THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
INTRODUCED BY HON. MANUEL B. VIL~AR, 
JR. 
2
,
 
' 
EXPLANATORY NOTE 
Though significant progress has been achieved fourteen years after the 
Omnibus Investment Code (Executive Order No. 226) was implemented, it must 
be admitted that much is left to be done for the Philippine economy to be at par 
with the other Asian economies. 
Since the economy is an ever-changing landscape, the government must 
be ready to adapt to meet impending needs. The amendments proposed in this 
bill centers mainly on Section 39 of the E.O. No. 226, which re-aligns and 
updates the incentives granted to preferred industries. 
Moreover, non-fiscal incentives are now provided to these preferred 
enterprises to further bolster the support that the government extends to these 
activities. 
With the approval of this bill, it is hoped that the Philippine economy will 
be given the much needed boost. 
Hence, approval of this bill is earnestly sought. 


. ,  
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
c 
,
1
 
-
>
 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
L- 
FURTHER AMENDING ARTICLE 39, TITLE I11 OF EXECUTIVE ORDER N0.226, 
OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987, AS 
AMENDED, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Article 39, Title I11 of Executive Order No.226, otherwise known as 
the Omnibus Investment Code of 1987, as amended, is hereby further amended to 
read as follows: 
"ART. 39. Incentives to Registered Enterprises. - [All registered 
enterprises shall be granted the following incentives to the extent 
engaged in a preferred area of investment] REGISTERED ENTERPRISES 
SHALL BE GRANTED ANY OF THE FOLLOWING INCENTIVES AS MAY 
BE DEEMED NECESSARY BY THE BOARD IN THE CONTEXT OF THE 
INVESTMENTS PRIORITIES PLAN (IPP): 
(A) 
Income Tax Holiday 
(1) 
For six (6) years from commercial operation for pioneer firms and 
four (4) years for non-pioneer firms, new registered firms shall be fully 
exempt from income taxes levied by the National Government. Subject to 
such guidelines as may be prescribed by the Board, the income tax 
exemption will be extended for another year in each of the following 
cases: 
i. 
ii. 
iii. 
The project meets the prescribed ratio of capital equipment to 
number of workers set by the Board; 
Utilization of indigenous raw materials at rates set by the Board; 
The net foreign exchange savings or earnings amount to at least 
US $500,000.00 annually during the first three (3) years of 
operation. 
The preceding paragraph notwithstanding, no registered pioneer firm 
may avail of this incentive for a period exceeding eight (8) years; 
PROVIDED, HOWEVER, THAT A REGISTERED PIONEER ENTERPRISE 
MAY BE GRANTED A MAXIMUM OF TWELVE (12) YEARS INCOME TAX 
HOLIDAY SUBJECT TO THE APPROVAL OF THE SECRETARY OF 
FINANCE, AND 
COMPLIANCE BY 
THE REGISTERED PIONEER 
ENTERPRISE, WITH ALL OF THE FOLLOWING CONDITIONS: 
A. 
THE PROJECT WILL MANUFACTURE PRODUCTS THAT ARE 
DISTINCTLY AND COMPLETELY NEW IN THE PHILIPPINES AND WILL 
EXPORT AT LEAST SEVENTY PERCENT (70%) OF TOTAL PRODUCTION 
OR WHICH ARE ESSENTIAL RAW MATERIALS, PARTS AND/OR 
COMPONENTS OF THE COUNTRY'S SIGNIFICANT EXPORTS; 


2 
B. 
THE PROJECT WILL REQUIRE A NEW INVESTMENT OF AT 
LEAST ONE BILLION US DOLLARS (US$1,000,000,000.00); 
C. 
D. 
THE PROJECT WILL CREATE HIGH DOMESTIC VALUE-ADDED; 
THE PROJECT WILL STRENGTHEN WORLD-COMPETITIVENESS 
OF DOWNSTREAM AND RELATED INDUSTRIAL AND 
SERVICE 
SECTORS; AND 
E. 
THE PROJECT WILL LEAD TO ACQUISITION BY FILIPINO 
WORKERS OF HIGHLY ADVANCED TECHNOLOGICAL SKILLS AND 
EXPERTISE OF WORLDCLASS STANDARDS. 
