FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
BO" 938

House Bill No._

Introduced by Representative Susan A. Yap

EXPLANATORY NOTE

Following the global economic downturn that brought the economy almost to a stop in
2009, the country is now in need of fuel to spur growth in order to help the economy back on
its feet. One of which takes the form of investments that should be able to facilitate economic
activity in the country. Indeed, empirics will show the positive correlation between
investments and economic growth, which has been earlier posited by economic literature.

In fact, even the 1987 Philippine Constitution acknowledged the significant role of the
private sector, endeavoring optimum provision of opportunities to encourage its expansion, It
is thus in the best interest of the country to enhance its competitiveness in the global economy
through investment promotion and industrial development activities geared towards
employment generation and countrywide development.

In view of such objectives, the government has put in place an array of incentives to
encourage the inflow investments from the pockets of both domestic and foreign investors,
ranging from the comprehensive Omnibus Investment Code (Executive Order 226 of 1987) to
special laws that seek to prop up industries such as exports and renewable energy, among
others. Therein, however, lays the folly as the plate of incentives has become seemingly
complex, redundant and confusing to prospective investors, as well as an administrative
nightmare for the bureaucracy. Not only that, the government coffers stand to suffer as more
and more tax incentives prevent inflows of revenues. While incentives offer perks for
investors, thus making it desirable to invest in the country, a balance must be achieved
between revenue generation and investment climate. This bill secks to offer this balance by
providing for an updated and coherent investment policy that will enhance the country's
investment programs and strategies but at the same time ensures that incentives are
rationalized to address the problem of too many revenue-leakages.

To start off, the proposed measure distinguishes “strategic” enterprises from the “non-
strategic” enterprises, where the former are seen to create more value-added to the economy.
‘These are in turn, beneficiaries of the perks enjoyed by export enterprises, along with duty and
value added tax (VAT) refunds on their capital equipment and raw material imports.
Meanwhile, non-strategic enterprises - although not entitled to income tax holiday (ITH) or
reduced income tax rate - will get net operating loss carry over (NOLCO), accelerated
depreciation, and double deduction for training expenses, and research and development.

The bill likewise provides “locational incentives” for 20 years to domestic enterprises
setting up shop in the 30 poorest provinces or “less-developed areas”. These include a
reduced income tax, NOLCO, VAT and duty refunds on capital equipment and raw material
imports, accelerated depreciation, and double deduction for training expenses and research
and development.

To carry out the objectives of the said measure, the Board of Investments — the major
implementing agency ~ is given a roster of functions and powers that will improve its service-


delivery, including the formulation of the Investment Priority Plan and provision of assistance
to micro and small enterprises, among other things. Under this agency, the Investment
Promotion Action Center (-PAC) shall be institutionalized to serve as the source of
investment information and as the link to all government agencies to facilitate entry, retention,
expansion and diversification of investments.

SUSA

Representative, 2"*District of Tarlac


FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

938

House Bill'No.

Introduced by Representative Susan A. Yap

‘THE INVESTMENTS AND INCENTIVES CODE OF THE PHILIPPINES

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

assembled:

PRELIMINARY TITLE
CHAPTER I
TITLE AND DECLARATION OF POLICY

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

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:

(@) The State shall pursue a market-responsive investment regime;

(b) The State shall formulate industry and sectoral development programs;

(©) The State shall undertake investment promotion activities;

(@) The State shall grant incentives that are simple to administer, time-bound and
performance-based; and

(©) The State recognizes that industrial peace is essential to attracting investments.

CHAPTER II

ORGANIZATION AND FUNCTIONS OF THE BOARD OF INVE:

MEN

Ss

SEC. 3. The Board of Investments (BO). - ‘The Board of Investments hereinafter referred to as
the "BOI" shall implement the provisions of this Code except as otherwise provided therein.

SEC. 4. Composition of the BO! Board of Govemors, - ‘The BOI 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 DTT
Undersecretary for Investments and Industry Group (JIG), the DTI Undersecretary of International
Trade Group (ITG), the DTI Undersecretary of Regional Operations Group (ROG) and three (3)
representatives from the private sector. The Secretary of the DTI shall concurrently be the
Chairman of the BOI and the D'l Undersecretary for Investments and Industry Group shall be the
concurrent Vice Chairman and Managing Governor of the BOL. The three (3) representatives from
the private sector shall be appointed by the President for a term not exceeding four (4) years:
Pronided, That a governor may be reappointed: Proided, further, That a governor shall serve as such
until his successor shall have been appointed and qualified



‘The Managing Governor of the BOT shall be assisted by two (2) career officials with the
rank of Deputy Managing Governor, who shall be appointed by the Board, upon the
recommendation of the Managing Governor.

Members of the Board shall receive a reasonable per diem for every meeting attended,

SEC. 5, Qualifications of the BOI Board of Governors. - The governors of the BOT 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 economics, business, marketing, advertising,
management or its equivalent.

SEC. 6. Powers and Functions of the Board. - ‘The Board shall be responsible for the regulation
and promotion of investments. It shall hold meetings at least once a week for the conduct of
business or as often as may be necessary upon the call of the Chairman or upon the request of 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. Investment Promotion-Related Functions:

(1) Formulate an evolving National Framework for Investment Promotions (NFIP), that will
govern all Investments Promotion Agencies (IPAs);

(2) Promulgate rules, regulations and poli
IP As and exercise monitoring functions over all investment promotion activities of all IPAs;

(3) Gather, consolidate and monitor investment data and information (both domestic and
forcign direct investments) from all IPAs and other concemed government agencies for submission
to the President and to Congress;

(4) Enter into agreements with other agencies for the simplification of systems and
procedures involved in the promotion of investments, operation of economic zones and registered
coterprises, and other activities necessary for the effective implementation of this Code;

(5) Establish the Investment Promotion Action Center (/PAQ);

(©) Establish and operate regional investment centers in the Philippines, and establish and
operate overseas investment offices.

to implement the NFIP in consultation with all

B. Regulatory Functions:

(1) Formulate an evolving National Framework for Industrial Dev
Promulgate rules, regulation
the private sector:

(3) 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

(4) Formulate positions for bilateral, multilateral and regional investments and investment-
related trade agreements and/or arrangements;

(5) Act on investment projects covered by bilateral, multilateral, and regional agreements
subject to rules and guidelines to be formulated by the Board;

© Recommend to the President the suspension of the nationality requirement provided for
in this Code in appropriate cases such as those involving bilateral, multilateral, or regional
investments, or other trading agreements of the Phikppines 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;

(7) Promulgate rules, regulations and policies on incentives which the IP As are mandated to
implement;

lopment (NFID);
ind policies to implement the NFID in consultation with



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8) Gather, consolidaze and monitor incentives data and information from all [P As and
other concerned government agencies for submission to the President, the DOF and Congress,

(9) Prepare the Investments Priorities Plan (IPP) in accordance with Tide HI, Chapter 1 of
this Code;

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

(11) Prepare an annual list of products and services that are not sufficiently
manufactured /rendered locally;

(12) Assist micro and small enterprises in the preparation of feasibility and other pre
investment project studies;

(13) Regulate the implementation of Regional Operating Headquarters, Retail Trade Law,
Long-Term Lease and other laws as mandaced;

(14) Process and approve, deny, suspend, revoke applications for registration, imposing
terms and conditions as it may deem necessary to promote the purposes of this Code, 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 BOlI-accredited
bonding companies, and payment of application, registration, publication and other fees, when
warranted;

(15) After due notice and hearing, cancel the registration or suspend the incentives of a
registered enterprise and /or require refund of incentives, including interests and monetary penalties;

(16) Establish a medianon center to resolve controversies and/or disputes between
registered enterprises;

(17) After due heating, decide controversies that may arise berween registered enterprises or
investors therein which espouse conflicting interests arising from the implementation of this Code.
The Board shall have the power co 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 t any person whose testimony or documents or other evidence is
necessary or eelevant to the case

Provided, further, That a registered enterprise may file a motion for reconsideration of a
Uecision or final order within Géteen (15) days from notice thereof, with proof of service on the
parties affected. No second motion for reconsideration of a decision or final order by the same party
shall be entertained;

(18) Recommend to the Commissioner of the Bureau of Immigration the employment of
foreign nationals in registered enterprises and the geant of Investor's Visaj

(19) Ascertain by inspec ed reports, the proportion of the participation of
Philippine nationals in a registered enterprise to ensure compliance with the nationality requirements
of Philippine laws to retain registration under this Code or to verily the compliance by registered
caterprises with the terms and conditions of regis

(211) Waive, condone or reduce fines or penaltics imposed on registered enterprises;

(21) Devermine the ox I scructure of the BOL Appoint, discipline or remove its
personnel consistent with the provisions of eivil service laws, rules and regulations; and

») Exercise all the powers necessary or incidental to actain che purposes of this Code and
other laws vesting additional functions on the Board.

or vi

n;

SEC. 7. Appainenient of BOL Personnel, The Managing Governor, upon recommendation of
the Board, shall appoint its personnel subject to civil service laws, rales and regulations. All positions
in the BOI shall be governed by compensation, position classification systems, and qualification
standards approved by the Board based on 2 comprehensive job analysis and audit of actual duties
and responsibilities, ‘The compensation plan shall be comparable with the prevailing compensation
plan of Philippine Economic Zone Authority (PEZ.A) and shall be subject to periodic review by the


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Board without prejudice to yearly merit reviews or increases based on productivity. The BOI shall
therefore be exempt from existing laws, rules and regulations on compensation, position
classification and qualification standards.

