EXECUTIVE ORDER NO. 226
EXECUTIVE ORDER NO. 226 - THE
OMNIBUS INVESTMENTS CODE OF 1987
WHEREAS,
the Government is committed to encourage investments in desirable areas
of activities;
WHEREAS, to facilitate investment, there is a need to adopt a cohesive
and consolidated investments incentives law;
WHEREAS, it is imperative to integrate basic laws on investment, to
clarify and harmonize their provisions for the guidance of domestic and
foreign investors;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do
hereby order and ordain the following:
PRELIMINARY
TITLE
CHAPTER I
Title and Declaration of Policy
ARTICLE 1. Short Title. — This Order shall be known
as the “Omnibus Investments Code” of 1987.
ARTICLE 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 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.
The foregoing declaration of investment policies shall apply to all
investment incentive schemes.
CHAPTER
II
Board of Investments
ARTICLE 3. The Board of Investments. — The Board of
Investments shall implement the provisions of Books One to Five of this
Code.
ARTICLE 4. Composition of the Board. — 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 appointed by the President for a term of four (4)
years: Provided, That upon the expiration of his term, a governor shall
serve as such until his successor shall have been appointed and
qualified: Provided, further, That no vacancy shall be filled except
for the unexpired portion of any term, and that no one may be
designated to be governor of the Board in an acting capacity but all
appointments shall be ad interim or permanent.
ARTICLE 5. 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.
ARTICLE 6. Appointment of Board Personnel. — The
Board shall appoint its technical staff and other personnel subject to
Civil Service Law, rules and regulations.
ARTICLE 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.
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
(3)) 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:
(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, protectionalism 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; 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.
ARTICLE 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;
(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.
ARTICLE 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.
BOOK
I
INVESTMENTS WITH INCENTIVES
TITLE I — PREFERRED AREAS OF
INVESTMENTS
CHAPTER I
Definitions of Terms
ARTICLE 10. “Board” shall mean the Board of
Investments created under this Code.
ARTICLE 11. “Registered Enterprises” 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.
ARTICLE 12. “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.
ARTICLE 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.
ARTICLE 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.
ARTICLE 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 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.
ARTICLE 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.
ARTICLE 17. “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 provided under Title V, Book I, hereof.
ARTICLE 18. “Non-pioneer enterprise” shall include
all registered producer enterprises other than pioneer enterprises.
ARTICLE 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.
ARTICLE 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.
ARTICLE 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 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 Sec. 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.
ARTICLE 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 export subjects to such conditions and limited incentives
as may be determined by the Board.
ARTICLE 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 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.
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.
ARTICLE 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.
ARTICLE 25. “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.
ARTICLE 26. “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 in accordance with the criteria set forth in
this Book.
CHAPTER
II
Investment Priorities Plan
ARTICLE 27. Investment Priorities Plan. — 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.
ARTICLE 28. 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.
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.
ARTICLE 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 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.
ARTICLE 30. 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.
ARTICLE 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
ARTICLE 32. Qualifications of a 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;
(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; and
(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 to facilitate proper
implementation of this Code.
ARTICLE 33. 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.
ARTICLE 34. Approval and 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.
ARTICLE 35. 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;
(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.
ARTICLE 36. 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.
ARTICLE 37. 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.
TITLE
II — BASIC RIGHTS AND GUARANTEES
ARTICLE 38. 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 Sec. 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 Sec. 74 of Republic Act No.
265 as amended;
(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 Sec. 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 Sec. 74 of
Republic Act No. 265 as amended;
(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 Sec. 74 of Republic Act No. 265 as amended.
TITLE
III — INCENTIVES TO REGISTERED ENTERPRISES
ARTICLE 39. Incentives to Registered Enterprises. —
All registered enterprises shall be granted the following incentives to
the extent engaged in a preferred area of investment;
(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.
(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; and
(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 Sec. 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 Sec. 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.
TITLE
IV — INCENTIVES TO LESS-DEVELOPED-AREA REGISTERED ENTERPRISE
ARTICLE 40. 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:
(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.
(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.
TITLE
V — GENERAL PROVISIONS
ARTICLE 41. 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.
ARTICLE 42. 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.
ARTICLE 43. Benefits of Multiple Area Enterprises. —
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.
