Philippine Policy Framework on Foreign Investments
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Transcript of Philippine Policy Framework on Foreign Investments
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Philippine foreign investment brief
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PHILIPPINE FOREIGN INVESTMENT BRIEF ONRENEWABLE ENERGY
The Philippine government is prioritizing renewable energy for the next ten (10) years. In
ordertofacilitatesuchadramaticexpansion thePhilippinegovernmenthas:
1.Givenrenewableenergytechnologiesfavoredinvestmentstatus;
3.ApprovaloftheRenewableEnergyActwitharangeofspecificmarketbasedincentives;
4.BeenworkingwithalocalgovernmentandNongovernmentOrganizationstodevelopaGreen
IndependentPowerProducer(GRIPP)modelforpowerprojects.
5.Lastly,alternativesourceofenergyprojects hashighlevelpoliticalsupport.
TheRenewableEnergyLawof2008(RepublicActNo.9513). Thislawwasapprovedintolawon
December 16, 2008. This law intends to establish the framework for the accelerated
development and advancement of renewable energy resources, and the development of a
strategicprogramtoincreaseitsutilization.Thepertinentprovisionsprovides,asfollows:
Section8.RenewableEnergyMarket (REM). Tofacilitate compliancewith
Section6ofthisAct,theDOEshallestablishtheREMandshalldirectPEMCto
implementchangestotheWESMRulesinordertoincorporatetherulesspecific
totheoperationoftheREMundertheWESM.
The PEMC shall, under the supervision of the DOE, establish a Renewable
EnergyRegistrarwithin one (1) yearfrom the effectivity of thisAct and shall
issue,keepand verifyRECertificates corresponding toenergygeneratedfrom
eligibleRE
facilities.
Such
certificates
will
be
used
for
compliance
with
the
RPS.
Forthispurpose,atransactionfee,equaltohalfofwhatPEMCcurrentlycharges
regularWESMplayers,maybeimposedbyPEMC.
Section 9. Green EnergyOption. TheDOE shall establish aGreen Energy
OptionprogramwhichprovidesenduserstheoptiontochooseREresourcesas
theirsourcesofenergy.InconsultationwiththeNREB,theDOEshallpromulgate
the appropriate implementing rules and regulations which are necessary,
incidentalorconvenienttoachievetheobjectivessetforthherein.
WhatisthepotentialforrenewableenergyinthePhilippines?
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Section 15. Incentives for Renewable Energy Projects andActivities. RE
developersofrenewableenergyfacilities,includinghybridsystems,inproportion
to and to the extent of the RE component,for bothpower and nonpower
applications,as
duly
certified
by
the
DOE,
in
consultation
with
the
BOI,
shall
be
entitledtothefollowingincentives:
(a) Income Tax Holiday (ITH) For the first seven (7) years of its
commercialoperations, theduly registeredREdeveloper shallbeexemptfrom
incometaxesleviedbythenationalgovernment.
Additional investments intheprojectshallbeentitledtoadditional income tax
exemption on the income attributable to the investment: Provided, That the
discovery and development of new RE resource shall be treated as a new
investment and shall therefore be entitled to afreshpackage of incentives:
Provided,further,
That
the
entitlement
period
for
additional
investments
shall
notbemorethanthree(3)timestheperiodoftheinitialavailmentoftheITH.
(b)Dutyfree ImportationofREMachinery,EquipmentandMaterials
Within thefirst ten (10) years upon the issuance of a certification of an RE
developer, the importation of machinery and equipment, and materials and
parts thereof, including control and communication equipment, shall not be
subjecttotariffduties:Provided,however,Thatthesaidmachinery,equipment,
materialsandpartsaredirectlyandactuallyneededandusedexclusivelyinthe
REfacilitiesfortransformationintoenergyanddeliveryofenergytothepointof
use and covered by shipping documents in the name of the duly registered
operator
to
whom
the
shipment
will
be
directly
delivered
by
customs
authorities:
Provided, further, That endorsement of the DOE is obtained before the
importationofsuchmachinery,equipment,materialsandpartsaremade.
(c)SpecialRealtyTaxRatesonEquipmentandMachinery. Any lawto
thecontrarynotwithstanding,realtyandothertaxesoncivilworks,equipment,
machinery,andother improvementsofaRegisteredREDeveloperactuallyand
exclusivelyusedforREfacilitiesshallnotexceedoneandahalfpercent(1.5%)of
their original cost less accumulated normal depreciation or net book value:
Provided,That in caseofan integrated resourcedevelopmentandgeneration
facilityasprovidedunderRepublicActNo.9136,therealpropertytaxshallonly
beimposedonthepowerplant;
(d) Net Operating Loss CarryOver (NOLCO). The NOLCO of the RE
Developerduringthefirstthree(3)yearsfromthestartofcommercialoperation
whichhadnotbeenpreviouslyoffsetasdeductionfromgross income shallbe
carriedoverasadeductionfromgrossincomeforthenextseven(7)consecutive
taxableyears immediatelyfollowing theyearof such loss:Provided,however,
Thatoperatinglossresultingfromtheavailmentofincentivesprovidedforinthis
ActshallnotbeentitledtoNOLCO;
(e)CorporateTaxRate. Afterseven(7)yearsofincometaxholiday,all
REDevelopersshallpayacorporatetaxoftenpercent(10%)on itsnettaxable
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incomeasdefinedintheNationalInternalRevenueActof1997,asamendedby
RepublicActNo.9337.Provided,ThattheREDevelopershallpassonthesavings
totheendusersintheformoflowerpowerrates.
(f) Accelerated Depreciation. If, and only if, an RE project fails to
receiveanITHbeforefulloperation,itmayapplyforAcceleratedDepreciationin
its tax books and be taxed based on such: Provided, That if it applies for
AcceleratedDepreciation,theprojectoritsexpansionsshallnolongerbeeligible
for an ITH.Accelerated depreciation ofplant,machinery,and equipment that
arereasonablyneededandactuallyusedfortheexploration,developmentand
utilizationofREresourcesmaybedepreciatedusingaratenotexceedingtwice
theratewhichwouldhavebeenusedhadtheannualallowancebeencomputed
inaccordancewiththerulesandregulationsprescribedbytheSecretaryofthe
DepartmentofFinanceandtheprovisionsoftheNationalInternalRevenueCode
(NIRC)of
1997,
as
amended.
Any
of
the
following
methods
of
accelerated
depreciationmaybeadopted:
i)Decliningbalancemethod;and
ii)Sumoftheyears digitmethod
(g)ZeroPercentValueAddedTaxRate. The saleoffuelorpowergenerated
from renewable sourcesofenergy suchas,butnot limited to,biomass, solar,
wind, hydropower, geothermal, ocean energy and other emerging energy
sourcesusingtechnologiessuchasfuelcellsandhydrogenfuels,shallbesubject
to
zero
percent
(0%)
value
added
tax
(VAT),
pursuant
to
the
National
Internal
RevenueCode(NIRC)of1997,asamendedbyRepublicActNo.9337.