SEC. 8. The Investment Promotion Action Center (-PAC), - There is hereby created an i-PAC in
the BOI in place of the current One Stop Action Center (OSAC) created under Executive Order
No. 136, series of 1987, entitled "Establishing the Council for Investment in Trade, Industry,
Tourism, Agriculture, Natural Resources, Transportation, Communication and Services, and for
Other Purposes". The i-PAC shall serve as the source of investment information and as the link to
all government agencies to facilitate entry, retention, expansion and diversification of investments.
The i-PAC shall be composed of all government agencies involved in the establishment ot operation
of business 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
(BD, the Department of Trade and Industry (DTI), the Department of the Interior and Local
Government (DJLG), 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 representatives to the i-
PAC that are clothed with authority to act and approve/deny any matter relative to their respective
agencies

SEC. 9, Powers and Functions of the PAC. - The i:PAC shall exercise and perform the
following powers and functions

(@) 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
ays. In cases of applications not acted upon within ten (J 0) working days, the same shall be
deemed approved: Provided, bowerer, That deferment shall be considered as an action

(©) Recommend the streamlining of existing procedures to ensure that all frontline agencies,
caling with the operation of business, perform their tasks for identified government to business
transactions,

(@ Establish an on-line investment facilitation system.

(©) Act, in coordination with appropriate government offices ot agencies, such as the Office
of the Ombudsman and the Civil Service (C), on complaints filed by any investor or
potential investor against any public official or employee or any office, agency ot 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.

( Perform such other functions as may be directed by the Board.

SEC. 10. Honoraria and Alowames. - The Board shall provide for reasonable honoraria and
allowances for the i-PAC members and its personnel

TITLE I
DEFINITION OF TERMS

SEC. 11. Definition of Terms. - As used herein, the following shall mean:

(2) "BOM" shall refer to the Board of Investments created under this Code.

(b) "Investments promotion agencies (IPAs)" shall include the BOI, the PEZA, the Bases

sion Development Authority (BCDA), the Subic Bay Metropolitan Authority (SBMA), the
lopment Corporation (CDO), the John Hay Management Corporation (HMO), the Poro

Point Management Corporation (PPMC), the Bataan Technology Park Inc. (BTPI), the Cagayan

Economic Zone Authority (CEZA), the Zamboanga City Special Economic Zone Authority



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(ZCSEZA), the PHIVIDEC Industrial Authority (PIA), the Aurora Special Economic Zone
Authority (ASEZA), and all other IPAs that may be created by lnw.

(©) "Registered enterprise” shall mean 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 Code: 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, trucking/forwarding services, parcel services,
janitorial services, security services, insurance and/or banking and other financial services,
consumets 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

(@) "Investments priorities plan (IPP)” shall refer to the list of industries, services and other
economic activities, which will be eligible for incentives under this Code, prepared and determined
as priority or preferred activities in accordance with Title Ill, Chapter I of this Code,

(c) "New product of service” shall refer to any product ot service not locally or not
sufficiently manufactured /rendered to meet the demand.

("Gross income earned” refers to gross sales or gross receipts dei
activity less sales returns, discounts and allowances and cost of goods sold.
‘ax credit” shall mean any credits against taxes and/or duties equal to th i
paid or would have been paid. Tax credit certificate shall be issued by the Secretary of Finance or his
representative, or the concemed IPA, if so delegated by the Secretary of Finance. The tax credit
certificate issued pursuant to this Code shall not be transferable to another registered enterprise
under this Code. In case the industry is in a state of distress, as declared by the Board, the tax credit
certificate held by enterprises of such distressed industry shall be freely transferable. The tax credit
shall be valid only for a petiod of five (5) years from the date of issuance. The tax credit certificate
shall be used to pay taxes, duties, charges and fees due to the national government, except
withholding tax.

(h) "Export sales of goods" shall mean 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;

(2) sales of goods to an export enterprise registered in accordance with this Code; 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 seacrafts

@) sales 0 @ 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

(4) sales of goods to « nonresident buyer, except automobiles and non-essential
goods, manufactured or processed in the Philippines, for delivery to a resident in the
Philippines: Pronided, ‘That they are paid for in acceptable foreign currency. 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
ansport operations of goods, equipment, spare parts and supplies, except fuel, to be used in
the aircraft or seacraft and capital equipment needed for the shipping or air transport
operations, shall be entitled to incentives for export enterprises under this Code. Sales of
locally manufactured or assembled goods for household and personal use under the Internal
Export Program and similar programs of the government shall be ,deemed as “export sales”
@ "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:

(1) services rendered for clients abroad by registered enterprises;

d from the registered



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(@ services rendered for an export enterprise registered in accordance with this
Code; to diplomatic missions and to other agencies or institutions with tax and duty-free
privileges;

(3) 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 Code.

The foregoing nonwithstanding, 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 mean 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. An export trader that
buys and sells for its own account products of micro and small enterprises and earns one hundred
percent (100%) of its annual sales from exports of the same shall be deemed to be an export
enterprise

(&) A "domestic enterprise” shall mean a registered enterprise, which produces goods for sale
\ders services exclusively to the domestic market or does not comply with the minimum export
requirement of an export enterprise.

() "Service enterprise” is an enterprise engaged or proposing to engage in rendering
technical, professional or other services listed in the IPP. Service enterprise that ears more than
seventy percent (70%) of its revenues paid for in foreign currency ated from nonresident
clients shall be entitled to the incentives provided to an "export" enterpri

(m) "Source documents" shall refer to input materials and documents reasonably needed by
information technology (IT) and IT-enabled industries 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 out

(n) "Processing" shall mean converting raw materials into marketable form through physical,
mechanical, chemical, eleettical, biochemical, biological or other means, or by a special treatment ot
a series of actions, such as slaughtering, milling, pasteurizing, drying or desiccating, quick freezing,
that results in a change in the nature oF state of the products. Processing shall include assembly
provided that a distinet or new product is formed. Mete packing ot packaging shall riot constitute
processing.

(0) "Industrial Estate (1F)" 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. It includes government industrial estates such as
the PHIVIDEC Industrial Authority

(p) "ECOZONES" or "Special economic zones (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, tourist/recreational, 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
(Es), export processing zones (EPZs), supply chain cities, ICT parks and centers, free trade zones
and tourism estates: Prowided, however, That areas where mining operations are undertaken shall not be
declured as ecozones

(q) "Ecozone developer” shall refer to a business entity duly registered with the PEZA to
develop, operate and maintain an ecozone that will put up the required infrastructure facilities and
tilities, 10 include among others, light and power system, water supply and distribution system,
sewerage and drainage system, pollution control devices, communication facilities, paved road

or rei



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network, administration building, standard factory buildings, and other facilities as may be required
by enterprises registered with the PEZ.A.

(© "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.

(9) "Freeport" is an isolated and policed area adjacent to a port of entry as defined by Section
3519 of the Tariff and Customs Code, which shall be operated and managed as a separate customs
territory to ensure free Mow 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 of stored, repacked, sorted, mixed or otherwise manipulated without being
subject to taxes and duties.

(0 "Tourism estate” is a tract of land with defined boundaries, suitable for development into
an integrated resort complex to render tourism services for both local and foreign tourists, travelers
and investors, with prescribed carrying capacities, of tourist facilities and activities such as, but not
limited to, sport, gaming and recreation centers, accommodations including hotels, apartelles, tourist
inas/villas, pension houses, convention and cultural facilities, food and beverage outlets, commercial
establishments and other special interest and attraction activities /establishments, and provided with
roads, water supply facilities, power distribution facilities, drainage and sewage systems, and other
necessary infrastructures and facilities. A tourism estate shall be under unified and continuous
management, and can either be a component of an ecozone or the whole ecozone itself.

