Topic 5 - EO 226

THE OMNIBUS INVESTMENTS CODE OF 1987
EXECUTIVE ORDER NO. 226

Declaration of Investment Policies
To accelerate the sound development of the national economy in consonance
with the principles and objectives of economic nationalism and in pursuance of
a planned economically feasible and practical dispersal of industries and the
promotion of small and medium scale industries, under conditions which will
encourage competition and discourage monopolies, the following are declared
policies of the State:
1. The State shall encourage private Filipino and foreign investments in
industry, agriculture, forestry, mining, tourism and other sectors of the economy
which shall: provide significant employment opportunities relative to the
amount of the capital being invested; increase productivity of the land,
minerals, forestry, aquatic and other resources of the country, and improve
utilization of the products thereof; improve technical skills of the people
employed in the enterprise; provide a fountain for the future development of
the economy; meet the tests of international competitiveness; accelerate
development of less developed regions of the country; and result in increased
volume and value of exports for the economy.
2. The State shall ensure the holistic development by safeguarding
the well-being of the social, cultural and ecological life of the
people. For this purpose, consultation with affected communities
will be conducted whenever necessary.
3. The State shall extend to projects which will significantly contribute
to the attainment of these objectives, fiscal incentives without which
said projects may not be established in the locales, number and/or
pace required for optimum national economic development. Fiscal
incentive system shall be devised to compensate for market
imperfections, to reward performance contributing to economic
development, be cost-efficient and be simple to administer.
4. The State considers the private sector as the prime mover for
economic growth. In this regard, private initiative is to be
encouraged, with deregulation and self-regulation of business
activities to be generally adopted where dictated by urgent social
concerns.
5. The State shall principally play a supportive role,
rather than a competitive one, providing the framework,
the climate and the incentives within which business
activity is to take place.
6. The State recognize that there are appropriate roles for local and
foreign capital to play in the development of the Philippine economy
and that it is the responsibility of Government to define these roles and
provide the climate for their entry and growth.
7. The State recognizes that industrial peace is an
essential element of economic growth and that it is a
principal responsibility of the State to ensure that such
condition prevails.
8. Fiscal incentives shall be extended to stimulate the
establishment and assist initial operations of the enterprise, and
shall terminate after a period of not more than 10 years from
registration or start-up of operation unless a specific period is
otherwise stated.
Board of Investments
• Government agency tasked to implement the provisions of Executive
Order 226 (Book 1-5)
Composition of Board of Investments
• The Board of Investments shall be composed of seven (7) governors: The
Secretary of Trade and Industry, three (3) Undersecretaries of Trade and
Industry to be chosen by the President, and three (3) representatives from
other government agencies and the private sector.
• The Secretary of Trade and Industry shall be concurrently Chairman of the
Board and the Undersecretary of the Department of Trade and Industry for
Industry and Investments shall be concurrently the Vice-Chairman of the
Board and its Managing Head.
• The three (3) representatives from other government agencies and the private
sector shall be appointed by the President for a term of four (4) years
Qualifications of Governors of the Board
• The governors of the Board shall be citizens of the Philippines, at least thirty
(30) years old, of good moral character and of recognized competence in the
fields of economics, finance, banking, commerce, industry, agriculture,
engineering, law, management or labor.
Powers and Duties of the Board
• The Board shall be responsible for the regulation and promotion of
investments in the Philippines.
• It shall meet as often as may be necessary generally once a week on such day
as it may fix.
• Notice of regular and special meetings shall be given all members of the
Board.
• The presence of four (4) governors shall constitute a quorum and the
affirmative vote of four (4) governors in a meeting validly held shall be
necessary to exercise its powers and perform its duties, which shall be as
follows:
(1) Prepare annually the Investment Priorities Plan as defined in Article 26,
which shall contain a listing of specific activities that can qualify for incentives
under Book I of this Code, duly supported by the studies of existing and
prospective demands for such products and services in the light of the level and
structure of income, production, trade, prices and relevant economic and
technical factors of the regions as well as existing facilities
(2) Promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this
Code relevant to the Board
(3) Process and approve applications for registration with the Board, imposing
such terms and conditions as it may deem necessary to promote the objectives
of this Code, including refund of incentives when appropriate, restricting
availment of certain incentives not needed by the project in the determination
of the Board, requiring performance bonds and other guarantees, and payment
of application, registration, publication and other necessary fees and when
warranted may limit the availment of the tax holiday incentive to the extent
that the investor's country law or treaties with the Philippines allows a credit for
taxes paid in the Philippines
(4) After due hearing, decide controversies concerning the implementation of
the relevant books of this Code that may arise between registered enterprises
or investors therein and government agencies, within thirty (30) days after the
controversy has been submitted for decision: Provided, That the investor or the
registered enterprise may appeal the decision of the Board within thirty (30)
days from receipt thereof to the President
(5) Recommend to the Commissioner of Immigration and
Deportation the entry into the Philippines for
employment of foreign nationals under this Code
(6) Periodically check and verify, either by inspection of the books
or by requiring regular reports, the proportion of the participation
of Philippine nationals in a registered enterprise to ascertain
compliance with its qualification to retain registration under this
Code
(7) Periodically check and verify the compliance by registered
enterprises with the relevant provisions of this Code, with the
rules and regulations promulgated under this Code and with the
terms and conditions of registration
(8) After due notice, cancel the registration or suspend the enjoyment of
incentives benefits of any registered enterprise and/or require refund of
incentives enjoyed by such enterprise including interests and monetary
penalties, for (a) failure to maintain the qualifications required by this Code for
registration with the Board of (b) for violation of any provisions of this Code, of
the rules and regulations issued under this Code, of the terms and conditions of
registration, or of laws for the protection of labor or of the consuming public:
Provided, That the registration of an enterprise whose project timetable, as set
by the Board is delayed by one year, shall be considered automatically cancelled
unless otherwise reinstated as a registered enterprise by the Board
(9) Determine the organizational structure taking into
account Article 6 of this Code; appoint, discipline and
remove its personnel consistent with the provisions of
the Civil Service Law and Rules
(10) Prepare or contract for the preparation of feasibility and other pre-
investment studies for pioneer areas either upon its own initiative; or
upon the request of Philippine nationals who commit themselves to
invest therein and show the capability of doing so; Provided, That if the
venture is implemented, then the amount advanced by the Board shall
be repaid within five (5) years from the date the commercial operation
of said enterprise starts
(11) When feasible and considered desirable by the
Board, require registered enterprises to list their shares
of stock in any accredited stock exchange or directly offer
a portion of their capital stock to the public and/or their
employees
(12) Formulate and implement rationalization programs for certain
industries whose operation may result in dislocation, overcrowding or
inefficient use of resources, thus impeding economic growth. For this
purpose, the Board may formulate guidelines for progressive
manufacturing programs, local content programs, mandatory sourcing
requirements and dispersal of industries. In appropriate cases and
upon approval of the President, the Board may restrict, either totally or
partially, the importation of any equipment or raw materials or finished
products involved in the rationalization program
(13) In appropriate cases, the subject to the conditions which the
Board deems necessary, suspend the nationality requirement
provided for in this Code or any other nationalization statute in
cases of ASEAN projects or investments by ASEAN nationals in
preferred projects, and with the approval of the President, extend
said suspension to other international complementation
arrangements for the manufacture of a particular product on a
regional basis to take advantage of economies of scale
(14) Extend the period of availment of incentives by any
registered enterprise; Provided, That the total period of
availment shall not exceed ten (10) years, subject to any
of the following criteria
(14) Extend the period of availment of incentives by any registered enterprise; Provided,
That the total period of availment shall not exceed ten (10) years, subject to any of the
following criteria:
(a) The registered enterprise has suffered operational force majeure that has impaired its
viability;
(b) The registered enterprise has not fully enjoyed the incentives granted to it for reasons
beyond its control;
(c) The project of the registered enterprise has a gestation period which goes beyond the
period of availment of needed incentives; and
(d) The operation of the registered enterprise has been subjected to unforeseen changes in
government policies, particularly, protectionism policies of importing countries, and such
other supervening factors which would affect the competitiveness of the registered firm
(15) Regulate the making of investments and the doing
of business within the Philippines by foreigners or
business organizations owned in whole or in part by
foreigners
(16) Prepare or contract for the preparation of industry
and sectoral development programs and gather and
compile statistical, technical, marketing, financial and
other data required for the effective implementation of
this Code
(17) Within four (4) months after the close of the fiscal
year, submit annual reports to the President which shall
cover its activities in the administration of this Code,
including recommendations on investment policies
(18) Provide, directly or through Philippine Diplomatic
Missions, such information as may be of interest to
prospective foreign investors
(19) Collate, analyze and compile pertinent information
and studies concerning areas that have been or may be
declared preferred areas of investments
(20) Enter into agreements with other agencies of government for
the simplification and facilitation of systems and procedures
involved in the promotion of investments, operation of registered
enterprises and other activities necessary for the effective
implementation of this Code
(21) Generally, exercise all the powers necessary or
incidental to attain the purposes of this Code and other
laws vesting additional functions on the Board
Powers & Duties of the Chairman
(1) To preside over the meetings of the Board;
(2) To render annual reports to the President and such special reports as may be
requested;
(3) To act as liaison between investors seeking joint venture arrangements in
particular areas of investments;
(4) Recommend to the Board such policies and measures he may deem
necessary to carry out the objectives of this Code; and
(5) Generally, to exercise such other powers and perform such other duties as
may be directed by the Board of Governors from time to time.
