A
collection of Philippine laws, statutes and codes
not
included or cited in the main
indices
of
the
Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 1789
|
PRESIDENTIAL DECREE NO. 1789 - A
DECREE TO REVISE, AMEND AND CODIFY THE INVESTMENT, AGRICULTURAL AND
EXPORT INCENTIVES ACTS TO BE KNOWN AS THE OMNIBUS INVESTMENTS CODE
|
chanroblesvirtualawlibrary
(REPEALED
BY BATAS PAMBANSA BLG. 391)
WHEREAS, Republic Act Numbered 5186, as amended, otherwise known as
Investment Incentives Act, Republic Act Numbered 6135, as amended,
otherwise known as Export Incentives Act, and Presidential Decree
Numbered 1159, otherwise known as Agricultural Investments Incentives
Decree, grant substantially the same incentives to investors and
enterprises registered with the Board of Investments; chanroblesvirtualawlibrary
WHEREAS, Republic Act Numbered 5455, otherwise known as Foreign
Business Regulation Act, regulates the entry of foreign investments
into the country and as such complements the aforementioned investment
incentives laws;chanroblesvirtualawlibrary
WHEREAS, there are in the aforementioned laws provisions which require
clarification, revision or simplification as a result of various
presidential decrees, letters of instructions and executive orders on
the same subject;chanroblesvirtualawlibrary
WHEREAS, it is imperative to adopt a consolidated investments code to
integrate the said amendments and to clarify and harmonize their
provisions not only for the proper guidance of domestic and foreign
investors, but also for the efficient and effective implementation of
the said laws;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines by virtue of the powers in me vested by the
Constitution, do hereby order and decree as follows:cralaw:red
Section 1. Codification of investment, agricultural
and export incentives laws. — All acts, presidential decrees, letters
of instructions and executive orders which govern investments and the
grant of incentives in connection therewith which are administered by
the Board of Investments and all laws regulating the making of
investments and the doing of business by foreigners in the Philippines
are hereby revised, consolidated and codified into a single code to be
known as the Omnibus Investments Code which shall form an integral part
of this Decree. chanroblesvirtualawlibrary
Section 2. Effectivity. — The provisions of the
Omnibus Investments Code shall take effect immediately.
DONE in the City of Manila,
this 16th day of January, in the year of Our Lord, nineteen hundred and
eighty-one.
THE OMNIBUS INVESTMENTS CODE
PRELIMINARY TITLE
CHAPTER I
Title and Declaration of Policy
ARTICLE 1. Short Title. — This Decree shall be known
as the "Omnibus Investments Code." chanroblesvirtualawlibrary
ARTICLE 2. Declaration of Policy. — 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 practicable dispersal or
industries, under conditions which will encourage competition and
discourage monopolies, it is hereby declared to be the policy of the
State: a) to encourage Filipino and foreign investments, as
hereinafter set out, in projects to develop agricultural, mining and
manufacturing industries which increase national income most at the
least cost, bring about greater economic stability, provide more
opportunities for employment, raise the standards of living of the
people, and provide for an equitable distribution of wealth; b) to
welcome and encourage foreign capital to establish pioneer enterprises
that are capital intensive and would utilize a substantial amount of
domestic raw materials, in joint venture with substantial Filipino
capital, whenever available; c) to actively encourage, promote and
diversify exports of services and manufacturer utilizing domestic raw
materials to the fullest extent possible, and to develop new markets
for Philippine products, in order to attain a rising level of
production and employment, increase foreign exchange earnings, hasten
the economic development of the nation, and assure that the benefits of
development accrue to the Filipino people; d) to achieve promptly
self-reliance in the basic requirements of food and raw materials and
in the implementations thereof, to accelerate the development of the
agricultural sector by diffusing productive employment and income
opportunities to the countryside and thus attain self-sufficiency in
basic food and raw materials, as well as increased production of export
crops and other products; and e) to make investments and the doing of
business within the Philippines by foreigners and business
organizations owned in whole or in part by foreigners contribute to the
sound and balanced development of the national economy on a
self-sustaining basis.
ARTICLE 3. "Board" shall mean the Board of Investment
created under this Code.
CHAPTER II
Board of Investments
ARTICLE 4. The Board of Investments. — The Board of
Investments shall be composed of five full-time governors to be
appointed by the President of the Philippines. The Minister of industry
shall be concurrently Chairman of the Board. The Vice-Chairman of the
Board who shall be appointed by the President shall concurrently be its
Managing Head. The tenure of office of the governors of the Board,
except the Chairman, shall be six (6) 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 a governor of the Board
in an acting capacity, but all appointments shall be ad interim or
permanent: Provided, finally, That a governor of the Board may serve as
director or in any capacity in government-owned or controlled
corporations.
ARTICLE 5. Qualification of Governors of the Board. —
The governors of the Board shall be citizens of the Philippines, at
least thirty years old, of good moral character and of recognized
competence in the field of economics, finance, banking, commerce,
industry, agriculture, engineering, law, management or labor.
ARTICLE 6. Compensation of the Governors of the Board
and its Personnel. — For the purpose of determining the compensation
and allowances of the governors of the Board and its personnel, the
Board shall be considered in the same category as a government
financial institution.
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 but not less than 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 three (3) governors shall
continue a quorum, and the affirmative vote of three (3) governors in a
meeting validly held shall be necessary to exercise its powers and
perform its duties, which shall be as follows:cralaw:red
(1) Prepare annually the Investments Priorities Plan
as defined in Article 28, which shall contain a listing of specific
activities that can qualify for incentives under 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;chanroblesvirtualawlibrary
(2) Promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this Code; chanroblesvirtualawlibrary
(3) Process and approve applications for registration
under this Code, 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;chanroblesvirtualawlibrary
(4) After due hearing, decide controversies
concerning the implementation of this Code that may arise between
registered enterprises or investors therein and government agencies,
within thirty (30) days after the controversy has been submitted for
decision: Provided, That the investor or the registered enterprise may
appeal the decision of the Board within thirty (30) days from receipt
thereof to the President;chanroblesvirtualawlibrary
(5) Recommend to the Commissioner of Immigration and
Deportation the entry in the Philippine for employment of foreign
nationals under this Code; chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(7) Periodically check and verify the compliance by
registered enterprises with the provisions of this Code, with the rules
and regulations promulgated under this Code and with the terms and
conditions of registration;chanroblesvirtualawlibrary
(8) After due notice, cancel the registration or
suspend the employment 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
or (b) for violation of any provisions of this Code, of the rules and
regulations issued under this Code, or 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; chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(12) Formulate and implement rationalization programs
for certain industries whose operation may result in dislocation,
overcrowding or inefficient use of resources, thus impending 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;chanroblesvirtualawlibrary
(13) In appropriate cases, and subject to the
conditions which the Board deems necessary, suspend the nationality
requirement provided for in this Code or any other nationalization
statute in cases of ASEAN projects or investments by ASEAN nationals in
preferred projects, and with the approval of the President extend
said suspension to other international complementation arrangements for
the manufacture of a particular product on a regional basis to take
advantage of economies of scale; chanroblesvirtualawlibrary
(14) Extend the period of availment of incentives by
any registered enterprise for a period not exceeding five (5) years
and/or increase the rate of tax exemption of registered enterprises to
not more than 50% of the tax exemption enjoyed prior to the increase,
subject to any of the following criteria:cralaw:red
(a) The registered enterprise has suffered heavy
financial loses and is in a distressed condition;chanroblesvirtualawlibrary
(b) The registered enterprise has suffered
operational force majeure that has impaired its viability;chanroblesvirtualawlibrary
(c) The registered enterprise has not fully enjoyed
the incentives granted to it for reasons beyond its control;chanroblesvirtualawlibrary
(d) The project of the registered enterprise has a
gestation period which goes beyond the period of availment of needed
incentives; and
(e) The operation of the registered enterprise has
been subjected to unforeseen changes in government policies,
particularly, protectionism policies of importing countries, and such
other supervening factors which would affect the competitiveness of the
registered firm; chanroblesvirtualawlibrary
(15) To regulate the making of investments and the
doing of business within the Philippines by the foreigners or business
organizations owned in whole or in part by foreigners;chanroblesvirtualawlibrary
(16) Gather and compile statistical data required for
the effective implementation of this Code;chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(18) Provide, through Philippine diplomatic mission,
such information as may be of interest to prospective foreign investors;chanroblesvirtualawlibrary
(19) Collate, analyze and compile pertinent
information and studies concerning areas that have been or may be
declared preferred areas of investments; and
(20) 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:cralaw:red
(1) To preside over the meetings of the Board;chanroblesvirtualawlibrary
(2) To render annual reports to the President and
such special reports as may be requested;chanroblesvirtualawlibrary
(3) To act as liaison between investors seeking joint
venture arrangements in particular areas of investment;chanroblesvirtualawlibrary
(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:cralaw:red
(1) To act as Managing Head of the Board;chanroblesvirtualawlibrary
(2) To preside over the meetings of the Board in the
absence of the Chairman;chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(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 ONE
INVESTMENTS WITH INCENTIVES
CHAPTER I
Definition of Terms
ARTICLE 10. "Registered enterprise" shall mean any
individual, partnership cooperative, corporation or other entity
incorporated and/or organized and existing under Philippine laws, and
registered with the Board in accordance with this Book: Provided,
however, That the term registered enterprise shall not include
commercial banks, savings and mortgage banks, rural banks, savings and
loan associations, building and loan associations, development banks,
trust companies, investment banks, finance companies, brokers and
dealers in securities, consumers cooperatives and credit unions, and
other business organizations whose principal purpose or principal
source of income is to receive deposits, lend or borrow money, buy and
sell or otherwise deal, trade or invest in common or preferred stocks,
debentures, bond or other marketable instruments generally recognized
as securities, or discharge other similar intermediary, trust or
fiduciary functions. chanroblesvirtualawlibrary
ARTICLE 11. "Technologies assistance contracts" shall
mean contracts for: (1) the transfer, by license or otherwise, of
patents, processes, formulae or other technological rights of foreign
origin; and/or (2) foreign assistance concerning technical and factory
management, design, planning, construction and similar matters.
