SEVENTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

House Bill No_ 4547

EXPLANATORY NOTE

This bill was originally introduced in the 15” Congress.This bill is the
substitute bill that was approved by the Committee on Ways and Means. It was
subsequently approved on 2 reading, approved on 3" reading and was transmitted
to the Senate where it was not acted upon.

This bill seeks to streamline the tax breaks for businesses in order to
maximize the use of available funds and not to abuse the incentives given by the
government by stopping the practice of having perpetual perks for several
industries. This bill also grants tax breaks to exporters and limits the income tax
holiday for domestic enterprises to four years.

Further, this bill will also provide for an investment policy that will improve the
country's investment programs and strategies but at the same time ensuring that no
industry will unjustly benefit from the incentives that will be provided.

In view of the foregoing, early passage of this bill is earnestly sought

iM!

MAXIMO B. RODRIGUEZ, JR.


SEVENTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION. )

HOUSE OF REPRESENTATIVES

__ Introduced by Representative Maximo B. Rodriguez, Jr.

‘Not Bill No. 4547

THE INVESTMENTS AND INCENTIVES CODE OF THE PHILIPPINES

Be it enacted by the Senate and House of the Representatives of the Philippines in
Congress assembled.

PRELIMINARY TITLE
CHAPTER |
TITLE AND DECLARATION OF POLICY

SECTION 1. Title. - This Act shall be known as "The Investments and Incentives
Code of the Philippines”

SEC. 2. Declaration of Investment Policies. - The national economy shall be
developed so as to enhance its competitiveness in the global economy through
investment promotion and industrial development activities geared towards
‘employment generation and countrywide development. Accordingly, the following are
the declared policies of the State’
a. The State shall pursue a market-responsive investment regime; ,
b. The State shall formulate industry and sectoral development programs;
c. The State shall undertake investment promotion activities;
d. The State shall grant incentives that are simple to administer, time-bound
and
performance-based; and
e. The State recognizes that industrial peace is essential to attracting
investments.

CHAPTER II
ORGANIZATION AND FUNCTIONS OF THE BOARD OF INVESTMENTS

SEC. 3. The Board of Investments (BO!). - The Board of Investments hereinafter
referred to as the “BO!” shall implement the provisions of this Act except as otherwise
provided therein

SEC. 4. Relationship of investment Promotion Agencies (IPAs) with the BO! and
Other Government Agencies. — IPAs shall maintain their functions as provided for in
their respective Charters except to the extent modified by the provisions of this Act.

For purposes of maintaining an efficient database on investment statistics and
other investment data and information, all IPAs shall be required to submit to the BO!
all investment data and information and such other related data semi-annually or as
often as may be required.

SEC 5. Governing Provision for IPAs. - All existing and future IPAs vested with the
power to confer and administer incentives shall offer the incentives provided in this
Act: Provided, however, That IPAs that are not covered by this Act may opt to


administer the incentives hereunder; Provided, further, That there shall be no double
availment of incentives.

SEC. 6. Composition of the BO! Board of Governors. ~ The 8O| Board of Governors,
hereinafter referred to as the “Board”, shall be composed of nine (9) governors: the
Secretary of the Department of Trade and Industry (DTI), the Secretary of the
Department of Finance (DOF), the Director General of the National Economic and
Development Authority (NEDA), the DTI Undersecretary for Investments and Industry
Group (IIG), the DTI Undersecretary for International Trade Group (ITG), the DT!
Undersecretary for Regional Operations Group (ROG) and three (3) representatives
from the private sector. The Secretary of the DTI shall concurrently be the
Chairperson of the BO! and the DTI Undersecretary for Investments and Industry
Group shall be the concurrent Vice Chairperson and Managing Governor of the BO!
The three (3) representatives from the private sector shall be appointed by the
President for a term not exceeding two (2) years: Provided, That a governor may be
Teappointed: Provided, further, That a governor shall serve as such until the
‘successor shall have been appointed and qualified

The Managing Governor of the BO! shall be assisted by four (4) career
deputy managing governors with the rank of Assistant Secretary, who shall be
appointed by the Board, upon the recommendation of the Managing Governor.

SEC. 7. Qualifications of the BO! Board of Governors. — The governors of the BO!
shall be citizens of the Philippines, at least thirty-five (35) years old, with proven
probity and integrity, of good moral character and of recognized competence in law,
economics, business, marketing, advertising, management or its equivalent.

SEC. 8. Powers and Functions of the Board. - The Board shall be responsible for
industry development, policy formulation, investment promotion, and investment
facilitation. It shall hold meetings at least once a week for the conduct of business or
as often as may be necessary upon the instance of the Chairperson or the Managing
Governor. The notice of regular and special meetings shall be given to all the
members of the Board and the presence of five (5) members shall constitute a
quorum and the affirmative vote of five (5) members in a meeting validly held shall be
necessary to exercise its powers and perform its functions which shall include the
following

a. Formulate an evolving National Framework for Investment Promotions
(NFIP) and promulgate its rules, regulations and policies that will govern
all Investments Promotion Agencies (IPAs);

b. Formulate an evolving National Framework for industrial Development
(NFID) and promulgate its rules, regulations and policies in consultation
with the private sector. The NFID shall identify key emerging markets or
industries that will substantially enhance the competitiveness of the
country, which include among others, research and development,
agricultural technology, biomedical devices and systems, renewable
energy, logistics and information communications and technologies;

c. Promulgate rules, regulations and policies on the administration of
incentives which the IPAs are mandated to implement;

d. Plan and implement industrial programs to hasten economic development
including those relating to the implementation of international trade,
investment and industry-related environmental agreements and protocols;

e. Determine the criteria for the grant of subsidy on utilities to certain sectors
and/or industries and recommend to the President the approval thereof;
this shall be carried out and be appropriated in the annual general
appropriations or such other sources as may be identified;


Prepare the Investments Priorities Plan (IPP) in accordance with Title Ill,
Chapter | of this Act:

Formulate rationalization programs for certain industries whose operation
may result in dislocation, oversupply or inefficient use of resources that
impedes economic growth. In the interest of national development and
upon approval of the President, the Board may restrict, either totally or
Partially, the importation or exportation of any equipment, raw materials,
intermediate goods or finished goods;

Formulate and negotiate positions for bilateral, multilateral and regional
investments and investmentrelated trade agreements and/or
arrangements;

Establish the Investment Promotion Action Center (i-PAC);

Establish and operate regional investment centers in the Philippines, and
establish and operate overseas investment offices

Extend assistance to micro and small enterprises in the preparation of
feasibility and other pre-investment project studies

Process and approve, deny, suspend, revoke applications for registration,
imposing terms and conditions as it may deem necessary to promote the
purposes of this Act, including the refund and forfeiture of incentives when
appropriate, restricting availment of incentives not needed by the project
as determined by the Board, requiring performance bonds from BOl-
accredited bonding companies, and payment of application, registration,
publication and other fees, when warranted:

Recommend to the President the suspension of the nationality
requirement provided for in this Act in appropriate cases such as those
involving bilateral, multilateral, or regional investments, of other trading
agreements of the Philippines with other countries; or when the existing
laws of another country where the investor comes from provides no
nationality restrictions for Filipino investors or provides for “reciprocal
nationality accommodations;

in meritorious cases, waive, condone or reduce fines or penatties imposed
on registered enterprises: Provided, That in case of reduction, the
minimum compromise rate shall not be less than 40 % of the basic
assessed fines or penalties:

Enter into agreements with other agencies for the simplification of
systems and procedures involved in the promotion of investments,
operation of zones and registered enterprises, and other activities
necessary for the effective implementation of this Act:

Exercise general supervision over the ecozones and freeports according
to the principles and provisions set forth in this Act:

Establish domestic industrial zones to be approved by the President;

Set the general policies on the establishment and operations of domestic
industrial zones and determine the qualifications, responsibilities and
functions of the Administrator of such domestic industrial zones;
Coordinate with local government units and exercise general supervision
over the development plans, activities and operations of domestic
industrial zones;

