Reviewer on
Incentives and Foreign Investment Law
COVERAGE of LAW:
1. Omnibus Investments Code
2. Foreign Investments Act
3. Cases
i. Garcia cases (due process requirements)
ii. Appealing decisions of the BOI
I. Relevant Constitutional Provision
ARTICLE II
Declaration of Principles and State Policies
Section 9. The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for all.
Section 10. The State shall promote social justice in all phases of national
development.
Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
Section 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.
Section 20. The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments.
Section 21. The State shall promote comprehensive rural development and
agrarian reform.
ARTICLE VI
The Legislative Department
Section 28. (1) The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
(4) No law granting any tax exemption shall be passed without the concurrence
of a majority of all the Members of the Congress.
ARTICLE VII
Executive Department
Section 20. The President may contract or guarantee foreign loans on
behalf of the Republic of the Philippines with the prior concurrence of
the Monetary Board, and subject to such limitations as may be provided
by law. The Monetary Board shall, within thirty days from the end of every
quarter of the calendar year, submit to the Congress a complete report of its
decision on applications for loans to be contracted or guaranteed by the
Government or government-owned and controlled corporations which would
have the effect of increasing the foreign debt, and containing other matters as
may be provided by law.
ARTICLE XII
National Economy and Patrimony
Section 1. The goals of the national economy are:
1. a more equitable distribution of opportunities, income, and wealth;
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2. a sustained increase in the amount of goods and services produced by
the nation for the benefit of the people
3. an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged.
The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full
and efficient use of human and natural resources, and which are competitive in
both domestic and foreign markets. However, the State shall protect Filipino
enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. Private enterprises,
including corporations, cooperatives, and similar collective organizations, shall
be encouraged to broaden the base of their ownership.
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State.
All natural resourced EXCEPT AGRICULTURAL LAND cannot be alienated.
The exploration, development, and utilization of natural resources shall
be under the full control and supervision of the State.
The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Period <= 25 yrs + 25 yrs extension
The State shall protect the nation's marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources
by Filipino citizens, as well as cooperative fish farming, with priority to
subsistence fishermen and fish- workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations
involving either
1. technical or
2. financial assistance
for large-scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions provided by
law, based on real contributions to the economic growth and general welfare of
the country. In such agreements, the State shall promote the development and
use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution.
Section 3. Lands of the public domain:
1. agricultural (may be further classified, may be alienated)
2. forest or timber
3. mineral lands and
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4. national parks.
Private corporations can only LEASE property
- Period <= 25 yrs + 25 yrs extension
- Limit: <= 1000 ha
Citizens LEASE - <=500 ha
OWN - <= 12ha
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the Congress
shall determine, by law, the size of lands of the public domain which may be
acquired, developed, held, or leased and the conditions therefor.
Section 5. The State, subject to the provisions of this Constitution and national
development policies and programs, shall protect the rights of indigenous
cultural communities to their ancestral lands to ensure their economic, social,
and cultural well-being.
Section 6. The use of property bears a social function, and all economic agents
shall contribute to the common good. Individuals and private groups, including
corporations, cooperatives, and similar collective organizations, shall have the
right to own establish, and operate economic enterprises, subject to the duty of
the State to promote distributive justice and to intervene when the common
good so demands.
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.
- Aliens cannot own land but can own condominiums through a condominium
corporation (only up to 40% of such corp.).
Section 9. The Congress may establish an independent economic and planning
agency headed by the President, which shall, after consultations with the
appropriate public agencies, various private sectors, and local government units,
recommend to Congress, and implement continuing integrated and coordinated
programs and policies for national development.
Until the Congress provides otherwise, the National Economic and
Development Authority shall function as the independent planning agency of
the government.
Section 10. The Congress shall, upon recommendation of the economic and
planning agency, when the national interest dictates, reserve to citizens of
the Philippines or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or such higher
percentage as Congress may prescribe, certain areas of investments.
The Congress shall enact measures that will encourage the formation and
operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within
its national jurisdiction and in accordance with its national goals and priorities.
Section 11. Public Utility = Citizens or Corporations established under
Philippine Law. Period= <= 50 years.
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Neither shall any such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by the Congress when
the common good so requires. The State shall encourage equity participation in
public utilities by the general public. The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the Philippines.
Section 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures that
help make them competitive.
Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of economic
viability.
Section 17. In times of national emergency, when the public interest so
requires, the State may, during the emergency and under reasonable terms
prescribed by it, temporarily take over or direct the operation of any privately
owned public utility or business affected with public interest.
Section 18. The State may, in the interest of national welfare or defense,
establish and operate vital industries and, upon payment of just compensation,
transfer to public ownership utilities and other private enterprises to be operated
by the Government.
Section 19. The State shall regulate or prohibit monopolies when the public
interest so requires. No combinations in restraint of trade or unfair competition
shall be allowed.
Section 20. The Congress shall establish an independent central monetary
authority, the members of whose governing board must be natural-born Filipino
citizens, of known probity, integrity, and patriotism, the majority of whom shall
come from the private sector. They shall also be subject to such other
qualifications and disabilities as may be prescribed by law. The authority shall
provide policy direction in the areas of money, banking, and credit. It shall have
supervision over the operations of banks and exercise such regulatory powers as
may be provided by law over the operations of finance companies and other
institutions performing similar functions.
Until the Congress otherwise provides, the Central Bank of the Philippines,
