I. 
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
EXPLANATORY NOTE 
Developing countries in need of foreign capital to pump up their economies often dangle 
attractive incentives to potential investors in order to lure them into establishing businesses in 
their respective areas. 
One such incentive is the tax holiday, which is an exemption granted by the National 
Government from the imposition of corporate income tax on registered pioneer or non-pioneer 
enterprises for a certain period of time adequate enough for them to obtain a return of their 
investments. 
This grace period is commonly called the “incubation period” and is widely observed in 
other countries, such as Taiwan, Malaysia, Malta, Zimbabwe, St. Kitts and Nevis, to name a few. 
All things being equal, the preference of investors is likely to hinge on the incentive 
packages being offered by host countries. Some countries give longer tax holidays than the 
others: Taiwan offers six (12) years; St. Kitts and Nevis, fifteen (1 5 )  years; Malta, ten (1 0) years. 
The Philippines allows a maximum of six (6) years for pioneer firms and four (4) years 
for non-pioneer firms. 
Most investors and export-oriented establishments observe that the periods are too short 
for them to attain a certain degree of financial stability and fear that the continued 
implementation of this policy will lead to the eventual closure of their businesses, especially in 
the face of the current Asian economic crisis. 
We must, therefore, evaluate our policy on tax holidays and make the corresponding 
adjustments based on the present economic dynamics in the region with the end view of giving 
the Philippines a competitive edge in the Asian market. 
This bill seeks to restructure the fiscal incentives regime of the country by increasing 
allowable tax holidays, rationalizing other incentive laws, and granting other benefits to 
investors. 
Passage of this bill is earnestly sought. 


THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
AN ACT RESTRUCTURING THE FISCAL INCENTIVES UNDER EXECUTIVE 
ORDER NO. 226, OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE 
OF 1987, AS AMENDED, AMENDING PERTINENT ARTICLES OF THE CODE, 
PROVIDING FOR PENALTIES IN VIOLATION THEREOF, AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assem bled: 
SECTION 1. Article 23, Title I of Executive Order No. 226, otherwise known as the Omnibus 
Investments Code of 1987, as amended, is hereby further amended to read as follows: 
“Art. 23. 
‘Export sales’ shall mean the Philippine port F.O.B. value, determined from 
invoices, bills of lading, inward letters of credit, landing certificates, and other commercial 
documents, of export products exported directly by a registered export producer, or the net 
selling price of export products sold by a registered export producer to another export producer, 
or to an export trader that subsequently exports the same: Provided, That sales of export 
products to another producer or to an export trader shall be deemed export sales when actually 
exported by the latter, as evidenced by landing certificates or similar commercial documents: 
Provided, further, That without actual exportation the following shall be considered 
constructively exported for purposes of this provision: 
(1) sales to bonded manufacturing 
warehouses of export-oriented manufacturers; (2) sales to export processing zones; (3) sales to 
registered export traders operating bonded trading warehouses supplying raw materials used in 
the manufacture of export products under guidelines to be set by the Board in consultation with 
the Bureau of Internal Revenue and the Bureau of Customs; 
(4) SALES BY 
MANUFACTURERS LOCATED IN ANY SPECIAL ECONOMIC ZONE TO BOI- 
REGISTERED EXPORT PRODUCERS OF ANY SUPPLIES, RAW MATERIALS AND 
SEMI-MANUFACTURED PRODUCTS ACTUALLY PRODUCED BY THE FORMER, 
AND USED IN THE MANUFACTURE, PROCESSING OR PRODUCTION OF THE 
LATTER’S EXPORT PRODUCTS, UNDER GUIDELINES TO BE SET BY THE 


BOARD IN CONSULTATION WITH THE BUREAU OF INTERNAL REVENUE AND 
THE BUREAU OF CUSTOMS; [(4)] (5) sales to foreign military bases, diplomatic missions 
and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, 
assembled or repacked products whether paid for in foreign currency or not: Provided, further, 
That export sales of registered export traders may include commission income, and: Provided, 
Jinally, That exportation of goods on consignment shall not be deemed export sales until the 
export products consigned are in fact sold by the consignee. 
Sales of locally manufactured or assembled goods for household and personal use to Filipinos 
abroad and other non-residents of the Philippines as well as returning Overseas Filipinos under 
the Internal Export program of the government and paid for in convertible foreign currency 
inwardly remitted through the Philippine banking systems shall also be considered as export 
sales.” 
SEC. 2. 
hereby further amended to read as follows: 
“ART. 39. 
Incentives to Registered Enterprises. - [All registered enterprises shall be 
granted the following incentives to the extent engaged in a preferred area of investment] 
REGISTERED ENTERPRISES SHALL BE GRANTED ANY OF THE FOLLOWING 
INCENTIVES AS MAY BE DEEMED NECESSARY BY THE BOARD IN THE 
CONTEXT OF THE INVESTMENTS PRIORITIES PLAN (IPP): 
(a) 
Income Tax Holiday. - 
(1) 
for non-pioneer firms, new registered firms shall be fully exempt from income taxes 
levied by the national government. Subject to such guidelines as may be prescribed by 
the Board, the income tax exemption will be extended for another year in each of the 
following cases: 
(0 
the Board; 
(ii) 
(iii) 
thousand US dollars (US $500,000.00) annually during the first three (3) years of 
operation. 