(u) "ICT park" or "information and communications technology (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, 2s well as amenities required
by professionals and workers involved in ICT enterprises, or easy access to such amenities.

(v) "ICT center" shall refer co a building which has been developed by public or private
corporate entities to provide infrastructure and other support facilities required by ICT enterprises,
‘as well. as amenities required by professionals and workers involved in ICT’ enterprises, or easy
access to such amenities

(w) "Capital equipment" refers to machinery, equipment, and 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,

(x) "Supply chain city" shall refer to a self-contained zone that includes manufacturing
facility with hub operations in an economic zone, The manufacturing facility covers whole ot partial
operations, and the hub operations include Business Process Outsourcing (BPO) in support of the’
manufacturing activity of the registered enterprise, 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.

(y) "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
incloding its accessibility to developed urban centers

TILE tl
INVESTMENTS WITH INCENTIVES

CHAPTER |
QUALIFIED ACTIVITIES

SEC. 12. Investments Priorities Plan (PP). - The BOI, upon consultation with the Office of the
President, concerned IPAs and appropriate government agencies and the private sector, shall


formulate the IPP to be submitted to the President for his/her approval. In the listing of the activity
in the IPP, the following shall be complied with:
(@) The activity shall be covered by the current Medium Term Philippine Development Plan
(MIPDP) 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 modern or new technology; or
4) Installation of adequate environmental protection systems: Provided, That items b(
1) and b( 4) above shall be present in all activities, and the threshold amount of investments
and employment generation required for a specific activity shall be subject to a periodic
review every three (3) years taking into consideration international standards and other
indicators,
(€) The activity must comply with the specific qualification requirements and/or conditions
for a particular sector or industry as set by the Board and other limitations the Board may determine.

13. 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
red area. or after approval of its deletion as a preferred area of investment in the IPP.

SEC. 14. 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 de the areas of investment
shall be published in at least one (1) newspaper of general cizculation and all such areas shall be open
for application until publication of an amendment ot deletion thereof.

SEC. 15. 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 eshibits 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) creation of value-added.

CHAPTER II
INCENTIVES TO REGISTERED ENTERPRISES

SEC. 16. Performance-Based Incentives. - This Act shall provide two (2) types of performance-
based incentives to qualified enterprises, as herein classified: (1) the direct taxes incentives such as,
Net Operating Loss Carryover (NOLCO), a accelerated depreciation and double deduction for
training expenses and double deduction for research and development; and (2) the indirect taxes
incentives, such as zero percent (0%) rate of value-added tax (VA) on sales, exemption from taxes
and/or customs duties on importation of capital equipment, raw materials and source documents
and wharfage dues and export tax.

Qualified enterprises which avail of the Income Tax Holiday (ITH), or Reduced Income
Tax, or the five percent (5%) tax rate on Gross Income Earned (GIE), as the case may be, shall be
precluded from availing of the performance-based direct taxes incentives.


Sowrdsueune

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network, administration building, standard factory buildings, and other facilities 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 tettitory and predominantly
oriented to export production.

(9) "Freeport" is an isolated and policed area adjacent to a port of entry as defined by Section
3519 of the Tariff and Customs Code, 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 ot stored, repacked, sorted, mixed or otherwise manipulated without being
subject to taxes and duties.

(9 "Tourism estate" is a tract of land with defined boundaries, suitable for development into
an integrated resort complex to render tourism services for both local and foreign tourists, travelers
and investors, with prescribed carrying capacities, of tourist facilities and activities such as, but not
limited to, sport, gaming and recreation centers, accommodations including hotels, apartelles, tourist
inas/villas, pension houses, convention and cultural facilities, food and beverage outlets, commercial
establishments and other special interest and attraction activities/establishments, and provided with
roads, water supply facilities, power distribution facilities, drainage and sewage systems, and other
necessary infrastructures and facilities. A tourism estate shall be under unified and continuous
management, and can either be a component of an ecozone or the whole ecozone itself.

(s) "ICT park" or "information and communications technology (ICT) park" shall refer to an
aren 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 required
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 ICT enterprises,
as well. as amenities required by professionals and workers involved in ICT enterprises, or easy
access to such amenities.

(W) "Capital equipment" refers to machinery, equipment, and 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,

(8) "Supply chain city" shall refer to a self-contained zone that includes manufacturing
facility with hub operations in an economic zone, 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, 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.

()) "Less Developed Area (LIDA)" 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 IL

INVESTMENTS WITH INCENTIVES

CHAPTER |
QUALIFIED ACTIVITIES

SEC. 12. Investments Priorities Plan (IPP). - The BOI, upon consultation with the Office of the
President, concerned IPAs and appropriate government agencies and the private sector, shall


SEC. 17. Incentives co Registered Export Enerpnises, ~ AW IPAs may administer the following
incentives to their respective registered export enterpises to the extent of their registered activity

{a) Income ‘Tax Holiday (ITH), Activities of an export enterprise shall be entitled to six (6)
seats off from the date of start of its commerct The BIR shall require a repistered
export enterprise availing of [TH to secure a certificate of eligibility fom the appropriate IP A
before filing an official copy of its income tax return (TTR). Thereafter, the registered export
enterprise shall file its claim with che appropriate IPA for validation, Failure to secure certification
and/or to file the [TH availment for validation by the appropriate IP. shall cause the forfeiture of
the ITH availment for the tasable period.

‘b) Reduced Income Tax. — After enntiement to ITH,
regardless of location, may be enutled co a preferenual tax.
income as defined under Section 31 of the NIRC of 1997, as s

(©) Five percent (6%)Tax Rare on Gross Income Earned (GIF). Instead of the above
Reduced Income Tax rate, a registered export enterprise located inside or outside the ecozone,
industrial estate or freeport zone may opt and apply with the concerned IPA for the five percent
6%) tax of the GIL in lieu of all id local taxes, including but not limited to, VA'T on their
registered activity, VAT on importation directly related to their registered activity, documentary
stamp taxes (DST) and excise taxes, except real property tax on land owned by private developers
‘The allocation of the five percent (5%) GIE pertaining to the LGU foregoing taxes hereunder shall
be governed by the charter or governing law of the IRA, Once the registered export enterprise has
made the choice, such choice shall be irrevocable for the duration of its registration.

\ registered export enterprise enjoying the five percent (5°%) tax on GIE may generate
income from domestic sales up to thirey percent (39%) of its total income from all sources: Provided,
‘That should a registered export enterprise's income from domestic sales exceed thirty percent (30%)
of its total income from all sources, the entire income shall be subject to the regular income tax. If
the thirty percent (30%) threshold is not exceeded, the domestic sales of a registered export
enterprise shall continue to enjoy the five percent (5%) tax on GIE.

(a) Net Operating Loss Carrover (NOL.CO}. - The net operating loss of the registered
activity during the first five (5) years from start of commercial operation which ad aot been
previously offser as deduction from gross income shall be carried over as a deduction from gross
income for the next five (5) consecutive taxable years immediately following the year of such loss:
Prov! fonever, Uhat the NOLCO shall be the actual loss without the benefit of the incentives
provided herein. The BIR shall require a registered export enterprise availing of the NOLCO to
secure a certificate of eligibility from the appropriate JP/1 before filing an official copy of its ITR
with the appropriate IP A for validation of the NOL.CO claim,

Failure to secure a certification and/or to file the NOLCO availment for validation by the
BOL o¢ appropriate IPA shall cause the forfeiture of the availmeat for the taxable period.

(¢) Accelerated Depreciation. - Accelerated depreciation of 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 nwice 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 197, as amended.

( Double Deduction for g Expenses or ‘Train xpenses Credit. — Expenses
incurred for local taining given ro employees and texining expenses of potential employees for the
development of skills identified as necessary by the appropriate government agencies, upon approval
by the concerned IP A, shall entitle the registered export enterprise to a special deduction from the
taxable income equivalent to one hundred percent (100%) of the toral expenses over and above the
allowable ordinary and necessary business deductions for said expenses under the NIRC of 1997, as
amended

a registered export enterprise,
1 of fifteen percent (15%) of taxable
nended.

ior

ng

The same benefit of double deduction shall likewise extend 10 expen:
the registered export enterprise in its craining projects in collabo:
redited by the Deparunent of Education Deplid) or Commission on Higher Education

s paid or incurred by
tion with schools and universities

ac



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(CHED). ‘The training expenses incurred shall be deductible from taxable income on the taxable
year the said training expenses were incurred.

The concerned IP A shall issue the corresponding certificate of entitlement for this
incentive upon filing of an application for training expenses credit, otherwise, the training expense
credit shall be deemed waived.