operating under existing laws, shall function as the central monetary authority.
Section 21. Foreign loans may only be incurred in accordance with law and the
regulation of the monetary authority. Information on foreign loans obtained or
guaranteed by the Government shall be made available to the public.
Section 22. Acts which circumvent or negate any of the provisions of this Article
shall be considered inimical to the national interest and subject to criminal and
civil sanctions, as may be provided by law.
ARTICLE XIV
Education
Section 4 (2) Educational institutions, other than those established by
religious groups and mission boards, shall be owned solely by citizens of the
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Philippines or corporations or associations at least sixty per centum of the capital
of which is owned by such citizens. The Congress may, however, require
increased Filipino equity participation in all educational institutions.
Science and Technology
Section 10. Science and technology are essential for national development and
progress. The State shall give priority to research and development, invention,
innovation, and their utilization; and to science and technology education,
training, and services. It shall support indigenous, appropriate, and self- reliant
scientific and technological capabilities, and their application to the country's
productive systems and national life.
Section 11. The Congress may provide for incentives, including tax deductions,
to encourage private participation in programs of basic and applied scientific
research. Scholarships, grants-in-aid, or other forms of incentives shall be
provided to deserving science students, researchers, scientists, inventors,
technologists, and specially gifted citizens.
Section 12. The State shall regulate the transfer and promote the adaptation of
technology from all sources for the national benefit. It shall encourage the widest
participation of private groups, local governments, and community-based
organizations in the generation and utilization of science and technology.
Section 13. The State shall protect and secure the exclusive rights of scientists,
inventors, artists, and other gifted citizens to their intellectual property and
creations, particularly when beneficial to the people, for such period as may be
provided by law.
General Provisions
Section 11. (1) The ownership and management of mass media shall be
limited to citizens of the Philippines, or to corporations, cooperatives or
associations, wholly-owned and managed by such citizens.
The Congress shall regulate or prohibit monopolies in commercial mass media
when the public interest so requires. No combinations in restraint of trade or
unfair competition therein shall be allowed.
(2) The advertising industry is impressed with public interest, and shall be
regulated by law for the protection of consumers and the promotion of the
general welfare.
Only Filipino citizens or corporations or associations at least seventy per centum
of the capital of which is owned by such citizens shall be allowed to engage in
the advertising industry.
The participation of foreign investors in the governing body of entities in such
industry shall be limited to their proportionate share in the capital thereof, and
all the executive and managing officers of such entities must be citizens of the
Philippines.
Nationalized Industries
Public Utilities 100% Filipino
Educational Institutions 100% Filipino
(except those established by
religious organizations)
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Mass Media 100% Filipino
Advertising At least 70% Filipino
II. Omnibus Investments Code
Policies:
1. Economic Nationalism
2. Planned Economy
3. Disperse Industries
4. Promote small and medium scale industries
5. Encourage competition/ discourage monopoly
ART. 2. 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
foundation 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 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
systems 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.
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6. The State recognizes 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 a 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.
The foregoing declaration of investment policies shall apply to all investment
incentive schemes.
CHAPTER II
BOARD OF INVESTMENTS
ART. 3. The Board of Investments. - The Board of Investments shall implement
the provisions of Books One to Five of this Code.
ART. 4. Composition of the Board. - The Board of Investments shall be composed
of seven (7) governors:
1. The Secretary of Trade and Industry (Chairman)
2. three (3) Undersecretaries of Trade and Industry to be chosen by the
President; (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)
3. three (3) representatives from other government agencies and the
private sector (4-yr term; shall serve until replaced
No vacancy shall be filled except for the unexpired portion of any term, and that
no one may be designated to be a governor of the Board in an acting capacity
but all appointments shall be ad interim or permanent.
ART 5. Qualifications of Governors of the Board.
1. at least thirty (30) years old
2. of good moral character
3. and of recognized competence in the fields of economics, finance,
banking, commerce, industry, agriculture, engineering, law,
management or labor.
ART. 6. Appointment of Board Personnel. - The Board shall appoint its technical
staff and other personnel subject to Civil Service Law, rules and regulations.
ART 7. 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.
Four (4) governors = QUORUM
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Four (4) governors = MAJORITY VOTE
(1) Prepare annually the Investment Priorities Plan
(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
(4) After due hearing, decide controversies concerning the implementation
of the 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:
Decision = 30 days from submission of controversy
Appeal to the President = 30 days from receipt of adverse decision
(5) Recommend the entry of foreign nationals into the Philippines for
employment to the CID
(6) Check by inspection or reports the participation of foreign nationals
in registered enterprises
(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 or
(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.
(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
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industries whose operation may result in dislocation, overcrowding or inefficient
use of resources, thus impeding economic growth.
(13) In appropriate cases, and 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:
(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 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 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; and
(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.
ART. 8. Powers and Duties of the Chairman. - The CHAIRMAN shall have the
following powers and duties:
(1) To preside over the meetings of the Board;
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(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 investment;
(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.
ART. 9. Powers and Duties of the Vice-Chairman. - The VICE-CHAIRMAN shall
have the following powers and duties:
(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.
INVESTMENTS WITH INCENTIVES
TITLE I
PREFERRED AREAS OF INVESTMENTS
CHAPTER I DEFINITION OF TERMS
ART. 10. Board shall mean the Board of Investments created under this Code.
ART. 11. 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, development 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
or fiduciary functions.
ART. 12. TECHNOLOGICAL ASSISTANCE CONTRACTS shall mean contracts for:
(1) the transfer, by license or otherwise, of patents, processes, formulas