Powers & Duties of the Vice Chairman
(1) To act as Managing Head of the Board;
(2) To preside over the meetings of the Board in the absence of the Chairman;
(3) Prepare the Agenda for the meetings of the Board and submit for its
consideration and approval the policies and measures which the Chairman
deems necessary and proper to carry out the provisions of this Code;
(4) Assist registered enterprises and prospective investors to have their papers
processed with dispatch by all government offices, agencies, instrumentalities
and financial institutions; and
(5) Perform the other duties of the Chairman in the absence of the latter, and
such other duties as may be assigned to him by the Board of Governors.
Term Definitions
Board
• shall mean the Board of Investments created under
EO226
Registered Enterprise
• shall mean any individual, partnership, cooperative, corporation or other entity
incorporated and/or organized and existing under Philippine laws; and registered
with the Board in accordance with this Book: Provided, however, That the term
"registered enterprise" shall not include commercial banks, savings and mortgage
banks, rural banks, savings and loan associations, building and loan associations,
developmental banks, trust companies, investment banks, finance companies,
brokers and dealers in securities, consumers cooperatives and credit unions, and
other business organizations whose principal purpose or principal source of
income is to receive deposits, lend or borrow money, buy and sell or otherwise
deal, trade or invest in common or preferred stocks, debentures, bonds or other
marketable instruments generally recognized as securities, or discharge other
similar intermediary, trust of fiduciary functions.
Technological Assistance Contracts
• shall mean contracts for: (1) the transfer, by license otherwise, of
patents, processes, formulas or other technological rights of foreign
origin; and/or (2) foreign assistance concerning technical and factory
management, design, planning, construction, operation and similar
matters.
Foreign Loans
• shall mean any credit facility or financial assistance other than equity
investment denominated and payable in foreign currency or where
the creditor has the option to demand payment in foreign exchange
and registered with the Central Bank and the Board
Foreign Investments
• shall mean equity investments owned by a non-Philippine national
made in the form of foreign exchange or other assets actually
transferred to the Philippines and registered with the Central Bank
and the Board, which shall assess and appraise the value of such
assets other than foreign exchange
Philippine National
• shall mean a citizen of the Philippines or a domestic partnership or association
wholly-owned by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines, or a
trustee of funds for pension or other employee retirement or separation benefits,
where the trustee is a Philippine national and at least sixty per cent (60%) of the
fund will accrue to the benefit of Philippine nationals; Provided, That where a
registered and its non-Filipino stockholders own stock in a registered enterprise, at
least sixty per cent (60%) of the capital stock outstanding and entitled to vote of
both corporations must be owned and held by the citizens of the Philippines and at
least sixty per cent (60%) of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that the corporation shall be
considered a Philippine national
Preferred Areas of Investments
• shall mean the economic activities that the Board shall
have declared as such in accordance with Article 28
which shall be either non-pioneer or pioneer
Pioneer Enterprise
• shall mean a registered enterprise (1) engaged in the manufacture, processing or production, and
not merely in the assembly or packaging of goods, products, commodities or raw materials that
have not been or are not being produced in the Philippines on a commercial scale or (2) which
uses a design, formula, scheme, method, process, or system of production or transformation of
any element, substance or raw materials into another raw material or finished goods which is new
and untried in the Philippines or (3) engaged in the pursuit of agricultural, forestry and mining
activities and/or services including the industrial aspects of food processing whenever
appropriate, pre-determined by the Board, in consultation with the appropriate Department, to
be feasible and highly essential to the attainment of the national goal, in relation to a declared
specific national food and agricultural program for self-sufficiency and other social benefits of the
project or (4) which produces non-conventional fuels or manufactures equipment which utilize
non-conventional sources of energy or uses or converts to coal or other non-conventional fuels or
sources of energy in its production, manufacturing or processing operations. Provided, That the
final product in any of the foregoing instances, involves or will involve substantial use and
processing of domestic raw materials, whenever available; taking into account the risks and
magnitude of investment: Provided, further, That the foregoing definitions shall not in any way
limit the rights and incentives granted to less-developed-area enterprises
Non-pioneer enterprise
• shall include all registered producer enterprises other
than pioneer enterprises
Expansion
• shall include modernization and rehabilitation and shall mean
increase of existing volume or value of production or upgrading
the quality of the registered product or utilization of inefficient or
idle equipment under such guidelines as the Board may adopt
Measured Capacity
• shall mean the estimated additional volume of production or service which the
Board determines to be desirable in each preferred area of investment in order to
supply the needs of the economy at reasonable prices, taking into account the
export potential of the product, including economies of scale which would render
such product competitive in the world market. Measured capacity shall not be
less than the amount by which the measurable domestic and country's potential
export market demand exceeds the existing productive capacity in said preferred
areas. For export market industries, when warranted the Board shall base
measured capacity on the availability of domestic raw materials after deducting
the needs of the domestic market therefore
Tax Credit
• shall mean any of the credits against taxes and/or duties equal to those actually
paid or would have been paid to evidence which tax credit certificate shall be
issued by the Secretary of Finance or his representative, or the Board, if so
delegated by the Secretary of Finance. The tax credit certificates including those
issued by the Board pursuant to laws repealed by this Code but without in any
way diminishing the scope of negotiability under their laws of issue are
transferable under such conditions as may be determined by the Board after
consultation with the Department of Finance. The tax credit certificate shall be
used to pay taxes, duties, charges and fees due to the National Government;
Provided, That the tax credits issued under this Code shall not form part of the
gross income of the grantee/transferee for income tax purposes under Section 29
of the National Internal Revenue Code and are therefore not taxable: Provided,
further, That such tax credits shall be valid only for a period of ten (10) years from
date of issuance
Export Products
• shall mean manufactured or processed products the total F.O.B. Philippine
port value of the exports of which did not exceed five million dollars in the
United States Currency in the calendar year 1968 and which meet the local
content requirement, if any, set by the Board, and standards of quality set by
the Bureau of Product Standards, or, in default of such standards, by the
Board or by such public or private organization, chamber, group or body as the
Board may designate. The above definition notwithstanding, the Investment
Priorities Plan may include other products for export subjects to such
conditions and limited incentives as may be determined by the Board
Export Sales
• shall mean the Philippine port F.O.B. value, determined from invoices, bills of lading, inward
letters of credit, landing certificates, and other commercial documents, of exports products
exported directly by a registered export producer or the net selling price of export product sold by
a registered export producer to another export producer, or to an export trader that subsequently
exports the same: Provided, That sales of export products to another producer or to an export
trader shall only be deemed export sales when actually exported by the latter, as evidenced by
landing certificates or similar commercial documents: Provided, further, That without actual
exportation the following shall be considered constructively exported for purposes of this
provision: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2)
sales to export processing zones; (3) sales to registered export traders operating bonded trading
warehouses supplying raw materials used in the manufacture of export products under guidelines
to be set by the Board in consultation with the Bureau of Internal Revenue and the Bureau of
Customs; (4) sales to foreign military bases, diplomatic missions and other agencies and/or
instrumentalities granted tax immunities, of locally manufactured, assembled or repacked
products whether paid for in foreign currency or not: Provided, further, That export sales of
registered export trader may include commission income: and Provided, finally, That exportation
of goods on consignment shall not be deemed export sales until the export products consigned
are in fact sold by the consignee
Export Sales…(continued)
• Sales of locally manufactured or assembled goods for household
and personal use to Filipinos abroad and other non-residents of
the Philippines as well as returning Overseas Filipinos under the
Internal Export Program of the government and paid for in
convertible foreign currency inwardly remitted through the
Philippine banking systems shall also be considered export sales
Production Cost
• shall mean the total of the cost of direct labor, raw materials, and
manufacturing overhead, determined in accordance with
generally accepted accounting principles, which are incurred in
manufacturing or processing the products of a registered
enterprise
Processing
• shall mean converting of raw materials into marketable from
through physical, mechanical, chemical, electrical, biochemical,
biological or other means or by a special treatment or a series of
actions, such as slaughtering, milling, pasteurizing, drying or
desiccating, quick freezing, that results in a change in the nature
or state of the products
• Merely packing or packaging shall not constitute processing
Investment Priorities Plan
• shall mean the over-all plan prepared by the Board which includes and contains:
• (a) The specific activities and generic categories of economic activity wherein investments are to
be encouraged and the corresponding products and commodities to be grown, processed or
manufactured pursuant thereto for the domestic or export market;
• (b) Specific public utilities which can qualify for incentives under this Code and which shall be
supported by studies of existing and prospective regional demands for the services of such public
utilities in the light of the level and structure of income, production, trade, prices and relevant
economic and technical factors of the regions as well as the existing facilities to produce such
services;
• (c) Specific activities where the potential for utilization of indigenous no-petroleum based fuels or
sources of energy can be best promoted; and
• (d) Such other information, analyzes, data, guidelines or criteria as the Board may deem
appropriate.