(g) Double Deduction for Research and Development ot Research and Development Credit.
- Expenses incurred for research and development conducted in the Philippines relating to the
business shall entitle the registered export enterprise to a special deduction from taxable income
equivalent to one hundred percent (100%) of the total expenses over and above the allowable
ordinary and business deductions for said expenses under the NIRC of 1997, as amended,

The expenses for research and development shall be deductible from taxable income on the
taxable year the said research and development expenses were incurred, The concerned IPA shall
issue the corresponding certificare of entitlement for this incentive upon filing of an application for
research and development expenses credit; otherwise, the research and development, expenses credit
shall be deemed waived

(h) Capital Equipment Incentives, - (1) Importations of capital equipment, including
consignment thereof, by registered export enterprises regardless of location and whether enjoying
the ITH ot reduced income tax or the five percent (5%) tax on GIE shall be exempted to the extent
of one hundred percent (100%) of the taxes and customs duties: Provided, That the following
conditions are complied with:

(i) The capital equipment is directly and/or reasonably needed and will be used
exclusively in the registered activity of the export enterprise unless prior approval of the IP

A 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

(i) ‘The approval of the IP A was obtained by the registered export enterprise for the
importation of such machinery, equipment and spare parts. Approval of the IP A must be

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

(aa) If made to another enterprise enjoying tax and duty exemption on
imported capital equipment;
(bb) 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;
(cc) Exportation of the capital equipment, machinery, spare parts or source
documents or those required for pollution abatement and control; or
(dd) 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 (ji), the registered
export enterprise shall not pay the taxes and duties waived from such items: Provided,
Jfurtber, That if the registered export enterprise sells, transfers or disposes the
aforementioned imported items without prior approval within five (5) years from
date of importation, the registered export enterprise and the vendee, transferee ot
assignee shall be solidarily liable 10 pay twice the amount of the tax and duty
exemption given st: Pronided, finaly, That even if the sale, transfer or disposition of the
capital equipment is approved after five (5) years fom date of importation, the
registered export enterprise is still 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.
(2) The sale by a domestic manufacturer to a registered export enterprise of machinery and
capital equipment and raw materials, supplies, parts and semi-finished products, used in the



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fabrication of machinery and capital equipment used in the reg
subject to a zero-percent (0%) VAT rate

The registered export enterprise availing of the incentives provided under the immediately
preceding two (2) paragraphs shall be subject to the following: { that said capital equipment will be
used exclusively by the registered export enterprise in its registered activity; (ii) that the capital
equipment where the raw materials, supplies, parts and sem finished products were used would
have qualified for tax and duty-free import ‘hat che approval of the concerned IP A is
obtained by the registered export entezprise, Lf the registered export enterprise sells, transfers or
disposes of the capital equipment, the provision 3s the preceding paragraphs for such disposition
shall apply

(@ Raw Material Incentives. - "Importanons of raw materials ro exclusively used by a
tegistered export enterprise in the manufacture, processing or production of its export products
shall be exempted from the payment of customs duties and taxes

@) Tax and Duty-Free Importation of Source Documents. The importation of source
documents by leT-registered export enterprises shall be eligible for tax and duty-free importation.

(k) Zero Percent (0%) Rate of VAT on the Sale by a Domestic Enterprise t0 a Registered
Export Enterprise, - The provisions of law co the contrary notwithstanding, the sale by a domestic
enterprise of goods and/or services to a registered export enterprise, regardless of the latter's
locauon and whether enjoying the ITH, the Reduced Income ‘Tax or the five percent (5%) tax on
GE, shall be subject to zero percent (0%) VAT rate: Provided, That such goods and/or services are
required by registered export enterprise's activity.

() Exemption from Wharfage Dues and Export Tax. - ‘The provisions 25 of law to the
contrary notwithstanding, exports by a registered export enterprise shall be exempted from wharfage
dues and export taxes,

(m) Access to Bonded Manufacturing Warehouse, - Registered export enterprises located
outside ecozones oF feeeports shall have access to the utilization of bonded warehousing, system
required by the project subject to such guidelines as may be issued by the Board

(n) Employment .of Foreign Nationals. . Subject to the provisions of Section 29 of
Commonwealth Act No. 613, as amended, a registered export enterprise may employ foreign
nationals in managerial, technical or aclvisory pos

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 duing the period of employment of such foreign nation

tered activity of the latter shall be

ion; and fii

SLC. 18, Tax Treatment| Other Incentives for Registered Enterprines in Beozones 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 Code, foreign and domestic merchandise, raw materials, supplies, articles,
equipment, machineries, spare parts 4 es of every description, except those prohibited by law,
brought into the ecozones or freeports to he 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.

2) Merchandise purchased! by a registe

lw

id 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 cistoms territory shall, whether ot
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


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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.

() Qualified mercha factured by register ecozone or Freeport lo
which are made available for sale in the domestic marker shall be imposed the applicable ASEAN
Common Effective Preferential Tariff (CEPT) rate, if qualified, or applicable tariff rates under
bilateral or regional teade agreements, if qualified, or Most Favoured Nation (MIEN) rate on
imported raw materials and MFN 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.

(8) Domestic merchandise on which all internal revenue taxes have been paid, if subject
thereto, and foreign merchandise previously imported on which dury or tax has been paid, or which
have been admitted free of ducy 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.

(6) Subject to such regulations respecting identity and safeguarding of the revenue as the
concerned IP A may deem necessary when the identity of an article entered into the ecozones or
freeports under the immediately preceding paragraph has been lost, such asticle when removed from
the ccozones 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

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

(8) Articles regulated by law for sale to the domestic market shall only be allowed 10 be used
oy consumed within the ecozones or treeports

(9) Unless the contrary is shown, merchandise taken out of the ecozones oF freeports shall
be considered, for tax purposes, to have been sent to customs tertory. Special Economie 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.

\dise or articles man.

(b) Tax Treatment of Services in the Ecozones or Freeports. - (1) Sale of service by an entity
from the customs territory to a repistered ecozone or freeport enterprise or by a registered ecozone
or freeport enterprise (© another ecozone oF freeport enterprise shall be treated as indizect export,
and hence, shall not be subjected to internal revenue taxes for such transaction. (2) Sale or service by
a registered ecozone oF freepor ory shall be subject to the applicable
internal revenue laws and regulations.

nterprise co the customs tert

SEC. 19. Incentives for Registered Domestic Registered domestic enterprises not
engiyed in strategic projects under the sectors or industries under the IPP including tegistered
micro, small and medium enterprises (SMEs) as defined by the appropriate agency, shall be qualified
to the following incentives to the extent of their regsstered activit
(a) Income Tax Holiday (ITH). - Activiues of a registered domestic enterprise shall be
entitled to four (4) years of ITH from the date of start of its commercial operations.
he BIR shall require a registered domestic enterprise availing of ITH to secure a certificate
of eligibiliyy from the appropriate IP A before filing an official copy of ifs income tax return (TR),
Uhereatier, the registered domestic

rise shall f

cits claim with the appropriate IPA for
validation. Failure to secure a certification andlor to file the [TH availment for validation by the
approptiate IP A shall cause the forteiture of the ITH

availment for the taxable period.

(b) Net Operating Loss Carryover (NOLCO). - The net operating loss of the registered
activity dusing the first five (5) years ftom stat of commercial operation which had not been
previously offset as deduction from gross income shall he carried over
income for the next five (5) consecutive taxable years innnediately fe

a deduction from gros
lowing the year of such loss:



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Provided, bowever,' That the NOLCO shall be the actual loss without the benefit of the incentives
provided herein

‘The BIR shall require a registered domestic enterprise availing of the NOLCO to secure a
certificate of eligibility from'the appropriate IPA before filing an official copy of its ITR with the
appropriate IP A for validation of the NOLCO claim. Failure to secure a certification andlot to file
the NOLCO availment for validation by the BOI or appropriate IPA shall cause the forfeiture of the
availment for the taxable period,

(©) Accelerated Depreciation. - Accelerated depreciation of 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 or Training Expenses Credit. - Expenses
incurred for local training given to employees and training expenses of potential employees for the
development of skills identified as necessary by the appropriate government agencies, upon approval
by the concerned IPA, shall entitle the registered domestic enterprise to a special deduction from the
taxable income equivalent to one hundred percent (100%) of the total expenses over and above the
allowable ordinary and necessary business deductions for said expenses under the NIRC of 1997, as
amended.