or other technological rights of foreign origin; and/or
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(2) foreign assistance concerning technical and factory management,
design, planning, construction, operation and similar matters.
ART. 13. 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.
ART. 14. 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.
ART. 15. 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 corporation 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
percent (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.
ART. 16. 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.
ART. 17. PIONEER ENTERPRISE shall mean a registered enterprise
(1) engaged in the manufacture, processing or production, 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
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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 provided under Title V,
Book 1 hereof.
ART. 18. NON-PIONEER ENTERPRISE shall include all registered producer
enterprises other than pioneer enterprises.
ART. 19. 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.
ART. 20. 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
therefor.
ART. 21. 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 a 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.
ART. 22. 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 exports subject to such
conditions and limited incentives as may be determined by the Board.
ART. 23. 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 export products exported directly by a
registered export producer or the net selling price of export products sold by a
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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 traders 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.
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.
ART. 24. 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.
ART. 25. PROCESSING shall mean converting of raw materials into marketable
form 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 dessicating quick freezing, that
results in a change in the nature or state of the products. Merely packing or
packaging shall not constitute processing.
ART. 26. INVESTMENT PRIORITIES PLAN shall mean the overall 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
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facilities to produce such services;
(c) Specific activities where the potential for utilization of indigenous non-
petroleum based fuels or sources of energy can be best promoted; and
(d) Such other information, analyses, data, guidelines or criteria as the
Board may deem appropriate.
CHAPTER II
INVESTMENT PRIORITIES PLAN
ART. 27. Investment Priorities Plan.
- BOI must submit to the President the IPP on or before March 31.
President may extend deadline.
ART. 28. Criteria in Investment Priority Determination. - No economic activity
shall be included in the Investment Priorities 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.
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 development
goal;
(c) Other indicators of 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.
ART. 29. 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 Investments 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.
ART. 30. Amendments. - Subject to publication requirements and the criteria for
investment priority determination, the Board of Investments may, at any time,
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 Reviewer on
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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.
ART. 31. 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.
CHAPTER III
REGISTRATION OF ENTERPRISES
Qualifications of a Registered Enterprise.
A. Citizenship
a. Filipino citizen
b. Partnership/ Corporation/ Cooperative
i. organized under Philippine laws
ii. at least 60% of capital owned and controlled by
Filipino citizens
iii. at least 60% of the Board of Directors are citizens
c. Foreign corporation
i. Proposes to engage in a PIONEER PROJECT
1. Measured capacity cannot be filled in by
Philippine nationals
2. Area of business not within activities
reserved by the Constitution or other laws to
Philippine citizens or corporations owned and
controlled by Philippine citizens
ii. OR exports 70% of its total production
iii. Obligates to attain PHILIPPINE NATIONAL STATUS
within 30 years from registration
EXCEPTION: 100% EXPORT
B. Type of Business
a. 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
b. at least fifty percent (50%) of its total production is for export
c. it is an existing producer which will export part of production
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under such conditions and/or limited incentives as the Board
may determine;
d. enterprise is engaged or proposing to engage in the sale
abroad of export products bought by it from one or more
export producers
e. enterprise is 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.
C. Has the capacity to CONTRIBUTE to the development of the preferred
are and of the national economy in general
D. Proposing to engage in NOT PREFERRED projects
- it must have 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 to facilitate proper
implementation of this Code.
Criteria for Evaluation of Applications.
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;
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 conditions;
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.
- applications NOT ACTED UPON within 20 WORKING DAYS shall be
deemed approved
- decision can be appealed to the OFFICE OF THE PRESIDENT within 30
DAYS from its promulgation
- if appealed, decision of the board shall be FINAL and executory after 90
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DAYS after perfection of appeal unless the OP reverses it
Certificate of Registration.
- issued a certificate of registration
o under the seal of the Board of Investments
o with the signature of its Chairman and/or such other officer or
employee of the Board as it may empower and designate for
the purpose.
o CONTENTS
The name of the registered enterprise;
The preferred area of investment in which the
registered enterprise is proposing to engage;
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
The other terms and conditions to be observed by the
registered enterprise by virtue of the registration.
TITLE II
BASIC RIGHTS AND GUARANTEES
ART. 38. Protection of Investment. - 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) REPARTRIATION OF INVESTMENTS. - 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
(b) REMITTANCE OF EARNINGS. 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,
(c) 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;
(d) 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.
(e) RIGHT TO REMIT
TITLE III
INCENTIVES TO REGISTERED ENTERPRISES
When is an enterprise entitled to benefits and incentives?
GENERAL RULE: when the incentives are made in the PREFERRED AREAS OF
INVESTMENT as defined by the Investment Priorities Plan
EXCEPTIONS:
1. Filipino-owned enterprise where 50% of products is for export
2. Not Filipino-owned where 70% of products is for export
A. Fiscal Incentives
1. Income Tax Holiday
6 years- pioneer enterprises
4 years- non-pioneer enterprises
Can be EXTENDED for 1 year if:
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.
CANNOT EXCEED 8 years
EXPANDING FIRMS- 3 years from commercial operation, proportionate to
expansion
- not entitled to additional deduction due to labor expense
2. Additional Deduction for Labor Expense
For the FIRST 5 YEARS
Deduction of 50% of wages corresponding to the increment in the
number of direct labor for skilled and unskilled workers
Additional deduction shall be DOUBLED if the activity is located in less
developed areas as defined in Art. 40.
3. Exemption From Taxes And Duties On Imported
Spare Parts
100% EXEMPT from customs duties and NIR tax