ARTICLE 12. "Foreign loan" shall mean any credit
facility of financial assistance other than equity investment obtained
by a registered enterprise from a source outside the Philippines and
brought into the Philippines either in foreign exchange or in other
assets, and registered with the Central Bank and the Board, which shall
assess and appraise the assets other than foreign exchange representing
the proceeds of the loan.
ARTICLE 13. "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. chanroblesvirtualawlibrary
ARTICLE 14. "Philippine national" shall mean a
citizen of the Philippines; or a domestic partnership or association
wholly owned by citizens of the Philippines; or a corporation organized
under the laws of the Philippines of which at least sixty per cent
(60%) of the capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines; or a trustee of funds for
pension or other employee retirement or separation benefits, where the
trustee is a Philippine national and at least sixty per cent (60%) of
the fund will accrue to the benefit of Philippine nationals: Provided,
That where a corporation and its non-Filipino stockholders own stock in
a registered enterprise, at least sixty per cent (60%) of the capital
stock outstanding and entitled to vote of both corporations must be
owned and held by the citizens of the Philippines and at least sixty
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. chanroblesvirtualawlibrary
ARTICLE 15. "Preferred areas of investments" shall
mean the economic activities that the Board shall have declared as such
in accordance with Article 30 which shall be either non-pioneer or
pioneer.
ARTICLE 16. "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 material
into another raw material or finished goods which is new and untried in
the Philippines or (3) engaged in the pursuit of agricultural
activities and/or services including the industrial aspects of food
processing whenever appropriate, predetermined by the Board, in
consultation with the appropriate Ministry, to be feasible and
highly essential to the attainment of the national goal taking into
account the risks, magnitude of investment, 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 other
non-conventional fuels or sources of energy its production,
manufacturing or processing operations: Provided, That the final
products in any of the foregoing instances, involves or will involve
substantial use and processing of domestic raw materials, whenever
available: Provided, however, That the foregoing definitions shall not
in any way limit the rights and incentives granted to less developed
areas enterprises provided under Section 5 of Batas Pambansa Blg.
44. chanroblesvirtualawlibrary
ARTICLE 17. "Non-pioneer enterprise" shall include
all registered producer enterprises other than pioneer enterprises.
ARTICLE 18. "Registered export producer" shall mean
an enterprise (1) engaged or proposing to engage in an industrial or
agricultural activity for the production, manufacture or processing of
export products as hereinbelow defined (2) directly exporting its
export products, selling them (a) to an export trader that
subsequently exports the said products, or (b) to other export
producers who utilize said products as direct inputs in products
subsequently manufactured or processed and thereafter exported; and (3)
duly registered as such by the Board.
ARTICLE 19. "Registered export trader" shall mean an
enterprise engaged or proposing to engage in the sale abroad of export
products bought by it from one or more export producers, and duly
registered as such by the Board.
ARTICLE 20. "Registered service exporter" shall mean
an enterprise engaged or proposing to engage (a) in rendering
technical, professional or other services which are paid for in foreign
currency, including, but not limited to, the fields of law, medicine,
accounting, management, valuation and appraisals, engineering,
geodetic, surveying, teaching, pharmacy, nursing, cultural
presentations or promotions, works of arts, and entertainments or (b)
in exporting television and motion pictures and musical recordings made
or produced in the Philippines, either directly or through a registered
export trader and duly registered as such by the Board. chanroblesvirtualawlibrary
ARTICLE 21. "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 the
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 market demand exceeds the existing
productive capacity in said preferred areas nor shall measured capacity
be so much in excess of measurable market demand as to foster or
encourage overcrowding in any such area. For export market
industries, the Board shall base measured capacity on the availability
of domestic raw materials after deducting the needs of the domestic
market therefor. In no case, however, shall measured capacity be
construed so as to result in a monopoly in any preferred area of
investment which would unduly restrict trade and fair competition.
ARTICLE 22. "Tax credit" shall mean any of the
credits against taxes and/or duties extended to a registered enterprise
by this Code, to evidence which a tax credit certificate shall be
issued by the Minister of Finance or his representative. The tax credit
certificate shall be used to pay taxes, duties, charges and fees due to
the national government and may be transferable under such conditions
as may be determined by the Ministry of Finance and the Board.
ARTICLE 23. "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 Standards, or, in default of such standards, by
the Board or by such public or private organization, chamber, group or
body as the Board may designate. The above definition notwithstanding
the Investment Priorities Plan may include other products for exports
subject to such conditions and limited incentives as may be determined
by the Board. chanroblesvirtualawlibrary
ARTICLE 24. "Export sales" shall mean the Philippine
port F.O.B. value, determined from invoices, bills of lading, inward
letters of credit, landing certificates, and other commercial
documents, of export products exported directly by a registered
export producer or registered export trader 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, however, 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 Bureau of
Customs: Provided, That export sales of registered export trader shall
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.
ARTICLE 25. "Export fees" shall mean the total
foreign exchange which is charged or received by a registered service
exporter of furnishing or performing services, or permitting the
showing or playing, outside of the Philippines, of television or motion
pictures or musical recordings. chanroblesvirtualawlibrary
ARTICLE 26. "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 27. "Processing" shall mean converting of raw
materials into marketable form through physical, mechanical, chemical,
electrical, biochemical, biological or other means or by a special
treatment or a series of actions, such as slaughtering, milling,
pasteurizing, drying or desiccating, quick freezing, that results in a
change of the nature or state of the products. Merely packing or
packaging shall not constitute processing.
ARTICLE 28. "Investment Priorities Plan" shall mean
the over-all plan prepared by the Board and approved by the president
which include the contain:cralaw:red
(a) The analysis, synthesis and projections of data
collected by the Board from public and private sources, and which
measures and indicates: chanroblesvirtualawlibrary
(1) The existing and prospective demand for specific
products and commodities, final and intermediate, in the light of the
level and structure of income, production, trade, prices and relevant
economic and technical factors;chanroblesvirtualawlibrary
(2) The existing capacities for producing specific
products and commodities;chanroblesvirtualawlibrary
(3) The gaps between prospective demand and existing
supply for specific products and commodities, and the additional
production capacities that must be induced where such gaps exist;chanroblesvirtualawlibrary
(4) The specific products and commodities,
manufactured out of or with the use of domestic raw materials, the
export of which should be encouraged;chanroblesvirtualawlibrary
(5) The specific areas of economic activity to be
declared preferred areas of investment and the corresponding measured
capacities thereof;chanroblesvirtualawlibrary
(6) The capital investments necessary to bring such
additional capacities into existence;chanroblesvirtualawlibrary
(7) The raw material input requirements of the
additional production capacities needed, and the sources thereof,
whether domestic or imported;chanroblesvirtualawlibrary
(8) The manpower requirements of existing and new
industries; chanroblesvirtualawlibrary
(9) The region where such additional capacities can
be located considering the presence of natural resources, labor,
transport facilities, power, water and the like;chanroblesvirtualawlibrary
(10) The respective roles and responsibilities of the
private sector and the government in bringing such additional
capacities into existence;chanroblesvirtualawlibrary
(11) The specific public works project that need to
be undertaken by the government and the capital investment required
therefor, to make private investments in preferred areas feasible;chanroblesvirtualawlibrary
(12) The prospective impact of the projected
investments on prices, the exchange rate and the balance or
payments; chanroblesvirtualawlibrary
(13) The changes in tariffs that would be required
for the protection of industry during its infant state;chanroblesvirtualawlibrary
(14) The minimum requirements for maintaining
conditions of competition in any industry; and
(15) Other similar or relevant factors which the
Board considers desirable to include;chanroblesvirtualawlibrary
(b) The list of the export products or services that
should be encouraged with priority, considering;chanroblesvirtualawlibrary
(1) the comparative advantages they enjoy or could be
made to enjoy;chanroblesvirtualawlibrary
(2) their potential for earning foreign exchange; and
(3) their profitability to the national economy;chanroblesvirtualawlibrary
(c) Additional volume of agricultural production and
related services necessary to supply the needs of the economy including
the export market, which can qualify for incentives under this
Code; chanroblesvirtualawlibrary
(d) 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 such 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
the existing facilities to produce such services; and
(e) Specific activities where the potential for
utilization of coal and non-conventional sources of energy can be best
promoted.
