IMPLEMENTING RULES
&
REGULATIONSOFTHE FOREIGN
INVESTMENTS
ACT OF 1991[Republic
Act No. 7042]AN ACT TO
PROMOTE
FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING
ENTERPRISES
DOING BUSINESS IN THE PHILIPPINES AND FOR OTHER PURPOSES
RULE IDEFINITIONS
SECTION 1.
Definition
of Terms. - For the purpose of
these Rules and Regulations:
a. "Act"
shall refer to Republic Act 7042 entitled "An Act to Promote Foreign
Investments,
Prescribe the Procedures for Registering Enterprises Doing Business in
the Philippines, and for Other Purposes", also known as the Foreign
Investments
Act of 1991, as amended.cralaw:red
b. "Philippine
national" shall mean a citizen of the Philippines or a domestic
partnership
or association wholly owned by the citizens of the Philippines; or a
corporation
organized under the laws of the Philippines of which at least sixty
percent
[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 percent [60%] of the fund
will
accrue to the benefit of the Philippine nationals; Provided,
that
where a corporation its non-Filipino stockholders own stocks in a
Securities
and Exchange Commission [SEC] registered enterprise, at least sixty
percent
[60%] of the capital stock outstanding and entitled to vote of both
corporations
must be owned and held by citizens of the Philippines and at least
sixty
percent [60%] of the members of the Board of Directors of each of both
corporation must be citizens of the Philippines, in order that the
corporation
shall be considered a Philippine national. The control test shall be
applied
for this purpose.cralaw:red
Compliance with the
required Filipino ownership of a corporation shall be determined on the
basis of outstanding capital stock whether fully paid or not, but only
such stocks which are generally entitled to vote are considered.cralaw:red
For stocks to be
deemed owned and held by Philippine citizens or Philippine nationals,
mere
legal title is not enough to meet the required Filipino equity. Full
beneficial
ownership of the stocks, coupled with appropriate voting rights is
essential.
Thus, stocks, the voting rights of which have been assigned or
transferred
to aliens cannot be considered held by Philippine citizens or
Philippine
nationals.cralaw:red
Individuals or juridical
entities not meeting the aforementioned qualifications are considered
as
non-Philippine nationals.cralaw:red
c. "Foreign
corporation" shall mean one which is formed, organized or existing
under laws other than those of the Philippines.cralaw:red
Branch office of
a foreign company carries out the business activities of the head
office
and derives income from the host country.cralaw:red
Representative or
liaison office deals directly, with the clients of the parent company
but
does not derive income from the host country and is fully subsidized by
its head office. It undertakes activities such as but not limited to
information
dissemination and promotion of the company's products as well as
quality
control of products.cralaw:red
d. Investment
shall mean equity participation in any enterprise organized or existing
under the laws of the Philippines. It includes both original and
additional
investments, whether made directly as in stock subscription, or
indirectly
through the transfer of equity from one investor to another as in stock
purchase. Ownership of bonds [including income bonds], debentures,
notes
or other evidences of indebtedness does not qualify as investments.cralaw:red
The purchase of stock
options or stock warrants is not an investment until the holder thereof
exercises his option and actually acquires stock from the corporation.cralaw:red
e. "Foreign
investment" shall mean an equity investment made by a
non-Philippine
national; Provided, however, That for purposes of determining
foreign
ownership, peso investments made by non-Philippine nationals shall be
considered;
Provided, further, That only foreign investments in the form of
foreign exchange and/or other assets actually transferred to the
Philippines
and duly registered with the Central Bank (CB) and profits derived
therefrom
can be repatriated; and Provided, finally, That, for purposes
of
Section 8 of the Act, and Rule VIII, Section 6 of these Rules and
Regulations,
"Existing Foreign Investments" shall mean an equity investments
made by a non-Philippine national duly registered with the SEC or the
Bureau
of Trade Regulation and Consumer Protection (BTRCP) in the form of
foreign
exchange and/or other assets transferred to the Philippines.cralaw:red
f. "Doing
business" shall include soliciting orders, service contracts,
opening
offices, whether liaison offices or branches; appointing
representatives
or distributors, operating under full control of the foreign
corporation,
domiciled in the Philippines or who in any calendar year stay in the
country
for a period totaling 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.cralaw:red
The following acts
shall not be deemed "doing business" in the Philippines:
1. Mere
investment
as a shareholder by a foreign entity in domestic corporations duly
registered
to do business, and/or the exercise of rights as such investor;
2. Having
a
nominee director or officer to represent its interest in such
corporation;
3.
Appointing
a representative or distributor domiciled in the Philippines which
transacts
business in the representative's or distributor's own name and account;
4. The
publication
of a general advertisement through any print or broadcast media;
5.
Maintaining
a stock of goods in the Philippines solely for the purpose of having
the
same processed by another entity in the Philippines;
6.
Consignment
by a foreign entity of equipment with a local company to be used in the
processing of products for export;
7.
Collecting
information in the Philippines; and
8.