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Provided: on RAW MATERIALS equivalent to tax due on

a. 70% of products for export such
b. not manufactured domestically Board may set a fixed percentage of export
sales as tax
c. reasonably needed and exclusively used by the registered
enterprise EXCEPT on purchase of genetic material and breeding
upon prior approval for part-time use in a non- stocks
registered activity reasonable needed and exclusively used for
proportionate taxes are paid on the specific registered business
equipment and machinery being permanently used for would have been tax-exempt had they been
non-registered activities imported
d. Board approval was secured prior to importation of prior approval of Board secured
machinery
made within 10 years from registration
Board may require INTERNATIONAL CANVASSING but if value exceed $5
Million, the provisions of PD 1764 on INTERNATIONAL COMPETITIVE 7. Additional Deductions from Taxable Income
BIDDING shall apply.
Should the enterprise sell the machinery within 5 YEARS from B. Non-Fiscal Incentives
importation, both the vendor and the vendee shall be liable to pay Employment Of Foreign Nationals
TWICE the tax exemption granted to it.
Registered enterprise may employ foreign nationals in supervisory,
EXCEPT if sale within 5 years is made to: technical or advisory positions for a period not exceeding five (5) years
to another registered enterprise or registered from its registration, extendible for limited periods at the discretion of
domestic producer enjoying similar incentives; the Board
for reasons of proven technical obsolescence; or o if majority of shares owned by foreign nationals, the positions
of PRESIDENT, TREASURER and GENERAL MANAGER maybe
for purposes of replacement to improve and/or
retained by foreign nationals.
expand the operations of the registered enterprise.
Spouse and children below 21 shall be allowed entry to the Philippines
4. Exemption From Wharfage Dues And Export Tax,
Duty, Impost And Fees A registered enterprise shall train Filipinos as understudies of foreign
nationals in administrative, supervisory and technical skills.
5. Tax Exemption On Breeding Stocks And Genetic
Materials Simplification of customs procedures
Importation of BREEDING STOCKS and GENETIC MATERIALS Importation of consigned equipment
a. not locally available or not available in a comparative price No restriction as to use of equipment consigned to the registered
enterprise
b. reasonably needed by the enterprise
o upon payment of re-importation bond
c. prior approval by Board secured
o for the exclusive use of the registered enterprise
6. Tax Credits
o if sold or transferred, rule on imported machinery shall apply
on domestic equipment
The privilege to operate a bonded manufacturing/trading warehouse
reasonable needed and exclusively used for
registered business 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
would have been tax-exempt had they been the Board upon prior consultation with the Bureau of Customs.
imported
prior approval of Board secured
TITLE IV
made within 5 years from effectivity of Code
INCENTIVES TO LESS-DEVELOPED-AREA REGISTERED ENTERPRISE
exempt from CONTRACTORS TAX