(2) 
For a period of three (3) years from commercial operation, 
registered expanding firms shall be entitled to an exemption from income 
taxes levied by the National Government proportionate to their 
expansion under such terms and conditions as the Board may 
determine; Provided, however, That during the period within which this 
incentive is availed of by the expanding firm it shall not be entitled to 
additional deduction for incremental labor expense. 
[(3) The provision of Article 7 (14) notwithstanding, registered firms shall 
not be entitled to any extension of this incentive.] 
(3) 
FIRMS AVAILING OF THE INCOME TAX HOLIDAY AS HEREIN 
PROVIDED SHALL NOT BE ENTITLED TO AVAIL OF THE INCENTIVES 
OF NET OPERATING LOSS CARRY-OVER (NOLCO), DEFERRED 
IMPOSITION OF TWO PERCENT (2%) MINIMUM CORPORATE INCOME 
TAX (MCIT), ACCELERATED DEPRECIATION, AND INVESTMENT TAX 
ALLOWANCE AS PRROVIDED IN SUB-PARAGRAPHS (B), (E), (0) AND (R) 
HEREOF, RESPECTIVELY. 
[(B) Additional Deduction for Labor Expense. --- For the first five (5) 
years from registration, the enterprise shall be allowed an additional 
deduction from the taxable income of fifty percent (50%) of the wages 
corresponding to the increment in the number of direct labor for skilled 
and unskilled workers if the project meets the prescribed ration of 
capital equipment to number of workers set by the Board: Provided, that 
this additional deduction shall be doubled if the activity is located in less 
developed areas as defined in Article 40.1 
(B) NET OPERATING LOSS CARRY-OVER (NOLCO) - THE NET 
OPERATING LOSS OF THE BUSINESS OF ENTERPRISE 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 
PROVIDED. HOWEVER, THAT OPERATING LOSS DUE TO AVAILMENT 
OF INCENTIVES PROVIDED IN THIS ACT SHALL NOT BE ENTITLED TO 
'YEARS IMMEDIATELY FOLLOWING THE YEAR OF SUCH LOSS. 
NET OPERATING LOSS CARRY-OVER (NOLCO). 
[(C) Tax and Duty Exemption on Imported Capital Equipment. - Within 
five (5) years from the effectivity of this Code, importations of machinery 
and equipment and accompanying spare parts of new and expanding 
registered enterprise shall be exempt to the extent of one hundred 
percent (100%) of the customs duties and national internal revenue tax 
payable thereon: Provided, that the importation of machinery and 
equipment and accompanying spare parts shall comply with the 
following conditions: 
(1) They are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
(2) They are reasonably needed and will be used exclusively by the 
registered enterprise in the manufacture of its products, unless prior 


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


4 
SEMI-FINISHED PRODUCTS USED IN THE FABRICATION OF THE 
MACHINERY AND EQUIPMENT SHALL BE GIVEN TO REGISTERED 
ENTERPRISES WHICH PURCHASE MACHINERY AND EQUIPMENT 
FROM A DOMESTIC MANUFACTURER; PROVIDED: (1) THAT SAID 
EQUIPMENT, MACHINERY AND SPARE PARTS WILL BE USED 
EXCLUSIVELY 
BY 
THE 
REGISTERED 
ENTERPRISE 
IN 
ITS 
REGISTERED ACTIVITY; (2) THAT THE EQUIPMENT WOULD HAVE 
QUALIFIED FOR TAX 
AND 
DUTY-FREE IMPORTATION UNDER 
PARAGRAPH (C); (3)THAT THE VALUE-ADDED TAX THAT HAS BEEN 
PAID AND REFUNDED TO OR FOR WHICH TAX CREDIT HAS ALREADY 
BEEN ISSUED TO THE MANUFACTURER OF THE EQUIPMENT OR 
MACHINERY FOR SUCH RAW MATERIALS, SUPPLIES, SPARE PARTS 
OR SEMIFINISHED PRODUCTS, SHALL NO LONGER BE AVAILABLE 
FOR THE ISSUANCE OF TAX CREDIT TO THE REGISTERED 
ENTERPRISE WHO PURCHASED THE EQUIPMENT; AND (4) THAT THE 
APPROVAL OF THE BOARD IS OBTAINED BY THE REGISTERED 
ENTERPRISE. IF THE REGISTERED ENTERPRISE SELLS, TRANSFERS, 
OR DISPOSES OF THESE MACHINERY, EQUIPMENT AND SPARE 
PARTS, THE PROVISION IN THE PRECEDING PARAGRAPH FOR SUCH 
DISPOSITION SHALL APPLY. 