AllREDevelopersshallbeentitledtozeroratedvalueaddedtaxonitspurchases
of local supplyofgoods,propertiesand servicesneededfor thedevelopment,
constructionandinstallationofitsplantfacilities.
Thisprovisionshallalsoapplytothewholeprocessofexploringanddeveloping
renewable energy sources up to its conversion intopower, including but not
limitedtotheservicesperformedbysubcontractorsand/orcontractors.
(h)CashIncentiveofRenewableEnergyDevelopersforMissionaryElectrification.
A
renewable
energy
developer,
established
after
the
effectivity
of
this
Act,
shall
be entitled to a cash generationbased incentive per kilowatt hour rate
generated,equivalent tofiftypercent (50%)of theuniversal chargeforpower
neededtoservicemissionaryareaswhereitoperatesthesame,tobechargeable
againsttheuniversalchargeformissionaryelectrification;
(i) Tax Exemption of Carbon Credits. Allproceedsfrom the sale of carbon
emissioncreditsshallbeexemptfromanyandalltaxes;
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(j) Tax Credit on Domestic Capital Equipment and Services. A tax credit
equivalent toonehundredpercent (100%)of thevalueof thevalueadded tax
andcustomdutiesthatwouldhavebeenpaidontheREmachinery,equipment,
materialsand
parts
had
these
items
been
imported
shall
be
given
to
an
RE
operatingcontractholderwhopurchasesmachinery,equipment,materials,and
partsfromadomesticmanufacturerforpurposessetforthinthisAct:Provided,
That prior approval by the DOE was obtained by the local manufacturer:
Provided,further,Thattheacquisitionofsuchmachinery,equipment,materials,
andpartsshallbemadewithinthevalidityoftheREoperatingcontract.
Section19.Hybrid and Cogeneration Systems. The tax exemptions and/or
incentivesprovidedforinSection15ofthisActshallbeavailedofbyregistered
REDeveloperofhybridandcogenerationsystemsutilizingbothREsourcesand
conventionalenergy:Provided,however,Thatthetaxexemptionsandincentives
shallapply
only
to
the
equipment,
machinery
and/or
devices
utilizing
RE
resources.
Section 21. Incentives for RE Commercialization. All manufacturers,
fabricatorsandsuppliersoflocallyproducedREequipmentandcomponentsduly
recognizedandaccreditedbytheDOE,inconsultationwithDOST,DOFandDTI,
shall,uponregistrationwiththeBOI,beentitledtotheprivilegessetforthunder
thissection.
ConsistentwithArticle7,Item(20)ofEONo.226,theregistrationwiththeBOI,
asprovidedfor in Section 15 and Section 21 of thisAct, shall be carried out
through
an
agreement
and
an
administrative
arrangement
between
the
BOI
and
the DOE, with the endview of facilitating the registration of qualified RE
facilitiesbasedontheimplementingrulesandregulationsthatwillbedeveloped
by DOE. It isfurthermandated that the applicationsfor registration will be
positivelyacteduponbyBOIonthebasisoftheaccreditationissuedbyDOE.
TheRenewableEnergy Sector isherebydeclaredapriority investment sector
thatwill regularlyformpart of the country's Investment Priority Plan, unless
declaredotherwisebylaw.Assuch,allentitiesdulyaccreditedbytheDOEunder
thisActshallbeentitledtoalltheincentivesprovidedherein.
(a)TaxandDutyfree ImportationofComponents,PartsandMaterials. All
shipmentsnecessary
for
the
manufacture
and/or
fabrication
of
RE
equipment
andcomponentsshallbeexemptedfromimportationtariffanddutiesandvalue
added tax:Provided,however,That the said components,partsandmaterials
are: (i) notmanufactured domestically in reasonable quantity and quality at
competitiveprices;(ii)directlyandactuallyneededandshallbeusedexclusively
in themanufacture/fabricationofREequipment;and (iii) coveredby shipping
documentsinthenameofthedulyregisteredmanufacturer/fabricatortowhom
theshipmentwillbedirectlydeliveredbycustomsauthorities:Provided,further,
Thatprior approval of theDOEwas obtained before the importation of such
components,partsandmaterials;
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(b) Tax Credit onDomestic Capital Components, Parts andMaterials. A tax
creditequivalent toone hundredpercent (100%)of theamount of the value
added taxandcustomsduties thatwouldhavebeenpaidon thecomponents,
partsand
materials
had
these
items
been
imported
shall
be
given
to
an
RE
equipment manufacturer, fabricator, and supplier duly recognized and
accreditedbytheDOEwhopurchasesREcomponents,partsandmaterialsfrom
a domestic manufacturer: Provided, That such components, and parts are
directlyneededandshallbeusedexclusivelybytheREmanufacturer,fabricator
and supplierfor themanufacture,fabrication and sale of the RE equipment:
Provided,further, Thatprior approval by the DOEwas obtained by the local
manufacturer;
(c) IncomeTaxHolidayandExemption. For seven (7)years startingfrom the
dateof recognition/accreditation,anREmanufacturer,fabricatorand supplier
ofRE
equipment
shall
be
fully
exempt
from
income
taxes
levied
by
the
National
Government on net income derived only from the sale of RE equipment,
machinery,partsandservices;and
(d)Zeroratedvalueaddedtaxtransactions Allmanufacturers,fabricatorsand
suppliers of locallyproduced renewable energy equipment shall be subject to
zerorated value added tax on its transactionswith local suppliers of goods,
propertiesandservices.
Section23.TaxRebateforPurchaseofREComponents. Toencourage the
adoptionofREtechnologies,theDOF,inconsultationwithDOST,DOE,andDTI,
shall
provide
rebates
for
all
or
part
of
the
tax
paid
for
the
purchase
of
RE
equipment for residential, industrial, or community use. The DOF shall also
prescribetheappropriateperiodforgrantingthetaxrebates.
SEC. 5.Mandatory Use Biofuel. Pursuant to the abovepolicy, it is hereby
mandatedthatallliquidfuelsformotorsandenginesoldinthePhilippinesshall
containlocallysourcedbiofuelscomponentsasfollows:
5.1WithintwoyearsfromtheeffectivityofthisAct,atleastfivepercent
(5%)bioethanolshallcomprisetheannualtotalvolumeofgasolinefuel
actually sold and distributed by each and every oil company in the
country,subjecttotherequirementthatallbioethanolblendedgasoline
shallcontain
aminimum
of
five
percent
(5%)
bioethanol
fuel
by
volume:
ProvidedThattheethanolblendconformstoPNS.
