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~, 
FOURTEENTH CONGRESS OF THE REPUBLIC) 
9 
i 9 
/ ?  .; Y8 
OF THE PJBLIPPINES 
) 
Second Regular Session 
) 
S.B. No. 
lntroduced by: Senator Lacson 
EXPLANATORY NOTE 
Tax incentives can he good policy tools when applied properly. They can be potent 
instruments to encourage private capital in relatively unprofitable but socially-beneficial 
activities. They can also he used to spur investments in exports, or to provide more 
employment opportunities, or to improve the technica1 skills of the local labor force 
through foreign technology spillovers, or to promote countryside development. 
The Philippines, like other developing countries, grant tax incentives to encourage 
investments. Income tax holidays, tax and duty exemptions on imported capital equipment 
and raw materials, tax credit, accelerated depreciation, net operating loss carry-over, 
preferential tax on gross income, and exemption from local taxes are offered to investors 
under various investment incentive laws. There are about ten investment promotions 
agencies (IPAs) and several national government agencies involved in managing 
investment activities and administering tax incentives. Among the IPAs are the Board of 
Investments, the Philippine Economic Zone Authority and Clark Development 
Corporati on, 
However, the Philippine fiscal incentives system, which is more than half a 
century old, is ailing. There are so many incentive laws with difierent incentives 
provisions. This is because, admittedly, the government has been over-zealous in enacting 
tax incentive laws to promote every particular objective or activity or locality. And the tax 
incentives packages found in existing laws are not necessarily identical. For instance, the 
tax incentives to exporters vary under the BO1 and PEZA laws. PEZA incentives, on the 
other hand, are different from Aurora ecozone incentives. Subic Free Port incentives and 
Cagayan Free Port incentives also differ from each other. There is, indeed, a glaring need 
to consolidate and harmonize these laws to level the playing field and eliminate 
competition among P A S  in terms of tax incentive offers. This will also ,prevent investors 
from cherry-piclung and dual registration. In fact, because dual registration happens, it is 
not far-fetched that the amount of FDIs reported may have been overblown - - the same 
investor investment is reported by two PAS. 
Government has not been successful at picking winners. Going through 39 
Investment Priorities Plans (IPP) in the last 39 years, many industries are found to be 
almost mainstays of this annual list. One wonders when these sectors can ever be weaned 


from government subsidies. Examining the criteria for fonnulating IPPs does not help any 
because they are very complex, not easily quantifiable and open to subjectivity. 
The centerpiece of the Philippine incentives system, which is the income taw 
holiday (ITH), is the most redundant type of tax incentive. The ITH benefits the investor 
who expects to immediately earn profits from his investments, and thus, would have made 
such investment even without a tax holiday, profit being the bottomline of all business 
undertakings. This is very evident in the case of domestic enterprises which are market- 
seeking and resource-seeking in orientation. The ITH also benefits the footloose projects, 
and not the longer-term projects that would be more beneficial for the economy’s 
sustained growth. Singularly, the income tax holiday inflicts the highest cost and the 
biggest stumbling block to a rational fiscal incentives system. 
As a result, the policy of granting taw incentives comes with a huge cost to 
government. The government foregoes tax revenues on investments that would have 
come in anyway even without tax incentives. A study by University of the Philippines 
economist Dr. Renato Reside estimated that at least 83% of all tax and duty exemptions 
granted to €301-registered investments are redundant, and 10% in the case of PEZA, Subic 
and Clark, since these investments would have come in anyway even without the tax 
incentives. In peso value, the redundant incentives amounted to P47 billion. 
These fiscal costs of government from tax incentives are real costs or actual 
foregone revenue that would have been put to better use for the benefit of a greaterpart of 
society. The P47 billion redundant tax incentives could have - - funded 8,737 one- 
classroom school buildings that could have helped address the perennial school building 
and classroom shortage; paved 10,000 kilometers of national roads; or increased by an 
additional 8% the basic pay of 1.1 million government workers. 
Studies have shown, though, that the ITIi is least redundant when offered to 
exporters. This is because export-oriented enterprises have to compete in the world 
market rather than depend on the availability of the domestic market. Export-oriented 
entities also exhibit high positive spill-over effects on the economy through transfer of 
new technology, large volume of foreign currency investments, and provision of more job 
opportunities to the domestic workforce, among others. 
Domestic “strategic” projects may also merit some consideration in the grant of the 
ITH for as long as they meet certain criteria. These “strategic” projects are those that are 
unanticipated projects which are not listed in the IPP but are bringing in huge investments 
and have the potential to generate substantial employment. These are those which have the 
strong inclination to locate in the Philippines if entitled to the ITH or the ITH being the 
“swing factor.” 
To address these structural weaknesses and administrative gaps, plug the massive 
wastage of goveinment resources and strengthen the institutional framework in the grant 
of tax incentives, this bill is hereby introduced with the overarching objective of 
rationalizing the Philippine fiscal incentives system. 
With this proposed measure, the government shall henceforth adopt a fiscal 
incentives policy that will enhance the competitiveness of the Philippines as an 


investment site and, at the same time, ensure that the tax incentives are cost efficient and 
attuned with the fiscal sustainability thrust of the national government. 
Specifically, 
1. The bill will promote exports equally, whether they are located inside or 
outside the economic zones, because of the positive benefits they bring into the 
country in terms of foreign exchange earnings, job generation and technology 
transfers. The registered exporter can avail of the income tax holiday from the 
start of commercial operations or a reduced income tax regime at the rate of 
15% or the gross income tax regime at 5% of G E .  
2. The bill will have the flexibility to accommodate domestic “strategic” projects 
with the grant of ITH under certain conditions, before given the choice to 
either be under a reduced income tax regime of 15% or a 5% GE. 
3. It will promote countryside development and job generation by granting 
reduced income tax incentives to investors that will locate in any of the 30 
poorest provinces. These investors can avail of a reduced income tax rate of 
15% for 5 years. By doing so, this bill espouses the developmental and equity 
objectives of growth. 
4. It will eliminate competition among ecozone administrators on account of 
unequal tax incentives regimes by eliminating the existing redundant tax 
incentives found in all investment incentive laws and replacing them with 
either a reduced income tax package or a gross income tax package. It will 
harmonize the tax incentive packages that ecozones and free ports can offer. 
5. It will introduce institutional reforms by clarifying the mandates and roles, and 
enhancing the capabilities of key government agencies, and by strengthening 
the monitoring and reporting processes in the implementation of tax incentives 
for better fiscal policymaking. 
The rationalization of fiscal incentives has long been in the pipeline of the 
Legislature. It was first filed in the 31d Regular Session of the gth Congress as part of the 
Comprehensive Tax Reform Package (or the “CTRP’) of the Ramos Administration. It 
was the only CTRP component not enacted into law. The bill had been filed in several 
Congresses thereafter. 
It is earnestly prayed that, €or all its good intents and provisions, this bill on the 
rationalized and harmonized fiscal incentives system will finally see the light and be 
favorably acted on in this 14’h Congress. 
enator 
W 


i.;.z. 
~ 
L* 
FOURTEENTH CONGRESS OF TJE REPUBLIC) 
a 
1 9 i‘ 3 :(# 
Second Regular Session 
) 
i 
OF T E  PHILIPPINES 
1 
Introduced by: Senator Lacson 
THE INVESTMENTS AND INCENTIVES CODE OF THE PHILIPPINES 
Be it enacted bu the Senate and the House of Representatives of the 
Philippines in Conqress 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”. 
SEC. 2. Declaration of Investment Policies. - The national economy 
shall be developed so as to enhance its competitiveness in the global 
economy through investment promotion and industrial development 
activities geared towards employment generation and countrywide 
development. Accordingly, the following are the declared policies of the 
State: 
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 investment incentives that shall promote 
substantial social and economic spillovers, equitable development 
across income classes and across provinces, are fiscally- 
sustainable, are financially and economically-justifiable, and are 
consistent with international treaties. Investment incentives shall 
encourage long-term and recurrent investments, are simple to 
administer, time- bound and performance-based. 
5. The state shall devote resources toward monitoring enterprises 
benefiting from incentives, and shall vigorously prosecute abuses. 
6. The State recognizes that industrial peace is essential to 
attracting investments. 


