Incentives and Foreign Investment Law

MIDTERMS Coverage: 3. an expanding productivity as the key to raising the quality of life for all, especially the
1. Omnibus Investments Code underprivileged.
2. Foreign Investments Act The State shall promote industrialization and full employment based on sound agricultural
3. Cases development and agrarian reform, through industries that make full and efficient use of human and
i. Garcia cases (due process requirements) natural resources, and which are competitive in both domestic and foreign markets. However, the
ii. Appealing decisions of the BOI State shall protect Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
I. Relevant Constitutional Provision optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and
ARTICLE II similar collective organizations, shall be encouraged to broaden the base of their ownership.
Declaration of Principles and State Policies Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
and independence of the nation and free the people from poverty through policies that provide resources are owned by the State.
adequate social services, promote full employment, a rising standard of living, and an improved All natural resourced EXCEPT AGRICULTURAL LAND cannot be alienated.
quality of life for all.
The exploration, development, and utilization of natural resources shall be under the full control
Section 10. The State shall promote social justice in all phases of national development. and supervision of the State.
Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of The State may directly undertake such activities, or it may enter into co-production, joint venture,
workers and promote their welfare. or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty
Section 19. The State shall develop a self-reliant and independent national economy effectively per centum of whose capital is owned by such citizens. Period <= 25 yrs + 25 yrs extension
controlled by Filipinos. The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and
Section 20. The State recognizes the indispensable role of the private sector, encourages private exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
enterprise, and provides incentives to needed investments. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as
Section 21. The State shall promote comprehensive rural development and agrarian reform. well as cooperative fish farming, with priority to subsistence fishermen and fish- workers in rivers,
ARTICLE VI lakes, bays, and lagoons.
The Legislative Department The President may enter into agreements with foreign-owned corporations involving either
Section 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a 1. technical or
progressive system of taxation. 2. financial assistance
(4) No law granting any tax exemption shall be passed without the concurrence of a majority of all for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral
the Members of the Congress. oils according to the general terms and conditions provided by law, based on real contributions to
ARTICLE VII the economic growth and general welfare of the country. In such agreements, the State shall
Executive Department promote the development and use of local scientific and technical resources.
Section 20. The President may contract or guarantee foreign loans on behalf of the Republic of the The President shall notify the Congress of every contract entered into in accordance with this
Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as provision, within thirty days from its execution.
may be provided by law. The Monetary Board shall, within thirty days from the end of every quarter Section 3. Lands of the public domain:
of the calendar year, submit to the Congress a complete report of its decision on applications for
loans to be contracted or guaranteed by the Government or government-owned and controlled 1. agricultural (may be further classified, may be alienated)
corporations which would have the effect of increasing the foreign debt, and containing other 2. forest or timber
matters as may be provided by law. 3. mineral lands and
ARTICLE XII 4. national parks.
National Economy and Patrimony
Private corporations can only LEASE property
Section 1. The goals of the national economy are:
- Period <= 25 yrs + 25 yrs extension
1. a more equitable distribution of opportunities, income, and wealth;
- Limit: <= 1000 ha
2. a sustained increase in the amount of goods and services produced by the nation for the
Citizens – LEASE - <=500 ha
benefit of the people
OWN - <= 12ha

Page 1 of 16
 Incentives and Foreign Investment Law

Taking into account the requirements of conservation, ecology, and development, and subject to the Section 17. In times of national emergency, when the public interest so requires, the State may,
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public during the emergency and under reasonable terms prescribed by it, temporarily take over or direct
domain which may be acquired, developed, held, or leased and the conditions therefor. the operation of any privately owned public utility or business affected with public interest.
Section 5. The State, subject to the provisions of this Constitution and national development policies Section 18. The State may, in the interest of national welfare or defense, establish and operate vital
and programs, shall protect the rights of indigenous cultural communities to their ancestral lands to industries and, upon payment of just compensation, transfer to public ownership utilities and other
ensure their economic, social, and cultural well-being. private enterprises to be operated by the Government.
Section 6. The use of property bears a social function, and all economic agents shall contribute to Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No
the common good. Individuals and private groups, including corporations, cooperatives, and similar combinations in restraint of trade or unfair competition shall be allowed.
collective organizations, shall have the right to own establish, and operate economic enterprises, Section 20. The Congress shall establish an independent central monetary authority, the members of
subject to the duty of the State to promote distributive justice and to intervene when the common whose governing board must be natural-born Filipino citizens, of known probity, integrity, and
good so demands. patriotism, the majority of whom shall come from the private sector. They shall also be subject to
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed such other qualifications and disabilities as may be prescribed by law. The authority shall provide
except to individuals, corporations, or associations qualified to acquire or hold lands of the public policy direction in the areas of money, banking, and credit. It shall have supervision over the
domain. operations of banks and exercise such regulatory powers as may be provided by law over the
- Aliens cannot own land but can own condominiums through a condominium corporation (only up operations of finance companies and other institutions performing similar functions.
to 40% of such corp.). Until the Congress otherwise provides, the Central Bank of the Philippines, operating under existing
Section 9. The Congress may establish an independent economic and planning agency headed by the laws, shall function as the central monetary authority.
President, which shall, after consultations with the appropriate public agencies, various private Section 21. Foreign loans may only be incurred in accordance with law and the regulation of the
sectors, and local government units, recommend to Congress, and implement continuing integrated monetary authority. Information on foreign loans obtained or guaranteed by the Government shall
and coordinated programs and policies for national development. be made available to the public.
Until the Congress provides otherwise, the National Economic and Development Authority shall Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered
function as the independent planning agency of the government. inimical to the national interest and subject to criminal and civil sanctions, as may be provided by
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when law.
the national interest dictates, reserve to citizens of the Philippines or to corporations or ARTICLE XIV
associations at least sixty per centum of whose capital is owned by such citizens, or such higher Education
percentage as Congress may prescribe, certain areas of investments. The Congress shall enact Section 4 (2) Educational institutions, other than those established by religious groups and mission
measures that will encourage the formation and operation of enterprises whose capital is wholly boards, shall be owned solely by citizens of the Philippines or corporations or associations at least
owned by Filipinos. sixty per centum of the capital of which is owned by such citizens. The Congress may, however,
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the require increased Filipino equity participation in all educational institutions.
State shall give preference to qualified Filipinos. Science and Technology
The State shall regulate and exercise authority over foreign investments within its national Section 10. Science and technology are essential for national development and progress. The State
jurisdiction and in accordance with its national goals and priorities. shall give priority to research and development, invention, innovation, and their utilization; and to
Section 11. Public Utility = Citizens or Corporations established under Philippine Law. Period= <= 50 science and technology education, training, and services. It shall support indigenous, appropriate,
years. and self- reliant scientific and technological capabilities, and their application to the country's
Neither shall any such franchise or right be granted except under the condition that it shall be productive systems and national life.
subject to amendment, alteration, or repeal by the Congress when the common good so requires. Section 11. The Congress may provide for incentives, including tax deductions, to encourage private
The State shall encourage equity participation in public utilities by the general public. The participation in programs of basic and applied scientific research. Scholarships, grants-in-aid, or
participation of foreign investors in the governing body of any public utility enterprise shall be other forms of incentives shall be provided to deserving science students, researchers, scientists,
limited to their proportionate share in its capital, and all the executive and managing officers of inventors, technologists, and specially gifted citizens.
such corporation or association must be citizens of the Philippines. Section 12. The State shall regulate the transfer and promote the adaptation of technology from all
Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and sources for the national benefit. It shall encourage the widest participation of private groups, local
locally produced goods, and adopt measures that help make them competitive. governments, and community-based organizations in the generation and utilization of science and
Section 16. The Congress shall not, except by general law, provide for the formation, organization, or technology.
regulation of private corporations. Government-owned or controlled corporations may be created or Section 13. The State shall protect and secure the exclusive rights of scientists, inventors, artists, and
established by special charters in the interest of the common good and subject to the test of other gifted citizens to their intellectual property and creations, particularly when beneficial to the
economic viability. people, for such period as may be provided by law.