[(E) Exemption from Contractor's Tax. - The registered enterprise shall 
be exempt from the payment of contractor's tax, whether national or 
local.] 
(E) 
DEFERRED IMPOSITION OF TWO PERCENT (2%) MINIMUM 
CORPORATE INCOME TAX (MCIT) - A MINIMUM CORPORATE INCOME 
TAX OF TWO PERCENT (2%) OF THE GROSS INCOME AS OF THE END 
OF THE TAXABLE YEAR SHALL BE IMPOSED BEGINNING ON THE 
SIXTH TAXABLE YEAR IMMEDIATELY FOLLOWING THE YEAR IN 
WHICH 
SUCH 
CORPORATION 
COMMENCED 
ITS 
BUSINESS 
OPERATIONS, WHEN THE MINIMUM INCOME TAX IS GREATER THAN 
THE TAX COMPUTED UNDER SEC. 27, SUBSECTION (A) OF REPUBLIC 
ACT NO. 8424 OR THE TAX REFORM ACT OF 1997 FOR THE TAXABLE 
YEAR. 
(F) 
Simplification of Customs Procedures. - Customs procedures for 
the importation of equipment, spare parts, raw materials and supplies, 
and exports of processed products by registered enterprises shall be 
simplified by the Bureau of Customs. 
(G) Unrestricted Use of Consigned Equipment. - Provisions of existing 
laws notwithstanding, machinery, equipment and spare parts consigned 
to any registered enterprise shall not be subject to restrictions as to 
period of use of such machinery, equipment and spare parts; Provided, 
that the appropriate re-export bond is posted unless importation is 
otherwise covered under subsections (c) and (m) of this Article. Provided, 
further, that such consigned equipment shall be the exclusive use of the 
registered enterprise. 
If such equipment is sold, transferred or otherwise disposed of by 
the registered enterprise the related provision of Article 39 (c) [(3)] shall 
apply. Outward remittance of foreign exchange covering the proceeds of 
such sale, transfer or disposition shall be allowed only upon prior 
Central Bank approval. 
(H) Employment of Foreign Nationals. - Subject to the provisions of 
Section 29 of Commonwealth Act Number 613, as amended, a registered 
enterprise may employ foreign nationals in supervisory, technical or 
advisory positions for a period not exceeding five (5) years from its 
registration, extendible for limited periods at the discretion of the Board: 
Provided, however, That when the majority of the capital stock of a 


5 
registered enterprise is owned by foreign investors, the positions of 
president, treasurer and general manager or their equivalents may be 
retained by foreign nationals beyond the period set forth herein. 
Foreign nationals under employment contract within the purview 
of this incentive, their spouses and unmarried children under 
twenty-one (21) years of age, who are not excluded by Section 29 of 
Commonwealth Act Numbered 613, as amended, shall be permitted to 
enter and reside in the Philippines during the period of employment of 
such foreign nationals. 
[(I) 
Exemption on Breeding Stocks and Genetic Materials. - The 
importation of breeding stocks and genetic materials within ten (10) 
years from the date of registration of commercial operation of the 
enterprise shall be exempt from all taxes and duties: Provided, that such 
breeding stocks and genetic materials are (1) not locally available and/or 
obtainable locally in comparable quality and at reasonable prices; (2) 
reasonable needed in the registered activity; and (3) approved by the 
Board.] 