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LESS DEVELOPED AREA citizens of the Philippines

- determined by the Board upon consultation with the NEDA and other 3. a corporation organized abroad and registered as doing
government agencies business in the Philippines under the Corporation Code of
- CRITERIA: which one hundred percent (100%) of the capital stock
outstanding and entitled to vote is wholly owned by
o LOW PER CAPITA GROSS DOMESTIC PRODUCT Filipinos or a trustee of funds for pension or other
o LOW LEVEL OF INVESTMENTS employee retirement or separation benefits, where the
o HIGH RATE OF UNEMPLOYMENT AND/OR UNDEREMPLOYMENT trustee is a Philippine national and at least sixty percent
(60%) of the fund will accrue to the benefit of Philippine
o LOW LEVEL OF INFRASTRUCTURE DEVELOPMENT including its nationals: Provided, That where a corporation and its non-
accessibility to developed urban centers, shall be entitled to Filipino stockholders own stocks in a Securities and
the following incentives in addition to those provided in the Exchange Commission (SEC) registered enterprise, at least
preceding article. sixty percent (60%) of the capital stock outstanding and
Incentves: entitled to vote of each of both corporations must be
owned and held by citizens of the Philippines and at least
1. Incentives for Necessary and Major Infrastructure
sixty percent (60%) of the members of the Board of
and Public Facilities.
Directors of each of both corporations must be citizens of
Income Tax deduction equal to 100% of costs for the Philippines, in order that the corporation, shall be
necessary and major infrastructure works considered a "Philippine national.
prior approval of the Board in consultation with other Doing Business
government agencies concerned; 1. soliciting orders, service contracts, opening offices,
all such infrastructure works shall upon completion, whether called "liaison" offices or branches; appointing
be transferred to the Philippine Government representatives or distributors domiciled in the Philippines
- any amount not deducted for a particular year may be or who in any calendar year stay in the country for a
carried over for deduction for subsequent years not period or periods totaling one hundred eighty [180] days
exceeding ten (10) years from commercial operation. or more
2. Nationality requirements not as strict in less 2. participating in the management, supervision or control of
developed areas any domestic business, firm, entity or corporation in the
Philippines;
Types of Investment
3. and any other act or acts that imply a continuity of
a. Pioneer Areas of Investments commercial dealings or arrangements and contemplate to
- (Initially owned by foreigners) Investments that are required to attain that extent the performance of acts or works, or the
Filipino status (60% Filipino) within thirty (30) years or such longer exercise of some of the functions normally incident to, and
period as the BOI may determine except enterprises whose production in progressive prosecution of commercial gain or of the
is 100% geared for exports. purpose and object of the business organization:
b. Non-Pioneer Areas of Investments 4. not mere investment as a shareholder by a foreign entity
- Foreign investments are allowed up to forty percent (40%) of the in domestic corporations duly registered to do business,
outstanding voting capital stock; may be higher if it exports at least and/or the exercise of rights as such investor; nor having a
70% of its total production. nominee director or officer to represent its interests in
such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts
III. Foreign Investments Act business in its own name and for its own account;
Philippine National
1. citizen of the Philippines; of a domestic partnership or
association wholly owned by citizens of the Philippines; Is a foreign corporation required to register with the SEC if it
wants to do business in the Philippines? NO
2. a corporation organized under the laws of the Philippines
of which at least sixty percent (60%) of the capital stock What are the consequences of not registering with the SEC?
outstanding and entitled to vote is owned and held by Foreign corporation not registered CANNOT SUE but can counter-sue