The same benefit of double deduction shall likewise extend to expenses paid ot incurred by
the registered domestic enterprise in its training projects in collaboration with schools and
universities accredited by the Department of Education (DepEd) ot the Commission on Higher
Education (CHED). The training expenses incurred shall be deductible from taxable income on the
taxable year the said training expenses were incurred. The concerned IPA shall issue the
corresponding certificate of entitlement for this incentive upon filing of an application for training
expenses credit, otherwise, the training expense credit shall be deemed waived.

(¢) Double Deduction for Research and Development or Research and Development Credit.

Expenses incurred for research and development conducted in the Philippines relating to the
business shall entitle the registered domestic enterprise to a special deduction from taxable income
equivalent to one hundred percent (100%) of the total expenses over and above the allowable
ordinary and business deductions for said expenses under the NIRC of 1997, as amended.

‘The expenses for research and development shall be deductible from taxable income on the
taxable year the said research and development expenses were incurred.

The concerned [PA shall issue the corresponding cettificate of entitlement for this incentive
upon filing of an application for research and development expenses credit; otherwise, the research
and development expenses credit shall be deemed waived

( VAT and Duty Incentives on Importations of Capital Equipment and/or Raw Material. -
Importations of capital equipment and/or raw materials by registered domestic enterprises shall be
subject toa VAT and customs duty refund mechanism.

In order to facilitate the immediate processing, clearance and release of VAT and customs
duty refunds as provided in this Act, a trust liability account (TLA) is hereby authorized to be
established in the Bureau of the Treasury (BTr). All VAT and customs duty payments pertaining to
the importation of registered domestic enterprises of capital equipment or raw materials shall be
deposited in the TLA for the purpose of funding valid V AT and customs duty refund claims. The
claims for VAT and customs duty refunds shall be made by the registered domestic enterprise to the
DOF which, in turn shall process, approve and release the V A T and customs duty refund.

‘The VAT and customs duty paid on imported capital equipment may be refunded: Pronided,
That the capital equipment is being used by the registered domestic enterprise pursuant to its
registered activity. The amount of VAT and customs duty refund on a particular shipment of raw
materials shall be equivalent to the proportion of raw materials used in the production to the total
taw materials imported multiplied by the amount of VAT and customs duty paid on such
importation. No claim for refund shall be allowed on VAT and customs duty paid on raw materials
which are not ot no longer intended to be used in the registered activity.



The registered domestic enterprise shall Ale a claim for ¥ AT and customs dury refund
within neo 2) years after che payment was made All amounts paid but no longer allowed for refund
shal! immediately accrue to the general fund of cke rational goverument.

\l applications for VAT and customs duty refund shall be processed and acted upon within
Hurry (30) days after submission of complete documents, The refund shall be in a form of cash or
manager's ‘cashier's check payable to the registered! domestic enterprise.

ln case of dispute under the V AT and custorns duty refund mechanism provided in this
section, the pernnent provisions of is

d, and the Tariff and Customs

Code of the Philippines, as amended, s!
The registered domestic enterpr 4 Of the above incentives shall be subject to the
following: (1) thar said capital equyment will be used exclusively by the registered domestic
registered activity, (2) thar the capual equipment where the saw materials, supphes,
party and semi-finished products were used would have qualified for tax and duty-free amportauon;
and (3) thac the approval of the concerned IPA ts cbtaned by che registered domestic enterprise. If
the registered domestic enterprise sells, tsansfers or disposes of the capital equipment, the provision
of suhseetion {h) of Section 17 of this Ace shal! apply
(g) Preferenual Access to Financing and Acceptable |
all be vccorded

eaterprise tn i

in of Collaterals. - Registered SMEs
panctal imsttutions at preferential rates

ess to financiny

below the market rates.
Fusther, capital goods acquired from loans secured fom government financial institutions
shall be an acceptable form of collateral for the same loan.
ch) Assistance in the Preparat
assistance in the preparation of project study for purposes of regist

tered SMEs may be provided
ition under this Code.

SEC. 20. fnventies for Domestic ™
incennves 1 registered domestic enterpns
of this Net, whenever applicable, to

w Income Tax Holiday (ITH). trategic" enterprise shall be enntled
ean ETH equivalent to six (@) years from the date of {ts commercial operations, The BIR
shull require a registered domestic "stturepie” enterprise availing of the ITH to secure a certificate of
chgibulity fom dhe appropriate [PA before flay an official copy of ats income tay cecurn (TTR)

The cxpeise shall file its clum with the appropriate IP A.
for val

~ AILIPAs may administer the following
projects, as defined under Section
activity

darion.
Fullure 10 secure a certification and/or
appropriate IPA shall cause the forfeiture of the 1

{b) Reduced Income Tax
preferenmal tax rate of fifteen percent (15
NIRC of 199
seyistens sith

the ITH availment for validauon by the
ment for the taxable period,

be entided to a

er Section 31 of the

ume as defined und
1s. If the domestic "strategic" enterprise

is amended, for a period

the first six (6) years from the effecursty of thts Act, may opt to avail of the [TH
priot 1 the reduced income tx
de avaried of for a penod of eight (8

fc) Net Operating Loss C:

| operation which had not been
tied over as a deduction from gross
sears immediately following the year of such loss
oss without che benefit of the incentives provided

previoush offset as deduction from gs
income for the next eight (8) cons
Pomeded, Chat the NOLCO shall be the ee

herein

The BIR shall requite a registered dot
icute of eligibility from the
sh the appropsiate IPA for validation of th
und orto ale the NOLCO a
forte

mestie "strategic" ete
propriate IPA before filing an official copy
NOLCO claim. Fa:
be the BO! or appropriate IPA shall cause the

rprise availing of the NOILGO to
ts TPR
et secure a ceruficawon

ve of the availme:

for the taxable. per
Accelerated Depreciat
that are reasonabl

d Accel

{depreciation of plant, machinery and equipment

needed and actually used for the production and transport of goods and services


Soonausuna

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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 provisions of the NIRC of 1997, as
amended and the rules and regulations prescribed by the Secretary of Finance.

(¢) Double Deduction for Training Expenses. - Expenses incurred for local training given to
employees and waining expenses of potential employees for the development of skills identified as
necessary by the appropriate government agencies, upon approval by the concerned IPA, may entitle
the registered domestic "strategic" enterprise to a special deduction from the taxable income
equivalent t0 one hundred percent (100%) of the total expenses over and above the allowable
ordinary and necessary business deductions for said expenses under the NIRC of 1997, as amended,
‘The same benefit of double deduction shall likewise extend to expenses paid or incurred by the
registered domestic "strategic" enterprise in its training projects in collaboration with schools and
universities accredited by the Department of Education (DepEd) or the Commission on Higher
Education (CHED). The training expenses incurred shall -be deductible from taxable income on the
taxable year the said training expenses were incurred.

‘The concerned IPA shall issue the corresponding certificate of entitlement for this incentive
upon filing of an application, otherwise, the training incentive shall be deemed waived.

( Double Deduction for Research and Development ~ Expenses incurred for research and
development conducted in the Philippines relating to the business may entitle the registered
domestic "strategic" enterprise to a special deduction from taxable income equivalent to one
hundred percent (100%) of the total expenses over and above the allowable ordinary and business
deductions for said expenses under the NIRC of 1997, as amended. ‘The
development shall be deductible from taxable income ov the taxable y
development expenses were incurred.
he concerned IPA shall issue the corresponding certificate of entitlement for this incentive
upon filing of an application, otherwise, the research and development incentive shall be deemed
waived

(® VAT and Duty Incentives on Importations of Capital Equipment and/or Raw Material, -
Importations of capital equipment and/or raw materials by registered domestic. "strategic"
enterprises shall be subject to a VAT and customs duty refund mechanism.

enses for esearch and.
the said research and

In order to facilitate the immediate processing, clearance and release of VAT and customs
duty refunds as provided in this Act, a trust liability account (TIA) is hereby authorized to be
established in the Bureau of the Treasury (BT). All VAT and customs duty payments pertaining to
the importation of registered clomestic "strategic" enterprises of capital equipment or raw materials
shall be deposited in the TLA for the purpose of funding valid VAT and customs duty refund
claims. ‘The claims for VAT and customs duty refunds shall be made by the registered domestic
"strategic" enterprise to the DOF which, in cura, shall process, approve and release the V AT and
customs duty refund.

‘The VAT and customs duty paid on imported capital equipment may be refunded: Provided,
‘That the capital equipment is being used by the registered domestic "strategic" enterprise pursuant
to its registered activity. The amount of VAT and customs duty refund on a particular shipment of
raw materials shall be equivalent to the proportion of raw materials used in the production to the
total raw materials imported multiplied by the amount of VAT and customs duty paid on such
importation. No claim for refund shall be allowed on VAT and customs duty paid on raw materials
which are not or no longer intended to be used in the registered activity.