Set the policies on the establishment of utlities, other services, and
infrastructure in the domestic industrial zones such as heat, light, power,
water supply, telecommunications, transport, toll roads and bridges, port
services, and others and to fix just, reasonable and competitive rates,
charges, and fees therefor: Provided, That the appropriate government
regulatory agencies shall regulate the operation and


maintenance of utilities, such as heat, light, power, water supply,
telecommunications, transport, toll roads and bridges, port services, and
others based inside the domestic industrial zones insofar as such services
are rendered outside the domestic industrial zones;

u, Approve the construction, acquisition, ownership, and lease through
contract, franchise, license, bulk purchase from the private sector and
build-operate-transfer scheme or joint venture, or such other scheme as
may be determined, adequate facilities and
infrastructure, such as light and power systems, water supply and
distribution systems, telecommunications and transportation, buildings,
structures, warehouses, roads, bridges, ports and other facilities for the
operation and development of the domestic industrial zones;

v. Gather, consolidate and monitor incentives data and information from all
IPAs and other concerned government agencies for submission to the
President and Congress;

w. Monitor the implementation of Regional Operating Headquarters, Retail
Trade Law, Long-Term Lease and other laws as mandated;

x. Cancel registration or suspend the availment of incentives of a registered
enterprise and/or require the refund of incentives, including interests and
monetary penalties, when warranted:

y. Mediate controversies and/or disputes involving investors

2. After due hearing, decide controversies that may arise between BOI-
registered enterprises arising from the implementation of this Act. The
Board shall have the power to subpoena witnesses, administer oaths, and
compel the production of books, papers and other evidence, and to cite
for contempt any person or organization that fails to comply with the
aforestated processes: Provided, That the Board may grant immunity from
prosecution to any person whose testimony or possession of relevant
documents and other evidence is necessary to the case:” Provided,
further, That a registered enterprise may file a motion for reconsideration
of a decision or final order within fifteen (15) days from notice thereof, with
proof of service on the parties affected. No second motion for
Teconsideration of a decision or final order by the same party shall be
entertained:

aa. Implement the investment projects covered by bilateral, multilateral, and
regional agreements subject to rules and guidelines to be formulated by
the Board:

bb. Determine the organizational structure of the BOI; and

cc. Exercise all the powers necessary or incidental to attain the purposes of
this Act and other laws vesting additional functions on the Board.

SEC. 9. Powers and Duties of the Managing Governor. - The Managing Governor
shall have the following powers and duties:

a. Preside over the meetings of the Board in the absence of the
Chairperson;

b. Prepare the Agenda for the meetings of the Board and submit for its
consideration and approval the policies and measures which the
Chairperson deems necessary and proper to carry out the provisions of
this Act;

c. Recommend to the Board such policies and measures may be deemed
necessary to carry out the objectives of this Act;

d. Sit as member of the Board of all IPAs covered under this Code;


e. Assist registered enterprises and prospective investors to have their
papers processed with dispatch by all government offices, agencies
instrumentalities and financial institutions;

f. Actas liaison to investors, government, affiliated organizations and other
stakeholders;

9. Coordinate the policies, plans and programs of the BOI. As such, to
exercise overall supervision and general direction on the operations and
affairs of the BOI;

h. Perform the other duties of the Chairperson in the absence of the latter,
and such other duties as may be assigned by the Board of Governors
and

i. Generally, to exercise such other powers and perform such other duties
as may be directed by the Board from time to time

SEC. 10. The Investment Promotion Action Center (PAC). - There is hereby
created an PAC at the BO! that shall serve as the link to all government agencies to
facilitate entry, retention, expansion and diversification of investments, The BO! shall
serve as the Coordinator of the i-PAC.

The EPAC shall be composed of all govemment agencies involved in the
establishment of the operation of business enterprises including, but not limited to, all
IPAs, the Securities and Exchange Commission (SEC), the Bureau of Internal
Revenue (BIR), the Bureau of Customs (BOC), the Bureau of Immigration (BI), the
Department of Trade and industry (DTI), the Department of the Interior and Local
Government (DILG), the Department of Agriculture (DA), the Department of
Environment and Natural Resources (DENR), the Department of Labor and
Employment (DOLE), the Department of Foreign Affairs (DFA), the Department of
Energy (DOE), the Department of Public Works and Highways (DPWH), the
Department of Agrarian Reform (DAR) and such other agencies as may be
determined by the Board. The government agencies involved shall ‘designate
Tepresentatives to the HPAC authorized to act and approve/deny any matter relative
to their respective agencies.

SEC. 11. Powers and Functions of the KPAC. - The LPAC shall exercise and
perform the following powers and functions:

a. Provide advice, guidance, information and procedure on various laws,
rules and regulations governing investments and the conduct of business
in the Philippines;

b. Ensure that all investment-related requirements are acted upon within ten
(10) working days;

c. Recommend the streamlining of existing procedures to ensure that all
frontine agencies, dealing with the operation of business enterprises,
shall perform their tasks for identified transactions between the
government and the enterprises;

d. Establish an on-line investment facilitation system;

e. Act, in coordination with appropriate government offices or agencies, such
as the Office of the Ombudsman and the Civil Service Commission
(CSC), on complaints filed by any investor or potential investor against
any public official or employee or any office, agency or instrumentality,
including local government units (LGUs) and officials, as well as any
government-owned and -controlled corporation (GOCC), in connection
with any act or duty required by law to facilitate the entry of local and
foreign investments; and

{Perform other functions as may be directed by the Board.


SEC. 12. Honoraria and Allowances. - The Board shall provide for reasonable
honoraria and allowances for the -PAC members and their personnel.

CHAPTER Ill
ESTABLISHMENT OF DOMESTIC INDUSTRIAL ZONES

SEC 13. Criteria for the Establishment of Domestic Industrial Zones. — The
establishment of domestic industrial zones must conform to the following criteria:

‘a. The proposed area must be identified as a regional growth center in the
Medium-Term Philippine Development Plan or by the Regional
Development Council:

b. The existence of required infrastructure in the proposed domestic
industrial zones, such as roads, raitvays, telephones, ports, airports, and
the suitability and capacity of the proposed site to absorb such
improvements;

c. The availability of water source and electric power supply for use of the
domestic industrial zones;

d. The extent of vacant lands available for industrial and commercial
development and future expansion of the domestic industrial zones as
well as of lands adjacent to the domestic industrial zones available for
development of residential areas for the domestic industrial zones
workers:

e. The availability of skilled, semi-skilled and non-skilled trainable labor force
in and around the domestic industrial zones;

{. The area must have a significant incremental advantage over the existing

economic zones and its potential profitability can be established;

‘The area must be strategically located: and

The area must be situated where controls can easily be established to
curtail smuggling activities. 2

ze

Other areas which do not meet the foregoing criteria may be established as
domestic industrial estates: Provided, That the area shall be developed only through
local government and/or private sector initiative under any of the schemes allowed in
Republic Act No. 6957 or the Build-Operate-Transfer Law, and without any financial
exposure on the part of the national government: Provided, further, That the area can
be easily secured to curtail smuggling activities: Provided, finally, That after five (5)
years the area must have attained a substantial degree of development, the
indicators of which shall be formulated by the Board.

TITLE I
DEFINITION OF TERMS

SEC. 14. Definition of Terms. — As used herein, the following shall mean:

a. BO! or the Board shall refer to the Board of Investments created under
this Act.

b. Investments Promotion Agencies (IPAs) shall include the BOl, the
Philippine Economic Zone Authority (PEZA), the Bases Conversion
Development Authority (BCDA), the Subic Bay Metropolitan Authority
(SBMA), the Clark Development Corporation (CDC), the John Hay
Management Corporation (JHMC), the Poro Point Management
Corporation (PPMC), and the Tourism Infrastructure and Enterprise Zone
Authority (TIEZA) and all other IPAs that may be created by law.

c. Registered Enterprise shall refer to any individual, partnership,
corporation, Philippine branch of a foreign corporation or other entity
incorporated and/or organized and existing under Philippine laws and


registered with an IPA, in accordance with this Act: Provided, however,
That the term “registered enterprise” shall not include any of the following
service enterprises such as, but not limited to, those engaged in customs
brokerage, truckingforwarding services, janitorial services, security
services, insurance and/or banking and other financial services,
Consumers cooperatives, credit unions, consultancy services, restaurants
or such other services, within the economic zones, as may be determined
by the IPA Board, duly accredited and/or licensed by any of the IPAs and
whose income derived within the economic zones shall be subject to
taxes under the National Internal Revenue Code (NIRC) of 1997, as
amended.

d. Investments Priorities Plan (IPP) shall refer to the list of industries,
services and other economic activities, which will be eligible for incentives
under this Act, prepared and determined as priority or preferred activities
in accordance with Title Ill, Chapter 1 of this Act

e. New Product or Service shall refer to any product or service not locally or
not sufficiently manufactured/rendered to meet the demand.

