, at least 60% of domestic purchases | At least 70% of total production or output |
| Main advantage | Access to 100% foreign ownership in unrestricted activities without the US$200,000 domestic-market capital threshold | Access to approved income tax, VAT, and customs incentives |
| Registration | SEC incorporation or branch licensing, plus BOI registration and reporting under the Foreign Investments Act | Registration of the eligible project with PEZA, BOI, or another investment promotion agency |
For incentive purposes, qualifying exports can include direct exports and certain sales to another registered export enterprise that become part of its final export product or service. This allows some suppliers within an export production chain to qualify even when they do not ship the finished product abroad themselves.
Services also qualify. The 2026 Strategic Investment Priority Plan covers service activities delivered to clients abroad and paid for in foreign currency, with an export requirement of at least 70%. Examples of such activities include software development, voice support, and back-office operations.
A company exporting between 60% and less than 70% can meet the Foreign Investments Act threshold while falling short of registered export-enterprise incentive requirements. It would need a separate assessment of whether its project qualifies for domestic-market incentives.
Foreign Ownership and Minimum Capital
An export enterprise can be 100% foreign-owned if its activity is open to full foreign participation. Restrictions under the Constitution, sector-specific laws, and the Foreign Investment Negative List still apply.
The current list is the 13th Regular Foreign Investment Negative List, issued through Executive Order 113 on 13 April 2026. Exporting does not override an ownership restriction on the underlying activity.
Does the US$200,000 minimum apply?
A qualifying export enterprise is not subject to the Foreign Investments Act’s US$200,000 domestic-market capital threshold. It must still meet any sector-specific capital requirements and have sufficient funding for its proposed operations.
For comparison, a domestic market enterprise with more than 40% foreign ownership generally needs at least US$200,000 in paid-in capital, because enterprises below that figure are reserved for Philippine nationals. That threshold can fall to US$100,000 if the enterprise:
- Uses advanced technology recognized by the Department of Science and Technology.
- Is endorsed as a startup or startup enabler under the Innovative Startup Act.
- Has a majority of Filipino direct employees, with at least 15 Filipino employees.
The Revised Corporation Code does not impose a general minimum capital-stock requirement on ordinary stock corporations unless a special law provides otherwise. However, an incentive application must demonstrate the financial capacity to carry out the project.
We recommend setting capitalization around your operating budget, staffing, equipment, and working-capital needs. A low incorporation capital figure does not establish that a project is adequately funded.
Which business structures can you use?
Foreign investors commonly establish:
- A Philippine domestic corporation, including a qualifying one person corporation.
- A Philippine branch of a foreign company.
A one person corporation suits an eligible individual shareholder, while an ordinary corporation or branch can accommodate a corporate parent. A representative office cannot conduct the income-generating export operations described here.
The choice also affects liability, governance, and ongoing compliance. Our comparison of legal entities in the Philippines explains the differences.
Export Registration and Tax Incentive Registration
Company registration and incentive registration serve different purposes. Incorporation with the Securities and Exchange Commission creates the Philippine corporation, while an SEC license allows a foreign company to operate through a branch.
Under the amended Foreign Investments Act, export enterprises that are non-Philippine nationals must also register with the Board of Investments and submit the required export-compliance reports. This registration route is distinct from an application for tax incentives.
To obtain CREATE MORE incentives, you register an eligible project or activity with an investment promotion agency. The agency assesses the activity, location, investment, employment commitments, and export performance.
Incentives attach to the approved project rather than every activity carried out by the company. Revenue from unregistered activities requires separate tax treatment and accounting records.
CREATE MORE Incentives for Export Enterprises
The CREATE MORE Act, Republic Act 12066, amended the incentive framework established by CREATE. Registered export enterprises can choose an income tax holiday followed by special corporate income tax or enhanced deductions, or elect to use one of those regimes from the start of commercial operations.
The choice is irrevocable for the incentive entitlement period. Compare the options before submitting the application.
Income tax holiday by tier and location
The standard income tax holiday lasts four to seven years. Its duration depends on the registered activity’s tier under the Strategic Investment Priority Plan and the project location.
| Project location | Tier I | Tier II | Tier III |
|---|---|---|---|
| National Capital Region | 4 years | 5 years | 6 years |
| Metropolitan areas or areas contiguous and adjacent to the National Capital Region | 5 years | 6 years | 7 years |
| All other areas | 6 years | 7 years | 7 years |
Under the 2026 plan, export activities fall under Tier I unless they satisfy Tier II or Tier III requirements. Tier II includes activities such as integrated circuit design, electric vehicle manufacturing, and specified renewable energy projects, while Tier III covers qualifying advanced technology and research activities.