‘The registered domestic "strategic" enterprise shall file a claim for VAT and customs duty
refund within two (2) years after the payment was made. All amounts paid but no longer allowed for
refund shall immediately accrue to the general fund of the national government.

All applications for V AT and customs duty 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
manager's/cashier's check payable to the registered domestic "strategic" enterprise.



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In case of dispute under the V AT and customs duty refund mechanism provided in this
section, the pertinent provisions of the NIRC of 1997, as amended, and the Tariff and Customs
Code of the Philippines, as amended, shall apply

The registered domestic "strategic" enterprise availing of the above incentives shall be
subject ro the following: (1) that said capstal equipment will be used exclusively by the registered
domestic "strategic" enterprise in its registered activity; (2) that the capital equipment where the raw
nuterials, supplies, parts and semi-finished products were used would have qualified for tax and
duty-free importation; and (3) that the approval of the concerned IPA is obtained by the registered
domestic "strategic" enterprise. If the registered domestic "strategic" enterprise sells, transfers or
disposes of the capital equipment, the provision of subsection (b) of Section 17 of this Act shall

apph

(h) Employment of Foreign Nationals. Subject to the provisions of Section 29 of
Commonwealth Aet No. 613, as amended, a registered domestic “strategie” enterprise may employ
foreign nerionals 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 exchided by
Section 29 of Commonwealth Act No. 613, as amended, shall be permurced to enter and reside in the
Philippines during the period of employment of such foreign nationals.

SEC. 21, Incentives Jor Registered Domestic Exnterprises in the Vhinty Poorest Provinees or Less Developed
Areas (DAs. ~ Registered domestic enterprises located in the thirty (30) poorest provinces as
determined by the appropriate agency or in LDAs as defined hereof are entitled to a twenty (20)-year
cumulative availment of the following incentives:

a) Income ‘Tas Holiday (ITH), - Activities of « registered domestic enterprise located in the
thiery (30) poorest provinces or LDa\s shall be entitled to six (6) years of ITH from the date of start
of its commercial operation

(b) Reduced Income ‘Tax After Entitlement to ITH or NOLCO.
enterprise located in the 30 poorest provinces or LDAs shall be entitled to tw
preferential tax race of fifteen percent (15)
NIRC of 1997, as amended.

() Net Operating Loss Carryover (NC
activity during the first five (5) vears from
previously offset as deduction from gross inc
income for the next five (5) consecutive taxable years immedi
Pravtded, inwever, That the NOLCO shall be the
jel Leven

‘The BIR shall require a registered dome:

egistered domestic
c (12) years of a
) of taxable income as defined under Section 31 of the

CO}, The net operating loss of the registered
att of commercial operation which had not been
me shall be carried over as a deduction from gross
ely following the year of such loss:
cual loss without the benefit of the incentives

pro

enterprise availing of the NOLCO to secure a
certificate of eligibility trom the appropriate {P-7 before filing an official copy of its IR with the
Appropriate IP A for validation of the NOLCO claim. Failure to secure a certification and/ot to file
the NOLCO availment for validation by the BOL or appropriate 1P A shall cause the forfeiture of
the availlment for the taxable period

(@) Accelerated Depreciation. -- Accelerated depreciation of 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
aanual allowance been computed im accordance with the rules and regulations prescribed by the
Secretary of Finance and the provisions of the NIRC of 1997, as amended,

(6) Double Deduction for Training 's or Training Expenses Credit. - Expenses
incurred for local training given co employees and aaining expenses of potential employees for the
development of skills identified as necessary by the appropriate government agencies, upon approval
by the concerned IP A, shall entitle the registered domestic enterprise to a special deduction from
the taxable income equivalent to one hundred percent (10%) of the total expenses over and above
the allowable ordinary and necessary business deductions for said expenses under the NIRC of 1997,
as amended.



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‘The same benefit of double deduction shall likewise extend to expenses paid or incurred by
n collaboration with schools and
!) or the Commission on Higher

the registered domestic enterprise in its training projects
universities accredited by the Department of Education (Dep
Education (CHED),

‘The training expenses incurred shall be deductible from taxable income on the taxable year
the said training expenses were incurred. The concerned IP A shall issue the corresponding
cettificare of entitlement for this incentive upon filing of an application for training expenses credit,
Otherwise, the training expense credit shall be deemed waived

() Double Deduction for Research and Development or Research and Development Credit.
~ Expenses incurred for research and development conducted in the Philippines relating to the
business shall entitle the registered domestic enterprise to a special deduction from taxable income
equivalent to one hundred percent (100%) of the total expenses over and above the allowable
ordinary and business deductions for said expenses under the NIRC of 1997, as amended.

‘The expenses for research and development shall be deductible from taxable income on the
taxable year the said research and development expenses were incurred.

The concerned [PA shall issue the corresponding certificate of entitlement for this incentive
upon filing of an application for research and development expenses credit; otherwise, the research
and development expenses credit shall be deemed waived.

@) and Duty Incentives on Importations of Capital Equipment and/or Raw Material. -
Importations of capital equipment and/or raw materials by registered domestic enterprises located
in the thirty (30) poorest provinces' or LIDAs shall be subject to a VAT and customs duty refund
mechanism. In order to facilitate the immediate processing, clearance and release of VAT and
customs duty refunds as provided in this Act, a trust liability account (TLA) is hereby authorized to
be established in the Bureau of the Treasury (B11). All VAT and customs duty payments pertaining
to the importation of registered domestic enterprises located in the thirty (30) poorest provinces o
LDAs of capital equipment or raw materials shall be deposited in the TLA for the purpose of
funding valid V ATT and customs duty refund claims. The claims for VAT and customs duty refunds
shall be made by the registered domestic enterprise to the DOF which, in turn, shall process,
approve and release the VAT and customs duty refund

‘The VAT and customs duty paid on imported capital equipment may be refunded: Provided,
‘That the capital equipment is being used by the registered domestic enterprise pursuant to its
registered activity, The amount of VAT and customs duty refund on a particular shipment of raw
materials shall be equivalent to the proportion of raw materials used in the production to the total
taw materials imported multiplied by the amount of VAT and customs duty paid on such
importation. No claim for refund shall be allowed on VAT and customs duty paid on raw materials
which are not or no longer intended to be used in the registered activity. Registered domestic
enterptises located in the thirty (30) poorest provinces or LDAs shall file a claim for V AT and
customs duty refund within two (2) years after the payment was made. All amounts paid but no
longer allowed for refund shall immediately accrue to the general fund of the national government.

All applications for VAT and customs duty 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 ot
manager's/cashier's check payable to the registered domestic enterp!

In case of dispute under the VA T and customs duty refund mechanism provided in this
section, the pertinent provisions of the NIRC of 1997, as amended, and the Tariff and Customs
Code of the Philippines, as amended, shall apply

Registered domestic enterprises located in the thirty (30) poorest provinces or LDAs availing
of the above incentives shall be subject to the following: (1) that said capital equipment will be used
exclusively by the registered domestic enterprise in its registered activity; (2) that the capital
equipment where the raw materials, supplies, parts and semi-finished products were used would
have qualified for tax and duty-free importation; and (3) that the approval of the concerned IPA is
obtained by the registered domestic enterprise. If the registered domestic enterprise sells, transfers
or disposes of the capital equipment, the provision of subsection (h) of Section 17 of this Act shall
apply.



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SEC. 22. Incentives for Pr icone Developers. - Private ecozone developers may avail of the
incentives provided herein as conferred by the PEZA

SEC. 23. Imentives jor Registered Enterprises in Supply Chain Cities, - Registered enterprises located
in the supply chain cities shall be granted incentives provided under Sections 17 and 18 hereof. A
registered enterprise under che supply chain city engaged in manufacturing may subconteact 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
ally outside the Philippines by its affiliated entities

4 Phase-oudt of ITH Incentive. - Upon recommendation of the NEDA Board, the granting
of the ITH incentive to a registered domestic enterprise shall be terminated by a joint resolution
<l by the Senate and the House of Representatives: Provided, That export, agriculture,
infrastructure and shipping activities, projects located in the thirty (30) poorest provinces or LDAs
and suategic projects as defined under Section 15 hereof, shall not be covered by the phase-out of
the ITH.

pass

SEC. 25. Nowsfiscal Incentives. ~ Registered enterprises shall be entitled to the following non-
fiscal mcentives:
(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 ageney concerned within ten
(10) working days from official acceptance thereof, otherwise, the same shall be considered

ly approved. For this purpose, all government agenc’ be mandated to post in their
respective 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 internal 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.

automatic

SEC, 26. Entitement to Investor's Visa by a Foriqn National, ~ © foreign national who invests an
amount of at least US$150,000, either in cash and/or equipment, in a registered enterprise shall be
entitled © an Investor's Visa: Provided, ‘That:

(a) He is at least eighteen (18) years of age;

(b) He has not been convicted of a crime involving moral murpitude;

(6) He is not afflicted with any loathsome, dangerous or contagious disease; and

(@) He has not been institutionalized for any mental disorder or disability:

Provided, further, Vhat 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 purpose, 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 Code shall be made applicable

to visas granted to investors by the BOL, the PEZ
BIPI, the CEZA, the ZC
the law

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

he SBMA, the CDC, the ruMC, the PPMC, the
EZA, the PIA, the ASEZA, and other IPAs that may be created under



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SEC. 27. Governing Incentive Provision for IPAs, - All existing and future IPAs vested with the
power to confer and administer incentives shall offer incentives provided in this Code: Prowided, ‘That
the incentives granted under this Code (o a registered enterprise shall be applicable to the extent of
the registered activity or project.