{. Gross Income Earned shall refer to gross sales or gross receipts derived
from the registered activity less sales retums, discounts and allowances
and cost of goods sold/cost of service.

g. Export Sales of Goods shall refer to the sales revenues paid for in
freely convertible foreign currency. determined from invoices, bills of
lading, inward letters of credit, landing certificates, or other commercial
documents, of the following:

1) The sale and actual shipment of goods from the Philippines to a
foreign country by a registered enterprise:

Sale of goods to an export enterprise registered in accordance with

this Act; to

diplomatic missions and to agencies or institutions allowed to import

said goods tax and duty-free: to international shipping or international

air transport operations; and to foreign military aircraft or seacraft;

Sale to a nonresident buyer for delivery to a resident local export

enterprise of capital equipment, raw materials, production supplies,

packaging materials and other production requirements needed for the
registered activity of the export enterprise; or

Sale of goods to a nonresident buyer, except automobiles and _non-

essential goods, manufactured or processed in the Philippines, for

delivery to a resident in the Philippines: Provided, That they are paid
for in acceptable foreign cu

Provided, That in the case of paragraph (2) above, only sales
to an export enterprise of capital equipment, raw materials, production
supplies, packaging materials and other production requirements
needed for the registered activity of the export enterprise; and sales to
international sea or air transport operations of goods, equipment,
spare parts and supplies, except fuel, to be used in the aircraft or sea
craft and capital equipment needed for the shipping or air transport
operations, shall be entitled to incentives for export enterprises under
this Act

Sales of locally manufactured or assembled goods for
household and personal use under the Internal Export Program and
similar programs of the goverment shall be deemed as “export
sales”

h. Export Sales of Services shall mean the sales revenues or receipts,
determined from contracts, invoices, vouchers, official receipts, or other
commercial documents of the following:

2

3

4


1) Services rendered for clients abroad by registered enterprises,

2) Services rendered for an export enterprise registered in accordance
with this Act, to diplomatic missions and to other agencies or
institutions with tax and duty-free privileges;

Services rendered to international airlines or shipping lines, or foreign
military aircraft or seacraft, or information and communication
technology enterprises, even if rendered locally.

Provided, That in the case of paragraph (2) above, only
services for an export enterprise performed by subcontractors and/or
contractors in the manufacture or processing of goods; other services
necessary for the registered activity of an export enterprise; and in the
case of paragraph (3), only services for the overhaul, repair and
maintenance for international shipping or air transport operations, and
foreign military aircraft or seacraft, shall be entitled to incentives for
export enterprises under this Act.

The foregoing notwithstanding, services rendered locally by
registered enterprises that are paid for in freely convertible foreign
currency shall be considered as “export sales”

‘An Export Enterprise shall refer to a registered enterprise which is a
manufacturer, processor or service provider and whose export sale of its
products or services exceeds seventy percent (70%) of its total annual
production of the preceding taxable year. The export requirement herein
provided may be reduced, but shail not be less than thirty (30%), in
meritorious cases under such conditions as the Board may determine.

A Domestic Enterprise shall refer to a registered enterprise, which
produces goods for sale or renders services exclusively to the domestic
market or does not comply with the minimum export requirement of an
export enterprise.

Service Enterprise shall refer to an enterprise engaged or proposing to
engage in rendering technical, professional or other services listed in the
IPP,

3)

Service enterprise that earns more than seventy percent (70%) of
its revenues paid for in foreign currency generated from nonresident
clients shall be entitled to the incentives provided to an “export
enterprise.”

Source Documents shall refer to input materials and documents
reasonably needed by the registered enterprise such as, but not limited to,
books, directories, magazines, newspapers, brochures, pamphlets,
medical records or files, legal records or files, instruction materials,
drawings, blueprints or outlines.

|. Processing shall mean the conversion of raw materials into marketable
form through
physical, mechanical, chemical, electrical, biochemical, biological or other
means, orby a special treatment or a series of actions, such as
slaughtering, milling,
pasteurizing, drying or desiccating, quick freezing, that results in a change
in the nature or state of the products. Processing shall include assembly
provided that a distinct or new product is formed. Mere packing or
packaging shall not constitute processing,
Domestic Industrial Zone shall refer to a tract of land subdivided and
developed according to a comprehensive plan under a unified continuous
management and with provisions for basic infrastructure and utilities, with
or without pre-built standard factory buildings and community facilities for
the use of a community of industries established under this Act in


accordance with the criteria provided in Section 14, Chapter Ill of the
Preliminary Title

ECOZONE or Special Economic Zone (SEZ) shall refer to selected areas
with highly developed or which have the potential to be developed into
agro-industrial, industrial, supply chain city, information technology,
touristrecreational, commercial, banking, investment and_ financial
centers, retirement and medical zones whose metes and bounds are fixed
or delimited by presidential proclamations. An ecozone may contain any
or all of the following: industrial estates (IEs), export processing zones
(EPZs), supply chain cities, ICT parks and centers, free trade zones and
tourism estates: Provided, however, That areas where mining operations
are undertaken shall not be declared as ecozones.

Ecozone Developer or Domestic Industrial Zone Developer shall refer toa
business entity duly registered with the Philippine Economic Zone
‘Authority (PEZA) or the BOI, as the case may be, to develop, operate and
maintain an ecozone that will put up the required infrastructure facilities
and utilities, to include among others, light and power system, water
supply and distribution system, sewerage and drainage system, pollution
control devices, communication facilities, paved road network,
administration building, standard factory buildings, and other facllities as
may be required by enterprises registered with the PEZA.

Export Processing Zone (EPZ) or Export Zone shall refer to a specialized
industrial estate located physically and/or administratively outside the
customs territory and predominantly oriented to export production
Freeport shall refer to an isolated and policed area adjacent to a port of
entry, which shall be operated and managed as a separate customs
territory to ensure free flow or movement of goods, except those expressly
prohibited by law, within, into and exported out in the freeport zone where
imported goods may be unloaded for immediate transshipment or stored,
Tepacked, sorted, mixed or otherwise manipulated without being subject to
taxes and duties.

Information and Communications Technology (ICT) Park or ICT Park shall
refer to an area which has been developed into an integrated
development complex capable of providing infrastructure and other
support facilities required by ICT enterprises, as well as amenities
Tequired by professionals and workers involved in ICT enterprises, or easy
access to such amenities.

ICT Center shall refer to a building which has been developed by public or
private corporate entities to provide infrastructure and other support
facilities required by

CT enterprises, as well as amenities required by professionals and
workers involved in ICT enterprises, or easy access to such amenities.
Supply Chain City shall refer to a self-contained zone that includes
manufacturing facility with hub operations in an economic zone: Provided,
That, the manufacturing facility covers whole or partial operations, and the
hub operations include Business Process Outsourcing (BPO) in support of
the manufacturing activity of the registered enterprise; Provided, further,
That the BPO activities cover finance and accounting, high end processes
such as marketing, client or buyer- manufacturer relationship,
Procurement of materials, logistics management. and other related
activities of a borderless global manufacturing set-up.

Capital Equipment shall refer to machinery, equipment, major components
thereof, spare parts, accessories, tools, devices, apparatus,
fixtures, fittings and accompaniments which are directly and/or
reasonably needed in the registered activity of the enterprise and those


required for pollution abatement and control, cleaner production and water
reduction/ conservation.

w. Less Developed Area (LDA) shall refer to an area that is included in the
list prepared by the BOI, after consultation with appropriate government
agencies. Such listing shall take into consideration the following criteria:
low per capita gross domestic product, low level of investments, high rate
of unemployment and/or underemployment and low level of infrastructure
development including its accessibility to developed urban centers

TITLE til
INVESTMENTS WITH INCENTIVES

CHAPTER!
QUALIFIED ACTIVITIES

SEC. 15. Investments Priorities Plan (IPP). - The BOI, upon consultation with the
Office of the President, concemed IPAs and appropriate government agencies and
the private sector, shall formulate a focused IPP to be submitted to the President for
approval and which shall be valid for a period of three (3) years.
In the listing of activities to be undertaken under the IPP, the following shall
be complied with:
a, The activity shall be covered by the current Medium Term Philippine
Development Plan (MTPDP) and Medium Term Philippine Investment
Plan (MTPIP) or its equivalent;
b. The activity shall satisfy the following conditions:
1) Substantial amount of investments;
2} Considerable generation of employment:
3) Use of modem or new technology: or
4) _ Installation of adequate environmental protection systeris:
Provided, That items b(1) and b(4) above shall be required in all
activities, and the threshold amount of investments and employment
generation required for a specific activity shall be subject to a periodic
Teview taking into consideration international standards and other
indicators: Provided, further, That the Pian shall be reviewed every
three (3) years.
c. The activity must comply with the specific qualification requirements and
conditions for a particular sector or industry as set by the appropriate
government agency and such other conditions as may be determined

SEC. 16. Amendments. - Subject to publication requirements and the criteria for
investment priority determination, the Board may, at any time, include additional
areas in the IPP, alter any of the terms of the declaration of an investment area, and
temporarily or permanently suspend activities on the IPP if it considers that such
activity is no longer a priority. In no case, however, shall any amendment of the IPP
impair the incentives conferred on a registered enterprise. The Board shall not
accept applications in an area of investment prior to the approval of the same as a
preferred area or after approval of its deletion as a preferred area of investment in
the IPP.

SEC. 17. Publication. - Upon approval of the IPP, in whole or in part, or upon
approval of an amendment thereof, the IPP or the amendment, specifying and
declaring the areas of investment 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.