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should the Domestic Corporation file a case against it first
Summary of Doing Business: The principles regarding the right of a
foreign corporation to bring suit in Philippine courts may thus be
condensed in four statements: (1) if a foreign corporation does business
in the Philippines without a license, it cannot sue before the Philippine
courts; (2) if a foreign corporation is not doing business in the
Philippines, it needs no license to sue before Philippine courts on an
isolated transaction or on a cause of action entirely independent of any
business transaction; (3) if a foreign corporation does business in the
Philippines without a license, a Philippine citizen or entity which has
contracted with said corporation may be estopped from challenging the
foreign corporations corporate personality in a suit brought before the
Philippine courts; and (4) if a foreign corporation does business in the
Philippines with the required license, it can sue before Philippine courts
on any transaction. MR. Holdings, Ltd. V. Bajar, 380 SCRA 617 (2002);
Agilent Technolgies Singapore (PTE) Ltd. v. Integrated Silicon
Technology Phil. Corp., G.R No. 154618, 14 April (2004).

Modes of Definition/ Description Capital Taxes Expenses Liabilitie Deposit of Establishment and
Investment Requirement s Securities Registration Costs:

Subsidiary - incorporated and Minimum capital Corporate Income Tax Cannot pass Limited to NONE Filing fee: .2% of
existing under the requirement = = 30% of NET income to parent assets of required authorized capital
laws of the Philippines $200K or MCIT (2% of GROSS subsidiary stock but not less than
- wholly owned or at EXCEPT: income) P1,000
least majority owned 1. advanced
by a foreign parent technolog Remittance of Legal Research fee:
company y Dividends = 30% 1% of fling fee but not
- separate juridical approved EXCEPT: 15% if country less than P10.00
entity from parent by DOST of parent company
company ($100K) 1. grants 15% By-laws fee: P500
2. direct tax sparing
employme 2. does not DST: P1 for each P200
nt of at impose tax on par value of shares
least 50 dividends
persons Additional Fees:
($100K) a. P2,000 if
3. exports at registering
least 60% under Foreign
of output Investments
Act
b. Fees for
permits and
applications
with BIR and
DTI
Branch - extension of foreign Minimum capital Corporate Income Tax Parent Parent Deposit Filing fee: .2% of
corporation requirement = = 30% of NET income company answerabl Government authorized capital
- subject to $200K or MCIT (2% of GROSS can allocate e to Securities = stock but not less than
NATIONALITY EXCEPT: income) to its branch liabilities at least P1,000
requirements in 1. advanced a incurred P100K with
certain industries technolog Branch Profit proportional by branch SEC within 60 Legal Research fee:
y Remittance Tax = 15% part of days from 1% of fling fee but not
approved of total profits applied branchs issuance of less than P10.00
by DOST or earmarked for expenses license
($100K) remittance without Additional Fees:
2. direct deduction of tax Additional a. P2,000 if
employme component (shall not securities= registering

