In brief

On 24 May 2022, the Philippine president signed Memorandum Order No. 61 ("Memorandum Order"), which approved the 2022 Strategic Investment Priority Plan (SIPP). Pursuant to Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and its implementing rules and regulations ("CREATE IRR"), enterprises engaged in activities covered by the SIPP may register with investment promotion agencies (IPA) and be entitled to tax and nontax incentives.

The adoption of the SIPP became effective 15 days after publication of the Memorandum Order, or on 14 June 2022.

Salient points of the SIPP

The SIPP lists the economic and business activities that may be given investment incentives under the CREATE Act and the CREATE IRR.

Under the CREATE Act and the CREATE IRR, subject to compliance with the terms and conditions for the availment of tax incentives as may be provided under applicable law and the enterprise's registration agreement with the relevant IPA, an enterprise may be granted income tax holiday (ITH) of four to seven years, depending on its location and industry tier as specified in the SIPP.

Upon expiration of an enterprise's ITH incentive, the enterprise has the option to avail of either (i) corporate income tax rate (of 5%) (SCIT) or enhanced deductions (ED).

  • If an enterprise is engaged in export activities (i.e., at least 70% of its total production or output is exported) or there is an activity identified by the SIPP as 'critical' (i.e., industries identified by the National Economic and Development Authority to be crucial to national development), such enterprise may avail of SCIT or ED for 10 years after the expiration of its ITH incentive.
  • A domestic market enterprise that is not engaged in a critical activity may avail of either 5% SCIT or ED for five years after the expiration of its ITH incentive.

We summarize in the tables below the industries covered by each industry tier as provided under the SIPP, and the period for ITH and SCIT or ED incentive availment applicable to each industry tier.

Tier I

All activities listed in the 2020 Investments Priorities Plan ("2020 IPP") unless listed in Tiers II and III below

Such activities include, but shall not be limited to, the provision of IT-BPM services whether for domestic or export markets; maintenance, repair and overhaul of aircrafts; mass housing; infrastructure and logistics; production and manufacture of export products; mining; and tourism.

Period to avail of tax incentives

National Capital Region

Export enterprise or enterprise in critical industry: 4 years ITH + 10 years of ED/SCIT

Domestic market enterprise: 4 years ITH + 5 years of ED/SCIT

Metropolitan areas or areas contiguous and adjacent to NCR

Export enterprise or enterprise in critical industry: 5 years ITH + 10 years of ED/SCIT

Domestic market enterprise: 5 years ITH + 5 years of ED/SCIT

All other areas

Export enterprise or enterprise in critical industry: 6 years ITH + 10 years of ED/SCIT

Domestic market enterprise: 6 years ITH + 5 years of ED/SCIT

Tier II

Activities that promote a competitive and resilient economy and fill gaps in the Philippines' industrial value chains, and are deemed critical in promoting green ecosystems — ensuring a dependable health system; achieving a robust self-reliance in defense systems; and realizing modern, competitive, and resilient industrial and agricultural sectors, including, but not limited to:

  1. Green ecosystems such as electric vehicle (EV) assembly; manufacture of EV parts, components and systems; operation of EV infrastructure; manufacture of energy efficient marine vessels and equipment; electronic devices and circuits for smart grid and renewable energy (including wearable solar devices); bioplastics and biopolymers; renewable energy; energy efficiency and conservation projects; energy storage technologies; and integrated waste management and disposal
  1. Health-related activities such as manufacturing in support of the Vaccine Self-Reliance Program or other health-related programs as endorsed by the Department of Health, Department of Science and Technology (DOST), or other agencies; medicines; active pharmaceutical ingredients; and specialty hospitals
  1. Defense-related activities that are endorsed by the Department of National Defense, Armed Forces of the Philippines or the National Security Council
  1. Industrial value-chain gaps that will address gaps in several industries such as steel, textiles, chemicals, etc.
  1. Food security related activities that cover products and services critical in ensuring food security or in support of green/organic agriculture, as endorsed by the Department of Agriculture or Philippine Council for Agriculture, Aquatic and Natural Resources Research and Development such as, but not limited to, integrated food production and processing activities; productions and/or adoption of hybrid seeds contained in the National Seed Industry Council Crop Variety Registration; manufacture of animal vaccine, pesticides and fertilizers; and agricultural and fisheries machinery and equipment, and parts and components thereof

Period to avail of tax incentives

National Capital Region

Domestic market enterprise: 5 years ITH + 5 years of ED/SCIT

Metropolitan areas or areas contiguous and adjacent to NCR

Domestic market enterprise: 6 years ITH + 5 years of ED/SCIT

All other areas

Domestic market enterprise: 7 years ITH + 5 years of ED/SCIT

Tier III

Activities that (i) are projected to accelerate the transformation of the economy primarily through the application of research and development, and attracting technology investments; (ii) involve the production of equipment, parts and services that embed new technologies; and (iii) involve the commercialization of research and development output.

Tier III includes, but is not limited to, the following activities:

  1. Research and development (R&D) and activities adopting advanced digital production technologies of the fourth industrial revolution, such as, but not limited to, robotics; artificial intelligence; additive manufacturing; data analytics; digital transformative technologies (e.g., cloud computing services, hyperscalers, data centers and digital infrastructure); nanotechnology (including nanoelectronics); biotechnology; production and/or adoption of new hybrid seeds; and other Industry 4.0 technologies
  1. Highly technical manufacturing and production of innovative products and services, such as, but not limited to, manufacture of equipment, parts and services; commercialization of intellectual property and R&D products/services, aerospace, medical devices (except personal protective equipment); Internet of Things devices and systems (includes wireless sensors and devices); full-scale wafer fabrication; and advanced materials
  1. Establishment of innovation support facilities, such as, but not limited to, R&D hubs; Centers of Excellence; science and technology parks; innovation incubation center; tech start-ups; start-up enablers; incubators and accelerations; and space-related infrastructures

Period to avail of tax incentives

National Capital Region

Domestic market enterprise: 6 years ITH + 5 years of ED/SCIT

Metropolitan areas or areas contiguous and adjacent to NCR

Domestic market enterprise: 7 years ITH + 5 years of ED/SCIT

The Philippine government may include additional activities under Tiers II and III of the SIPP, provided that activities to be included under Tier III must be duly endorsed by relevant government agencies.

Upon effectivity of the SIPP, all government agencies and entities are enjoined to issue the necessary regulations to ensure its implementation in a synchronized and integrated manner. No government body shall adopt any policy or take any course of action contrary to, or inconsistent with, the SIPP and relevant laws.

All IPAs shall facilitate and expedite, to the extent possible, the setting up and conduct of registered projects or activities through a one-stop action center. Further, local government units and other government agencies shall coordinate with the concerned IPA to comply with RA No. 11032 or the 'Ease of Doing Business and Efficient Government Service Delivery Act of 2018'.

To date, the Philippine government has yet to issue the general policies and specific guidelines to implement the SIPP. Pending issuance thereof, IPAs continue to evaluate projects on the basis of the general policies and specific guidelines to implement the 2020 IPP as may be applicable.

Actions to consider

Enterprises currently engaged in or that will engage in activities covered by the SIPP may consider registering with IPAs to avail of incentives under the CREATE Act and CREATE IRR.