Chapter I1 - ORGANIZATION AND FUNCTIONS 
OF THE BOARD OF INVESTMENTS (BOI) 
SEC. 3. The Board of Investments (BOI). - The Board of Investments 
hereinafter referred to as the “BOY shall implement the provisions of this 
Code to all BOI-registered enterprises, except as otherwise provided 
therein. 
SEC. 
4. Composition of the BOI Board of Governors. - The BO1 
Board of Governors, hereinafter referred to as the “Board, shall be 
composed of nine (9) governors: the Secretary of the Department of Trade 
and Industry (DTI), the Secretary of the Department of Finance (DOF), 
the Director General of the National Economic and Development 
Authority (NEDA); DTI Undersecretary for Investments and Industry 
Group (IIG), DTI Undersecretary of International Trade Group (ITG), 
Managing Governor of the Board; and three (3) representatives from the 
private sector. The Secretary of Trade and Industry shall concurrently be 
the Chairman of the BO1 and the DTI Undersecretary for Investment and 
Industry Group shall be the concurrent Vice-Chairman and Managing 
Governor of the BOI. 
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; Providedfurther, 
That a governor shall serve as such until his successor shall have been 
appointed and qualified. 
The Managing Governor of the BO1 shall be assisted by two (2) 
career officials with the rank of Deputy Managing Governor, who shall be 
appointed by the Board, upon the recommendation of the Managing 
Governor. 
Members of the Board shall receive a reasonable per diem for every 
meeting attended. 
SEC. 5. 
Qualifications of the BOI Board of Governors. - The 
governors of the 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. 
SEC. 6. Powers and Functions of the Board. - The Board shall be 
responsible for the regulation of all BOI-registered enterprises and the 
over-all promotion of investments. It shall hold meetings at least once a 
week for the conduct of business or as often as may be necessary upon 
the call of the Chairman or upon the request of the Managing Governor. 
The notice of regular and special meetings shall be given to all the 
members of the Board and the presence of five (5) members shall 
constitute a quorum and the affirmative vote of five (5) members in a 
meeting validly held shall be necessary to exercise its powers and 
perform its functions which shall include the following: 
A. Investment Promotion- Related Functions: 
(1) Formulate an evolving National Framework for Investment 
Promotions (NFIP) that will govern all Investment Promotion 
Agencies (IPAs), in consultation and coordination with all the 
concerned IPAs: 
2 


(2) Promulgate rules, regulations and policies to implement the 
NFIP in consultation and coordination with all concerned IPAs 
and exercise monitoring functions over all investment 
promotion activities of all IPAs; 
(3) 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 the President and to Congress; 
(4) Enter into agreements with other agencies for the simplification 
o f  systems and procedures involved in tlie promotion of 
investments, operation of economic zones and registered 
enterprises, and other activities necessary for the effective 
implementation of this Code; 
(5) Establish the Investment Promotion Action Center (i-PAC); 
(6) Establikh and operate regional investment centers in the 
Philippines; and establish and operate overseas investment 
offices; 
B. Regulatory Functions: 
1. Formulate an evolving National Framework for Industrial 
Development 
(NFID), consistent 
with 
the medium-term 
Philippine development plan, and in consultation and 
coordination with NEDA, DOF and other concerned government 
agencies; 
2. Promulgate rules, regulations and policies to implement the 
NFID in consultation with NEDA, DOF and private sector. 
3. Plan and implement industrial programs to hasten economic 
development including those relating to the implementation of 
international 
trade, 
investment 
and 
industry-related 
environmental agreements and protocols; 
4. Formulate positions for bilateral, multilateral, and regional 
investments and investment-related trade agreements and/or 
arrangements; 
5. Act on investment projects covered by bilateral, multilateral, 
and regional agreements subject to rules and guidelines to be 
formulated by the Board; 
6. Recommend to the President the suspension of the nationality 
requirement provided for in this Code in appropriate cases such 
as 
those 
involving bilateral, 
multilateral, or 
regional 
investments, or other trading agreements of the 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; 
7. Prepare the Investments Priorities Plan (IPP) in accordance 
with Title 111, Chapter I of this Code: 
3 


8. Formulate rationalization programs for certain industries 
registered with the BO1 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: 
9. Prepare an annual list of products and services that are not 
sufficiently manufactured/rendered locally in consultation with 
the NEDA 
10. Assist micro and small enterprises in the preparation of 
feasibility and other pre-investment project study: 
1 1. Regulate the implementation of Regional Operating 
Headquarters, Retail Trade Law, Long Term Lease and other 
laws as mandated: 
12. Process and approve, deny, suspend, revoke applications for 
Registration with the BOI, imposing terms and conditions as it 
may deem necessary to promote the purposes of this Code, 
including the refund and forfeiture of incentives when 
appropriate, restricting availment of incentives not needed by 
the project as determined by the Board, requiring performance 
bonds from BOI-accredited bonding companies, and payment of 
application, registration, publication and other fees, when 
warranted: 
13. After due notice and hearing, cancel the registration or 
suspend the incentives of a BOI-registered enterprise and/or 
require refund of incentives, including interests and monetary 
penalties: 
14. Establish a mediation center to resolve controversies and/or 
disputes between BOI-registered enterprises: 
15. After due hearing, decide controversies that may arise 
between BOI-registered enterprises or investors therein which 
espouse conflicting interests arising from the implementation of 
this Code. The Board shall have the power to subpoena 
witnesses, administer oaths, and compel the production of 
books, papers, and other evidence, and to cite for contempt any 
person or organization that fails to comply with the afore-stated 
processes: Prouided, That the Board may grant immunity from 
prosecution to any person whose testimony or documents or 
other evidence is necessary or relevant to the case; Prouided 
further, That a registered enterprise may fie a motion for 
reconsideration of a decision or final order within fdteen 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: 
16. Recommend to the Commissioner of Immigration and 
Deportation the employment of foreign nationals in BOI- 
registered enterprises and the grant of Investor’s Visa: 
4 


17. Ascertain by inspection or verified reports, the proportion of 
the participation of Philippine nationals in a BOI-registered 
enterprise 
to 
ensure 
compliance with 
the 
nationdty 
requirements of Philippine laws to retain registration under this 
Code or to verify the compliance by registered enterprises with 
the terms and conditions of registration; 
18. Waive, condone or reduce fines or penalties imposed on 
BOI-registered enterprises; 
19. Determine the organizational structure of the BOI. Appoint, 
discipline or remove its personnel consistent with the provisions 
of civil service laws, rules and regulations; and, 
20. Exercise all powers necessary or incidental to attain the 
purposes of this Code and other laws vesting additional 
functions on the Board. 
SEC. 7. Appointment ofBOI Personnel. - The 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 
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 Philippine Economic Zone Authority 
(PEZA) and shall be subject to periodic review by the Board 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. 
SEC. 8. The Investment Promotion Action Center (i-PAC). - There is 
hereby created an i-PAC in 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 Trade, 
Industry, Tourism, Agriculture, Natural Resources, Transportation, 
Communication and Services, and for Other Purposes”. The i-PAC shall 
serve as the source of investment information and as the link to all 
government agencies to facilitate entry, retention, expansion and 
diversification of investments. 
The i-PAC shall be composed of all government agencies involved in 
the establishment or operation of business including, but not limited to, 
all IPAs, Securities and Exchange Commission (SEC), BIR, BOC, Bureau 
of Immigration and Deportation (BID), the DTI, and the Departments of 
Interior and Local Government (DILG), Agriculture (DA), Environment 
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 Board. The government agencies involved shall designate 
representatives to the i-PAC that are clothed with authority to act and 
approve/deny any matter relative to their respective agencies. 
SEC. 9. Powers and Functions of the 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. 
5 