SEC, 28, Relationship of IPAs and the BOL and Other Garerament Agencies, ~1P As shall maintain
tieir functions as provided for in their respective Charters except to the extent that these have been
modified by the provisions of this Code. For purposes of efficient database on investment statistics
and other investment data and information, all IP As are required to submit to the BOL all
investment data and information and such other related data semi-annually or as may be required,

CHAPTER IIL

REGISTRATION OF ENTERPRJSES

SEC. 29. 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 ic must comply with all. the
qualifications provided under this Code: Provided, jowever, That for purposes of this Code and any law
to the contrary notwithstanding, a natural-born ASEAN n of a corporation effectively
controlled by ASEAN citizens, or a corporation organized in any N country shall be
considered as a Philippine investor: Pronided. forther, Ubac the investment is made in an acuvity where
the Constitution does not specifically require Filpino participation;

(b) The activity it will engage in is not within the activities reserved by the Constitution to
Philippine citizens or corporations owned and controlled by Philippine citizens;

(©) It will engage in an activity included in the IPP or in an export activity or in an activity
located 11 supply chain cities, thirty (30) poorest provinces or LDAs or in an activity considered as
“strategic project”

(@) It will infuse new inv ts. For this purpose "new investments" shall mean a new
enterprise infusing new investments and undertal . 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. Furthermore, government assets that will be
privatized shall be deemed "new investments’

(©) If the applicant is engaged or propos

me

nd

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

CHAPTER IV

BASIC RIGHTS AND GUARAN} OF REGISTERED ENTERPRISES

30. Protection of Investments

z - All investors and registered enterprises are entitled to the
basic rights and guarantees provided in the Constituson. Among other rights recognized by the
Goyernment of the Philippines are the following:

)) 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 £0 the



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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 2 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 Earnings. - In the case of foreign investments, the right to remit earnings
from the investment in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the provisions of Section 74 of
Republic Net No. 265, as amended

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

(© Foreign Loans and Contracts. - The night 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,
aus amended.

(@) 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 puxpose, of in the interest of national welfare or defense and upon payment of
just compensation

In such eases, foreign investors or enterprises shall have the right to remit sums teceived as
compensation for the expropriated property in the curreney 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.

(¢) 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 wat or national emergency
and only for the duration thereof.

Just compensation shall be determined and paid either at the time of requisition of
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

investn

ent

‘s 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

31. Application jor 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 Code shall be
contidential and shall nor be disclosed to any person except with the consent of the applicant or
upon an order of a court of competent jurisdiction

SEC. 32. 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) IP A. In the event that an
enterprise shall transfer to another IPA, only the remaining unutilized incentives shall be granted to
the enterprise or the transferee, vendee or assignee

SEC. 33. Cinteria for Evaluation of Application. - The following criteria shall be considered in the
evaluation of applications for registration under a preferred area

(2) Impact of the project on the overall economy;

(b) Overall viability of the project;

(6) The extent of employment generation;


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(@) The extent to which technological advances aze applied and adopted to local conditions;
and
(¢) Such other criteria as the Board may determine.

SEC. 34. Environmental Protection and Corporate Sacial Responsibility, - Exery 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
regisization to be submitted to the appropriate IPA. The cavironmental program shall 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 Nores to the Audited Financial Statements

SEC. 35. Appronal and Registration Procedures. - The IPA is authorized to adopt rales and
regulations to facilitate action on applications filed with it; prescribe criteria for the evaluation of
applications; devise standard forms for the use of ate to the regional offices of
the DI 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. Deferment 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
complance with the cause of the last deferment,

SEC. 36. Cortficate of Registration, - \ registered enterprise under this Code shall be issued a
Certificate of Registration under the seal of the TPA and the signature of its Chairman 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. 37. Validity of Registration. - The registration shall be ralid for a period of twenty (20)
years from the date of start of commercial operation except on certain industries as may be
determined by the Board and those that are registered with the PEZ.A.

SEC. 38. Extension of Period of Availinent of Incentives. ~ The availment period of the incentives
provided herein may be extended by the concerned IPA in “he event that the registered enterprise
has suffered operational fone majewre or losses that have impaired the viability of the registered
activity

SEC. 39. Administration, Implementation and Monitoring of Incentives,
the other IPAs shall be re:

‘The BOI, the PEZA and:
onsible for the administration and implementation of incentives granted
w thar vespective registered enterprises. ‘They shall submit to the DOF their respective tax
expenditures based on the computed cost in terms of revenue foregone on the tax incentives
granted to their registered enterprises, and other data related to the grant of investment incentives,
on a quarterly basis and to cover all their registered enterprises including those whose incentives are
provided by investment incentive laws prior to the effectivity of this Act. For proper monitoring, the
DOF shall czeate a single database of all incentives provided by all IPAs. The DOF shall monitor



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and review the incentives granted and submit an annual report to the President and to the Chairman
of the Committee on Ways and Means of both Houses of Congress.

TITLE IV
FINAL PROVISIONS

SEC. 40, Vested Right - Any provision of law to the contrary notwithstanding, incentives
granted to existing registered enterprises pursuant to contracts or agreements entered into with
government instramentalities/corporations shall continue to be legally binding in accordance with
the terms and conditions stated in theit respective contracts or agreements, as provided under

existing laws,

SEC, 41. Authority to Retain Funds. - Registered enterprises availing of fiscal incentives, except
those located in the thirty (30) poorest provinces or LD.As, shall be assessed with a maximum fee of
one percent (1%) of the amount of incentives granted. Said amount shall automatically accrue to the
Board of Investments to be allotted for investment promotions activities and other special projects
to achieve the objectives of this Code, subject to the usual accounting and auditing rules and
procedures.

SEC. 42. Protection of the Environment. - Vhe IP As, 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
required Environmental Compliance Certificate (ECO): Pronided, powever, ‘That applications for
covironmental 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. 43, Appeals. - All orders ot decisions of the BOL or the IPA in cases involving the
provisions of this Code shall immediately be executory. No appeal from the order or decision of the
BOI or the IP A by the party adversely affected shall stay such order or decision, unless a sypersedeas
bond equivalent to the amount stated in the order or decision is posted by the appellant.

All appeals involving cases decided by the BOI or the IPA, except as provided in the next
succeeding paragraph, shall be filed with the Cours of Appeals within fifteen (15) days from receipt
of notice of the order or decision or of the denial of the appelJant’s motion for new trial or
econsideration, Within the same period, the aggrieved party may file a motion for reinvestigation or
reconsideration. Only orie (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 registeation, the party adversely affected by
such dental 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. 44. Suspension. and Forfeiture of Incentives of Registered Enterprises, Refund and Penalties, ~
When thete ts probable cause to believe that the registered enterprise has violated its registration
terms and conditions, the BOI or the IP A may suspend its availment of incentives, until proven
otherwise. The BOI 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.


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Tn case of cancellation of the Certificate of Registration granted under this Code, the BOL or
the IPA may, in appropriate cases, require the refund of incenuves availed of and impose
corresponding fines and penalties. Any enterprise which violates any provision of this Code, its
amplementing rules and regulations, the terms and conditions of its registration, or of any lnwful
dlirccte of the BOL or the IPA, shall be subject ta a to exceed One mullion pesos
(P1,000,000,00), without prejudice 10 the disapproval of us application for registration or
cancellation of its registration: Promded, ‘That any willful commission of fraudulent misrepresentation
in its application for registration or submission of reports or gross violation of this Code and its
implementing rules and regulations, a fine of at least One million pesos (P1,000,000.00) but not to
exceed Ten million pesos (P10,000,000) shall be imposed, in addition to other penalties that may be
umposed by the BOT or the IPA.

