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PRESIDENTIAL DECREE NO. 1034
PRESIDENTIAL DECREE NO. 1034 -
AUTHORIZING THE ESTABLISHMENT OF AN OFFSHORE BANKING SYSTEM IN THE
PHILIPPINES
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WHEREAS,
conditions conducive to the establishment of an offshore banking
system, such as political stability, a growing economy and adequate
communication facilities, among others, exist in the Philippines;chanroblesvirtualawlibrary
WHEREAS, it is in the interest of developing countries to have as wide
access as possible to the sources of capital funds for economic
development;chanroblesvirtualawlibrary
WHEREAS, an offshore banking system based in the Philippines will be
advantageous and beneficial to the country by increasing our links with
foreign lenders, facilitating the flow of desired investments into the
Philippines, creating employment opportunities and expertise in
international finance, and contributing to the national development
effort.
WHEREAS, the geographical location, physical and human resources, and
other positive factors provide the Philippines with the clear potential
to develop as another financial center in Asia;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution, do hereby
decree and make the following part of the law of the land:cralaw:red
Section 1. Definition of Terms. — As used in this
Decree, unless the context otherwise indicates:cralaw:red
a. "Offshore Banking" shall refer to the conduct of
banking transactions in foreign currencies involving the receipt of
funds from external sources and the utilization of such funds as
provided in this Decree.
b. "Offshore Banking Unit" shall mean a branch,
subsidiary or affiliate of a foreign banking corporation which is duly
authorized by the Central Bank of the Philippines to transact offshore
banking business in the Philippines.
c. "Deposits" shall mean funds in foreign currencies
which are accepted and held by an offshore banking unit in the regular
course of business, with the obligation to return an equivalent amount
to the owner thereof, with or without interest.
d. "Resident" shall mean —
(1) an individual citizen of the Philippines residing
therein; or
(2) an individual who is not a citizen of the
Philippines but is permanently residing therein; or
(3) a corporation or other juridical person organized
under the law of the Philippines. chanroblesvirtualawlibrary
e. "Non-resident" shall mean an individual,
corporation or other juridical person not included in the above
definition of "resident": Provided, however, that branches,
subsidiaries, affiliates, extension offices or any other units of
corporation or juridical person organized under the laws of any foreign
country operating in the Philippines shall be considered residents of
the Philippines.
f. "Branch" shall mean a separately managed
department or unit of a foreign corporation.
Section 2. Qualification Requirements. — Subject to
such regulatory guidelines as the Monetary Board may prescribe, only
banks which are organized under any law other than those of the
Republic of the Philippines their branches, subsidiaries or affiliates,
shall be qualified to operate offshore banking units in the
Philippines. However, local branches of foreign banks already
authorized to accept foreign currency deposits under the provisions of
R.A. No. 6426 may opt to apply for authority to operate an offshore
banking unit under the provisions of this Decree: Provided, that, upon
their receipt of a corresponding certificate of authority to operate as
an offshore banking unit, the license to transact business under the
provisions of R.A. No. 6426 shall be deemed automatically withdrawn.
Section 3. Certificate of Authority to Operate. — The
Monetary Board of the Central Bank of the Philippines is hereby
authorized to issue certificates of authority to operate offshore
banking units: Provided, however, that, in issuing such certificates,
the Monetary Board shall take into consideration the applicant's
liquidity and solvency position, networth and resources, management,
international banking expertise, contribution to the Philippine
economy, and other relevant factors such as participation in equity of
local commercial banks and appropriate geographic representation.
The Central Bank of the Philippines is hereby authorized to collect a
fee of not less than US$ 20,000.00 upon issuing any certificate of
authority to operate and annually thereafter on the anniversary date of
such certificate. chanroblesvirtualawlibrary
Section 4. Corporate Undertaking. — No application to
operate as an offshore banking unit under the provisions of this Decree
shall be considered unless the applicant shall have first submitted to
the Central Bank of the Philippines a sworn undertaking of its head
office or parent or holding company, duly supported by an appropriate
resolution of its board of directors, that, among other things: (a) it
will, on demand, provide the necessary specified currencies to cover
liquidity needs that may arise or other shortfall that is offshore
banking unit may incur; (b) the operations of its offshore banking unit
shall be managed soundly and with prudence; (c) it will train and
continually educate a specific number of Filipinos in international
banking and foreign exchange trading with a view to reducing the number
of expatriates; (d) it will provide and maintain in its offshore
banking unit net office funds in the minimum amount of US$ 1,000,000.00
and (e) it will start operations of its offshore banking unit within
180 days from receipt of its certificate of authority to operate such
unit.
Section 5. Supervision. — The operations and
activities of offshore banking units shall be conducted under the
supervision of the Central Bank of the Philippines.
Section 6. Transactions of Offshore Banking Units:
Regulations. — Transactions of offshore banking units with
non-residents or with other offshore banking units shall be freely
allowed: Provided, that the Central Bank of the Philippines may
establish such safeguards as may be necessary to prevent circumvention
of applicable foreign exchange regulations. Transactions of offshore
banking units with resident of the Philippines, including those with
local commercial banks and local branches of foreign banks authorized
to receive foreign currency deposits under Republic Act No. 6426, shall
be subject to applicable law and regulations. chanroblesvirtualawlibrary
The Monetary Board of the Central Bank of the Philippines shall
promulgate such rules and regulations as may be necessary to carry out
and implement the provisions of this Decree.