Performing
services auxiliary to an existing isolated contract of sale which are
not
on a continuing basis, such as installing in the Philippines machinery
it has manufactured or exported to the Philippines, servicing the same,
training domestic workers to operate it, and similar incidental
services.
g. "Export
enterprise" shall mean an enterprise wherein a manufacturer,
processor
or service [including tourism] enterprise exports sixty percent [60%]
or
more of its output, or wherein a trader purchases products domestically
and exports sixty percent [60%] or more of such purchases.
h. "Exports"
shall mean the volume of the Philippine port F. O. B. peso value,
determined
from invoices, bills of lading, inward letters of credit, loading
certificates,
and other commercial documents, of products exported directly by an
export
enterprise or the value of services including tourism sold by
service-oriented
enterprises to non-resident foreigners or the net selling price of
export
products sold by an export enterprise to another export enterprise that
subsequently exports the same; Provided, That sales of export
products
to another export enterprise shall only be deemed exports when actually
exported by the latter, as evidenced by loading certificates or similar
commercial documents; and Provided, finally, That without
actual
exportation, the following shall be considered constructively exported
for purposes of the Act: [1] sales of products to bonded manufacturing
warehouses of export enterprises; [2] sales of products to export
processing
zone enterprises; [3] sales of products to export enterprises operating
bonded trading warehouses supplying raw materials used in the
manufacture
of export products; and [4] sales of products 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 pesos funded from inwardly
remitted
foreign currency.cralaw:red
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 system shall also be considered exports.cralaw:red
i. "Output"
shall refer to the export enterprise's total sales in a taxable year.
The
term sales shall refer to the value in case of heterogeneous products
and
volume in case of homogeneous products.cralaw:red
Heterogeneous products
shall refer to products of different kinds and characteristics as well
as to those of the same kind but with various categories using
different
units of measurement.cralaw:red
Homogeneous products
shall refer to products of the same kind or category using a common
unit
of measurement.cralaw:red
j. "Export
ratio" shall refer to:
1. the
percentage
share of the volume or peso value of goods exported to the total volume
or value of goods sold in any taxable year if the export enterprise is
engaged in manufacturing or processing;
2. the
percentage
share of the peso value of services sold to foreigners to total
earnings
or receipts from the sale of its services from all sources in any
taxable
year if the export enterprise is service-oriented; Value of services
sold
shall refer to the peso value of all services rendered by an export
enterprise
to foreigners that are paid for in foreign currency and/or pesos funded
from inwardly remitted foreign currency as properly documented by the
export
enterprise; or
3. the
percentage
share of the volume or peso value of goods exported to the total volume
or value of goods purchased domestically in any taxable year if the
export
enterprise is engaged in merchandise trading.
k. "Domestic
market enterprise" shall mean an enterprise which produces goods
for
sale, or renders service or otherwise engages in any business in the
Philippines.
l. "Joint venture"
shall mean two or more entities, whether natural or juridical, one of
which
must be a Philippine national, combining their property, money,
efforts,
skills or knowledge to carry out a single business enterprise for
profit,
which is duly registered with the SEC as a corporation or partnership.cralaw:red
m. "Substantial
partner" shall mean an individual or a firm who owns enough shares
to be entitled to at least one [1] seat on the Board of Directors of a
corporation, or in the case of a partnership, any partner.cralaw:red
n. "Dangerous
drug" as defined under Republic Act 6425 or the Dangerous Drugs
Act,
as amended, refers to either:
1. "Prohibited
drug" which includes opium and its active components and
derivatives,
such as heroin and morphine; coca leaf and its derivatives, principally
cocaine; alpha and bet eucaine; hallucinogenic drugs, such as
mescaline,
lysergic and dicthlylamide [LSD] and other substances producing similar
effects; Indian hemp and its derivatives; all preparations made from
any
of the foregoing; and other drugs and chemical preparations whether
natural
or synthetic, with the physiological effects of a narcotic or
hallucinogenic
drug; or
2. "Regulated
drug" which includes, unless authorized by the Department of Health
[DOH] and in accordance with the Dangerous Drugs Board, self-inducing
sedatives,
such as secobarbital, phenobarbital, pentobarbital, barbital,
amobarbital
or any other drug which contains a salt or a derivative of salt of
barbituric
acid; any salt, isomer, or salt of an isomer, of amphetamine such as
benzedrine
or dexedrine, or any drug which produces a physiological action similar
to amphetamine; and hypnotic drugs, such as methaqualone, nitrazepam or
any other compound producing similar physiological effects.
o. "Advanced
technology" refers to a higher degree or form of technology than
what
is domestically available and needed for the development of certain
industries
as subject to guidelines of the Department of Science and Technology
[DOST].
Its introduction into the country through foreign investments under the
terms and conditions of the Act must be linked to its appropriateness
and
adaptability to local conditions with a view towards eventual transfer
and applicability including the upgrading of the indigenous technology
available.