(2) Ensure that all investment-related requirements are acted upon 
within ten (10) working days. In cases of applications not acted 
within ten (10) working days, the same shall be deemed 
approved; Prouided, 
however, That deferment shall be 
considered as an action. 
(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) Act, in coordination with appropriate government offices or 
agencies, such as the Office of the Ombudsman and the Civil 
Service Commission (CSC), on complaints filed by any investor 
or potential investor against any public official or employee or 
any 
office, agency or instrumentality, 
including local 
government units (LGUs) and officials, as well as any 
government-owned and controlled corporation (GOCC) , in 
connection with any act or duty required by law to facilitate the 
entry of local and foreign investments. 
(6) Perform such other functions as may be directed by the Board. 
SEC. 10. Honoraria and Allowances. - The Board shall provide for 
reasonable honoraria and allowances for the i-PAC members and its 
personnel. 
TITLE II. DEFINITION OF TERMS 
SEC. 11. De$nition of Terms. - As used herein, the following shall 
mean- 
(a) ‘Tnuestments Promotion Agencies (PAS)” shall include the BOI, 
PEZA, Bases Conversion Development Authority (BCDA), Subic Bay 
Metropolitan Authority (SBNIA), 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)), PHMDEC Industrial 
Authority (PIA), Aurora Special Economic Zone (ASEZA), and all other 
IPAs that may be created by law. 
(b) “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: Prouided, 
however, That the term “registered enterprise” shall not include any of 
the following service enterprises such as, but not limited to, those 
engaged in customs brokerage, trucking/forwarding services, parcel 
services, janitorial services, security services, insurance and/or 
banking and other financial services, consumers cooperatives, credit 
unions, consultancy services, restaurants or such other services, 
within the economic zones, as may be determined by the IPA Board, 
duly accredited and/or licensed by any of the IPAs and whose income 
6 


derived within the economic zones shall be subject to taxes under the 
National Internal Revenue Code of 1997 (NIRC), as amended. 
(c) “Investments Priorities Plan (IPP)” shall refer to the focused list of 
priority industries, services and other economic activities, which will 
be eligible for incentives under this Code, prepared and determined 
[as priority or preferred activities] in accordance with Title 111, Chapter 
1 of this Code. 
(d) “New product or seruice” shall refer to any product or service not 
locally or not sufficiently manufactured/rendered to meet demand. 
(e) “Gross income earned” refers to gross sales or gross revenues 
derived from the registered activity 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 NIRC of 1997,as amended. 
(0 
“Export sales of goods” shall mean the sales values and/or 
revenues paid for in freely convertible foreign currency, determined 
from invoices, bills of lading, inward letters of credit, landing 
certificates, or other commercial documents, of the following: 
i. the sale and actual shipment o€ goods from the Philippines 
to a Poreign 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 paragraph (ii) above, only sales to an 
export enterprise of capital equipment, raw materials, production 
supplies, packaging materials, and other production requirements 
needed for the registered activity of the export enterprise; and sales 
to international sea or air transport operations of goods, 
equipment, spare parts and supplies, except fuel, to be used in the 
aircraft or seacraft and capital equipment needed for the shipping 
or air transport operations, shall be entitled to incentives for export 
enterprises under this Code. 
Sales of locally manufactured or assembled goods for 
household and person& use under the Internal Export Program 
and similar programs of the government shall be deemed as 
“export sales”. 
7 


(g) “Export sales of services” shall mean the sales revenues, 
determined from contracts, invoices, vouchers, official receipts, or 
other commercial documents of the following: 
i. 
services rendered for clients abroad by registered 
enterprises: 
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 dutyfree 
privileges; 
iii. 
services rendered to international airlines or shipping 
lines, or foreign military aircraft or seacraft, or information 
and communication technology enterprises, even if rendered 
locally. 
Provided, That in the case of paragraph (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 in the case of paragraph (iii), only services for the 
overhaul, repair and maintenance for international shipping or air 
transport operations, and foreign military aircraft or seacraft, shall 
be entitled to incentives for export enterprises under this Code. 
The foregoing notwithstanding, services rendered locally by 
registered enterprises that are paid for in freely convertible foreign 
currency shall be considered as “export sales”. 
(h) An “export enterprise” shall mean a registered enterprise 
which is a manufacturer, processor or service provider and whose 
export sale of its products or services exceeds seventy percent 
(70%) of its total annual production of the preceding taxable year. 
An export trader that buys and sells for its own account 
products of micro and small enterprises and earns one hundred 
percent (100%) of its annual sales from exports of the same shall 
be deemed to be an export enterprise. 
(i) A “domestic enterprise” shall mean a registered enterprise, 
which produces goods for sale or renders services exclusively to the 
domestic market or does not comply with the minimum export 
requirement of an export enterprise. 
(j) “Service enterprise” is an enterprise engaged or proposing to 
engage in rendering technical, professional or other services listed 
in the IPP. 
Service enterprise that earns more than seventy percent 
(70%) of its revenues paid for in foreign currency generated from 
non-resident clients shall be entitled to the incentives provided to 
an “export” enterprise. 
(k) “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, 
8 


medical records or files, legal records or files, instruction materials, 
drawings, blueprints, or outlines. 
(1) 
“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, milling, 
pasteurizing, drying or desiccating, quick freezing, that results in a 
change in the nature or state of the products. Processing shall 
include assembly provided that a distinct or new product is 
formed. 
Mere packing or packaging shall nat constitute 
processing. 
(m) “Industrial Estate (I@” shall refer to a tract of land subdivided 
and developed according to a comprehensive plan under a unified 
continuous 
management 
and with 
provisions 
€or 
basic 
infrastructure and utilities, with or without prebuilt standard 
factory buildings and community facilities for the use of a 
community of industries. It includes government industrial estates 
such as the PHMDEC Industrial Authority. 
(n) 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, 
information 
technology, tourist/recreational, commercial, banking, investment 
and fmancial centers whose metes and bounds are fmed or 
delimited by Presidential Proclamations. An ecozone may contain 
any or all of the following: industrial estates (IEs), export 
processing zones (EPZs), ICT parks and centers, free trade zones 
and tourism estates; Provided, however, That areas where mining 
operations are undertaken shall not be declared as ecozones. 
(0) “ECOZONE Developer” shall refer to a business entity duly 
registered with PEZA to develop, operate, and maintain an ecozone 
that will put up the required infrastructure facilities and utilities to 
include among others light and power system, water supply and 
distribution system, sewerage and drainage system, pollution 
control devices, communication 
facilities, paved road network, 
administration building, standard factory buildings, and other 
facilities as may be required by enterprises registered with PEZA.” 
(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. 
(q) “Reeport” is an isolated and policed area adjacent to a port of 
entry as defined by Section 3519 of the Tariff and Customs Code, 
which shall be operated and managed as a separate customs 
territory to ensure free flow or movement of goods, except those 
expressly prohibited by law, within, into and exported out in the 
freeport zone where imported goods may be unloaded for 
immediate transshipment or stored, repacked, sorted, mixed, or 
otherwise manipulated without being subject to import duties. 
(r) ‘Tourism Estate” is a tract of land with defmed boundaries, 
suitable for development into an integrated resort complex to 
render tourism services for both local and foreign tourists, 
9 


travelers and investors, with prescribed carrying capacities, of 
tourist facilities and activities, such as, but not limited to, sport, 
gaming and recreation centers, accommodations including hotels, 
apartelles, tourist inns/villas, pension houses, convention and 
cultural facilities, food and beverage outlets, commercial 
establishments 
and other special interest and attraction 
activities/establishments, and provided with roads, water supply 
facilities, power distribution facilities, drainage and sewage 
systems, and other necessary infrastructures and facilities. 
A 
tourism 
estate 
shall be 
under 
unified 
and 
continuous 
management, and can either be a component of an ecozone or the 
whole ecozone itself. 
(s) “ICT Park” or “information and communications technology (ICT) 
park” shall refer to an 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 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 Equipmen? refers to machinery, equipment, major 
components thereof, spare parts, accessories, tools, devices, 
apparatus, furtures, fittings and accompaniments which are 
directly and/or reasonably needed in the registered activity of the 
enterprise and those required for pollution abatement and control, 
cleaner production and water reduction/ conservation. 
TITLE I11 - INVESTNENTS WITH INCENTIVES 
CHAPTER I - QUALIFIED ACTMTIES 
SEC. 12. 
Investments Priorities Plan (IPP). - The BOI, upon 
consultation with the DOF, NEDA, the Office of the President, concerned 
IPAs and appropriate government agencies and the private sector shall 
formulate the IPP to be submitted to the President for [his] approval. 
In the listing of the activity in the IPP, the following shall be 
complied with. 
1) The activity shall be covered by 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 modem or new technology; or 
d. installation of adequate environmental protection systems; 
10 