Section 7. Tax and Other Incentives. —
a. The provisions of any law to the contrary
notwithstanding, the transactions of offshore banking unit authorized
hereunder with non-residents and other offshore banking units shall be
subject to a five per cent (5%) tax on the net, income from such
transactions which shall be in lieu of all taxes on the said
transactions: Provided, however, that transactions of offshore banking
units with local commercial banks, including branches of foreign banks
that may be authorized by the Central Bank to transact business with
offshore banking units, shall likewise be subject to the same tax,
except net income from such transactions as may be specified by the
Secretary of Finance, upon recommendation of the Monetary Board, to be
subject to the usual income tax payable by banks. Any income of
non-residents from transactions with said offshore banking units shall
be exempt from any tax.
b. In the case of transaction with residents (other
than other offshore banking units or local commercial banks including
local branches of foreign banks that may be authorized by the Central
Bank of the Philippines to transact business with offshore banking
units), interest income from loans granted to such residents shall be
subject only to a ten per cent (10%) withholding tax as final tax.
c. Notwithstanding the provision of any law to the
contrary, foreign personnel may be assigned by any foreign bank to work
in its offshore banking unit in the Philippines. Such foreign
personnel, their spouses and unmarried children under twenty-one years
of age, shall be issued a multiple entry special visa, valid for a
period of one year, to enter the Philippines: Provided, however, that a
responsible officer of such foreign bank submits a certificate of the
effect that the person who seeks entry in the Philippines is an
employee of the said foreign bank and will work exclusively for its
offshore banking unit in the Philippines and that he will be paid by
the foreign bank in the Philippines compensation in foreign currencies:
Provided, further, that in the case of the spouse and unmarried
children mentioned herein the certificate shall be to the effect that
they are dependents of the foreign personnel working in the offshore
banking unit.
The admission and stay of the foreign personnel and their dependents
mentioned in the next preceding paragraph shall be co-terminous with
the validity of the multiple entry special visa: Provided, however,
that their stay may be extended yearly upon submission to the
Commission on Immigration and Deportation of a sworn certification by a
responsible officer of the offshore banking unit in the Philippines
that such bank's authority to operate as an offshore banking unit is
valid and subsisting and that the personnel concerned has been paid in
the Philippines, from the date of original admission, the compensation
mentioned in the next preceding paragraph, for which that tax due
thereon has been withheld and paid to the Bureau of Internal Revenue.
The foreign personnel and their respective spouses and dependents
mentioned in this Section shall be exempt from: the Payment of all fees
due under the immigration and alien registration laws; securing alien
certificates of registration; and obtaining emigration clearance
certificates, and all types of clearances required by any government
department or agency, except that upon their final departure from the
Philippines, the employer of the said foreign personnel shall so advice
in writing the Commission on Immigration and Deportation at least five
(5) working days prior to such departure, and the finally departing
personnel shall be required to submit to the said office a tax
clearance from the Bureau of Internal Revenue. chanroblesvirtualawlibrary
d. Section 22 of Commonwealth Act No. 466, as
amended, is hereby amended to include an additional subsection (d) to
read as follows:cralaw:red
"(d) Aliens employed by offshore banking units. —
There shall be levied, collected and paid for each taxable year upon
the gross income received by every alien individual employed by
offshore banking units established in the Philippines as salaries,
wages, annuities, compensations, remunerations and emoluments from such
offshore banking units a tax equal to fifteen per centum of such gross
income."
e. The alien executives of offshore banking units
shall enjoy the privileges extended to foreigners coming to settle in
the Philippines for the first time as provided for under Section 105(h)
of the Tariff and Customs Code, as amended.
f. The offshore banking units shall be exempt from
all forms of local licenses, fees, dues, imposts, or any other local
taxes or burdens.
Section 8. Effect of Certain Laws. — The provisions
of Act No. 2566 (Usury Law), Republic Act No. 529, as amended (Uniform
Currency Law), and Republic Act No. 3591, as amended (Deposit Insurance
Law), shall not apply to transactions and/or deposits in offshore
banking units in the Philippines: Provided, however, that the
provisions of R.A. No. 1405 (Secrecy of Bank Deposits Law) shall apply
to deposits in offshore banking units.
Section 9. Sanctions for Violations. — Any willful
violation by any bank authorized to engage in offshore banking in the
Philippines of any of the provisions of this Decree, or its
implementing rules and regulations, or other terms and conditions of
the authority to engage in offshore banking in the Philippines may be
subject to the administrative sanctions provided for in Section 34-A,
as well as to other applicable provisions, of Republic Act No. 265, as
amended.
Section 10. Repealing Clause. — Any provisions of
existing general or special laws inconsistent with the provisions of
this Decree shall be deemed modified, amended or repealed accordingly.
Section 11. Effectivity. — This Decree shall take
effect upon approval.
DONE in the City of Manila,
this 30th day of September, in the year of Our Lord, nineteen hundred
and seventy-six.
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