CHAPTER II
Investment Priorities Plan
ARTICLE 29. Investment Priorities Plan. — Not later
than the end of March of every year, the Board of Investments, after
consultation with the appropriate government agencies, as it may deem
necessary, shall submit to the President an Investment Priorities Plan:
Provided, however, That the deadline for such submission, may be
extended by the President.
ARTICLE 30. Criteria for Preferred Areas. — In
determining the preferred areas of investment and their corresponding
measured capacities, the Board shall determine which areas of
investment best accomplish the policy declared in this Code, including
those which will economically produce goods for domestic use in
substitution of goods being imported in large quantities, and
especially those which will process further and thereby increase the
value of agricultural, mining and timber products already being
produced for export or which will make products at costs low enough to
be sold competitively in export markets.
The Board shall take into account all the following criteria:cralaw:red
(a) The gaps between prospective demand and existing
supply for specific products, commodities and services and the
additional production capacities that must be induced where such gaps
exist;chanroblesvirtualawlibrary
(b) The potential of such areas of investments for
creating new markets, both domestic and foreign, for domestic suppliers
of raw materials and/or intermediate goods, or new sources of supply
for domestic consumers of the products;chanroblesvirtualawlibrary
(c) The potential of such areas of investment for
creating productive employment, considering the necessity for the
dispersal of industries in the country on a planned and balanced basis
to the extent that is economically feasible and practicable;chanroblesvirtualawlibrary
(d) Their potential for earning foreign exchange;chanroblesvirtualawlibrary
(e) The extent to which investment in such areas will
integrate existing production facilities;chanroblesvirtualawlibrary
(f) The amounts of import substitution or of new
exports such areas of investment will promote;chanroblesvirtualawlibrary
(g) The amount of capital normally needed thereby;chanroblesvirtualawlibrary
(h) The nature of the risks, commercial or otherwise,
which may be entailed;chanroblesvirtualawlibrary
(i) The proportion of the required capital, raw
materials and labor inputs of indigenous origin;chanroblesvirtualawlibrary
(j) The rate of profitability;chanroblesvirtualawlibrary
(k) The rate of return to the national economy;chanroblesvirtualawlibrary
(l) The maintenance of competition; chanroblesvirtualawlibrary
(m) The comparative advantage they enjoy or could be
made to enjoy; and
(n) Such other criteria as the Board may adopt.
Considering the amount of investment capital which the Board may
estimate to be available during any given year, the Board shall give
priority to projects with the highest rates of return to the national
economy. No project shall be included in the priorities plan nor
declared a preferred area of investment, unless it is shown to be
economically, technically, and financially sound after thorough
investigation and analysis by the Board. In any of the areas declared
preferred areas of investment, the Board may designate as pioneer areas
the specific products and commodities that meet the requirements
of Article 16.
ARTICLE 31. 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 Bureau of Investments for revision. Portions not returned to the
Board of Investments shall be proclaimed in effect. chanroblesvirtualawlibrary
Upon the effectivity of the plan or portions thereof, the President
shall issue all necessary directives to all ministries, bureaus,
agencies and 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 32. Amendments. — The Board of Investments
may, after due notice, amend the whole or any part of 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: Provided, That in all such cases the procedures outlined in
Articles 29 to 31 observed to the extent that they are applicable. 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 by the
President nor after approval of its deletion as a preferred area of
investment. chanroblesvirtualawlibrary
ARTICLE 33. 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 34. Qualifications of Producer under
Investment Priorities Plan. — To be entitled to registration under the
Investment Priorities Plan, an applicant must satisfy the Board
that: chanroblesvirtualawlibrary
(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 per cent (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
14 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: chanroblesvirtualawlibrary
(a) That it proposes to engage in a pioneer project
as defined in Article 16 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 seventy per cent (70%) of its 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;chanroblesvirtualawlibrary
(b) That it obligates itself to attain the status of
a Philippine national, as defined in Article 14, within thirty (30)
years from the date of registration or within such longer period as the
Board may require taking into account the export potential of the
project: Provided, That a registered export producer which exports one
hundred per cent (100%) of its total production need not comply with
the requirement;chanroblesvirtualawlibrary
(c) That the pioneer area it will engage in is one
that is not within the activities reserved by the Constitution or other
laws of the Philippines to Filipino citizens or corporations owned and
controlled by Filipino citizens;chanroblesvirtualawlibrary
(2) The applicant is proposing to engage in a
preferred project 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 per cent (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;chanroblesvirtualawlibrary
(3) The applicant is capable of operating on a sound
and efficient basis and of contributing to the national development of
the preferred area in particular and of the national economy in general;chanroblesvirtualawlibrary
(4) If the applicant is engaged or proposes to engage
in undertakings of activities other than preferred projects, it has
installed or undertakes to install an accounting system adequate to
identify the investments, revenue, 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 35. Qualifications for Export Trader. — To be
registered as export trader, the applicant must be a citizen of the
Philippines, in case of natural person, or in case of partnership or
any other entity, it is organized under Philippine laws and that at
least sixty per cent (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
14 of this Code, and at least sixty per cent (60%) of the members of
the Board of Directors are citizens of the Philippines: Provided,
That a citizen of the Philippines or a corporation, partnership or
other organized and existing under Philippine laws at least seventy per
cent (70%) of the capital stock of which is owned and controlled by
citizens of the Philippines shall also be entitled to registration as
export trader and to enjoy the benefits and incentives for registered
export traders under this Code, except exemption from export tax, if it
is engaged or proposes to engage in the exportation of export products
the total F.O.B. port value of the exports of which exceeded five
million dollars in United States currency in the calendar year 1968 and
if the business of exportation of the said product at the time the
application is filed, is substantially in the hands of non-Philippine
nationals: Provided, further, That notwithstanding the above
nationality requirement, the Board, may, in meritorious cases, allow
registration of export trader not possessing the required percentage of
Philippine ownership and control under such conditions and/or
limited incentives as the Board may determine. chanroblesvirtualawlibrary
ARTICLE 36. Qualifications for Service Exporter. — To
qualify for registration as service exporter, the applicant must (a) be
engaged or proposes to engage in the activities mentioned in Article 20
or other export services which may be declared by the Board; and (b)
comply with the nationality requirement set forth in the
preceding Article excluding the first proviso but including the
second proviso thereof.
ARTICLE 37. Liberalized Preferred Areas. —
Notwithstanding the provisions of No. 1 of Article 34, if the measured
capacity of any preferred non-pioneer area is not filled within three
(3) years from the date of its declaration as a preferred non-pioneer
area, the Board may allow non-Philippine nationals otherwise qualified,
to be registered in such areas, under the conditions prescribed above
for pioneer areas: Provided, however, That such non-Philippine
nationals may engage, without incentives, in the manufacture of
finished products primarily for export, during the said period
aforestated.
ARTICLE 38. Application. — Applications shall be
recorded in a registration book and the date appearing therein and
stamped on the application shall be considered the date of
filing. chanroblesvirtualawlibrary
The Board shall cease to register any applicant in a preferred area of
investment when the measured capacity therein has been filled; but all
applicants registered within the measured capacity shall enjoy the
status under which they were registered: Provided, however, That the
Board may register subsequent applicants as non-pioneer registered
enterprises in an area previously declared as pioneer, when a number of
enterprises have already been registered and are in commercial
operation for the same activity.
ARTICLE 39. Several Applicants for a Preferred Area.