(I) 
TAX AND DUTY EXEMPTION ON BREEDING STOCKS AND 
AND GENETIC MATERIALS WITHIN TEN (10) YEARS FROM THE DATE 
OF 
REGISTRATION 
OR 
COMMERCIAL 
OPERATION 
OF 
THE 
ENTERPRISE SHALL BE EXEMPT FROM ALL TAXES AND DUTIES, 
PROVIDED, THAT 
SUCH 
BREEDING 
STOCKS 
AND 
GENETIC 
MATERIALS ARE EXCLUSIVELY USED IN THE REGISTERED ACTIVITY 
AND APPROVED BY THE BOARD. 
GENETIC MATERIALS - THE IMPORTATION OF BREEDING STOCKS 
[(J) Tax Credit on Domestic Breeding Stocks and Genetic Materials. - A 
tax credit equivalent to one hundred percent (100%) of the value of 
national internal revenue taxes and customs duties that would have 
been waived on the breeding stocks and genetic materials had these 
items been imported shall be given to the registered enterprise which 
purchases 
breeding 
stocks 
and genetic materials from a domestic producer: Provided, 1) that said 
breeding stocks and genetic materials would have qualified for tax and 
duty free importation under the preceding paragraph; 2) that the 
breeding stock and genetic materials are reasonably needed in the 
registered activity; 3) that approval of the Board has been obtained by 
the registered enterprise; and 4) that the purchase is made within ten, 
(10) years from date of registration or commercial operation of the 
registered enterprise.] 
(J) 
TAX CREDIT FOR USE OF DOMESTIC STOCKS AND GENETIC 
PERCENT (100%) OF THE TAXES AND DUTIES THAT WOULD HAVE 
BEEN WAIVED ON THE DOMESTIC BREEDING STOCKS AND GENETIC 
MATERIALS HAD THESE ITEM BEEN IMPORTED SHALL BE GIVEN TO 
REGISTERED FIRMS WHICH PURCHASE BREEDING STOCKS AND 
GENETIC MATERIALS FROM A DOMESTIC PRODUCER; PROVIDED, 
THAT (1) THE APPROVAL OF THE BOARD HAS BEEN OBTAINED BY 
THE REGISTERED ENTERPRISE, AND (2) THE PURCHASE IS MADE 
WITHIN TEN (10) YEARS FROM THE DATE OF REGISTRATION OR 
COMMERCIAL OPERATION OF THE REGISTERED ENTERPRISE. 
MATERIALS -A TAX CREDIT EQUIVALENT- TO ONE HUNDRED 
[(K) Tax Credit for Taxes and Duties on Raw Materials. - Every registered 
enterprise shall enjoy a tax credit equivalent to the National Internal 
Revenue taxes and Customs duties paid on the supplies, raw materials 
and semi-manufactured products used in the manufacture, processing 
or production of its export products and forming part thereof; exported 
directly or indirectly by the registered enterprise: Provided, however, that 


6 
the taxes on the supplies, raw materials and semi-manufactured 
products domestically purchased are indicated as a separated item in 
the sales invoice.] 
(K) 
TAX 
CREDIT 
FOR 
TAXES 
AND 
DUTIES 
ON 
RAW 
MATERIALS/ SUPPLIES 
ENTERPRISE SHALL ENJOY A TAX CREDIT EQUIVALENT TO THE 
NATIONAL INTERNAL REVENUE TAXES AND CUSTOM DUTIES PAID 
PRODUCTS 
USED 
IN 
THE 
MANUFACTURE, 
PROCESSING 
PRODUCTION OF ITS EXPORT PRODUCTS. ENTITLEMENT OF 
INDIRECT EXPORTERS TO TAX CREDIT SHALL BE SUBJECT TO 
SAFEGUARDS THAT WILL BE PROVIDED IN THE IMPLEMENTING 
RULES AND REGULATIONS FOR THIS ACT TO PREVENT THE ABUSE 
AND/OR FRAUDULENT AVAILMENT OF TAX CREDITS UNDER THIS 
PROVISION. THESE SAFEGUARDS SHALL INCLUDE, AMONG OTHERS, 
A PROVISION THAT SAID TAX CREDITS IN THE CASE OF INDIRECT 
EXPORTERS SHALL BE APPLICABLE ONLY AGAINST INCOME TAX 
DUE AND NOT AGAINST ANY OTHER TAX. 
