FOLLOWING passage of a law that reduced the corporate income tax (CIT), the Philippines is encouraging South Korean manufacturers of electric vehicle (EV) parts and semiconductor firms to invest in or expand their operations in the country.
Trade Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo said these firms can also access tax incentives such as the Income Tax Holiday (ITH) which is good for 4 to 7 years.
The BOI is the government’s lead industry and investment promotion agency. Rodolfo made the statements in a recent online briefing on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and the Strategic Investment Priority Plan (SIPP).
“With CREATE in place, we are encouraging South Korean firms, especially those engaged in strategic activities like EV/EV parts and semiconductor manufacturing to invest or expand in the country and take full advantage of this landmark legislation,” Rodolfo said.
“We are strongly optimistic of a resilient post-pandemic recovery as the fundamental structure and strength of our economy remain intact. We positively respond to the easing of quarantine restrictions,” he added.
Rodolfo added that after the ITH, export-oriented companies can enjoy 10 years of—at their choice—either Enhanced Deductions or the Special Corporate Income Tax (SCIT) of 5 percent on Gross Income Earned.
He also said that if firms like Hyundai decide to assemble the Hyundai Ioniq in the Philippines; or THN Autoparts or Bolim decides to add another wiring harness facility dedicated to EV, they will enjoy the same incentives as semiconductor firms.
The BOI Managing Head added that after the ITH period, purchases by Hyundai of Wiring Harness from THN or Bolim will be allowed an additional 50-percent deduction from taxable income.
Firms like Hyundai can also enjoy 100-percent additional deduction for training the workers in their factory, Rodolfo also said.
The benefits do not start and end with EV and semiconductor firms. Rodolfo said Korean companies that invest in food manufacturing and sell primarily to the domestic market can also enjoy incentives, as CREATE treats local and foreign companies alike.
“I just used semiconductors and automotive/auto parts such as wiring harness as examples but the situations are also applicable to other manufacturing and non-manufacturing projects,” Rodolfo said.
Rodolfo stressed the timing is right to invest in the Philippines. He said the Manufacturing Purchasing Managers’ Index (PMI) and inflation showed signs of the economy recovering.
He shared the Central Bank’s latest report on the 41.5-percent increase in foreign direct investments (FDIs) into the country in January 2021, compared with the same month of last year.
“Our Philippine economic diplomacy is grounded on the pursuit of sustainable economic development through globally-oriented, open, and inclusive economic policies for stakeholders,” Chargé d’ Affaires Christian De Jesus of the Philippine Embassy in South Korea said.
“With the incentives tied to CREATE law, we can encourage more Korean companies in these manufacturing sectors to seriously consider the Philippines as their investment destination,” he added.
Despite the pandemic, Rodolfo said, the BOI posted its second-highest level of project approvals in history with a total approved investments of $20.55 billion or P1.02 trillion.
In the January to March period this year, he said, BOI project approvals surged by 66 percent compared to the same period in 2020.
Rodolfo said the Philippines now also has access to key markets through bilateral and regional Free Trade Agreements (FTAs)—for instance, with Japan through the Jpepa and the members of the Efta; and with Asean.
The Asean also has an FTA with Australia and New Zealand, China, India, and South Korea; and Generalized System of Preferences of Canada, the EU, the UK and Russia.