Page 2 of 16
 Incentives and Foreign Investment Law

General Provisions 2. The State shall ensure holistic development by safeguarding the well-being of the
Section 11. (1) The ownership and management of mass media shall be limited to citizens of the social, cultural and ecological life of the people. For this purpose, consultation with
Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such affected communities will be conducted whenever necessary.
citizens. 3. The State shall extend to projects which will significantly contribute to the attainment
The Congress shall regulate or prohibit monopolies in commercial mass media when the public of these objectives, fiscal incentives without which said projects may not be established
interest so requires. No combinations in restraint of trade or unfair competition therein shall be in the locales, number and/or pace required for optimum national economic
allowed. development. Fiscal incentive systems shall be devised to compensate for market
imperfections, to reward performance contributing to economic development, be cost-
(2) The advertising industry is impressed with public interest, and shall be regulated by law for the efficient and be simple to administer.
protection of consumers and the promotion of the general welfare.
4. The State considers the private sector as the prime mover for economic growth. In this
Only Filipino citizens or corporations or associations at least seventy per centum of the capital of regard, private initiative is to be encouraged, with deregulation and self-regulation of
which is owned by such citizens shall be allowed to engage in the advertising industry. business activities to be generally adopted where dictated by urgent social concerns.
The participation of foreign investors in the governing body of entities in such industry shall be 5. The State shall principally play a supportive role, rather than a competitive one,
limited to their proportionate share in the capital thereof, and all the executive and managing providing the framework, the climate and the incentives within which business activity is
officers of such entities must be citizens of the Philippines. to take place.
6. The State recognizes that there are appropriate roles for local and foreign capital to
Nationalized Industries play in the development of the Philippine economy and that it is the responsibility of
Public Utilities 100% Filipino Government to define these roles and provide the climate for their entry and growth.

Educational Institutions (except those 100% Filipino 7. The State recognizes that industrial peace is an essential element of economic growth
established by religious organizations) and that it is a principal responsibility of the State to ensure that such a condition
prevails.
Mass Media 100% Filipino
8. Fiscal incentives shall be extended to stimulate the establishment and assist initial
Advertising At least 70% Filipino operations of the enterprise, and shall terminate after a period of not more than 10 years
from registration or start-up of operation unless a specific period is otherwise stated.
II. Omnibus Investments Code The foregoing declaration of investment policies shall apply to all investment incentive schemes.
Policies:
1. Economic Nationalism CHAPTER II
2. Planned Economy BOARD OF INVESTMENTS
3. Disperse Industries ART. 3. The Board of Investments. - The Board of Investments shall implement the provisions of
Books One to Five of this Code.
4. Promote small and medium scale industries
ART. 4. Composition of the Board. - The Board of Investments shall be composed of seven (7)
5. Encourage competition/ discourage monopoly
governors:
ART. 2. Declaration of Investment Policies. - To accelerate the sound development of the national
1. The Secretary of Trade and Industry (Chairman)
economy in consonance with the principles and objectives of economic nationalism and in
2. three (3) Undersecretaries of Trade and Industry to be chosen by the President;
pursuance of a planned economically feasible and practical dispersal of industries and the promotion
(Undersecretary of the Department of Trade and Industry for Industry and Investments
of small and medium scale industries, under conditions which will encourage competition and
shall be concurrently the Vice-Chairman of the Board and its Managing Head)
discourage monopolies, the following are declared policies of the State:
3. three (3) representatives from other government agencies and the private sector (4-yr
1. The State shall encourage private Filipino and foreign investments in industry, term; shall serve until replaced
agriculture, forestry, mining, tourism and other sectors of the economy which shall:
No vacancy shall be filled except for the unexpired portion of any term, and that no one may be
provide significant employment opportunities relative to the amount of the capital being
designated to be a governor of the Board in an acting capacity but all appointments shall be ad
invested; increase productivity of the land, minerals, forestry, aquatic and other resources
interim or permanent.
of the country, and improve utilization of the products thereof improve technical skills of
the people employed in the enterprise; provide a foundation for the future development ART 5. Qualifications of Governors of the Board. –
of the economy; meet the tests of international competitiveness; accelerate development 1. at least thirty (30) years old
of less developed regions of the country; and result in increased volume and value of 2. of good moral character
exports for the economy. 3. and of recognized competence in the fields of economics, finance, banking, commerce,