p. "Paid-in
equity capital" shall mean the total investment in a business that
has been paid-in in a corporation or partnership or invested in a
single
proprietorship, which may be in cash or in property. It shall also
refer
to inward remittance or assigned capital in the case of foreign
corporations.cralaw:red
q. "Foreign Investment
Negative List [FINL]" or "Negative List" shall mean a list
of
areas of economic activity whose foreign ownership is limited to a
maximum
of forty percent [40%] of the outstanding capital stock in the case of
a corporation, or capital in the case of a partnership.cralaw:red
r. "NEDA
Board" shall refer to the body constituted as such under Executive
Order No. 230 entitled "Reorganizing the National Economic and
Development
Authority" and in which reside the powers and functions of the
Authority.cralaw:red
s. "NEDA"
shall refer to the NEDA Secretariat, which is the body constituted as
such
under Executive Order No. 230 and which serves as the research and
technical
support arm and the Secretariat of the NEDA Board.cralaw:red
t. "SEC"
shall refer to the Securities and Exchange Commission.cralaw:red
u. "BTRCP"
shall refer to the Bureau of Trade Regulation and Consumer Protection
as
represented by the provincial offices of the Department of Trade and
Industry
[DTI].cralaw:red
v. "BOI"
shall refer to the Board of Investments.cralaw:red
w. "Technology
Transfer Board" shall refer to the Bureau of Patents, Trademarks
and
Technology Transfer (BPTTT).cralaw:red
x. "Former
natural born Filipino" shall mean those who have lost Philippine
citizenship
but were previously citizens of the Philippines falling in either of
the
following categories: [a] from birth without having to perform any act
to acquire or perfect their Philippine citizenship; or [b] by having
elected
Philippine citizenship upon reaching the age of majority, if born
before
January 17, 1973, of Filipino mothers.cralaw:red
y. "Transferee
of private land" shall mean a person to whom the ownership rights
of
private land is transferred through either voluntary or involuntary
sale,
devise or donation or involuntary executions of judgment.cralaw:red
z. "Direct
employees" shall mean Filipino personnel hired and engaged under
the
control and supervision of the applicant investor/employer in the
production
of goods or performance of services. Excluded from this definition are
personnel hired as casual, seasonal, learner, apprentice or any
employee
of subcontractor or those under fixed term employment.cralaw:red
aa. "Start
of commercial operation" shall mean the date when a particular
enterprise
actually begins production of the product for commercial purposes or
commercial
harvest in the case of agricultural activities. In the case of export
traders
and service exporters, the date when the initial export shipment in
commercial
quantity has been made or initial performance of service as borne out
by
the appropriate supporting documents.
RULE
IISCOPE
SECTION 1.
Coverage.
- The Act covers all investment areas or areas of economic activity
except
banking and other financial institutions which are governed and
regulated
by the General Banking Act and other laws under the supervision of the
CB.
RULE
IIIBASIC
GUIDELINES
SECTION 1. The Act
covers restrictions pertaining to foreign equity participation only.
All
other regulations governing foreign investments remain in force.cralaw:red
SECTION 2.
Monitoring
of compliance with equity participation requirements.
- The SEC or BTRCP, as applicable, shall monitor the compliance with
the
equity requirements of the Act.
RULE
IVREGISTRATION
OF INVESTMENTS OF NON-PHILIPPINE NATIONALS
SECTION 1.
Qualifications.
-
a. Any non-Philippine
national may do business or invest in a domestic enterprise up to one
hundred
percent [100%] of its capital provided:
1. it is
investing
in a domestic market enterprise in areas outside the FINL; or
2. it is
investing
in an export enterprise whose products and services do not fall within
Lists A and B [except for defense-related activities, which may be
approved
pursuant to Section 8(b)(1) of the Act] of the FINL.
Provided,
further, That, as required by existing laws, the country or
state
of the applicant must also allow Filipino citizens and corporations to
do business therein.
b. Non-Philippine
nationals qualified to do business per paragraph [a] above, but who
will
engage in more than one investment area, one or more of which is in the
FINL, may be registered under the Act. However, said non-Philippine
national
will not be allowed to engage in the investment areas which are in the
FINL.
c. Existing
enterprises which are non-Philippine nationals at the time of
effectivity
of the Act and which intend to increase the percentage of foreign
equity
participation under the Act, beyond that previously authorized by SEC,
shall be governed by the qualifications in item [a] above. Thus,
existing
enterprises shall be allowed to increase the percentage share of
foreign
equity participation beyond current equity holdings only if their
existing
investment area is not in the FINL. Similarly, existing enterprises
engaged
in more than one [1] investment area shall be allowed to increase
percentage
of foreign equity participation if none of the investment areas they
are
engaged in is in the FINL.cralaw:red
Existing foreign
corporations shall be allowed to increase capital even if their
existing
investment area is in the FINL.cralaw:red
Transfer of ownership
from one foreign company to another shall be allowed even if the
enterprise
is engaged in an area in the FINL as long as there is the percentage
share
of foreign equity.cralaw:red
SECTION 2.
Application
for registration. -
a. Filing
of Application. Applications for registration shall be filed
with the SEC in the case of foreign corporations and domestic
corporations
or partnerships which are non-Philippine nationals. In the case of
single
proprietorships, applications for Metro Manila shall be filed with the
BTRCP or the DTI-National Capital Region. In the provinces,
applications
may be filed with the extension offices of the SEC for
corporations/partnerships
and the provincial offices of the DTI for sole proprietorships.cralaw:red
b. Pre-Processing
of Documents. Pre-processing of documents shall be undertaken to
assist
the investor in determining the completeness of his documents. All
applications
are considered officially accepted only upon submission of complete
documents
to either the SEC or BTRCP. Applications for clearances from the
Department
of National Defense [DND] or Philippine National Police [PNP] for
defense-related
activities, or the DOST for investments involving advanced technology
shall
be decided upon by said agencies within fifteen [15] working days.cralaw:red
c. Approval.