BOOK
II
FOREIGN INVESTMENTS WITHOUT
INCENTIVES
TITLE I
CHAPTER I
Definitions and Scope of this
Book
ARTICLE 44. Definition of terms. — As used in this
Book, the term “investment” shall mean equity participation in any
enterprise formed, organized or existing under the laws of the
Philippines; and the phrase “doing business” shall include soliciting
orders, purchases, service contracts, opening offices, whether called
“liaison” offices or branches; appointing representatives or
distributors who are domiciled in the Philippines for a period or
periods totalling one hundred eighty (180) days or more; participating
in the management, supervision or control of any domestic business
firm, entity or corporation in the Philippines, and any other act or
acts that imply a continuity of commercial dealings or arrangements and
contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and
object of the business organization.
ARTICLE 45. Non-Applicability to Banking
Institutions. — This Book shall not apply to banking institutions which
are governed and regulated by the General Banking Act and other laws
which are under the supervision of the Central Bank.
CHAPTER
II
Investments
ARTICLE 46. Permitted Investments. — (1) Without need
of prior authority, anyone not a Philippine national as that term is
defined in Article 15 of this Code, and not otherwise disqualified by
law, may invest:
(a)
In any enterprise registered under Book One hereof, to the extent that
the total investment of non-Philippine nationals therein would not
affect its status as a registered enterprise under the law;
(b) In an
enterprise not registered under Book One hereof, to the extent that the
total investment of non-Philippine nationals herein shall not exceed
forty percent (40%) of the outstanding capital of that enterprise,
unless existing law forbids any non- Philippine ownership in the
enterprise or limits ownership by non-Philippine national to a
percentage smaller than forty percent (40%).
(2) Within thirty (30) days after notice of the
investment is received by it, the enterprise in which any investment is
made by a non-Philippine national shall register the same with the
Board of Investments for purposes of record. Investments made in the
form of foreign exchange or other assets actually transferred to the
Philippines shall also be registered with the Central Bank. The Board
shall assess and appraise the value of such assets other than foreign
exchange.
ARTICLE 47. Permissible Investments. — If an
investment by a non-Philippine national in an enterprise not registered
under Book One hereof is such that the total participation by
non-Philippine nationals in the outstanding capital thereof shall
exceed forty percent (40%), the enterprise must obtain prior authority
from the Board of Investments, which authority shall be granted unless
the proposed investment —
(a)
Would conflict with existing constitutional provisions and laws
regulating the degree of required ownership by Philippine nationals in
the enterprise; or
(b) Would pose
a clear and present danger of promoting monopolies or combinations in
restraint of trade; or
(c) Would be
made in enterprise engaged in an area adequately being exploited by
Philippine nationals; or
(d) Would
conflict or be inconsistent with the Investment Priorities Plan in
force at the time the investment is sought to be made; or
(e) Would not
contribute to the sound and balanced development of the national
economy on a self-sustaining basis.
Investments made in the form of foreign exchange or other assets
actually transferred to the Philippines shall also be registered with
the Central Bank. The Board shall assess and appraise the value of such
assets other than foreign exchange.
CHAPTER
III
License to Do Business
ARTICLE 48. Authority to Do Business. — No alien, and
no firm association, partnership, corporation or any other form of
business organization formed, organized, chartered or existing under
any laws other than those of the Philippines, or which is not a
Philippine national, or more than forty per cent (40%) of the
outstanding capital of which is owned or controlled by aliens shall do
business or engage in any economic activity in the Philippines or be
registered, licensed, or permitted by the Securities and Exchange
Commission or by any other bureau, office, agency, political
subdivision or instrumentality of the government, to do business, or
engage in any economic activity in the Philippines without first
securing a written certificate from the Board of Investments to the
effect:
(1)
That the operation or activity of such alien, firm, association,
partnership, corporation or other form of business organization, is not
inconsistent with the Investment Priorities Plan;
(2) That such
business or economic activity will contribute to the sound and balanced
development of the national economy on a self-sustaining basis;
(3) That such
business or economic activity by the applicant would not conflict with
the Constitution or laws of the Philippines;
(4) That the
field of business or economic activity is not one that is being
adequately exploited by Philippine nationals; and
(5) That the
entry of applicant therein will not pose a clear and present danger of
promoting monopolies or combinations in restraint of trade.
ARTICLE 49. Requirements to be Imposed by the Board.