— Where several applicants are qualified for registration with the
Board but the total of their proposed combined production capacities
exceeds the available measured capacity of the preferred area of
investment in which they are proposing to engage, the Board shall
approve and register only those that can be accommodated within the
available measured capacity and are better suited to achieve the
objectives of this Code. The Board shall base its choice on the
following criteria:cralaw:red
(a) The extent of ownership and control by Philippine
nationals of the enterprises;chanroblesvirtualawlibrary
(b) The manner in which the enterprises are
integrated, and the length of their experience in the preferred area of
investment or in areas closely related to it; chanroblesvirtualawlibrary
(c) The cost factors and the economies of scale and
competitiveness in the world market involved in their processes;chanroblesvirtualawlibrary
(d) The amount of foreign exchange earned, used, or
saved in their operations;chanroblesvirtualawlibrary
(e) The extent to which they employ labor, materials
and other resources obtained from indigenous sources;chanroblesvirtualawlibrary
(f) The amount of their equity, and the degree to
which the ownership of such equity is spread out and diversified;chanroblesvirtualawlibrary
(g) The extent to which they shall insure the
maintenance of a compensation within the industry;chanroblesvirtualawlibrary
(h) The extent of public participation in each
applicant; and
(i) Such other criteria as the Board may determine.
In making a choice between two or more applicants for registration and
proposing to produce identical or substantially identical products or
commodities, both possessing the required degree of Filipino ownership
and control, the Board shall give preference to projects that
constitute an expansion of, or addition to or integration of existing
facilities whenever these enjoy the advantages of lower costs and
economies of scale over projects undertaken in isolation from
technically related facilities; and other things being equal, the Board
shall give preference to applicants where the degree of ownership and
control by Philippine nationals is greater. chanroblesvirtualawlibrary
ARTICLE 40. Appeal from Board's Decision. — Any order
or decision of the Board under the preceding article may be appealed
within thirty (30) days from receipt of said order or decision to the
President. Upon failure on the part of the President to act within a
period of ninety (90) days, the decision of the Board shall be deem
upheld.
ARTICLE 41. 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:cralaw:red
(a) The name of the registered enterprise;chanroblesvirtualawlibrary
(b) The preferred area of investment in which the
registered enterprise is proposing to engage;chanroblesvirtualawlibrary
(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 chanroblesvirtualawlibrary
(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 42. Proclamation 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:cralaw:red
(a) Repatriation of Investment. — In the case of the
foreign investments, the rights to repatriate the entire proceeds of
the liquidation of the investment in the currency in which the
investment was originally made and at the exchange rate prevailing at
the time of repatriation, subject to the provisions of Section 74 of
Republic Act No. 265;chanroblesvirtualawlibrary
(b) Remittance of Earnings. — In case of foreign
investments, the right to remit earnings from the investment in the
currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the
provisions of Section 74 of Republic Act No. 265;chanroblesvirtualawlibrary
(c) Foreign Loans and Contracts. — The right to remit
at the exchange rate prevailing at the time of remittance such sums as
may be necessary to meet the payments of interest and principal on
foreign loans and foreign obligations arising from technological
assistance contracts, subject to the provisions of Section 74 of
Republic Act No. 265; chanroblesvirtualawlibrary
(d) Freedom from Expropriation. — There shall be no
expropriation by the government of the property represented by
investments or of the property of enterprises except for public use or
in the interest of national welfare and defense and upon payment of
just compensation. In such cases, foreign investors or enterprises
shall have to right to remit sums received as compensation for the
expropriated property in the currency in which the investment was
originally made and at the exchange rate at the time of remittance,
subject to the provisions of Section 74 of Republic Act No. 265;chanroblesvirtualawlibrary
(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 rational emergency. Payments
received as compensation for the requisitioned property may be remitted
in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the
provisions of Section 74 of Republic Act No. 265. chanroblesvirtualawlibrary
Title III — Incentives
CHAPTER I
Incentives to Investors
ARTICLE 43. Incentives to Investors in a Registered
Producer Enterprise. — An investor, with respect to his investment in a
registered enterprise, other than an export trader or service exporter,
shall be granted the following incentive benefits:cralaw:red
(1) Protection of Patents and Other Proprietary
Rights. — The right to be protected from infringement of patents,
trademarks, copyright, trade names and other proprietary rights, where
such patents, trademarks, copyright, trade names, and other proprietary
rights have been registered with the appropriate agencies of the
Government of the Philippines;chanroblesvirtualawlibrary
(2) Capital Gains Tax Exemption. — Exemption from
income tax on that portion of the gains realized from the sale,
disposition, or transfer of capital assets, as defined in Section
thirty-four of the National Internal Revenue Code, that corresponds to
the portion of the proceeds of the sale that is invested in new issues
of capital stock of a registered enterprise within six (6) months from
the date the gains were realized: Provided, (1) That the said sale,
disposition or transfer and the investment of the proceeds thereof have
been registered with the Board and the Bureau of Internal Revenue; and
(2) That the shares of stock representing the investment are not
disposed of, transferred, assigned, or conveyed for a period of five
(5) years from the date the investment was made. If such shares of
stock are disposed of within the said period of five (5) years, all
taxes due on the gains realized from the original transfer, sale or
disposition of the capital assets shall immediately become due and
payable. The incentives herein may be extended to non-corporate
registered enterprises if the Board deems it desirable and
administratively feasible.
CHAPTER II
Additional Incentives to Philippine Nationals in Pioneer Areas
ARTICLE 44. Incentives to Philippine Nationals
Investing in Pioneer Areas. — In addition to the incentives provided in
the preceding Article, Philippine nationals investing in a pioneer
enterprise shall be granted the following incentives benefits:cralaw:red
(a) Tax Allowance for Investments. — An Investment
allowance to the extent of his actual investment, paid in cash or
property, shall be allowed as a deduction from his taxable income but
not to exceed twenty per cent (20%) in case of registered enterprises
engaged in pioneer agricultural ventures and related services, and ten
per cent (10%) in case of registered enterprises in other pioneer
projects: Provided, (1) That the investment is made in a subscription
of shares in the original and/or increased capital stock of a pioneer
enterprise within seven (7) years from the date of registration; (2)
That the shares are held for a period of not less than three (3) years;
(3) That the investment is registered with the Board. If the shares are
disposed of within the said three (3) year period, the taxpayer shall
lose the benefit of this deduction, his income tax liability shall be
recomputed, and he shall pay whatever additional sum be due plus
interest thereon, within thirty (30) days from the date of disposition.
The incentives herein may be extended to non-corporate registered
enterprises if the Board deems it desirable and administratively
feasible.
(b) Capital Gains Tax Exemption. — Exemption from
income tax on the portion of the gains realized from the sale,
disposition or transfer of capital assets, as defined in Section
thirty-four of the National Internal Revenue Code, that corresponds to
the portion of the proceeds of the sale that is invested in new issues
of capital stock of, or in the purchase of stock owned by foreigners
in, pioneer enterprises, within (6) months from the date the gains were
realized: Provided, (1) That such sale disposition or transfer and the
investment of the proceeds thereof are registered with the Board and
the Bureau of Internal Revenue; and (2) That the shares of stock
representing the investment are not disposed of, transferred, assigned
or conveyed for a period of three (3) years from the date of investment
was made. If said business or shares of stock are disposed of within
the said period of three (3) years, all taxes due on the gains realized
from the original transfer, sale or disposition of the capital assets
shall immediately become due and payable. The last sentence of the
preceding paragraph should likewise apply herein.
(c) Tax Exemption on Sale of Stock Dividends. —
Exemption from income tax or all gains realized from the sale,
disposition, or transfer of stock dividends received from a pioneer
enterprise: Provided, That the sale, disposition or transfer occurs
within seven (7) years from the date of registration of the enterprise.
Title IV — Incentives to Registered
Producer Enterprises
CHAPTER I
Registered Producer Enterprises
ARTICLE 45. Incentives to a Registered Enterprise. —
All registered enterprises, except export traders and service
exporters, shall be granted the following incentives to the
extent engaged in a preferred area of investment:cralaw:red
(a) Deduction of Organization and Pre-Operating
Expenses. — All capitalized organizational and pre-operating expenses
attributable to the establishment of a registered enterprise may be
deducted from its taxable income over a period of not more than ten
(10) years beginning with the month the enterprise begins operations,
provided the taxpayer indicates the desired amortization period at the
time of the filing of income tax returns for the first taxable year.
For the purpose of this provision, organizational and pre-operating
expenses shall include expenses for pre-investment studies, start-up
costs, costs of initial recruitment and training and similar expenses;chanroblesvirtualawlibrary
(b) Accelerated Depreciation. — At the option of the
taxpayer and in accordance with the procedure established by the Bureau
of Internal Revenue, fixed assets may be (1) depreciated to the extent
of not more than twice as fast as normal rate of depreciation or
depreciated at normal rate of depreciation if expected life is ten (10)
years or less; or (2) depreciated over any number of years between five
(5) years and expected life if the latter is more than ten (10) years;
and the depreciation thereon allowed as a deduction from taxable
income: Provided, That the taxpayer notifies the Bureau of Internal
Revenue at the beginning of the depreciation period which depreciation
rate allowed by this article will be used by it;chanroblesvirtualawlibrary
(c) Net Operating Loss Carry-Over. — At net operating
loss of the registered operations incurred in any of the first ten (10)
years of operations may be carried over as a deduction from taxable
income for the six (6) years immediately following the year of such
loss. The entire amount of the loss shall be carried over to the first
of the six (6) taxable years following the loss, and any portion of
such loss which exceeds the taxable income of such first year shall be
deducted in like manner from the taxable income of the next remaining
five (5) years.