Within fifteen [15] working days from official acceptance of an
application,
the SEC or BTRCP shall act on the same. Otherwise, the application
shall
be considered as automatically approved if it is not acted upon within
said period for a cause not attributable to the applicant.cralaw:red
SECTION 3.
Registration
with the SEC. -
a. Existing
Requirements. As required by existing laws and regulations, an
application
form together with the following documents shall be submitted to the
SEC:
1. In the
case of new domestic corporation or a partnership:
i.
Articles of Incorporation/Partnership
ii.
Name
Verification Slip
iii.
Bank Certificate
of Deposit
iv. ACR/ICR,
SIRV
[Special Investors Resident Visa], Visa No. 13 of the alien subscribers
v.
Proof of
Inward Remittance [for non-resident aliens]
2. In the
case
of a foreign corporation:
i.
Name
verification slip
ii.
Certified
Copy of the Board Resolution authorizing the establishment of an office
in the Philippines; designating the resident agent to whom summons and
other legal processes may be served in behalf of the foreign
corporation;
and stipulating that in the absence of such agent or upon cessation of
its business in the Philippines, the SEC shall receive any summons or
legal
processes as if the same is made upon the corporation at its home
office.
iii.
Financial
statements for the immediately preceding year at the time of filing of
the application, certified by an independent Certified Public
Accountant
of the home country.
iv.
Certified
copies of the Articles of Incorporation/Partnership with an English
translation
thereof, if in a foreign language.
v.
Proof of
inward remittance such as bank certificate of inward remittance or
credit
advices.
For
representative
offices, the amount remitted initially should be at least US$30,000.
If the
paid-in equity/capital
is in kind, additional requirements shall be submitted to the SEC
pursuant
to its existing rules and regulations.
All documents
executed
abroad should be authenticated by the Philippine Embassy or Consular
Office.
3. In the
case
of an existing corporation intending to increase foreign equity
participation,
all documents required of the proposed transaction under applicable
laws,
rules and regulations shall be submitted.
b. Additional
Requirements. As required by the Act, the following shall be
submitted
to the SEC:
1. For
enterprises
wishing to engage in defense-related activities, clearance from the
Department
of National Defense [DND] or Philippine National Police [PNP].
2. For
small
and medium-sized domestic market enterprises with paid-in equity
capital
less than the equivalent of US$200,000 but not less than the equivalent
of US$100,000, a certificate from the Department of Science and
Technology
[DOST] that the investment involves advance technology, or a
certificate
from the appropriate Department of Labor and Employment [DOLE] Regional
Office that the enterprise has issued an undertaking to employ at least
50 direct employees shall be submitted.
The Dole through
its
Regional Offices, shall validate and monitor compliance by the investor
to the undertaking that it will hire at least 50 direct employees
within
six [6] months from the start of commercial operations.
Non-satisfaction
of the undertaking shall be reported to the DOLE Regional Offices and
to
the SEC, which shall cause the investor to satisfy the appropriate
higher
investment requirement, with penalty for failure to satisfy the
undertaking.
3. For
former
natural-born Filipinos wishing to engage in investment areas allowed to
them under this Act, the following documents are required:
I. Copy of
birth certificate
a.
Certified
by the local civil registrar or the National Statistics Office [NSO]; or
b.
For those
born abroad, certificate of birth from the appropriate government
agency
of the country where the birth is recorded showing the father or mother
to be a Filipino at the time of birth or if the citizenship of the
parents
is not indicated, additional proof that the parent is a Filipino at the
time of the applicant investor's birth.
II. Those
born
before 17 January 1973 of Filipino mother must additionally submit all
of the following: certified true copies of his/her sworn statement of
election
of Filipino citizenship, oath of allegiance from the civil registrar
where
the documents were filed and/or forwarded, and identification
certificate
issued by the Bureau of Immigration.
III. In
case of
loss and/or destruction of the record of birth or non-registration of
birth.
c. Application
Fee. A reasonable application fee to be determined by the SEC shall
be collected from each applicant.
d. SEC Action.
Upon fulfillment of all SEC requirements and favorable evaluation by
the
SEC, the Certificate of Registration under the Act for domestic
corporations
and partnerships, or license to do business in the case of a foreign
corporation,
shall be issued by the SEC. In case of disapproval, the SEC shall also
inform the applicant in writing of the reasons for the disapproval of
the
registration.cralaw:red
SECTION 4.
Registration
with the BTRCP-Department of Trade and Industry.
-
a. Existing
Requirements. As required by existing laws and regulations, BTRCP
Form
No. 17 and accompanying documents shall be submitted to BTRCP.cralaw:red
All documents executed
abroad should be authenticated by the Philippine Embassy or Consular
Office.cralaw:red
b. Additional
Requirements. The additional requirements for corporations and
partnerships
provided under Sec. 3[b] hereof shall be complied with.cralaw:red
c. Application
Fee. A reasonable application fee to be determined by BTRCP shall
be
collected from each applicant.cralaw:red
d. BTRCP-DTI
Action. Upon fulfillment of all BTRCP-DTI requirements and
favorable
evaluation by DTI, the Certificate of Registration for Sole
Proprietorship
shall be issued by DTI. In case of disapproval, DTI shall also inform
the
applicant in writing of the reasons for the disapproval of the
registration.cralaw:red
SECTION 5.