Uhe [PAs shall prepare a schedule of tines and penalues to be amposed on erring cegistered
enterprises depending on the violation incusted, 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 hundged thousand pesos (300,000.00) wnbout prejudice to disqualification from appearing,
ot doing business with the BOL or any IPA.

Government officers and employees who participate directly or indirectly in the commission
of the foregoing acts shall likewise be hable to a fine of not less than One hundred thousand pesos
(P'100,000.00) bur not niore than Three hundred thousand pesos (P300,000.00), in addition to any
le under the Civil Service Law, Revised. Penal Code,
Repubhe Act No, 3019, otherwise known as the "Anu-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
imposuble fines and penalues above, the f
deportation

criminal and administrative penalties impos:

Jer is a forcizn national, in addition to the
ang acts shall be grounds for his summary

SEC. 45. Disposition of Savings from the tion 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 Nauonal Treasury and shall be over and above the annual appropriations for
similar parposes. The carmarking provided under this provision shall be observed for ten (10) years
starting from the effectivity of this Act

46. Implementing Rades and Regulations (IRR). "The TI, the DOF, the NEDA, the DBM,
the BOI, the PEZ.A, other IPAs and other concerned government agencies, shall promulgate rules
and regulations to implement the intent and provi his Code within one hundred oventy
(120) davs from the effectivity of this Code, Such tules and regulations shall take effect fifteen (15)
days following its publication in a newspaper of general circulation in the Philippines

SI

3C, 47. Transitory Provision, - ‘The incentives under Section 17 of this Act shall be applicable

wo existing BOLregistered export enterpnses, particularly the tax and duty-free importation of

eguupment and raw materials by the said BOL registered export enterprises. Until the IRR of this Act

rahe effect, the present rules and regulations under the old investments laws shall apply 10 the extent
sions of this et

that they are not inconsistent with the p

SEC. 48, Sepunability Clause. - Ube provisions of this Code a

« hereby declared to be separable
othe event any of such provisions is declared unconstitutional, the other provisions which are
not affected thereby, shall remain in force and effect.

and,

SHC. 49. Repeating Clause. The following provisions are hereby repealed:
(a) Tide 1, Chapter IL, Article 32(1)(B); Title 11, Article 39a), ().(@), (€), @. @, 9, W, Ws
(m) and (n)s ‘Tide IV, Article 40/2) and (b); Book fll, Chapter II, Arucles 61 and 62; Book Il,


Sennanevn—

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13

Chapter HL, Articles 63, 64, 65,66 and 67; Book IV, Arucley 69 and 70; and Book vi, Amncle 77 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 Leonomic Zones tn the Philippi the Purpose the Philippine Economic Zone
Authority (PEZ.A), and for other Purposes (Special Economic Zone Act of 1995)

(©) Section 17(1), 2 GG &) >), (8) and Section 18 {@}, (b} and (©) of Presidential
Decree No. 66, otherwise known ning the Export Processing Zone Authority and Revising
Republic Act No. 5490",

(d) Fourth paragraph of Presiden
otherwise known a
of 1949 Exemption from Customs Duty and Compe
Lequipment, Spare Parts and Materials Required tor Their Exploratic

(¢) Sections 8, 9 and the second sentence of the first p:
Section 10 of Presidential Decree No. 538, otherwise known as
PHIVIDEC Industrial Authority and Making Its Subsidiary A;
Tnvestment Development Corporation 1D
Other Purposes";

(0 Section 36fe} and (f} (1) and (2) of Presidential Decree No. 705, otherwise known as the
"Revised Forestry Code”:

(@) Section 16(a), (©), (@), ©) and Section 17 of Republic Act No. 7844, otherwise known as
“An Act 10 Develop Exports as a Key Towards the Achievement of the National Goals Towards
the Year 2000 (Export Development Act of 1994)"

(h) Chapter NV, Section 83; Chapter NVI, Sections 90, 91, 92, 93{a) 2 and (b) of Republic
Act No. 7492, otherwise known as the "Philippine Mining 3 Act of 1995";

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

Chapter I, Article IT, Section 35(b), (c) and (€) of Republic Act No. 8550, otherwise
known as "The Philippine Fisheries Code of 199:

{k) Section 5 of Proclamation No. 216, otherwise known as "Creating and Designating the
Arca Covered by the Former Wallace Air ous Areas in Poro Point as the Poro
Pomt Special Economic and Freeport Zone and Transferring Lands to the Bases Conversion
Development \uthority pursuant to Republic Act No.
nation, No, 984 pthenvise knowa as "Creating and Designating the
Municipality of Morong, Province of Bataan, meluding the Area of Philippine Refugee Processing,
Center Complex (PRPCC) as the Morong Special Economic Zone pursuant co Republic Act No.
7227 and transferring the land comprising the PRPCC to the Bases Conversion Development
Authority (BCDA)";

(m) Section 1 and Section 2(a} and (b) and Section 6 of Executive Order No. 528, series of
10006, Amending Executive Order No. 31, series of 2004, "Reducing the Rates of Dury on Capital
Uiquipment, Spare Parts and Accessories Imported by BOMtegistered new and Expanding
Enterprises";

(n) Section 4(e) of Republic Ace No. 79
Economic Zone Act of 195)

Sections 4(b) of Republic Act No. “922 otherwise known ay the "Cagayan Special
Lconomic Zone Act of 1995'

(p) Section 12(b) of Republic Act No. 722°, otherwise known as the "Bases Conversion and
Development Act of 1992";

(@) Section ]{b), Sections 5, 6 and 7 af Republic Act No. 9400, otherwise known as, "An Act
Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and
Development Act of 1992, and for Other Purposes"; and

(s) Section 1 of Executive Order No. 619, otherwise known as "Creating and Designating
Special Heonomic Zones Pursuant to Republic Act No. 7916, as Amended by Republic Act No.

Creating fo

6,

Decree No, 529 (sestored by FIRB Resolution 19:87),
ssionaires under the Petroleum Act

perations”
raph and second paragraph of
reauny, and Establishing the
cacy of the Philippine Veterans
fining Its Powers, Functions and Responsibilities, and for

1 Scenon af Proc

3, otherwise known as "Zamboanga City Special



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18
19
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21

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24
25
26
27
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30
31
32:
33
34
35
36
37
38

8784, in Relation to Republic Act No. 7227, as Amended by Republic Act No. 9400, Inside the
Clark Freeport Zone".

All other 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. 50, Suritnr Clause - (a) The provisions of this Act to the contrary notwithstanding, the
following laws, decrees and orders shall continue co have full force and effect: (1) Book VI, Article
78 of Executive Order No. 226, series of 1987, otherwise known as "The Omnibus Investments
Code of 1987"; (2) Section 18(f) of Presidential Decree No. 66, otherwise known as "Creating the
Export Processing Zone Authority and Revising Republic Act No, 5490"; (3) Section 23 of Republic
Act No. 7916, otherwise known as "An Act Providing for the Legal Framework and Mechanisms for
the Creation, Operation, Adnunistration and Coordination of Specul Economic Zones in the
Philippines, Creating for the Purpose the Phuppine Economie Zone Authonty (PEZA), and tor
other Purposes (Special Economic Zone Act of 1995)"; and (4) Section 1 of Republic Act No. 9281
entitled, "An Act to Strengthen Agriculture and Fisheries Modernization in the Philippines by
Extending the Effectivity of 1 and its Mandated Funding Support, Amending for this
Purpose Sections 109 and 112 of Republic Act No. 8435";

(0) The provisions of this Act and Republic Act No. 9337 to the contrary notwithstanding,
the following laws, decrees and orders shall continue to have full force and effect: (1) 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-Hydroclectric Incentive Act)"; (2) Sections
10, 16(a), (6) and (c) and Section 17(a) to (©) 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"; (@) Section 12 of
Presidenual Decree No. 87, otherwise known as "An Act to Promote the Discovery and Production
of Indigenous Petroleum, and Appropriating Funds Therefor"; (4) Section 4{a) and (d) of
Presidential Decree No. 1442, as restored by FIRE Resolution 19-87, otherwise known as "An Act
to Promote the Exploration and Development of Geothermal Resources"; and (5) Chapter II,
Section 4(A), (B), (C) and (D); and Chapter VII, 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”: 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.

x Incentives

SEC. 51. Effetiity, - ‘This Act shall take effect fifteen (15) days following its publication in
the Official Gazette or in a newspaper of general circulation, whichever is carlier.

Approved,