SALES AS THE APPROXIMATE TAX CREDIT FOR TAXES AND DUTIES 
OF RAW MATERIALS BASED ON AN AVERAGE OR STANDARD USAGE 
FOR SUCH MATERIALS IN THE INDUSTRY. 
- EVERY REGISTERED DIRECT OR INDIRECT OR INDIRECT EXPORT 
ON THE SUPPLIES, RAW MATERIALS AND SEMI-MANUFACTURED 
THE BOARD MAY SET A FIXED PERCENTAGE OF EXPORT- 
((L) Access to Bonded Manufacturing/Trading Warehouse System. 
Registered exhort oriented enterprise shall have access to the utilization 
of the bonded warehousing system in all required by the project subject 
to such guidelines as may be issued by the Board upon prior 
consultation with the Bureau of Customs.] 
(L) 
ACCESS 
TO 
BONDED 
MANUFACTURING/TRADING 
HAVE ACCESS TO THE BONDED WAREHOUSING SYSTEM. 
WAREHOUSE - REGISTERED EXPORT-ORIENTED ENTERPRISE SHALL 
(M) Exemption from Taxes and Duties on Imported Spare Parts.- 
Importation of required supplies and spare parts for consigned 
equipment or those imported tax and duly free by a registered enterprise 
with a bonded manufacturing warehouse shall be exempt front customs 
and duties and national internal revenue taxes payable thereon: 
Provided, however, that at least seventy percent (70%) of production is 
exported; Provided, further, that such spare parts and supplies are not 
locally available at reasonable prices, sufficient quantity and comparable 
quality; Provided, finally, that all such spare parts and supplies shall be 
used only in the bonded manufacturing warehouse of the registered 
enterprise under such requirements as the Bureau of Customs may 
impose. 
(N) 
Exemption from Wharfage Dues and any Export Tax, Duty, 
Impost and Fee. - The provisions of law to the contrary notwithstanding, 
exports by a registered enterprise of its non-traditional export products 
shall be exempted from any wharfage dues, any export tax, duty, impost 
and fee. 
(0) ACCELERATED DEPRECIATION - FIXED ASSETS MAY BE 
DEPRECIATED AS FOLLOWS: 
(A) 
TO THE EXTENT OF NOT MORE THAN TWICE AS 
FAST AS THE NORMAL 
RATE OF DEPRECIATION IF THE 
EXPECTED LIFE IS TEN (10) YEARS OR LESS; OR 
(B) DEPRECIATED OVER ANY NUMBER OF YEARS 


7 
BETWEEN FIVE (5) YEARS AND THE EXPECTED LIFE IF THE 
LATTER 
IS 
MORE THAN 
TEN 
(10) YEARS, 
AND 
THE 
DEPRECIATION THEREON ALLOWED AS DEDUCTION FROM 
TAXABLE 
INCOME; 
PROVIDED 
THAT THE 
REGISTERED 
ENTERPRISE NOTIFIES THE BUREAU OF INTERNAL REVENUE 
AT THE BEGINNING OF THE DEPRECIATION PERIOD THAT THIS 
DEPRECIATION RATE SHALL BE USED. 
(P) 
DOUBLE 
DEDUCTION 
FOR 
TRAINING 
EXPENDITURES.- 
EXPENSES INCURRED FOR LOCAL TRAINING GIVEN TO EMPLOYEES 
FOR THE DEVELOPMENT OF SKILLS INDENTIFIED AS NECESSARY BY 
THE APPROPRIATE GOVERNMENT AGENCIES SHALL ENTITLE THE 
REGISTERED 
ENTERPRISE TO A SPECIAL DEDUCTION FROM 
TAXABLE INCOME EQUIVALENT TO ONE HUNDRED PERCENT (100%) 
OF THE TOTAL EXPENSES OVER AND ABOVE THE ALLOWABLE 
ORDINARY AND NECESSARY BUSINESS DEDUCTIONS FOR SAID 
EXPENSES UNDER THE NATIONAL INTERNAL REVENUE CODE, AS 
AMENDED, THE INCENTIVE SHALL BE AVAILED OF BY REGISTERED 
FIRMS FOR A PERIOD OF TEN (10) YEARS FROM START OF 
COMMERCIAL OPERATION BUT SHOULD BE CLAIMED WITHIN FIVE 
(5) YEARS FROM THE DATE WHEN THE EXPENDITURE WAS MADE. 