Provided, That items 2(a) and 2(d) above shall be present in all 
activities, and the threshold amount of investments and employment 
generation required for a specific activity shall be subject to a periodic 
review every three (3) years taking into consideration international 
standards and other indicators. 
3) The activity must comply with the specifk qualification 
requirements and/or conditions for a particular sector or 
industry as set by the Board and other limitations the Board 
may determine. 
SEC. 13. Amendments. - Subject to publication requirements and 
the criteria for investment priority determination, the Board may, at any 
time, include additional areas in the IPP, alter any of the terms of the 
declaration of an investment area, and temporarily or permanently 
suspend activities on the IPP if it considers that such activity is no longer 
a priority. In no case, however, shall any amendment of the IPP impair 
the incentives conferred on a registered enterprise. The Board shall not 
accept applications in an area of investment prior to the approval of the 
same as a preferred area or after approval of its deletion as a preferred 
area of investment in the IPP. 
SEC. 14. Publicatloion. - Upon approval of the IPP, in whole or in 
part, or upon approval of an amendment thereof, the IPP or the 
amendment, speciljmg and declaring the areas of investment shall be 
published in at least one (1) newspaper of general circulation and aU 
such areas shall be open for application until publication of an 
amendment or deletion thereof. 
SEC. 15. Strategic Projects. - The President, upon the joint 
recommendation of the Secretary of Finance, Secretary of Trade and 
Industry and Director-General for economic planning, may allow 
registration of a strategic project that may not be listed in the IPP, but 
will locate in the country as a result of stiff competition with other 
countries. 
A strategic project is a project that exhibits high social economic 
returns and requires large investments that will significantly contribute 
to the country's economic development. It'may be registered as an 
export or a domestic enterprise. 
In the exercise of this authority, the following criteria shall be 
taken into account: (1) large capital investments of at least US$ 500 
Million; (2) generate sizeable employment of at least 200; (3) use of new 
and internationally accepted high level of technology; and (4) creation of 
value added. 
CHAPTER I1 - INCENTIVES TO REGISTERED ENTERPRISES 
SEC. 16. Incentives to Registered Export Enterprises. - AU IPAs may 
administer the following incentives to their respective registered export 
enterprises to the extent of their registered activity: 
(a) Income Tax Holiday (ITH). - A registered export enterprise may be 
entitled to an income tax holiday from the date of start of its commercial 
operations. 


The ITH shall be phased-out when the ratio of infrastructure 
spending to gross domestic product has reached five per cent (5%). 
The BIR shall require a registered export 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 
export enterprise shall fie 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 ITH 
availment for the taxable period. 
(bJ Reduced Income Tax. - A registered export enterprise, 
regardless of location, may be entitled to a preferential tax rate of fifteen 
percent (15%) of taxable income as defined under Section 31 of the NIRC 
of 1997, as amended. 
(c) Eve Percent (5%) Tax On Gross Income Earned (GIE). - Instead of 
the above Reduced Income Tax Rate, a registered export enterprise 
located inside or outside the ecozone, industrial estate, freeport zone may 
opt and apply with the concerned IPA for the five percent (5%) tax of the 
gross income earned in lieu of all national and local taxes, except real 
property tax on land owned by private developers. The allocation of the 
five percent (5vo) GIE pertaining to the local government unit foregoing 
taxes hereunder shall be governed by the charter or governing law of the 
IPA. Once the registered export enterprise has made the choice, such 
choice shall be irrevocable for the duration of its registration. 
The export enterprise may opt to avail of the ITH prior to the 5% 
tax on gross income earned. 
(d) 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 MAY be carried over as a deduction from gross income 
for the next EIGHT consecutive taxable years immediately following the 
year of such loss. 
Registered export enterprises availing of the ITH and the five 
percent (5%) tax rate on GIE as herein provided shalI not be entitled to 
avail of the NOLCO. 
The BIR shall require a registered export enterprise availing of 
NOLCO to secure a certificate of eligibility from the appropriate IPA 
before filing an official copy of its 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 BO1 or appropriate IPA shall cause the forfeiture of 
the availment for the taxable period. 
(e) VAT AND DUTYINCENTZVES ON IMPORTATIONS. - 
(1.1) Importations of capital equipment, including consignment 
thereof, by registered export enterprises may be exempted to the extent of 
one hundred percent (1OOOh) of the taxes and customs duties: Prouided, 
that the following conditions are complied: 
12 


i The capital equipment is directly and/or reasonably needed and 
will be used exclusively in the registered activity of the export 
enterprise unless prior approval of the 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 export 
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 
imported 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, 
iv For reasons of proven technical obsolescence. 
If made to another enterprise enjoying tax and duty exemption on 
When the aforementioned sale, transfer or disposition is made 
under any of the conditions provided for in the foregoing paragraphs 
other than paragraph (ii), the registered export enterprise shall not pay 
the taxes and duties waived on such items: Prouidedfurther, That if the 
registered 
export 
enterprise 
sells, 
transfers 
or 
disposes 
the 
aforementioned imported items without prior approval within five (5) 
years from date of importation, the registered export enterprise and the 
vendee, transferee, or assignee shall be solidarily liable to pay twice the 
amount of the tax and duty exemption given it: Provided, finally, That 
even if the sale, transfer or disposition of the capital equipment, is 
approved after five (5) years from date of importation, the registered 
export enterprise is still liable to pay the taxes and duties based on the 
net book value of the capital equipment, if it has violated any of its 
registration terms and conditions. Otherwise, it shall no longer be 
subject to the payment of the taxes and duties waived thereon. 
[I.Z.) Importations of raw materials, supplies, spare parts and 
semi-finished products exclusively used by registered export enterprises 
in the manufacture, processing or production of its export products may 
be exempted from the payment of customs duties and taxes. 
The registered export enterprises availing of the above incentives 
shall be subject to the following: (a) that said importation will be used 
exclusively by the registered export enterprise in its registered activity: 
(b) that the capital equipment where the raw materials, supplies, parts 
13 


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 export enterprise. 
If the registered export 
enterprise sells, transfers or disposes of the imported capital equipment, 
the provision in the preceding paragraphs for such disposition shall 
apply. 
(F) VAT INCENTIVE ON LOCAL PURCHASES. - 
(1.1.) The purchase of machinery and capital equipment by a 
registered export enterprise, or the purchase of raw materials, supplies, 
parts and semi-finished products used in the fabrication of machinery 
and capital equipment by a registered export enterprise, from a domestic 
manufacturer shall be subject to zero percent (0%) value-added tax 
VAT). 
(1.2.) 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 subject to zero percent (OYo) rate of VAT. 
(GI Accelerated Depreciation. - Plant, machinery, and equipment 
that are reasonably needed and actually used for the production and 
transport of goods and services may be depreciated using a rate not 
exceeding twice the rate which would have been used had the annual 
allowance been computed in accordance with the rules and regulations 
prescribed by the Secretary of Finance and the provisions of the NIRC of 
1997, as amended. 
Registered enterprises availing of the ITH and the five percent (5%) 
tax rate on GIE as herein provided shall not be entitled to avail of the 
accelerated depreciation. 
(h) Duty Free Importation of Source Documents. - The importation of 
source documents by ICT-registered export enterprises shall be eIigible 
for tax and duty free importation. 
(i) Double Deduction for Training Expenses: Expenses incurred for 
local training given to employees for the development of skills identified 
as necessary by the appropriate government agencies, upon approval by 
the concerned IPA, MAY entitle the registered export 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 
NIRC of 1997, as amended. 
The training expenses incurred shall be deductible from taxable 
income on the taxable year the said training expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
training INCENTIVE shall be deemed waived. 
Registered enterprises availing o€ the ITH and the five percent (5%) 
tax rate on GIE as herein provided shall not be entitled to avail of the 
double deduction for training expenses. 
0) Double Deduction for Research and Development. - Expenses 
incurred for research and development conducted in the Philippines 
14 