(d) Tax Exemption on Imported Capital Equipment. —
Within seven (7) years from the date of registration of the non-pioneer
registered enterprise, importations of machinery and equipment, and
accompanying spare parts shall be exempt to the extent of fifty per
cent (50%) of the tariff duties and compensating tax payable thereon,
but shall comply with the following conditions:cralaw:red
(1) They are not manufactured domestically in
reasonable quantity and quality at reasonable prices;chanroblesvirtualawlibrary
(2) 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 non-registered operations to
maximize usage thereof or the proportionate taxes and duties paid on
the specific equipment and machinery being permanently used for
non-registered operations;chanroblesvirtualawlibrary
(3) Are covered by shipping documents in the name of
the registered enterprise to whom the shipment will be delivered
directly by customs authorities; and
(4) The approval of the Board was obtained by the
registered enterprise for the importation of such machinery, equipment
and spare parts.
In granting approval of importations under this paragraph, the Board
shall require international bidding to be conducted by the end-user in
Manila under its supervision; however, the Board may, in its
discretion, dispense with this requirement if:cralaw:red
(1) there is, to the knowledge of the Board, only one
(1) manufacturer of the machinery, equipment and spare parts to be
imported, or
(2) the importation is made for the expansion of the
registered enterprise and such imports shall be acquired from the same
manufacturer who supplied the machinery, equipment, and spare parts
being used by the registered enterprise, or
(3) the total cost of importation is less than one
million dollars ($1,000,000.00), or
(4) the Board has other means of determining the
reasonableness of the procurement costs. chanroblesvirtualawlibrary
If the registered enterprise sells, transfers or disposes of these
machinery, equipment and spare parts without the prior approval of the
Board within five (5) years from date of acquisition, the registered
enterprise shall pay twice the amount of the tax exemption given it.
However, 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:cralaw:red
(1) to another registered enterprise;chanroblesvirtualawlibrary
(2) for reasons of proven technical obsolescence; or
(3) for purposes of replacement to improve and/or
expand the operations of the enterprise.
In such cases, the transferee shall not be subject to the taxes and
duties waived on the said equipment, if any, if it will undertake an
economic project substantially carrying out the objectives for which
such equipment has been imported, as determined by the Board.
In cases of replacement of existing facilities, the Board may allow
mere deferment of taxes and duties, in lieu of reduction of taxes,
taking into account the financial condition of the enterprise.
(e) Tax Credit on Domestic Capital Equipment. — A tax
credit equivalent to one hundred per cent (100%) of the value of the
compensating tax and customs duties that would have been paid on the
machinery, equipment and spare parts had these items been imported
shall be given to the registered enterprise which purchases machinery,
equipment and spare parts from a domestic manufacturer, and another tax
credit equivalent to fifty per cent (50%) thereof shall be given to the
manufacturer: Provided, (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 non-registered operations to maximize usage thereof; (2)
That the approval of the Board was obtained by the local manufacturer
concerned; and (3) That the sale is made within seven (7) years from
the date of registration of the registered enterprise. 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.
(f) Tax Credit for Withholding Tax on Interest. — A
tax credit for taxes withheld on interest payments on foreign loans
shall be given a registered enterprise when (1) no such credit is
available to lender-remittee in his country; and (2) the registered
enterprise has assumed the liability for payment of the tax due from
the lender-remittee.
(g) Incentives for Necessary and Major
Infrastructure and Public Facilities. — 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 an area which the Board finds deficient in
infrastructure, public utilities, and other facilities, such as
irrigation, drainage and other similar waterworks infrastructure, may
apply in payment of taxes due from it to the government an amount
equivalent to one hundred per cent (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 should the registered enterprise undertake necessary and
major maintenance work on such infrastructure works with the prior
approval of the Board, a similar incentive shall be given to it in an
amount equivalent to the cost of such necessary maintenance; chanroblesvirtualawlibrary
(h) Employment of Foreign Nationals. — Subject to the
provisions of Section twenty-nine of Commonwealth Act Numbered Six
Hundred Thirteen, as amended, an enterprise may employ foreign
nationals in supervisory, technical or advisory positions for a period
not exceeding five years from its registration, extendible for limited
periods at the discretion of the Board.
Foreign nationals under employment contract within the purview of this
Code, their spouses and unmarried children under twenty-one years of
age, who are not excluded by Section twenty-nine of Commonwealth Act
Numbered Six Hundred Thirteen, 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 of
Investments;chanroblesvirtualawlibrary
(i) Deduction from Expansion Reinvestment. — When a
registered enterprise reinvests its undistributed profit or surplus,
whether from registered operations or not, by actual transfer thereof
to its capital for procurement of machinery, equipment and spare parts
previously approved by the Board under paragraphs (d) and (e) of
Article 45 or for the expansion of machinery and equipment used in
production or for the construction of the buildings, improvements or
other facilities for the installation of the said machinery and
equipment, the amount so reinvested, to the extent of 25%, 37 ½,
50%, the appropriate percentage to be determined by the Board for each
industry taking into account the relative risk, technology transfer and
fall-out, export potential, incremental labor, use of locally
manufactured machinery and equipment and domestic raw materials, shall
be allowed as a deduction from its taxable income in the year in which
such reinvestment was made: Provided, (1) That prior approval of the
Board of such reinvestment was obtained by the registered enterprise
planning such reinvestment, and (2) That the registered enterprise does
not reduce its capital stock represented by the reinvestment within
seven (7) years from the date such reinvestment was made. In the event
the registered enterprise does not order the machinery and equipment
within two (2) years from the date the reinvestment was made or reduces
its capital stock represented by the reinvestment within a period of
seven (7) years from the date of reinvestment, a recomputation of the
income tax liability therefore shall be made for the period when the
deduction was made, and the proper taxes shall be assessed and paid
with interest. chanroblesvirtualawlibrary
(j) Anti-Dumping Protection. — Upon recommendation of
the Board, made after notice and hearing, the President shall issue a
directive banning for a limited period the importation of goods or
commodities which, as provided in Section three hundred one (a) of the
Tariff and Customs Code of the Philippines, unfairly or unnecessarily
compete with those produced by registered enterprises: Provided, (1)
That the Board certifies to the satisfactory quality of the goods or
commodities produced or manufactured by the registered enterprises; and
(2) That the enterprises agree not to increase the price of these
goods, or commodities during this period, unless for good cause, the
Board allows such an increase;chanroblesvirtualawlibrary
(k) Protection from Government Competition. — No
agency or instrumentality of the government shall import or allow the
importation tax and duty-free of products or items that are being
produced or manufactured by registered enterprises, except when the
President determines that the national interest so requires or when
international commitments require international competitive bidding;chanroblesvirtualawlibrary
(l) Deduction of Labor Training Expenses. — An
additional deduction from taxable income of one-half of the value of
labor training expenses incurred for upgrading the productivity and
efficiency of unskilled labor and of apprentices shall be granted to a
registered enterprise: Provided, That such training program is duly
approved by the appropriate government agency or in the absence thereof
by the Board: Provided, further, That such deduction shall not exceed
ten per cent (10%) of direct labor wage: and, Provided, finally, That
the enterprise who wishes to avail of this incentives shall pay his
apprentices the minimum wage; chanroblesvirtualawlibrary
(m) Protection of Patents and Other Proprietary
Rights. — The right to be protected from infringement of patents,
trademarks, copyright, trade names, and other proprietary rights, where
such patents, trademarks, copyright, trade names, and other proprietary
rights have been registered with the appropriate agencies of the
Government of the Philippines.
CHAPTER II
Additional Incentives to Pioneer Enterprises
ARTICLE 46. In addition to the incentives granted to
registered enterprises, pioneer enterprises shall be entitled to the
following incentives:cralaw:red
(a) Tax Exemption. — Exemption from all taxes under
the National Internal Revenue Code, except income tax, from the
date the area of investment is included in the Investment Priorities
Plan, to the following extent:cralaw:red
(1) One hundred per cent (100%) for the first five
years;chanroblesvirtualawlibrary
(2) Seventy-five per cent (75%) for the sixth through
the eighth years;chanroblesvirtualawlibrary
(3) Fifty per cent (50%) for the ninth and tenth
years;chanroblesvirtualawlibrary
(4) Twenty per cent (20%) for the eleventh and
twelfth years; and
(5) Ten per cent (10%) for the thirteenth through the
fifteenth year.
