In the Philippines, the Philippine Economic Zone Authority (PEZA) serves as a primary investment promotion agency, offering a suite of fiscal and non-fiscal incentives to enterprises operating within Special Economic Zones (Ecozones). For investors looking to capitalize on these benefits, understanding the legal framework governing minimum capital and registration is paramount.

1. Legal Basis and Regulatory Framework

The primary legislation governing PEZA is Republic Act No. 7916, otherwise known as the Special Economic Zone Act of 1995, as amended. More recently, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act (R.A. 11534) has significantly overhauled the incentives regime and registration requirements for Business Enterprises (BEs) in the Philippines.

2. Minimum Capital Requirements

Unlike many regulated industries with fixed statutory minimums, PEZA’s capital requirements are often dictated by the project’s feasibility and the nature of the industry.

A. The General Rule (Foreign Equity)

Under the Foreign Investments Act (FIA), as amended by R.A. 11647, foreign-owned domestic enterprises (more than 40% foreign equity) serving the domestic market generally require a minimum paid-in capital of USD 200,000.

However, PEZA-registered enterprises are typically Export Enterprises (exporting at least 70% of output). For these entities:

The USD 200,000 requirement is waived if the enterprise is considered an export-oriented firm.
In practice, PEZA evaluates the "financial capability" of the applicant. The capital must be sufficient to cover the projected costs of the project as presented in the feasibility study.

B. Industry-Specific Minimums

While PEZA is flexible, certain sectors have baseline expectations:

IT-BPM/Service Exports: Generally requires enough capital to cover initial equipment, office fit-out, and at least six months of operating expenses.
Ecozone Developers: Developers of IT Parks or Manufacturing Zones face much higher capital requirements (often in the tens of millions of Pesos) to ensure they can sustain the infrastructure development.

3. Eligibility for Registration

To qualify for PEZA registration, an entity must fall under one of the following categories:

Export Manufacturing: Production of goods for export.
Information Technology (IT) Service Export: Software development, BPO, call centers.
Tourism: Development and operation of resorts or hotels within PEZA tourism zones.
Medical Tourism: Health services provided within medical zones.
Ecozone Developer/Operator: Developing the physical land and infrastructure of the zone.
Facilities Providers: Providing specialized buildings for PEZA tenants.

4. Documentary and Registration Requirements

The registration process is divided into two main phases: the Pre-Registration (Proposal) phase and the Signing of the Registration Agreement.

Step 1: Filing of Application

The applicant must submit the following to the PEZA Board:

PEZA Application Form: Duly notarized.
Project Feasibility Study: Detailing technical, financial, and marketing aspects for the next five years.
Company Profile: Including the background of board members and key officers.
SEC Registration Documents: Articles of Incorporation and Bylaws.
Board Resolution: Authorizing the registration with PEZA and appointing an authorized representative.

Step 2: Evaluation and Board Approval

PEZA evaluates the project based on:

Value Added: The economic contribution to the Philippines.
Job Creation: Number of local employees to be hired.
Foreign Exchange Earnings: Net positive inflow of currency.

Step 3: Registration Agreement

Once the PEZA Board issues a Letter of Authority (LOA), the enterprise must fulfill "pre-registration requirements," which typically include:

Acceptance of the terms and conditions in the LOA.
Payment of registration fees.
Proof of the specific location (Lease Agreement or Title) within a PEZA-proclaimed zone.

Upon completion, the Registration Agreement is signed, and a Certificate of Registration is issued.

5. Key Compliance Mandates

Post-registration, the enterprise must adhere to strict operational standards to maintain its status:

Location Restriction: The business must physically operate within a PEZA-designated zone. Under the CREATE Act, IT-BPM firms have faced shifting rules regarding Work-From-Home (WFH) percentages; compliance with current Department of Finance (DOF) and PEZA thresholds is mandatory to retain tax incentives.
Reporting: Monthly, quarterly, and annual reports (e.g., Audited Financial Statements, Income Tax Returns) must be submitted to PEZA.
Environmental Compliance: Manufacturing firms must obtain an Environmental Compliance Certificate (ECC) from the DENR.

6. Summary of Incentives (CREATE Act Framework)

For enterprises meeting the capital and registration hurdles, the rewards are substantial:

Income Tax Holiday (ITH): 4 to 7 years, depending on location and industry priority.
Special Corporate Income Tax (SCIT): A 5% tax on gross income earned in lieu of all national and local taxes (for export enterprises after the ITH).
Duty-Free Importation: Capital equipment, raw materials, and spare parts.
VAT Incentives: 0% VAT on local purchases and VAT exemption on imports.