FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
The 1987 Constitution of the Philippine provides that the State recognizes the 
indispensable role of the private sector, encourages private enterprise, and provides 
incentives to needed investments. It is in this regard that the State shall endeavor to 
enhance the economy's competitiveness through investment promotion and industrial 
development activities geared towards employment generation and countrywide 
development. 
Since then, the government has been putting in place incentives to attract 
investments. Because of this endeavour, there are now many laws that intend to 
encourage the same resulting in a confusing plate of basis in granting incentives, thus 
causing an administrative nightmare. 
This bill seeks to harmonize the incentives that shall be given to investors in 
order to streamline regulation. The Board of Investments (BOI) shall be given the 
authority to oversee all investment promotion activities and are thus tasked with 
significant responsibilities such as: 
1. Formulate an evolving National Framework for Investment. Promotions that will 
govern all investment promotion agencies; 
2. Prepare the Investments Priorities Plan; 
3. Establish the Investment Promotion Action Center (i-PAC); 
4. 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 agreements of the Philippines with other 
countries; or when the existing laws of another country where the investor comes 
from provides no nationality restrictions for Filipino investors or provides for 
reciprocal nationality accommodations; 
5. 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 enterprises, and other activities necessary for the effective 
implementation of this Code; 
6. Process and approve, deny, suspend, revoke applications for registration, 
imposing terms and conditions as it may deem necessary; and 
7. Assist micro and small enterprises in the preparation of feasibility and other 
investment. 


The rationalization and harmonization of incentives are necessary in order to 
streamline regulation, which is considered as a requisite in attracting investments, 
among other things. This undertaking is also identified as a legislative priority in 'the 
14th Congress as the same will finally bring about the much-needed reform that will 
improve the investment climate and likewise, the administrative activities. 
In view of the foregoing, the passage of this bill is earnestly sought. 
Senator 


FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
Introduced by Senator Loren Legarda 
THE INVESTMENTS AND INCENTIVES CODE OF THE PHILIPPINES 
Be it enacted bu the Senate and House of Representatives of the Philippines in Congress 
- 
assembled: 
PRELIMINARY TITLE 
Chapter I. TITLE AND DECLARATION OF POLICY 
SECTION 1. Title. This Act shall be known as "The Investments and Incentives 
Code of the Philippines". 
Section 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 industria1 development activities geared towards 
employment generation and countrywide development. Accordingly, the following are 
the declared policies of the State: 
1. The State shall pursue a market responsive investment regime. 
2. The State shall formulate industry and sectoral development programs. 
3. The State shall undertake investment promotion activities. 
4. The State shall grant incentives that are simple to administer, time- bound 
and performance-based. 
5. The State recognizes that industrial peace is essential to attracting 
investments. 
Chapter I1 - ORGANIZATION AND FUNCTIONS 
THE BOARD OF INVESTMENTS 
Section 3. The Board of Investments (BOI). The .Board of Investments hereinafter 
referred to as the "BOI" shall be the national investments promotion agency and shall 
be responsible for sectoral and industrial development programs, which shall be 
attached to the Department of Trade and Industry (DTI) and under the supervision of 
the Industry and Investments Group (IIG) of the DTI. 
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Section 4. Composition of the BO1 Board of Governors. The BO1 Board of Governors 
shall be composed of seven (7) governors: the Secretaries of Trade and three (3) DTI 
Undersecretaries, and three (3) representatives from the private sector. The Secretary of 
Trade and Industry shall concurrently be the Chairman of the BO1 while the DTI 
Undersecretary for IIG shall serve as the Vice Chairman. The three (3) representatives 
from the private sector shall be appointed by the President for a term not exceeding 
four (4) years: Provided, that a governor may be reappointed; Provided further, that a 
governor shall serve as such until his successor shall have been appointed and 
qualified. 
The DTI Undersecretary for Investment and Industry Group shall be the 
Managing Governor and shall be assisted by four (4) career officials with the rank of 
Deputy Governors, who shall be appointed by the BO1 Board, upon the 
recommendation of the Managing Governor. 
Members of the Board shall receive a reasonable per diem for every meeting 
attended. 
Section 5. Qualifications of the BO1 Board of Governous. The governors of the BO1 
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. 
Section 6. Ponws and Functions of the BO1 Board. The BO1 Board 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 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 four (4) members shall constitute a quorum and the 
affirmative vote of four (4) members in a meeting validly held shall be necessary to 
exercise its powers and perform its functions which shall include the following: 
(1) Formulate an evolving National Framework for Investment Promotions (NFIP) 
that will govern all Investment Promotion Agencies (IPAs); 
(2) Promulgate rules, regulations and policies to implement the NFIP; 
(3) Exercise oversight functions over all investment promotion activities of all 
IPAs; 
(4) Gather, consolidate and monitor investment data and information (both 
domestic and foreign direct investments) from all IPAs and other concerned 
government agencies for submission to Congress; 
(5) 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 enterprises, and other activities necessary for the effective implementation of 
this Code; 
(6) Manage the investment promotion funds contributed by all IPAs; 
2 


(7) Establish the Investment Promotion Action Center (i-PAC); 
(8) Establish and operate regional investment centers in the Philippines; 
(9) Establish and operate overseas investment offices; 
(10) ' Determine the organizational structure and staffing pattern of the BOI. Appoint, 
promote, transfer, assign personnel any provision of the law to the contrary 
notwithstanding, and discipline, or remove its personnel consistent with the provisions 
of civil service laws, rules and regulations; 
(11) Conduct and implement industrial and sectoral programs on economic 
development related to investments; 
(12)Forniulate positions for bilaterai, multilateral, and regional investments agreements 
and/ or arrangements; 
(13) Act on investment projects covered by bilateral, multilateral, and regional 
agreements subject to rules and guidelines to be formulated by the Board; 
(14)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 agreements of the Philippines with other countries; 
or when the existing laws of another country where the investor comes from provides 
no nationality restrictions for Filipino investors or provides for reciprocal nationaIity 
accommodations; 
(15)Promulgate rules, regulations and policies on incentives which the IPAs are 
mandated to implement; 
(16)Gather, consolidate, and monitor incentives data and information from all IPAs and 
other concerned government agencies for submission to the President; 
(17)Prepare the Investments Priorities Plan (IPP) in accordance with Title 111, Chapter I 
of this Code; 
(18)Formulate rationalization programs for certain industries whose operation may 
result in dislocation, over-supply or inefficient use of resources that impedes economic 
growth. In the interest of national development and upon approval of the President, the 
Board may restrict, either totally or partially, the importation or exportation of any 
equipment, raw materials, intermediate goods or finished goods; 
(19) Assist micro and small enterprises in the preparation of feasibility and other pre- 
investment project study; 
(20)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, in any manner, as may be determined by the Board, requiring 
performance bonds from accredited bonding companies, and payment of application, 
registration, publication and other fees, when warranted; 
3 