The preceding paragraph notwithstanding, no registered pioneer firm may avail of this incentive 
for a period exceeding eight (8) yeqrs: 
PROVIDED, HOWEVER, THAT A NEW 
REGISTERED PIONEER ENTERPRISE MAY BE GRANTED A MAXIMUM OF 
TWELVE (12) YEARS INCOME TAX HOLIDAY FROM COMMERCIAL OPERATION 
SUBJECT TO THE APPROVAL OF THE SECRETARY OF FINANCE, AND 
Article 39, Title I11 of the Omnibus Investments Code of 1987, as amended, is 
For six (6) years from commercial operation for pioneer firms and four (4) years 
the project meets the prescribed ratio of capital equipment to number of workers set by 
utilization of indigenous raw materials at rates set by the Board; 
the net foreign exchange savings or earnings amount to at least Five hundred 


COMPLIANCE BY THE REGISTERED PIONEER ENTERPRISE, WITH ALL OF THE 
FOLLOWING CONDITIONS: 
(A) 
THE PROJECT WILL REQUIRE A NEW INVESTMENT OF AT LEAST 
TWENTY-FIVE MILLION US DOLLARS (US $25,000,000.00). 
(B) 
THE 
PROJECT 
WILL 
MANUFACTURE 
PRODUCTS 
THAT ARE 
DISTINCTLY AND COMPLETELY NEW IN THE PHILIPPINES AND WILL EXPORT 
AT LEAST SEVENTY PERCENT (70%) OF TOTAL PRODUCTION OR WHICH ARE 
ESSENTIAL RAW+ MATERIALS, PARTS AND/OR COMPONENTS OF THE 
COUNTRY’S SIGNIFICANT EXPORTS: 
PROVLDED, HOWEVER, THAT THIS 
CONDITION WILL NOT APPLY IF THE PROJECT WILL LOCATE OUTSIDE 
METRO MANILA. 
PROVIDED, FINALLY, THAT A NEW REGISTERED ENTERPRISE ENGAGED IN 
INFORMATION TECHNOLOGY AND INFORMATION TECHNOLOGY-RELATED 
PROJECTS MAY BE GRANTED A MAXIMUM TWELVE (12) YEARS INCOME TAX 
HOLIDAY WITHOUT SECURING PRIOR APPROVAL FROM THE DEPARTMENT 
OF FINANCE AND COMPLIANCE WITH THE FOREGOING CONDITIONS. 
(2) 
For a period of three (3) years from commercial operation, registered expanding firms 
shall be entitled to an exemption from income taxes levied by the national government 
proportionate to their expansion under such terms and conditions as the Board may determine: 
[Provided, however, That during the period within which this incentive is availed of by the 
expanding firm it shall not be entitled to additional deduction for incremental labor expense.] 
t(3) 
to any extension of this incentive.] 
(3) 
FIRMS AVAILING OF THE INCOME TAX HOLIDAY AS HEREIN 
PROVIDED SHALL NOT BE ENTITLED TO AVAIL OF THE INCENTIVES OF 
The provision of Article 7 (14) notwithstanding, registered firms shall not be entitled 
ACCELERATED DEPRECIATION, AND INVESTMENT TAX ALLOWANCE AS 
PROVIDED IN SUB-PARAGRAPHS (0) AND (R) HEREOF, RESPECTIVELY. 
Kb) 
Additional Deduction for Labor Expense. - For the first five (5) years from 
registration a registered enterprise shall be allowed an additional deduction from the taxable 
income of fifly percent (50%) of the wages corresponding to the increment in the number of 
direct labor for skilled and unskilled workers if the project meets the prescribed ratio of capital 
equipment to number of workers set by the Board: Provided, That this additional deduction shall 
be doubled if the activity is located in less developed areas as defined in Art. 40.1 
(B) 
NET OPERATING LOSS CARRY OVER (NOLCO). - THE PROVISIONS OF 
ANY LAW TO THE CONTRARY NOTWITHSTANDING, THE NET OPERATING 
LOSS OF THE BUSINESS OR ENTERPRISE INCURRED DURING THE PERIOD OF 
ITS INCOME TAX HOLIDAY INCENTIVE WHICH HAD NOT BEEN PREVIOUSLY 
OFFSET 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 LAST YEAR OF THE FIRM’S 
INCOME TAX HOLIDAY AVAILMENT PERIOD: PROVIDED, HOWEVER, THAT 
OPERATING LOSSES INCURRED DUE TO AVAILMENT OF INCENTIVES THAT 
ARE DEDU~TIBLE FROM TAXABLE INCOME SUCH AS ACCELERATED 
DEPRECIATION, DOUBLE DEDUCTION FOR TRAINING AND RESEARCH AND 
DEVELOPMENT EXPENDITURES AND 
INVESTMENT TAX ALLOWANCE, 
AMONG OTHERS, SHALL NOT BE ENTITLED TO NOLCO. 