• The specific and generic activities to be included in the Investment Priorities Plan with their status
as pioneer or non-pioneer shall be determined by the Board of Investments
• Not later than the end of March of every year, the Board of
Investments, after consultation with the appropriate government
agencies and the private sector, shall submit to the President an
Investment Priorities Plan: Provided, however, That the deadline
for submission, may be extended by the President.
Criteria in Investment Priority Determination
• No economic activity shall be included in the Investment Priority
Plan unless it is shown to be economically, technically and
financially sound after thorough investigation and analysis by the
Board.
• The determination of preferred areas of investment to be listed
in the Investment Priorities Plan shall be based on long-run
comparative advantage, taking into account the value of social
objectives and employing economic criteria along with market,
technical, and financial analyses.
Criteria in Investment Priority Determination…(continued)
The Board shall take into account the following:

(a) Primarily, the economic soundness of the specific activity as shown by its economic internal rate
of return;
(b) The extent of contribution of an activity to a specific developmental goal;
(c) Other indicators or comparative advantage;
(d) Measured capacity as defined in Article 20; and
(e) The market and technical aspects and considerations of the activity proposed to be included.
In any of the declared preferred areas of investment, the Board may designate as pioneer areas the
specific products and commodities that meet the requirements of Article 17 of this Code and review
yearly whether such activity, as determined by the Board, shall continue as pioneer, otherwise, it
shall be considered as non-pioneer and accordingly listed as such in the Investment Priorities Plan
or removed from the Investment Priorities Plan.
Approval of the Investment Priorities Plan
• The President shall proclaim the whole or part of such plan as in effect; or
alternatively, return the whole or part of the plan to the Board of Investment
for revision.
• Upon the effectivity of the plan or portions thereof, the President shall issue
all necessary directives to all departments, bureaus, agencies or
instrumentalities of the government to ensure the implementation of the plan
by the agencies concerned in a synchronized and integrated manner.
• No government body shall adopt any policy or take any course of action
contrary to or inconsistent with the plan.
Amendments
• Subject to publication requirements and the criteria for investment priority
determination, the Board of Investments may, at any time, add additional
areas in the plan, alter any of the terms of the declaration of an investment
area or the designation of measured capacities, or terminate the status of
preference.
• In no case, however, shall any amendment of the plan impair whatever rights
may have already been legally vested in qualified enterprises which shall
continue to enjoy such rights to the full extent allowed under this Code.
• The Board shall not accept applications in an area of investment prior to the
approval of the same as a preferred area nor after approval of its deletion as a
preferred area of investment.
Publication
• Upon approval of the plan, in whole or in part, or upon approval of an
amendment thereof, the plan or the amendment, specifying and declaring the
preferred areas of investment and their corresponding measured capacity
shall be published in at least one (1) newspaper of general circulation and all
such areas shall be open for application until publication of an amendment or
deletion thereof, or until the Board approves registration of enterprises which
fill the measured capacity.
Registration of Enterprises
Qualifications of Registered Enterprises
• To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy the Board that:
(1) He is a citizen of the Philippines, in case the applicant is a natural person, or in case of a partnership or any
other association, it is organized under Philippine laws and that at least sixty percent (60%) of its capital is
owned and controlled by citizens of the Philippines; or in case of a corporation or a cooperative, it is organized
under Philippine laws and that at least sixty per cent (60%) of the capital stock outstanding and entitled to vote
is owned and held by Philippine nationals as defined under Article 15 of this Code, and at least sixty per cent
(60%) of the members of the Board of Directors are citizens of the Philippines. If it does not possess the
required degree of ownership as mentioned above by Philippine nationals, the following circumstances must
be satisfactorily established:
(a) That it proposes to engage in a pioneer projects as defined in Article 17 of this Code, which, considering the
nature and extent of capital requirements, processes, technical skills and relative business risks involved, is in
the opinion of the Board of such a nature that the available measured capacity thereof cannot be readily and
adequately filled by Philippine nationals; or, if the applicant is exporting at least seventy per cent (70%) of is
total production, the export requirement herein provided may be reduced in meritorious cases under such
conditions and/or limited incentives as the Board may determine;
Qualifications of Registered
Enterprises…(continued)
(b) That it obligates itself to attain the status of a Philippine national, as defined
in Article 15, within thirty (30) years from the date of registration or with such
longer period as the Board may require taking into account the export potential
of the project: Provided, That a registered enterprise which exports one
hundred percent (100%) of its total production need not comply with this
requirement;
(c) That the pioneer are it will engage in is one that is not within the activities
reserved by the Constitution or other laws of the Philippines to the Philippine
citizens or corporations owned and controlled by Philippine citizens;
(2) The applicant is proposing to engage in a preferred project listed or
authorized in the current Investment Priorities Plan within a reasonable time to
be fixed by the Board or, if not so listed, at least fifty percent (50%) of its total
production is for export or it is an existing producer which will export part of
production under such conditions and/or limited incentives as the Board may
determine; or that the enterprise is engaged or proposing to engage in the sale
abroad of export products bought by it from one or more export producers; or
the enterprise in engaged or proposing to engage in rendering technical,
professional or other services or in exporting television and motion pictures and
musical recordings made or produced in the Philippines, either directly or
through a registered trader.
(3) The applicant is capable of operating on a sound and efficient basis of
contributing to the national development of the preferred area in particular and
of the national economy in general;
(4) If the applicant is engaged or proposes to engage in undertakings or
activities other than preferred projects, it has installed or undertakes to install
an accounting system adequate to identify the investments, revenues, costs,
and profits or losses of each preferred project undertaken by the enterprise
separately from the aggregate investment, revenues, costs and profits or losses
of the whole enterprise or to establish a separate corporation for each
preferred project if the Board should so require.