relating to the business shall entitle the registered export enterprise to a 
special deduction from taxable income equivalent to one hundred percent 
(100%) of the total expenses over and above the allowable ordinary and 
business deductions for said expenses under the NIRC of 1997, as 
amended. 
The expenses for research and development shall be deductible from 
taxable income on the taxable year the said research and development 
expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
research and development incentive shall be deemed waived. 
Registered enterprises availing of the ITH and the five percent (5%) 
tax rate on GIE as herein provided shall not be entitled to avail of the 
double deduction for research and development. 
[kj Exemption from wharfage Dues and Export Tax. - The provisions 
of law to the contrary notwithstanding, exports by a registered export 
enterprise shall be exempted from wharfage dues and export taxes. 
{LJ Employment of Foreign Nationals. - Subject to the provisions of 
Section 29 of Commonwealth Act No. 613, as amended, a registered 
export enterprise may employ foreign nationals in managerial, technical 
or advisory positions for a period not exceeding five (5) years from its 
registration, extendible for limited periods at the discretion of the Board: 
Prouided, 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 of their equivalents may be 
retained by foreign nationals beyond the period set forth within. 
Foreign nationals under employment contract within the purview 
of this incentive, their spouses and unmarried children under twenty-one 
(21) years of age, who are not excluded by Section 29 of Commonwealth 
Act No. 613, as amended, shall be permitted to enter and reside in the 
Philippines during the period of employment of such foreign nationals. 
A registered export 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: Provided, 
That employment of foreign nationals hired by registered export 
enterprises in a supervisory, technical or advisory capacity shall not 
exceed five percent (5%) of its workforce without the express 
authorization of the Secretary of DOLE. 
SEC. 17. Tax Treatmentlother lncentives for Registered Enterprises 
in Ecozones and Freeport Zones. - In addition to the applicable incentives 
provided under the preceding section on export incentives, registered 
enterprises locating in the Special Economic Zones and Freeport Zones 
shall be entitled to the following incentives: 
(a) Tax Treatment of Merchandise in Ecozones or Freeports. (1) 
Except as otherwise provided in this 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 ecozones or freeports to be sold, stored, broken up, 
repacked, assembled, installed, sorted, cleaned, graded, or otherwise 
processed, manufactured, mixed with foreign or domestic merchandise 
15 


whether directly or indirectly related in such activity, shall not be subject 
to customs and internal revenue laws and regulations nor to local tax 
ordinances, the provisions of law to the contrary notwithstanding. 
(2) Merchandise purchased by a registered enterprise located in the 
ecozones or freeports from the customs territory, and subsequently 
brought into the ecozones or freeports, shall be considered as export 
sales and exportation thereof shall be entitled to the benefits allowed by 
law for such transaction. 
(3) Merchandise sent from the ecozones or freeports to the cu.stoms 
territory shall, whether or not combined with or made part of other 
articles likewise of local origin or manufactured in the Philippines while 
in the ecozones or freeports, be subject to internal revenue laws of the 
Philippines as domestic goods sold, transferred or disposed of for local 
consumption. If the fmished goods have imported components, the 
duties shall be based on the value of said imported materials (except 
when the final product is exempt). 
(4) Qualified merchandise or articles manufactured by registered 
ecozone or freeport locators, which are made available for sale in the 
domestic market shall be imposed the applicable ASEAN Common 
Effective Preferential Tariff (CEFT) 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. 
been 
i m D 0 1  
(5) Domestic merchandise on which all internal revenue taxes have 
paid, if subject thereto, and foreign merchandise previously 
ted on which duty or tax has been paid, or which have been 
adhitted free of duty and tax, may be taken into the ecozones or 
freeports from the customs territory of the Philippines and be brought 
back thereto free of quotas, duty or tax. 
(6) 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 ecozones or freeports 
under the immediately preceding paragraph has been lost, such article 
when removed from the ecozones or freeports and taken to the customs 
territory shall be treated as foreign merchandise entering the country for 
the first time, under the provisions of the Tariff and Customs Code of the 
Philippines, as amended. 
(7) Articles produced or manufactured in the ecozones or freeports 
arid 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. 
(8) Articles regulated by law for sale to the domestic market shall 
only be allowed to be used or consumed within the ecozones or freeports. 
(9) Unless the contrary is shown, merchandise taken out of the 
ecozones or freeports shall be considered, for tax purposes, to have been 
sent to customs temtory. 
16 


Special Economic Zones declared by Presidential Proclamations or 
created by law may avail of the incentives provided herein as conferred 
by the appropriate IPA subject to such terms and conditions as may be 
provided by law. 
(b) Tax Treatment of Services in the Ecozones or Freeports. - (I] Sale 
of service by an entity from the customs territory to a registered ecozone 
or freeport enterprise or by a registered ecozone or freeport enterprise to 
another ecozone or freeport enterprise shall be treated as indirect export, 
and hence, shall not be subjected to internal revenue taxes for such 
transaction. 
(2) Sale or service by a registered ecozone or freeport enterprise to 
the customs territory shall be subject to the applicable internal revenue 
laws and regulations. 
SEC. 18. Incentives To Registered Domestic “Strategic” Enterprises. 
- All IPAs may administer the following incentives to registered domestic 
“strategic” enterprises, whenever applicable, to the extent of their 
registered activity: 
(A) Income Tax Holiday (ITH). - A registered domestic “strategic” 
enterprise may be entitled to an income tax holiday from the date of start 
of its commercial operations. 
The ITH shall be phased-out when the ratio of infrastructure 
spending to gross domestic product has reached five per cent (5%), 
whichever comes fxst. 
The BIR shall require a registered domestic “strategic” 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 domestic “strategic” 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 ITH 
availment for the taxable period. 
(B) Reduced Income Tax. - A registered domestic “strategic” 
enterprise may be entitled to a preferential tax rate of fifteen percent 
(15%) of taxable income as defined under section 31 of the NIRC of 1997, 
as amended, for a period of 8 years. 
If the domestic “strategic” enterprise registers within the first six 
years from the effectivity of the act. it may opt to avail of the ITH prior to 
the reduced income tax. 
Prouided, that the ITH together with the 
reduced income tax shall be availed of for a period of 8 years. 
(C) 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 may be carried over as a deduction from gross income 
for the next eight consecutive taxable years immediately following the 
year of such loss. 
Registered domestic “strategic” enterprises availing of the ITH as 
herein provided shall not be entitled to avail of the NOLCO. 
17 


The BIR shall require a registered domestic “strategic” enterprise 
availing of NOLCO to secure a certificate of eligibility from the 
appropriate IPA before filing an official copy of its 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 BO1 or appropriate IPA shall cause the forfeiture of 
the availment for the taxable period. 
(D) VAT And Duty incentives on importations. - 
Importations of registered domestic “strategic” enterprises shall be 
subject to a vat and customs duty refund mechanism. 
In order to facilitate the immediate processing, clearance and 
release of vat and customs duty refunds as provided in this act, a trust 
liability account (TU) is hereby authorized to be established in the 
bureau of the treasury (BTr). All VAT and customs duty payments 
pertaining to the importation of 
registered domestic “strategic” 
enterprises of capital equipment or raw materials shall be deposited in 
the TLA for the purpose of funding valid vat and customs duty refund 
claims. The claims for VAT and customs duty refunds shall be made by 
the registered enterprise to the DOF which, in turn, will process, approve 
and release the vat and customs duty refund. 
The VAT and customs duty paid on imported capital equipment may 
be refunded provided that the capital equipment: is being used by the 
registered domestic “strategic” enterprise pursuant to its registered 
activity. 
The amount of VAT and customs duty refund on a particular 
shipment of raw materials shall be equivalent to the proportion of raw 
materials used in tlie production to the total raw materials imported 
multiplied by the amount of VAT and customs duty paid on such 
importation. No claim for refund shall be allowed on VAT and customs 
duty paid on raw materials which are not or no longer intended to be 
used in the registered activity. 
The registered domestic “strategic” enterprise shall file a claim for 
VAT and customs duty refund within two (2) years after the payment was 
made. 
All amounts paid but no longer allowed for refund shall 
immediately accrue to the general fund of the national government. 
All applications for VAT and customs duty refund shall be processed 
and acted upon within thirty (30) days after submission of complete 
documents. 
The refund shall be in a form of cash or manager’s/ 
cashier’s check payable to the registered domestic “strategic” enterprise. 
In case of dispute under the VAT and customs duty refund 
mechanism provided in this section, the pertinent provisions of the 
national internal revenue code of 1997, as amended, and the Tariff and 
Customs Code of the Philippines, as amended, shall apply. 
The registered domestic “strategic” enterprise availing of the above 
incentives shall be subject to the following: (a) that said capital 
equipment will be used exclusively by the registered domestic “strategic” 
enterprise in its registered activity; (b) that the capital equipment where 
18 