(21)After due notice, cancel the registration or suspend the incentives of a registered 
enterprise and/or require refund of incentives, including interests and monetary 
penalties; 
(22)Establish an arbitration and mediation center to resolve controversies and/or 
disputes between registered enterprises; 
(23) After due hearing, decide controversies concerning the implementation of this Code 
that may arise between registered enterprises or investors therein, and government 
agencies. The BO1 shall have the power to subpoena witnesses, administer oaths, and 
compel the production of books, papers, and other evidence, and to cite for contempt 
any person or organization that fails to comply with the afore-stated processes; Provided 
that, a registered enterprise may file a motion for reconsideration of a decision or final 
order within fifteen days (15) 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; 
(24) Recommend to the Commissioner of Immigration and Deportation the employment 
of foreign nationals in registered enterprises and the grant of Investor's Visa under 
Section 22 of this Code; 
(25) Ascertain by inspection or verified reports, the proportion of the participation of 
Philippine nationals in a registered enterprise to ensure compliance with the nationality 
requirements of our laws to retain registration under this Code or to verify the 
compliance by registered enterprises with the terms and conditions of registration; 
(26) Waive, condone or reduce fines or penalties imposed on registered enterprises; 
(27) Implement the Regional Operating Headquarters, Retail Trade Law, Long Term 
Lease and other laws as mandated; and 
(28)Generally, exercise all powers necessary or incidental to attain the purposes of this 
Code and other laws vesting additional functions on the Board. 
Section 7. Appointment of BO1 Personnel. The BO1 Board shall appoint its 
personnel subject to civil service laws, rules and regulations.' All positions in the BO1 
shall be governed by compensation, position classification systems, and qualification 
standards approved by the BO1 Board based on a comprehensive job analysis and audit 
of actual duties and responsibilities. The compensation plan shall be comparable with 
the prevailing compensation plan of other Investment Promotion Agencies or 
government financial institutions and shall be subject to periodic review by the BO1 
Board no more than once every five (5) years without prejudice to yearly merit reviews 
or increases based on productivity. The BO1 shall therefore be exempt from existing 
laws, rules and regulations on compensation, position classification and qualification 
standards. 
Section 8. The Investment Prorhofion Acfion Cenfer. There is hereby created an 
Investment Promotion Action Center (SAC) under the supervision and control of the 
BO1 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 
4 


Trade, 
Industry, 
Tourism, 
Agriculture, 
Natural 
Resources, 
Transportation, 
Communication and Services, and for Other Purposes”. The i-PAC shall promote, 
coordinate, and facilitate investment development efforts of the government and shall 
serve as the link to all government agencies to facilitate entry, retention, expansion and 
diversification of investments and source of investment information. 
The i-PAC shall be composed of all government agencies involved in the 
establishment or operation of business including, but not limited to, all IPAs, Securities 
and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), Bureau of Customs 
(BOC), Bureau of Immigration and Deportation (BID), the Departments of Trade and 
Industry (DTI), Interior and Local Government (DILG), Agriculture (DA), 
Environmental and Natural Resources (DENR), Labor and Employment (DOLE), 
Foreign Affairs (DFA), Energy (DOE), Public Works and Highways (DPWH), Agrarian 
Reform (DAR), and such other agencies as may be determined by the BO1 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. 
Section 9. Pouws and Functions of the i-PAC. The i-PAC shall exercise and perform 
the following powers and functions: 
(1) Provide advice, guidance, information and procedure on various laws, rules and 
regulations governing investments and the conduct of business in the Philippines. 
(2) Member government agencies shall act on investment-related requirements within 
ten (10) working days from filing thereof, otherwise, such request shall be deemed 
approved. 
(3) Recommend the streamlining of existing procedures to ensure that all frontline 
agencies, dealing with the operation of business, perform their tasks for identified 
government to business transactions. 
(4) Establish an on-line investment facilitation system. 
(5) Coordinate with appropriate government offices or agencies, such as the Office of 
the Ombudsman and the Civil Service Commission (CSC), any complaints filed by a 
investor or potential investor against any public official or employee or any office, 
agency or instrumentality, including local government units (LGUs) and officials, as 
well as any government-owned and controlled corporation (GOCC), in connection 
with any act or duty required by law to facilitate the entry of local and foreign 
investments. 
(6) Perform such other functions as may be directed by the BO1 Board 
Section 10. Honoraria and Allozoances. The BO1 Board shall provide for reasonable 
honoraria and allowances for the i-PAC members and its personnel. 
5 


TITLE 11. DEFINITION OF TERMS 
Section 11. Definition ofTerms. As used herein, the following shall mean- 
A. "BOY shall refer to the Board of Investments created under this Code. 
B. "Investment Promotion Agencies (PAS)" shall include the BOI, Philippine 
Economic Zone Authority (PEZA), Bases Conversion Development Authority 
(BCDA), Subic Bay Metropolitan Authority (SBMA), Clark Development 
Corporation (CDC), John Hay Management Corporation (JHMC), Poro Point 
Management Corporation (PPMC), 
Bataan Technology Park Inc. (BTPI), 
Cagayan Economic Zone Authority (CEZA), Zamboanga City Special Economic 
Zone Authority (ZCSEZA), PHIVIDEC Industrial Authority (PIA), Aurora 
Economic Zone (AEZ), and all other II'As that may be created by law. 
C. "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, hou~ever, That the term "registered 
enterprise", unless provided for under the charters of the IPAs, shall not include 
commercial banks, savings and mortgage banks, rural banks, savings and loan 
associations, building and loan associations, developmental banks, trust 
companies, investment banks, finance companies, brokers and dealers in 
securities, consumers cooperatives and credit unions, and other business 
organizations whose principal purpose or principal source of income is to receive 
deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest 
in common or preferred stocks, debentures, bonds or other marketable 
instruments generally recognized as securities, or discharge other similar 
intermediary, trust or fiduciary functions. 
D. "Investment Priorities Plun (IPP)" shall refer to the list of industries, services 
and other economic activities that will be eligible for incentives under this Code, 
prepared and determined as priority or preferred activities in accordance with 
Title 111, Chapter 1 of this Code. 
E. "Ne70 pvoduct or sewice" shall refer to any product or service not locally or not 
sufficiently manufactured/rendered to meet demand. 
F. "Gross income earned" refers to gross sales or gross revenues derived from the 
registered activity within the zones or freeports, less sales returns, discounts and 
allowances and cost of goods sold and/or cost of services rendered, as defined 
under Section 27(E)(4) of the National Internal Revenue Code of 1997. 
G. "Tux Credit" shall mean any credits against taxes and/or duties equal to those 
actually paid or would have been paid. Tax credit certificate shall be issued by 
the Secretary of Finance or his representative, or by the BO1 Board or concerned 
IPA, if so delegated by the Secretary of Finance. The tax credit certificate issued 
pursuant to this Code shall be transferable to another registered enterprise under 
this Code. In case the indushy is in a state of distress, as declared by the BO1 
Board, the tax credit certificate shall be freely transferable. The tax credit shall be 
valid only for a period of ten (10) years from date of issuance. 
6 


The tax credit certificate shall be used to pay taxes, duties, charges and 
fees due to the national government. 
H. (a) "Export sales of goods" shall mean the sales values, determined from 
invoices, bills of lading, inward letters of credit, landing certificates, or other 
commercial documents, of the following: 
i. the sale and actual shipment of goods from the Philippines to a foreign 
country by a registered enterprise; 
ii. 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 
seacraft; 
iii. sales to a nonresident buyer for delivery to a resident local export 
enterprise, of 
capital equipment, raw materials, production supplies, 
packaging materials and other production requirements needed. for the 
registered activity of the export enterprise; or 
iv. sales of goods to a nonresident buyer, except automobiles and non- 
essential goods, manufactured or processed in the Philippines, for 
delivery to a resident in the Philippines. 
Provided, that: in the case of (ii) above, only sales to an export enterprise of 
capita1 equipment, raw materials, production supplies, packaging materials, and 
other production requirements needed for the registered activity of the export 
enterprise; and sales to international sea or air transport operations of goods, 
equipment, spare parts and supplies, except fuel, to be used in the aircraft or 
seacraft and capital equipment needed for the shipping or air transport 
operations, shall be entitled to incentives for export enterprises under this Code. 
(b) "Export sales of services'' shall mean the sales revenues, determined 
from contracts, invoices, vouchers, official receipts, or other commercial 
documents of the following: 
i. 
ii. 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; 
services rendered for clients abroad by registered enterprises; 
iii. transport of passengers and cargo by air or sea vessels from the 
Philippines to a foreign country; or 
7 


