What Are the Tax Incentives Under BOI?
The Board of Investments (BOI) plays a major role in promoting investments in the Philippines. One of the ways it attracts investors is through a range of tax perks designed to reduce operational costs and enhance competitiveness.
But what exactly are these BOI tax incentives in the Philippines, and how do you apply them effectively?
Let’s break it down in a clear and practical way.
TL;DR: What Are the Tax Incentives Under BOI?
The Board of Investments (BOI) in the Philippines grants several fiscal incentives to eligible local and foreign-owned businesses. These include Income Tax Holidays (ITH), VAT exemptions, and duty-free importation of capital equipment. Understanding the duration, application process, and compliance requirements is key to maximizing these BOI tax incentives.
Quick Summary of BOI Tax Incentives
Here are the major BOI fiscal incentives granted to qualified companies:
1. Income Tax Holiday (ITH)
- Enjoy tax exemption from corporate income tax for a set number of years
- Usually 4 years for non-pioneer and 6 years for pioneer projects
- Can be extended in certain cases
2. Duty-Free Importation of Capital Equipment
- Import qualified machinery, equipment, and spare parts without paying customs duties
- Saves substantial upfront costs
3. VAT Exemptions
- On imports and local purchases of capital equipment, raw materials, and supplies
- Reduces the cost of procurement
4. Enhanced Deductions (after ITH expires)
- Allow additional deductions for labor expenses, training costs, infrastructure, and more
Why These BOI Incentives Matter
These tax benefits for BOI-registered companies help:
- Reduce startup and operating costs
- Improve cash flow and profitability
- Make Philippine operations more competitive
- Attract foreign and local investors
Still, many businesses are confused about the mechanics of how to actually enjoy these perks. Let’s clarify them.
How BOI Income Tax Holiday (ITH) Works
The BOI income tax holiday is often the most attractive incentive. Here’s how it works:
- It provides a full exemption from the 25% regular corporate income tax.
- Applies only to income generated from registered activities.
- The typical duration is:
- 4 years for non-pioneer status
- 6 years for pioneer projects
- +1 or +2 years for firms that meet performance targets or export thresholds
Important: The ITH is non-transferable and must be availed during continuous operations. You cannot pause and resume it.
Who Is Eligible for BOI Tax Incentives?
To qualify for BOI registration tax exemptions, your business must:
- Be engaged in a priority activity listed under the Strategic Investment Priority Plan (SIPP)
- Register and receive approval from the BOI
- Commit to economic contributions such as job generation, exports, or technology transfer
Eligible sectors include:
- Renewable energy
- IT-BPM services
- Manufacturing
- Agribusiness
- Infrastructure
- Healthcare
BOI Tax Incentives for Foreign-Owned Companies
Yes, BOI incentives are available to foreign-owned companies as long as:
- Their activity is not restricted under the Foreign Investment Negative List (FINL)
- They serve the export market (at least 70% export ratio in some cases)
This means tax perks for foreign investors in the Philippines are within reach, especially for manufacturing and tech.
Foreign companies can enjoy 100% ownership and full access to BOI tax perks in qualified sectors.
What Are VAT and Duty-Free Perks?
BOI-registered enterprises can benefit from:
VAT Exemptions:
- On importation and local purchase of capital equipment and raw materials
- On the sale of goods and services to registered exporters (zero-rated)
Duty-Free Importation:
- For brand-new machinery and equipment
- For spare parts necessary for BOI-approved operations
These BOI VAT exemptions and duty-free incentives provide immediate cost savings.
Enhanced Deductions After ITH
Once the ITH ends, the BOI allows enhanced deductions:
- Additional deduction for labor expenses (50% more than actual cost)
- Training expenses for Filipino workers
- Power cost, depreciation, and R&D expenses
These deductions lower your taxable income even after your tax holiday.
PEZA vs BOI Tax Incentives: What’s the Difference?
Some companies also consider PEZA registration. Here’s a quick comparison:
| Feature | BOI | PEZA |
| Income Tax Holiday | Yes | Yes |
| VAT Exemptions | Yes | Yes (on local purchases) |
| Duty-Free Importation | Yes | Yes |
| Location Restriction | None | Must be in a PEZA zone |
| 5% GIE after ITH | No (replaced by enhanced deductions) | Yes |
PEZA vs BOI tax incentives ultimately depends on your business model, market (domestic vs export), and location preferences.
Application Process: How to Apply for BOI Tax Incentives
Here’s how to qualify for BOI incentives:
Step-by-Step Guide:
- Prepare Business Plan and Project Study
- Identify if your activity is on the SIPP list
- Submit the online BOI application form
- Attend the project evaluation meeting
- Get approval and Certificate of Registration
- Register with the BIR to avail fiscal perks
The approval process typically takes 2–3 months.
What Documents Are Required?
Typical BOI-approved project tax incentives require:
- SEC or DTI registration documents
- Business plan or feasibility study
- Articles of Incorporation
- Audited financial statements
- Project location documents
- List of machinery and equipment to be imported (for duty-free perks)
Common Compliance Issues and How to Avoid Them
Businesses often run into trouble when:
- They fail to file reports required by the BOI
- They misuse equipment or apply incentives to unregistered activities
- They do not properly register with the BIR to implement tax perks
To avoid penalties and cancellation of incentives, maintain strict compliance and documentation.
FAQ: Board of Investments Tax Incentives
What are the tax incentives offered by the BOI in the Philippines?
Income tax holidays, VAT exemptions, duty-free importation, and enhanced deductions.
Who is eligible for BOI tax incentives?
Companies engaged in priority sectors are listed under the SIPP.
How long does the BOI Income Tax Holiday last?
Typically 4–6 years, with possible extensions.
Are BOI incentives available to foreign-owned companies?
Yes, especially if they serve export markets and are in eligible sectors.
What is the difference between BOI and PEZA tax incentives?
BOI has broader location options, while PEZA provides a 5% GIE and location-based perks.
Can BOI tax incentives be extended or renewed?
Yes, under specific conditions, such as performance milestones.
What is duty-free importation under BOI incentives?
Exemption from customs duties for machinery, equipment, and spare parts.
Do BOI tax perks include VAT exemptions?
Yes, on both imports and local purchases related to approved activities.
How do I apply for BOI tax incentives?
Submit your application through the BOI portal with the required documents.
What are the documentary requirements to avail of BOI tax incentives?
Business registration, project study, equipment list, and other legal papers.
Do I need to register with the BIR after BOI approval?
Yes, to activate and properly account for the fiscal incentives.
What happens if a company violates BOI conditions?
Incentives may be suspended or revoked, and penalties may apply.
Final Thoughts
The Philippine BOI tax perks can significantly improve your company’s financial performance. But to benefit fully, you must understand the rules and stay compliant.
Whether you’re a local startup or a foreign investor, the Board of Investments’ incentives offer powerful tools to help you grow.
Need help navigating your BOI registration or maximizing your incentives? Fill out the form below, and our experts with BOI-registered enterprise benefits can guide you through the process.