Application
• Applications shall be filed with the Board, recorded in a
registration book and the date appearing therein and stamped
on the application shall be considered the date of official
acceptance.
• Whenever necessary, the Board, through the People's Economic
Councils, shall consult the communities affected on the
acceptability of locating the registered enterprise within their
community.
Approval & Registration Procedures
• The Board is authorized to adopt rules and regulations to facilitate action on
applications filed with it; prescribe criteria for the evaluation of several
applications filed in one preferred area; devise standard forms for the use of
applicants and delegate to the regional offices of the Department of Trade and
Industry the authority to receive and process applications for enterprises to
be located in their respective regions.
• Applications filed shall be considered automatically approved if not acted
upon by the Board within twenty (20) working days from official acceptance
thereof.
Criteria for Evaluation of Applications
• The following criteria will be considered in the evaluation of applications for
registration under a preferred area:
(a) The extent of ownership and control by Philippine citizens of the enterprises;
(b) The economic rates of return;
(c) The measured capacity Provided, That estimates of measured capacities
shall be regularly reviewed and updated to reflect changes in market supply and
demand conditions; Provided, Further, That measured capacity shall not result
in a monopoly in any preferred area of investment which would unduly restrict
trade and fair competition nor shall it be used to deny the entry of any
enterprise in any field of endeavor or activity;
Criteria for Evaluation of
Applications…(continued)
(d) The amount of foreign exchange earned, used or saved in their
operations;
(e) The extent to which labor, materials and other resources
obtained from indigenous sources are utilized;
(f) The extent to which technological advances are applied and
adopted to local condition;
(g) The amount of equity and degree to which the ownership of
such equity is spread out and diversified; and
(h) Such other criteria as the Board may determine.
Appeal from Board’s Decision
• Any order or decision of the Board shall be final and executory after thirty (30)
days from its promulgation.
• Within the said period of thirty (30) days, said order or decision may be
appealed to the Office of the President.
• Where an appeal has been filed, said order or decision shall be final and
executory ninety (90) days after the perfection of the appeal, unless reversed.
Certificate of Registration
• A registered enterprise under this Code shall be issued a certificate of registration under
the seal of the Board of Investments and the signature of its Chairman and/or such other
officer or employee of the Board as it may empower and designate for the purpose. The
certificate shall be in such form and style as the Board may determine and shall state,
among other matters:
(a) The name of the registered enterprise;
(b) The preferred area of investment in which the registered enterprise is proposing to
engage;
(c) The nature of the activity it is undertaking or proposing to undertake, whether
pioneer or non-pioneer, and the registered capacity of the enterprise; and
(d) The other terms and conditions to be observed by the registered enterprise by virtue
of the registration.
Protection of Investments
All investors and registered enterprises are entitled to the basic rights and guarantees
provided in the Constitution. Among other rights recognized by the Government of the
Philippines are the following:
(a) Repatriation of Investments. — In the case of foreign investments, the right to
repatriate the entire proceeds of the liquidation of the investment in the currency in which
the investment was originally made and at the exchange rate prevailing at the time of
repatriation, subject to the provisions of Section 74 of Republic Act No. 265 as amended;
For investments made pursuant to Executive Order No. 32 and its implementing rules and
regulations, remittability shall be as provided therein.
(b) Remittance of Earnings. — In the case of foreign investments, the right to remit
earnings from the investment in the currency in which the investment was originally made
and at the exchange rate prevailing at the time of remittance, subject to the provisions of
Section 74 of Republic Act No. 265 as amended;
Protection of Investments…(continued)
(c) Foreign Loans and Contracts. — The right to remit at the exchange rate prevailing at
the time of remittance such sums as may be necessary to meet the payments of
interest and principal on foreign loans and foreign obligations arising from
technological assistance contracts, subject to the provisions of Section 74 of Republic
Act No. 265 as amended;
(d) Freedom from Expropriation. — There shall be no expropriation by the government
of the property represented by investments or of the property of the enterprise except
for public use or in the interest of national welfare or defense and upon payment of
just compensation. In such cases, foreign investors or enterprises shall have the right
to remit sums received as compensation for the expropriated property in the currency
in which the investment was originally made and at the exchange rate at the time of
remittance, subject to the provisions of Section 74 of Republic Act No. 265 as
amended;
Protection of Investments…(continued)
(e) Requisition of Investment. — There shall be no requisition of the property
represented by the investment or of the property of enterprises, except in the
event of war or national emergency and only for the duration thereof. Just
compensation shall be determined and paid either at the time of requisition or
immediately after cessation of the state of war or national emergency.
Payments received as compensation for the requisitioned property may be
remitted in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the provisions of
Section 74 of Republic Act No. 265 as amended.
Incentives to Registered Enterprises
(a) Income Tax Holiday. —
(1) For six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer
firms, new registered firms shall be fully exempt from income taxes levied by the National
Government. Subject to such guidelines as may be prescribed by the Board, the income tax
exemption will be extended for another year in each of the following cases:
i. the project meets the prescribed ratio of capital equipment to number of workers set by the
Board;
ii. utilization of indigenous raw materials at rates set by the Board;
iii. the net foreign exchange savings or earnings amount to at least US$500,000.00 annually during
the first three (3) years of operation.
The preceding paragraph notwithstanding, no registered pioneer firm may avail of this incentive for
a period exceeding eight (8) years.
Incentives to Registered
(2) For a period of three (3) years from commercial operation, registered
expanding firms shall be entitled to an exemption from income taxes levied by
the National Government proportionate to their expansion under such terms
and conditions as the Board may determine; Provided, however, That during the
period within which this incentive is availed of by the expanding firm it shall not
be entitled to additional deduction for incremental labor expense.
(3) The provision of Article 7 (14) notwithstanding, registered firms shall not be
entitled to any extension of this incentive.
(b) Additional Deduction for Labor Expense. — For the first five (5) years from
registration a registered enterprise shall be allowed an additional deduction
from the taxable income of fifty percent (50%) of the wages corresponding to
the increment in the number of direct labor for skilled and unskilled workers if
the project meets the prescribed ratio of capital equipment to number of
workers set by the Board: Provided, That this additional deduction shall be
doubled if the activity is located in less developed areas as defined in Art. 40.
(c) Tax and Duty Exemption on Imported Capital Equipment. — Within five (5) years from the
effectivity of this Code, importations of machinery and equipment and accompanying spare parts of
new and expanding registered enterprise shall be exempt to the extent of one hundred percent
(100%) of the customs duties and national internal revenue tax payable thereon: Provided, That the
importation of machinery and equipment and accompanying spare parts shall comply with the
following conditions:
(1) They are not manufactured domestically in sufficient quantity, of comparable quality and at
reasonable prices;
(2) They are reasonably needed and will be used exclusively by the registered enterprise in the
manufacture of its products, unless prior approval of the Board is secured for the part-time
utilization of said equipment in a non-registered activity to maximize usage thereof or the
proportionate taxes and duties are paid on the specific equipment and machinery being
permanently used for non-registered activities
(3) The approval of the Board was obtained by the registered enterprise for the importation of such
machinery, equipment and spare parts.
• In granting the approval of the importations under this paragraph, the Board
may require international canvassing but if the total cost of the capital
equipment or industrial plant exceeds US$5,000,000, the Board shall apply or
adopt the provisions of Presidential Decree Numbered 1764 on International
Competitive Bidding.
• If the registered enterprise sells, transfers or disposes of these machinery,
equipment and spare parts without prior approval of the Board within five (5)
years from date of acquisition, the registered enterprise and the vendee,
transferee, or assignee shall be solidarily liable to pay twice the amount of the
tax exemption given it.
The Board shall allow and approve the sale, transfer or disposition of the said
items within the said period of five (5) years if made:
(aa) to another registered enterprise or registered domestic producer enjoying
similar incentives;
(bb) for reasons of proven technical obsolescence; or
(cc) for purposes of replacement to improve and/or expand the operations of
the registered enterprise.
