M&A Guide 2025: Philippines

As the Philippines advances into 2025, the M&A landscape is experiencing significant transformations driven by regulatory reforms and economic policies. The government is actively reshaping the investment environment to position the country as a premier destination for foreign investments.

According to the Department of Finance, the Philippine economy sustained a steady 5.6% GDP growth in 2024, making it the second-fastest growing economy in the ASEAN region despite challenges such as weather-related disruptions. The outlook for 2025 remains optimistic, with the National Economic and Development Authority setting a GDP growth target of 6.0% to 8.0%.

Through strategic regulatory reforms and government-driven initiatives, the Philippines is bolstering investor confidence. Key drivers of these changes include:

• Regulatory streamlining;

• Progressive tax reforms;

• A sustained emphasis on energy sector expansion; and

• A strengthened commitment to environmental sustainability.

One of the most notable developments is Executive Order No. 18 (EO 18) of 2023, also known as Constituting Green Lanes for Strategic Investment. This executive order establishes “Green Lanes” aimed at expediting the processing of permits and approvals for investments deemed critical to national development. Under EO 18, the Board of Investments serves as the lead agency tasked with facilitating strategic investments, ensuring seamless coordination across multiple government agencies. The law mandates that all relevant government offices prioritise applications related to strategic investments, significantly reducing processing times and regulatory bottlenecks.

The executive order also introduces a one-stop shop system, allowing investors to track and expedite permit applications through a streamlined digital portal. Additionally, EO 18 outlines clear timelines for government approvals, ensuring a more predictable investment landscape. Investors engaged in cross-border M&A – particularly in industries such as energy, infrastructure, and technology – stand to benefit from a more favourable regulatory environment under the Green Lanes initiative.

Moreover, tax reforms have played a significant role in reshaping the M&A landscape. The Department of Finance has emphasised that recent tax reforms, such as the Corporate Recovery and Tax Incentives for Enterprises Act (the CREATE Act) of 2021, have enhanced the country’s economic competitiveness. Building on the CREATE Act (see this article for further details), Republic Act (RA) No. 12066, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises to Maximise Opportunities for Reinvigorating the Economy Act (the CREATE MORE Act), was enacted on November 8 2024. To facilitate its enforcement, its Implementing Rules and Regulations were signed on February 17 2025.

The CREATE MORE Act introduces several key features aimed at further enhancing the Philippines’ investment climate, such as the following:

• A lower corporate income tax (CIT) rate and expanded eligibility – under the CREATE MORE Act, registered business enterprises (RBEs) in the Philippines can choose between two tax regimes: (i) special CIT (SCIT), which provides for a fixed 5% tax on gross income earned by the RBE, and (ii) an enhanced deductions regime (EDR), which imposes a 20% CIT on taxable income, reduced from the previous 25%. This adjustment aligns with the OECD’s pillar two global minimum tax requirement, which mandates a 15% minimum tax rate. It also enhances the Philippines’ competitiveness in attracting foreign investment relative to its neighbours. In 2021, Indonesia reduced its CIT rate to 22%, while India, the Philippines’ key competitor in the IT and business process management industry, lowered its CIT rate from 30% to 22% in 2019. The CREATE MORE Act has also expanded the eligibility for tax incentives to include a broader range of enterprises, allowing foreign and local businesses to qualify as RBEs provided they meet specific requirements. Previously, the EDR, introduced under the CREATE Act, was exclusively available to registered export enterprises and domestic market companies.

• An extended incentives availment period – RBEs can now take advantage of the SCIT and EDR incentives from the start of their commercial operations without first availing of an income tax holiday (ITH). Moreover, such incentives, initially limited to 10 years, can now extend up to 17 or 27 years, depending on the nature of investment. Labour-intensive projects may apply for an extension of five to 10 years.