Page 3 of 16
 Incentives and Foreign Investment Law

industry, agriculture, engineering, law, management or labor. (12) Formulate and implement rationalization programs for certain industries whose operation may
ART. 6. Appointment of Board Personnel. - The Board shall appoint its technical staff and other result in dislocation, overcrowding or inefficient use of resources, thus impeding economic growth.
personnel subject to Civil Service Law, rules and regulations. (13) In appropriate cases, and subject to the conditions which the Board deems necessary, suspend
ART 7. Powers and Duties of the Board. - The Board shall be responsible for the regulation and the nationality requirement provided for in this Code or any other nationalization statute in cases of
promotion of investments in the Philippines. It shall meet as often as may be necessary generally ASEAN projects or investments by ASEAN nationals in preferred projects, and with the approval of
once a week on such day as it may fix. Notice of regular and special meetings shall be given all the President, extend said suspension to other international complementation arrangements for
members of the Board. the manufacture of a particular product on a regional basis to take advantage of economies of scale;
Four (4) governors = QUORUM (14) Extend the period of availment of incentives by any registered enterprise; Provided, That the
total period of availment shall not exceed ten (10) years, subject to any of the following criteria:
Four (4) governors = MAJORITY VOTE
(a) The registered enterprise has suffered operational force majeure that has impaired its viability;
(1) Prepare annually the Investment Priorities Plan
(b) The registered enterprise has not fully enjoyed the incentives granted to it for reasons beyond its
(2) Promulgate such rules and regulations as may be necessary to implement the intent and control;
provisions of this Code relevant to the Board;
(c) The project of the registered enterprise has a gestation period which goes beyond the period of
(3) Process and approve applications for registration with the Board, imposing such terms and availment of needed incentives; and
conditions as it may deem necessary to promote the objectives of this Code
(d) The operation of the registered enterprise has been subjected to unforeseen changes in
(4) After due hearing, decide controversies concerning the implementation of the Code that may government policies, particularly, protectionism policies of importing countries, and such
arise between registered enterprises or investors therein and government agencies, within thirty other supervening factors which would affect the competitiveness of the registered firm;
(30) days after the controversy has been submitted for decision:
(15) Regulate the making of investments by foreigners or business organizations owned in whole or
Decision = 30 days from submission of controversy in part by foreigners;
Appeal to the President = 30 days from receipt of adverse decision (16) Prepare or contract for the preparation of industry and sectoral development programs and
(5) Recommend the entry of foreign nationals into the Philippines for employment to the CID gather and compile statistical, technical, marketing, financial and other data required for the
(6) Check by inspection or reports the participation of foreign nationals in registered enterprises effective implementation of this Code;
(7) Periodically check and verify the compliance by registered enterprises with the relevant (17) Within four (4) months after the close of the fiscal year, submit annual reports to the President
provisions of this Code, with the rules and regulations promulgated under this Code and with the which shall cover its activities in the administration of this Code, including recommendations on
terms and conditions of registration; investment policies;
(8) After due notice, cancel the registration or suspend the enjoyment of incentives benefits of any (18) Provide information as may be of interest to prospective foreign investors:
registered enterprise and/or require refund of incentives enjoyed by such enterprise including (19) Collate, analyze and compile pertinent information and studies concerning areas that have
interests and monetary penalties, for been or may be declared preferred areas of investments; and
(a) failure to maintain the qualifications required by this Code for registration with the (20) Enter into agreements with other agencies of government for the simplification and
Board or facilitation of systems and procedures involved in the promotion of investments, operation of
(b) for violation of any provisions of this Code, of the rules and regulations issued under registered enterprises and other activities necessary for the effective implementation of this Code;
this Code, of the terms and conditions of registration, or of laws for the protection of (21) Generally, exercise all the powers necessary or incidental to attain the purposes of this Code
labor or of the consuming public: and other laws vesting additional functions on the Board.
Provided, That the registration of an enterprise whose project timetable, as set by the Board is ART. 8. Powers and Duties of the Chairman. - The CHAIRMAN shall have the following powers and
delayed by one year, shall be considered automatically cancelled unless otherwise reinstated as a duties:
registered enterprise by the Board; (1) To preside over the meetings of the Board;
(9) Determine the organizational structure taking into account Article 6 of this Code; appoint, (2) To render annual reports to the President and such special reports as may be requested;
discipline and remove its personnel consistent with the provisions of the Civil Service Law and
Rules; (3) To act as liaison between investors seeking joint venture arrangements in particular areas of
investment;
(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 (4) Recommend to the Board such policies and measures he may deem necessary to carry out the
themselves to invest therein and show the capability of doing so. objectives of this Code; and
(11) When feasible and considered desirable by the Board, require registered enterprises to list (5) Generally, to exercise such other powers and perform such other duties as may be directed by
their shares of stock in any accredited stock exchange or directly offer a portion of their capital the Board of Governors from time to time.
stock to the public and/or their employees; ART. 9. Powers and Duties of the Vice-Chairman. - The VICE-CHAIRMAN shall have the following