AFTER THE TENTH YEAR, THE EXPENDITURE CAN BE CLAIMED AS A 
DEDUCTIBLE ITEM AS PROVIDED FOR UNDER REPUBLIC ACT NO. 
8424. 
(9) DOUBLE DEDUCTION FOR RESEARCH AND DEVELOPMENT- 
EXPENSES 
INCURRED 
FOR 
RESEARCH 
AND 
DEVELOPMENT 
RELATING TO THE BUSINESS SHALL ENTITLE THE REGISTERED 
ENTERPRISE TO A SPECIAL DEDUCTION FROM TAXABLE INCOME 
EQUIVALENT TO ONE HUNDRED PERCENT (100%) OF THE TOTAL 
EXPENSES OVER AND ABOVE ALL ALLOWABLE ORDINARY AND 
NECESSARY BUSINESS DEDUCTIONS FOR SAID EXPENSES UNDER 
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED. THE 
INCENTIVE SHALL BE AVAILED OF BY REGISTERED FIRMS FOR A 
PERIOD OF TEN (10) YEARS FROM START OF COMMERCIAL 
OPERATION BUT SHOULD BE CLAIMED WITHIN FIVE (5) YEARS FROM 
THE DATE WHEN THE EXPENDITURE WAS MADE. AFTER THE TENTH 
YEAR, THE EXPENDITURE CAN BE CLAIMED AS A DEDUCTIBLE ITEM 
AS PROVIDED FOR UNDER REPUBLIC ACT N0.8424. 
FOR PURPOSES OF THIS ACT, "RESEARCH AND DEVELOPMENT 
COST# MEANS RESEARCH AND EXPERIMENTAL EXPENDITURES 
SUCH 
AS 
COSTS 
INCIDENT 
TO 
THE 
DEVELOPMENT 
OR 
IMPROVEMENT 
OF A 
PRODUCT, 
INCLUDING 
PILOT 
MODEL, 
PROCESS, FORMULA, INVENTION, TECHNIQUE, PATENT OR SIMILAR 
PROPERTY (EXAMPLES; EXPENDITURES PAID OR INCURRED TO 
DISCOVER INFORMATION THAT ELIMINATES UNCERTAINTY AS TO 
THE DEVELOPMENT OR IMPROVEMENT OF A PRODUCT; THE 
DEPRECIATION ON SUCH PROPERTY USED FOR RESEARCH AND 
EXPERIMENTATION; FEES INCUREED TO OBTAIN PATENTS ON THE 
TAXPAYERS INVENTIONS, LEGAL AND ACCOUNTING FEES PAID OR 
INCURRED 
INCIDENT 
TO 
RESEARCH 
AND 
DEVELOPMENT 
ACTIVITIES; EXPENSES INCURRED IN DEVELOPING THE CONCEPT 
OF A PRODUCT; OR OTHER SIMILAR ITEMS). 
(R) 
INVESTMENT TAX ALLOWANCE (ITA) - AN INVESTMENT TAX 
ALLOWANCE TO THE EXTENT OF THE REGISTERED FIRM'S ACTUAL 
INVESTMENT IN FIXED ASSETS (EXCLUDING INVESTMENTS IN LAND 
AND CAPITAL EQUIPMENT FOR R&D) SHALL BE ALLOWED AS A 
DEDUCTION FROM FIFTY PERCENT (50%) OF ITS TAXABLE INCOME 
IN THE YEAR IN WHICH SUCH INVESTMENT WAS MADE; PROVIDED, 
(1) THAT THE INVESTMENT IS MADE WITHIN THREE (3) YEARS FROM 


THE DATE OF REGISTRATION; AND (2) THAT THE INVESTMENT IS 
REGISTERED WITH THE BOARD. PROVIDED FURTHER, THAT DURING 
THIS INCENTIVE SHALL NOT 
BE ALLOWED 
TO 
AVAIL 
OF 
ACCELERATED DEPRECIATION. PROVIDED , FINALLY THAT THE 
REGISTERED ENTERPRISE SHALL CHARGE, AT THE MINIMUM, THE 
NORMAL RATE OF DEPRECIATION IN ANY YEAR WHEN THE ITA IS 
NOT BEING USED DURING THE SAID THREE (3) YEARS. 