5.2Withinfouryearsfrom the effectivity ofthisAct,theNBBcreated
underthisAct isempoweredtodeterminethefeasibilityandthereafter
recommendtoDOEtomandateaminimumoftenpercent(10%)blend
of bioethanol by volume into all gasolinefuel distributed and sold by
eachandeveryoilcompanyinthecountry.
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Intheeventofsupplyshortageoflocallyproducedbioethanolduringthe
four yearperiod,oil companies shallbe allowed to import bioethanol
butonlytotheextentoftheshortageasmaybedeterminedbytheNBB.
5.3Within threemonthsfromtheeffectivityof thisAct,aminimumof
onepercent (1%) biodiesel by volume shall be blended into all diesel
engine fuels sold in the country: Provided, That the biodiesel blend
conformstoPNSforbiodiesel.
Within two yearsfrom the effectivity of thisAct, the NBB created under thisAct is
empoweredtodeterminethefeasibilityandthereafterrecommendtoDOEtomandatea
minimum of twopercent (2%) blend of biodiesel by volumewhichmay be increased
taking into account considerations including but not limited to domestic supply and
availabilityoflocallysourcedbiodieselcomponent.
SEC.6. Incentive Scheme. Toencourage investments in theproduction,distribution
anduseof locallyproducedbiofuelsatandabovetheminimummandatedblends,and
withoutprejudice to enjoying applicable incentives and benefits under existing laws,
rulesandregulations,thefollowingadditionalincentivesareherebyprovidedunderthis
Act.
i. Specifictax.Thespecifictaxonlocalorimportedbiofuelscomponent,perliterofvolume shallbezero (0).Thegasolineanddieselfuel component shall remain
subjecttotheprevailingspecifictaxrates.
ii. ValueAdded Tax The sale of rawmaterialused in theproductionof, biofuelssuch as, but not limited to, coconut,jatropha, sugarcane, cassava, corn, andsweetsorghumshallbeexemptfromthevalueaddedtax.
iii. WaterEffluents.Allwatereffluents,suchasbutnot limitedtodistilleryslops&fromtheproductionofbiofuelsusedasliquidfertilizerandforotheragricultural
purposesare considered reuse,andare therefore,exemptfromwastewater
chargesunderthesystem,providedunderSection13ofRANo.9275,alsoknown
asthePhilippineCleanWaterAct:Provided,however,Thatsuchapplicationshall
beinaccordancewiththeguidelinesissuedpursuanttoR.A.No.9275,subjectto
themonitoringandevaluationbyDENRandapprovedbyDA;
iv. FinancialAssistance.Governmentfinancialinstitutions,suchastheDevelopmentBank of the Philippines, Land Bank of the, Philippines, Quedancor and other
government institutionsprovidingfinancial services shall, in accordance with
andtotheextentallowedbytheenablingprovisionsoftheirrespectivecharters
orapplicablelaws,accordhighprioritytoextendfinancingtoFilipinocitizensor
entities, at least sixtypercent (60%) of the capital stock ofwhich belongs to
citizens of the Philippines that shall engage in activities involvingproduction,
storage,handlingand transportofbiofuelandbiofuelfeedstock, including the
blendingofbiofuelswithpetroleum,ascertifiedbytheDOE.
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21.DisadvantagesForeignInvestmentsinthePhilippines.
So muchpoliticsinthePhilippinebusinessactivities; Somuchcorruptionand red tape thatmayhamperorhinder thesmooth implementationof
anyRenewableEnergyprojects.
Inconsistent government policy, complex laws and regulations, including environmentalregulationswhichcouldadverselyaffect thecost,mannerorfeasibilityofdoingtheRenewable
Energy/BiofuelGenerationbusiness.
Realityoflooksdifferent neglectbusinessduetorestrictiveownershipofbusiness.Shorttermlease contracts are little inviting to invest in the future and improve as necessary to remain
competitiveinbusiness;
As a result of existing economical problems many Philippine business ventures have lostcontacttointernationalcompetition. Lowsalariesalone isnoattractionforinvestors.Political
stabilityandlegalsoundbusinessbasisareneededtoofferthesecuritynecessarytoinvestalife
times savings and earnings into a new business venture. While some of may have venture
capitaltoriskorlose othersjustinvesttheirlifetimesavings intoabetterfuture.Suchfuture
needstobestableandsolidinalegalenvironmentthatgivesthenecessarytrustintopoliticians
andlaws.Successfulbusinessneedstobemadewithlongtimeperspectivesinmind lifetime
planningorevenbeyond.Someamongmaywanttoconstructafuturetobe forwarded the
future.AsoundgiftsolidandhealthonlycanbegiventothenextgenerationofFilipinos.
Itwas
also
noted
that
the
country
needs
to
upgrade
and
modernize
its
infrastructure while improving its governance and cutting "nontariff
barriers"suchasredtape.
1. BASICLEGALFRAMEWORK:ForeigninvestmentsinthePhilippinesarebasicallygovernedbythefollowinglaws,rules,regulationsandothergovernmentissuances:
[1] ExecutiveOrderNo.226 TheOmnibusInvestmentsCodeof1987 setsforththerulesand
parameterswithinwhichforeigninvestmentsinthePhilippinesmaybemade,withemphasison
thegrantofincentivestocertainsectors.
[2] RepublicActNo.7042,asamendedbyRepublicActNo.8179 TheForeignInvestmentsAct
of 1991 dwells on foreign investments without incentives; it reduced the minimum paidin
equity from US Dollars Five Hundred Thousand [US$500,000] to US Dollars Two Hundred
Thousand[US$200,000].
BASICLEGALFRAMEWORK
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[3] RepublicActNo.7227 TheBasesConversionandDevelopmentActof1992 setsforththe
grantofincentivestoindustriesandenterpriseswhichestablishtheirplantsandofficeswithin
theSubicBayFreeportZone.
[4] RepublicActNo.7916 TheSpecialEconomicZoneActof1995 treatsofincentivesgranted
toindustriesandenterpriseswhichsituatetheiroperationwithinSpecialEconomicZones.
[5] RepublicActNo.7844 TheExportDevelopmentActof1994 provides for incentivesto
businessenterprisesintheexportindustry.
[6]RepublicActNo.7721 liberalizedtheentryandoperationsof foreignbanksand financial
institutionsinthePhilippines.
[7] RepublicActNo.7652 TheInvestor'sLeaseAct grantstoforeigninvestorstheprivilegeof
leasingprivate landsforaperiodoffifty(50)years[initial]whichmayberenewedforanother
twentyfive(25)years.
[8] Republic Act No. 7718 The BuildOperateTransfer Act [BOT] liberalized the
implementationoftheBuildOperateTransferSchemeincertainprojects,easedtherestrictions
ongovernment financingand settingand impositionof tollsand chargesandwholly foreign
ownedcorporationsareallowedtoundertakecertainprojectsunderthisscheme.