iv. services rendered to international airlines or shipping lines, or military 
aircraft or seacraft, or information and communication technology 
enterprises, even if rendered locally. 
Provided, that: in the case of (ii) 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 overhaul, repair and maintenance services 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 notwithstanding, services rendered locally by registered 
enterprises that are paid for in freely convertible foreign currency shall be 
considered as "export sales". 
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". 
I. An "export enfeupn'se" shall mean a manufacturer, processor that exports at 
least fifty percent (50%) of its output. 
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. 
J. A "domestic enterprise" shall mean an enterprise which produces goods for 
sale or renders services exclusively to the domestic market or does not comply 
with the minimum export requirement of an export enterprise. 
K. "Sewice enterprise" is an enterprise engaged or proposing to engage in 
rendering technical, professional or other services listed in the IPP. 
Service enterprise that earns at least thirty percent (30%) of its revenues 
paid for in foreign currency generated from non-resident clients shall be entitled 
to the incentives provided to an "export" enterprise. 
L. "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 outlines. 
M. "Processing" shall mean converting raw materials into marketable form 
through physical, mechanical, chemical, electrical, biochemical, biological or 
other means, or by a special treatment or a series of actions, such as slaughtering, 
8 


milling, pasteurizing, drying or desiccating, quick freezing, that results in a 
change in the nature or state of the products. Processing shall include assembly 
provided that a distinct or new product is formed. 
N. “Industrial Esfafe Zone (IEZ)” 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. 
0. 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 tourist/recreational, commercial, banking, investment and 
financial centers whose metes and bounds are fixed or delimited by Presidential 
Proclamations. An ecozone may contain any or all of the following: industrial 
estates (IEs), export processing zones (EPZs), free trade zones and tourist, 
recreational centers, ICT Park/Centers; Provided however, that areas where 
mining operations are undertaken shall not be declared as ecozones. 
P. ”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. Enterprises located 
in export processing zones are allowed to import capital equipment and raw 
materials free from duties, taxes and other import restrictions. 
Q. ”Free Trade Zoize” shall refer to an isolated and policed area adjacent to a port 
of entry as a seaport or airport, as defined in Section 3519 of the Tariff and 
Customs Code, where imported goods that are not expressly prohibited by law, 
may be unloaded for immediate transshipment or stored, repacked, sorted, 
mixed, or otherwise manipulated without being subject to import. However, 
movement of these imported goods from the free-trade area to a non-free trade 
area in the country shall be subject to customs and internal revenue rules and 
regulations. 
R. ”Freeport Zone” shall refer to an isolated and policed area adjacent to a port of 
entry which shall be operated and managed as a separate customs territory 
ensuring free flow or movement of goods, except those expressly prohibited by 
law, within, into and exported out of the freeport zone. 
S. “ICT Park” shall refer to an area which has been developed into an integrated 
development complex capable of providing infrastructure and other support 
facilities required by ICT enterprises, as well as amenities required by 
9 


professionals and workers involved in ICT enterprises, or easy access to such 
amenities. 
T. "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 professional and 
workers involved in ICT enterprises, or easy access to such amenities. 
U. "Capital Equipment" refers to machinery, equipment, major components 
thereof, spare parts, accessories, those required for pollution abatement and 
control, tools, devices, apparatus, fixtures, fittings and accompaniments which 
are directly and/or reasonably needed in the registered activity of the enterprise. 
TITLE I11 - INVESTMENTS WITH INCENTIVES 
CHAPTER I - QUALIFIED ACTIVITIES 
Section 12. Investment Pviovifies Plan (IPP). The BOI, upon consultation with the 
Department of Finance, National Economic and Development Authority, the Office of 
the President, concerned Investments Promotion Agencies and appropriate government 
agencies and the private sector shall formulate the IPP to be submitted to the President 
for his approval. 
In the listing of the activity in the IPP, the following shall be complied with: 
1. The activity shall be in the plans'and programs of the current Medium Term 
Philippine Development Plan (MTPDP) and Medium Term Philippine 
Investment Plan (MTPIP) or its equivalent; 
2. The activity shall satisfy the following conditions: 
a. substantial amount of investments; 
b. considerable generation of employment; 
c. use of modern or new technology; or 
d. installation of adequate environmental protection systems 
and, 
3. The activity must comply with the specific qualification requirements and/or 
conditions for a particular sector or industry as set by the Board. 
Further, the following limitations shall apply: 
1. Except for items 2 (a) and (d) which shall be present in all 
activities , the application of the conditions thereto set forth shall depend on the 
activity. 
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2. 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. 
3. Such other limitations as the Board may determine. 
The first IPP under this Code shall be valid until the year 2010. Subsequently, the 
IPP shall be prepared once every three years. 
Section 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, temporarily or 
permanently suspend activities oh 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 IPA shall not accept applications in an area of 
investment prior to the approval of the same as a preferred area or after approval of its 
deletion as a preferred area of investment. 
Section 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 declaring 
the areas of investment shall be published in at least one (1) newspaper of general 
circulation and all such areas shall be open for application until publication of an 
amendment or deletion thereof. 
Section 15. Strategic Projects. The President, upon recommendation of the Board, 
may allow registration to a “strategic project” that may not be listed in the IPP, in order 
to be competitive with global economies. 
A “strategic project” is a project that exhibit high social economic returns and 
require large investments that will significantly contribute to the country’s economic 
development. In the exercise of this authority, any of the three 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 
Strategic Project shall also include projects that locate in the country as a result of 
competition with other countries. 
CHAPTER I1 - INCENTIVES TO REGISTERED ENTERPRISES 
Section 16. Universal Incentives. Registered enterprises are entitled to the 
following incentives to the extent of their registered activity: 
11 


A. Net Operating Loss Carryover (NOLCO). The net operating loss of the 
registered activity during the first five (5) years from start of commercial operation 
which,had not been previously offset as deduction from gross income shall be carried 
over as a deduction from gross income for the next ten (10) consecutive taxable years 
immediately following the year of such loss. 
Registered enterprises availing of the ITH as herein provided shall not be entitled 
to avail of the NOLCO. 
The BIR shall require a registered enterprise availing of NOLCO to secure a 
certificate of eligibility from the appropriate IPA before filing an official copy of its 
Income Tax Return (ITR) with the appropriate IPA for validation of NOLCO claim. 
.Failure to secure certification and/or to file the NOLCO availment for validation 
by the appropriate investment promotion agency shall cause the forfeiture of the 
availment for the taxable period. 
B. Capital Equipment lncentives. 
(1) Importations of capital equipment, including consignment thereof, by 
registered enterprises upon the effectivity of this law, shall be exempted to the extent of 
one hundred percent (100%) of the taxes and customs duties; Provided that the 
following conditions are complied: 
i 
The capital equipment is directly and/or reasonably needed and will be used 
exclusively in the registered activity of the enterprise unless prior approval of the 
IPA is secured for the part time utilization of said equipment in a non-registered 
activity to maximize usage thereof or the proportionate taxes and duties are paid 
on a specific equipment and machinery being permanently used for non- 
registered activities; They are not manufactured domestically in sufficient 
quantity, of comparable quality and at reasonable prices; and, 
ii The approval of the IPA was obtained by the registered enterprise for the 
importation of such machinery, equipment and spare parts. 
Approval of the IPA must be secured before any sale, transfer or disposition of 
the imported capital equipment is made: 
Provided, that if such sale, transfer or 
disposition is made within the first five (5) years from date of importation, any of the 
following conditions must .be present: 
i 
capital equipment; 
ii 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; 
iii Exportation of the capital equipment, machinery, spare parts or source 
documents or those required for pollution abatement and control; or, 
If made to another enterprise enjoying tax and duty exemption on imported 
12 