PERIOD MAY BE CARRIED OVER FOR TWO (2) YEARS. EFFECTIVELY, 
THE INCENTIVE SHALL BE AVAILED OF FOR A TOTAL PERIOD OF 
FIVE (5) YEARS FROM DATE OF REGISTRATION. UPON FULL 
UTILIZATION OF THE ITA, THE NORMAL RATE OF DEPRECIATION 
SHALL APPLY. DEPRECIATION BY MORE THAN ONE HUNDRED 
PERCENT (100%) OF THE VALUE OF THE ASSETS SHALL NOT BE 
ALLOWED. 
FURTHERMORE, REGISTERED ENTERPRISES SHALL ALSO BE 
THE SAID THREE- YEAR PERIOD, REGISTERED FIRMS AVAILING OF 
ANY UNUTILIZED ALLOWANCE AFTER SUCH THREE-YEAR 
ENTITLED TO THE FOLLOWING NON-FISCAL INCENTIVES: 
1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
10. 
11. 
ASSISTANCE IN THE PREPARATION OF INVESTMENT 
OPPORTUNITY STUDIES 
ASSISTANCE FOR JOINT VENTURE MATCHING 
ASSISTANCE IN SOURCING FINANCING SUPPORT 
THE AVAILABILITY OF AN EXCHANGE AND ASSISTANCE 
FACILITY THAT IDENTIFIES SAME SUPPORT COMPANY 
OF A REGISTERED ENTERPRISE 
TECHNICAL 
ASSISTANCE 
THROUGH 
THE 
BOI’S 
REGULAR PROGRAMS 
BUSINESS CONSULTANCY SERVICES 
ENTREPRENEURIAL 
ASSISTANCE 
TO 
OVERSEAS 
CONTRACT WORKERS 
AVAILABILITY OF INVESTMENT PROMOTION UNITS OR 
SMALL STAFF UNITS IN KEY GOVERNMENT OFFICES 
THROUGH THE INDUSTRY DEVELOPMENT COUNCIL 
ASSISTANCE IN THE FACILITATION FOR THE ISSUANCE 
OF 
REGISTRATION/CLEARANCES 
FROM 
OTHER 
GOVERNMENT AGENCIES IN RELATION TO THEIR BO1 
REG1 STRATI ON 
LEGAL OPINIONS. 
PROMOTION OF INTRA-SECTOR LINKAGES THROUGH 
UTILIZATION OF MULTI-SECTORAL NETWORK SYSTEM 
(IDC) 
IN EXTENDING THE FOREGOING NON-FISCAL INCENTIVES, 
THE BOARD MAY CHARGE A MINIMAL FEE. 
SECTION 2. RuEes and Regulations. - The BOI, in consultation with NEDA, 
Department of Finance, Department of Trade and Industry and other appropriate 
government agencies shall promulgate rules and regulations to implement the intent 
and provisions of this Act. Such rules and regulations shall take effect fifteen (15) days 
following its publication in a newspaper of general circulation in the Philippines. 
SECTION 3. The provisions of existing laws, rules, regulations and other 
issuances to the contrary notwithstanding, all the foregoing fiscal and non-fiscal 
incentives may be availed by BOI-registered firms as may be deemed necessary by the 
I 
Board subject to the conditions set herein. 


9 
SECTION 4. Repealing Clause. - All ocher laws, decrees, orders, issuances and 
rules and regulations or parts thereof inconsistent with this Act are hereby repealed or 
modified accordingly. 
SECTION 5. Separability Clause. - The provisions of this Act are hereby declared 
to be separable and, in the event any of such provisions is declared unconstitutional, 
the other provisions which are not affected shall remain in force and affect. 
SECTION 6. Effectivity. - This Act shall take effect fifteen (15) days following its 
publication in at least two (2) newspapers of general circulation. 
Approved,