Page 4 of 16
 Incentives and Foreign Investment Law

powers and duties: sixty per cent (60%) of the fund will accrue to the benefit of Philippine nationals : Provided, That
(1) To act as Managing Head of the Board; 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
(2) To preside over the meetings of the Board in the absence of the Chairman; be owned and held by the citizens of the Philippines and at least sixty percent (60%) of the members
(3) Prepare the Agenda for the meetings of the Board and submit for its consideration and approval of the Board of Directors of both corporations must be citizens of the Philippines in order that the
the policies and measures which the Chairman deems necessary and proper to carry out corporation shall be considered a Philippine national.
the provisions of this Code; ART. 16. PREFERRED AREAS OF INVESTMENTS shall mean the economic activities that the Board
(4) Assist registered enterprises and prospective investors to have their papers processed with shall have declared as such in accordance with Article 28 which shall be either non-pioneer or
dispatch by all government offices, agencies, instrumentalities and financial institutions; pioneer.
and ART. 17. PIONEER ENTERPRISE shall mean a registered enterprise
(5) Perform the other duties of the Chairman in the absence of the latter, and such other duties as (1) engaged in the manufacture, processing or production, of goods, products,
may be assigned to him by the Board of Governors. commodities or raw materials that have not been or are not being produced in the
Philippines on a commercial scale or
INVESTMENTS WITH INCENTIVES (2) which uses a design, formula, scheme, method, process or system of production or
TITLE I transformation of any element, substance or raw materials into another raw material or
finished goods which is new and untried in the Philippines or
PREFERRED AREAS OF INVESTMENTS
(3) engaged in the pursuit of agricultural, forestry and mining activities and/or services
CHAPTER I DEFINITION OF TERMS
including the industrial aspects of food processing whenever appropriate, pre-determined
ART. 10. Board shall mean the Board of Investments created under this Code. by the Board, in consultation with the appropriate Department, to be feasible and highly
ART. 11. REGISTERED ENTERPRISE shall mean any individual, partnership, cooperative, corporation essential to the attainment of the national goal in relation to a declared specific national
or other entity incorporated and/or organized and existing under Philippine laws; and registered with food and agricultural program for self sufficiency and other social benefits of the project
the Board in accordance with this Book; Provided, however, That the term registered enterprise shall or
not include commercial banks, savings and mortgage banks, rural banks, savings and loan (4) which produces non-conventional fuels or manufactures equipment which utilize non-
associations, building and loan associations, development banks, trust companies, investment banks, conventional sources of energy or uses or converts to coal or other non-conventional
finance companies, brokers and dealers in securities, consumers' cooperatives and credit unions, and fuels or sources of energy in its production, manufacturing or processing operations
other business organizations whose principal purpose or principal source of income is to receive
Provided, That the final product in any of the foregoing instances, involves or will involve substantial
deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest in common or
use and processing of domestic raw materials, whenever available; taking into account the risks and
preferred stocks, debentures, bonds or other marketable instruments generally recognized as
magnitude of investment; Provided, further, That the foregoing definitions shall not in any way limit
securities, or discharge other similar intermediary, trust or fiduciary functions.
the rights and incentives granted to less-developed-area enterprises provided under Title V, Book 1
ART. 12. TECHNOLOGICAL ASSISTANCE CONTRACTS shall mean contracts for: hereof.
(1) the transfer, by license or otherwise, of patents, processes, formulas or other ART. 18. NON-PIONEER ENTERPRISE shall include all registered producer enterprises other than
technological rights of foreign origin; and/or pioneer enterprises.
(2) foreign assistance concerning technical and factory management, design, planning, ART. 19. EXPANSION shall include modernization and rehabilitation and shall mean increase of
construction, operation and similar matters. existing volume or value of production or upgrading the quality of the registered product or
ART. 13. FOREIGN LOANS shall mean any credit facility or financial assistance other than equity utilization of inefficient or idle equipment under such guidelines as the Board may adopt.
investment denominated and payable in foreign currency or where the creditor has the option to ART. 20. MEASURED CAPACITY shall mean the estimated additional volume of production or service
demand payment in foreign exchange and registered with the Central Bank and the Board. which the Board determines to be desirable in each preferred area of investment in order to supply
ART. 14. FOREIGN INVESTMENTS shall mean equity investments owned by a non-Philippine national the needs of the economy at reasonable prices, taking into account the export potential of the
made in the form of foreign exchange or other assets actually transferred to the Philippines and product, including economies of scale which would render such product competitive in the world
registered with the Central Bank and the Board, which shall assess and appraise the value of such market. Measured capacity shall not be less than the amount by which the measurable domestic and
assets other than foreign exchange. country's potential export market demand exceeds the existing productive capacity in said preferred
areas. For export market industries, when warranted, the Board shall base measured capacity on the
ART. 15. PHILIPPINE NATIONAL shall mean a citizen of the Philippines or a domestic partnership or
availability of domestic raw materials after deducting the needs of the domestic market therefor.
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 ART. 21. Tax Credit shall mean any of the credits against taxes and/or duties equal to those actually
vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other paid or would have been paid to evidence which a tax credit certificate shall be issued by the
employee retirement or separation benefits, where the trustee is a Philippine national and at least Secretary of Finance or his representative, or the Board, if so delegated by the Secretary of Finance.