SEC. 18. Strategic Projects. - The President, upon recommendation of the Board,
may allow registration of a strategic project that may not be listed in the IPP, but will
locate in the country as a result of stiff competition with other countries.

A strategic project is a project that exhibits high social economic returns and
requires large investments that will significantly contribute to the country’s economic
development. In the exercise of this authority, any three (3) of the following criteria
shall be taken into account: (1) large capital investments; (2) generate sizeable
employment; (3) use of new and internationally accepted high level of technology;
and (4) valuation of significance and usefulness.

Notwithstanding the preceding paragraphs of this Section or any law to the
contrary, a project which shall lead to significant improvements in productivity and
valuation of significance and usefulness and that will (a) produce or manufacture
new, emerging and technologically advanced product, or (b) involve breakthrough
process innovation, or (c) involve new and innovative service; and projects under the
flagship program of the government such as projects under the Public-Private
Partnership (PPP) program shall also be deemed as “strategic project”

CHAPTER Il
INCENTIVES TO REGISTERED ENTERPRISES

SEC 19. General Incentive Provision- The incentives provided in this Act may be
availed of by the registered enterprise to the extent of their registered activity upon
election at the time of application for registration; Provided, That, such election, once
made, shall be final; Provided, further, That the reckoning period for availment of
incentives shall be at the start of commercial operation.

SEC. 20. Incentives to Registered Export Enterprises. — Registered Export
Enterprises shall have the following incentives:
a. Income tax-based incentive options for registered export enterprises located
inside or outside ecozones or free ports. —

1) Income Tax Holiday (ITH) for a period of six years (6) years and
thereafter, five percent (5%) tax on Gross Income Earned (GIE), in
lieu of all national and local taxes except real property tax (RPT) on
land owned by private developers, for a period of nineteen (19) years;
or

Five Percent (5%) Tax on GIE, in lieu of all national and local taxes
except RPT on land owned by private developers, for a period of
twenty five years (25) years; or

Fifty Percent (50%) reduction from corporate income tax for a period
of twenty-five (25) years.

The registered export enterprise shall avail 100% of any of these
income-tax based incentives; Provided, That, the 70% export requirement
is reached; Provided, further, That failure to meet the 70% threshold, the
registered export enterprise may only be entitled thereto to the extent of
the export sales generated provided that it is not less than 30%,
otherwise, all of its income shall be subject to the relevant internal
fevenue taxes under the National Internal Revenue Code of 1997, as
amended: Provided, finally, That the registered export enterprise shall pay
taxes and duties on importation of raw materials used for domestic sales.

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b. Value-added Tax (VAT) and Customs Duty Treatment on Importation of
Capital Equipment and Raw Materials. —


1) Located Inside an Economic Zone andlor Freeport Zones
Exemption from VAT and customs duty on importation of capital
equipment, including consignment thereof subject to Section 32
Of this Act:

ii, Exemption from VAT and customs duty on importation of raw
materials, supplies. spare parts and semi-finished products used
exclusively by the registered export enterprise in its registered
activity;

Located Outside Economic and/or Freeport Zones

i. Exemption from VAT and customs duty on importation of capital
equipment, including consignment thereof subject to Section 32

of this Act

il. Exemption from VAT and customs duty on importation of raw
materials, supplies, spare parts and semi-finished products used
exclusively by the registered export enterprise in its registered
activity provided that such registered export enterprise is
operating a Customs Bonded Manufacturing Warehouse
(CBMW) or an accredited user of a Customs Common Bonded
Manufacturing Warehouse (CCBMW).

ili. Refund of VAT and customs duty on importation of raw
materials, supplies, spare parts and semi-finished products used
exclusively by the registered export enterprise in its registered
activity if the registered export enterprise is not operating a
CBMW or is not an accredited user of a CCBMW.

cc. Tax and Duty Free Importation of Source Documents. — The importation
of source documents by registered export enterprises’ shall be
eligible for VAT and customs duty exemption. The tax incentive
may be granted to the registered export enterprise for a period of
ten (10) years

d. Zero Percent (0%) Rate of VAT on the Sale by a Domestic Enterprise to a
Registered Export Enterprise. - The provisions of law to the contrary
notwithstanding, the sale by a domestic enterprise of goods and/or
services to a registered export enterprise, regardless of the latter's
location and whether enjoying the ITH, the Reduced Income Tax or the
five percent (5%) tax on GIE shall be subject to zero percent (0%) VAT
rate: Provided, That such goods and/or services are required by
registered export enterprise's activity

e. Exemption trom Wharfage Dues. - The provisions of law to the contrary
notwithstanding, exports by a registered export enterprise shall be
exempted from wharfage dues and export taxes.

f. Employment of Foreign Nationals. - Subject to the provisions of
Commonwealth Act No. 613, as amended, a registered export enterprise
may employ foreign nationals in managerial, technical or advisory
positions.

Foreign nationals under employment contract within the purview of
this incentive, their spouses and unmarried children under twenty-one (21)
years of age, who are not excluded by Section 29 of Commonwealth Act
No. 613, as amended, shall be permitted to enter and reside in the
Philippines during the period of employment of such foreign nationals.


Notwithstanding any provision of the law to the contrary, foreign
nationals, subject to the following conditions, may be allowed the practice
of profession inside an ecozone:

1) The foreign national shall secure the required permit from the
Professional Regulatory Commission to practice his profession:

The law of the country of that foreign national allows genuine
reciprocity for Filipinos to practice their profession thereto;

There is no competent, able and willing Filipino at the time of
application to perform the profession for which the foreign national is
desired;

4) The foreign national shall train two Filipino understudies;

5) The ratio of foreign nationals vis-a-vis Filipinos practicing the same
profession in a registered enterprise shall not exceed 1:6 and shall not
in any case exceed 5% of the total workforce of the said registered
enterprise;

The foreign national meets the conditions set forth under Section 28
(b), (c) and (d); and

The practice of profession of the foreign national in the Philippines
shall not exceed a total of five years extendible for a limited period as
determined by the Board.

7}

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SEC. 21. Tax Treatment and Other Incentives for Registered Enterprises in
Ecozones and Freeport Zones. — In addition to the applicable incentives provided
under the preceding section on export incentives, registered enterprises locating in
the Special Economic Zones and Freeport Zones shall be entitled to the following

incentives:

a

Tax Treatment of Merchandise in Ecozones or Freeports.- *
1) Except as otherwise provided in this Act, foreign and domestic
merchandise, raw materials, supplies, articles, equipment,
machineries, spare parts and wares of every description, except those
prohibited by law, brought into the ecozones or freeports to be sold,
stored, broken up. repacked, assembled, installed, sorted, cleaned,
graded, or otherwise processed, manufactured, mixed with foreign or
domestic merchandise whether directly or indirectly related in such
activity, shall not be subject to customs and internal revenue laws and
regulations nor to local tax ordinances, the provisions of law to the
contrary notwithstanding

Merchandise purchased by a registered enterprise located in the

ecozones or freeports from the customs territory, and subsequently

brought into the ecozones or freeports, shall be considered as export
sales and exportation thereof shall be entitled to the benefits allowed
by law for such transaction.

3) Merchandise sent from the ecozones or freeports to the customs
territory shall, whether or not combined with or made part of other
articles likewise of local origin or manufactured in the Philippines while
in the ecozones or freeports, be subject to internal revenue and
customs laws of the Philippines as domestic goods
sold, transferred or disposed of for local consumption. If the finished
goods have imported components, the duties shall be based on the
value of said imported materials, except when the final product is
exempt


4) Qualified merchandise or articles manufactured by registered ecozone
or freeport locators, which are made available for sale in the domestic
market shall be imposed the applicable ASEAN Common Effective
Preferential Tariff (CEPT) rate, if qualified, or applicable tariff rates
under bilateral or regional trade agreements, if qualified, or Most
Favoured Nation (MFN) rate on imported raw materials and MEN rates
on non-qualified raw materials used in the manufacture of the qualified
merchandise or articles. In case of bilateral agreements, the
applicable rate shall be the agreed rate.

Domestic merchandise on which all intemal revenue taxes have been
paid, if subject thereto, and foreign merchandise previously imported
on which duty or tax has been paid, or which have been admitted free
of duty and tax, may be taken into the ecozones or freeports from the
customs territory of the Philippines and be brought back thereto free of
quotas, duty or tax.

Subject to such regulations respecting identity and safeguarding of the
revenue as the concemed IPA may deem necessary when the identity
of an article entered into the ecozones or freeports under the
immediately preceding paragraph has been lost, such article when
removed from the ecozones or freeports and taken to the customs
territory shall be treated as foreign merchandise entering the country
for the first time, under the provisions of the Tariff and Customs Code
of the Philippines, as amended

Articles produced or manufactured in the ecozones or freeports and
exported therefrom shall, on subsequent importation into the customs
territory, be subject to the import laws applicable to like articles
manufactured in a foreign country.