Provided, however, That the above schedule shall not affect the
duration and the percentage of tax exemption enjoyed by
registered enterprises at the time of the effectivity of this
Code; chanroblesvirtualawlibrary
(b) Tax Exemption on Imported Capital Equipment. —
Within seven (7) years from the date of registration of the pioneer
enterprise, importation of machinery, equipment, and spare parts shall
be fully exempt from tariff duties and compensating tax thereon under
the same conditions provided for in Article 45 (d) of this Code;chanroblesvirtualawlibrary
(c) Deduction for Expansion Reinvestment. — When a
registered pioneer enterprise reinvests its undistributed profit or
surplus, whether from registered operations or not, by actual
transfer thereof to the capital stock of the corporation for
procurement of machinery, equipment and spare parts previously approved
by the Board under subsections "d" and "e" of Article 45 or for the
expansion of machinery and equipment used in production or for the
construction of the buildings, improvements or other facilities for the
installation of the said machinery and equipment, the amount so
reinvested, to the extent of 50%, 75%, 100%, the appropriate percentage
to be determined by the Board for each industry taking into account the
relative risk, technology transfer and fall-out, export potential,
incremental labor, use of locally manufactured machinery and equipment
and domestic raw materials, shall be allowed as a deduction from its
taxable income in the year in which such reinvestment was made:
Provided, (1) That prior approval of the Board of such reinvestment was
obtained by the registered enterprise planning such reinvestment, and
(2) That the registered enterprise does not reduce its capital stock
represented by the reinvestment within seven (7) years from the date
such reinvestment was made. In the event the registered enterprise does
not order the machinery and equipment within two (2) years from the
date the reinvestment was made or reduces its capital stock represented
by the reinvestment within a period of seven (7) years from the date
of reinvestment, a recomputation of the income tax liability
therefore shall be made for the period when the deduction was made, and
the proper taxes shall be assessed and paid with interest.
(d) Post-Operative Tariff Protection. — Upon
recommendation of the Board, the President, with or without the
recommendation of the Tariff Commission or the National Economic and
Development Authority, shall issue a certification that a pioneer
industry shall be entitled to post-operative tariff protection to an
extent not exceeding fifty per cent (50%) of the dutiable value of
imported items similar to those being manufactured or produced by a
pioneer enterprise, unless a higher rate or amount is provided
for in the Tariff Code or pertinent laws. Said tariff shall take effect
automatically upon certification by the Board that the pioneer
enterprise is operating on a commercial scale: Provided, That said
tariff, once operative, may be modified in accordance with Section four
hundred one of the Tariff and Customs Code.
(e) Employment of Foreign Nationals. — Subject to the
provisions of Section twenty-nine of Commonwealth Act Numbered Six
Hundred Thirteen, as amended, a pioneer enterprise may employ foreign
nationals in any category for a period of five (5) years from
operations, extendible for such limited periods at the discretion of
the Board. When the majority of the capital stock of a
pioneer enterprise is owned by foreign investors, the position of
president, treasurer and general manager or their equivalents, may be
retained by foreign nationals. chanroblesvirtualawlibrary
CHAPTER III
Additional Incentives to Agricultural Producers
ARTICLE 47. Incentives to Agricultural Producers. —
All registered enterprises, whether pioneer or non-pioneer, engaged in
agricultural production and related services and registered for such
activities shall be granted the following incentives in addition to
those provided for registered enterprises:cralaw:red
(a) Tax Exemption on Breeding Stocks and Genetic
Materials. — The importation of breeding stocks and genetic materials
within seven (7) years from the date of registration of the enterprise
shall be exempt from all taxes and duties: Provided, That such breeding
stocks and genetic materials are (1) not locally available
strains/breeding stocks at reasonable prices; and (2) shall be used
exclusively by the registered enterprise in the improvement of
the strains/breeding stocks of its livestock, poultry, fish and/or
plants and must have been acquired with approval of the Board:
Provided, further, That breeding stocks and genetic materials shall not
be disposed of, transferred or sold for whatever reason within the
periods specified in the rules and regulations except for enterprise as
determined and approved by the Board. Sale, transfer and disposition
made within the specified period without prior approval shall render
the registered enterprise liable to pay twice the amount of tax that
should have been paid;chanroblesvirtualawlibrary
(b) Deduction of Research and Development Programs. —
And additional deduction from taxable income of not exceeding
twenty-five per cent (25%) of the research and development expenses and
twenty-five per cent (25%) of the management training expenses of
Philippine nationals within a period of seven (7) years from date of
registration shall be granted: Provided, That such deduction on both
programs shall not exceed ten per cent (10%) of taxable income; chanroblesvirtualawlibrary
(c) Deduction of Freight and Transportation Expenses.
— An additional deduction from taxable income not exceeding thirty per
cent (30%) of freight and transportation expenses incurred within a
period of five (5) years from date of registration or commercial
operation shall likewise be granted: Provided, That the enterprise is
established in a geographical area that the Board designated as a
preferred location for agricultural development and that the Board
finds deficient in transport facilities: and Provided, further, That
such freight and transport expenses are incurred in the course of
transporting registered products from the enterprises' project area to
the nearest economic marketing center as determined by the Board.
(d) Compliance with Mandatory Rice and Corn
Production. — Companies required to produce rice and corn for their
employees, subject to the rules and regulations to be promulgated by
the Ministry of Agriculture in consultation with the
Nationals Grains Authority and appropriate government agencies,
may register in any area of investment for agricultural production and
related activities and such registration shall be deemed to be in
compliance with said requirement.
CHAPTER IV
Incentives to Export Producers
ARTICLE 48. Incentives to Registered Export
Producers. — Registered export producers, whether pioneer or
non-pioneer, shall be entitled to additional incentives enumerated
hereunder:cralaw:red
(a) Tax Credit. — Every registered export producer
shall enjoy a tax credit equivalent to the sales, compensating and
specific taxes and duties on the supplies, raw materials and
semi-manufactured products used in the manufacture, processing or
production of its export products and constituting as substantial
portion of the cost of production or forming part of the export
product, whether exported directly by the registered export producer or
sold to another export producer, which uses such sold products as a
direct input in export products manufactured or processed by it and
subsequently exported, or to an export trader: Provided, That the tax
credit shall accrue to the registered export producer only after the
other export producer or export trader has actually or constructively
exported said products. chanroblesvirtualawlibrary
(b) Reduced Income Tax. — Every registered export
producer shall be entitled for the first five (5) years from its
registration or commercial operation, to deduct from its taxable
income from domestic and export sales and from all registered
operations, in addition to the normal deduction allowed by the National
Internal Revenue Code, and amount equivalent to the direct labor
cost of the product and the local raw materials of non-traditional
export products utilized in the manufacture of its export products:
Provided, however, That an additional amount equivalent to the direct
labor cost shall be deductible by an export producer located in an area
that the Board designated as necessary for the proper dispersal of
industry or in an area which the Board finds deficient in
infrastructure, public utilities and other facilities: Provided,
further, That such deduction shall in no case exceed twenty-five
per centum (25%) of its total export revenue;chanroblesvirtualawlibrary
(c) Exemption from Sales Tax. — Every registered
export producer shall be exempted from the percentage tax on sales
under the National Internal Revenue Code, as amended, for
articles sold to another export producer or export trader,
provided the products are exported within one (1) year from date of
purchase and, under such guidelines the Board may formulate in
consultation with the Bureau of Internal Revenue;chanroblesvirtualawlibrary
(d) Exemption from Export Tax, Impost and Fees. — The
provisions of law to the contrary notwithstanding, exports by a
registered export producer of its non-traditional registered export
products shall be exempted from any export tax, impost or fee;chanroblesvirtualawlibrary
(e) New Brand Name. — Whenever a registered export
producer shall use a new brand name for an export product that
distinguishes it from products manufactured or processed outside the
Philippines, the Board shall grant the registered export producer
directly exporting its product an additional deduction from taxable
income equivalent to one per cent (1%) of the increment of its export
sales during the year in which the incentive is claimed to the export
sales of the preceding year;chanroblesvirtualawlibrary
(f) Tax-Free Importation of Capital Equipment. —
Within seven (7) years from registration of the export producer,
importation of machinery and equipment shall be fully exempt from
tariff duties and compensating tax thereon under the same conditions
provided for in Article 45 (d) of this Code.