[9] RepublicActNo.7888 grantsauthoritytothePresidentofthePhilippinestosuspendthe
nationalityrequirementundertheOmnibusinvestmentsCode[ExecutiveOrderNo.226]inthe
caseofequityinvestmentsbymultilateralfinancialinstitutionsliketheAsianDevelopmentBank
[ADB]
or
the
International
Finance
Corporation
[IFC].
2. POLICYONCOMPETITION:Monopoliesarenotallowed inthePhilippines. It isa fundamentalpolicythattheStateshall
regulateorprohibitmonopolieswhenpublicinterestsorequires.Nocombinationinrestraintof
tradeorunfaircompetitionshallbeallowed.
3. POLICYONEXPROPRIATIONOFPRIVATEPROPERTYExpropriationofprivatepropertybythegovernmentisapolicywhichisexceptionally
exercised. Inextremeandurgentcaseswhereexpropriationbecomesnecessaryforpublicuse
orintheinterestofnationalwelfare,justcompensationisrequiredbylawtobepaidtothe
privateowneroftheproperty.Underthissituation,theaffectedforeignenterpriseorinvestor
hasthe righttoremitanyandallamountsreceivedasjustcompensationfortheexpropriated
propertyinthecurrencyinwhichtheinvestmentwasoriginallymadeandattheprevailing
foreignexchangerateatthetimeitisremitted.
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4. PHILIPPINECURRENCY
The currency of the Philippines is called the Philippine Peso [PhP]. A floating exchange rate
systemisbeingmaintainedbythePhilippinegovernment. Underthissystem,theexchangerate
isallowedtobedeterminedprincipallybyprevailingmarketforces. Thecentralbankauthority
the Bangko Sentral ng Pilipinas [BSP] intervenes only for the purpose of limiting sharp
fluctuationsintheexchangeratetomaintainorderinthemarketconditions.
4. FOREIGNEXCHANGEReformatorymeasurestoderegulatethePhilippineforeignexchangesystemwereimplemented
sometime in 1992. Consequently, foreign exchange surrender requirements were removed,
access to foreigncurrencydeposit facilitieswas liberalized, restrictionson the repatriationof
foreign
investments
and/or
profit
remittances
were
lifted
and
limitations
on
the
quantitative
restrictionsoncurrentaccounttransactionsdeleted.
Registrationwiththecentralmonetaryauthority BangkoSentralngPilipinas [BSP] of loans
and investmentsaccountswas liftedexcept incaseswhere fundingwillbemadethroughthe
banking system of transactions like repatriation of capital and remittances of dividends and
profitsaswellasforeignexchangerequirementforfuturedebt.
Further,BSPapprovalandregistrationarerequiredincaseofoutwardinvestmentsofresidents
inanamountinexcessofUS$6,000,000.00,perinvestorperyearshouldthefundsthereforbe
sourced from the banking system. Foreign borrowings by the public sector should also be
approved
by
the
BSP.
Thelawallowsthedepositinforeigncurrencyaccountsofanyforeignexchangereceivedinthe
Philippinesorabroad. Italsoallowsthesellingandacquisitionofforeignexchangeoutsideof
thePhilippinebankingsystem.Theonlyrestrictiononforeignexchangetransactionpertainsto
the payment of foreign loans and/or foreign investments, in which case, such may only be
serviced with foreign exchange purchased through authorized agent banks, if the loan is
approved/registeredwiththeBSPor the investment isregisteredtherewith. Thus, incaseof
sales of foreign exchange for payment of foreign obligations [foreign loan or foreign
investment],thepurchasershallberequiredbytheauthorizedagentbanktopresentproofof
BSPapprovaland/orregistrationforeachloanorinvestment.
In caseofpurchaseof foreignexchange foranynontradepurposes,authorizedagentbanks
maysellforeignexchangetoresidentswithoutneedofpriorBSPapprovalsubject,however,to
thefollowing:
[a] Written notarized application and supporting documents from the foreign exchange
purchaseriftheamountexceedsUS$25,000.00.
[b]SimplewrittenapplicationiftheamountdoesnotexceedUS$25,000.00.
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Thislimitationonnontradepurchasecannotbecircumventedbysplittingtheforeignexchange
purchaseintoseparatesmalleramounts.Splittingofpurchaseofforeignexchangeispresumed
ifthebanksellstoanyonepurchaser,acombinedtotalamountexceedingUS$25,000.00within
aperiodoffifteen[15]bankingdays.
Incasesofoutwardpayments,thelawdoesnotprescribeanyparticularcurrencyrequirements.
However,allforeignexchangeproceedsfromexportsandinvisiblesshouldbeprocuredthrough
specifiedcurrenciesnumberingmorethantwenty[20].
Philippinepeso denominated bank accounts may be opened by nonresidents whether an
individual or corporate without need to secure BSP approval. Nonresident depositors may
freelywithdrawtheiraccountsbutnonresidentbankaccountsmayonlybecreditedwiththe
proceedsfrom inwardforeignexchangeremittanceorwith incomeearned inthePhilippines.
Themaintenanceof foreigncurrencydepositaccountswith localbanksbyresidentsandnon
residentsalikeisnotsubjecttoanyfurtherrestrictions.
6.REPATRIATIONOFFUNDS[SALESPROCEEDS,PROFITS,DIVIDENDS,ROYALTIES,LOANPAYMENTS&
LIQUIDATION]
There are no existing restrictive regulations on the repatriation of funds related to BSP
registered foreign investments such as sales or divestment proceeds, profits, dividends,
royalties, loan payments and liquidation. As earlier pointed out, BSP registration of foreign
investments is necessary only in cases where the foreign exchange required to service the
repatriation of capital and remittance of profits, dividends, royalties, loan payments or
liquidation
proceeds
will
be
sourced
from
the
banking
system.
Further, it bears toemphasize that investments ingovernment or listed securities or money
market instruments or bank deposits need not be registered with the BSP or with the
designatedcustodianbankoftheinvestorconcerned.
7.SOURCESOFFINANCING
SOURCE1 ForeignBorrowings
[1] PublicSectorLoans Underthelaw,allpublicsectorloanstakenfromoffshoresourcesand
from Foreign Currency Deposit Units (FCDUs) must be approved by the Bangko Sentral ng
Pilipinas [BSP]. The BSP approval, however, is not required in case of shortterm interbank
borrowingsofpublicsectorbanksandshorttermFCDUloansfortradefinancing.
[2] PrivateSectorLoans TheapprovalofandregistrationwithBSPoftheprivatesectorloans
arerequiredunderthefollowingcircumstances:
[a] if the loan is guaranteed by a public sector entity such as the national government,
government financial institutions, governmentowned or controlled corporations and local
governmentunitsorbyalocalcommercialbank;or
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[b] if the loan is granted by an FCDU and will specifically or directly be funded from, or
collaterizedby,offshoreloansordeposits;or
[c]iftheloanisobtainedbybanksandfinancialinstitutionswithatermexceedingone[1]year
andintendedforrelendingtopublicandprivateenterprises.
