Who may invest?
|
Anyone,
regardless of nationality, is welcome to invest in the Philippines in almost all areas,
and up to the extent of 100% ownership. However, the Foreign Investments Act of 1991 (RA
7042) restricts some areas of economic activities open to foreign investors. These
activities are found in the Foreign Investment Negative List (FINL). |
| What
are the kinds of investments? |
Depending on
the type on incentives desired, the kind of investments under the Omnibus Investments Code
of 1987 (EO 226) are the following):
 | Investments with
incentives (Book I of EO 226)
|
| Incentives to
Multinational Companies Establishing Regional or Area Headquarters in the Philippines
(Book II of EO 226)
|
| Incentives to
Multinational Companies Establishing Regional or Area Headquarters in the Philippines
(Book III of EO 226)
|
| Special Investors
Resident Visa (Book V of EO 226)
|
| Incentives for
Export Processing Zone Enterprises (Book VI of EO 226).
|
Foreign-owned
companies not availing of incentives are covered by the provisions of RA 7042.
|
| In
what form can foreign investments be made? |
In general,
foreign investments which means equity investments, can be made in the form of foreign
exchange or other assets actually transferred to the Philippines. These non-cash assets
may be in the form of capital goods, patents, formula or other technologies rights or
processes. |
| What
are the basic rights and guarantees given for the safety of foreign investments? |
All investors
and enterprises are entitled to the basic rights and guarantees provided in the Philippine
Constitution. These include, among others, Right
to Repatriation of Investments
In the case of foreign investments, the right to repatriate the entire proceeds of the
liquidation of the investment in the currency in which the investment was originally made
at the exchange rate prevailing at the time of repatriation.
Right to Remittance of Earnings
In the case of foreign investments, the right to remit earnings from the investments in
the currency in which the investment was originally made at the exchange rate prevailing
at the time of remittance.
Right to Foreign Loans and Contracts
The right to remit, at the exchange rate prevailing at the time of remittance, such as may
be necessary to meet the payment of interest and the principal on foreign loans and
foreign obligations arising from technological assistance contracts.
Right to Freedom from Expropriation
There shall be no expropriation by the government of the property
represented by the 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 the right to remit sums received
as compensation for the expropriated property in the currency in which the investment was
originally made and at the exchange rate prevailing at the time of remittance.
Right to Non-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. Just 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.
|
| INVESTMENTS
WITH INCENTIVES |
|
| Who
may avail of government incentives? |
Under Book I of
the Omnibus Investments Code, an investor may enjoy certain benefits and incentives,
provided he invests in preferred areas of investment found in the current Investment
Priorities Plan (list of promoted areas of investments eligible for government incentives
which are comparable with other countries). An
enterprise may still be entitled to incentives even if the activity is not listed in the
IPP so long as:
| At least 50% of
production is for exports -- if Filipino-owned enterprise; and,
|
| At least 70% of
production is for exports -- if majority foreign-owned (more than 40% foreign equity)
|
The BIO in
certain instances as indicated in the IPP may completely or partially limit the incentives
available to export products.
|
What are these incentives?
|
Under Book I of
the Omnibus Investments Code, BOI-registered enterprises are given a number of incentives
in the form of tax-exemptions and concessions. More specifically, the fiscal incentives
include: Fiscal Incentives
|
|
| Income Tax Holiday
Four (4) years income tax holiday for registered new non-pioneer firms and six (6) years
for registered new pioneer firms, extended for another year in each of the following
cases:
- Indigenous raw materials are utilized at rates set by the BOI;
- Project meets the prescribed ration of capital equipment to annual number of workers set
by the BOI;
- Net foreign exchange savings or earnings amount to at least US$500,000 annually during
the first three (3) years of operation.In no case
shall the registered pioneer firm avail of this incentive for a period exceeding eight (8)
years.
Registered expanding firms shall be entitled to an
exemption from income taxes proportionate to their expansion for a period of three (3)
years from commercial operation.
|
| Tax and Duty Free
Importation of Capital Equipment -- Machineries and accompanying spare parts up to 31
December 1994.
|
| Tax credit on
Domestic Capital Equipment -- for the same period as provided in the preceding paragraph.
|
| Additional
Deduction for Labor Expense -- for the first five (5) years from registration, a
registered enterprise shall be allowed an additional deduction from taxable income of
fifty per cent (50%) of the wages corresponding to the increment in the number of direct
labor for skilled and unskilled workers if the project meets the prescribed ratio of
capital equipment to number of workers set by the Board. Provided that this additional
deduction shall be doubled if the activity is located in less developed areas.
|
| Exemption from
Contractor's Tax -- both on the national and local levels. This incentive is available to
export-oriented firms.
|
| Tax and Duty Free
Importation of Breeding Stocks and Genetic Materials -- for ten (10) years from
registration of commercial operation for agricultural producers.
|
| Tax credit on
Domestic Breeding Stocks and Genetic Materials -- under the same condition as the
preceding paragraph.
|
| Simplification of
Customs Procedures -- Customs procedures for the importation of equipment, spare parts,
raw materials and supplies and exports of processed products shall be simplified.