[(c) 
Tax and Duty Exemption on Imported Capital Equ@ment. - Within five (5) years from 
the effectivity of this Code, importations of machinery and equipment and accompanying spare 
parts of new and expanding registered enterprises shall be exempt to the extent of one hundred 
percent (1 00%) of the customs duties and national internal revenue tax payable thereon: 
Provided, That the importation of machinery and equipment and accompanying spare parts shall 
comply with the following conditions: 
(1) 
and at reasonable prices; 
(2) 
enterprise in the manufacture of its products, unless prior approval of the Board 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 the specific 
equipment and machinery being permanently used for non-registered activities; and 
(3) 
of such machinery, equipment and spare parts. 
In granting the approval of the importations under this paragraph, the Board may require 
international canvassing but if the total cost of the capital equipment or industrial plant exceeds 
Five million US dollars 
(US $5,000,000.00), the Board shall apply or adopt the provisions of 
Presidential Decree Numbered 1764 on International Competitive Bidding. 
If the registered enterprise sells, transfers or disposes of these machinery, equipment and spare 
parts without prior approval of the Board within five (5) years from date of acquisition, the 
registered enterprise and the vendee, transferee, or assignee shall be solidarily liable to pay twice 
the amount of the tax exemption given it. 
The Board shall allow and approve the sale, transfer or disposition of the said items within the 
said period of five (5) years if made: 
(a@ 
incentives; 
(bb) 
(CC) 
enterprise. J 
They are not manufactured domestically in sufficient quantity, of comparable quality 
They are reasonably needed and will be used exclusively by the registered 
The approval of the Board was obtained by the registered enterprise for the importation 
to another registered enterprise or registered domestic producer enjoyng similar 
for reasons of proven technical obsolescence; or 
for purposes of replacement to improve and/or expand the operations of the registered 


(C) 
TAX AND DUTY EXEMPTION ON IMPORTED CAPITAL EQUIPMENT. - 
IMPORTATIONS OF CAPITAL EQUIPMENT, SPARE PARTS AND PRODUCTION 
CONSUMABLES AND THOSE REQUIRED FOR POLLUTION ABATEMENT AND 
CONTROL BY NEW, EXPANDING AND/OR MODERNIZING REGISTERED 
ENTERPRISE UPON THE EFFECTIVITY OF THIS ACT SHALL BE EXEMPT TO 
THE EXTENT OF ONE HUNDRED PERCENT (100%) OF THE TAXES AND 
CUSTOMS DUTIES DUE THEREON: 
PROVIDED, THAT THE IMPORTATION 
THEREOF SFALL BE USED EXCLUSIVELY BY THE REGISTERED ENTERPRISE 
IN ITS REGISTERED ACTIVITY. 
THE BOARD SHALL ALLOW AND APPROVE THE SALE, TRANSFER OR 
DISPOSITION OF THE SAID ITEMS WITHIN THE FIRST FIVE (5) YEARS FROM 
DATE OF IMPORTATION SUBJECT TO ANY OF THE FOLLOWING CONDITIONS: 
(AA) 
IF MADE TO ANOTHER ENTERPRISE ENJOYING TAX AND DUTY 
EXEMPTION ON IMPORTED CAPITAL EQUIPMENT; 
OBB) 
IF MADE TO ANY OTHER DOMESTIC ENTERPRISE, UPON PAYMENT 
OF ANY TAXES AND DUTIES DUE ON THE UNDEPRECIATED PORTION OF THE 
EQUIPMENT, MACHINERY OR SPARE PARTS BASED ON A NORMAL RATE OF 
DEPRECIATION; OR 
(CC) 
PROVIDED, THAT, IF THE REGISTERED ENTERPRISE SELLS, TRANSFERS OR 
DISPOSES OF THESE MACHINERY, EQUIPMENT AND SPARE PARTS WITHOUT 
PRIOR APPROVAL OF THE BOARD WITHIN FIVE (5) YEARS FROM DATE OF 
IMPORTATION, 
THE 
REGISTERED 
ENTERPRISE 
AND 
THE 
VENDEE, 
TRANSFEREE, OR ASSIGNEE SHALL BE SOLIDARILY LIABLE TO PAY TWICE 
THE AMOUNT OF THE CUSTOMS DUTY AND THE INTERNAL REVENUE TAX 
DUE ON SUCH IMPORTATION. 
[(d) 
Tax Credit on Domestic Capital Equipment. - A tax credit equivalent to one hundred 
percent (100%) of the value of the national internal revenue taxes and customs duties that would 
have been waived on the machinery, equipment and spare parts, had these items been imported 
shall be given to the new and expanding registered enterprise which purchases machinery, 
equipment and spare parts from a domestic manufacturer: 
Provided, (1) That the said 
equipment, machinery and spare parts are reasonably needed and will be used exclusively by the 
registered enterprise in the manufacture of its products, unless prior approval of the Board is 
secured for the part-time utilization of said equipment in a non-registered activity to maximize 
usage thereof; (2) that the equipment would have qualified for tax and duty-free importation 
under paragraph (c) hereof; (3) that the approval of the Board was obtained by the registered 
enterprise; and (4) that the purchase is made within five (5) years from the date of effectivity of 
EXPORTATION OF THE EQUIPMENT, MACHINERY OR SPARE PARTS. 