(d) Tax Credit on Domestic Capital Equipment. — A tax credit equivalent to one hundred
percent (100%) of the value of the national internal revenue taxes and customs duties that
would have been waived on the machinery, equipment and spare parts, had these items
been imported shall be given to the new and expanding registered enterprise which
purchases machinery, equipment and spare parts from a domestic manufacturer: Provided,
That (1) That the said equipment, machinery and spare parts are reasonably needed and
will be used exclusively by the registered enterprise in the manufacture of its products,
unless prior approval of the Board is secured for the part-time utilization of said equipment
in a non-registered activity to maximize usage thereof; (2) that the equipment would have
qualified for tax and duty-free importation under paragraph (c) hereof; (3) that the
approval of the Board was obtained by the registered enterprise; and (4) that the purchase
is made within five (5) years from the date of effectivity of the Code. If the registered
enterprise sells, transfers or disposes of these machinery, equipment and spare parts, the
provisions in the preceding paragraph for such disposition shall apply.
(e) Exemption from Contractor's Tax. — The registered enterprise
shall be exempt from the payment of contractor's tax, whether
national or local.
(f) Simplification of Customs Procedure. — Customs procedures for
the importation of equipment, spare parts, raw materials and
supplies, and exports of processed products by registered
enterprises shall be simplified by the Bureau of Customs.
(g) Unrestricted Use of Consigned Equipment. — Provisions of existing laws
notwithstanding, machinery, equipment and spare part consigned to any
registered enterprises shall not be subject to restrictions as to period of use of
such machinery, equipment and spare parts Provided, that the appropriate re-
export bond is posted unless the importation is otherwise covered under
subsections (c) and (m) of this Article.
• Provided, further, that such consigned equipment shall be for the exclusive
use of the registered enterprise.
• If such equipment is sold, transferred or otherwise disposed of by the
registered enterprise the related provision of Article 39 (c) (3) shall apply.
Outward remittance of foreign exchange covering the proceeds of such sale,
transfer or disposition shall be allowed only upon prior Central Bank approval.
(h) Employment of Foreign Nationals. — Subject to the provisions of Section 29 of
Commonwealth Act Number 613, as amended, a registered enterprise may employ foreign
nationals in supervisory, technical or advisory positions for a period not exceeding five (5) years
from its registration, extendible for limited periods at the discretion of the Board: Provided,
however, That when the majority of the capital stock of a registered enterprise is owned by
foreign investors, the position of president, treasurer and general manager or their equivalents
may be retained by foreign nationals beyond the period set forth herein.
• Foreign nationals under employment contract within the purview of this incentive, their
spouses and unmarried children under twenty-one (21) years of age, who are not excluded
by Section 29 of Commonwealth Act Numbered 613, as amended, shall be permitted to enter
and reside in the Philippines during the period of employment of such foreign nationals.
• A registered enterprise shall train Filipinos as understudies of foreign nationals in
administrative, supervisory and technical skills and shall submit annual reports on such
training to the Board.
(i) Exemption on Breeding Stocks and Genetic Materials. — The importation of
breeding stocks and genetic materials within ten (10) years from the date of
registration or commercial operation of the enterprise shall be exempt from all
taxes and duties: Provided, That such breeding stocks and genetic materials are
(1) not locally available and/or obtainable locally in comparable quality and at
reasonable prices; (2) reasonably needed in the registered activity; and (3)
approved by the Board.
(j) Tax Credit on Domestic Breeding Stocks and Genetic Materials. — A tax credit
equivalent to one hundred percent (100%) of the value of national internal
revenue taxes and customs duties that would have been waived on the
breeding stocks and genetic materials had these items been imported shall be
given to the registered enterprise which purchases breeding stocks and generic
materials from a domestic producer: Provided, 1) That said breeding stocks and
generic materials would have qualified for tax and duty free importation under
the preceding paragraph; 2) that the breeding stocks and genetic materials are
reasonably needed in the registered activity; 3) that the approval of the board
has been obtained by the registered enterprise; and 4) that the purchase is
made within ten (10) years from date of registration or commercial operation of
the registered enterprise.
(k) Tax Credit for Taxes and Duties on Raw Materials. — Every registered enterprise
shall enjoy a tax credit equivalent to the National Internal Revenue taxes and
Customs duties paid on the supplies, raw materials and semi-manufactured
products used in the manufacture, processing or production of its export products
and forming part thereof, exported directly or indirectly by the registered
enterprise: Provided, however, that the taxes on the supplies, raw materials and
semi- manufactured products domestically purchased are indicated as a separate
item in the sales invoice.
• Nothing herein shall be construed as to preclude the Board from setting a fixed
percentage of export sales as the approximate tax credit for taxes and duties of
raw materials based on an average or standard usage for such materials in the
industry.
(l) Access to Bonded Manufacturing/Trading Warehouse System. — Registered export
oriented enterprises shall have access to the utilization of the bonded warehousing system
in all areas required by the project subject to such guidelines as may be issued by the
Board upon prior consultation with the Bureau of Customs.
(m) Exemption from Taxes and Duties on Imported Spare Parts. — Importation of required
supplies and spare parts for consigned equipment or those imported tax and duty free by a
registered enterprise with a bonded manufacturing warehouse shall be exempt from
customs duties and national internal revenue taxes payable thereon, Provided, However,
That at least seventy percent (70%) of production is exported; Provided, further, that such
spare parts and supplies are not locally available at reasonable prices, sufficient quantity
and comparable quality; Provided, finally, That all such spare parts and supplies shall be
used only in the bonded manufacturing warehouse of the registered enterprise under such
requirements as the Bureau of Customs may impose.
(n) Exemption from Wharfage Dues and any Export Tax, Duty, Impost and Fee.
— The provisions of law to the contrary notwithstanding, exports by a
registered enterprise of its non- traditional export products shall be exempted
of its non-traditional export products shall be exempted from any wharfage
dues, and any export tax, duty, impost and fee.
Incentives to less-developed-area registered enterprise
• A registered enterprise regardless of nationality located in a less-developed-

area included in the list prepared by the Board of Investments after
consultation with the National Economic & Development Authority and other
appropriate government agencies, taking into consideration the following
criteria: low per capita gross domestic product; low level of investments; high
rate of unemployment and/or underemployment; and low level of
infrastructure development including its accessibility to develop urban
centers, shall be entitled to the following incentives in addition to those
provided in the preceding article:
Incentives to less-developed-area registered
enterprise…(continued)
(a) Pioneer incentives. — An enterprise in a less-developed-area registered with
the Board under Book I of this Code, whether proposed, or an expansion of an
existing venture, shall be entitled to the incentives provided for a pioneer
registered enterprise under its law of registration.
Incentives to less-developed-area registered
enterprise…(continued)
(b) Incentives for necessary and Major Infrastructure and Public Utilities. —
Registered enterprise establishing their production, processing or manufacturing
plants in an area that the Board designates as necessary for the proper dispersal of
industry or in area which the Board finds deficient in infrastructure, public utilities,
and other facilities, such as irrigation, drainage or other similar waterworks
infrastructure may deduct from taxable income an amount equivalent to one
hundred percent (100%) of necessary and major infrastructure works it may have
undertaken with the prior approval of the Board in consultation with other
government agencies concerned; Provided, That the title to all such infrastructure
works shall upon completion, be transferred to the Philippine Government:
Provided, further, That any amount not deducted for a particular year may be
carried over for deduction for subsequent years not exceeding ten (10) years from
commercial operation.
Power of the President to Rationalize
Incentives
• The President may, upon recommendation of the Board and in the interest of
national development, rationalize the incentives scheme herein provided;
extend the period of availment of incentives or increase rates of tax
exemption of any project whose viability or profitability require such
modification.
Refund and Penalties
• In case of cancellation of the certificate granted under this Code,
the Board may, in appropriate cases, require the refund of
incentives availed of and impose corresponding fines and
penalties.
Benefits of Multiple Area Enterprise
• When a registered enterprise engages in activities or endeavors that have not
been declared preferred areas of investments, the benefits and incentives
accruing under this Code to registered enterprises and investors therein shall
be limited to the portion of the activities of such registered enterprise as is a
preferred area of investment.
INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHES REGIONAL OR AREA
HEADQUARTERS IN THE PHILIPPINES
Qualifications of Multinational Company
• Any foreign business entity formed, organized and existing under any laws
other than those of the Philippines whose purpose, as expressed in its
organizational documents or by resolution of its Board of Directors or its
equivalent, is to supervise, superintend, inspect or coordinate, its own
affiliates, subsidiaries, or branches in the Asia-Pacific Region may establish a
regional or area headquarters in the Philippines, after securing a license
therefor from the Securities and Exchange Commission, upon the favorable
recommendation of the Board of Investments.
Qualifications of Multinational
Company…(continued)
The Securities and Exchange Commission shall, within thirty (30) days from the
effectivity of this Code, issue the implementing rules and regulations. The
following minimum requirements shall, however, be complied with by the said
foreign entity.
(a) A certification from the Philippine Foreign Trade Senior Officer or in the
absence of such an official, a Philippine Consul in the foreign firm's home
country that said foreign firm is an entity engaged in international trade with
affiliates, subsidiaries or branch offices in the Asia-Pacific Region.
(b) A certification from a principal officer of the foreign entity to the effect that
the said foreign entity has been authorized by its Board of Directors or
governing copy to establish its regional headquarters in the Philippines,
specifying that:
1. The activities of the regional headquarters shall be limited to acting as a
supervisory, communications and coordinating center for its subsidiaries,
affiliates and branches in the region;
2. The headquarters will not derive any income from sources within the
Philippines and will not participate in any manner in the management of any
subsidiary or branch office it might have in the Philippines;
3. The headquarters shall notify the Board of Investments and the Securities
and Exchange Commission of any decision to close down or suspend operations
of its headquarters or terminate the services of any expatriate at least fifteen
(15) days before the same is effected.
(c) Any undertaking that the multinational company will remit into the country such
amount as may be necessary to cover its operations in the Philippines but which
amount will not be less than fifty thousand United States dollars or its equivalent in
other foreign currencies annually. Within thirty (30) days from receipt of Certificate of
Registration from the Securities and Exchange Commission, the multinational company
will submit to the Securities and Exchange Commission a Certificate of inward
remittance from a local bank showing that it has remitted to the Philippines the
amount of at least thirty thousand United States dollars or its equivalent in other
foreign currencies and converted the same to Philippine currency. Annually, within
thirty (30) days from the anniversary date of the multinational company's registration
as a regional or area headquarters with the Securities and Exchange Commission, it
will submit proof to the Securities and Exchange Commission of inward remittance
amounting to at least fifty thousand United States dollars or its equivalent in other
foreign currencies during the past year.
(d) Any willful violation by the regional or area headquarters of a multinational
company of any of the provisions of this Code, or its implementing rules and
regulations, or other terms and conditions of its registration, or any provision of
existing laws, shall constitute a sufficient cause for the cancellation of its license
or registration.
INCENTIVES TO EXPATRIATES
Multiple Entry Visa
• Foreign personnel of regional or area headquarters of multinational companies, their
respective spouses, and unmarried children under twenty-one years of age, if
accompanying them or if following to join them after their admission into the
Philippines as non- immigrant shall be issued a multiple entry special visa, valid for a
period of one year, to enter the Philippines: Provided, That a responsible officer or
the applicant company submits a certificate to the effect that the person who seeks
entry into the Philippines is an executive of the applicant company and will work
exclusively for applicant's company and will work exclusively for applicant's regional
or area headquarters which is duly licensed to operate in the Philippines, and that he
will receive a salary and will be paid by the headquarters in the Philippines an
amount equivalent to at least twelve thousand United States dollars, or the
equivalent in other foreign currencies per annum.
Multiple Entry Visa…(continued)
• The admission and stay shall be co-terminus with the validity of the multiple
entry special visa. The stay, however, is extendible yearly upon submission to the
Commission on Immigration and Deportation of a sworn certification by a
responsible officer of the regional or area headquarters; that its license to
operate remains valid and subsisting; that he has been paid in the Philippines
from the date of original admission, the equivalent of at least one thousand
United States dollars per month, or its equivalent in other foreign currencies; and
that the regional or area headquarters has withheld the tax due on said
compensation and the same has been paid to the Bureau of Internal Revenue.
Multiple Entry Visa…(continued)
• Non-immigrant who have been admitted under the multiple entry special visa, as
well as their respective spouses and dependents, shall be exempt from: the
payment of all fees due under the immigration and alien registration laws;
securing alien certificates of registration; and obtaining immigration clearance
certificates, and all types of clearances required by any government department
or agency, except that upon final departure from the Philippines the employer of
the said non-immigrants shall so advise in writing the Commission on
Immigration and Deportation at least five (5) working days prior to the non-
immigrant's departure, and the finally departing non-immigrant employee shall
be required to submit to the said office a tax clearance from the Bureau of
Internal Revenue.
Withholding tax of 15%
• Aliens employed by regional or area headquarters of multinational
corporations shall be subject for each taxable year upon their gross income
received from the regional or area headquarters established in the Philippines
by multinational companies as salaries, wages, annuities, compensations,
remunerations, and emoluments to a tax equal to fifteen per centum of such
gross income.
Tax & Duty Free Importation
• An alien executive of the regional or area headquarters of a multinational
company shall enjoy tax and duty free importation of personal and household
effects as provided for under Section 105 (h) of the Tariff and Customs Code,
as amended, and Section 169 (b) (4) of the Internal Revenue Code, as
amended.
Travel Tax Exemption
• Personnel of multinational companies performing technical and supervisory
functions with regional headquarters at, but not engaged in business in the
Philippines and the dependents of such foreign personnel if joining them
during the period of their assignment in the Philippines, as certified to by the
Board of Investments, shall be exempted from the payment of travel tax
imposed under Section 1 of Presidential Decree No. 1183, by securing a Travel
Tax Certificate from the Philippine Tourism Authority.
Exemption from Income Tax
• Regional or area headquarters established in the Philippines by multinational
corporations and which headquarters do not earn or derive income from the
Philippines and which act as supervisory, communications and coordinating
center for their affiliates, subsidiaries, or branches in the Asia-Pacific Regional
shall not be subject to income tax.
Exemption from Contractor’s Tax
• The regional or area headquarters established in the Philippines by
multinational corporations, including their alien executives, are exempted
from the contractor's tax.
Exemption from all Kinds of Local Licenses,
Fees & Dues
• The regional or area headquarters of multinational companies shall be exempt
from all kinds of local licenses, fees, dues, imposts or any other local taxes or
burdens.
Tax & Duty Free Importation of Training
Materials; Importation of Motor Vehicles
• Regional or area headquarters shall also enjoy tax and duty free importation of
equipment and materials for training, conferences which are needed for the
functions of the regional or area headquarters and which are not locally available
subject to the prior approval of the Board of Investments.
• Regional or area headquarters shall be entitled to the importation of motor vehicles
subject to the prior approval of the Board and the payment of the corresponding
taxes and duties: Provided, That such motor vehicles shall be for the exclusive use of
its expatriate executives and that the number thereof shall not exceed the number
of its expatriate executives and that such motor vehicles may be replaced every
three (3) years from their importation.
INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHING REGIONAL
WAREHOUSES TO SUPPLY SPARE PARTS OR MANUFACTURED COMPONENTS
AND RAW MATERIALS TO THE ASIA-PACIFIC REGION AND OTHER FOREIGN
MARKETS
Qualifications
• A multinational company organized and existing under any laws other than
those of the Philippines which is engaged in international trade and supplies
spare parts or manufactured components and raw materials to its distributors
or markets in the Asia-Pacific Area and other foreign areas and which has
established or will simultaneously establish a regional or area headquarters in
the Philippines in accordance with the provisions of Book III of this Code and
the rules and regulations implementing the same may also establish regional
warehouse or warehouses in the Philippines, after securing a license therefor
from the Board of Investments.
Qualifications…(continued)
The following minimum requirements shall be submitted or complied with by
the said foreign entity in accordance with the rules and regulations to be issued
by the Board of Investments as provided for in Article 7 (2) of this Code.