Articles regulated by law for sale to the domestic market shall only be
allowed to be used or consumed within the ecozones or freeports.
Unless the contrary is shown, merchandise taken out of the ecozones
or freeports shall be considered, for tax purposes, to have been sent
to customs territory.

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Special Economic Zones declared by presidential proclamations or
created by law may avail of the incentives provided herein as
conferred by the appropriate IPA subject to such terms and conditions
as may be provided by law.

b. Tax Treatment of Services in the Ecozones or Freeports. —

1). Sale of service by an entity from the customs territory to a registered
ecozone or

freeport enterprise or by a registered ecozone or freeport enterprise to

another ecozone or freeport enterprise shall be treated as indirect

export, and hence, shall not be subjected to internal revenue taxes for

such transaction

Sale of service by a registered ecozone or freeport enterprise to the

customs territory shall be subject to the applicable internal revenue

laws and regulations.

2)

SEC. 22. Incentives for Registered Domestic Enterprises. - Registered domestic
enterprises shall be qualified to the following incentives to the extent of their
registered activity:


a._ Income tax-based incentive options:
1) Income Tax Holiday (ITH) for a period of four (4) years: then ten
percent (10%) Corporate Income Tax (CIT) rate for ten (10) years if

in 1" to 3° class municipalities; twelve 12 years if located in 4"

ass municipalities;

2) Fifty Percent (50%) reduction from corporate income tax for a period
of fifteen (15) years; or

b. Value-added Tax (VAT) and Customs Duty Treatment on Importation of
Capital Equipment:

1) Exemption from customs duty on importation of capital equipment,
including consignment subject to Section 32 of this Act; and
2) Refund of VAT on importation of capital equipment.

c. Preferential Access to Financing and Acceptable Form of Collaterals.
Registered SMEs shall be accorded access to financing from government
financial institutions at preferential rates below the market rates. Further,
capital goods acquired from loans secured from government financial
institutions shall be an acceptable form of collateral for the same loan

d. Assistance in the Preparation of Project Study. — Registered SMEs may
be provided assistance in the preparation of project study for purposes of
registration under this Act.

e. Employment of Foreign Nationals. — Subject to the provisions of Section
24 of Commonwealth Act No. 613, as amended. a registered domestic
strategic’ enterprise may employ foreign nationals in managerial
technical or advisory positions.

Foreign nationals under employment contract within the purview of this
incentive, their spouses and unmarried children under twenty-one (21) years of age,
who are not excluded by Section 29 of Commonwealth Act No. 613, as amended,
shall be permitted to enter and reside in the Philippines during the’period of
employment of such foreign nationals.

SEC. 23. incentives for Domestic “Strategic” Enterprises. — Registered domestic
enterprises engaged in strategic projects, as defined under Section 18 of this Act
may avail of the following incentives, whenever applicable, to the extent of their
registered activity
a. Income Tax Holiday (ITH) for a period of eight (8) years. Thereafter, fifty
percent (50%) reduction from corporate income tax for a period of
seventeen (17) years.
b. Value-added Tax (VAT) and Customs Duty Treatment on Importation of
Capital Equipment. —
1) Exemption from customs duty on importation of capital equipment,
including consignment thereof subject to Section 32 of this Act; and
2) Refund of VAT on importation of capital equipment.

Notwithstanding (a) above, the President, upon recommendation of the
Board, may grant to highly strategic projects ITH for a period up to fifteen (15) years
and thereafter, five percent (5%) tax on GIE, in lieu of all national and local taxes
except RPT on land owned by private developers and such other incentives as may
be determined; Provided that, such projects meets all the following criteria:

a. Large capital investments of at least two billion US dollars (USD2 billion);

b. Generate sizeable employment of at least ten thousand (10,000) direct

employees;

c. Use of new and internationally accepted high level of technology; and

d. Creation of value-added.


The amount of capital investment and employment generation shall be
reviewed every five (5) years. Inno case shall the requirements prescribed above be
reduced.

SEC. 24. Incentives for Registered Domestic Enterprises in Mindanao and in the
Thirty Poorest Provinces outside of Mindanao or Less Developed Areas (LDAS). —
Registered domestic enterprises located in Mindanao, the thirty poorest provinces
outside of Mindanao and LDAs, shall have the following incentives:
a. Income based incentive options. -
1) Income Tax Holiday (ITH) for a period of six (6) years; then ten
percent (10%) Corporate Income Tax (CIT) rate for nineteen (19)
years; or
2) Five Percent (5%) Tax on Gross Income Earned (GIE) in lieu of all
national and local taxes, except RPT on land owned by private
developers, for a period of twenty five (25) years;

b. Value-added Tax and Customs Duty Treatment on Importation of Capital
Equipment—
1) Exemption from customs duty on importation of capital equipment,
including consignment thereof subject to Section 32 of this Act; and
2) Refund of VAT on importation of capital equipment

c. Special Realty Tax Rates on Equipment and Machinery - Realty and other
taxes on civil works, equipment, machinery, and other improvements by a
registered enterprises actually and exclusively used shall not exceed one
and a half percent (1.5%) of their original cost less accumulated normal
depreciation or net book value.

SEC. 25. incentives for Private Ecozone and Domestic industrial Zone Developers. —
Private ecozone and domestic industrial zone developers may avail of the incentives
provided in Section 22 of this Act.

SEC. 26. incentives for Registered Enterprises in Supply Chain Cities. - Registered
enterprises located in the supply chain cities shall be granted incentives provided
under Sections 20 and 21 hereof. A registered enterprise under the supply chain city
‘engaged in manufacturing may subcontract a portion of its manufacturing processes
to its affiliated entities outside the Philippines. Moreover, a registered enterprise may
book sales in the Philippines which sales include others undertaken partially outside
the Philippines by its affiliated entities.

SEC. 27. Non-fiscal Incentives. ~ Registered enterprises shall be entitled to the
following non-fiscal incentives:

a. Time-bound Processing of Requirement for Doing Business. - All
application for permits, licenses, authorization and other requirements
necessary for doing business including application for renewals thereof
‘shall be acted upon by the government agency concerned within ten (10)
working days from official acceptance thereof, otherwise, the same shall
be considered automatically approved. For this purpose, all
government agencies shall be mandated to post in their
Tespective offices, the procedural process, documentation requirements
and the imposable fees to be paid to facilitate the processing of the
application.

b. Simplification of Customs and internal Revenue Procedures. — Customs
procedures for the importation of equipment, spare parts, raw materials


and supplies, exports of processed products by registered enterprises
shall be simplified by the BOC.

The BIR shall simplify intemal revenue procedures for the
availment of incentives provided herein for registered enterprises.

¢. Reduction and Harmonization of Documentary Requirements Submitted
to Government Agencies. - The Board shall formulate guidelines for the
reduction and harmonization of related documentary requirements
submitted to government agencies,

d. Employment of Foreign Nationals. — Subject to the provisions of Section
25 of Commonwealth Act No. 613, as amended, a registered domestic
“strategic’ enterprise may employ foreign nationals in managerial,
technical or advisory positions,

Foreign nationals under employment contract within the purview of
this incentive, their spouses and unmarried children under twenty-one (21)
years of age, who are not excluded by Section 29 of Commonwealth Act
No. 613, as amended, shall be permitted to enter and reside in the
Philippines during the period of employment of such foreign nationals.

SEC. 28. Entitlement to investor's Visa by @ Foreign National. — A foreign national
who invests an amount of at least USS150,000, either in cash and/or equipment, in a
registered enterprise shall be entitled to an Investor's Visa: Provided, That

a. Heis atleast eighteen (18) years of age;

b. He has not been convicted of a crime involving moral turpitude;

¢. He is not afflicted with any loathsome, dangerous or contagious disease;

and

d._He has not been institutionalized for any mental disorder or disability

Provided, further, That as a holder of the Investor's Visa, an alien shall be
entitled to reside in the Philippines while his investment subsists. For this purpose, he
should submit an annual report, in the form duly prescribed for the purposé, to prove
that he has maintained his investments in the country. Should said alien withdraw his
investments from the Philippines, then the Investor's Visa issued to him shall
automatically expire.

The minimum amount for investment provided for under this Act shall be
made applicable to visas granted to investors by the BOI, the PEZA, the SBMA, the
CDC, the JHMC, the PPMC, and other IPAs that may be created under the law.

The investment amount heretofore stated shall be subject to a periodic review
every three (3) years by the BO!