Registration
of non-Philippine nationals intending to engage in the same line of
business
as their existing joint venture.-
a. During the
transitory period, any applicant who has an investment in an existing
joint
venture, in which he or his majority shareholder in the existing joint
venture is a substantial partner, shall be registered with the SEC or
BTRCP
in the same line of business if the Filipino partners representing the
majority of the Filipino equity in the existing joint venture certify
under
oath that they are not capable and willing to make the investment
needed
for the domestic market activities, which is being proposed to be
undertaken
by the applicant.cralaw:red
b. If the Filipino
partners are willing and able to make the needed investment, the SEC
shall
not register the applicant, in which case, both joint venture partners
may agree to undertake the expansion. Both partners are then required
to
place the balance of their agreed upon investment shares within six [6]
months from the date of the agreement. The Filipino partner[s] shall
not
be compelled to make additional investment for the proposed expansion
of
domestic market activities, if such will result in a higher Filipino
equity
share. If the Filipino partner[s] fails to infuse said capital within
said
period, per the report of the non-Philippine national applicant to the
SEC, the SEC or BTRCP shall then allow the registration of said
non-Philippine
national applicant as a separate enterprise under the Act.
RULE VREGISTRATION
WITH THE CENTRAL BANK
SECTION 1.
CB
Requirements.- Enterprises
seeking
to remit foreign exchange abroad for purposes of remittance of profits
and dividends and capital repatriation in connection with the foreign
investment
made pursuant to the Act shall be deemed registered with the CB after
SEC
or BTRCP registration. For this purpose, CB rules and regulations
covering
procedures for registration of foreign investments shall be observed.
RULE VIFOREIGN
INVESTMENTS
IN EXPORT ENTERPRISES
SECTION 1.
Allowable
foreign equity participation. -
Foreign equity participation in export enterprises shall be allowed up
to one hundred percent [100%] provided that the products and services
of
such enterprises do not fall within Lists A and B of the FINL.cralaw:red
SECTION 2.
Registration
of export enterprises. - Export
enterprises
shall be deemed registered with the BOI pursuant to Section 6 of the
Act
upon registration with the SEC or BTRCP.cralaw:red
Enterprises registered
under the Act seeking to avail of incentives under E. O. 226 must apply
for registration with the BOI. Rules and regulations on E. O. 226
shall be observed for this purpose.cralaw:red
Within then [10]
working days from the issuance of the certificate of registration, the
SEC or BTRCP shall transmit to BOI copies of the Certificate of
Registration
together with the application form duly accomplished by the export
enterprises.cralaw:red
SECTION 3.
Submission
of reports. - All
duly-registered
export enterprises under this Rule shall submit to the Board of
Investment
a duly accomplished form within six [6] months after the end of each
taxable
year.cralaw:red
Failure of export
enterprises to submit the required reports within the prescribed period
of time or the submission of fraudulent reports shall be a ground for
the
SEC or BTRCP to impose appropriate sanctions as provided for under Rule
XVII, Section 1, of these Rules and Regulations.cralaw:red
SECTION 4.
Monitoring
of compliance with the export requirement.
- Upon receipt of the report submitted by the export enterprise,
the BOI shall determine compliance of the enterprise with the export
requirement.
If the enterprise fails to comply with the export requirement, the BOI
shall advise the SEC or BTRCP of said failure. The SEC or BTRCP shall
require
the firm to immediately increase its export to at least sixty percent
[60%]
of total sales. If the firm fails to comply with the order of the SEC
or
BTRCP without any justifiable reason, it shall be penalized in
accordance
with the provisions of Rule XVIII, Section 1 of these Implementing
Rules
and Regulations. The BOI, in consultation with the SEC and BTRCP, shall
issue guidelines for this purpose.cralaw:red
RULE VIIFOREIGN
INVESTMENTS
IN DOMESTIC MARKET ENTERPRISES
SECTION 1.
Allowable
foreign equity participation.-
Foreign
equity participation in domestic market enterprises shall be allowed up
to one hundred percent [100%] unless such participation is prohibited
or
limited by existing laws or the FINL.cralaw:red
SECTION 2.
Change
of status from domestic market enterprise to export enterprise.-
At its option, a domestic market enterprise may change its status to an
export enterprise if, over the last three [3] years, it consistently
exported
in each year thereof sixty percent [60%] or more of its output.cralaw:red
Section 2 of Rule
VI shall apply for any change of status from domestic to export
enterprise.
Such application shall be supported by the relevant reports cited in
Rule
VI, Section 3 hereof, as evidence that the applicant enterprise has
consistently
exported sixty percent [60%] or more of its output.cralaw:red
The new export enterprise
shall be subject to the reportorial requirements and shall be monitored
or its compliance with the export requirement under Sections 3 and 4,
respectively,
of Rule VI of these Rules and Regulations.cralaw:red
RULE VIIITHE REGULAR
FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1.
Description.
- The Regular FINL shall have three [3] component list: A, B, and
C which shall contain areas of economic activities reserved to the
Philippine
nationals. The description and guidelines governing Lists A, B and C
are
provided for in Rules IX, X and XI hereof, respectively.cralaw:red
SECTION 2.