If the registered export producer does not bring into the country, the
proceeds of export sales equivalent to at least the costs of the
imported machinery, equipment and spare parts within five (5) years
after delivery of the same to it, the registered export producer shall
pay twice the amount of exemption given it, together with the penalty
and interest thereon, computed from the date of acquisition, fixed by
the Tariff and Customs Code and the National Internal Revenue Code for
delinquency in the payment of said duties and taxes. chanroblesvirtualawlibrary
Title V — Incentives to Export Traders and Service Exporters
CHAPTER I
Incentives to Export Traders
ARTICLE 49. Incentives to Registered Export Traders.
— A registered export trader shall be entitled to:cralaw:red
(a) Exemption from any export tax, fee or impost; for
registered export products bought by it from registered export producer
qualified to avail of such exemption from export tax, fee or
impost;chanroblesvirtualawlibrary
(b) Exemption from specific and sales tax on products
exported by it under such guidelines as the Board may formulate in
consultation with the Bureau of Internal Revenue;chanroblesvirtualawlibrary
(c) A tax credit equivalent to the amount of specific
and sales taxes on the registered export products bought by it from
export producers and subsequently exported;chanroblesvirtualawlibrary
(d) For the first five (5) years from registration or
commercial operation, to deduct from its taxable income from the
domestic and export sales as well as income from other registered
operations, in addition to the normal deduction allowed by the National
Internal Revenue Code, an amount equivalent to twenty per cent (20%) of
its total export sales: Provided, That the Board upon application of
the registered export trader may grant to registered export producer
exporting products through the registered export trader not more than
10% of this deduction irrespective of whether the registered export
producer has been registered or in commercial operation for five (5)
years: Provided, further, That the deduction of the registered export
producer shall be applicable to its registered operations only; chanroblesvirtualawlibrary
(e) For a period of five (5) years after registration
or commercial operation, an additional deduction of one per cent (1%)
of its total export sales shall be allowed a registered export trader
which extends financial assistance to export producers in an amount
equivalent to not less than twenty per cent (20%) of the total export
sales of such trader during the year in which the incentive is claimed;chanroblesvirtualawlibrary
(f) For a period of five (5) years from registration
or commercial operation, to deduct from taxable income from domestic
and export sales and from other registered operations, expenses for
establishing and maintaining offices abroad; and
(g) An additional deduction from taxable income
equivalent to one per cent (1%) of the increment of its export sales
during the year in which the incentive is claimed to the export sales
of the preceding year, whenever a registered export trader shall use a
new brand name for an export product that distinguishes it from
products manufactured or processed outside the Philippines.
CHAPTER II
Incentive to Service Exporters
ARTICLE 50. Incentives to Registered Service
Exporters. — Every registered service exporter shall, for the first
five (5) years from registration or commercial operation, be entitled
to deduct from its taxable income an amount equivalent to fifty per
cent (50%) of its total export fees during the year in which the
incentive is claimed: Provided, That to be entitled to this deduction,
the registered service exporter must have actually or constructively
remitted or repatriated to the Philippines in acceptable foreign
currencies its total export fees earned during the year in which the
incentive is claimed, less reasonable costs and expenses incurred or
payable in foreign currencies, under such rules and regulations as the
Monetary Board may prescribe. chanroblesvirtualawlibrary
In addition, a registered service exporter which produces television or
motion pictures, or musical recordings, in the Philippines, and exports
the picture or recording directly or through a registered export trader
shall also be entitled:cralaw:red
(a) To a tax credit equivalent to the amount of
specific, compensating and sales taxes and duties paid by it on the raw
materials and supplies used in producing the picture or recording that
is exported; and
(b) For a period of seven (7) years from
registration, to a full exemption from payment of customs duties and
compensating taxes on importations of equipment, machinery or spare
parts shipped with such machinery and equipment subject to the
conditions set forth in Article 45 (d) for tax free importation of
equipment: Provided, That if the registered service exporter does not
bring into the Philippines export fees equivalent to at least the cost
of the imported machinery, equipment and spare parts within five (5)
years after delivery of the same to it, it shall pay twice the amount
of the exemption given it, together with the penalty and interest
thereon, computed from the date of delivery, fixed by the Tariff and
Customs Code and the National Internal Revenue Code for delinquency in
the payment of duties and taxes.
Title VI — Special Assistance to Registered Enterprises
CHAPTER I
Financial Assistance
ARTICLE 51. Preference in Grant of Government Loans.
— Government financial institutions such as the Development Bank of the
Philippines, Philippine National Bank, Government Service Insurance
System, Social Security System, Land Bank, and such other government
institutions as are now engaged or may hereafter engage in financing or
investment operations shall, in accordance with and to the extent
allowed by the enabling provisions of their respective charters or
applicable laws, accord high priority to applications for financial
assistance submitted by registered enterprises, whether such financial
assistance be in the form of equity participation in preferred, common
or preferred convertible shares of stock, or in loans and guarantees,
and shall facilitate the processing thereof and the release of the
funds therefor. However, no financial assistance shall be extended
under this Article to any investor or enterprise that is not a
Philippine national.
The above-mentioned financial institutions, to the extent allowed by
their respective charters or applicable laws, shall contribute to the
capital of a registered enterprise whenever the said contribution would
enable the formation of a registered enterprise with at least sixty per
cent (60%) control by Philippine nationals: Provided, That the shares
representing the contribution of the said financial institutions shall
be offered for public sale to Philippine nationals through all the
members of a registered Philippine stock exchange within a reasonable
period after such acquisition. chanroblesvirtualawlibrary
To facilitate the implementation of this Article, all the said
financial institutions shall coordinate their financial assistance
programs with each other, exchange relevant information about
applicants and applications, and submit a monthly report to the Board
showing the amounts of funds available for financial assistance to
registered enterprises. The Board shall recommend to the Board of
Directors of each such financial institutions what order of priority
shall be given the applications of registered enterprises, or of
applicants that propose to seek registration as such.
ARTICLE 52. Private Financial Assistance. — Any
provision of existing laws to the contrary notwithstanding, the
Insurance Commissioner is hereby authorized to allow insurance
companies, under such rules and regulations as he may issue, to invest
in new issues of stock of registered enterprises, notwithstanding that
said enterprises may not have paid regular dividends, to the extent set
out in the Insurance Act: Provided, That said investments are
diversified.
Notwithstanding the provisions of Section one of Presidential Decree
No. 717, registered enterprises engaged in agricultural ventures and
related services, may be included as beneficiaries of the ten per cent
(10%) of a banking institution's loanable funds set aside for agrarian
reform credit: Provided, That such registered enterprises secure the
prior endorsement of the Ministry of Agrarian Reform stating that land
reform beneficiaries shall benefit from the agricultural enterprises'
projects. chanroblesvirtualawlibrary
ARTICLE 53. Loans for Investment. — The Government
Service Insurance System and Social Security System shall extend to
their respective members five-year loans at a rate of interest not to
exceed six per cent (6%) per annum for the purchase of shares of stock
in any registered enterprise: Provided, That (1) the shares so
purchased shall be deposited in escrow with the lending institution for
the full five-year term of the loan; partial release of the shares
shall, however, be allowed to the extent of the payment of amortization
made therefor; (2) such loans shall be amortized in sixty (60) equal
monthly salary of the employee concerned and remitted to the lending
institutions by the employer; but any and all dividends earned by the
shares of stock while they are held in escrow shall be delivered to the
employee; and (3) the maximum loan available per centum of the
employee's annual gross income: Provided, further, That the total
investment of the government financial institution concerned,
consisting of its direct investment in the registered enterprise and
the loans it has extended to its respective members which have been
invested by the members in a registered enterprise, shall not be more
than forty-nine per cent (49%) of the total capitalization of the
registered enterprise in which the investments have been made.
CHAPTER II
Exporters Assistance
ARTICLE 54. Special Assistance to Exporters. — There
is hereby created an Institute of Export Development to provide
assistance to exporters in the following areas of activities:cralaw:red
(1) Diversification of export products and export
markets;chanroblesvirtualawlibrary
(2) Improving existing methods of production so as to
reduce cost of export products;chanroblesvirtualawlibrary
(3) Promoting effective marketing of export products
abroad;chanroblesvirtualawlibrary
(4) Developing of export packaging and design;chanroblesvirtualawlibrary
(5) Conducting seminars and training courses on
functional aspects of exports; and
(6) Promoting investments in export-oriented
enterprises. chanroblesvirtualawlibrary
ARTICLE 55. Simplified Export Procedure. — All
registered enterprises may avail of the simplified export procedure
implemented for BOI registered exporting enterprise under Executive
Order No. 286, whereby they are exempt from the requirements of
securing BIR tax clearance and commodity clearance and filing of Report
of Foreign Sales prior to each exportation. The commodity clearances
for exportable products shall be done semestrally or annually by the
proper agency. In lieu of the existing export declaration, the
registered enterprise shall apply for an export permit with the
authorized agent bank of the Central Bank.