iv 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 (2), the 
registered enterprise shall not pay the taxes and duties waived on such items: Puovided 
furtker, That if the registered enterprise sells, transfers or disposes the aforementioned 
imported items without prior approval 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 tax and duty exemption given it: Puovided, finally, That 
even if the sale, transfer or disposition of the capital equipment, is approved after five 
(5) years from date of importation, the registered 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 purchase of machinery and capital equipment and raw materials, 
supplies, parts and semi-finished products, used in the fabrication of machinery and 
capital equipment by a registered enterprise, from a domestic manufacturer shall be 
subject to zero percent (0%) value-added tax. 
The registered enterprise shall be granted a tax credit equivalent to the amount 
of duties that would have been waived on the machinery; capital equipment; and raw 
materials, supplies, parts and semi-finished products used in the fabrication of 
machinery and capital equipment, had these items been imported, upon its submission 
to the Department of Finance (DOF) of the bill of materials evidencing the transaction 
value of such and other pertinent documents, for verification and proper endorsement. 
The registered enterprise availing of the incentives provided under the 
immediately preceding two paragraphs shall be subject to the following: (a) that said 
capital equipment, will be used exclusively by the registered enterprise in its registered 
activity; (b) 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 (c) that the approval of 
the concerned IPA is obtained by the 
registered enterprise. If the registered enterprise sells, transfers or disposes of the 
capital equipment, the provision in the preceding paragraphs for such disposition shall 
apply. 
This incentive shall be deemed waived if application for tax credit under this 
subsection was not filed within one (1) year from date of delivery of such machinery; 
capital equipment; and raw materials, supplies, parts and 'semi-finished products. 
13 


Domestic enterprises shall be entitled to this incentive for a period of five (5) 
years from date of registration. 
C. 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 National Internal Revenue Code (NIRC) of 1997, as amended. 
D. Double Deduction for Training Expenses or Training Expenses Credit. Expenses 
incurred for local training given to employees for the development of skills identified as 
necessary by the appropriate government agencies, upon approval by the concerned 
IPA, shall entitle the registered enterprise to a special deduction from the taxable 
income equivalent to one hundred (100%) percent 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 training expenses incurred shall be deducted from the taxable income after 
entitlement to other income tax based incentives or when the registered enterprise 
deems it necessary. The total deferred deduction shall be spread uniformly over a 
period of five (5) years. Any unused deduction after the said period shall be deemed 
waived and in no case shall it be extended. 
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. 
E. Double Deduction for Research and Development and Research and Developnzent 
Credit. Expenses incurred for research and development conducted in the Philippines 
relating to the business shall entitle the registered enterprise to a special deduction from 
taxable income equivalent to one hundred percent (100%) of the total expenses over and 
above the allowable ordinary and business deductions for said expenses under the 
National Internal Revenue Code, as amended. 
The expenses for research and development shall be deducted from the taxable 
income after entitlement to other income tax based incentives. The total deferred 
deduction shall be spread uniformly over a period of five (5) years. Any unused 
deduction after the said period shall be deemed waived and in no case shall it be 
extended. 
The concerned IPA 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. 
F. Incentives for Necessary and Major Infrastructure and Public Facilities. Registered 
enterprises establishing necessary and major infrastructure works in the area of its 
14 


activity shall be entitled to deduct from their taxable income an amount equivalent to 
one hundred percent (100%) of the works it may have undertaken with the prior 
approval of the IPA; Provided, That the title to all such infrastructure works shall upon 
completion be transferred to the Philippine Government; Provided further, That any 
amount not deducted for a .particular year may be carried over for deduction for 
subsequent years not exceeding ten (IO) years from commercial operation. 
Section 17. Export Incentives. Export enterprises regardless of location shall be 
entitled to the following incentives to the extent of its registered activity: 
A. Income Tax Holiday (ITH). Activities of an export enterprise shall be entitled to 
eight (8) years of Income Tax Holiday (ITH) from the date of start of its commercial 
operations. 
The Bureau of Internal Revenue (BIR) shall require a registered enterprise 
availing of ITH to secure a certificate of eligibility from the appropriate IPA before filing 
an official copy of its Income Tax Return (ITR). Thereafter, the registered enterprise 
shall file its claim with the appropriate IPA for validation. 
Failure to secure certification and/or to file the ITH availment for validation by 
the appropriate IPA shall cause the forfeiture of the availment for the taxable period. 
B. Reduced Income Tax. After entitlement to ITH, a registered export enterprise 
located outside the zones or freeports shall be imposed a preferential tax rate of fifteen 
percent (15%) of taxable income as defined under Section 31 of the National Internal 
Revenue Code of 1997, as amended, for a period of twelve (12) years. 
C. Duty Free Importation of Souvce Documents. The importation of source 
documents by information and communication technology (ICT) registered enterprises 
shall be eligible for tax and duty free importation. 
D. Ra70 Material Incentives. Registered export-oriented enterprise located outside 
the zones or freeports shall enjoy a tax credit equivalent to the 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 
forming part thereof, exported directly and indirectly by the registered export-oriented 
enterprise, based on the actual taxes and duties paid for such materials, supplies, or 
semi-manufactured products by the registered enterprise. 
This incentive shall be deemed waived if application for tax credit under this 
subsection was not filed within one (1) year from date of exportation of the final 
product. 
E. Access to Bonded Manufacturing Warehouse. Registered export enterprises 
located outside zones or freeports shall have access to the utilization of bonded 
15 


warehousing system required by the project subject to such guidelines as may be issued 
by the IDB Board. 
F. Exemption from Wha$age Dues and Export Tax. The provisions of law to the 
contrary notwithstanding, exports by a registered enterprise shall be exempted from 
wharfage dues and export taxes. 
G. 
Exemption from Value-Added-Tax on Local Purchases of Goods and Sewices. The 
provision of law to the contrary notwithstanding, local purchases of goods and services 
required by the activity of a registered export enterprise shall be exempt from the value 
added tax. 
Section 18. Zonal or Freeport Incentives. In addition to the applicable incentives 
provided under the preceding section on export incentives, registered enterprises 
locating in the Special Economic Zones, Free Trade and Freeport Zones shall be entitled 
to the following incentives: 
A. Imposition of a Tax Rate of Five Percent (5%) On Gross Income Earned (GIE). 
Except for real property tax on land owned by private developers, no local and national 
taxes as prescribed under Republic Act No. 8424, also known as "The National Internal 
Revenue Code of 1997 as amended, such as income tax, excise tax, franchise taxes, 
shall be imposed on business establishments operating within the zones or freeports, 
after ITH availment. In lieu thereof, five percent (5%) of the gross income earned shall 
be paid. The allocation of the five percent (5%) GIE pertaining to the local government 
unit foregoing taxes hereunder shall be governed by the charter or governing law of the 
IPA. 
The foregoing provision notwithstanding, mining and other projects that will 
affect public health and morals shall not be exempted from excise tax. 
B. Exemption porn Local Taxes and Licenses. Notwithstanding the provisions of law 
to the contrary, zone or freeport registered enterprise shall, to the extent of their 
construction, operation or production inside the zone or freeport be exempt from the 
payment of any and all local government imposts, fees, licenses or taxes including, but 
not limited to business permit, health permit, garbage permit, construction permit. 
C. (1 .) Tax Treatment of Merchandise in Zones or Freeports. 
(a) Except as otherwise provided in this Code, foreign and domestic merchandise, 
raw materials, supplies, articles, equipment, machineries, spare parts and wares of 
every description, except those prohibited by law, brought into the zones or freeports to 
be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or 
otherwise processed, manufactured, mixed with foreign or domestic merchandise 
whether directly or indirectly related in such activity, shall not be subject to customs 
16 