Formulation.
- The NEDA shall be responsible for the formulation of the Regular
FINL,
following the process and criteria provided in Section 8 of the Act and
in Rules IX, X and XI hereof.cralaw:red
SECTION 3.
Approval.
- The NEDA shall submit the proposed Regular FINLs to the
President
for approval and promulgation. The NEDA shall submit the first Regular
FINL to the President at least forty five [45] days before the
scheduled
date of publication.cralaw:red
SECTION 4.
Publication.
- The NEDA shall publish the first Regular Negative List not later than
sixty [60] days before the end of the transitory period.cralaw:red
SECTION 5.
Effectivity.
- The first Regular Negative List shall become immediately effective at
the end of the transitory period. Subsequent Regular FINLs shall become
effective fifteen [15] days after publication in two [2] newspapers of
general circulation in the Philippines. Except for List A, each
Regular
FINL shall remain in force for two [2] years from the date of its
effectivity.cralaw:red
SECTION 6.
Coverage
of operation. - Each Regular
FINL
shall apply only to new foreign investments and shall not affect
existing
foreign investments at the time of its publication.
RULE IXGUIDELINES
FOR
LIST A OF THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1.
Coverage.
- List A of the FINL shall consist of the areas of activities reserved
to Philippine nationals where foreign equity participation in any
domestic
or export enterprise engaged in any activity listed therein shall be
limited
to a maximum of forty percent [40%] as prescribed by the Constitution
and
other specific laws.cralaw:red
The NEDA shall make
an enumeration of said activities reserved to Philippine nationals by
the
Constitution and other specific laws.cralaw:red
SECTION 2.
Amendments.
- Amendments to List A may be made by the NEDA anytime to reflect
changes
made by law regarding the extent of foreign equity participation in any
specific area of economic activity.cralaw:red
RULE XGUIDELINES
FOR
LIST BOF THE
REGULAR
FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1.
Coverage.
- List B shall consist of the following:
a. Activities
regulated pursuant to law which are defense or law enforcement-related,
requiring prior clearance and authorization from the DND or PNP, to
engage
in such activity as the manufacture, repair, storage and/or
distribution
of firearms, ammunition, armored vests and other bullet proof attires,
lethal weapons, military ordinance, explosives, pyrotechnics and
similar
materials.cralaw:red
However, the manufacture
and repair of said items may be specifically authorized by the
Secretary
of National Defense or Chief of the PNP to non-Philippine nationals,
provided
a substantial percentage of output as determined by said agencies is
exported.cralaw:red
Compliance with the
export requirement shall be monitored by the DND or PNP, as the case
may
be.cralaw:red
b. Activities
which have negative implications on public health and morals, such as
the
manufacture and distribution of dangerous drugs; all forms of gambling;
sauna and steam bathhouses and massage clinics.cralaw:red
c. Small and
medium-sized domestic market enterprises with paid-in capital of less
than
US$500,000 or its equivalent unless they involve advanced technology as
determined by DOST.cralaw:red
d. Export enterprises
utilizing raw materials from depleting natural resources, with paid-in
equity capital of less than US$500,000 or its equivalent.cralaw:red
SECTION 2.
Process
for determination of List B.-
a. Activities
[a] and [b] above shall be determined upon recommendation of the
Secretary
of National Defense, Chief of the PNP, Secretaries of Health or
Education,
Culture and Sports and endorsed by the NEDA or upon recommendation motu
proprio of NEDA, approved and promulgated by the President. List B
shall be submitted for Presidential action together with List A. The
NEDA
shall inform said agencies of the deadline for the submission of their
recommendations.cralaw:red
b. Enterprises
which are covered by Section 1 [c] above are automatically reserved to
Philippine nationals.cralaw:red
SECTION 3.
Amendments.
- Amendments to List B shall be made only after two years, upon the
recommendation
of the Secretary of National Defense, Chief of the PNP, Secretaries of
Health and Education, Culture and Sports, endorsed by the NEDA, or upon
recommendation motu proprio of NEDA, approved and promulgated
by
the President. List B shall be submitted for Presidential action
together
with List A.cralaw:red
RULE XIINVESTMENT
RIGHTS
OF FORMER NATURAL BORN FILIPINOS
SECTION 1. Former
natural-born citizens of the Philippines shall have the same investment
rights of a Philippine citizen in cooperatives under R. A. 6938, rural
banks under R. A. 7353, thrift banks and private development
banks
under R. A. 7906, financing companies under R. A. 5980, and activities
listed under List B including defense-related activities, if
specifically
authorized by the Secretary of National Defense.cralaw:red
RULE XIIRIGHTS OF
FORMER
NATURAL-BORN FILIPINOS TO OWN PRIVATE LAND
SECTION 1.