CHAPTER III
Assistance to Individual Applicants
ARTICLE 56. Special Assistance to Individual
Applicants. — To facilitate the implementation of the provisions of
this Code, and to expedite action on any application, particularly to
individual applicants, or such related matters in pursuit of the
registered activity, the other government agencies concerned are hereby
directed to extend and provide the necessary assistance, and for this
purpose, the Board shall train and deputize personnel assigned therefor.
Title VII — General Provisions
ARTICLE 57. Power of the President to Rationalize
Incentives. — The President may, upon recommendation of the Board,
rationalize the incentives scheme herein provided; grant new or
additional incentives or modify existing ones; extend the period of
availment of incentives or increase rates of tax exemption of any
project in the interest of national development, whose viability or
profitability require such modification.
ARTICLE 58. 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 and
impose corresponding penalties. chanroblesvirtualawlibrary
ARTICLE 59. Marketing Affiliate. — Philippine
nationals who are stockholders in a registered enterprise in which
non-Philippine nationals hold stock may establish a marketing
corporation to handle and distribute exclusively the product of
the registered enterprise in its preferred area of investment:
Provided, (1) That the said marketing company is wholly owned by, with
entire beneficial ownership and control vested in, Philippine citizens;
(2) That the stock of said marketing company is available for
acquisition by other citizens of the Philippines who may desire to
invest therein; (3) That Philippine nationals hold at least twenty-one
per cent of the voting stock of the registered enterprise; and (4) That
the Board approves the creation for the marketing corporation for
reasons of economy and practicability.
ARTICLE 60. Applicability to Existing Enterprises. —
An enterprise which satisfies the definition of a Philippine national
engaged in a preferred area of investment at the time of its
declaration as such, shall be entitled to registration as to its
existing capacity, as well as to such an expansion or enlargement
thereof requiring new or additional machinery and equipment or breeding
stocks and genetic materials as shall be within the unfilled measured
capacity of the area; so also an investor in such an existing
enterprise, shall be entitled to benefits incentives to the extent of
his present as well as new or additional investment therein: Provided,
That the application is filed while the area is still in the Investment
Priorities Plan: Provided, however, That the incentives of this
Code, so far as may be applicable to such existing enterprises and
investors in such existing enterprises, shall be given prospective
effect only from the date of registration.
ARTICLE 61. Benefits of Multiple Area Enterprises. —
When a registered enterprise engages in activities or endeavors that
have not been declared preferred areas of investment, 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 preferred area of investment. chanroblesvirtualawlibrary
ARTICLE 62. Other Incentives Acts. — A registered
enterprise under this Code which is entitled to benefits and incentives
under other laws shall be entitled, to the extent of its registered
capacity, to such of the benefits and incentives granted under this
Code as are not granted by said other laws and to such benefits and
incentives granted under the latter as are not granted under the former.
ARTICLE 63. 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 64. Transitory Provisions. — Any enterprise
registered either under Republic Act Numbered Fifty-One Hundred
Eighty-Six, Republic Act Numbered Sixty-One hundred Thirty-Five,
Presidential Decree Numbered Eleven Hundred Fifty-Nine, shall continue
to be governed by the provisions of the law under which it is
registered.
BOOK TWO
FOREIGN INVESTMENTS WITHOUT INCENTIVES
Title I
CHAPTER I
Definitions and Scope of This Book
ARTICLE 65. 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 representative or
distributors who are domiciled in the Philippines or who in any
calendar year stay in the Philippines for a period or periods totalling
one hundred eighty 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. chanroblesvirtualawlibrary
ARTICLE 66. 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.
CHAPTER II
Investments
ARTICLE 67. Permitted Investments. — (1) Without need
of prior authority, anyone not a Philippine national as that term is
defined in Article 14 of this Code, and not otherwise
disqualified by law, may invest:cralaw:red
(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;chanroblesvirtualawlibrary
(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 thirty per cent (30%) of the
outstanding capital of that enterprise, unless existing law forbids any
non-Philippine ownership in the enterprise or limits ownership by
non-Philippine nationals to a percentage smaller than thirty per cent.
(2) Within thirty 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 68. Permissible Investments. — If an
investment by a non-Philippine nationals 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 thirty (30%) per cent, the enterprise must obtain prior
authority from the Board of Investments, which authority shall be
granted unless the proposed investment —chanroblesvirtualawlibrary
(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 an enterprise engaged in an area
adequately being exploited by Philippine nationals; or
(d) Would conflict or be inconsistent with the
Investments 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 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. chanroblesvirtualawlibrary
CHAPTER III
License to do Business
ARTICLE 69. 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 thirty (30%) per cent 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:cralaw:red
(1) That the operation or activity of such alien,
firm, association, partnership, corporation or other form of business
organization is not inconsistent with the Investments Priorities Plan;chanroblesvirtualawlibrary
(2) That such business or economic activity will
contribute to the sound and balanced development of the national
economy on a self-sustaining basis;chanroblesvirtualawlibrary
(3) That such business or economic activity by the
applicant would not conflict with the Constitution or laws of the
Philippines;chanroblesvirtualawlibrary
(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 70. 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. —chanroblesvirtualawlibrary
(1) To appoint a citizen of the Philippines, of legal
age, good moral character and reputation, and sound financial standing,
as resident agent, who shall be authorized to accept summons and other
legal process in behalf of the applicant;chanroblesvirtualawlibrary
(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:cralaw:red
(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;chanroblesvirtualawlibrary
(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 a 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;chanroblesvirtualawlibrary
(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 networth and results of operations, setting out
separately those pertaining to the branch office;chanroblesvirtualawlibrary
(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 inspection thereof
by the Securities and Exchange Commission, the Bureau of Internal
Revenue and the Board of Investments;chanroblesvirtualawlibrary
(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 of
revocation of the license; chanroblesvirtualawlibrary
(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 other 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 court 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 71. Cause for Cancellation of Certificate of
Authority. — A violation of any of the requirements set forth in
Article 70 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: 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 Articles 69 and 70 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 Court of
First Instance 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. chanroblesvirtualawlibrary
Title II — General Provisions
ARTICLE 72. Mergers and Consolidations. — The
provisions of this Book Two shall apply to any merger, consolidation,
syndicate or any other combination of firms, associations, partnerships
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 thirty (30%) per cent
of the outstanding capital of whatever organization results from the
merger, consolidation, syndicate or other combination.
ARTICLE 73. 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 74. 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 publish the notice of the action of the Board thereon at
the expense of the applicant once in one (1) 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. chanroblesvirtualawlibrary
ARTICLE 75. 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 76. 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 69 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.
FINAL PROVISIONS
ARTICLE 77. Confidentiality of Applications. — All
applications filed under Book One and Book Two of this Code shall be
considered as absolutely confidential and may not be subject to
subpoena duces tecum by the Courts, or inquired, looked into, or
examined by any government agency or instrumentality, or by the
National Assembly or its Committees.
ARTICLE 78. 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. chanroblesvirtualawlibrary
ARTICLE 79. Effectivity of Implementing Rules and
Regulations. — The rules and regulations issued by the Board pursuant
to this Code shall take effect thirty (30) days after their publication
in two (2) newspapers of general circulation in the Philippines.
ARTICLE 80. Penal Clause. — (1) A
violation of any provision 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 ording in any manner any such
violation, shall be punished by a fine not to exceed fifty thousand
(P50,000.00) pesos 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 the availment of incentives under 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 the 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. chanroblesvirtualawlibrary
ARTICLE 81. Separability Clause. — The provisions of
this Code are hereby declared to be separable, and in the event one or
more of such provisions are declared unconstitutional, the
validity of other provisions shall not be affected.
ARTICLE 82. Repealing Clause. — Without prejudice to
the right of any registered enterprise under P.D. 535 and to the rights
of any person or enterprise which, at the time of the effectivity
of this Code, has been registered with the Board of Investments under
R.A. 5186, R.A. 6135, P.D. 1159 and R.A. 5455, or any other
rights acquired prior to the effectivity of this Code, all the
said laws are hereby repealed and all other laws, executive orders,
administrative orders, rules and regulations, or parts thereof
inconsistent with the provisions of this Code are hereby likewise
repealed or modified accordingly; Provided, however, That the
provisions of Batas Pambansa Bilang 44 are not in any way affected,
amended, modified or repealed by any provision of this Code: Provided,
further, That when appropriate, any reference in other laws to
enterprise registered under Republic Act Numbered 5186, Republic Act
Numbered 6135 and Presidential Decree Numbered 1159 shall henceforth be
understood to refer to those registered under this Code.
ARTICLE 83. Effectivity. — This Code shall take
effect immediately.
|
Back
to Home
- Back
to Main
chanroblesvirtuallawlibrary
Since 19.07.98
|