• Increased deductions under the EDR – the EDR also now allows power expenses to be fully deductible, increasing the rate from 50% to 100%, lowering manufacturing costs and making the Philippines more attractive to energy-intensive industries. Additionally, the tourism sector benefits from a 50% deduction on trade fair and reinvestment expenses until 2034. The net operating loss carry-over period is likewise extended from the “year of loss” to “the next five consecutive taxable years immediately following the last year of the ITH entitlement period”. This means that businesses can carry over their losses as a deduction from gross income for a longer period.

• Clearer and expanded VAT incentives – the CREATE MORE Act clarifies and expands the regulations on an RBE’s VAT-exempt imports and zero-rated local purchases, and extends their applicability to non-registered exporters and high-value domestic market enterprises. The CREATE MORE Act explicitly states that the VAT incentives apply to goods and services that are “directly attributable” to the registered activities/projects undertaken by RBEs or high-value domestic market enterprises, including janitorial services, security services, financial services, consultancy services, marketing and promotion, and administrative operations such as human resources, legal, and accounting. Previously, the incentives under the CREATE Act were restricted to those used “directly and exclusively” in the registered project or activity by an RBE, leading to uncertainty about which expenses qualified.

• A streamlined VAT refund process – the CREATE MORE Act institutionalises simplified documentary requirements and procedures for the filing and processing of VAT refunds. To enhance transparency and accountability, the law requires the publication of statistics on the aggregated volume, processing time, and approval rates of refund claims, along with other relevant data.

• A standard RBE local tax – the RBE local tax, which local government units are authorised to impose on covered RBEs, is capped at a maximum of 2% of gross income. This tax replaces all other local taxes, fees, and charges imposed by local government units. By standardising the local tax rate during the ITH and EDR periods, businesses can gain greater predictability in their tax obligations.

• Institutionalised flexible work arrangements – the reform recognises the changing business landscape by allowing RBEs in economic zones and freeports to adopt flexible work arrangements, without losing their tax incentives.

The CREATE MORE Act is expected to enhance the Philippines’ position as a prime investment destination in Asia. By offering more competitive incentives, the law aims to attract businesses that are seeking to diversify their operations and expand into new markets.

Republic Act 12120 (RA 12120), or the Philippine Natural Gas Industry Development Act, was enacted on January 8 2025. The law establishes a regulatory framework for the transmission, distribution, and supply of natural gas, aiming to develop the Philippine downstream natural gas industry and expand the role of natural gas in the country’s energy mix. The law promotes natural gas as a reliable, efficient, and cost-effective energy source essential to national energy security. Additionally, it is expected to help to meet the country’s growing fuel demand, while positioning the Philippines as a liquefied natural gas trading and trans-shipment hub in the Asia-Pacific region.

To encourage investment in the sector, RA 12120 offers fiscal incentives, including VAT exemptions on the purchase and sale of indigenous natural gas, aggregated gas, and power generated by facilities using these resources. Beyond tax incentives, the law promotes a competitive, transparent, and fair business environment by ensuring equitable access to capital and offtake markets for natural gas. It also seeks to support affordable energy pricing and foster sustainable, long-term industry growth.

Furthermore, the Department of Energy has been preparing for the fifth round of the Green Energy Auction, specifically targeting offshore wind capacity. As a cornerstone of the Philippine Energy Plan 2023–2050, the Green Energy Auction Program is part of the government’s broader strategy to accelerate renewable energy development and encourage active private sector participation and investment in the energy industry. The Green Energy Auction is a mechanism to facilitate the selection of eligible renewable energy plants through a competitive process or auction.

These developments, coupled with the recent amendments to the Foreign Investments Act and the Public Service Act (see this article for further details) opening several sectors to increased foreign investment, signify heightened opportunities for M&A activities in the renewable energy space. Investors seeking acquisitions and partnerships can capitalise on the government’s push for sustainability and clean energy, as it aims to increase renewable energy’s share in the national energy mix from 22% to 35% by 2030 and to 50% by 2040.