the raw materials, supplies, parts and semi-finished products were used 
would have qualified for tax and duty-free refund; and (c) that the 
approval of the concerned IPA is obtained by the registered domestic 
“strategic” enterprise. If the registered domestic “strategic” enterprise 
sells, transfers or disposes of the capital equipment, the provision in the 
preceding paragraphs for such disposition shall apply. 
(E/ Accelerated Depreciation. - Plant, machinery, and equipment 
that are reasonably needed and actually used for the production and 
transport of goods and services may be depreciated using a rate not 
exceeding twice the rate which would have been used had the annual 
allowance been computed in accordance with the rules and regulations 
prescribed by the secretary of finance and the provisions of the NIRC of 
1997, as amended. 
Registered domestic “strategic” enterprises availing of the ITH as 
herein provided shall not be entitled to avail of the accelerated 
depreciation. 
IF) Double Deduction For Training Expenses. - Expenses incurred for 
local training given to employees for the development of skills identified 
as necessary by the appropriate government agencies, upon approval by 
the concerned PA, may entitle the registered domestic “strategic” 
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 NIRC of 1997, as amended. 
The training expenses incurred shall be deductible from taxable 
income on the taxable year the said training expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
training incentive shall be deemed waived. 
Registered domestic “strategic” enterprises availing of the ITH as 
herein provided shall not be entitled to avail of the double deduction for 
training expenses. 
(GI Double Deduction For Research And Development. - Expenses 
incurred for research and development conducted in the Philippines 
relating to the business may entitle the registered domestic “strategic” 
enterprise to a special deduction from taxable income equivalent to one 
hundred percent (100%) of the total expenses over and above the 
allowable ordinary and business deductions for said expenses under the 
NIRC of 1997, as amended. 
The expenses for research and development shall be deductible from 
taxable income on the taxable year the said research and development 
expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
research and development incentive shall be deemed waived. 
Registered domestic “strategic” enterprises availing of the ITH as 
herein provided shall not be entitled to avail of the double deduction for 
research and development. 
19 


[H) Employment of Foreign Nationals. - Subject to the provisions of 
section 29 of Commonwealth Act No. 613, as amended, a registered 
domestic “strategic” enterprise may employ foreign nationals in 
managerial, 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 domestic “strategic” enterprise is owned by 
foreign investors, the positions of president, treasurer and general 
manager or of their equivalents may be retained by foreign nationals 
beyond the period set forth within. 
Foreign nationals under employment contract within the purview 
of this incentive, their spouses and unmarried children under twenty-one 
(21) years of age, who are not excluded by section 29 of Commonwealth 
act no. 613, as amended, shall be permitted to enter and reside in the 
Philippines during the period of employment of such foreign nationals. 
A registered domestic “strategic” 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: provided, that employment of foreign nationals hired by registered 
domestic “strategic” enterprises in a supervisory, technical or advisory 
capacity shall not exceed five percent (5%) of its workforce without the 
express authorization of the secretary of dole. 
SEC. 19. Incentives To Registered Domestic Enterprises Located In 
The 30 Poorest Provinces. - Registered domestic enterprises located in any 
of the thirty (30) poorest provinces as determined by the appropriate 
agency may be entitled to the following incentives: 
[a) Reduced Income Tax. - A registered domestic enterprise located 
in any of the 30 poorest provinces shall be entitled to five (5) years of 
preferential tax rate of fifteen percent (15%) of taxable income as defined 
under Section 31 of the NIRC of 1997, as amended. 
[b) 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 five (5) consecutive 
taxable years immediately following the year of such loss. 
The BIR shall require a registered domestic enterprise availing of 
NOLCO to secure a certificate of eligibiIity from the appropriate IPA 
before filing an official copy of its ITR with the appropriate IPA for 
validation of NOLCO claim. 
Failure to secure certification and/or to iile the NOLCO availment 
for validation by the BO1 or appropriate IPA shall cause the forfeiture of 
the availment for the taxable period. 
[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 NIRC of 1997, as amended. 
20 


[dj Double Deduction for Training Expenses. - Expenses incurred for 
local training given to employees for the development of skills identified 
as necessary by the appropriate government agencies, upon approval by 
the concerned IPA, shall entitle the registered domestic enterprise, for a 
period of five years, 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 NIRC of 1997, as amended. 
The training expenses incurred shall be deductible from taxable 
income on the taxable year the said training expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
training incentive shall be deemed waived. 
(e) Double Deduction for Research and Development. - Expenses 
incurred for research and development conducted in the Philippines 
relating to the business shall entitle the registered domestic enterprise, 
for a period of five years, to a special deduction from taxable income 
equivalent to one hundred percent (100%) of the total expenses over and 
above the allowable ordinary and business deductions for said expenses 
under the NIRC o€ 1997, as amended. 
The expenses for research and development shall be deductible from 
taxable income on the taxable year the said research and development 
expenses were incurred. 
The concerned IPA shall issue the corresponding certificate of 
entitlement for this incentive upon filing of an application, otherwise, the 
research and development incentive shall be deemed waived. 
SEC. 20. 
Incentives for Private Ecozone Developers. Ecozone 
developers may avail of the incentives provided herein as conferred by 
PEZA. 
SEC. 21. Non-JLscal Incentives. Registered enterprises shall be 
entitled to the following non-fiscal incentives: 
(a) Time-Bound Processing of Requirement for Doing Business. All 
application for permits, licenses, authorization and other requirements 
necessary for doing business shall be acted upon by the government 
agency concerned within ten (IO] 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. 
(b) Simplijkation of Customs and Internal Revenue Procedures. - 
Customs procedures for the importation of equipment, spare parts, raw 
materials and supplies, exports of processed products by registered 
enterprises shall be simplified by the BOC. 
The BIR shall simplify internal revenue procedures for the 
availment of incentives provided herein for registered enterprises. 
21 


(c) Reduction and Harmonization of Documentary Requirements 
Submitted to Government Agencies.- The Board shall formulate guideline’s 
for the 
reduction 
and 
harmonization of 
related 
documentary 
requirements submitted to government agencies. 
SEC. 22. Entitlement to Investor’s Visa by a Foreign National. -. 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; 
Provided, further, That as a holder of the Investor’s Visa, an alien 
shall be entitled to reside in the Philippines while his investment 
subsists. For this purpose, he should submit an annual report, in the 
form duly prescribed for the 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, PEZA, 
SBMA, CDC, JHMC, PPMC, BTPI, CEZA, ZCSEZA, PIA, ASEZA, 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 BOI. 
SEC. 23. Governing Incentive Provision for IPAs. - All existing and 
future IPAs vested with the power to confer and administer incentives 
shall offer incentives provided in this Code. Provided, That the incentives 
granted under this Code to a registered enterprise shall be applicable to 
the extent of the registered activity or project. 
SEC. 24. Relationship of IPAs and t h  BOI 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 BO1 all investment data and information and such other related data 
semi-annually or as may be required. 
CHAPTER 111 - REGISTRATION OF ENTERPRISES 
SEC. 25. Qualiftcations of a Registered Enterprise. - To qualify for 
registration and be entitled to avail of incentives, an applicant must 
satisfy the following conditions: 
22 


(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 however, 
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: 
(3) It will engage in an export activity or in an activity identified in 
the IPP and that will be located in any of the thirty (30) poorest provinces 
as determined by the appropriate National Government agency. 
(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 FUGHTS AND GUARANTEES 
OF REGISTERED ENTERPRISES 
SEC. 26. Protection of Investments. - All 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 foreigfi 
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 
23 