CHAPTER Ill
AVAILMENT OF INCENTIVES

SEC 29. Income Tax-Based Incentives. - On availing the income tax-related
incentives, the BIR shall require a registered enterprise to secure a Certificate of
Eligibility from the appropriate IPA and attach the same to its Income Tax Return
(ITR) or Annual Information Retum (AIR), whichever is applicable. Thereafter, the
registered enterprise shall file its claim with the appropriate IPA for validation. The
IPA shall endorse the result ofits validation to the BIR after one year from the filing of
a claim for ITH by the registered enterprise.

Failure to secure and attach the certification to the ITR or AIR, and/or file the
ITH availment for validation by the appropriate IPA shall cause the forfeiture of the
ITH availment for the taxable period.

Within six (6) months from the effectivity of this law, the BIR shall review its
regulations on the computation of GIE to ensure that only direct costs, or cost of
goods sold and/or services rendered, shall be deductible from gross revenues, and
recommend stricter rules to the Secretary of Finance if warranted.


SEC. 30. Fifty Percent (50%) Reduction from Corporate Income Tax. - In computing
the net taxable income for this incentive, the enterprise may be entitled to deduct the
following expenses, in addition to ordinary and necessary business expenses
allowed under the NIRC of 1997, as amended:

a. Enhanced Net Operating Loss Camy-over (NOLCO) — The net operating
loss of the registered activity during the first five (5) years from the start of
commercial operation which had not been previously offset as deduction
from gross income may be carried over as deduction from gross income
for the next five (5) consecutive taxable years immediately following the
year of such loss.

b. Accelerated Depreciation — Plant, machinery, and equipment that are
reasonably needed and actually used for the production and transport of
goods and services may be depreciated using a rate not exceeding twice
the rate which would have been used had the annual allowance been
computed in accordance with the rules and regulations prescribed by the
Secretary of Finance and the provisions of the NIRC of 1997, as
amended.

©. Double Deduction for Training Expenses — Expenses incurred for local
training given to employees for the development of skills, identified as
necessary by the appropriate government agencies and approved by the
concemed IPA, may be claimed as deduction from gross income to the
extent of two hundred (200%) percent of the actual amount of expenses
incurred: Provided, That the training expense shall be deductible on the
taxable year the said training expenses were incurred: Provided, further,
That the concemed IPA shall issue the corresponding certificate of
entitlement for its incentive upon filling of an application, otherwise. the
training incentive shall be deemed waived. 2

d. Double Deduction for Research and Development — Expenses incurred
for research and development conducted in the Philippines relating to the
business shall entitle the registered enterprise to a special deduction from
taxable income equivalent to two hundred (200%) percent of the total
expenses over and above the allowable ordinary and business deductions
for said expenses under the NIRC of 1997, as amended, Provided,
That the expenses for research and development shall be deductible
from gross income on the taxable year the said research and
development expenses were incurred, Provided, further, That the
concerned IPA shall issue the corresponding certificate of entitlement for
this incentive upon fing of an application, otherwise, the research and
development incentive shall be deemed waived.

SEC. 31. Five Percent (5%) Tax on Gross income Eamed (GIE). In computing the
total five percent (5%) tax rate to be imposed, GIE shall refer to gross sales or gross
revenues derived from the business activity, net of sales discounts, sales returns and
allowances and minus cost of goods sold/cost of services or direct costs but before
any deduction is made for administrative, marketing, selling expenses or incidental
losses during a given taxable period,

The 5% tax on GIE shall be paid and remitted by registered enterprises
located inside the ecozone or freeport in accordance with the existing sharing
allocations provided in the IPAs respective charters. For registered enterprises
located outside the ecozones or free ports, the tax on GIE shall be paid and remitted
as follows:

2% to the National Government

2% to the Province or City where the project is located


4% to the Municipality or City where the project is located

SEC. 32. VAT and Customs Duties Exemption on Capital Equipment. importation of
capital equipment, including consignment thereof, by registered enterprises may be
exempted to the extent of one hundred percent (100%) of the VAT and customs
duties provided that the following conditions are complied with
a. The capital equipment is directly and/or reasonably needed and will be
used exclusively in the registered activity of the registered enterprise
unless prior approval of the IPA is secured for the part time utilization of
said equipment in a non-registered activity to maximize usage thereof or
the proportionate taxes and duties are paid on a specific equipment and
machinery being permanently used for non-registered activities; They are
not manufactured domestically in sufficient quantity, of comparable quality
and at reasonable prices; and
b. The approval of the IPA was obtained by the registered enterprise for the
importation of such machinery, equipment and spare parts.

Approval of the IPA must be secured before any sale, transfer or disposition
of the imported capital equipment is made: Provided, That, if such sale, transfer or
disposition is made within the first five (5) years from date of importation, any of the
following conditions must be present

a. If made to another enterprise enjoying tax and duty exemption on

imported capital equipment;

b. If made to another enterprise, upon payment of any taxes and duties due

on the net book value of the capital equipment to be sold;

¢. Exportation of capital equipment, machinery, spare parts or source

documents or those required for pollution abatement and control; or

d. For reasons of proven technical obsolescence

‘When the aforementioned sale, transfer or disposition is made under any of
the conditions provided for in the foregoing paragraphs other than paragraph (ii), the
registered export enterprise shall not pay the taxes and duties waived on such items:
Provided, further, That if the registered enterprise sells, transfers or disposes the
aforementioned imported items without prior approval within five (5) years from the
date of importation, the registered enterprise and the vendee, transferee, or assignee
shall be solidarily liable to pay twice the amount of the tax and duty exemption given
it’ Provided, finally, That even if the sale, transfer or disposition of the capital
equipment is approved after five (5) years from the date of importation, the registered
enterprise is stil liable to pay the taxes and duties based on the net book value of the
capital equipment if it has violated any of its registration terms and conditions;
otherwise, it shall no longer be subject to the payment of the taxes and duties waived
thereon

SEC. 33. VAT Refund Mechanism on Importation of Capital Equipment and/or raw
materials. - The VAT paid on imported capital equipment and/or raw materials may
be refunded provided that the imported items are used exclusively by the registered
enterprise pursuant to its registered activity.

In order to facilitate the immediate processing, clearance and release of VAT
refund as provided in this Act, a Trust Liability Account (TLA) is hereby authorized to
be established in the Bureau of Treasury (BTr). All VAT payments pertaining to the
importation of registered enterprises of capital equipment or raw materials shall be
deposited in the TLA for the purpose of funding valid VAT refund claims. The claims
for VAT refund shall be made by the registered enterprise to the DOF - One Stop
Shop Tax Credit and Duty Drawback Center (DOF-OSS) which, in turn, will process,
approve and release the VAT refund.


A registered enterprise shall file a claim for VAT refund within one (1) year
‘from the date of actual exportation. All amounts paid but no longer allowed for refund
‘shall immediately accrue to the general fund of the National Government.

All applications for VAT refund shall be processed and acted upon within
thirty (30) days after submission of complete documents. The refund shall be in a
form of cash or managers/cashiers check payable to the registered export enterprise.

In cases of dispute under the VAT refund mechanism provided in this section,
the pertinent provisions of the National Internal Revenue Code of 1997, as amended,
and the Tariff and Customs Code of the Philippines, as amended, shall apply.

CHAPTER IV
REGISTRATION OF ENTERPRISES

SEC. 34. Qualifications of a Registered Enterprise. - To qualify for registration and
be entitled to avail of incentives, an applicant must satisfy the following conditions:

a. He is a citizen of the Philippines. In case the applicant is a natural
person, or in case of a corporation or partnership or any other
association, regardless of nationality, it
must be organized and/or registered and existing under Philippine laws
and that it must comply with all the qualifications provided under this Act
Provided, however, That for purposes of this Act and any law to the
contrary notwithstanding, a naturaLborn ASEAN citizen or a corporation
effectively controlled by ASEAN cifizens, or a corporation organized in any
ASEAN country shall be considered as a Philippine investor: Provided,
further, That the investment is made in an activity where the Constitution
does not specifically require Filipino participation;

b. The activity it will engage in is not within the activities reserved by the
Constitution to Philippine citizens or corporations owned and cchtrolled by
Philippine citizens:

¢. It will engage in an activity included in the IPP or in an export activity or in
an activity located in supply chain cities, thirty (30) poorest provinces or
LDAs or in an activity considered as “strategic project”

d. It will infuse new investments. For this purpose “new investments” shall
mean a new enterprise infusing new investments and undertaking new
activity. However, an enterprise with an existing operation may be
qualified for registration if it will undertake new activity. Further, an
existing enterprise undertaking the same activity that shall infuse
additional investments of at least fifty percent (50%) of its present actual
investments shall be deemed to be “new investments” but only to the
extent of such additional investments; and

e. If the applicant is engaged or proposes to engage in undertakings or
activities other than the registered projects, it shall install adequate
accounting system that shall identify the investments, revenues, costs,
and profits or losses of each registered project undertaken by the
enterprise separately from the aggregate investment, revenues, costs and
profits or losses of the whole enterprise, or establish a separate
corporation for each registered project if the IPAs should so require, to
facilitate proper implementation of this Act.