— Upon granting said certificate, the Board shall impose the following
requirements on the alien or the firm, association, partnership,
corporation or other form of business organization that is not
organized or existing under the laws of the Philippines —
(1)
To appoint a citizen of the Philippines, of legal age, good moral
character and reputation, and sound financing standing, as resident
agent, who shall be authorized to accept summons and other legal
process in behalf of the applicant;
(2) To
establish an office in the Philippines and to notify the Securities and
Exchange Commission in writing of the applicant’s exact address and of
every contemplated transfer thereof or of the opening of new offices,
at least fifteen (15) days before the same are to be effected; and once
effected, not later than ten (10) days afterwards;
(3) To bring
assets into the Philippines to constitute the capital of the office or
offices, of such kind and value as the Board may deem necessary to
protect those who may deal with the applicant, and to maintain that
capital unimpaired during the period it does business in the
Philippines;
(4) To present
prior proof that citizens of the Philippines and corporations or other
business organizations organized or existing under the laws of the
Philippines are allowed to do business in the country or individual
state within the federal country of which applicant is a citizen or in
which it is domiciled: Provided, however, That if the state or country
of domicile of the applicant imposes on, or requires of, Philippine
nationals other conditions, requirements or restrictions besides those
set forth in this Code, the Board of Investments shall impose the said
other conditions, requirements or restrictions on the applicant, if in
its judgment, the imposition thereof shall foster the sound and
balanced development of the national economy on a self-sustaining
basis;
(5) To submit
to the Securities and Exchange Commission certified copies of
applicant’s charter and by-laws and all amendments thereto, if any,
with their translation into an official language within twenty (20)
days after their adoption or after the grant of the prescribed
certificate by the Board of Investments and annually of applicant’s
financial statements showing all assets, liabilities and net worth and
results of operations, setting out separately those pertaining to the
branch office;
(6) To keep a
complete set of accounting records with the resident agent, which shall
fully and faithfully reflect all transactions within the Philippines,
and to permit inspections thereof by the Securities and Exchange
Commission, the Bureau of Internal Revenue and the Board of
Investments;
(7) To give
priority to resident creditors as against non-resident creditors and
owners or stockholders in the distribution of assets within the
Philippines upon insolvency, dissolution or revocation of the license;
(8) To give
the Securities and Exchange Commission at least six (6) months advance
notice in writing of applicant’s intention to stop doing business
within the Philippines; and to give such public notice thereof as the
Securities and Exchange Commission may require for the protection of
resident creditors and others dealing with the applicant; and
(9) Not to
terminate any franchise, licensing or other agreement that applicant
may have with a resident of the Philippines authorizing the latter to
assemble, manufacture or sell within the Philippines the products of
the applicant, except for violation thereof or other just cause and
upon payment of compensation and reimbursement of investment and other
expenses incurred by the licensee in developing a market for the said
products: Provided, however, That in case of disagreement, the amount
of compensation or reimbursement shall be determined by the country
where the licensee is domiciled or has its principal office who shall
require the applicant to file a bond in such amount as, in its opinion,
is sufficient for this purpose.
The above requirements shall be
in addition to those set forth in the Corporation Code of the
Philippines for authorizing foreign corporations to transact business
in the Philippines.
ARTICLE 50. Cause for Cancellation of Certificate of
Authority or Payment of Fine. — A violation of any of the requirements
set forth in Article 49 or of the terms and conditions which the Board
may impose shall be sufficient cause to cancel the certificate of
authority issued pursuant to this Book and/or subject firms to the
payment of fines in accordance with the rules and regulations issued by
the Board: Provided, however, That aliens or foreign firms,
associations, partnerships, corporations or other forms of business
organization not organized or existing under the laws of the
Philippines which may have been lawfully licensed to do business in the
Philippines prior to the effectivity of R.A. 5455, shall, with respect
to the activities for which they were licensed and actually engaged in
prior to the effectivity of said Act, not be subject to the provisions
of Article 48 and 49 but shall be subject to the reporting requirements
prescribed by the Board: Provided, further, That where the issuance of
said license has been irregular or contrary to law, any person
adversely affected thereby may file an action with the Regional Trial
Court where said alien or foreign business organization resides or has
its principal office to cancel the said license. In such cases, no
injunction shall issue without notice and hearing; and appeals and
other proceedings for review shall be filed directly with the Supreme
Court.
