A few days ago, I had the opportunity to attend an event organized by the Embassy of the Philippines in Madrid. The event, presided over by the active Ambassador Lhuillier, focused on why investing in the Philippines and how to do business in the country. Raymond (Mon) Abrea, Chief Tax Adviser of the Asian Consulting Group (ACG) and author of the book “Why Invest in The Philippines,” highlighted two key chapters: “Ease of Doing Business” and “Tax Incentives.” Both chapters deserve, in my opinion, for their importance in the overall topic discussed, a special mention that not only serves to highlight their most outstanding aspects but also makes them available to Spanish companies, in case they could be useful.
The Importance of Understanding the Philippines and Southeast Asia
The lack of knowledge about the Philippines and Southeast Asia is often a challenge for companies looking to invest in the Philippines and expand in the region. Events like the one I am referring to are of undeniable importance as they allow us to approach a reality, such as the Filipino market in this case, whose potential is necessary to consider today more than ever: by territory -300,000 km2-, population -115 million inhabitants-, growth -at an average rate of 6% annually in the last ten years-, legality -immersed in a growing process of liberalization- and stability.
Ease of Doing Business and Efficient Government Services
Raymond (Mon) Abrea emphasized the importance of ease of investing in the Philippines, especially following the adoption of the corresponding law (Republic Act No. 11032, of June 17, 2018, “Ease of Doing Business and Efficient Government Service Delivery Act“). This law, in addition to creating a centralized business platform – the “Philippines Business Hub” (PBH) -, has established specific response times for transactions with government agencies. Specifically, 3 days for simple transactions, 7 days for complex transactions, and 20 days for highly technical transactions, so that if these deadlines pass without receiving any response, the transaction is considered approved under positive administrative silence.
Tax Incentives and Investment Strategies in the Philippines
Another equally important issue is taxation, which Raymond (Mon) Abrea also addressed, highlighting the role played by the tax incentives adopted by the law for the recovery of companies and tax incentives (Republic Act No. 11534, of March 26, 2021, “Corporate Recovery and Tax Incentives Enterprise (CREATE) Act“). This law has reduced the general corporation tax rate from 30% to 20% -25% for non-resident foreign corporations-; implemented tax moratoriums for certain exporting companies; and established tariff or tax exemptions -VAT- for the importation of capital goods, raw materials, spare parts, and accessories intended for specific projects. However, for these purposes, it is advisable to verify beforehand whether the type of investment being considered aligns with the priorities set by the “Strategic Investment Priority Plan (SPIP)” to maximize benefits when investing in the Philippines.
Special Economic Zones: Opportunities for Spanish Investments
In this context, another issue that should not be overlooked is that of Special Economic Zones, with more than 400 zones such as those located in Freeport Area of Bataan (FAB), Cavite Export Processing Zone (CPEZ), San Carlos Ecozone or, more recently, Robinsons Cyberpark Bacolod and Lima Technology Center, to name a few. Created by Republic Act No. 7916, of July 25, 1995, subsequently amended by Republic Act No. 8748, and established by the Philippines Economic Zone Authority (PEZA), they include activities related to trade, industry, logistics, information technology, tourism, or the environment and offer various benefits and incentives such as tax exemptions, simplified customs procedures, simpler corporate registrations, and easy access to government services. These areas promote trade, industry and offer tax breaks, streamlined processes and access to government services, making them attractive destinations for investing in the Philippines.
Final Thoughts: The Potential of the Philippines for Spain
In my opinion, the Philippines has been for many years -and still is to a large extent today- Spain’s great pending issue in Southeast Asia. It should have been our spearhead in the area, but our foreign policy, despite the existing political, social and cultural ties, has barely paid it due attention, lacking the necessary strategies, means and resources. Although late, it is time to make up for lost time, not only from an official perspective but also and above all from a private perspective, where our companies can and should play an economically, commercially and socially relevant role. The current regulatory framework supported by experts like Raymond (Mon) Abrea invites us to explore these possibilities and seriously consider investing in the Philippines. What are we waiting for to act and capitalize on this potential?
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