Exceptfortheforegoingtypesofloans,othercategoriesofprivatesectorloansarenotsubject
to prior approval by the BSP. Registration with BSP, however, is still required in order to
purchaseforeignexchangefromthebankingsystemtoservicetheloan. Thefollowingmaybe
cited: [a] privatesectorloansfromFCDUsoroffshoresourcesregardlessoftheirmaturitytobe
paid using foreign exchange purchased from outside of the banking system; [b] shortterm
loansofpublicandprivatefinancialinstitutions incurred innormal interbanktransactionsand
withmaturitynotexceedingone[1]year;[c] shorttermloansoftheprivatesectorintheform
ofexportadvancesfrombuyersabroad;[d] shorttermloansof privatesectorborrowersfrom
FCDUssuchasthoseincurred:[i] bycommunityandserviceexporters[providedtheseloansareused to finance exportrelated import costs of goods and services as well as peso cost
requirements];and[ii]by producersormanufacturers,includingoilcompaniesandpublicutility
concerns[providedtheloansareusedtofinanceimportcostsofgoodsandservicesnecessaryin
theproductionofgoodsbytheborrowerconcerned].
Itmustbeemphasizedthatproceeds fromFCDU loansarenotallowedtobedeposited inan
FCDUaccountifthesameshallbeservicedusingforeignexchangepurchasedfromthebanking
system.
[3] Shortterm loansofprivate sectorexportersor importers These loans fromparticipating
creditor
banks
under
the
Revolving
Trade
Facility
(RTF)
Agreement
are
subject
to
the
following
conditions:
[a] the loans are not covered by a guarantee from a government financial institution or
corporation;
[b] the loans shall be exclusively used to finance specific trade transactions in an amount
equivalent to the import bills to be liquidated and/or in the case of export financing
transactions,totheborrower'spreexportfinancingrequirements;
[c] proceedsofloansintendedtopayforforeignexchangerequirementsshallbepaiddirectly
to the supplier or creditor while amounts intended to fund preexport peso costs shall be
inwardlyremittedandsoldtothebankingsystem;
[d] the loansshallbegrantedagainstBSPapprovedshorttermrelendingprogramsofforeign
creditors.Creditors shall submit to theBSP their shortterm relendingprogram forPhilippine
borrowers indicating their proposed credit limit together with a list of prospective
borrowers/beneficiaries. These relending programs shall be valid for one year but shall be
subjecttosemiannualreviewifcommitmentsand/orutilizationforthesemestershallbebelow
fiftypercent[50%]oftotalrelendinglimit;
[e] drawdownandregistrationrequirementsshallbecompliedwith;
[f] anyassignmentoftheloanbythecreditorshallrequirepriorBSPapproval;and
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[g] theborrowershallsubmittoBSPtherequireddocumentsat leastfivedaysafter itscredit
lineisapprovedbythecreditor.
[4]
Priority
projects
Projects
considered
priority
for
foreign
financing
under
the
socio
economicdevelopmentplanincludethefollowing:
[a] exportorientedprojects;
[b] BOIregisteredprojects;
[c] thoselistedintheAnnualPrioritiesPlan(APP);and
[d] other projects which may be declared priority by the National Economic Development
Authority[NEDA]orbytheCongressofthePhilippines.
Thelawrequiresthattheproceedsofallloans,irrespectiveofmaturity,shallexclusivelyfinance
foreign exchange requirements of eligible projects. However, loans of direct and indirect
exportersandpublicsectorborrowersmaybeusedtofinancebothforeignexchangecostsand
localcostsoftheirprojects.
SOURCE2 DomesticBorrowings
Foreign firmsmayavailofdomestic loans.Except for the requirement that thebanks should
report the levelofdomesticborrowingsof foreign firms to theBSP formonitoringpurposes,
therearenorestrictionsondomesticborrowings.
8.INVESTMENT
PROPOSAL
AND
APPROVAL
Anyinvestmentproposalshallcomplywithcertainrequirementsofthelaw. Morespecifically,
thefollowingconditionsapply:
[1] Merger must comply with the legal requirements under the Corporation Code of the
Philippines;
[2] Acquisition must comply with Section 40 of the Corporation Code and subject to the
restrictionsregardingforeignequityownershipunderthe1987Constitution.
[3] RealEstate/Land theforeignequityisuptofortypercent[40%]only.
[4] ManagementContract mustcomplywithSection44oftheCorporationCode.
[5] Joint Venture may be entered into without legal restriction on registration unless the
partiestheretoformanotherbusinessorganizationrequiringregistrationsuchasacorporation
orpartnership.
[6] GreenfieldInvestments mustcomplywiththerequirementsundertheCorporationCode.
[7] Media noforeignequityisallowed.
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[8] Telecommunications foreignequityisalloweduptofortypercent[40%].
[9] Transportation foreignequityisalloweduptofortypercent[40%].
[10] Agriculture thereisnolimitationifprivatelandisusedforthispurpose. However,foreign
equityisrequireduptofortypercent[40%]incaseofpublicland.
[11]Infrastructure allowedbutsubjecttotheprovisionsoftheBuildOperateTransfer [BOT]
LawandPresidentialDecreeNo.1594.
[12]Mining allowed but subject to the conditions under the Revised Mining Act of 1995.
9.APPLICATIONANDAPPROVALFORMS
Thefollowingapplicationandapprovalformsarerequired:
[1]For formation of a new corporation with more than forty percent [40%] foreign equity
S.E.C.FormNo.F100.
[2]Forestablishmentofabranchofficeofaforeigncorporation S.E.C.FormNo.F103.
[3]BoardofInvestments[BOI]registrationform.
[4]PhilippineEconomicZoneAuthority[PEZA]registrationform.
10.PERIODSWHENPROCESSINGANDAPPROVALOFAPPLICATIONCOMPLETED
TheinvestmentlawsinthePhilippinesexplicitlyprescribethefollowingperiodswithinwhichthe
processing and approval of foreign investment proposal and/or applications should be
completedfromthetimeofsubmissionofallrequireddocuments:
[1] TheBOIshallapproveordisapproveanapplicationwithin twenty [20]workingdaysafter
official acceptance thereof. If application involves less than PhP5,000,000.00 production cost
andapplicantisanexporter,theperiodisseven[7]days. [1987OmnibusInvestmentCode]
[2] The SEC [in the case of corporation or partnership] or the BTRCP [in the case of sole
proprietorship] shall act on the application within fifteen [15] days from official acceptance
thereof. [ForeignInvestmentsAct]
[3] ThePEZAprocessesandevaluatesanapplicationwithintwo[2]weeks. Approvalthereofis
made during the regular monthly meeting of its Board.