the Code. If the registered enterprise sells, transfers or disposes of these machinery, equipment 
and spare parts, the provisions in the preceding paragraph for such disposition shall apply.] 
(D) 
TAX CREDIT ON THE PURCHASED 
COMPONENT OF LOCALLY- 
PRODUCED EQUIPMENT. - A TAX CREDIT EQUIVALENT TO TAXES AND/OR 
DUTIES PAID ON RAW MATERIALS, SUPPLIES, PARTS AND SEMI-FINISHED 
PRODUCTS USED IN THE FABRICATION OF THE MACHINERY AND EQUIPMENT 
SHALL BE GIVEN TO REGISTERED ENTERPRISES WHICH PURCHASE 
MACHINERY AND EQUIPMENT FROM A DOMESTIC MANUFACTURER: 
PROVIDED, (1) THAT SAID EQUIPMENT, MACHINERY AND SPARE PARTS WILL 
BE 
USED 
EXCLUSIVELY BY 
THE REGISTERED ENTERPRISE 
IN ITS 
REGISTERED ACTIVITY; (2) THAT THE EQUIPMENT WOULD HAVE QUALIFIED 
FOR TAX AND DUTY-FREE IMPORTATION UNDER PARAGRAPH (C); (3) THAT 
THE VALUE-ADDED TAX THAT HAS BEEN PAID AND REFUNDED TO OR FOR 
WHICH TAX CREDIT HAS ALREADY BEEN ISSUED TO THE MANUFACTURER 
OF THE EQUIPMENT OR MACHINERY FOR SUCH RAW MATERIALS, SUPPLIES, 
SPARE PARTS OR SEMI-FINISHED 
PRODUCTS, SHALL NO LONGER BE 
AVAILABLE FOR THE ISSUANCE OF TAX CREDIT TO THE REGISTERED 
ENTERPRISE WHO PURCHASED THE EQUIPMENT; AND (4) THAT THE 
APPROVAL OF THE BOARD IS OBTAINED BY THE REGISTERED ENTERPRISE. 
IF THE REGISTERED ENTERPRISE SELLS, TRANSFERS, OR DISPOSES OF THESE 
MACHINERY, EQUIPMENT AND SPARE PARTS, THE PROVISION IN THE 
PRECEDING PARAGRAPH FOR SUCH DISPOSITION SHALL APPLY. 
[(e) 
the payment of contractor’s tax, whether national or local.] 
(E) 
Exemption from Contractor’s Tax. - The registered enterprise shall be exempt from 
DEFERRED IMPOSITION OF TWO PERCENT (2%) MINIMUM CORPORATE 
INCOME TAX (MCIT) - A MINIMUM CORPORATE INCOME TAX (MCIT) OF TWO 
PERCENT (2%) OF THE GROSS INCOME AS OF THE END OF THE TAXABLE 
YEAR SHALL BE IMPOSED WHEN THE MINIMUM INCOME TAX IS GREATER 
THAN THE TAX COMPUTED UNDER SECTION 27, SUBSECTION (A) OF 
REPUBLIC ACT NO. 8424 OR THE TAX REFORM ACT OF 1997 FOR THE 
TAXABLE YEAR: PROVZDED, HOWEVER, THAT SAID MCIT SHALL BE IMPOSED 
ONLY AFTER THE FIRM’S ENTITLEMENT PERIOD TO THE INCOME TAX 
HOLIDAY OR NET 
OPERATING LOSS 
CARRY-OVER, 
WHICHEVER IS 
APPLICABLE. 
(0 
Simplzfzcation of Customs Procedures. - Customs procedures for the importation of 
equipment, spare parts, raw materials and supplies, and exports of processed products by 
registered enterprises shall be simplified by the Bureau of Customs. 


Unrestricted Use of Consigned Equipment. - Provisions of existing laws 
no ithstanding, machinery, equipment and spare parts consigned to any registered enterprise 
shal not be subject to restrictions as to period of use of such machinery, equipment and spare 
part : Provided, That the appropriate re-export bond is posted unless importation is otherwise 
cov red under subsections (c) and (m) of this Article: Provided, further, That such consigned 
equi ment shall be for the exclusive use of the registered enterprise. 
If s ch equipment is sold, transferred or otherwise disposed of by the registered enterprise the 
related provision of Article 39 (c) [3] shall apply. Outward remittance of foreign exchange 
covering the proceeds of such sale, transfer or disposition shall be allowed only upon prior 
Bangko Sentral ng Pilipinas approval. 
Employment of Foreign Nationals. - Subject to the provisions of Section 29 of 
Commonwealth Act Numbered 613, as amended, a registered enterprise may employ foreign 
nationals in supervisory, technical or advisory positions for a period not exceeding five (5) years 
from its registration, extendible for limited periods at the discretion of the Board: Provided, 
however, That when the majority of the capital stock of a registered enterprise is owned by 
foreign investors, the positions of president, treasurer and general manager or their equivalents 
may be retained by foreign nationals beyond the period set forth herein. 