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nt of at include income derived 2% of the under Foreign

least 50 from activity not gross income Investments
persons related to business) in excess of Act
($100K) P5M b. Fees for
- within 6 permits and
months after applications
each fiscal with BIR and
year DTI
Representa - promotes products of Amount initially NO TAX LIABILITY No NONE Filing fee: .1% of
tive Office parent company but remitted = at least allocation required actual inward
cannot enter into $30, 000 from parent remittance but not
contracts with local less than P2,000
entities on behalf of
parent company Legal Research fee:
- does not derive 1% of fling fee but not
income from the less than P10.00
Philippines
- contracts must be Fees for permits and
entered into by the applications with BIR
HEAD OFFICE and the and DTI
local entity

Acceptable activities of a
representative office:
a. dissemination of
foreign market
information;
b. promotion for export
of Philippine products
c. acting as a message
centre or a
communication centre
between interested
parties and the head
office;
d. promotion of products
presently being
distributed in the
Philippines;
e. to render, assist and
give technical know-
how and training to
existing and future
customers of the
Company's products;
f. to provide and
facilitate better
communication and
contact between its
head office and
affiliated companies

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on one hand and

present and future
customers on the
other;
g. to inform potential
customers of price
quotations of the head
office and affiliated
companies;
h. to conduct and make
surveys and studies of
the market, economic
and financial
conditions in the
Philippines;
i. attend to the needs of
end-users of its
products in the
Philippines.
Regional or - principally acts as a Not less than NO income tax if it does Expenses Liabilities NONE Filing fee: P5,000
Area supervision, $50,000 or its not derive income from financed by shouldere required
Headquart communications and equivalent in an the Philippines the parent d by Legal Research fee:
ers coordination center for acceptable company; parent 1% of fling fee but not
the subsidiaries, currency Employees of RAH = Not less company less than P10.00
branches or affiliates 15% of gross income or than
of a multinational NIRC rates $50,000 BOI requirement of
company in the Asia- annual inward
Pacific Region. remittance = Not less
- not allowed to do than $50,000 for
business or earn expenses
income from the host
country
- does not deal directly
with the clients of the
parent company,
Regional Branch office established in the Not less than Income Tax = 10% of Expenses Liabilities NONE Filing fee: 1% of actual
Operating Philippines engaged in any one $200K or its taxable income finance by shouldere required remittance but not
Headquart of the following services: equivalent in an parent d by less than 1% of the
ers a. general administration acceptable Branch Profit should parent Philippine currency
and planning; currency Remittance Tax = 15% income company equivalent of $200K
b. business planning of total profits applied earned from
and coordination; or earmarked for operations Legal Research fee:
c. sourcing and remittance without be 1% of fling fee but not
procurement of raw deduction of tax insufficient less than P10.00
materials and component (shall not
components; include income derived
d. corporate finance from activity not
advisory services; related to business)
e. marketing control and
sales promotion; Employees of ROHQ =
f. training and personnel 15% of gross income or

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management; NIRC rates

g. logistic services;
research and
development services
and product
development;
h. technical support and
maintenance;
i. data processing and
communication;
j. business
development.