11.ENTRYOFNONRESIDENTPERSONNEL
Enterprises registered under the Omnibus Investments Code [Executive Order No. 226] are
permittedtoemployforeignnationalsinsupervisory,technical,oradvisorypositionsduringits
first five years fromregistration. Those majority foreignowned registered enterprises are
allowed to employ foreign nationals as president, treasurer and general managers for an
indefiniteperiodof time. In the caseofOffshoreBankingUnits [OBUs], theyareallowed to
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employ foreign nationals as executives in their respective units. The same may be said for
executivesinareaheadquartersofmultinationalcorporations.
Fornonresidentpersonnelofforeignfirms,theentryvisarequirementsanddescriptionofthenatureof
theentryrestrictionareasfollows:
a. SpecialInvestorsResidentVisa[SIRV] Thisisissuedtoanyalien,exceptnationalscomingfromNorthKoreaandCambodiaandsuchothercountriesthatmaybeclassifiedrestricted
inthefuture,whomeetsthefollowingqualifications:
1. he/she had not been convicted of a crime involving moral turpitude;
2. he/shehadnotbeenafflictedwithanyloathsome,dangerousorcontiguous
disease;
3.he/shehadnotbeen institutionalized foranymentaldisorderordisability;
and4. he/sheiswillingandabletoinvesttheamountofat leastUS$75,000inthe
Philippines.
Thespecialfeatureofthisvisa isthegranttothe investoroftheprivilegetoreside in
thePhilippines foras longashis investmentexists.He shallbeentitled to importhis
usedhouseholdgoodsandpersonaleffects, taxanddutyfree,asanaliencoming to
settle inthePhilippines forthe firsttimeunderSec.105(h)oftheTariffandCustoms
CodeofthePhilippines.Moreover,theinvestor'sspouseandunmarriedchildrenunder
21yearsofagewhojoinhiminthePhilippinesmaybeissuedthesamevisa.
b.
Pre
arranged
Employment
Visa
This
is
granted
pursuant
to
Sec.
9(g)
of
the
Philippine
ImmigrationLaw. Thisisavailableforemploymentinanyexecutiveormanagerialposition.
c.International Treaty Investors Visa This is granted under Sec. 9(d) of the Philippine
Immigration Law. The required investment isat leastP300,000.00. OnlyGermans, Japanese
andAmericansarepartiestothistreaty.
12.RESTRICTIONSONEMPLOYMENTOFFOREIGNTECHNICALORMANAGERIALPERSONNELAND
ACCOMPANYINGFAMILYMEMBERS
Restrictionsonpositions:
[1] Registered foreign enterprises with the Board of Investments [BOI] may employ foreign
nationalsinsupervisory,technicaloradvisorypositionsforaperiodnotexceedingfive[5]years
fromitsregistration,extendibleforlimitedperiodsatthediscretionoftheBOI.
[2]BOIregistered majority foreignowned enterprises may employ foreign nationals in the
positionsofpresident,treasurerorgeneralmanagerbeyondtheperiodoffive[5]years.
[3]ForeignnationalsundertheCorporationCodemaybeemployedasmembersoftheBoardof
Directorsbywayofelection.
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[4] Foreignenterprises locatedattheSubicBayFreeportmayemployforeignnationals inany
positionuponpriorapprovaloftheSubicBayMetropolitanAuthority[SBMA]foraperiodoffive
[5]yearswhichmaybeextendedfromyeartoyear.
[5]Foreignenterprisesenteringintogovernmentcontractsandserviceforcoaloperationsand
explorationanddevelopmentofoilandgeothermal resourcesareallowed toemploy foreign
nationalsinanyposition.
Restrictionsonskillsrequirement:
Employment of foreign technicians in foreign enterprises in the Philippines is subject to the
requirement that the skills theypossessarenotavailable in thePhilippines. If there isnone
available in thePhilippines,aprearrangedemploymentvisamaybeextended to the foreign
technician. Further,underthelaw,theiremploymentshouldbeaccompaniedbyanunderstudy
programwhereinatleasttwo[2]Filipinounderstudiesshouldbetrainedontheskillsforwhich
they[foreigntechnicians]wereengaged.
13.MINIMUMWAGESANDOTHERLABORSTANDARDSANDLABORRELATIONSLAW
LaborlawsinthePhilippinesrespectingwages,hoursofwork,overtime,nightdifferentialpay,
service incentive leave, and other labor standards; strikes, picketing, termination of
employment,andotherlaborrelationsrules,haveallbeencodified. Allthesemaybefoundin
theLaborCodeofthePhilippines,asamended.
As regardsminimumwages, theLaborCodeof thePhilippines,asamended,provides for the
basic
standards
for
minimum
wage
fixing
which
is
done
through
the
various
Regional
Tripartite
WagesandProductivityBoards. Eachregionhasitsownsetofminimumwageratesandrules.
Asregardslaborunions,strikesandpicketing,collectivebargaining,voluntarymodesofsettling
labor disputes and other laborrelated rules, the Labor Code of the Philippines has provided
amplesafeguardstoprotecttheinterestofbothlaborandmanagement.
14.TAXATIONLAWONFOREIGNINVESTMENTS
I. Corporateandsimilarentities:a. [1]Foreigncorporationsengaged inbusinessortrade inthePhilippines Their income
derivedfromsourcesinthePhilippinesaretaxedaflatrateofthirtyfivepercent[35%]
basedonnetincome.
b. [2]Foreign corporations not engaged in business or trade in the Philippines TheirincomederivedfromsourcesinthePhilippinesaretaxedaflatrateofthirtyfivepercent
[35%]ongrossincome. Further,interestincomeonforeignloansearnedissubjecttoa
twentypercent[20%]tax.
c. [3]Foreigninternationalcarriers Theyaretaxedattherateoftwoandahalfpercent[2.5%]ontheirgrossPhilippinebillings.
d. [4]Nonresidentforeigncinematographicfilmowners,lessorsordistributors Theyaretaxedattherateoftwentyfivepercent[25%]ongrossincome.
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e. [5]Foreignmutuallifeinsurancecompanies Theyaretaxedattherateoftenpercent[10%]oftheirgrossinvestmentincomederivedfromsourceswithinthePhilippines.
f.II. Foreignindividuals:
[1]Individualresidentforeigners Theirincome:[a] derivedfromallsourcesinthePhilippines
and in foreign countries taxed from 135% on gross compensation income [arising from an
employeremployeerelationship];andnetonnoncompensation[businessandother]income.
a. [b]twentypercent[20%]onroyalties,prizes,winnings[finaltax].b. [c]twentypercent[20%]on interestonbankdeposit,andonsubstitutearrangements
[finaltax].
c. [d]fivepercent[5%]capitalgainstaxonsaleofrealty[finaltax].