Foreign nationals under employment contract within the purview of this incentive, their spouses 
' I  
':'(g( 
(h) 
and unmarried children under twenty-one (21) years of age, who are not excluded by Section 29 
of Commonwealth Act Numbered 613, as amended, shall be permitted to enter and reside in the 
Philippines during the period of employment of such foreign nationals. 
A registered enterprise shall train Filipinos as understudies of foreign nationals in administrative, 
supervisory and technical skills and shall submit annual reports on such training to the Board. 
[(i) 
Exemption on Breeding Stocks and Genetic Materials. - The importation of breeding 
stocks and genetic materials within ten (10) years from the date of registration or commercial 
operation of the enterprise shall be exempt from all taxes and duties: Provided, That such 
breeding stocks and genetic materials are (1) not locally available and/or obtainable locally in 
comparable quality and at reasonable prices; (2) reasonably needed in the registered activity; and 
(3) approved by the Board. J 
(1) 
TAX AND DUTY EXEMPTION ON BREEDING STOCKS AND GENETIC 
MATERIALS. - THE IMPORTATION OF BREEDING STOCKS AND GENETIC 
MATERIALS WITHIN TEN (10) YEARS FROM THE DATE OF REGISTRATION OR 
COMMERCIAL OPERATION OF THE ENTERPRISE SHALL BE EXEMPT FROM 
ALL TAXES AND DUTIES: PROVIDED, THAT SUCH BREEDING STOCKS AND 
GENETIC MATERIALS ARE EXCLUSIVELY USED IN THE REGISTERED 
ACTIVITY AND APPROVED BY THE BOARD. 
[o') 
Tax Credit on Domestic Breeding Stocks and Genetic Materials. - A tax credit 
equivalent to one hundred percent (100%) of the value of national internal revenue taxes and 


customs duties that would have been waived on the breeding stocks and genetic materials had 
these items been imported shall be given to the registered enterprise which purchases breeding 
stock and genetic materials from a domestic producer: Provided, (1) That said breeding stocks 
and genetic materials would have qualified for tax and duty fiee importation under the preceding 
paragraph; (2) that the breeding stocks and genetic materials are reasonably needed in the 
registered activity; (3) that approval of the Board has been obtained by the registered enterprise; 
and (4) that the purchase is made within ten (1 0) years from date of registration or commercial 
operation of the registered enterprise.] 
(J) 
TAX CREDIT FOR USE OF DOMESTIC STOCKS AND GENETIC MATERIALS. 
- A TAX CREDIT EQUIVALENT TO ONE HUNDRED PERCENT (100%) OF THE 
TAXES AND DUTIES THAT WOULD HAVE BEEN WAIVED ON THE DOMESTIC 
BREEDING STOCKS AND GENETIC MATERIALS HAD THESE ITEMS BEEN 
IMPORTED SHALL BE GIVEN TO REGISTERED FIRMS WHICH PURCHASE 
BREEDING STOCKS AND 
GENETIC MATERIALS FROM A DOMESTIC 
PRODUCER: PROVIDED, THAT (1) THE APPROVAL OF THE BOARD HAS BEEN 
OBTAINED BY THE REGISTERED ENTERPRISE; AND (2) THE PURCHASE IS 
MADE WITHIN TEN (10) YEARS FROM THE DATE OF REGISTRATION OR 
COMMERCIAL OPERATION OF THE REGISTERED ENTERPRISE. 
t (k) 
Tax Credit for Taxes and Duties on Raw Materials. - Every registered enterprise shall 
enjoy a tax credit equivalent to the National Internal Revenue taxes and Customs duties paid on 
the supplies, raw materials and semi-manufactured products used in the manufacture, processing 
or production of its export products and forming part thereof; exported directly or indirectly by 
the registered enterprise: Provided, however, That the taxes on the supplies, raw materials and 
semi-manufactured products domestically purchased are indicated as a separate item in the sales 
invoice. 
Nothing herein shall be construed as to preclude the Board from setting a fixed percentage of 
export sales as the approximate tax credit for taxes and duties of raw materials based on an 
average or standard usage for such materials in the industry. J 
(K) 
TAX CREDIT FOR TRXES AND DUTIES ON RAW MATERIALS/SUPPLIES. - 
EVERY REGISTERED DIRECT OR INDIRECT EXPORT ENTERPRISE SHALL 
ENJOY A TAX CREDIT EQUIVALENT TO THE NATIONAL INTERNAL REVENUE 
TAXES AND CUSTOMS DUTIES PAID ON THE SUPPLIES, RAW MATERIALS AND 
SEMI-MANUFACTURED 
PRODUCTS 
USED 
IN 
THE 
MANUFACTURE, 
PROCESSING OR PRODUCTION OF ITS EXPORT PRODUCTS. ENTITLEMENT OF 
INDIRECT EXPORTERS TO TAX CREDIT SHALL BE SUBJECT TO SAFEGUARDS 
THAT WILL BE PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS 
FOR THIS ACT TO PREVENT THE ABUSE AND/OR FRAUDULENT AVAILMENT 
OF TAX CREDITS UNDER THIS PROVISION. THESE SAFEGUARDS SHALL 


INCLUDE, AMONG OTHERS, A PROVISION THAT SAID TAX CREDITS IN THE 
CASE OF INDIRECT EXPORTERS SHALL BE APPLICABLE ONLY AGAINST 
INCOME TAX AND NOT AGAINST ANY OTHER TAX. 