The standard incentive periods differ according to the approving authority. In the table below, SCIT means special corporate income tax and EDR means enhanced deductions regime.
| Approval route | Income tax holiday followed by SCIT or EDR | Alternative without an income tax holiday |
|---|---|---|
| Investment promotion agency | 4–7 years of holiday, then 10 years of SCIT or EDR | 14–17 years of SCIT or EDR |
| Fiscal Incentives Review Board | 4–7 years of holiday, then 20 years of SCIT or EDR | 24–27 years of SCIT or EDR |
Projects that completely relocate from the National Capital Region during their incentive period can qualify for three additional years of income-tax-based incentives. Projects in areas officially identified as recovering from armed conflict or a major disaster can qualify for two additional years.
Furthermore, projects maintaining at least 10,000 direct local employees can apply for extensions, subject to performance review and statutory limits. These extensions are not automatic, and the enterprise must continue meeting its registration commitments.
Please note that the enterprise must begin availing of income-tax incentives within three years of registration unless the investment priority plan and its guidelines provide otherwise. Therefore, it's advisable to Include that deadline in the project implementation schedule.
Special corporate income tax: 5%
The special corporate income tax is charged at 5% of gross income earned from the registered project. It replaces the covered national and local taxes, local fees, and charges.
Gross income earned is not the same as total sales or net profit. It is calculated using revenue less returns, discounts, and allowable costs of sales or services under the relevant rules.
For example, assume a registered exporter has PHP 80 million in revenue and PHP 50 million in allowable costs of sales. Its gross income earned is PHP 30 million, producing special corporate income tax of PHP 1.5 million.
Operating expenses do not automatically reduce this tax base. A company can therefore owe special corporate income tax even when its final accounting profit is low or negative.
Enhanced deductions: 20%
Under enhanced deductions, registered projects pay corporate income tax at 20% of taxable income. They can also claim qualifying additional deductions.
| Qualifying expense | Additional deduction |
|---|---|
| Depreciation allowance for buildings | 10% |
| Depreciation allowance for machinery and equipment | 20% |
| Eligible direct local labor expenses | 50% |
| Research and development | 100% |
| Training | 100% |
| Domestic inputs | 50% |
| Power expenses | 100% |
| Approved exhibitions, trade missions, and trade fairs | 50% |
| Qualifying reinvestment by manufacturing and tourism enterprises | Up to 50% of the amount reinvested |
The additional labor deduction covers qualifying direct local employment. It excludes managerial, administrative, indirect-labor, and support-service personnel costs, so it should not be calculated using the company’s entire payroll.
The depreciation percentages represent additional depreciation allowances, rather than an automatic deduction of that percentage of the asset’s purchase price. Reinvestment relief also has a prescribed deduction period and is available only through 31 December 2034.
Qualifying losses incurred during the first three years of commercial operation can be carried forward for five consecutive taxable years immediately after the income tax holiday entitlement period ends. The detailed conditions for enhanced deductions are set out in Department Order 026-2026.
Local taxes during the holiday and enhanced deductions
The relevant local government unit may impose a registered business enterprise local tax through a local ordinance. Its rate cannot exceed 2% of the registered project’s gross income.
Where imposed, it replaces the local taxes, fees, and charges covered by the rules. Enterprises under special corporate income tax are excluded from this local tax, so the local-tax position should be included when comparing incentive packages.
Choosing between the two regimes
Special corporate income tax can suit projects with strong margins and relatively modest operating expenses. Enhanced deductions can be more attractive where qualifying labor, power, research, training, and other deductions substantially reduce taxable income.
Model both options over the full incentive period. Include the income tax holiday, projected margins, additional deductions, local taxes, and any income from unregistered activities.
Emerhub can assess these options alongside the project application so the selected regime reflects how the business will operate. This is particularly useful where the company combines export services, local sales, and other activities.
VAT and Customs Duty Incentives
Registered export enterprises can qualify for duty-free imports, VAT-exempt imports, and zero-rated local purchases. These benefits have their own conditions and can continue throughout the registration period while the enterprise maintains its eligibility.
Duty-free importation
Duty exemption covers qualifying capital equipment, raw materials, spare parts, and accessories directly attributable to the registered project, including approved administrative goods.
The items must satisfy domestic availability conditions concerning quantity, quality, and price. Approval from the investment promotion agency is required before importation.
Selling, transferring, or using duty-free items outside the registered activity can trigger approval requirements and tax liabilities. Special restrictions apply during the first five years after importation, so equipment movements and disposals need to be documented.
VAT-exempt imports and zero-rated local purchases
VAT relief covers goods and services directly attributable to the registered project. CREATE MORE defines this to include items incidental to and reasonably necessary for the activity, such as qualifying security, janitorial, financial, legal, accounting, and administrative services.