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 ofEarnings. - In the case of foreign investments, 
the right to remit earnings from the investment in the currency in which 
the investment was originally made and at the exchange rate prevailing 
at the time of remittance, subject to the provisions of Section 74 of 
Republic 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 at the 
prevailing rate at the time of remittance such sums as may be necessary 
to meet the payments of interest and principal on foreign loans and 
foreign obligations arising from technological assistance contracts at the 
exchange rate prevailing at the time of remittance, subject to the 
provisions of Section 74 of Republic Act No. 265; 
(d) 
Freedom from Expropriation. - 
There shall be no 
expropriation by the government of the property represented by 
investments or of the property of the enterprise except for public use, 
public interest, lawful purpose, or in the interest of national welfare or 
defense and upon payment of just compensation. In such cases, foreign 
investors or enterprises shall have the right to remit sums received as 
compensation for the expropriated property in the currency in which the 
investment was originally made and at the exchange rate at the time of 
remittance, subject to the provisions of Section 74 of Republic Act No. 
265, as amended; and 
(e) 
Requisition of Investment. There shall be no requisition of 
the property represented by the investment or of the property of 
enterprises, except in the event of war or national emergency and only for 
the duration thereof. Just compensation shall be determined and paid 
either at the time of requisition or immediately after cessation of the state 
of war or national emergency. Payments received as compensation for the 
requisitioned property may be remitted in the currency in which the 
investment was originally made and at the exchange rate prevailing at 
the time of remittance, subject to the provisions of Section 74 of Republic 
Act No. 265, as amended. 
CHAPTER V - ADMINISTRATION OF INCENTIVES 
SEC. 27. Applicamn for Registration. - 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. 
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. 
SEC. 28. 
No Double Registration of Enterprises. - Export or 
domestic enterprises shall not be allowed to register their export or 
24 


domestic activity in more than one IPA. In the event that an enterprise 
shall transfer to another P A ,  only the remaining unutilized incentives 
shall be granted to the enterprise or the transferee, vendee or assignee. 
SEC. 29. Criteria for Evaluation of Application. - The following 
criteria shall be considered in the evaluation of applications for 
registration under a preferred area: 
(a) 
sustainability; 
(b) Overall viability of the project; 
(c) 
The extent of employment, skills and foreign exchange 
generation: 
(d) The extent to which technological advances are applied and 
adopted to local conditions; 
(E) The extent to which poverty and inequality are reduced; 
(F) The extent to which the quality of the environment is improved; 
and 
(G) Such other criteria as the concerned IPA may determine. 
SEC. 
30. Environmental 
Protection and Corporate 
Social 
Responsibility. - Every registered enterprise shall prepare a Program for 
Environmental Protection and Corporate Social Responsibility (CSR) 
covering the period for its entitlement to fiscal incentives. Such Program 
shall be undertaken on a per registration basis and shaU be submitted as 
an accompanying document to the application for registration to be 
submitted to the appropriate IPA. 
Impact of the project on the overall economy and fiscal 
The environmental program shall include activities such as but not 
limited to those covered by the joint Memorandum of Agreement (MOA) of 
the DTI and DENR requiring registered firms to plant trees. 
For the CSR activities, registered enterprises shall allocate at least 
1 percent (1%] of the total amount of incentives availed of during the 
taxable year. The registered enterprise shall align such activities with the 
priority programs and projects of the National Anti-Poverty Commission 
and other special laws such as RA 7942 or the Philippine Mining Act of 
1995, as amended and DOE Energy Regulation 1-94. 
The amount spent for the CSR activities shall be reflected in the 
Notes to the Audited Financial Statements. 
SEC. 31. Approval and Registration Procedures. - The IPA is 
authorized to adopt rules and regulations to facilitate action on 
applications filed with it; prescribe criteria for the evaluation of 
applications: devise standard forms for the use of applicants and 
delegate to the regional offices of the DTI the authority to receive and 
process applications for enterprises located in their respective regions. 
Applications filed shall be considered automatically approved if not 
acted upon by the IPA within ten (10) working days from official 
acceptance thereof. Deferment by the IPA shall be considered as an 
25 


official action; Provided, however, That the IPA may defer action to a 
specific application not more than twice; and Prouidedfinally, That the 
IPA shall act upon the application within ten (10) working days from 
compliance with the cause of the last deferment. 
SEC. 32. 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 official or 
officer of the IPA as it may empower and designate for the purpose. The 
certificate shall be in such form and style as the IPA may determine and 
shall state, among other matters: 
(a) 
(b) 
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. 
(c) 
SEC. 33. Validily 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 
respective IPAs. 
SEC. 34. Extension of Period of Availment of Incentives. - The 
availment period of the incentives provided herein may be extended by 
the concerned IPA, with the concurrence of the DOF, in the event that 
the registered enterprise has suffered operational force majeure that has 
impaired the viability of the registered activity. 
SEC. 35. Administration, Implementation and Monitoring of 
Incentives. - The BOI, PEZA and the other IPAs shall be responsibIe for 
the administration and implementation of incentives granted to their 
respective registered enterprises. They shall submit to the DOF their 
respective tax expenditures based on the computed cost in terms of 
revenue foregone on the tax incentives granted to their registered 
enterprises, and other data related to the grant of investment incentives, 
on a quarterly basis and to cover all their registered enterprises including 
those whose incentives are provided by investment incentive laws prior to 
the effectivity of this Act. For proper monitoring, the DOF shall create a 
single database of all incentives provided by all IPAs. The DOF shall 
monitor and review the incentives granted and submit an annual report 
to the President and to the Chairman of the Committee on Ways and 
Means of both houses of Congress. 
TITLE IV 
FINAL PROVISIONS 
SEC. 36. Vested Right. - Notwithstanding any provision of law to 
the contrary, incentives granted to existing registered enterprises 
pursuant to contracts or agreements entered into with government 
instrumentalities/corporations shall continue to be legally binding in 
accordance with the terms and conditions stated in their respective 
contracts or agreements, as provided under existing laws. 
26 


SEC. 37. Protection of the Environment. - The IPAs, in 
coordination with the appropriate agencies, shall take appropriate steps 
to enact the proper measures for the protection of the environment, and 
shall coordinate with the Environmental Management Bureau of the 
Department of Environment and Natural Resources (EMB-DENR) to 
avoid undue delay in the issuance of the required Environmental 
Compliance Certificate (ECC): Provided, howeuer, 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: Provided, finally, That the IPA may withdraw the 
certificate of registration issued to the enterprise should the appropriate 
government agency eventually deny the application. 
SEC. 38. 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 BOX 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 receipt of notice of the order or 
decision or of the denial of the appellant's motion for new trial or 
reconsideration. Within the same period, the aggrieved party may file a 
motion €or reinvestigation or reconsideration. Only one motion for 
reconsideration shall be allowed, subject to the posting of the 
dorementioned 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 receipt of notice of the order 
denying the application for registration. Where an appeal has been filed, 
said order or decision shall be find and executory ninety (90) days after 
the perfection of the appeal, unless reversed. 
SEC. 39, Suspension and Forfeiture of Incentives of Registered 
Enterprises, Refund and Penalties. - When there is probable cause to 
believe that the registered enterprise has violated its registration terms 
and conditions, the 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. 
27 


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 (Pl,OOO,OOO.OO), 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 b e  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. 
The IPAs shall prepare a schedule of fines and penalties to be 
imposed on erring registered enterprises depending on the violation 
incurred, which may be reduced in exceptional cases. 
Responsible officers of such enterprises, including duly appointed 
external consultants-agents who knowingly commit, aid or abet the 
commission of any of the acts mentioned above, shall be subject to a fine 
of not less than One IHundred Thousand Pesos (PlOO,OOO.OO) but not 
more than Three Hundred Thousand Pesos (P300,OOO.OO) without 
prejudice to disqualification from appearing or doing business with BO1 
or any PA. 
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 (PlO0,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, 
otherwise known as the “Anti-Graft And Corrupt Practices Act,” Republic 
Act No. 6713, otherwise known as the “Code Of Conduct And Ethical 
Standards For Public Officials,” and other applicable laws. 
If the offender is a foreign national, in addition to the imposable 
fines and penalties above, the foregoing acts shall be grounds for his 
summary deportation. 
SEC. 40. 
Revenue Savings from the Rationalization of Fiscal 
Incentiues. - Revenue gains or savings from the implementation of this 
act shall be utilized exclusively for the following purposes: fifty per cent 
(50%) for infrastructure and fifty per cent (50%) for educational 
purposes. 
Such allocations shall be segregated as separate trust funds by the 
national treasury and shall be over and above the annual appropriations 
for similar purposes. 
SEC. 41. Implementing Rules and Regulations (IRR). - The DTI, 
DOF, NEDA, DBM, BOI, PEZA, other 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. 
28 