THE BOARD MAY SET A FIXED PERCENTAGE OF EXPORT SALES AS THE 
APPROXIMATE TAX CREDIT FOR TAXES AND DUTIES OF RAW MATERIALS 
BASED ON AN AVERAGE OR STANDARD USAGE FOR SUCH MATERIALS IN THE 
INDUSTRY. 
[(l) 
Access to Bonded Manufacturing/Trading Warehouse System. - Registered export 
oriented enterprises shall have access to the utilization of the bonded warehousing system in all 
areas required by the project subject to such guidelines as may be issued by the Board upon prior 
consultation with the Bureau of Customs.] 
(L) 
ACCESS 
TO BONDED MANUFACTURING/TRADING WAREHOUSE. - 
REGISTERED EXPORT-ORIENTED ENTERPRISES SHALL HAVE ACCESS TO THE 
BONDED WAREHOUSING SYSTEM. 
(m> 
Exemption from Taxes and Duties on Imported Spare Parts. - Importation of required 
supplies and spare parts for consigned equipment or those imported tax and duty free by a 
registered enterprise with a bonded manufacturing warehouse shall be exempt from customs 
duties and national internal revenue taxes payable thereon: Provided, however, That at least 
seventy percent (70%) of production is exported: Provided, further, That such spare parts and 
supplies are not locally available at reasonable prices, sufficient quantity and comparable quality: 
Provided, Jinally, That all such spare parts and supplies shall be used only in the bonded 
manufacturing warehouse of the registered enterprise under such requirements as the Bureau of 
Customs may impose. 
(n) 
Exemption from Wharfage Dues and any Export Tax, Duty, Impost and Fee. - The 
provisions of law to the contrary notwithstanding, exports by a registered enterprise of its non- 
traditional export products shall be exempted from any wharfage dues, and any export tax, duty 
impost and fee. 
(0) 
ACCELERATED 
DEPRECIATION. 
- FIXED 
ASSETS 
MAY 
BE 
DEPRECIATED AS FOLLOWS: 
(1) 
TO THE EXTENT OF NOT MORE THAN TWICE AS FAST AS THE 
NORMAL RATE OF DEPRECIATION OR DEPRECIATED AT NORMAL RATE OF 
DEPRECIATION IF THE EXPECTED LIFE IS TEN (10) YEARS OR LESS; OR 
(2) 
DEPRECIATED OVER ANY NUMBER OF YEARS BETWEEN FIVE (5) 
YEARS AND THE EXPECTED LIFE IF THE LATTER IS MORE THAN TEN (10) 
YEARS, AND THE DEPRECIATION THEREON ALLOWED AS DEDUCTION FROM 
TAXABLE INCOME: PROVIDED, THAT THE REGISTERED ENTERPRISE 
NOTIFIES THE BUREAU OF INTERNAL REVENUE AT THE BEGINNING OF THE 
DEPRECIATION PERIOD THAT THIS DEPRECIATION RATE SHALL BE USED. 


( 0  
DOUBLE DEDUCTION FOR TUINING EXPENDITURES. - EXPENSES 
INCURRED FOR LOCAL TRAINING GIVEN TO EMPLOYEES FOR THE 
DEVELOPMENT OF SKILLS IDENTIFIED AS NECESSARY BY THE APPROPRIATE 
GOVERNMENT AGENCIES SHALL ENTITLE THE REGISTERED 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 NECESSARY BUSINESS DEDUCTIONS FOR SAID 
EXPENSES UNDER THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED. 
THE INCENTIVE SHALL BE AVAILED OF BY REGISTERED FIRMS FOR A 
PERIOD OF TEN (10) YEARS FROM START OF COMMERCIAL OPERATION BUT 
SHOULD BE CLAIMED WITHIN FIVE (5) YEARS FROM THE DATE WHEN THE 
EXPENDITURE WAS MADE. AFTER THE TENTH YEAR, THE EXPENDITURE 
CAN BE CLAIMED AS A DEDUCTIBLE ITEM AS PROVIDED FOR UNDER 
REPUBLIC ACT NO. 8424. 
(Q) 
DOUBLE DEDUCTION FOR RESEARCH AND DEVELOPMENT. - EXPENSES 
INCURRED FOR RESEARCH AND DEVELOPMENT RELATING TO THE BUSINESS 
SHALL ENTITLE THE REGISTERED ENTERPRISE TO A SPECIAL DEDUCTION 
FROM TAXABLE INCOME EQUIVALENT TO ONE HUNDRED PERCENT (100%) 
OR THE TOTAL EXPENSES OVER AND ABOVE THE ALLOWABLE ORDINARY 
AND NECESSARY BUSINESS DEDUCTIONS FOR SAID EXPENSES UNDER THE 
NATIONAL INTERNAL REVENUE CODE, AS AMENDED. THE INCENTIVE SHALL 
BE AVAILED OF BY REGISTERED FIRMS FOR A PERIOD OF TEN (io) YEARS 
FROM START OF COMMERCIAL OPERATION BUT SHOULD BE CLAIMED 
WITHIN FIVE (5) YEARS FROM THE DATE WHEN THE EXPENDITURE WAS 
MADE. AFTER THE TENTH YEAR, THE EXPENDITURE CAN BE CLAIMED AS A 
DEDUCTIBLE ITEM AS PROVIDED FOR UNDER REPUBLIC ACT NO. 8424. 