Page 5 of 16
 Incentives and Foreign Investment Law

The tax credit certificates including those issued by the Board pursuant to laws repealed by this Code includes and contains:
but without in any way diminishing the scope of negotiability under their laws of issue are (a) The specific activities and generic categories of economic activity wherein investments are to be
transferable under such conditions as may be determined by the Board after consultation with the encouraged and the corresponding products and commodities to be grown, processed or
Department of Finance. The tax credit certificate shall be used to pay taxes, duties, charges and fees manufactured pursuant thereto for the domestic or export market;
due to the National Government: Provided, That the tax credits issued under this Code shall not form
part of the gross income of the grantee/transferee for income tax purposes under Section 29 of the (b) Specific public utilities which can qualify for incentives under this Code and which shall be
National Internal Revenue Code and are therefore not taxable: Provided, further, That such tax supported by studies of existing and prospective regional demands for the services of
credits shall be valid only for a period of ten (10) years from date of issuance. such public utilities in the light of the level and structure of income, production, trade,
prices and relevant economic and technical factors of the regions as well as the existing
ART. 22. Export products shall mean manufactured or processed products the total F.O.B. Philippine facilities to produce such services;
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 (c) Specific activities where the potential for utilization of indigenous non-petroleum based fuels or
standards of quality set by the Bureau of Product Standards,or, in default of such standards, by the sources of energy can be best promoted; and
Board or by such public or private organization, chamber, group or body as the Board may designate. (d) Such other information, analyses, data, guidelines or criteria as the Board may deem appropriate.
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.
CHAPTER II
ART. 23. Export sales shall mean the Philippine port F.O. B. value, determined from invoices, bills of
INVESTMENT PRIORITIES PLAN
lading, inward letters of credit, landing certificates, and other commercial documents, of export
products exported directly by a registered export producer or the net selling price of export products ART. 27. Investment Priorities Plan. –
sold by a registered export producer to another export producer, or to an export trader that - BOI must submit to the President the IPP on or before March 31. President may extend
subsequently exports the same: Provided, That sales of export products to another producer or to an deadline.
export trader shall only be deemed export sales when actually exported by the latter, as evidenced
ART. 28. Criteria in Investment Priority Determination. - No economic activity shall be included in the
by landing certificates or similar commercial documents: Provided, further, That without actual
Investment Priorities Plan unless it is shown to be ECONOMICALLY, TECHNICALLY AND FINANCIALLY
exportation the following shall be considered constructively exported for purposes of this provision:
SOUND after thorough investigation and analysis by the Board.
(1) sales to bonded manufacturing warehouses of export-oriented manufacturers;
The determination of PREFERRED AREAS OF INVESTMENT to be listed in the Investment Priorities
(2) sales to export processing zones; Plan shall be based on long-run comparative advantage, taking into account the value of social
(3) sales to registered export traders operating bonded trading warehouses supplying raw materials objectives and employing economic criteria along with market, technical; and financial analyses.
used in the manufacture of export products under guidelines to be set by the Board in The Board shall take into account the following:
consultation with the Bureau of Internal Revenue and the Bureau of Customs;
(a) Primarily, the economic soundness of the specific activity as shown by its economic internal rate
(4) sales to foreign military bases, diplomatic missions and other agencies and/or instrumentalities of return;
granted tax immunities, of locally manufactured, assembled or repacked products
(b) The extent of contribution of an activity to a specific development goal;
whether paid for in foreign currency or not: Provided, further, That export sales of
registered export traders may include commission income: and Provided, finally, That (c) Other indicators of comparative advantage;
exportation of goods on consignment shall not be deemed export sales until the export (d) Measured capacity as defined in Article 20; and
products consigned are in fact sold by the consignee. (e) The market and technical aspects and considerations of the activity proposed to be included.
Sales of locally manufactured or assembled goods for household and personal use to Filipinos abroad In any of the declared preferred areas of investment, the Board may designate as pioneer areas the
and other non-residents of the Philippines as well as returning Overseas Filipinos under the Internal specific products and commodities that meet the requirements of Article 17 of this Code and review
Export Program of the government and paid for in convertible foreign currency inwardly remitted yearly whether such activity, as determined by the Board, shall continue as pioneer, otherwise, it
through the Philippine banking systems shall also be considered export sales. shall be considered as non-pioneer and accordingly listed as such in the Investment Priorities Plan or
ART. 24. Production cost shall mean the total of the cost of direct labor, raw materials, and removed from the Investment Priorities Plan.
manufacturing overhead, determined in accordance with generally accepted accounting principles, ART. 29. Approval of the Investment Priorities Plan. - The President shall proclaim the whole or part
which are incurred in manufacturing or processing the products of a registered enterprise. of such plan as in effect; or alternatively return the whole or part of the plan to the Board of
ART. 25. PROCESSING shall mean converting of raw materials into marketable form through physical, Investments for revision.
mechanical, chemical, electrical, biochemical, biological or other means or by a special treatment or Upon the effectivity of the plan or portions thereof, the President shall issue all necessary directives
a series of actions, such as slaughtering, milling, pasteurizing, drying or dessicating quick freezing, to all departments, bureaus, agencies or instrumentalities of the government to ensure the
that results in a change in the nature or state of the products. Merely packing or packaging shall not implementation of the plan by the agencies concerned in a synchronized and integrated manner. No
constitute processing. government body shall adopt any policy or take any course of action contrary to or inconsistent with
ART. 26. INVESTMENT PRIORITIES PLAN shall mean the overall plan prepared by the Board which the plan.

Page 6 of 16
 Incentives and Foreign Investment Law

ART. 30. Amendments. - Subject to publication requirements and the criteria for investment priority e. enterprise is engaged or proposing to engage in rendering technical,
determination, the Board of Investments may, at any time, add additional areas in the plan, alter any professional or other services or in exporting television and motion pictures
of the terms of the declaration of an investment area or the designation of measured capacities, or and musical recordings made or produced in the Philippines, either directly or
terminate the status of preference. In no case, however, shall any amendment of the plan impair through a registered trader.
whatever rights may have already been legally vested in qualified enterprises which shall continue to C. Has the capacity to CONTRIBUTE to the development of the preferred are and of the
enjoy such rights to the full extent allowed under this Code. The Board shall not accept applications national economy in general
in an area of investment prior to the approval of the same as a preferred area nor after approval of
its deletion as a preferred area of investment. D. Proposing to engage in NOT PREFERRED projects

ART. 31. Publication. - Upon approval of the plan, in whole or in part or upon approval of an - it must have installed or undertakes to install an accounting system adequate to identify
amendment thereof, the plan or the amendment, specifying and declaring the preferred areas of the investments, revenues, costs, and profits or losses of each preferred project
investment and their corresponding measured capacity shall be published in at least one (1) undertaken by the enterprise separately from the aggregate investment, revenues, costs
newspaper of general circulation and all such areas shall be open for application until publication of and profits or losses of the whole enterprise or to establish a separate corporation for
an amendment or deletion thereof, or until the Board approves registration of enterprises which fill each preferred project if the Board should so require to facilitate proper implementation
the measured capacity. of this Code.
Criteria for Evaluation of Applications.