(a) A certification from the Foreign Trade Officer or in the absence of such an
official, a Philippine Consul in the foreign firm's home country that said foreign
firm is engaged in international trade and supplies or will supply spare parts or
manufactured components and raw materials to its distributors or markets in
the Asia-Pacific Region.
(b) A certification from a principal officer of the foreign entity to the effect that said foreign entity
has been authorized by its Board of Directors or governing body to establish its regional warehouse
in the Philippines, specifying that:
1. The activities of the regional warehouse shall be limited to serving as a supply depot for the
storage, deposit, safekeeping of its spare parts or manufactured components and raw materials
including the packing, covering, putting up, marking, labelling and cutting or altering to customer's
specification, mounting and/or packaging into kits or marketable lots thereof, to fill up transactions
and sales made by its head offices or parent companies and to serving as a storage or warehouse of
goods purchased locally by the home office of the multinational for export abroad; Provided, That
said locally purchased goods for export may be stored in the regional warehouse only after they
have been cleared for export in accordance with the laws and regulations, including those of the
Central Bank and simplified procedures governing exports. The regional warehouse shall not directly
engage in trade nor directly solicit business, promote any sale, nor enter into any contract for the
sale or disposition of goods in the Philippines.
2. The regional warehouse will not derive any income from the sources within
the Philippines and its personnel will not participate in any manner in the
management of any subsidiary, affiliate or branch office it might have in the
Philippines.
3. The personnel of the regional headquarters shall be responsible for the
operation of the regional warehouse subject to the provisions of this Code.
(c) The multinational company shall pay the Board of Investments and the
appropriate Regional Collector of Customs the corresponding license fees and
storage fees to be determined by said offices.
(d) An application for the establishment of a regional warehouse shall be made
in writing to the Board of Investments upon recommendation of the Bureau of
Customs. The application shall describe the premises, the location and capacity
of the regional warehouse and the purpose for which the building is to be used.
The jurisdiction and responsibility of supervising the regional warehouses shall
be vested on the Bureau of Customs.
The Board of Investments, in consultation with the Regional Director of Customs
of the district where the warehouse will be situated shall cause an examination
of the premises to be made with reference particularly to the location,
construction and means provided for the safekeeping of its articles and if found
satisfactory, it may authorize its establishment without complying with the
requirements of any other government body and aimed at providing speedy
procedure for its establishment, subject to the following conditions:
1) That the articles to be stored in the warehouse are spare parts or
manufactured components and/or raw materials of the multinational company
operator for distribution and supply to its Asia-Pacific markets including
packaging, coverings, brands, labels and warehouse equipment
2) That the entry or importation, storage or re-export of the goods destined for
or to be stored in the regional warehouse will not involve any dollar outlay from
Philippine sources;
3) That they are of such character as to be readily identifiable for re-export;
4) That they shall be allowed provisional entry expeditiously by means of a pro
forma invoice of the parent company, identified, examined and appraised by the
Regional Collector of Customs and they shall be directly delivered to and kept in
the regional warehouses and released therefrom only in accordance with
pertinent provisions of this Act.
In the absence of a Regional Collector of Customs where the volume of the
establishment of regional warehouses does not yet warrant the creation of said
offices, the duties of the Regional Collector of Customs shall be performed by
the Collector of Customs of the district where the regional warehouse will be
located.
5) Each shipment of goods which will be stored in the regional warehouse shall
be covered by an affidavit of the multinational company operator setting forth
that said articles shall be exclusively used as supply for its Asia-Pacific markets
and stating the C & F price thereof;
6) That it shall file an ordinary warehousing bond in an amount equal to ONE
HUNDRED PER CENT (100%) of the ascertained customs duties on the articles
imported without prejudice to its filing a general warehousing bond in lieu of
the ordinary warehousing bond.
7) The percentage of annual allowable withdrawal for domestic use shall be
subject to the approval of the Board of Investments; Provided, however, That in
no case shall such withdrawals exceed thirty per cent (30%) of the value of
goods it has brought in for any given year and the payment of the
corresponding taxes and duties.
Tax Treatment of Imported Articles in the
Regional Warehouse
(a) Tax Incentives for Qualified Goods Destined for Re-exportation to the Asia-Pacific
and other Foreign Markets. — Except as otherwise provided in this Code, imported
spare parts or manufactured components, raw materials and other items including any
packages, coverings, brands and labels and warehouse equipment as may be allowed
by the Board of Investments for the use exclusively on the goods stored, except those
prohibited by law, brought into the regional warehouse from abroad to be kept, stored
and/or deposited or used therein and re-exported directly therefrom under the
supervision of the Regional Collector of Customs for distribution to its Asia-Pacific and
other foreign markets in accordance with the guidelines implementing Book IV of this
Code including to a bonded manufacturing warehouse in the Philippines and
eventually re-exported shall not be subject to customs duty, internal revenue tax,
export tax nor to local taxes, the provisions of law to the contrary notwithstanding.
Regional Warehouse…(continued)
(b) Payment of Applicable Duties and Taxes on Qualified Goods subject to Laws and
Regulations Covering Imported Merchandise if destined for the Local Market. — Any spare
parts, manufactured components, raw materials and other items sent, delivered, released
or taken from the regional warehouse to the local market in accordance with the
guidelines implementing Book IV of this Code shall be subject to the payment of customs
duties, taxes and other charges and for which purpose, the proper commercial invoice of
the head offices or parent companies shall be submitted to the Regional Collector of
Customs; and shall be subject to laws and regulations governing imported merchandise,
Provided, that in case any of the foregoing items are sold, bartered, hired or used for
purposes other than they were intended for without prior compliance with the guidelines
implementing Book IV of this Code and without prior payment of the duty, tax or other
charge which would have been due and payable at the time of entry if the articles had
been entered without the benefit of this decree, shall be subject to forfeiture and the
importation shall constitute a fraudulent practice against customs revenue punishable
under Section 3602, as amended, of the Tariff and Customs Code of the Philippines
Regional Warehouse…(continued)
(b) Payment of Applicable Duties and Taxes on Qualified Goods subject to Laws and Regulations Covering
Imported Merchandise if destined for the Local Market. — Any spare parts, manufactured components, raw
materials and other items sent, delivered, released or taken from the regional warehouse to the local market in
accordance with the guidelines implementing Book IV of this Code shall be subject to the payment of customs
duties, taxes and other charges and for which purpose, the proper commercial invoice of the head offices or
parent companies shall be submitted to the Regional Collector of Customs; and shall be subject to laws and
regulations governing imported merchandise, Provided, that in case any of the foregoing items are sold,
bartered, hired or used for purposes other than they were intended for without prior compliance with the
guidelines implementing Book IV of this Code and without prior payment of the duty, tax or other charge which
would have been due and payable at the time of entry if the articles had been entered without the benefit of
this decree, shall be subject to forfeiture and the importation shall constitute a fraudulent practice against
customs revenue punishable under Section 3602, as amended, of the Tariff and Customs Code of the
Philippines
Provided, further, that a sale pursuant to a judicial order shall not be subject to the preceding proviso without
prejudice to the payment of duties, taxes and other charges.
Exemption from the Maximum Storage Period under the Tariff &
Code; Period of Storage in the Regional Warehouse
• The provision of the law in Section 1908 of the Tariff and Customs Code of the
Philippines, as amended, to the contrary notwithstanding, articles duly
entered for warehousing may remain in the regional warehouses for a period
of two (2) years from the time of their transfer to the regional warehouse,
which period may be extended with the approval of the Board of Investments
for an additional period of one (1) year upon payment of the corresponding
storage fee on the unexported articles
Rules and Regulations on the Jurisdiction, Operation & Control over
Qualified Goods Stored in the Regional Warehouse
• The Board of Investments and the Bureau of Customs shall jointly issue special rules and
regulations on the receiving, handling, custody, entry, examinations, classifications, delivery,
storage, warehousing, manipulation and packaging, release for re-exportation and for the
safekeeping, recording, inventory and liquidation of said qualified goods, any existing law
notwithstanding. Such rules and regulations shall be formulated in consultation with the
applicants/operators of regional warehouses in order to be responsive to the objective of
providing a procedure for the speedy inflow and outflow of the qualified goods which are
destined for the Asia-Pacific and other foreign markets and keeping a proper balance
between promoting the Philippines as a center for multinational regional warehouses and
safeguarding the revenue laws of the country.