FOR PURPOSES OF THIS ACT, “RESEARCH AND DEVELOPMENT COST” MEANS 
RESEARCH AND EXPERIMENTAL EXPENDITURES SUCH AS COSTS INCIDENT 
TO THE DEVELOPMENT OR IMPROVEMENT OF A PRODUCT, INCLUDING 
PILOT MODEL, PROCESS, FORMULA, INVENTION, TECHNIQUE, PATENT OR 
SIMILAR PROPERTY (EXAMPLES: 
EXPENDITURES PAID OR INCURRED TO 
DISCOVER INFORMATION THAT ELIMINATES UNCERTAINTY AS TO THE 
DEVELOPMENT OR IMPROVEMENT OF A PRODUCT; THE DEPRECIATION ON 
SUCH PROPERTY USED FOR RESEARCH AND EXPERIMENTATION; FEES 
INCURRED TO OBTAIN PATENTS ON THE TAXPAYER’S INVENTIONS; LEGAL 
AND ACCOUNTING FEES PAID OR INCURRED INCIDENT TO RESEARCH AND 
DEVELOPMENT ACTIVITIES; EXPENSES INCURRED IN DEVELOPING THE 
CONCEPT OF A PRODUCT; OR OTHER SIMILAR ITEMS). 


(R) 
INVESTMENT 
TAX ALLOWANCE (ITA). - AN INVESTMENT TAX 
ALLOWANCE TO THE EXTENT OF THE REGISTERED FIRM’S ACTUAL 
INVESTMENT IN FIXED ASSETS (EXCLUDING INVESTMENTS IN LAND AND 
CAPITAL EQUIPMENT FOR R&D) SHALL BE ALLOWED AS A DEDUCTION 
FROM FIFTY PERCENT (50%) OF ITS TAXABLE INCOME IN THE YEAR IN 
WHICH SUCH INVESTMENT WAS MADE: 
PROVIDED, (1) THAT THE 
INVESTMENT IS MADE WITHIN THREE (3) YEARS FROM THE DATE OF 
REGISTRATION; AND (2) THAT THE INVESTMENT IS REGISTERED WITH THE 
BOARD: PROVIDED, FURTHER, THAT DURING THE SAID THREE-YEAR PERIOD, 
REGISTERED FIRMS AVAILING OF THIS INCENTIVE SHALL NOT BE ALLOWED 
TO AVAIL OF ACCELERATED DEPRECIATION: PROnDED, FINALLY, THAT THE 
REGISTERED ENTERPRISE SHALL CHARGE, AT THE MINIMUM, THE NORMAL 
RATE OF DEPRECIATION IN ANY YEAR WHEN THE ITA IS NOT BEING USED 
DURING THE SAID THREE (3) YEA~S. 
ANY UNUTILIZED ALLOWANCE AFTER SUCH THREE-YEAR PERIOD MAY BE 
CARFUED OVER FOR TWO (2) YEARS. EFFECTIVELY, THE INCENTIVE SHALL 
BE AVAILED OF FOR A TOTAL PERIOD OF FIVE (5) YEARS FROM DATE OF 
REGISTRATION. UPON FULL UTILIZATION OF THE ITA, THE NORMAL RATE 
OF DEPRECIATION SHALL APPLY. 
DEPRECIATION BY MORE THAN ONE 
HUNDRED PERCENT (100%) OF THE VALUE OF THE ASSETS SHALL NOT BE 
ALLOWED. 
FURTHERMORE, REGISTERED ENTERPRISES SHALL ALSO BE ENTITLED TO 
THE FOLLOWING NON-FISCAL INCENTIVES: 
(1) 
STUDIES; 
(2) 
(3) 
ASSISTANCE IN THE PREPARATION OF INVESTMENT OPPORTUNITY 
ASSISTANCE FOR JOINT VENTURE MATCHING; 
ASSISTANCE IN SOURCING FINANCING SUPPORT; 
(4) 
PROMOTION 
OF 
INTRA-SECTOR 
LINKAGES 
THROUGH 
THE 
AVAILABILITY OF AN EXCHANGE AND ASSISTANCE FACILITY THAT 
IDENTIFIES SME SUPPORT COMPANIES OF A REGISTERED ENTERPRISE; 
(5) 
(6) 
BUSINESS CONSULTANCY SERVICES; 
(7) 
ENTREPRENEURIAL 
ASSISTANCE 
TO 
OVERSEAS 
CONTRACT 
WORKERS; 
(8) 
UNITS IN KEY GOVERNMENT OFFICES; 
TECHNICAL ASSISTANCE THROUGH BOI’S REGULAR PROGRAMS; 
AVAILABILITY OF INVESTMENT PROMOTION UNITS OR SMALL STAFF 
(9) 
UTILIZATION OF MULTI-SECTORAL NETWORK SYSTEM THROUGH 
THE INDUSTRY DEVELOPMENT COUNCIL (IDC); 


(1 0) 
ASSISTANCE 
IN THE FACILITATION FOR THE ISSUANCE OF 
REGISTRATION/CLEARANCES FROM OTHER GOVERNMENT AGENCIES IN 
RELATION TO THEIR BO1 REGISTRATION; AN 
(1 9 
LEGAL OPINIONS. 