TITLE
II — GENERAL PROVISIONS
ARTICLE 51. Mergers and Consolidations. — The
provisions of this Book Two shall apply to any merger, consolidation,
syndicate or any other combination of firms, associations, partnership
or other forms of business organization that will result in ownership
or control by persons or entities that are not Philippine nationals or
have foreign equity participation, of more than forty per cent (40%) of
the outstanding capital of whatever organizations results from the
merger, consolidation, syndicate or other combination.
ARTICLE 52. Local Government Action. — No agency,
instrumentality or political subdivision of the Government shall take
any action in conflict with or which will nullify the provisions of
Book Two of this Code, or any certificate of authority granted
hereunder.
ARTICLE 53. Automatic Registration. — Application
filed under this Book shall be considered automatically approved if not
acted upon within ten (10) working days from official acceptance
thereof.
ARTICLE 54. Publication and Posting of Notices. —
Immediately after the application has been given due course by the
Board, the Secretary of the Board or any official designated by the
Board shall require the applicant to publish the notice of the action
of the Board thereon at his expense once in a newspaper of general
circulation in the province or city where the applicant has its
principal office, and post copies of said notice in conspicuous places,
in the office of the Board or in the building where said office is
located; setting forth in such copies the name of the applicant, the
business in which it is engaged or proposes to engage or invest, and
such other data and information as may be required by the Board. No
approval or certificate shall be valid without the publication and
posting of notices as herein provided.
ARTICLE 55. Limited Authority to do Business. — When
appropriate, the Board may grant permissible investments or authority
to do business under Book Two of this Code for a limited period where
the need to prove economic viability of such activity warrants the
issuance of a temporary authorization.
ARTICLE 56. Periodic Reports. — The Board shall
periodically check and verify compliance with these provisions, either
by inspection of the books or by requiring regular reports from aliens
or foreign firms, domestic enterprises with foreign investments and new
entities licensed to do business under Article 48 of this Code.
A summary of said reports shall be periodically submitted by the Board
to the President. For this purpose, the Board may require other
government agencies licensing and/or regulating foreign enterprises or
domestic firms with foreign equity, to furnish the Board with reports
on such foreign investments.
ARTICLE 57. Penal Clause. — (1) Without prejudice to
the provisions of Articles 42 and 50 hereof a violation of any
provision of Books I and II of this Code, or of the terms and
conditions of registration, or of the rules and regulations promulgated
pursuant thereto, or the act of abetting or aiding in any manner any
such violation, shall be punished by a fine not to exceed one hundred
thousand pesos (P100,000.00) or imprisonment for not more than ten (10)
years, at the discretion of the Court.
(2) No official or employee of the government, its
subdivisions or instrumentalities shall appear as counsel for or act as
agent or representative of, or in any manner intervene or intercede,
directly or indirectly, in behalf of any party in any transaction with
the Board regarding any application under Books I and II of this Code.
The penalty for violation of this prohibition is the same as that
provided for in the preceding paragraph. If the offender is an
appointive official or employee, the maximum of the penalty herein
prescribed shall be imposed, and the offender shall suffer the
additional penalty of perpetual disqualification from public office,
without prejudice to any administrative action against him.
(3) If the offense is committed by a juridical
entity, its president and/or other officials responsible therefor shall
be subject to the penalty prescribed above. If the offender or the
president/official, in cases where the offense was committed by a
juridical entity, is an alien, he shall be deported without further
proceedings on the part of the Deportation Board in addition to the
penalty herein prescribed and shall, if naturalized, be automatically
denaturalized from the date his sentence becomes final.
(4) Payment of the tax due after apprehension shall
not constitute a valid defense in any prosecution for violation of any
provision of this Code.
BOOK
III
INCENTIVES TO MULTINATIONAL
COMPANIES ESTABLISHES REGIONAL OR AREA HEADQUARTERS IN THE PHILIPPINES
CHAPTER
I
Licensing of the Multinational
Company
ARTICLE 58. 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.
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.
CHAPTER
II
Incentives to Expatriates
ARTICLE 59. 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.
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.
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.
ARTICLE 60. 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.
ARTICLE 61. Tax and 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.
ARTICLE 62. 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.
CHAPTER
III
Incentives to the Regional
Headquarters
ARTICLE 63. 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.
ARTICLE 64. 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.
ARTICLE 65. 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.
ARTICLE 66. Tax and 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.
ARTICLE 67. Exemption from Registration Requirements.
— The regional or area headquarters of multinational companies shall be
exempt from the provisions of Book II of this Code.