• The Commissioner of customs is directed is directed to expedite the immediate re-
exportation or transshipment of the foregoing goods destined for regional warehousing to
their Asia-Pacific and other foreign markets, including the emergency withdrawal for re-
exportation by air and ship and the partial liquidation of bonds adopting simplified export
procedures therefor.
Penalties
• Any willful violation by the regional or area headquarters of a multinational
company which has established regional warehouse or warehouses of the
provisions of existing laws shall constitute a sufficient cause for the
cancellation of its license or registration in addition to the penalties provided
for in this Act.
SPECIAL INVESTORS RESIDENT VISA
Qualifications
Any alien who possesses the following qualifications may be issued a Special
Investors Resident Visa.
1. He had not been convicted of a crime involving moral turpitude;
2. He is not afflicted with any loathsome, dangerous or contagious disease;
3. He has not been institutionalized for any mental disorder or disability;
4. He is willing and able to invest the amount of at least US$75,000.00 in the
Philippines; Provided, That the foregoing invested amount shall be lowered to
US$50,000 for aliens availing of Executive Order No. 63 and Executive Order No.
1037 subject to the conditions imposed by said legislations: Provided, further, That
for purposes of compliance with this particular condition, the alien-applicant
should prove that he has remitted such amount in acceptable foreign currency to
the Philippines.
Reportorial Requirements
• As a holder of the Special Investors Resident Visa, an alien shall be entitled to
reside in the Philippines while his investment subsists. For this purpose, he
should submit an annual report, in the form fully prescribed for the purpose,
to prove that he has maintained his investment in the country. Should said
alien withdraw his said investment from the Philippines, then the Special
Investors Resident Visa issued to him will automatically expire.
INCENTIVES OF EXPORT PROCESSING ZONE ENTERPRISES
Employment of Foreign Nationals
• The provisions of law to the contrary notwithstanding, Export Processing Zone
Authority, hereinafter referred to as the "Authority" may authorize an alien or
an association, partnership, corporation or any other form of business
organization formed, organized, chartered or existing under any law other
than those of the Philippines, or which is not a Philippine national, or the
working capital of which id fully owned or controlled by aliens to do business
or engage in an industry inside the export processing zone.
Employment of Foreign
Nationals…(continued)
• Subject to the provisions of Section 29 of Commonwealth Act No. 613, as
amended, an enterprise, a zone registered enterprise may employ foreign
nationals in supervisory, technical or advisory positions for a period not
exceeding five (5) years from its registration, extendible for limited periods at
the discretion of the Authority: Provided, however, That when the majority of
the capital stock of a zone registered enterprise is owned by foreign national,
the positions of president, treasurer, and general manager or their equivalents
may be retained by foreign nationals beyond the period set forth herein.
Employment of Foreign
Nationals…(continued)
• Foreign nationals employed within the purview of this Book, their spouses, and unmarried
children under twenty-one years of age who are not excluded by Sec. 29 of C.A. No. 613, as
amended, shall be permitted to enter and reside in the Philippines during the period of
employment of such foreign nationals. They shall be issued a multiple entry visa, valid for a period
of three years, to enter and leave the Philippines without further documentary requirements
other than valid passports or other travel documents in the nature of passports. The validity of
the multiple entry special visa shall be extendible yearly. Foreign Nationals who have been issued
multiple entry special visas under this provision, as well as their respective spouses and
dependents, shall be exempt from obtaining alien certificates and all types of clearances required
by any government department or agency. For this purpose, the Commission on Immigration and
Deportation and the authority shall jointly issue the necessary implementing rules and
regulations.
• A registered enterprise shall train Filipinos as understudies of foreign nationals in administrative,
supervisory and technical skills and shall submit annual reports of such training to the Board.
Tax Treatment of Merchandise in the Zone
(1) Except as otherwise provided in this Code, foreign and domestic
merchandise, raw materials, supplies, articles, equipment, machineries, spare
parts and wares of every description, except those prohibited by law, brought
into the zone to be sold, stored, broken up, repacked, assembled, installed,
sorted, cleaned, graded, or otherwise processed, manipulated, manufactured,
mixed with foreign or domestic merchandise whether directly or indirectly
related in such activity, shall not be subject to customs and internal revenue
laws and regulations nor to local tax ordinances, the provisions of law to the
contrary notwithstanding.
Tax Treatment of Merchandise in the
Zone…(continued)
(2) Merchandise purchased by a registered zone enterprise from the customs
territory and subsequently brought into the zone, shall be considered as export
sales and the exported thereof shall be entitled to the benefits allowed by law
for such transaction.
(3) Domestic merchandise sent from the zone to the customs territory shall,
whether or not combined with or made part of other articles likewise of local
origin or manufactured in the Philippines while in the export processing zone,
be subject to internal revenue laws of the Philippines as domestic goods sold,
transferred or disposed of for local consumption.
Zone…(continued)
(4) Merchandise sent from the export processing zone to the customs territory
shall, whether or not combined with or made part of other articles while in the
zone, be subject to rules and regulations governing imported merchandise. The
duties and taxes shall be assessed on the value of imported materials (except when
the final product is exempt) and the internal revenue taxes on the values added.
(5) Domestic merchandise on which all internal revenue taxes have been paid, if
subject thereto, and foreign merchandise previously imported on which duty or tax
has been paid, or which have been admitted free of duty and tax, may be taken
into the zone from the customs territory of the Philippines and be brought back
thereto free of quotas, duty or tax.
Zone…(continued)
(6) Subject to such regulations respecting identity and safeguarding of the revenue as
the Authority may deem necessary when the identity of an article entered into the
export processing zone under the immediately preceding paragraph has been lost,
such article when removed from the zone and taken to the customs territory shall be
treated as foreign merchandise entering the country for the first time, under the
provisions of the Tariff and Customs Code.
(7) Articles produced or manufactured in the zone and exported therefrom shall, on
subsequent importation into the customs territory, be subject to the import laws
applicable to like articles manufactured in a foreign country;
(8) Unless the contrary is shown, merchandise taken out of the zone shall be
considered for tax purposes to have been sent to customs territory.
Additional Incentives
A zone registered enterprise shall also enjoy all the incentive benefits provided in Article 39 hereof
under the same terms and conditions stated therein. In addition zone registered enterprises shall
also be entitled to the following:
(a) Exemption from Local Taxes and Licenses. — Notwithstanding the provisions of law to the
contrary, zone registered enterprise shall, to the extent of their construction, operation or
production inside the zone be exempt from the payment of any and all local government imposts,
fees, licenses or taxes except real estate taxes which shall be collected by the
Province/City/Municipality responsible for the collection thereof under the provisions of the Real
Property Tax Code: Provided, That machineries owned by zone registered enterprises which are
actually installed and operated in the Zone for manufacturing, processing or for industrial purposes
shall not be subject to the payment of real estate taxes for the first three (3) years of operation of
such machineries: Provided, further, That fifty percent (50%) of the proceeds of the real estate taxes
collected from all real properties located in the Zone and such other areas owned or administered
by the Authority shall be remitted to the Authority by the province/city/municipality responsible for
the collection of such taxes under the provisions of the Real Property Tax Code. All real estate taxes
accruing to the Authority as herein provided shall be expanded for such community facilities,
utilities and/or services as the Authority may determine.
Additional Incentives…(continued)
(b) Production equipment or machineries, not attached to real
estate, used directly or indirectly, in the production, assembly or
manufacture of the registered product of the zone registered
enterprise shall be exempt from real property taxes.
End

Topic 5 - EO 226

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THE OMNIBUS INVESTMENTS CODE OF 1987

EXECUTIVE ORDER NO. 226

The Board shall take into account the following:

• A registered enterprise regardless of nationality located in a less-developed-

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