The different IPAs shall implement the provisions of this act in 
accordance with their respective mandates. 
SEC. 42. Transitory Provision. Until the Implementing Rules and 
Regulations of this Code take effect, the present rules and regulations 
under the old investments laws shall apply. 
SEC. 43. 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. 
SEC. 44. Repealing Clauses. - The following laws or provisions are 
1) Title 111, Article 39 (A), (B), (D), (E), (GI, (I), (J), (K), (Ll, (MI AND (N); 
Title IV, Article 40, (A) and (B): Book 111, Chapter 11, Articles 61 and 
62; Book 111, Chapter 111, Articles 63, 64, 65, 66 and 67; Book IV, 
Articles 69 and 70; and Book VI, Articles 77 and 78 of Executive 
Order No. 226, series of 1987, otherwise known as “The Omnibus 
Investments Code of 1987;” 
hereby repealed: 
2) Sections 23 and 24 of RA No. 7916, otherwise known as “An Act 
Providing for the Legal Framework and Mechanisms for the 
Creation, Operation, Administration, and Coordination of Special 
Economic Zones in the Philippines, Creating for the Purpose the 
Philippine Economic Zone Authority (PEZA), and for other 
Purposes (Special Economic Zone Act Of 1995):” 
3) Section 4 of RA No. 8748, or “An Act Amending Republic Act No. 
7916, Otherwise Known as the Special Economic Zone Act of 
1995”; 
4) Section 17, (1) to (8) and section 18, (a), (b), (c) and (fJ of PD No. 66, 
otherwise known as “Creating the Export Processing Zone 
Authority and Revising Republic Act No. 5490;” 
5) 4‘h paragraph of PD No. 529 (restored by FIRB Resolution 19-87), 
otherwise known as “Granting to 
Petroleum 
Exploration 
Concessionaires Under the Petroleum Act of 1949 Exemption From 
Customs Duty and Compensating Tax on Importations of 
Machinery and Equipment, Spare Parts and Materials Required for 
their Exploration Operations;” 
6) Sections 8, 9 and, 2”‘ sentence of the 1”‘ paragraph and 2”‘ 
paragraph of sec. 10 of PD No. 538, otherwise known as “Creating 
and Establishing the PHMDEC Industrial Authority and Making it 
a Subsidiary Agency of the Philippine Veterans Development 
Corporation, Defining its Powers, Functions and Responsibilities, 
and for other Purposes:” 
7) Sections 36 (e) and (0, (1) and (2) of PD No. 705, or “Revising PD 
No. 389, otherwise known as the Forestry Reform Code of the 
Philippines; ” 
8) Section 16 (a), (b) and (c) and Section 17 (a) to (e) of PD 972, 
otherwise known as “Promulgating An Act to Promote an 
29 


Accelerated Exploration, Development, Exploitation, Production 
and Utilization of Coal”; 
9) Section 3 of PD 1174, amending Section 10 of pd 972, as amended, 
entitled, “Amending PD 972, otherwise known as the Coal 
Development Act of 1976”; 
10) 
Section 4 (a) and (d) of Presidential Decree No. 1442 - 
restored by F I B  resolution 19-87, otherwise known as “An Act to 
Promote the Exploration and Development of 
Geothermal 
Resources”; 
11) 
Section 10 (1) to (6) of RA 7156, Otherwise known as “An Act 
Granting Incentives to Mini-Hydro Electric Power Developers and 
for other Purposes” (Mini-Hydroelectric Incentive Act)”; 
12) 
Section 16 (a). (e), (d), (e) and Section 17 of RA 7844, 
otherwise known as “An Act to Develop Exports as a Key Towards 
the Achievement of the National Goals Towards the Year 2000 
(Export Development Act of 1994)”; 
13) 
Chapter XV, Section 83; Chapter XVI, Sections 90, 91, 92, 
93 (a) and (b) of RA No. 7942, otherwise known as “An Act 
Instituting a New System of Mineral Resources Exploration, 
Development, Utilization, and Conservation (Philippine Mining Act 
of 1995)”: 
14) 
Section 9 of RA No. 8479, otherwise known as “An Act 
Deregulating The Downstream Oil Industry, and for other Purposes 
(Downstream Oil Industry Deregulation Act of 1998)”; 
15) 
Section 3 (a) to (dl and (h) of RA No. 8502, otherwise known 
as “An Act To Promote The Development of the Jewelry 
Manufacturing Industry, Providing Incentives Therefor and for 
other Purposes (Jewelry Industry Development Act of 1998)”: 
Chapter 11, Article 11, Sec. 35 (b), (c) and (d) of RA NO. 8550, 
otherwise known as “An Act Providing for the Development, 
Management and Conservation of the Fisheries and Aquatic 
Resources, Integrating All Laws Pertinent Thereto, and for other 
purposes (The Phirippine Fisheries Code of 1998)”; 
16) 
17) 
Section 1 of RA No. 9281, otherwise known as “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 RA 8435”: 
18) 
Section 5 of Proclamation No. 216, otherwise known as 
“Creating and Designating the Area Covered by the Former Wallace 
Air Station and Contiguous Areas in Poro Point as Poro Point 
Special Economic and Freeport Zone and Transferring Lands to the 
Bases Conversion Development Authority Pursuant To RA No. 
7227”: 
19) 
Section 6 of Proclamation No. 984, otherwise known as 
“Creating and Designating the Municipality of Morong, Province of 
Bataan, Including the Area of the Philippine Refugee Processing 
30 


Center Complex (PRPCC) as the Morong Special Economic Zone 
Pursuant to Ra No. 7227 and Transferring the Land Comprising 
the PRPCC to the Bases Conversion Development Authority 
(BCDA]”; 
20) 
Section 1 and Section 2 (a) and (b) and Sec. 6 of EO No. 
528, series of 2006, Amending EO No. 313, series of 2004 - 
Reducing the Rates of Duty on Capital Equipment, Spare Parts and 
Accessories Imported by BOI-registered New and Expanding 
Enterprises”; 
21) 
Section 4 (e) and (fl of RA No. 7903, otherwise known as “An 
Act Creating Special Economic Zone and Free Port in the City of 
Zamboanga for this purpose the Zamboanga City Special Economic 
Zone Authority, Appropriating Funds Therefor, and for other 
Purposes”; 
221 
Section 4 (b) and (c) of RA No. 7922, otherwise known as “An 
Act Establishing A Special Economic Zone and Free Port in the 
Municipality of Sta. Ana and the Neighboring Islands in the 
Municipality of Aparri, Province of Cagayan, Providing Funds 
Therefor, and €or other Purposes (Cagayan Special Economic Zone 
of 1995)”; 
23) 
Section 12 (b) and (c) of RA 7227 otherwise known as “An 
Act Accelerating the Conversion of Military Reservations into Other 
Productive Uses, Creating the Bases Conversion and Development 
Authority For This Purpose, Providing Funds Therefor and for 
other Purposes (Bases Conversion And Development Act Of 1992)”; 
Section 1 (b) and (c), Sections 2, 3, 4, 5, 6 and 7 of RA No. 
9400 otherwise known as “An Act Amending RA 7227, as 
amended, Otherwise Known as the Bases Conversion And 
Development Act Of 1982, and for other Purposes”; 
24) 
25) 
Section 1 of EO No. 619, otherwise known as “Creating and 
Designating Special Economic Zones Pursuant to RA 7916, as 
Amended by RA 8784, in Relation to RA No. 7227, as Amended by 
RA 9400, Inside the Clark Freeport Zone”; 
26) 
Section 5 (a) to (m) and Section 9 of RA No. 9490, or 
“Establishing the Aurora Special Economic Zone in the Province Of 
Aurora, Creating for the Purpose the Aurora Special Economic 
Zone Authority, Appropriating Funds Therefor and for other 
Purposes”; And 
27) 
Chapter 11, Section 4 (a), (b), (c) and (d) and Chapter VIII, 
Section 19 (a), (b) and (c) of RA 9295, entitled, “An Act Promoting 
the Development of Philippine Domestic Shipping, Shipbuilding, 
Ship Repair and Ship Breaking, Ordaining reforms in Government 
Policies Towards Shipping in the Philippines and for other 
Purposes.” 
All other laws, acts, decrees orders and issuances or provisions 
thereof inconsistent with any of the provisions of this act are hereby 
repealed or modified accordingly. 
31 


Sec. 45. Eflectiuity. - 
This act shall take effect fifteen (151 days 
following its publication in a newspaper of general circulation in the 
Philippines. 
Approved, 
32