III. [2]ForeignersengagedintradeorbusinessinthePhilippines Theirincome:a. [a] derived from Philippine sources are taxed from 135% on gross compensation
incomeandnetonnoncompensationincome.
b. [b] thirtypercent[30%]onroyalties,interestsanddividends,andothers.IV. [3]Foreignersnotengaged intradeorbusiness inthePhilippines Their incomederivedfrom
Philippinesourcesaretaxedaflatrateofthirtypercent[30%]ongrossPhilippineincome.
15.FISCALINCENTIVESTOFOREIGNINVESTMENTS
a.
FISCAL
INCENTIVES
Omnibus
Investments
Code
of
1987:
Incometaxholiday.
[1]Fullexemptionfrom incometaxforsix(6)yearsfornewlyregisteredpioneerprojectsfrom
thestartofcommercialoperations;and
[2]Fullexemptionfrom incometaxforfour(4)yearsfromthestartofcommercialoperations
fornewlyregisterednonpioneerprojects.
Theseexemptionperiodsmaybeextendedforanotheryeareachunderthefollowingcases:
[a] theprojectusedindigenousrawmaterials;
[b]theprojectmeetstheBOIprescribedratioofcapitalequipmenttothenumberofworkers;
[c]thenetforeignexchangesavingsorearningsamounttoatleastUS$500,000annuallyduring
thefirstthree(3)yearsofthecommercialoperationsoftheproject.
Anyprojectwhichisestablishedinlessdevelopedareas[LDAs]shallbeentitledtotheincentive
forsix(6)years.
Expansionprojectsofdomesticorientedindustriesarenotentitledtotheincometaxholiday
incentive.
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Taxcreditondomesticcapitalequipment.
[a]Firms registered on or before December 31, 1994 shall be entitled to tax credit
equivalent toonehundredpercent [100%]ofany taxesanddutieswhich couldhave
beenwaivedhadthecapitalequipmentandaccompanyingsparepartsbeen imported
untilDecember31,1997,providedthatthosefirmslocatedoutsidetheNationalCapital
Region[NCR]shallenjoysaidtaxcredituntilDecember31,1999.
[b] FirmsregisteredafterDecember31,1994shallbeentitledtotaxcreditontheduty
portionequivalenttothedifferencebetweenthethreepercent[3%]minimumdutyand
the actual duty rate provided under the Philippine Tariffs and Customs Code, as
amended.
Taxanddutyfreeimportationofcapitalequipment.
[a] FirmsregisteredonorbeforeDecember31,1994shallbeentitledtotaxandduty
free importation of capitalequipment andaccompanying spare parts untilDecember
31, 1997. However, firms locatedoutside the National Capital Region [NCR] shall be
entitledtotheincentiveuntilDecember31,1999.
[b]Firms registered after December 31, 1994 shall be subject to ten percent [10%]
ValueAdded Tax [VAT] upon the implementation of Republic Act No. 7716, the
expandedVATLawandthreepercent[3%]duty.
I. Additionaldeductionforlaborexpense. Forthefirstfive[5]yearsfromregistration,aregisteredenterpriseshallbeallowedanadditionaldeductionfromtaxable incomeof
fiftypercent[50%]ofthewagescorrespondingtothe increment inthenumberofthe
directlaborforskilledandunskilledworkersiftheprojectmeetstheprescribedratioof
capital equipment to the number of workers set by the Board of Investments. This
additionaldeductionshallbedoubled if theactivity is located in lessdevelopedareas
[LDAs].
II. Tax and duty free importation of breeding stocks and genetic materials for ten [10]yearsfromregistrationorcommercialoperationforagriculturalproducers.
Taxcreditondomesticbreedingstocksandgeneticmaterials. Simplificationofcustomsproceduresfortheimportationofequipment,spareparts,raw
materialsandsuppliesandexportsofprocessedproducts.
Unrestricteduseofconsignedequipmentprovidedareexportbondisposted. EmploymentOfForeignNationals. Taxcreditfortaxesanddutiespaidonrawmaterials,suppliesandsemimanufactured
productsusedinthemanufactureofexportproductsandformingpartthereof.
Access to bonded manufacturing/trading warehouse system.Registered exportorientedenterprisesmayhaveaccesstobondedwarehousingsystems.
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Exemptionfromwharfageduesandanyexporttax,duty,impostandfees. New enterprises registered under the 1995 Investments Priorities Plan [IPP] shall be
granted
a
five
year
period
to
avail
of
the
exemption
from
wharfage
dues
and
any
export
tax, impostandfees.Expansionandexistingprojects,however,arenotentitledtothis
incentive.
Tax and duty exemption of imported spareparts and suppliesfor exportproducers with customs
bondedwarehouseexportingatleastseventypercent[70%]oftheproduction.
b. FISCALINCENTIVES SpecialEconomicZoneActof1995:Fiscal incentives,ingeneral.
EnterprisesoperatingwithintheEconomicZones[ECOZONES]areentitledtothefiscal
incentives
granted
under
Presidential
Decree
No.
66,
[Export
Processing
Zone
Authority
Law], or those provided under Book VI of Executive Order No. 226, [Omnibus
InvestmentsCodeof1987].
Taxcreditforexportersusing localmaterialsas inputs inaccordancewiththeExportDevelopment
Actof1994.
Exemption from taxesunder theNational InternalRevenueCode [NIRC]but in lieuofpaying taxes,
fivepercent[5%]ofthegross incomeearnedbyallbusinessesandenterpriseswithintheECOZONE
shallberemittedtothenationalgovernment.
c. FISCALINCENTIVES ExportDevelopmentActof1994: ExemptionfromPresidentialDecreeNo.1853ontheadvancedpaymentofcustomsduties. Dutyfree importation of machinery and equipment and accompanying spare parts until
December31,1997.
TaxcreditforimportedinputsandrawmaterialsprimarilyusedfortheproductionandpackagesofexportgoodsthatarenotreadilyavailablelocallyuntilDecember31,1999.
Taxcreditforincreaseincurrentyear'sexportrevenues. Firstfivepercent[5%]increaseinannualexportrevenueoverthepreviousyearacreditof2.5%
shallbegrantedtobeappliedonincrementalexportrevenueconvertedtopesos.
Next
five
percent
[5%[
increase
shall
be
entitled
to
a
credit
of
5%.
Nextfivepercent[5%]increaseshallbeentitledtoacreditof7.5%. Inexcessoffifteenpercent[15%]shallbeentitledtoacreditof10%. Taxcreditfortheuseorimportsubstitutionofnontraditionalproducts.
Taxcreditequivalenttotwentyfivepercent[25%]ofdutiesuntilDecember31,1997.ClaimsForTaxCredits.