|
| Unrestricted Use of
Consigned Equipment -- no restrictions on the use of consigned equipment provided a
re-export bond may be waived subject to certain conditions.
|
| Employment of
Foreign Nationals -- in supervisory, technical or advisory positions for five (5) years
from registration, extendible for limited period. The president, general manager and
treasurer of foreign-owned registered firms or their equivalent shall not be subject to
the foregoing limitations.
|
| Tax credit for
Taxes and Duties on Raw Materials, Supplies and Semi-manufactured Products and forming
parts thereof.
|
| Access to Bonded
Manufacturing/Trading Warehouse System -- registered export-oriented enterprises shall
have access to the utilization of the bonded warehousing system in all areas.
|
| Exemption from
Wharfage Dues and any Export Tax, Duty, Impost and Fees -- exports by a registered
enterprise of its non-traditional export products shall be exempted from wharfage dues and
any export tax, impost and fees.
|
| Tax and Duty
Exemption of Imported Spare Parts and Supplies -- for export producers with customs bonded
warehouse exporting at least 70% of production.
|
|
|
Non-Fiscal
Incentives |
Are foreign firms allowed to employ foreign
nationals?
|
Yes,
BOI-registered enterprises and firms in the Export Processing Zones are allowed to employ,
within five years from registration, foreign nationals in the supervisory, technical or
advisory positions and the positions of president, treasurer and general manager or their
equivalents may be retained by foreign nationals if the majority of the capital stock of
the firms is owned by foreign nationals. All
foreign employees may bring with them their spouses and unmarried children under 21 years
of age.
|
Are there government facilities for training
laborers?
|
The Export
Processing Zone Authority extends assistance on major manpower training of laborers to
firms in the zones. The National Manpower and Youth Council (NMYC) of the Department of
Labor and Employment also conducts manpower training programs on electronics, automotive
mechanics, machine shop, welding, hotel and restaurant, garments industry, footwear and
leather goods, business equipment computer and electromechanical. In addition, the Labor
Code grants incentives to firms engaged in labor training activities. |
In case I want to locate my project in less
developed areas, are there any additional incentives?
|
Additional
incentives for BOI-registered enterprises locating in a less developed area include:
| The same set of
incentives given to a pioneer registered enterprise;
|
| A 100% deduction
from its taxable income representing the necessary and major infrastructure it may have
undertaken in the course of its operation; and,
|
| An additional
deduction from taxable income of 100% of the wages corresponding to the increment in the
number of direct labor for skilled and unskilled workers in the year of availment as
against the previous year is observed.
|
The
nationality requirement on non-pioneer activities locating in a less-developed area is
likewise waived, thus 100% foreign ownership is allowed.
|
Are investment incentives transferable?
|
In general,
investment incentives are not transferable. However, tax credit certificates may be
transferable under conditions set by the BOI, after consultation with the Department of
Finance. Investment incentives may be enjoyed by a
registered enterprise in relation to the registered operation only.
|
Are there any incentives to firms offering
their stocks to the public?
|
There are no
incentives granted to enterprises merely on account of their stocks being issued publicly
and listed in the stock exchange. By law, enterprises registered with the BOI are required
to offer their equity to the public in order to provide for a wider base of ownership or
corporate holdings. By policy, the BOI requires a
minimum of 10% of equity to be offered to the public.
|
What are other areas are entitled to
incentives?
|
Export
Trader Those engaged or proposing to
engage in the sale abroad of export products bought by it from one or more export
producers. New export traders are those engaged in export marketing of new products (means
total Philippine export did not exceed US$100,000 annually in two calendar years
immediately preceding BOI application for registration) or in exporting to new export
markets (country where the Philippines has never exported the specific export product).
New export traders are entitled to the following
incentives:
| Income tax holiday
for a period of four (4) years;
|
| Tax and duty free
importation of capital equipment until 31 December 1994 (limited to packaging and quality
control equipment);
|
| Tax credit on
domestic capital equipment
|
| Tax credit for
taxes and duties on raw materials used for its export products and forming part thereof
(packaging materials and supplies)
|
| Exemption from
wharfage dues, export tax, duties, imposts and fees;
|
| Additional
deduction for incremental labor expenses (after income tax holiday);
|
| Employment of
foreign nationals
|
Existing
export traders are not entitled to income tax holiday and capital equipment incentives.
Service Exporter
Those enterprises engaged or proposing to engage in
rendering technical, professional or other services or in exporting television and motion
pictures and musical recording made or produced in the Philippines, either directly or
through a registered trader.
New Service Exporters are entitled to the following
incentives:
| Income tax holiday
for a period of four (4) years;
|
| Tax and duty free
importation of capital equipment until 31 December 1994 (limited to packaging and quality
control equipment);
|
| Tax credit on
domestic capital equipment;
|
| Unrestricted use of
consigned equipment;
|
| Exemption from
contractors’ tax, national or local’ and
|
| Exemption from
wharfage dues, export tax, duties, imposts and fees.
|
Export
traders and service exporters availing of incentives shall, at all times, be at least 60%
owned by Philippine nationals.
|
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