Any natural-born citizen who has lost his Philippine citizenship and
who
has the legal capacity to enter into a contract under Philippine laws
may
be a transferee of a private land up to a maximum area of 5,000 square
meters in the case of urban or three [3] hectares in the case of rural
land to be used by him for business or other purposes.cralaw:red
SECTION 2. In case
where both spouses are qualified under the law, one of them may avail
of
the said privilege. However, if both shall avail of the privilege, the
total area acquired shall not exceed the maximum allowed.cralaw:red
SECTION 3. In case
the transferee already owns urban or rural land for business or other
purposes,
he shall still be entitled to be a transferee of additional urban or
rural
land for business or other purposes, which when added to those already
owned by him shall not exceed the maximum areas allowed.cralaw:red
SECTION 4. A transferee
may acquire not more than two [2] lots which should be situated in
different
municipalities or cities anywhere in the Philippines. The total land
area
acquired shall not exceed 5,000 square meters in the case of urban land
or three [3] hectares in the case of rural land for use by him for
business
or other purposes. A transferee who has already acquired urban land
shall
be disqualified from acquiring rural land and vice versa. However, if
the
transferee has disposed of his urban land, he may still acquire rural
land
and vice versa, provided that the same shall be used for business or
other
purposes.cralaw:red
SECTION 5. Land acquired
under this Act shall be primarily, directly and actually used by the
transferee
in the performance or conduct of his business or commercial activities
in the broad areas of agriculture, industry, and services, including
the
lease of land, but excluding the buying and selling thereof. A
transferee
shall use his land to engage in activities that are not included in the
Negative List or in those areas wherein investment rights have been
granted
to him under this Act.cralaw:red
SECTION 6.
Registration
of land. - The Register of Deeds in
the
province or city where the land is located shall register the land in
the
name of the transferee that it will be used for any of the purposes
mentioned
in Section 5 above, i.e., certification of business
registration
issued by the BTRCP/Department of Trade and Industry and affidavit that
the land shall be used for business purposes.cralaw:red
The provision of
B. P. 185 [An Act to Implement Section 15 of Article XIV of the
Constitution
and for Other Purposes Pertaining to the Ownership of Private Lands for
Residential Purposes by Former Natural Born Filipinos] and its
implementing
Rules and Regulations shall be adopted, where applicable, in the
implementation
of this Act through a Circular to be issued by the Land Registration
Authority.cralaw:red
The Register of Deeds
shall also ensure that the limits prescribed by law are observed.cralaw:red
RULE XIIITRANSITORY
PROVISIONS
SECTION 1.
Prior to effectivity of these Implementing Rules and Regulations, the
provisions
of Book II of E. O. 226 and its implementing rules and regulations
shall
govern the registration of foreign investments without incentives.cralaw:red
SECTION 2. There
shall be a transitory period of thirty-six [36] months after issuance
of
these Implementing Rules and Regulations to implement the Act.cralaw:red
SECTION 3. During
the transitory period, the Transitory FINL described in Rule XIV,
Section
1 hereof shall take effect.cralaw:red
RULE XIVTRANSITORY
FOREIGN
INVESTMENT NEGATIVE LIST
SECTION 1.
Description.
- The Transitory FINL shall consist of the following:
a. List A
All investment
areas
in which foreign ownership is limited by mandate of the Constitution
and
specific laws.
b. List B
1.
Manufacture,
repair, storage and/or distribution of firearms, ammunition, armored
vests
and other bullet proof attires, lethal weapons, military ordnance,
explosives,
pyrotechnics and similar materials required by law to be licensed by
and
under the continuing regulation of the DND or the PNP, as the case may
be.
However, the
manufacture
or repair of these items may be specifically authorized by the
Secretary
of National Defense or the Chief of the PNP to non-Philippine
nationals,
provided a substantial percentage of output, as determined by the said
agencies, is exported.
The extent of
foreign
equity ownership allowed shall be specified in the said
authority/clearance.
Compliance with
the
export requirement shall be monitored by the DND or PNP, as the case
may
be.
2.
Manufacture
and distribution of dangerous drugs; all forms of gambling, sauna and
steam
bath houses, massage clinics and other like activities regulated by law
because of risks they may pose to public health and morals.
3. Small and
medium-sized
domestic market enterprises with paid-in equity capital less than the
equivalent
of Two hundred thousand US dollars [US$200,000.00], are reserved to
Philippine
nationals: Provided, That if: [1] they involve advanced
technology
as determined by the Department of Science and Technology, or [2] they
employ at least fifty [50] direct employees, then a minimum paid-in
capital
of One hundred thousand US dollars [US$100,000.00] shall be allowed to
non-Philippine nationals.
SECTION 2.
Formulation
of the transitory foreign investment negative list.
-
a. NEDA, in
consultation with relevant agencies, shall enumerate, as appropriate,
the
areas of investment covered in this Transitory FINL.cralaw:red
b. The Transitory
FINL shall be published in full at the same time as, or prior to, the
publication
of these Implementing Rules and Regulations to implement the Act.cralaw:red
RULE XVOPTIONS FOR
EXISTING BOI-REGISTERED ENTERPRISES
SECTION 1.
Existing enterprises which have been issued Certificates of Authority
to
do Business or to Accept Permissible Investments under Book II of E. O.
226, Book II of PD 1789 and R. A. 5455, whose activities are included
in
the Transitory FINL or in subsequent Negative List, are allowed to
continue
to undertake the same activities which they have been authorized to do
subject to the same terms and conditions stipulated in their
certificates
of registration.cralaw:red
Those whose activities
have been previously authorized under Book II of E. O. 226, Book II of
PD 1789 and R. A. 5455, and whose activities are not in the Transitory
FINL or in subsequent Negative Lists may opt to be governed by the
provisions
of the Act. Said enterprises shall be considered automatically
registered
with the SEC upon surrender of their certificates of authority to the
BOI.