and internal revenue laws and regulations nor to local tax ordinances, the provisions of 
law to the contrary notwithstanding. 
(b) 
Merchandise purchased by a registered enterprise located in the zones or 
freeports from the customs territory, and subsequently brought into the zones or 
freeports, shall be considered as export sales and exportation thereof shall be entitled to 
the benefits allowed by law for such transaction. 
(c) 
Merchandise sent from the zones or freeports to the customs territory 
shall, whether or not combined with or made part of other articles likewise of local 
origin or manufactured in the Philippines while in the zones or freeports, be subject to 
internal revenue laws of the Philippines as domestic goods sold, transferred or disposed 
of for local consumption. If the finished goods have imported components, the duties 
shaI1 be based on the value of said imported materials (except when the final product is 
exempt). 
(d) 
Qualified merchandise or articles manufactured by registered zone or 
freeport locators, which are made available for sale in the domestic market shall be 
imposed the applicable ASEAN Common Effective Preferential Tariff (CEPT) rate, if 
qualified, or applicable tariff rates under bilateral or regional trade agreements, if 
qualified, or Most Favoured Nation (MFN) rate on imported raw materials and 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. 
(e) 
Domestic merchandise on which all internaI revenue taxes have been 
paid, if subject thereto, and foreign merchandise previously imported on which duty or 
tax has been paid, or which have been admitted free of duty and tax, may be taken into 
the zones or freeports from the customs territory of the Philippines and be brought back 
thereto free of quotas, duty or tax. 
(f) 
Subject to such regulations respecting identity and safeguarding of the 
revenue as the concerned IPA may deem necessary when the identity of an article 
entered into the zones or freeports under the immediately preceding paragraph has 
been lost, such article when removed from the zones 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. 
(g) 
Articles produced or manufactured in the zones or freeports and exported 
therefrom shall, on subsequent importation into the customs territory, be subject to the 
import laws applicable to like articles manufactured in a foreign country. 
(h) Articles prohibited or regulated by law for sale to the domestic market shall 
only be allowed to be used or consumed within the zones or freeports. 
17 


(i) Unless the contrary is shown, merchandise taken out of the zones or freeports 
shall be considered, for tax purposes, to have been sent to customs territory. 
Special Economic Zones declared by Presidential Proclamations or created by 
law may avail of the incentives provided herein as conferred by the appropriate IPA 
subject to such terms and conditions as may be provided by law. 
C. (2.) Tax Treatment of Sewices in the Zones or Freeports. 
(a) Sale of service by an entity from the customs territory to a registered zone or 
freeport enterprise or by a registered zone or freeport enterprise to another zone or 
freeport enterprise shall be treated as indirect export, and hence, shall not be subjected 
to internal revenue taxes for such transaction. 
(b) Sale or service by a registered zone or freeport enterprise to the customs 
territory shall be subject to the applicable internal revenue laws and regulations. 
Section 19. Locational Incentives. Domestic enterprises located in the thirty (30) 
poorest provinces and less developed areas (LDAs) as determined by the appropriate 
agency may opt to choose from any of the following incentives: 
A. Income Tax Holiday (ITH). As provided under Section 19(A); and 
B. 
Investment Tux Allowance (ITA). After availment of income tax holiday, 
domestic enterprises incurring capital expenditure shall be entitled to a twelve (12) year 
investment tax allowance of thirty percent (30%) which can be utilized to offset against 
100% of the taxable income; or 
C. Reduced Income Tax (RIT). In lieu of ITH and ITA, a registered domestic 
enterprise under this section may avail of a preferential tax rate of fifteen percent (15%) 
of taxable income as defined under Section 31 of the National Internal Revenue Code of 
1997, as amended for a period of twenty'(20) years from the date of start of commercial 
operation. 
The exercise of the option to avail of RIT over the ITH and ITA shall be deemed 
irrevocable. 
Section 20. Incentives to Micro, Small and Medium Enterprises. Micro, small and 
medium enterprises as defined by the appropriate agency shall be qualified to the 
following incentives to the extent of their registered activity: 
18 


A. Income Tux Holiday (ITH). Activities of micro, small and medium enterprise 
shall be entitled to an eight (8) year ITH from the start of their commercial operations, 
regardless of location. 
B. Exemption Pam Local Taxes @r Micro Enterprise. Micro enterprises shall be 
exempted from payment of local taxes. 
C. Preferential Access to Financing and Acceptable Form of Collaterals. Access to 
financing from government financial institutions at preferential rates below the market 
rates shall be extended. 
Further, capital goods acquired from loans secured from government financial 
institutions shall be an acceptable form of collateral for the same loan. 
D. Assistance in the Prepuration of.Project Study. Micro and small enterprises may 
be provided assistance in the preparation of project study for purposes of registration 
under this Code. 
Section 21. Universal Non-fiscul Incentives. Registered enterprises shall be entitled 
to the following non-fiscal incentives: 
A. Employment of Foreign Nationals. Subject to the provisions of Section 29 of 
Commonwealth Act No. 613, otherwise known as ”The Philippine Immigration Act of 
1940,” as amended, a registered enterprise may employ foreign nationals in managerial, 
supervisory or technical positions provided that the registered enterprise shall train 
Filipinos as understudies of foreign nationals in administrative, supervisory and 
technical skills and shall submit annual reports of such training to the PA. 
Foreign nationals under employment contract within the purview of this 
incentive, their spouses and unmarried children under twenty-one (21) yeak of age, 
who are not excluded by Section 29 of Commonwealth Act No. 613, as amended, shall 
be permitted to enter and reside in the Philippines during the period of employment of 
such foreign nationals. They shall be issued a multiple entry visa, valid for a period of 
five (5) years. The foreign national may enter and leave the Philippines without further 
documentary requirements other than valid passports or other travel documents in the 
nature of passports. 
The foreign national admitted herein, as well as their respective spouses and 
dependents shall be exempt from: (a) obtaining alien certificate of registration and 
emigration clearance certificates; and (b) securing the Alien Employment Permit (AEP) 
and other types of clearances, permits, licenses or their equivalents required by any 
government department or agency: 
19 