BOOK
IV
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
ARTICLE 68. 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.
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 as provided in Art. 69 (a) hereof;
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; and
in case of local distribution they shall be subject to Article 69
paragraph (b) and the guidelines implementing Book IV of this Code;
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 Article 69 paragraphs (a) and (b) and the
guidelines implementing Book IV of this Code;
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.
ARTICLE 69. 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.
(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 Sec. 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.
ARTICLE 70. Exemption from the Maximum Storage Period
under the Tariff and Customs 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, as provided for under Article 68 paragraph (c) for
each extension until they are re-exported in accordance with the
guidelines implementing Book IV of this Code. Any article, withdrawn,
release or removed contrary to the provisions of said guidelines shall
be forfeited pursuant to the provisions of Article 69, paragraph (b)
hereof.
ARTICLE 71. Rules and Regulations on the
Jurisdiction, Operation and 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.
ARTICLE 72. 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 and the implementing guidelines of Book IV of this Code
shall constitute a sufficient cause for the cancellation of its license
or registration in addition to the penalties hereinabove provided in
Article 69, paragraph (b) hereof.
ARTICLE 73. The regional or area headquarters of
multinational companies establishing regional warehouses shall be
exempt from the provisions of Book II of this Code.
BOOK
V
SPECIAL INVESTORS RESIDENT VISA
ARTICLE 74. 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.
ARTICLE 75. 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.
BOOK
VI
INCENTIVES OF EXPORT PROCESSING
ZONE ENTERPRISES
ARTICLE 76. 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.
Subject to the provisions of Sec. 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.
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.
ARTICLE 77. 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.
(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.
(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.
(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.
ARTICLE 78. 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.
(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.
FINAL
PROVISIONS
ARTICLE 79. Interpretation. — All doubts concerning
the benefits and incentives granted enterprises and investors by this
Code shall be resolved in favor of investors and registered
enterprises.
ARTICLE 80. Vested Rights. — Existing registered
enterprises which are enjoying the incentives under the laws repealed
by Books One and Six of this Code shall continue to enjoy such
incentives for the period therein stated: Provided, however, That firms
which made investments in new or expansion projects approved or
registered by the Board of the Authority on or after December 1, 1986
but before the effectivity of this Code may opt to be governed by the
provisions of this Code.
ARTICLE 81. Confidentiality of Applications. — All
applications and their supporting documents filed under this Code shall
be confidential and shall not be disclosed to any person, except with
the consent of the applicant or on orders of a court of competent
jurisdiction.
ARTICLE 82. Judicial Relief . — All orders or
decisions of the Board in cases involving the provisions of this Code
shall immediately be executory. No appeal from the order or decision of
the Board by the party adversely affected shall stay such order or
decision: Provided, That all appeals shall be filed directly with the
Supreme Court within thirty (30) days from receipt of the order or
decision.
ARTICLE 83. Effectivity of Implementing Rules and
Regulations. — The Board shall promulgate rules and regulations to
implement the intent and provisions of this Code and shall have the
authority to impose such fines in amounts that are just and reasonable
in cases of late submission or non-compliance on the part of registered
enterprises, with reporting and other requirements under this Code and
its implementing rules and regulations. Such rules and regulations
shall take effect fifteen (15) days following its publication in
newspaper of general circulation in the Philippines.
ARTICLE 84. Separability Clause. — The provisions of
this Code are hereby declared to be separable and, in the event any
such provisions is declared unconstitutional, the other provisions
which are not affected thereby shall remain in force and effect.
ARTICLE 85. Repealing Clause. — The following
provisions or laws are hereby repealed:
1)
Batas Pambansa 44
2) Batas
Pambansa 391 (1983)
3)
Presidential Decree 218
4)
Presidential Decree 1419
5)
Presidential Decree 1623, as amended
6)
Presidential Decree No. 1789 (1981)
7)
Presidential Decree 2032
8) Executive
Order 815
9) Executive
Order 1945 (1985)
All other laws, decrees, executive orders, administrative orders, rules
and regulations or parts thereof which are inconsistent with the
provisions of this Code are hereby repealed, amended or modified
accordingly.
ARTICLE 86. Effectivity. — This Code shall take
effect immediately upon approval.
Done in the City of Manila,
this 16th day of July, in the year of Our Lord, nineteen hundred and
eighty-seven.
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