CHAPTER V
BASIC RIGHTS AND GUARANTEES OF REGISTERED ENTERPRISES


SEC. 35. Protection 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

a. 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
and at the exchange rate prevailing at the time of repatriation, subject to
the provisions of Section 74 of Republic Act No. 265, otherwise known as
the “Central Bank Act’, as amended

For investments made pursuant to Executive Order No. 32, series
of 1986, entitled “Directing the Establishment of a Program for the
Conversion of Philippine External Debt into Equity Investments’, and its
implementing rules and regulations, the repatriation of investments shall
be as provided therein

b. Remittance of Eamings. — In the case of foreign investments, the right to
remit earings 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, as amended.

For investments made pursuant to Executive Order No. 32, series
of 1986, and its implementing rules and regulations, the remittance of
earnings shall be as provided therein

¢. Foreign Loans and Contracts. — The right to remit at the prevailing rate 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 at the exchange rate
prevailing at the time of remittance, subject to the provisions of Section 74
of Republic Act No. 265, as amended.

d. Freedom from Expropriation. — There shall be no expropriation by the
government of the property represented by investments or of the property
of the enterprise except for
public use, public interest, lawful purpose, or in the interest of national
welfare or 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 at the
time of remittance, subject to the provisions of Section 74 of Republic Act
No. 265, as amended.

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 national
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, as amended.

CHAPTER V
ADMINISTRATION OF INCENTIVES

SEC. 36. Application for Registration. — Applications shall be filed with an IPA or any
other government office authorized by the BOI to accept applications, recorded in a


registration book and the date appearing therein and stamped on the application
shall be considered the date of official acceptance.

All applications and their supporting documents filed under this Act shall be
confidential and shail not be disclosed to any person except with the consent of the
applicant or upon an order of a court of competent jurisdiction

SEC. 37. No Double Registration of Enterprises. - Export or domestic enterprises
shall not be allowed to register their export or domestic activity in more than one (1)
IPA. In the event that an enterprise shall transfer to another IPA, only the remaining
unutilzed incentives shalll be granted to the enterprise or the transferee.

SEC. 38. Criteria for Evaluation of Application. - The following criteria shall be
considered in the evaluation of applications for registration under a preferred area:

a. Impact of the project on the overall economy;

b. Overall viability of the project;

¢. The extent of employment generation;

d. The extent to which technological advances are applied and adopted to

local conditions; and
e. Such other criteria as the Board may determine.

SEC. 39. Environmental Protection and Corporate Social Responsibility. — Every
registered enterprise shall prepare a Program for Environmental Protection and
Corporate Social Responsibility (CSR) covering the period for its entitlement to fiscal
incentives. Such Program shall be undertaken on a per registration basis and shall
be submitted as an accompanying document to the application for registration to be
submitted to the appropriate IPA.

The environmental program shail include activities such as, but not limited to,
requiring registered firms to plant trees.

For the CSR activities, the registered enterprise shall align such activities with
the priority programs and projects of the National Anti-Poverty Commission and other
special laws such as Republic Act No. 7942 or the Philippine Mining Act of 1995, as
amended and DOE Energy Regulation 1-94.

The amount spent for the CSR activities shall be reflected in the Notes to the
Audited Financial Statements

SEC. 40. Approval and Registration Procedures. - The IPA is authorized to adopt
rules and regulations to facilitate action on applications filed with it; prescribe criteria
for the evaluation of applications; devise standard forms for the use of applicants and
delegate to the regional offices of the DTI the authority to receive and process
applications for enterprises located in their respective regions.

Applications filed shall be considered automatically approved if not acted
upon by the IPA within ten (10) working days from official acceptance thereof,
Determent by the IPA shall be considered as an official action: Provided, however,
That the IPA may defer action to a specific application not more than twice: Provided,
finally, That the IPA shall act upon the application within ten (10) working days from
compliance with the cause of the last deferment

SEC. 41. Certificate of Registration. - A registered enterprise under this Act shall be
issued a Certificate of Registration under the seal of the IPA and the signature of its
Chairperson and/or such other official or officer of the IPA as it may empower and
designate for the purpose. The certificate shall be in such form and style as the IPA
may determine and shall state, among other matters:

a. The name of the registered enterprise:

b. The activity in which the registered enterprise is proposing to engage; and


¢. The terms and conditions to be observed by the registered enterprise by
Virtue of the registration

SEC. 42. Extension of Period of Availment of incentives. - The availment period of
the incentives provided herein may be extended by the concerned IPA in the event
that the registered enterprise has suffered operational force majeure or losses that
have impaired the viability of the registered activity

SEC. 43, Administration of Incentives. — The BOI, the PEZA and the other IPAs shall
be responsible for the administration of incentives granted to their respective
registered enterprises.

TITLE IV
FINAL PROVISIONS

SEC. 44, Vested Right. - Any provision of law to the contrary notwithstanding,
incentives granted to existing registered enterprises pursuant to their certificates of
registration, contracts or agreements entered into with government
instrumentaiities/corporations shall continue to be legally binding in accordance with
the terms and conditions stated therein. Provided, further, That, the registered
enterprise may opt to be governed by the provisions of this Act, Provided, however,
That, only the remaining unutilized incentives shall be granted to the said enterprise
in such case, said enterprise shall be required to surrender its certificate of
registration, which shall be deemed as an express waiver of their privilege to apply
for and avail of incentives provided in the incentives law, under which they were
previously registered.

SEC. 45. Authority to Retain Funds. — Registered enterprises availing of fiscal
incentives, except those located in the thirty (30) poorest provinces or LDAS, shall be
assessed with a maximum fee of one percent (1%) of the amount of incentives
granted. Said amount shall automatically accrue to the BO! to be allotted for
investment promotions activities and other special projects to achieve the objectives
of this Act, subject to the usual accounting and auditing rules and procedures.

SEC. 46. Protection of the Environment. — The IPAs, in coordination with the
appropriate agencies, shall take appropriate steps to enact the proper measures for
the protection of the environment, and shall coordinate with the Environmental
Management Bureau of the Department of Environment and Natural Resources
(EMB-DENR) to avoid undue delay in the issuance of the required Environmental
Compliance Certificate (ECC): Provided, however, That applications for
environmental clearances, permits, and/or licenses of registered enterprises shall be
acted upon by the appropriate government agency within thirty (30) days from date of
official acceptance. In the event that the appropriate government agency failed to act
within the aforementioned date, the application for the said environmental
requirement shall be deemed complied with for purposes of operation of the
registered activity.

SEC. 47. Appeals. — All orders or decisions of the IPA in cases involving the
provisions of this Act shall be immediately executory. No appeal from the order or
decision of the IPA by the party adversely affected shall stay such order or decision,
unless a supersedeas bond equivalent to the amount stated in the order or decision
is posted by the appellant

All appeals involving cases decided by the IPA, except as provided in the next
succeeding paragraph, shall be filed with the Court of Appeals within fifteen (15) days
from receipt of notice of the order or decision or of the denial of the appellant's


motion for new trial or reconsideration. Within the same period, the aggrieved party
may file a motion for reinvestigation or reconsideration. Only one (1) motion for
reconsideration shall be allowed, subject to the posting of the aforementioned
supersedeas bond which shall be limited to cash and/or surety bond from a BOI
accredited bonding company

in cases involving the denial of an application for registration, the party
adversely affected by such denial may appeal the same to the Office of the President
within thirty (30) days from receipt of notice of the order denying the application for
registration. Where an appeal has been filed, said order or decision shall be final and
executory ninety (90) days after the perfection of the appeal, unless reversed.

SEC. 48. Suspension and Forfeiture of Incentives of Registered Enterprises, Refund
and Penalties. - When there is probable cause to believe that the registered
enterprise has violated its registration terms and conditions, the BO! or the IPA may
Suspend its availment of incentives, until proven otherwise.

The BO! or the IPA may impose fines and penalties and/or forfeit the
incentives granted to its registered enterprises whenever there are violations of the
registration terms and conditions by the latter, without prejudice to the cancellation of
the registration of said enterprise.

Ih case of cancellation of the Certificate of Registration granted under this
Act, the BOI or the IPA may, in appropriate cases, require the refund of incentives
availed of and impose corresponding fines and penalties.