B. Time-Bound Processing of Requirement fir Doing Business. All’ application for 
permits, licenses, authorization and other requirements necessary for doing business 
shall be acted upon by the government agency concerned within ten (10) working days 
from official acceptance thereof, otherwise, the same -shall be considered automatically 
approved. For this purpose, all government agencies shall be mandated to post in their 
respective offices, the procedural process, documentation requirements and the 
imposable fees to be paid to facilitate the processing of the application. 
C. 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 Bureau of 
Customs (BOC). 
Internal revenue procedures for the availment of incentives provided herein shall 
be simplified by the Bureau of Internal Revenue (BIR) for registered enterprises. 
D. 
Reduction and Harmonization of Documentary Requirements Submitted to 
Government Agencies. The BO1 Board shall formulate guidelines for the reduction and 
harmonization of related documentary requirements submitted to government 
agencies. 
Section 22. lncentive to Invesfors. A foreign national who invests an amount of at 
least US$l50,000.00, either in cash and/or equipment, in a registered enterprise shall be 
entitled to an Investor’s Visa: Provided, That: 
1. He is at least eighteen (18) years of age; 
2. He has not been convicted of a crime involving moral turpitude; 
3. He is not afflicted with any loathsome, dangerous or contagious disease; and, 
4. He has not been institutionalized for any mental disorder or disability; 
Pi’ovided, further, That in securing the investor’s visa, the alien-applicant shall be 
entitled to the same privileges provided for under Section 23(A), paragraph 3. 
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 BOI, Philippine Economic Zone 
Authority (I’EZA), Subic Bay Metropolitan Authority (SBMA), Clark Development 
Corporation (CDC), John Hay Management Corporation (JHMC), Poro Point 
Management Corporation (PPMC), Bataan Technology Park, Inc. (BTPI), Cagayan 
Special Economic Zone Authority (CEZA), Zamboanga City Special Economic Zone 
20 


Authority (ZCSEZA), Phividec Industrial Authority (PIA), Aurora Economic Zone 
(AEZ), and other IPAs that may be created under the law. 
The investment amount heretofore stated shall be subject to a periodic review 
every three (3) years by the IDB. 
Section 23. Governing Incentive Provision for Investment Promotion Agencies. All 
existing and future IPAs vested with the power to confer and administer incentives 
shall offer incentives provided in this Code. Further, incentives provided under this 
Code to registered enterprise shall be applicable to the extent of the registered activity 
or project. 
Section 24. Relationship of investment Promotion Agencies and the Board of 
Investments and Other Government Agencies. IPAs shall maintain their 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 IPAs are required to submit to the IDB or BOI, as the case may 
be, all investment data and information and such other related data semi-annually or as 
may be required. 
Further, all IPAs are required to contribute such amount as may be determined 
by the BO1 Board to a common fund for the conduct of national investment promotion 
activities. The common fund shall be administered by the BO1 Board. 
CHAPTER I11 - REGISTRATION OF ENTERPRISES 
Section 25. Qualifications of a Registered Enterprise. To qualify for registration and 
be entitled to avail of incentives, an applicant must satisfy the following conditions: 
(1) He is a citizen of the Philippines, in case the applicant is a natural person, or 
in case of a corporation or partnership or any other association, regardless of 
nationality, it must be organized and/or registered and existing under Philippine laws 
and that it must comply with all the qualifications provided under this Code: Provided 
ko7tiever, That for purposes of this Code and any law to the contrary notwithstanding, a 
natural-born ASEAN citizen or a corporation effectively controlled by ASEAN citizens, 
or a corporation organized in any ASEAN country shall be considered as a Philippine 
investor; Provided, further, That the investment is made in an activity where the 
Constitution does not specifically require Filipino participation; 
(2) 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; 
21 


(3) It will engage in an activity included in,the Investment Priorities Plan (IPP) or 
in an export activity or in an industry servicing eco-tourism sites duly designated by the 
President 3s provided under this Code; 
(4) It will infuse new investments. For this purpose ‘new investments’ shall 
mean a new enterprise infusing new investments and undertaking new activity. 
However, an enterprise with an existing operation may be qualified for registration if it 
will undertake new activity. Further, an existing enterprise undertaking the same 
activity that shall infuse additional investments of ,at least fifty percent (50%) of its 
present actual investments shall be deemed to be ‘new investments’ but only to the 
extent of such additional investments. Furthermore, government assets that will be 
privatized shall be deemed ‘new investments’; and, 
(5) If the applicant is engaged or proposes 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 from 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 GUARANTEES 
OF REGISTERED ENTERPRISES 
Section 26. 
Pvotection ofInvestrnents. All investors and registered enterprises are 
entitled to the basic rights and guarantees provided in the Constitution. Among other 
rights recognized by the Government of the Philippines are the following: 
(a) 
Repatriation of Investments. In the case of foreign investments, the right to 
repatriate the entire proceeds of the liquidation of the investment in the currency in 
which the investment was originally made and at the exchange rate prevailing at the 
time of repatriation, subject to the provisions of Section 74 of Republic Act No. 265, 
otherwise known as the ”Central Bank Act,” as amended; 
For investments made pursuant to Executive Order No. 32, Series of 1986, 
entitled ”Directing the Establishment of a Program for the Conversion of Philippine 
External Debt into Equity Investments”, and its implementing rules and regulations, the 
repatriation of investments shall be as provided therein. 
(b) 
Remittance of Earnings. In the case of foreign investments, the right to remit 
earnings from the investment in the currency in which the investment was originally 
22 


made and at the exchange rate prevailing at the time of remittance, subject to the 
provisions of Section 74 of Republic Act No. 265; 
For investments made pursuant to Executive Order No. 32, Series of 1986, and its 
implementing rules and regulations, the remittance of earnings shall be as provided 
therein. 
(c) 
Foreign Loans and Contracts. The right to remit 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 
prevaiIing at the time of remittance, subject to the provisions of Section 74 of Republic 
Act No. 265; 
(d) 
Freedom from Expropriatibn. 
There shall be no expropriation by the 
government of the property represented by investments or of the property of the 
enterprise except for public use, public interest, lawful purpose, or in the interest of 
national welfare or defense and upon payment of just compensation. In such cases, 
foreign investors or enterprises shall have the right to remit sums received as 
compensation for the expropriated property in the currency in which the investment 
was originally made and at the exchange rate at the time of remittance, subject to the 
provisions of Section 74 of Republic Act No. 265; 
(e) 
Requisition of Investment. There shall be no requisition of the property 
represented by the investment or of the property of enterprises, except in the event of 
war or national emergency and only for the duration thereof. Just compensation shall be 
determined and paid either at the time of requisition or immediately after cessation of 
the state of war or national emergency. Payments received as compensation for the 
requisitioned property may be remitted in the currency in which the investment was 
originally made and at the exchange rate prevailing at the time of remittance, subject to 
the provisions of Section 74 of Republic Act No. 265. 
CHAPTER V - ADMINISTRATION OF INCENTIVES 
Section 27. Applicutiox for Registrution. Applications shall be filed with an IPA or 
any other government office authorized by the BO1 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. In no case shall double registration be 
allowed. In the event that an enterprise shall transfer to another IPA, only the remaining 
unutilized incentives shail be granted to the enterprise or the transferee, vendee or 
assignee. 
23 