- It refers to a foreign
business entity which
is allowed to derive
income in the
Philippines by
performing qualifying
services to its
affiliates, subsidiaries
or branches in the
Philippines, in the
Asia-Pacific Region
and in other foreign
markets.
- Regional operating
headquarters are
prohibited from
offering qualifying
services to entities
other than their
affiliates, branches or
subsidiaries
Joint - a cooperative If foreign interest Corporate Income Tax
Venture arrangement of exceeds 40%, = 30% of NET income
corporations, whether minimum capital or MCIT (2% of GROSS
foreign or domestic, to requirement = income)
jointly perform a $200K
single, specific EXCEPT: Dividends = 30%
undertaking or project 1. advanced EXCEPT: 15% if country
with each of the technolog of parent company
partners contributing y 1. grants 15%
to the performance approved tax sparing
- subject to by DOST 2. does not
NATIONALITY ($100K) impose tax on
requirements for 2. direct dividends
certain industries employme
nt of at
least 50
persons

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($100K)
3. exports at
least 60%
of output
Purchase - the foreign corporation Corporate Income Tax NONE DST: P1 for each P200
of stocks in may take advantage = 30% of NET income Required par value of shares
Existing of the goodwill already or MCIT (2% of GROSS
Corporatio generated by the income) Subsequent sale:
n domestic corporation, DST = .75 centavos
as an ongoing concern Tax on the Sale of for each or fractional
- subject to Shares of Stock: part of par value
NATIONALITY Unlisted corporation,
requirements Capital Gains Tax = 5%
of the first P
100,000.00 and 10%
for the excess above P
100,000.00 of net gain.

traded and listed in the

Philippine Stock
Exchange, = 1/2 of 1%
of the value of the
stock sold

Exchange of property
for stock where party
gains control of stock
TAX FREE

Dividends = 30%
EXCEPT: 15% if country
of parent company
1. grants 15%
tax sparing
2. does not
impose tax on
dividends

Merger or - merger occurs when Merger or consolidation shouldered shouldere NONE Filing fee: .2% of
Consolidati one or more existing NOT TAXABLE by surviving d by required authorized capital
on corporations are corporation surviving stock but not less than
absorbed by another New corporation liable corporatio P3,000
corporation which for CIT= 30% n
survives and continues Merger with
the combined application to increase
business. capital stock: .2% of
- Consolidation occurs increase in capital
when two or more stock or subscription
existing corporations price OR .2% of
consolidate or join authorized capital

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their businesses to stock but not less than

form a new, single, P3,000 whichever is
consolidated higher
corporation.
- Subject to Consolidated
constitutional companys authorized
prohibition against capital stock different
monopolies and from total equity of
restraint of trade constituent
corporations: 2% of
capital stock in
constituent
corporations OR .2% of
capital stock or
subscription price but
not less than P1,000
whichever is higher

Legal Research fee:

1% of fling fee but not
less than P10.00

By-laws fee: P500

DST: P1 for each P200

par value of shares

Fees for permits and

applications with BIR
and DTI
Technology Refers to contracts or Income Tax = 30% No NOT NONE Filing fee: P2,500
Transfer agreements entered into - can be allocation shouldere required Registration fee:
Arrangeme involving the: reduced to at d by P2,500
nt most 10% by foreign
a. transfer of systematic treaty corporatio
knowledge for the n
manufacture of a Royalty subject to 12%
product or the VAT
application of a
process;
b. rendering of a service,
including
management
contracts;
c. transfer, assignment
or licensing of all
forms of intellectual
property rights,
including licensing of
computer software,
except computer

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software developed for

mass market.

- no longer required to
be registered if it
complies with IP Code
- should not have
adverse effects on
competition and trade
- must provide for
effective quality
control by the licensor
over the product or
service covered by the
contract
- must allow continued
access to
improvements in the
transferred technology
Manageme - foreign corporation Only Only NONE Need not be registered
nt Contract shall undertake to expenses of liabilities required because it is a
manage all or foreign of foreign PRIVATE CONTRACT.
substantially all of the corporation corporatio - must be
business of a domestic n disclosed
corporation.
- Period: only 5 years/
term
- Domestic enterprises
engaging in wholly or
partially nationalized
activities cannot enter
into a management
contract with a foreign
corporation.

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 Reviewer on
Incentives and Foreign Investment Law

Joemyl Baloro Page 19 of 19