IN EXTENDING THE FOREGOING NON-FISCAL INCENTIVES, THE BOARD MAY 
CHARGE A MINIMAL FEE.” 
SEC. 3. 
hereby amended to read as follows: 
“Art. 
42. Refund, ADMINISTRATIVE SANCTIONS, and Penalties. - ANY ENTERPRISE 
WHICH VIOLATES ANY PROVISION OF THIS CODE, ITS IMPLEMENTING RULES 
AND REGULATIONS, THE TERMS AND CONDITIONS OF ITS REGISTRATION OR 
ANY LAWFUL DIRECTIVE OF THE BOARD, OR WILLFULLY COMMITS ANY 
FRAUDULENT MISREPRESENTATION IN THE COURSE OF FILING AN 
APPLICATION FOR REGISTRATION, OR IN THE AVAILMENT OF INCENTIVES, 
INCLUDING ALL OFFICIAL REPORTS REQUIRED TO BE SUBMITTED BY THE 
BOARD, SHALL BE SUBJECT TO A FINE OF ONE MILLION PESOS (P1,000,000.00) 
Article 42, Title V of the Omnibus Investments Code of 1987, as amended, is 
OR AN AMOUNT EQUIVALENT TO ONE PERCENT (1%) OF ITS PROJECT COST, 
WHICHEVER IS HIGHER, WITHOUT PREJUDICE TO THE DISAPPROVAL OF ITS 
APPLICATION 
FOR 
REGISTRATION 
OR 
CANCELLATION 
OF 
ITS 
REGISTRATION. 
In case of cancellation of the Certificate granted under this Code, the Board may, in 
appropriate cases, require the refund of incentives availed of. [and impose 
corresponding fines and penalties]. 
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,OOO.OO) BUT NOT MORE THAN THREE HUNDRED THOUSAND PESOS 
(P300,OOO.OO). 
GOVERNMENT OFFICERS AND EMPLOYEES WHO PARTICIPATE DIRECTLY OR 
INDIRECTLY IN THE COMMISSION OF THE FOREGOING ACTS SHALL 
LIKEWISE BE LIABLE TO A FINE OF NOT LESS THAN ONE HUNDRED 
THOUSAND PESOS (PlOO,OOO.OO) BUT NOT MORE THAN THREE HUNDRED 
THOUSAND PESOS (P300,000.00), IN ADDITION TO ANY CRIMINAL AND 
ADMINISTRATIVE PENALTIES IMPOSABLE UNDER THE CIVIL SERVICE LAW, 
REVISED PENAL CODE, REPUBLIC ACT NO. 3019 (ANTI-GRAFT AND CORRUPT 
PRACTICES ACT), REPUBLIC ACT NO. 6713 (CODE OF CONDUCT AND ETHICAL 
STANDARDS FOR PUBLIC OFFICIALS) AND OTHER APPLICABLE LAWS. 


IF THE OFFENDER IS A FOREIGN NATIONAL, IN ADDITION TO THE 
IMPOSABLE FINES AND PENALTIES ABOVE, THE FOREGOING ACTS SHALL BE 
GROUNDS FOR HIS SUMMARY DEPORTATION.” 
SEC. 4. 
Reporting of Incentives. - For purposes of monitoring the incentives granted by the 
government, the BO1 and other incentives-giving agencies shall, on a quarterly basis, submit 
reports to the Development Budget Coordination Committee (DBCC) of the National Economic 
and Development Authority NEDA, on incentives availed of by their respective registered 
enterprises. 
SEC. 5 ,  
The provisions of existing laws, rules, regulations and other issuances to the 
contrary notwithstanding, all the foregoing fiscal and non-fiscal incentives may be availed by 
BOI-registered firms as may be deemed necessary by the Board subject to the conditions set 
herein. 
SEC. 6. 
Implementing Rules and Regulations. - The BOI, in consultation with the NEDA, 
Department of Finance, Department of Trade and Industry and other appropriate government 
agencies shall promulgate rules and regulations to implement the intent and provisions of this 
Act. Such rules and regulations shall take effect fifteen (15) days following its publication in a 
newspaper of general circulation in the Philippines. 
SEC. 7. 
Repealing Clause, - All other laws, decrees, orders, issuances and rules and 
regulations or parts thereof inconsistent with this Act are hereby repealed or modified 
accordingly. 
SEC. 8. 
Separability Clause. - The provisions of this Act are hereby declared to be 
separable and, in the event any of such provisions is declared unconstitutional, the other 
provisions which are not affected thereby shall remain in full force and effect. 
SEC. 9. 
a newspaper of general circulation in the Philippines. 
Effectivity. - This Act shall take effect fifteen (1 5) days following its publication in 
Approved,