Another significant regulatory development is Republic Act 11995, or the Philippine Ecosystem and Natural Capital Accounting System (PENCAS) Act, enacted on May 22 2024. This legislation establishes a framework for systematically measuring and valuing the country’s natural resources and their contributions to the ecosystem and the economy.

The Philippines’ rich biodiversity plays a crucial role in the nation’s ecological and economic stability. However, these natural assets have long been undervalued, leading to unsustainable resource exploitation and severe biodiversity loss. The PENCAS Act seeks to address this gap by integrating natural capital accounting into national planning and policymaking. By quantifying the economic value of natural resources, the law seeks to ensure that economic growth does not come at the cost of environmental degradation.

Unlike traditional environmental impact assessments, which focus on evaluating the effects of specific activities on natural resources, the PENCAS framework provides a broader, data-driven approach to environmental governance. By establishing key indicators for tracking ecosystem health and resource use, the law enables policymakers to integrate environmental considerations into budget allocation, development planning, and economic decision making at national and local levels.

Embedding natural capital valuation into governance impacts the private sector, particularly industries dependent on natural resources. For instance, measuring the carbon sequestration capacity of forests and coastal ecosystems opens opportunities for the Philippines to participate in global carbon markets. The availability of reliable environmental data also enhances investor confidence, allowing for more informed and long-term business planning that aligns with global sustainability standards.

The rapid adoption of digital payments has transformed financial transactions in the Philippines, driving greater financial inclusion and improving business efficiency. According to the Bangko Sentral ng Pilipinas (BSP), the share of digital payments in total monthly retail transactions rose from 42.1% in 2022 to 52.8% in 2023, as highlighted in its 2023 E-Payments Measurement Report. This milestone exceeded the BSP’s target of digitalising 50% of payment volumes under The BSP Digital Payments Transformation Roadmap 2020–2023.

This surge in digital transactions is fuelling M&A activity, as investors recognise the growth potential of the fintech sector. Companies operating in digital payments, financial technology, and e-commerce are becoming prime acquisition targets. One notable transaction in this space was Empower Finance’s acquisition of Cashalo, a Philippine-based fintech platform that delivers digital credit to unbanked and underserved Filipinos. Empower Finance, known for its expertise in alternative credit underwriting and financial product innovation for underserved consumers in the US and Mexico, expanded its reach to the Southeast Asian credit market with this strategic move.

The Philippines’ M&A landscape is poised for continued growth, driven by government-led initiatives easing regulatory bottlenecks, enhanced investment incentives, and a strong push for sustainability and digitalisation. The government’s efforts to streamline investment processes, particularly through Green Lanes, are set to enhance the ease of doing business and attract foreign direct investment across multiple sectors.

The energy sector is expected to see continued M&A activity as domestic and international investors capitalise on liberalised ownership rules, incentive structures, and the country’s renewable energy targets. The government’s ambitious goal to increase renewable energy’s share to 50% by 2040 provides a strong foundation for strategic partnerships and acquisitions in the sector.

Additionally, sustainability-driven investments are expected to gain momentum. The institutionalisation of natural capital accounting through the PENCAS Act underscores the Philippines’ commitment to balancing economic growth with environmental conservation. This move is likely to attract ESG-conscious investors and reinforce sustainability as a key driver of investment decisions.

The fintech sector remains a hotbed for M&A transactions, with digital payment adoption accelerating. The continued expansion of financial technology and e-commerce will likely lead to further consolidation, with larger players acquiring emerging firms to strengthen market positions. The recent acquisition of Cashalo highlights the growing interest in alternative credit solutions and financial innovation, which will remain a focal point for local and international investors.

Moving forward, investors and businesses looking to engage in M&A activities will benefit from a more favourable regulatory climate, a growing economy, and emerging opportunities in key sectors such as renewable energy and fintech. The success of M&A transactions in 2025 and beyond will largely depend on how well market players navigate the evolving regulatory environment, sustainability imperatives, and digital transformation trends, all of which are shaping the future of investment in the Philippines.