Philippines emerges as prime investment destination 

The Philippines has emerged as a prime investment destination through tax reforms that have created a favorable business environment for foreign investors, property advisory firm Colliers said in a report by Manila Bulletin.

The report published on Friday, Feb. 28, cited the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act for introducing tax incentives aimed at boosting key sectors such as information technology and business process management (IT-BPM) and manufacturing.

“As businesses look for stable, cost-effective opportunities in the region, the Philippines remains a competitive hub for growth, innovation, and long-term success,” it said.

The CREATE MORE Act, enacted in November of last year, amended the CREATE Act signed in 2021 and the Implementing Rules and Regulations (IRR) of Title XIII of the Tax Reform Act of 1997.

Last week, the IRR of CREATE MORE was finally signed, signaling the country’s readiness to compete globally with its slew of incentives relevant in an environment where flexibility and cost savings are increasingly vital.

The IT-BPM sector, which has been a constant economic driver in the Philippines, is provided under CREATE MORE with substantial tax reliefs that are attractive to companies looking to establish or expand operations.

The law grants registered businesses in the industry access to income tax benefits such as the income tax holiday (ITH) and the special corporate income tax (SCIT).

Specifically, the ITH allows outsourcing companies to enjoy full income tax exemption for a set period. A seven-year exemption is granted to export-oriented manufacturing and IT-BPM industries, alongside a tax-free importation of machinery and raw materials.

Meanwhile, the SCIT provides a reduced 5 percent tax on gross income and enhanced deductions for research and development (R&D), workforce training, and power expenses.

CREATE MORE also extends a 50 percent work-from-home incentive, aligning with the IT-BPM sector’s evolving workforce needs.

“These measures reduce the tax burden on companies, allowing them to direct more resources toward expansion, talent acquisition, and technological innovation,” Colliers said.

In a global context, the Philippines’ tax incentives are deemed aligned with the best practices in countries known for their investment-friendly policies.

Colliers pointed out that the 20 percent corporate income tax (CIT) rate provided under CREATE MORE is on par with international tax regimes such as Singapore’s 17 percent rate and Ireland’s 12.5 percent.

The country is likewise hailed for its provision of enhanced deductions in terms of labor costs, power consumption, R&D, and employee training—incentives that are appealing to foreign investors.

Colliers stated that the overall outlook for industries supported by the aforementioned incentives is “exceptionally promising” despite challenges in the office market.

Latest data shows that Metro Manila’s office vacancy rate stood at 19.8 percent during the fourth quarter of 2024, equating to about 2.8 million square meters (sqm) of available space.

For the IT-BPM sector, office space transactions equaled 246,672.36 sqm last year, down from the previous year’s 281,891.63 sqm.

However, Colliers noted that as the market stabilizes, an uptick in transactions is expected as early as the first quarter of 2025.

“It is clear that the government’s incentives are helping key sectors, like IT-BPM and manufacturing, remain competitive,” the report read. “These reforms come at a critical time, as industries across the globe seek stability and growth opportunities.”

Colliers added that the incentives are also crucial in promoting the Philippines as a global leader in outsourcing as demand for digital services, technology, and artificial intelligence (AI) grows.

“With these tax breaks, the Philippines remains an attractive destination for multinational companies looking for cost-effective, long-term growth,” it said.