The investment promotion agency determines whether purchases meet that standard. Keep purchase records and the required certifications to support the treatment.
A registered export enterprise that fails to maintain the 70% export threshold in the preceding year loses the specified VAT and duty incentives for the following year. Other registration conditions must also continue to be met.
VAT relief outside incentive registration
CREATE MORE also provides a separate VAT framework for qualifying export-oriented enterprises under sections 106, 108, and 109 of the Tax Code. This involves the export threshold and verification by the DTI Export Marketing Bureau.
This route does not itself grant an income tax holiday or special corporate income tax. Our guide to zero-rated and VAT-exempt sales in the Philippines explains the difference between these VAT treatments.
Can an Export Enterprise Sell Locally?
Yes, but local sales affect both export compliance and tax treatment. The relevant thresholds are 60% under the Foreign Investments Act and 70% for registered export-enterprise incentives.
The enterprise must also follow its registration conditions and any approval procedures for domestic sales. Maintaining a 70% export ratio does not replace those requirements.
Covered local sales by registered business enterprises to domestic-market enterprises or businesses without incentive registration are subject to 12% VAT unless an exemption or zero-rating provision applies. Under CREATE MORE, the buyer is responsible for paying and remitting that VAT.
Income tax on local sales depends on whether they fall within the registered activity and on the incentive regime elected. Keep the supporting records separate where sales receive different tax treatment.
If a foreign-owned export enterprise falls below the Foreign Investments Act’s export requirement, the Board of Investments can notify the SEC or DTI. The regulator can then order the enterprise to reduce domestic sales to no more than 40% of total production, with continued noncompliance potentially leading to cancellation and penalties.
Non-Fiscal Benefits for Registered Enterprises
Registered enterprises can also access investment-law benefits concerning foreign staff, equipment, and operating arrangements. The available benefits depend on the agency and registration framework.
Foreign employees and visa facilitation
The Omnibus Investments Code provides for foreign nationals in supervisory, technical, or advisory roles for up to five years from registration, with extensions at the agency’s discretion. In majority-foreign-owned enterprises, the president, treasurer, and general manager, or equivalent positions, can remain foreign-held beyond that period.
Filipino understudy and skills-transfer obligations also apply. The Board of Investments and PEZA offer visa facilitation through their respective procedures, alongside the required employment authorizations.
Customs procedures and consigned equipment
BOI-registered enterprises can access simplified customs procedures under the investment framework. Qualifying consigned equipment can be used without a fixed time limit where the required re-export bond is posted and exclusive-use conditions are met.
These arrangements still require customs documentation and compliance with the registered project’s terms. They do not provide unrestricted use or disposal of imported assets.
Long-term land leases
A wholly foreign-owned company cannot own Philippine land. However, qualifying foreign investors with approved and registered investments can lease private land for up to 99 years under Republic Act 12252.
The lease must support the approved investment, be registered with the Registry of Deeds, and be annotated on the land title. Tourism projects require at least US$5 million in investment, with 70% infused within three years of signing the lease.
The permitted lease period is only one part of the assessment. Our guide to the 99-year lease law in the Philippines explains the investment and registration conditions.
Work-from-home arrangements
For registered projects in economic zones and freeports, CREATE MORE provides a telecommuting framework allowing up to 50% of the workforce to work remotely. The arrangement is subject to the investment promotion agency’s rules.
A temporary measure under FIRB Resolution 005-2026 allows up to 90% work from home during the national energy emergency. The agency can set a lower limit, but not below 50%.
Participating enterprises must notify the agency, maintain the required export revenue and existing headcount, and meet asset inventory, bond, and reporting requirements when moving equipment outside the zone. These conditions remain relevant even when the enterprise stays within its approved remote-work limit.
The temporary measure applies for one year from 24 March 2026 unless Executive Order 110 of 2026 is extended or lifted earlier. Confirm the approved arrangement before choosing premises or planning staffing around remote work.
PEZA, BOI, or a Freeport Authority?
Your project’s location and operating model help determine the appropriate agency. Each route also has its own application and ongoing compliance requirements.
| Agency | Main consideration |
|---|---|
| PEZA | Eligible projects in PEZA-administered economic zones, IT parks, and accredited buildings |
| Board of Investments | Eligible priority projects nationwide, including projects outside economic zones |
| Freeport authorities | Eligible projects within their respective territories, such as Clark and Subic |
Investment promotion agencies approve incentives for registered projects with investment capital of PHP 15 billion or less under the statutory threshold. Larger projects proceed to the Fiscal Incentives Review Board on the agency’s recommendation.
Compare location requirements, logistics, staffing arrangements, reporting obligations, and the incentive package before committing to premises. The highest advertised incentive period may not produce the best operating outcome.