Any enterprise which violates any provision of this Act, its implementing rules
and regulations, the terms and conditions of its registration, or of any lawful directive
of the BOI or the IPA, shall be subject to a fine not to exceed One million pesos
(P1,000,000.00), without prejudice to the disapproval of its application for registration
or cancellation of its registration: Provided, That any willful commission of fraudulent
misrepresentation in its application for registration or submission of reports or gross
violation of this Act and its implementing rules and regulations, a fine of af least One
million pesos (P1,000,000.00) but not to exceed Ten million pesos (P10,000,000.00)
shall be imposed, in addition to other penalties that may be imposed by the BO! or
the IPA

The IPAs shall prepare a schedule of fines and penalties to be imposed on
erring registered enterprises depending on the violation incurred, which may be
reduced in exceptional cases,

Responsible officers of such enterprises, including duly appointed external
consultants-agents who knowingly commit, aid or abet the commission of any of the
acts mentioned above. shall be subject to a fine of not less than One hundred
thousand pesos (P100,000.00) but not more than Three hundred thousand pesos
(P300,000.00) without prejudice to disqualification from appearing or doing business
with the BOI or any IPA.

Government officers and employees who participate directly or indirectly in
the commission of the foregoing acts shall likewise be liable to a fine of not less than
One hundred thousand pesos (P100,000.00) but not more than Three hundred
thousand pesos (P300,000.00), in addition to any criminal and administrative
penalties imposable under the Civil Service Law, Revised Penal Code, Republic Act
No. 3019, otherwise known as the “Anti-Graft And Corrupt Practices Act’, Republic
Act No. 6713, otherwise known as the “Code Of Conduct And Ethical Standards For
Public Officials’, and other applicable laws.

If the offender is a foreign national, in addition to the imposable fines and
penalties above, the foregoing acts shall be grounds for summary deportation

SEC. 49, Disposition of Savings from the Implementation of this Act. ~ The total
amount of savings to be generated from the implementation of this Act shall be


allocated annually and used exclusively for the provision of scholarships under the
CHED.
Such allocations shall be segregated as separate trust funds by the National
Treasury and shall be over and above the annual appropriations for similar purposes.
The earmarking provided under this provision shall be observed for ten (10)
years starting from the effectivity of this Act

SEC. 50. implementing Rules and Regulations (IRR). ~ The BOI in coordination with
DOF, NEDA, DBM, PEZA, other IPAs and other concerned government agencies,
shall promulgate rules and regulations to implement the intent and provisions of this
Act within one hundred twenty (120) days from the effectivity of this Act. Such rules
and regulations shall take effect fifteen (15) days following its publication in a
newspaper of general circulation in the Philippines,

SEC. 51. Transitory Provision. - Until the IRR of this Act takes effect, the present
rules and regulations under the old investments laws shall apply to the extent that
they are not inconsistent with the provisions of this Act.

SEC. 52. Separability Clause. — The provisions of this Act are hereby declared to be
‘separable and, in the event any of such provisions is declared unconstitutional, the
other provisions which are not affected thereby, shall remain in force and effect.

SEC. 53. Survivor Clause. - (a) The provisions of this Act to the contrary
notwithstanding, the following laws, decrees and orders shall continue to have full
force and effect

a. Section 18(f) of Presidential Decree No. 66, otherwise known as “Creating
the Export Processing Zone Authority and Revising Republic Act No.
5490";

b. Section 1 of Republic Act No. 9281 entitled, “An Act to Strengthen
Agriculture and Fisheries Modernization in the Philippines by Extending
the Effectivity of Tax Incentives and its Mandated Funding Support,
Amending for this Purpose Sections 109 and 112 of Republic Act No.
8435";

c. Section 10(1) to (6) of Republic Act No. 7156, otherwise known as “An Act
Granting Incentives to Mini-Hydro Electric Power Developers and for other
Purposes (Mini-Hydroelectric Incentive Act)’;

d. Sections 10, 16(a), (b) and (c) and Section 17(a) to (e) of Presidential
Decree No. 972, as amended by Presidential Decree No. 1174, otherwise
known as “Promulgating an Act to Promote an Accelerated Exploration,
Development, Exploitation, Production and Utilization of Coal’;

e. Section 12 of Presidential Decree No. 87, otherwise known as “An Act to
Promote the Discovery and Production of Indigenous Petroleum, and
Appropriating Funds Therefor’,

f. Section 4 (a) and (d) of Presidential Decree No. 1442, as restored by
FIRB Resolution 19-87, otherwise known as “An Act to Promote the
Exploration and Development of Geothermal Resources”.

g. Chapter Il, Section 4(A), (B), (C) and (D); and Chapter Vill, Section 19(A),
(B) and (C) of Republic Act No. 9295, Entitled "An Act Promoting the
Development of Philippine Domestic Shipping, Shipbuilding, Ship repair
and Ship Breaking, Ordaining Reforms in Government Policies Towards
Shipping in the Philippines and for other Purposes”. and

h. Republic Act No. 7903, otherwise known as the “Zamboanga City Special
Economic Zone Act of 1995,” Republic Act No. 7922, otherwise known as
the “Cagayan Special Economic Zone Act of 1995,” Republic Act No.
9490, otherwise known as the “Aurora Special Economic Zone Act of


2007," and Republic Act No. 9728, otherwise known as the "Freeport Area
of Bataan Act of 2009".
Provided, That grantees or operators under their respective laws, decrees
and orders shall have the option to avail of the incentives provided under this Act.

SEC, at Repealing Clause. — The following provisions are hereby repealed
Books |, V and VI of Executive Order No. 226, series of 1987, otherwise
known as “The Omnibus Investments Code of 1987",

b. Section 24 of Republic Act No. 7916, otherwise known as “An Act
Providing for the Legal Framework and Mechanisms for the Creation,
Operation, Administration and
Coordination of Special Economic Zones in the Philippines, Creating for
the Purpose the Philippine Economic Zone Authority (PEZA), and for
other Purposes (Special Economic Zone Act of 1995)’

¢. Section 17(1), (2). (3), (4), (5), (6), (7), (8) and Section 18 (a), (b) and (c)
of Presidential Decree No. 66, otherwise known as “Creating the Export
Processing Zone Authority and Revising Republic Act No. 5490",

d. Fourth paragraph of Presidential Decree No. 529 (restored by FIRB
Resolution 19-87), otherwise known as “Granting to Petroleum
Exploration Concessionaires under the Petroleum Act of 1949 Exemption
from Customs Duty and Compensating Tax on importations of Machinery
and Equipment, Spare Parts and Materials Required for Their Exploration
Operations”:

€. Sections 8, 9 and the second sentence of the first paragraph and second
paragraph of Section 10 of Presidential Decree No. 538, otherwise known
as “Creating and Establishing the PHIVIDEC Industrial Authority and
Making ts Subsidiary Agency of the Philippine Veterans Investment
Development Corporation Defining Its Powers, Functions and
Responsibilities, and for Other Purposes”. °

f. Section 36(e) and (f) (1) and (2) of Presidential Decree No. 705, otherwise
known as the “Revised Forestry Code”,

g. Section 16 (c) and (d), and Section 17 of Republic Act No. 7844,
otherwise known as “An Act to Develop Exports as a Key Towards the
Achievement of the National Goals Towards the Year 2000 (Export
Development Act of 1994)"

h. Chapter XVI, Sections 90, 92, 93(a) and (b) of Republic Act No. 7942,
otherwise known as the “Philippine Mining Act of 1995";

i. Section 9 of Republic Act No. 8479, otherwise known as the “Downstream
Oil Deregulation Act of 1998”;

j. Chapter Il, Article I, Section 35(b), (c) and (d) of Republic Act No. 8550,
otherwise known as “The Philippine Fisheries Code of 1998";

k. Section 5 of Proclamation No. 216, otherwise known as “Creating and
Designating the Area Covered by the Former Wallace Air Station and
Contiguous Areas in Poro Point as the Poro Point Special Economic and
Freeport Zone and Transferring Lands to the Bases Conversion
Development Authority pursuant to Republic Act No. 7227";

Section 6 of Proclamation No. 984, otherwise known as “Creating and
Designating the Municipality of Morong, Province of Bataan, including the
Area of Philippine

Refugee Processing Center Complex (PRPCC) as the Morong Special
Economic Zone pursuant to Republic Act No. 7227 and transferring the
land comprising the PRPCC to the Bases Conversion Development
Authority (BCDA)":

|. Executive Order No. 528, series of 2006, Amending Executive Order No.
31, series of 2004, “Reducing the Rates of Duty on Capital Equipment,


Spare Parts and Accessories Imported by BOlregistered new and
Expanding Enterprises”:

m. Section 1 of Executive Order No. 619, otherwise known as “Creating and
Designating Special Economic Zones Pursuant to Republic Act No. 7916,
as Amended by Republic Act No. 8784, in Relation to Republic Act No.
7227, as Amended by Republic Act No. 9400, Inside the Clark Freeport
Zone”; and

n. Allother laws, acts, decrees, orders and issuances or provisions thereof
inconsistent with any of the provisions of this Act are hereby repealed or
modified accordingly,

SEC. 55. Effectivity. - This Act shall take effect fifteen (15) days following its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,