All applications and their supporting documents filed under this Code shall be 
confidential and shall not be disclosed to any person except with the consent of the 
applicant or upon an order of a court of competent jurisdiction. 
Section 28. Criteria for Evaluation of Application. The following criteria shall be 
considered in the evaluation of applications for registration under a preferred area: 
(a) Impact of the project on the overall economy; 
(b) Overall viability of the project; 
(c) The extent of employment generation; 
(d) The extent to which technological advances are applied and adopted to local 
conditions; and, 
(e) Such other criteria as the Board may determine. 
Section 29. Approval and Registration Procedures. The IPA is authorized to adopt 
rules and regulations to facilitate action on applications filed with it; prescribe criteria 
for the evaluation of applications; devise standard forms for the use of applicants and 
delegate to the regional offices of the Department of Trade and Industry 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, hoxmeu, That the IPA may 
defer action to a specific application not more than twice; and Providedjnally, That the 
P A  shall act upon the application within ten (10) working days from compliance with 
the cause of the last deferment. 
Section 30. Certificate of Registration. A registered enterprise under this Code shall 
be issued a Certificate of Registration under the seal of the IPA and the signature of its 
Chairman and/or such other officer or employee 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) 
(b) 
(c) 
The name of the registered enterprise; 
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. 
Section 31. Validity of Registration. The registration shall be valid 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. 
Section 32. Extension of Period of Availrnent of Incentives. The availment period of 
the incentives provided herein may be extended by the concerned IPA in the event that 
24 


the registered enterprise has suffered operational force majeure that has impaired the 
viability of the registered activity. 
Section 33. Duration oflncentives. Enterprises registered with PEZA, SBMA, CDC, 
JHMC, PPMC, BTPI, CEZA, ZCSEZA, PIA, and AEZ may enjoy the ITH or NOLCO 
prior to availment of the five percent (5%) GIE. 
Fiscal incentives under this Code shall be terminated after a cumulative period of 
twenty (20) years from date of start of commercial operation, except that it could be 
extended with regard to industries deemed indispensable to national development as 
may be determined by the BO1 Board; Provided, further, that the duration of incentives 
shall not be applicable to tax and duty free importation of capital equipment, raw 
materials, supplies and spare parts of enterprises registered with PEZA, SBMA, CDC, 
JHMC, PPMC, BTPI, CEZA, ZCSEZA, PIA, and AEZ, and other zones or freeports. 
TITLE IV 
FINAL PROVISIONS 
Section 34. Authority to Retain Funds. 
Subject to accounting and auditing 
procedures, registered enterprises availing of fiscal incentives shall be assessed with a 
fee equivalent to one percent (1%) of the amount of incentives granted. The amount 
collected shall be placed in the special development fund of the IPA and BO1 for use in 
activities to achieve the objectives of this Code. 
Section 35. Vested Right. Incentives of existing registered enterprises arising from 
contracts or agreements entered into by an enterprise with the government, its 
instrumentalities and agencies shall continue to be in force and effect according to the 
terms thereof; Provid,ed, that within five years from the date of the effectivity of this 
Code, such existing registered enterprises may opt to register and be governed by the 
provisions of this Code. 
Section 36. 
Protection of the Environnzent. The IPAs, in coordination with the 
appropriate agencies, shall take appropriate steps to enact the proper measures for the 
protection of the environment, and shall coordinate with the Environmental 
Management Bureau of the Department of Environment and Natural Resources (EMB- 
DENR) to avoid undue delay in the issuance of the required Environmental Compliance 
Certificate (ECC): Provided, kozuever, That applications for environmental clearances, 
permits, and/or licenses of registered enterprises shall be acted upon by the 
appropriate government agency within one hundred twenty (120) 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: 
25 


Provided, finally, That the IPA may withdraw the certificate of registration issued to the 
enterprise should the appropriate government agency eventually deny the application. 
Section 37. Appeals. All orders or decisions of the BO1 or IPA in cases involving 
the provisions of this Code shall immediately be executory. No appeal from the order or 
decision of the BO1 or IPA by the party adversely affected shall stay such order or 
decision, unless a supersedeas bond equivalent to the amount stated in the order or 
decision is posted by the appellant. 
All appeals involving cases decided by the BO1 or IPA, except as provided in the 
next succeeding paragraph, shall be filed with the Court of Appeals within fifteen (15) 
days from notice of the order or decision or of the denial of the appellant’s motion for 
new trial or reconsideration. Within the same period, the aggrieved party may file a 
motion for reinvestigation or reconsideration. Only one 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 BOI-accredited bonding company. 
In cases involving the denial of an application for registration, the party 
adversely affected by such denial may appeal the same to the Office of the President 
within thirty (30) days from 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. 
Section 38. (A) Fines and Penalties. When there is probable cause to believe that 
the registered enterprise has violated its registration terms and conditions, the BO1 or 
IPA may suspend its availment of incentives, until proven otherwise. 
The BO1 or 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. 
In case of cancellation of the Certificate of Registration granted under this Code, 
the BO1 or IPA may, in appropriate cases, require the refund of incentives availed of 
and impose corresponding fines and penalties. 
Any enterprise which violates any provision of this Code, its implementing rules 
and regulations, the terms and conditions of its registration, or of any lawful directive 
of the BO1 or IPA, shall be subject to a fine not to exceed One Million Pesos 
(P1,000,000.00), without prejudice to the disapproval of its application for registration or 
cancellation of its registration; Provided, that any willful commission of fraudulent 
misrepresentation in its application for registration or submission of reports or gross 
violation of this Code and its Implementing Rules and Regulations, a fine of at least One 
Million Pesos (Pl,OOO,OOO.OO) 
but not to exceed Ten Million Pesos (PlO,OOO,OOO.OO) shall 
be imposed, in addition to other penalties that may be imposed by the BOI/IPA. 
26 


