Tax Incentives of Registered Business Enterprises (RBES)

By: Atty. Mabel L. Buted

"The enterprises are also entitled to incentives on VAT and duties. All RBEs which are considered export enterprises and high-value domestic market enterprises are subject to 0% VAT on their local purchases of goods and services and are exempt from VAT on their importations, provided that these are directly attributable to the registered project or activity. Further, all RBEs are exempt from duties on importation of capital equipment, raw materials, spare parts, and accessories for their registered project or activity, provided that the imported items are directly attributable to the registered project or activity. Qualified RBEs can enjoy these VAT and duties incentives during the period of their registrations."

Enterprises whose projects or activities are approved under the Strategic Investment Priority Plan (SIPP) of the government are qualified for tax incentives. The SIPP is a three-year blueprint that identifies the country’s key or priority economic activities and sectors which can qualify for fiscal incentives. As of this writing, the latest SIPP was the SIPP released in 2022. The supposed 2025 SIPP has not yet been released and as it is still undergoing public consultation and finalization.

Similar to the 2022 SIPP, the projects or activities in the proposed 2025 SIPP are categorized into industry tiers – Tier I, Tier II and Tier III, depending on the industry priorities.

Under the draft 2025 SIPP, Tier I covers (a) those that address modern basic needs (such as processing and commercial production of agriculture, fishery and forestry products and value-added manufacturing activities, creative/knowledge-based services like software development, healthcare and disaster risk reduction management services, certain services on infrastructure and logistics, and energy projects; and (b) sustainability-driven industries (i.e., bulk water treatment and supply, industrial waste and wastewater treatment, and assembly of goods leading to energy conservation and reduction of pollution).

Tier II are (a) defense-related activities; (b) those that address gaps on the industrial value chain that include all logic and circuit design techniques required to design integrated circuits, manufacture of products like iron and steel and chemicals not locally produced and other import substituting activities, crude oil refining, sustainability activities related to the use and establishment of energy efficient transport vehicles and infrastructure, waste management, disposal and recycling, and health-related activities such as herbal medicines, active pharmaceutical ingredients and specialty hospitals, and (c) products and services critical to the country’s food security or in support of green/organic agriculture.

Tier III are projects focusing on innovation. It covers (a) innovation-related activities like research and development (i.e., clinical trials on emerging or novel pharmaceutical products), commercialization of patents, industrial designs, copyrights, and utility models, cybersecurity related IT-BPM services, artificial intelligence, establishment and operation of data center facilities, and modern biotechnology, and (b) establishment of innovation support facilities.

The tax incentives may be granted either by the Fiscal Incentives Review Board (FIRB) or an Investment Promotion Agency (IPA). IPAs grant incentives for investments amounting to P15 billion and below, while FIRB approves the incentives for investments with more than P15 billion in amount. Enterprises with incentives approved by the FIRB and industries belonging to Tier III enjoy longer period of availment for the incentives granted.

In general, RBEs are entitled to enjoy income tax holiday (ITH) during the first few years of their operations (4 to 7 years). During this period, they will be exempted from paying income tax, but subject to all other kinds of taxes, fees and charges, both national and local.

After the period of ITH entitlement, the registered enterprises will enjoy either (a) the 5% Special Corporate Income Tax (SCIT) rate on their gross income or (b) the 20% regular tax rate to be applied on the net taxable income.

Enterprises availing of the 5% SCIT are exempt from payment of all kinds of national and local taxes, fees and charges imposed by the local government unit (LGU) such as local business tax, mayor’s permit fees and garbage fees. On the other hand, enterprises paying the 20% income tax are entitled to the enhanced deductions (ED) on some of the incurred expenses in computing the net taxable income. These EDs are provided in the law and they include additional deductions on electricity costs, depreciation on production machinery and equipment, labor, training, and research and development.

The RBEs can choose, however, to avail the SCIT or the ED outright, without opting to avail ITH first. These SECIT or ED incentives can be enjoyed up to 10 to 27 years.

Entities under the ITH or ED regime are qualified to pay RBE local tax (RBELT) of not more than 2% of their gross income in lieu of payment of all local taxes and local fees and charges imposed by the LGU. However, the payment must be imposed first by the LGU through the enactment of an ordinance. In such case, if the RBELT is paid, the RBE would no longer be required to pay the usual local taxes, fees and charges imposed by the concerned LGU.

The enterprises are also entitled to incentives on VAT and duties. All RBEs which are considered export enterprises and high-value domestic market enterprises are subject to 0% VAT on their local purchases of goods and services and are exempt from VAT on their importations, provided that these are directly attributable to the registered project or activity. Further, all RBEs are exempt from duties on importation of capital equipment, raw materials, spare parts, and accessories for their registered project or activity, provided that the imported items are directly attributable to the registered project or activity. Qualified RBEs can enjoy these VAT and duties incentives during the period of their registrations.

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 160.