CHAPTER III a. The extent of ownership and control by Philippine citizens of the enterprises;

REGISTRATION OF ENTERPRISES b. The economic rates of return;

Qualifications of a Registered Enterprise. c. The measured capacity: Provided, That estimates of measured capacities shall be
regularly reviewed and updated to reflect changes in market supply and demand
A. Citizenship conditions: Provided, further, That measured capacity shall not result in a monopoly
a. Filipino citizen in any preferred area of investment which would unduly restrict trade and fair
b. Partnership/ Corporation/ Cooperative competition nor shall it be used to deny the entry of any enterprise in any field of
endeavor or activity;
i. organized under Philippine laws
d. The amount of foreign exchange earned, used or saved in their operations;
ii. at least 60% of capital owned and controlled by Filipino citizens
e. The extent to which labor, materials and other resources obtained from indigenous
iii. at least 60% of the Board of Directors are citizens sources are utilized;
c. Foreign corporation f. The extent to which technological advances are applied and adopted to local
i. Proposes to engage in a PIONEER PROJECT conditions;
1. Measured capacity cannot be filled in by Philippine g. The amount of equity and degree to which the ownership of such equity is spread
nationals out and diversified; and
2. Area of business not within activities reserved by the h. Such other criteria as the Board may determine.
Constitution or other laws to Philippine citizens or - applications NOT ACTED UPON within 20 WORKING DAYS shall be deemed approved
corporations owned and controlled by Philippine citizens
- decision can be appealed to the OFFICE OF THE PRESIDENT within 30 DAYS from its
ii. OR exports 70% of its total production promulgation
iii. Obligates to attain PHILIPPINE NATIONAL STATUS within 30 years - if appealed, decision of the board shall be FINAL and executory after 90 DAYS after
from registration perfection of appeal unless the OP reverses it
EXCEPTION: 100% EXPORT Certificate of Registration.
B. Type of Business - issued a certificate of registration
a. proposing to engage in a preferred project listed or authorized in the current o under the seal of the Board of Investments
Investment Priorities Plan within a reasonable time to be fixed by the Board
o with the signature of its Chairman and/or such other officer or employee of
b. at least fifty percent (50%) of its total production is for export
the Board as it may empower and designate for the purpose.
c. it is an existing producer which will export part of production under such
o CONTENTS
conditions and/or limited incentives as the Board may determine;
 The name of the registered enterprise;
d. enterprise is engaged or proposing to engage in the sale abroad of export
products bought by it from one or more export producers  The preferred area of investment in which the registered enterprise

Page 7 of 16
 Incentives and Foreign Investment Law

is proposing to engage;
 The nature of the activity it is undertaking or proposing to A. Fiscal Incentives
undertake, whether pioneer or non-pioneer, and the registered 1. Income Tax Holiday
capacity of the enterprise; and
6 years- pioneer enterprises
 The other terms and conditions to be observed by the registered
enterprise by virtue of the registration. 4 years- non-pioneer enterprises
Can be EXTENDED for 1 year if:

TITLE II i. the project meets the prescribed ratio of capital equipment to number of
workers set by the Board;
BASIC RIGHTS AND GUARANTEES
ii. utilization of indigenous raw materials at rates set by the Board;
ART. 38. Protection of Investment. - All investors and registered enterprises are entitled to the basic
rights and guarantees provided in the Constitution. Among other rights recognized by the iii. the net foreign exchange savings or earnings amount to at least
Government of the Philippines are the following: US$500,000.00 annually during the first three(3) years of operation.

(a) REPARTRIATION OF INVESTMENTS. - right to repatriate the entire proceeds of the CANNOT EXCEED 8 years
liquidation of the investment in the currency in which the investment was originally made EXPANDING FIRMS- 3 years from commercial operation, proportionate to expansion
and at the exchange rate prevailing at the time of repatriation - not entitled to additional deduction due to labor expense
(b) REMITTANCE OF EARNINGS. – right to remit earnings from the investment in the 2. Additional Deduction for Labor Expense
currency in which the investment was originally made and at the exchange rate prevailing
For the FIRST 5 YEARS
at the time of remittance,
Deduction of 50% of wages corresponding to the increment in the number of direct labor
(c) FREEDOM FROM EXPROPRIATION. - There shall be no expropriation by the
for skilled and unskilled workers
government of the property represented by investments or of the property of the
enterprise EXCEPT for public use or in the interest of national welfare or defense and Additional deduction shall be DOUBLED if the activity is located in less developed areas as
upon payment of just compensation. In such cases, foreign investors or enterprises shall defined in Art. 40.
have the right to remit sums received as compensation for the expropriated property in 3. Exemption From Taxes And Duties On Imported Spare Parts
the currency in which the investment was originally made and at the exchange rate at the
100% EXEMPT from customs duties and NIR tax
time of remittance, subject to the provisions of Section 74 of Republic Act. No. 265 as
amended; Provided:
(d) REQUISITION OF INVESTMENT. - There shall be no requisition of the property a. 70% of products for export
represented by the investment or of the property of enterprises, EXCEPT in the event of b. not manufactured domestically
war or national emergency and only for the duration thereof. Just compensation shall be c. reasonably needed and exclusively used by the registered enterprise
determined and paid either at the time of requisition or immediately after cessation of EXCEPT
the state of war or national emergency.
 upon prior approval for part-time use in a non-registered activity
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  proportionate taxes are paid on the specific equipment and
prevailing at the time of remittance. machinery being permanently used for non-registered activities
(e) RIGHT TO REMIT d. Board approval was secured prior to importation of machinery
Board may require INTERNATIONAL CANVASSING but if value exceed $5 Million, the
provisions of PD 1764 on INTERNATIONAL COMPETITIVE BIDDING shall apply.
TITLE III
Should the enterprise sell the machinery within 5 YEARS from importation, both the
INCENTIVES TO REGISTERED ENTERPRISES vendor and the vendee shall be liable to pay TWICE the tax exemption granted to it.
When is an enterprise entitled to benefits and incentives? EXCEPT if sale within 5 years is made to:
GENERAL RULE: when the incentives are made in the PREFERRED AREAS OF INVESTMENT as defined  to another registered enterprise or registered domestic producer
by the Investment Priorities Plan enjoying similar incentives;
EXCEPTIONS:  for reasons of proven technical obsolescence; or
1. Filipino-owned enterprise where 50% of products is for export  for purposes of replacement to improve and/or expand the
2. Not Filipino-owned where 70% of products is for export operations of the registered enterprise.