The BO1 Board shall prepare a schedule of fines and penalties to be imposed on 
erring registered enterprises depending on the violation incurred, which may be 
reduced in exceptional cases. 
Responsible officers of such enterprises, including duly appointed external 
consultants-agents who knowingly commit, aid or abet the commission of any of the 
acts mentioned above, shall be subject to a fine of not less than One Hundred Thousand 
Pesos (PlO0,000.00) but not more than Three Hundred Thousand Pesos (P300,OOO.OO) 
without prejudice to disqualification from appearing or doing business with BO1 or any 
IPA. 
Government officers and employees who participate directly or indirectly in the 
commission of the 'foregoing acts shall likewise be liable to a fine of not less than One 
Hundred Thousand Pesos (Pl00,000.00) but not more than Three Hundred Thousand 
Pesos (P300,000.00), in addition to any criminal and administrative penalties imposable 
under the Civil Service Law, Revised Penal Code, Republic Act No. 3019, otherwise 
known as the "Anti-Gvnft And Corvupt Pructices Act," Republic Act No. 6713, otherwise 
known as the "Code Of Conduct And Ethical Stundurds Fov Public OjJicials," 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. 
(B) Government officers and employees, whether employed in the national or 
local government or in government owned and controlled corporation, who violate, 
directly or indirectly, the provisions of this Code shall be subject to any administrative 
penalty imposed under the Civil Service Law, Republic Act No. 3019, Republic Act No. 
6713, and other applicable laws. 
Section 39. Effectivity of Implementing Rules and Regulations. The BOI, IPAs and 
other concerned government agencies, shall promulgate rules and regulations to 
implement the intent and provisions of this Code within one hundred twenty (120) days 
from effectivity of this Code. Such rules and regulations shall take effect fifteen (15) 
days following its publication in a newspaper of general circulation in the Philippines. 
Section 40. Trunsitory Provision. Until the Implementing Rules and Regulations of 
this Code take effect, the present rules and regulations under the old investments laws 
shall apply. 
Employees currently employed with the BO1 who will be affected by the creation 
of the BO1 shall be entitled to four (4) months compensation for every year of service 
and fraction thereof, and such other gratuities and benefits under existing laws. 
Section 41. Separability Clause. The provisions of this Code are hereby declared 
to be separable and, in the event any of such provisions is declared unconstitutional, the 
other provisions which are not affected thereby shall remain in force and effect. 
Section 42. Repealing Clauses. The following laws or provisions of laws are 
hereby repealed: 
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1) Batas Pambansa 44 - “An Act To Promote Investments in Less Developed Areas” 
2) Batas Pambansa 391 - “An Act Declaring the 1983 Investment Incentives Policy by 
Modifying the System on the Grant of Investment Incentives, Amending for the 
Purpose Presidential Decree No. 1689 and other Pertinent Laws” 
3) Presidential Decree No 1623 - ”Authorizing the Issuance of Special Investors 
Resident Visas to Aliens and for other Purposes (Repealed by E.O. 226)” 
P.D. 1893 - ”Further Amending P.D. 1623 entitled ”Authorizing the Issuance of 
Special Investors Resident Visas to Aliens and for other Purposes”, as amended. 
4) Presidential Decree No. 1789 - “A Decree to Revise, Amend and Codify the 
Investment, Agricultural and Export Incentives Acts to be Known as the Omnibus 
Investments Code (Repealed by B.P. 3911’’ 
5) Presidential Decree 2032 - “A Decree Declaring National Policies on Agricultural 
Development and Promulgating the Agricultural Incentives Act of 1986 (Repealed 
by Batas Pambansa Blg. 391)” 
6) Executive Order 815 - ”TO Safeguard and Promote the Development of the 
Philippine Semiconductor Electronics Industry” 
7) Executive Order 1045 -”Modifying Fiscal Incentives to BOI-Registered Enterprises.” 
8) Presidential Decree No. 66 - ”Creating the Export Processing Zone Authority and 
9) Republic Act No. 7888 - “An Act to Amend Article 7(13) of Executive Order No. 226, 
10) Book I, V, VI of Executive Order No. 226 are hereby absolutely repealed; 
11) The incentive provisions under the following investment incentive related laws are 
hereby repealed as follows: 
Revising Republic Act No. 5490 
Otherwise Known as the Omnibus Investment Code of 1987).” 
a.) Section 36(f) of Presidential Decree No. 705, otherwise known as the “Revised 
Forestry Code“; 
b.) Sections 16 and 17 of Presidential Decree No. 972 otherwise known as the ”Coal 
Development Act”; 
c.) Sections 4(a) and (d) of Presidential Decree No. 1442, otherwise known as the 
”Geothermal Exploration and Development Act”; 
d.) Sections 10 and 11 of Republic Act No. 7156 otherwise known as the “Mini- 
hydroelectric Incentive Act”; 
e.) Sections 6 and 7 of Republic Act No. 7103 otherwise known as the ”Iron and 
Steel Industry Act”; 
f.) Sections 6 and 7 of Republic Act No. 7471 otherwise known as the ”Philippine 
Overseas Shipping Development Act” and Section 2 of Republic Act 9301 (An 
Act Amending Certain Provisions of Republic Act No. 7471 otherwise known as 
the ”Philippine Overseas Shipping Development Act ’‘ and For Other Purposes”; 
g.) Sections 19 and 20 of Republic Act No. 7279 otherwise known as the ”Urban 
Development and Housing Act of 1992”; 
h.) Sections 16 and 17 of Republic Act No. 7844 otherwise known as the ’Export 
Development Act of 1994”; 
i.) Sections 83, 90, 91, 92 and 93 of Republic Act No. 7942 otherwise known as the 
“Philippine Mining Act of 1995”; 
28 


j.) Section 35 of Republic Act No. 8550 otherwise known as the "Philippine 
Fisheries Code of 1998; 
k.) Section 9 of Republic Act No. 8479 otherwise known as the "Downstream Oil 
Deregulation Act of 1998"; 
1.) Section 1 of Republic Act No. 9281 entitled "An Act to Strengthen Agriculture 
and Fisheries Modernization in the Philippines by Extending the Effectivity of 
Tax Incentives and its Mandated Funding Support, Amending for this Purpose 
Sections 109 and 112 of Republic Act No. 8435; 
m.) Section 45 of Republic Act No. 9003 also known as "Ecological Solid Waste 
Management Act of 2000; 
n.) Section 26 (A.1, A.l.l,A.1.2) of Republic Act No. 9275 entitled "The Philippine 
Clean Water Act of 2004"; 
0.) Section 4 of Republic Act No. 9295 also known as "An Act Promoting the 
Development of Philippine ' Domestic Shipping, Shipbuilding, Shiprepair and 
Ship Breaking, Ordaining Reforms in Government Policies Towards Shipping in 
the Philippines and For Other Purposes"; 
p.) Sec. 13 of RA 8479 also known as the "Clean Air Act of 1999"; 
9.) Sections 1, 2, 3 and 4 of Republic Act No. 7109, entitled "An Act Granting Tax 
Exemption Privileges To Local Water Districts"; 
r.) Last paragraph of Section 17, and Section 18 OF RA 7884, "An Act Creating the 
National Dairy Authority To Accelerate the Development of the Dairy Industry 
in the Philippines, Providing for a Dairy Development Fund, and For Other 
Purposes"; 
s.) Section 3 of Republic Act No. 9290, also known as "Footwear, Leather Goods and 
Tannery Industries Development Act"; 
t.) Section 12 Of Republic Act No. 7718 Otherwise Known As The "Build-Operate- 
Transfer Law"; 
u.) Section 3 (A), (C), (D) And (H) Of Republic Act No. 8502 Otherwise Known As 
The "Jewelry Industry Development Act Of 1998" and 
v.) Section 6 of RA 7471, "An Act to Promote the Development of Philippine 
Overseas Shipping and For Other Purposes"; 
w.) Section 2 of RA 9301, "An Act Amending Certain Provisions of RA 7471, Entitled 
"An Act to Promote the Development of Philippine Overseas Shipping and For 
Other Purposes"; 
x.) Sections 4 and 19 of RA 9295, "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"; 
y.) Section 16 of RA 7844 entitled "An Act to Develop Exports as a Key Towards the 
Achievement of the National Goals Towards the Year 2000". 
29 


12.) The provisions of: 
a.) Section 12 (c) and (8) of Republic Act No. 7227, Otherwise known as the "Bases 
Conversion and Development Act of 1992; 
b.) Section 6 of Proclamation 984 creating the Morong Special Economic Zone 
pursuant to RA 7227; 
c.) Section 5 of Proclamation 216 creating the Poro Point Special Economic zone 
pursuant to RA 7227; 
d.) Section 3 of Executive Order No. 32, Series of 1994 amending E.O. 103, Series of 
1993, establishing the John Hay Development Corporation; 
e.) Section 4, paragraphs (e), (f) and (g) of Republic Act no. 7903 otherwise known 
as "Zamboanga City Special Economic Zone Act of 1995"; 
f.) Section 4, paragraphs (b), (c) and (e) of Republic Act No. 7922 entitled, 
"Cagayan Special Economic Zone Act of 1995"; and 
8.) Sections 8, 9 and 10 of Presidential Decree No. 538 entitled "Creating and 
Establishing the PHIVIDEC Industrial Authority and Making its Subsidiary 
Agency of the Philippine Veterans Investment Development Corporation 
Defining Its Powers, Functions and Responsibilities and for Other Purposes"; 
that are inconsistent with this Code, are hereby repealed or modified accordingly; 
Provided, howeuev, That they shall draw their respective incentives from any of those 
provided for under this Code. 
13.) The provisions of Republic Act Nos. 7916, otherwise known as "Special Economic 
Zone Act of 1995", and 8748, otherwise known as "An Act Amending R.A.7916," which 
are inconsistent with this Code are hereby repealed or modified accordingly. 
14.) The provisions of Section 12 (b) of R.A. 7227 and Section 5 of R.A. 7103 are modified 
accordingly. 
All others laws, acts, decrees, orders and issuances inconsistent with any 
provisions of this Code are hereby repealed or modified accordingly. 
Section 43. Eflectivity. This Act shall take effect fifteen (15) days following its 
publication in a newspaper of general circulation in the Philippines. 
Approved, 
30