The investment priorities plan (IPP) is the plan issued by Philippines Board of Investments (BOI) to identify priority investment areas eligible for fiscal and non-fiscal incentives. It is updated periodically, with the latest 2022 Strategic Investment Priority Plan (SIPP) further extending tax perks. The priorities plan serves as a guideline for enterprises applying for BOI registration to enjoy tax holidays, import duty exemptions, and other benefits.
Investment priorities plan incentivizes pioneer and non-pioneer projects
The investment priorities plan specifies business activities across different industries that are deemed as pioneer or non-pioneer projects eligible for tax incentives. Pioneer projects refer to innovative activities that have great economic significance, such as manufacturing of semi-conductors and development of artificial intelligence. They enjoy a 6-year income tax holiday. Non-pioneer projects engage in activities included in the priority plan but are more established, granting a 4-year income tax holiday.
Export-oriented companies enjoy enhanced deductions beyond tax holidays
For export-oriented companies with over 70% of output exported, the investment priorities plan allows them to avail of enhanced deductions (EH) or 5% special corporate income tax rate after the expiration of the initial income tax holiday period. EH allows additional business expense deductions while the special tax means just paying 5% tax based on gross income, much lower than the regular 25% rate.
Incentives period depends on location and domestic/export focus
The duration of incentives that companies can receive depends on whether their activities serve the domestic market or are export-oriented. Export-oriented firms focused on innovation and high technology can have tax holidays up to 7 years under the investment priorities plan compared to just 4 years for domestic market participants. Firms located in less developed regions of the Philippines also enjoy 1-2 more years of incentives.
The Philippines Board of Investments investment priorities plan lays out the specific industries and activities eligible for fiscal and non-fiscal incentives. It classifies pioneer export-oriented high technology firms as deserving of the longest tax holidays while also prescribing extended benefits for companies locating in less developed areas.