Page 8 of 16
 Incentives and Foreign Investment Law

4. Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees o if sold or transferred, rule on imported machinery shall apply
5. Tax Exemption On Breeding Stocks And Genetic Materials 4. The privilege to operate a bonded manufacturing/trading warehouse
Importation of BREEDING STOCKS and GENETIC MATERIALS Access to the utilization of the bonded warehousing system in all areas required by the
a. not locally available or not available in a comparative price project subject to such guidelines as may be issued by the Board upon prior consultation
with the Bureau of Customs.
b. reasonably needed by the enterprise
c. prior approval by Board secured
TITLE IV
6. Tax Credits
INCENTIVES TO LESS-DEVELOPED-AREA REGISTERED ENTERPRISE
 on domestic equipment
 reasonable needed and exclusively used for registered
business LESS DEVELOPED AREA
 would have been tax-exempt had they been imported - determined by the Board upon consultation with the NEDA and other government
agencies
 prior approval of Board secured
- CRITERIA:
 made within 5 years from effectivity of Code
o LOW PER CAPITA GROSS DOMESTIC PRODUCT
 exempt from CONTRACTOR’S TAX
o LOW LEVEL OF INVESTMENTS
 on RAW MATERIALS equivalent to tax due on such
o HIGH RATE OF UNEMPLOYMENT AND/OR UNDEREMPLOYMENT
 Board may set a fixed percentage of export sales as tax
o LOW LEVEL OF INFRASTRUCTURE DEVELOPMENT including its accessibility to
 on purchase of genetic material and breeding stocks
developed urban centers, shall be entitled to the following incentives in
 reasonable needed and exclusively used for registered addition to those provided in the preceding article.
business Incentves:
 would have been tax-exempt had they been imported 1. Incentives for Necessary and Major Infrastructure and Public Facilities.
 prior approval of Board secured  Income Tax deduction equal to 100% of costs for necessary and
 made within 10 years from registration major infrastructure works
7. Additional Deductions from Taxable Income  prior approval of the Board in consultation with other government
agencies concerned;
B. Non-Fiscal Incentives  all such infrastructure works shall upon completion, be transferred
to the Philippine Government
1. Employment Of Foreign Nationals
- any amount not deducted for a particular year may be carried over for
Registered enterprise may employ foreign nationals in supervisory, technical or advisory deduction for subsequent years not exceeding ten (10) years from
positions for a period not exceeding five (5) years from its registration, extendible for commercial operation.
limited periods at the discretion of the Board
2. Nationality requirements not as strict in less developed areas
o if majority of shares owned by foreign nationals, the positions of PRESIDENT,
TREASURER and GENERAL MANAGER maybe retained by foreign nationals. Types of Investment

Spouse and children below 21 shall be allowed entry to the Philippines a. Pioneer Areas of Investments

A registered enterprise shall train Filipinos as understudies of foreign nationals in - (Initially owned by foreigners) Investments that are required to attain Filipino status (60%
administrative, supervisory and technical skills. Filipino) within thirty (30) years or such longer period as the BOI may determine except
enterprises whose production is 100% geared for exports.
2. Simplification of customs procedures
b. Non-Pioneer Areas of Investments
3. Importation of consigned equipment
- Foreign investments are allowed up to forty percent (40%) of the outstanding voting
No restriction as to use of equipment consigned to the registered enterprise capital stock; may be higher if it exports at least 70% of its total production.
o upon payment of re-importation bond
o for the exclusive use of the registered enterprise III. Foreign Investments Act

Page 9 of 16
 Incentives and Foreign Investment Law

Philippine National or arrangements and contemplate to that extent the performance of acts
1. citizen of the Philippines; of a domestic partnership or association wholly or works, or the exercise of some of the functions normally incident to,
owned by citizens of the Philippines; and in progressive prosecution of commercial gain or of the purpose and
object of the business organization:
2. a corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled to 4. not mere investment as a shareholder by a foreign entity in domestic
vote is owned and held by citizens of the Philippines corporations duly registered to do business, and/or the exercise of rights
as such investor; nor having a nominee director or officer to represent its
3. a corporation organized abroad and registered as doing business in the interests in such corporation; nor appointing a representative or
Philippines under the Corporation Code of which one hundred percent distributor domiciled in the Philippines which transacts business in its
(100%) of the capital stock outstanding and entitled to vote is wholly own name and for its own account;
owned by Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the
benefit of Philippine nationals: Provided, That where a corporation and Is a foreign corporation required to register with the SEC if it wants to do business in the
its non-Filipino stockholders own stocks in a Securities and Exchange Philippines? NO
Commission (SEC) registered enterprise, at least sixty percent (60%) of What are the consequences of not registering with the SEC? Foreign corporation not
the capital stock outstanding and entitled to vote of each of both registered CANNOT SUE but can counter-sue should the Domestic Corporation file a case
corporations must be owned and held by citizens of the Philippines and against it first
at least sixty percent (60%) of the members of the Board of Directors of
each of both corporations must be citizens of the Philippines, in order Summary of Doing Business: The principles regarding the right of a foreign corporation
that the corporation, shall be considered a "Philippine national. to bring suit in Philippine courts may thus be condensed in four statements: (1) if a
foreign corporation does business in the Philippines without a license, it cannot sue
“Doing Business”
before the Philippine courts; (2) if a foreign corporation is not doing business in the
1. soliciting orders, service contracts, opening offices, whether called Philippines, it needs no license to sue before Philippine courts on an isolated transaction
"liaison" offices or branches; appointing representatives or distributors or on a cause of action entirely independent of any business transaction; (3) if a foreign
domiciled in the Philippines or who in any calendar year stay in the corporation does business in the Philippines without a license, a Philippine citizen or
country for a period or periods totaling one hundred eighty [180] days or entity which has contracted with said corporation may be estopped from challenging the
more foreign corporation’s corporate personality in a suit brought before the Philippine courts;
2. participating in the management, supervision or control of any domestic and (4) if a foreign corporation does business in the Philippines with the required license,
business, firm, entity or corporation in the Philippines; it can sue before Philippine courts on any transaction. MR. Holdings, Ltd. V. Bajar, 380
3. and any other act or acts that imply a continuity of commercial dealings SCRA 617 (2002); Agilent Technolgies Singapore (PTE) Ltd. v. Integrated Silicon Technology
Phil. Corp., G.R No. 154618, 14 April (2004).