The SEC shall issue a new certificate of authority upon advise of the
BOI.cralaw:red
SECTION 2.
Existing enterprises with more than forty percent [40%] foreign equity
which have availed of incentives under any of the investment incentives
laws implemented by the BOI may opt to be governed by the Act. In
such cases, said enterprises shall be required to surrender their
certificates
of registration, which shall be deemed as an express waiver of their
privilege
to apply for and avail of incentives under the incentives law under
which
they were previously registered. Subject to BOI rules and regulations,
said enterprises may be required to refund all capital equipment
incentives
availed of.
RULE XVICONSISTENT
GOVERNMENT
ACTION
SECTION 1.
No agency, instrumentality or political subdivision of the Government
shall
take any action in conflict with or which will nullify the provisions
of
the Act, or any certificate or authority granted hereunder.cralaw:red
RULE XVIICOMPLIANCE
WITH
ENVIRONMENTAL STANDARDS
SECTION 1.
All industrial enterprises, regardless of nationality or ownership,
shall
comply with existing rules and regulations, and applicable
environmental
standards set by the Department of Environment and Natural Resources
[DENR]
to protect and conserve the environment.cralaw:red
The DENR shall provide
the SEC with a list of environmentally critical activities/projects and
areas. Necessary clearances may be secured after registration with the
SEC.cralaw:red
RULE XVIIIADMINISTRATIVE
SANCTIONS
SECTION 1.
Foreign
investments in export enterprises.
- Non-compliance by any duly-registered export enterprise with Rule VI,
Sections 3 and 4 above shall be subject to the following sanctions:
a. For late
submission of the required annual report -
1st violation -
written warning
2nd violation -
basic fine of P1,000.00 and a daily fine of P50.00
3rd violation -
basic fine of P2,000.00 and a daily fine of P100.00
Subsequent
violation
- basic fine of P5,000.00
b. For the
submission
of fraudulent reports -
FINE |
PARTNERSHIP/CORPORATION |
SOLE
PROPRIETORSHIP |
1st
violation |
P
100,000.00 |
P
50,000.00 |
2nd
violation |
P150,000.00 |
P
70,000.00 |
3rd
violation |
Fine
in an amount not exceeding 1/2 of 1% of total paid-in capital but not
more
than Five Million Pesos |
P100,000.00 |
Subsequent
violation |
Cancellation
of registration granted under the Act |
|
The President and/or
official/personnel of the partnership/corporation responsible for the
submission
of fraudulent reports shall be subject to the following sanctions:
1st
violation - a fine
of P50,000.00 |
2nd
violation - a fine
of P100,000.00 |
3rd
violation - a fine
of P200,000.00 |
c. For
non-submission
of the required reports within twelve [12] months after the taxable
year,
cancellation of the certificate of registration granted under the Act.
d. For
failure
of any duly-registered export enterprise to comply, without justifiable
reason, with the SEC or BTRCP order to increase its export to at least
sixty percent [60%] of total sales:
FINE |
PARTNERSHIP/CORPORATION |
SOLE
PROPRIETORSHIP |
1st
violation |
P100,000.00 |
P
50,000.00 |
2nd
violation |
P150,000.00 |
P
70,000.00 |
3rd
violation |
Fine
in an amount not exceeding 1/2 of 1% of total paid-in capital but not
more
than Five Million Pesos |
P100,000.00 |
4th
violation |
Cancellation
of registration granted under the Act |
|
The President and/or
official of the partnership/corporation responsible in the failure to
comply
with the said SEC or BTRCP order shall be subject to the following
sanctions:
1st
violation - a fine
of P50,000.00 |
2nd
violation - a fine
of P100,000.00 |
3rd
violation - a fine
of P200,000.00 |
SECTION 2.
Compliance
with environmental standards. -
Any industrial enterprise, regardless of nationality of ownership which
fails to comply with existing rules and regulations to protect and
conserve
the environment and meet applicable environmental standards shall be
subject
to the sanctions as may be provided for in the rules and regulations of
the DENR.
SECTION 3.
Hearing
of violations of the Act.- The
SEC or BTRCP shall adopt their respective rules and regulations for the
purpose of conducting hearings and investigations involving violations
of the provisions of the Act and these Implementing Rules and
Regulations.cralaw:red
SECTION 4.
Other
grounds for cancellation - The
following
are other grounds for the cancellation of the certificate of
registration
granted under the Act:
a. Failure
of non-Philippine national intending to engage in the same line of
business
as an existing joint venture, in which he or his majority shareholder
is
a substantial partner, to disclose such fact and the names and
addresses
of the partners in the existing joint venture in his application for
registration
with the SEC; or
b. Commission
of any other fraudulent act.cralaw:red
SECTION 5.
Other
violations. - Any other violations of
the Act and these Implementing Rules and Regulations shall be penalized
in accordance with Section 14 of the Act.cralaw:red
RULE XIXEFFECTIVITY
SECTION 1.
These Implementing Rules and Regulations shall take effect fifteen [15]
days after publication in a newspaper of general circulation in the
Philippines.
Approved by the
NEDA
Board: 9 July 1996. |