How to Register an Export Enterprise
1. Confirm the activity, ownership rules, and export model
Check the proposed activity against the Foreign Investment Negative List and sector-specific laws. Establish whether the business will meet the Foreign Investments Act’s export threshold and whether the project can qualify for registered export-enterprise incentives.
If applying for incentives, identify the relevant activity and tier in the Strategic Investment Priority Plan. Resolve the expected export ratio before selecting the entity and capital structure.
2. Incorporate the company or license the branch
Register a domestic corporation or one person corporation, or obtain an SEC license for the foreign company’s branch. Capitalization should support the project and meet any special legal requirements.
Entity setup also requires decisions on officers, registered premises, and tax registration. Our company registration service in the Philippines covers these steps and the registrations needed to begin operating.
3. Complete foreign-investment registration and assess incentives
Address BOI registration and reporting requirements under the Foreign Investments Act. If seeking incentives, separately confirm the project’s eligibility with PEZA, the Board of Investments, or the relevant freeport authority.
Plan the application before commencing the proposed incentivized activity. Starting operations does not create a retrospective entitlement to incentives.
4. Prepare the project application
The supporting documents can include:
- A project study and financial projections.
- Export contracts, purchase orders, or other evidence of an overseas market.
- An investment schedule and funding information.
- SEC registration documents and corporate authorizations.
- Details of the premises, equipment, staffing, and operating model.
- Environmental approvals for projects that require them.
For relevant projects, this includes an Environmental Compliance Certificate or Certificate of Non-Coverage. The exact checklist depends on the activity and approving agency.
5. Apply for incentives and elect the tax package
Submit the project application to the appropriate investment promotion agency. The agency evaluates the activity, tier, location, investment commitments, and projected benefits.
Choose between an income tax holiday followed by special corporate income tax or enhanced deductions, or an immediate special-tax or enhanced-deductions package. Model the alternatives before making the irrevocable election.
6. Complete operating registrations and maintain compliance
Complete Bureau of Internal Revenue registration, local permits, employer registrations, and customs accreditation where required. Arrange the certifications and import approvals needed to claim VAT and duty relief.
Track export performance throughout the year and submit the reports required by the Board of Investments, the incentive-granting agency, and the tax authorities, including annual incentive and benefits reports. Separate records for registered and unregistered activities help support the correct tax treatment.
Setting Up an Export Enterprise with Emerhub
Emerhub’s Manila team helps foreign investors structure, register, and operate Philippine export businesses. We can support you with:
- Incorporating a corporation or licensing a branch with the SEC.
- Assessing foreign ownership, capital, and export requirements.
- Preparing foreign-investment and incentive registration applications.
- Comparing special corporate income tax and enhanced deductions against your projections.
- Completing tax, local, employer, and customs registrations.
- Providing corporate secretary or resident agent services.
- Managing accounting, tax filings, and incentive reporting.
Tell our Philippines team what you plan to sell, where your customers are, and how you will operate. We will help you establish the appropriate structure and registration route.
Frequently asked questions
Can foreigners own 100% of an export enterprise?
Yes, if the activity is open to full foreign ownership and the enterprise meets the relevant requirements. Export status does not override restrictions under the Constitution, sector-specific laws, or the Foreign Investment Negative List.
Is the export requirement 60% or 70%?
The Foreign Investments Act uses a 60% threshold for export-enterprise status. The registered export-enterprise incentive framework uses a 70% threshold, so the test depends on which benefit you are seeking.
Does an export enterprise need US$200,000 in capital?
A qualifying export enterprise is not subject to the Foreign Investments Act’s US$200,000 domestic-market threshold. It still needs to meet sector-specific requirements and demonstrate sufficient funding for its proposed operations.
Do IT and BPO companies qualify?
Yes. The 2026 Strategic Investment Priority Plan covers qualifying service exports, including IT-BPM activities delivered to overseas clients and paid for in foreign currency, with at least 70% exports for the export-activity incentive route.
Can an export enterprise sell to Philippine customers?
Yes, subject to its registration conditions and export commitments. Local sales can create VAT obligations and affect whether the company continues to meet the 60% and 70% thresholds.
Can I switch from special corporate income tax to enhanced deductions later?
The elected incentive package is irrevocable for its entitlement period. Compare the alternatives before registration, including the effects of additional deductions, local taxes, and expected margins.
Does an income tax holiday cover the whole company?
No. It covers income from the approved registered project or activity. Income from other activities must be accounted for separately and taxed under the relevant rules.
Can a foreign-owned export enterprise own land?
A wholly foreign-owned enterprise cannot own Philippine land. Qualifying investors can instead lease private land for up to 99 years under Republic Act 12252, subject to investment and registration conditions.