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

Subsidiary - incorporated and existing Minimum capital Corporate Income Tax = 30% Cannot pass to Limited to NONE required Filing fee: .2% of authorized
under the laws of the requirement = $200K of NET income or MCIT (2% parent assets of capital stock but not less
Philippines EXCEPT: of GROSS income) subsidiary than P1,000
- wholly owned or at least 1. advanced
majority owned by a foreign technology Remittance of Dividends = Legal Research fee: 1% of
parent company approved by 30% fling fee but not less than
- separate juridical entity DOST EXCEPT: 15% if country of P10.00
from parent company ($100K) parent company
2. direct 1. grants 15% tax By-laws fee: P500
employment sparing
of at least 50 2. does not impose DST: P1 for each P200 par
persons tax on dividends value of shares
($100K)

Page 10 of 16
 Incentives and Foreign Investment Law

3. exports at Additional Fees:

least 60% of a. P2,000 if
output registering under
Foreign
Investments Act
b. Fees for permits
and applications
with BIR and DTI
Branch - extension of foreign Minimum capital Corporate Income Tax = 30% Parent Parent Deposit Filing fee: .2% of authorized
corporation requirement = $200K of NET income or MCIT (2% company can answerable Government capital stock but not less
- subject to NATIONALITY EXCEPT: of GROSS income) allocate to its to liabilities Securities = at than P1,000
requirements in certain 1. advanced branch a incurred by least P100K with
industries technology Branch Profit Remittance Tax proportional branch SEC within 60 Legal Research fee: 1% of
approved by = 15% of total profits applied part of branch’s days from fling fee but not less than
DOST or earmarked for remittance expenses issuance of P10.00
($100K) without deduction of tax license
2. direct component (shall not include Additional Fees:
employment income derived from activity Additional a. P2,000 if
of at least 50 not related to business) securities= 2% of registering under
persons the gross income Foreign
($100K) in excess of P5M Investments Act
- within 6 b. Fees for permits
months after and applications
each fiscal year with BIR and DTI
Representative - promotes products of Amount initially NO TAX LIABILITY No allocation NONE required Filing fee: .1% of actual
Office parent company but cannot remitted = at least $30, from parent inward remittance but not
enter into contracts with 000 less than P2,000
local entities on behalf of
parent company Legal Research fee: 1% of
- does not derive income fling fee but not less than
from the Philippines P10.00
- contracts must be entered
into by the HEAD OFFICE Fees for permits and
and the local entity applications with BIR and
DTI
Acceptable activities of a
representative office:
a. dissemination of foreign
market information;
b. promotion for export of
Philippine products
c. acting as a message centre
or a communication centre
between interested parties
and the head office;
d. promotion of products
presently being distributed
in the Philippines;
e. to render, assist and give
technical know-how and

Page 11 of 16
 Incentives and Foreign Investment Law

training to existing and

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

Page 12 of 16
 Incentives and Foreign Investment Law

promotion;
f. training and personnel
management;
g. logistic services; research
and development services
and product development;
h. technical support and
maintenance;
i. data processing and
communication;
j. business development.

- It refers to a foreign
business entity which is
allowed to derive income in
the Philippines by
performing qualifying
services to its affiliates,
subsidiaries or branches in
the Philippines, in the Asia-
Pacific Region and in other
foreign markets.
- Regional operating
headquarters are prohibited
from offering qualifying
services to entities other
than their affiliates,
branches or subsidiaries
Joint Venture - a cooperative arrangement If foreign interest Corporate Income Tax = 30%
of corporations, whether exceeds 40%, minimum of NET income or MCIT (2%
foreign or domestic, to capital requirement = of GROSS income)
jointly perform a single, $200K
specific undertaking or EXCEPT: Dividends = 30%
project with each of the 1. advanced EXCEPT: 15% if country of
partners contributing to the technology parent company
performance approved by 1. grants 15% tax
- subject to NATIONALITY DOST sparing
requirements for certain ($100K) 2. does not impose
industries 2. direct tax on dividends
employment
of at least 50
persons
($100K)
3. exports at
least 60% of
output
Purchase of - the foreign corporation may Corporate Income Tax = 30% NONE Required DST: P1 for each P200 par
stocks in take advantage of the of NET income or MCIT (2% value of shares
Existing goodwill already generated of GROSS income)
Corporation by the domestic Subsequent sale:

Page 13 of 16
 Incentives and Foreign Investment Law

corporation, as an ongoing Tax on the Sale of Shares of DST = .75 centavos for each
concern Stock: Unlisted corporation, or fractional part of par
- subject to NATIONALITY Capital Gains Tax = 5% of the value
requirements first P 100,000.00 and 10%
for the excess above P
100,000.00 of net gain.

traded and listed in the

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

Exchange of property for

stock where party gains
control of stock TAX FREE

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

Merger or - merger occurs when one or Merger or consolidation NOT shouldered by shouldered NONE required Filing fee: .2% of authorized
Consolidation more existing corporations TAXABLE surviving by surviving capital stock but not less
are absorbed by another corporation corporation than P3,000
corporation which survives New corporation liable for
and continues the combined CIT= 30% Merger with application to
business. increase capital stock: .2% of
- Consolidation occurs when increase in capital stock or
two or more existing subscription price OR .2% of
corporations consolidate or authorized capital stock but
join their businesses to form not less than P3,000
a new, single, consolidated whichever is higher
corporation.
- Subject to constitutional Consolidated company’s
prohibition against authorized capital stock
monopolies and restraint of different from total equity of
trade constituent corporations:
2% of capital stock in
constituent corporations
OR .2% of capital stock or
subscription price but not
less than P1,000 whichever
is higher

Legal Research fee: 1% of

fling fee but not less than

Page 14 of 16
 Incentives and Foreign Investment Law

P10.00

By-laws fee: P500

DST: P1 for each P200 par

value of shares

Fees for permits and

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

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

Page 15 of 16
 Incentives and Foreign Investment Law

partially nationalized
activities cannot enter into a
management contract with
a foreign corporation.

Page 16 of 16