1. Importedinputs,rawmaterialsandcapitalequipment.
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1. Increaseincurrentyear'sexportrevenues.1. Importsubstitution.
d. FISCALINCENTIVES BasesConversionandDevelopmentActof1992: ExemptedfromanyandallPhilippinenationalandlocaltaxes. Inlieu,however,ofpayingtaxes,
afinaltaxoffivepercent[5%]ofgrossincomeearnedisimposed.
16.INTELLECTUALPROPERTYRIGHTS
PROTECTION
IntellectualPropertyCodeofthePhilippines:
In order to strengthen protection to intellectual property rights, Republic Act No. 8293 [otherwise
knownas the IntellectualPropertyCodeof thePhilippines] wasapprovedon June6,1997and took
effect on January 1, 1998. This is the codification of all laws on intellectual property rights in the
Philippines. It repealed and superseded the Philippine Law on Patents [R. A. No. 165], the Law on
Trademarks[R.A.No.166], Articles188and189oftheRevisedPenalCodeandtheLawonCopyright
[PresidentialDecreeNo.49]includingPresidentialDecreeNo.285,asamended.
RelatedLawsandIssuances:
Thefollowingaresomerelatedlawsandexecutiveissuances:
PresidentialDecreeNo.1987[DecreeCreatingtheVideogram RegulatoryBoard] Executive Order No. 60 issued on February 26, 1993, creating the Presidential Inter
Agency Committee on Intellectual Property Rights. Several memberagencies of this
Committeehavecreatedspecial task forceson IPRsuchas: theDepartmentofTrade
andIndustry[DTI],DepartmentofJustice[DOJ],NationalBureauofInvestigation[NBI],
BureauofCustoms[BOC]andthePhilippineNationalPolice[PNP].
Executive OrderNo.913 [Strengthening theRuleMakingandAdjudicatoryPowersoftheMinisterofTradeandIndustryinordertofurtherprotectconsumers].
TreatiesonIntellectualPropertyRights[Philippinesisasignatory]:
TheRepublicof thePhilippines isasignatory toseveral international treatieson intellectualproperty
rights,towit:
ConventionEstablishingtheWorldIntellectualPropertyOrganization[since1980] ParisConventionfortheProtectionofIndustrialProperty[since1965] BudapestTreatyontheInternationalRecognitionoftheDepositofMicroorganismsfor
PurposesofPatentProcedure[since1981]
BerneConventionfortheProtectionofLiteraryandArtisticWorks[since1984]
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InternationalConvention for theProtectionofPerformers,ProducersofPhonographsandBroadcastingOrganizations[since1984]
AgreementonTradeRelatedAspectsofIntellectualPropertyRights[TRIPSAgreement]17.INTERNATIONALINVESTMENTAGREEMENTS
[PHILIPPINES,APARTYSIGNATORY]
Thefollowingisarundownofinternationalagreements[inforceandineffect]towhichthePhilippines
isapartysignatory,whichareofcommercialoreconomicnatureandsignificance:
FriendshipCommerceandNavigationTreaty:1. "The Treaty of Amity, Commerce and Navigation between the Republic of the
Philippines and Japan" where they express their intent to maintain and strengthen
amicablerelationsexistingbetweenthemonamutuallyadvantageousbasis.
BilateralInvestmentTreaties:1. PhilippinesandKingdomofGreatBritainandNorthernIreland2. PhilippinesandKingdomofNetherlands3. PhilippinesandRepublicofItaly4. PhilippinesandSocialistRepublicofVietnam5. PhilippinesandChineseTaipei6. PhilippinesandPeople'sRepublicofChina7. PhilippinesandKingdomofSpain8.
Philippines
and
Romania
9. PhilippinesandRepublicofKorea10.PhilippinesandFrance11.PhilippinesandAustralia12.PhilippinesandCzech13.PhilippinesandThailand14.PhilippinesandIran15.PhilippinesandCanada16.PhilippinesandChile17.PhilippinesandSwitzerland18.PhilippinesandGermany19.TheASEANAgreementforthePromotionandProtectionofInvestments
Alltheforegoingtreatiescommonlyembodythefollowingbasictenets:
[1]Promotionofinvestmentsineithereconomybyinvestorsoftheothereconomythroughthe
creation of favorable conditions of investments to foster their respective economic
developments.
[2]Provision on MostFavouredNation (MFN) Treatment arrangement where respective
investorsareaccordedtreatmentnolessfavorablethanthataccordedtoinvestorsofanythird
State.
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[3] Provision on expropriation which ordains that if any investors of either economy suffer
losses in the other economy by reason of national emergency, revolution, revolt or similar
events,thehosteconomyshallaccordtreatmenttothateconomynolessfavorablethanthatit
accordstoinvestmentsofanythirdState.
[4] Provisionontransferofinvestmentswhichguaranteesthefreetransferofinvestmentsand
returnsheldintheterritoryofonecontractingeconomytotheothereconomy.
[5]Provisiononsubrogationofrights.
18.DISPUTESSETTLEMENT
Governmentvs.Government:
As a member of the WTO, the Philippines adheres to the procedures for dispute settlement
prescribedbyWTO. Consequently,itconsiderstheseproceduresasbeingapplicabletoanycaseor
controversyfallingwithinWTO'sjurisdiction.
PrivateParty/iesvs.Government:
The Philippines adheres to the dispute settlement procedures prescribed under the
International Convention on the Settlement of Investment Disputes Between States and
NationalsofOtherStates[ICSID]aswellastheConventionontheRecognitionandEnforcement
ofForeignArbitralAwards[NewYorkConvention],beingasignatorythereof.
PrivateParty/ies
vs.
Private
Party/ies:
Thebasic legal framework applicable in the resolutionof conflicts and disputes between private
partiesareasfollows:
Executive Order No. 1008 provides for the creation of an Arbitration Machinery in theConstructionIndustryofthePhilippines.
Republic Act No. 876 provides for arbitration and submission agreements, appointment ofarbitratorsandtheprocedureforarbitrationincivilcontroversies.
Presidential
Decree
No.
442,
as
amended
provides
for
compulsory
and
voluntary
arbitration
in
laborrelatedconflicts.
20.AdvantagesThePhilippinegovernmenthasplacehighpriorityonattractingforeign investmentswhich
createnewjobs,higherincomes,higherpublicsectorrevenue.Thegovernmenthasforthe
past ten (10) years had many ways of achieving such goals for example, by providing
modern,efficientinfrastructure,educatingtheworkforcewithskillsindemandbyindustry,
settingupfreeports,andspecialexportszonesandthelike.Whiletheyareonlyoneofthe
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tools available to encourage foreign investment in the Philippines in encouraging higher
levels of investment, fiscal incentives are extremely available under existing laws. These
fiscal incentivesaccelerate thepaceand levelof total investments intheeconomy, these
incentivesencouragerenewableenergyinvestmentstodevelopmorerapidlyandshouldbe
used to support this particular sector where the Philippine has strong comparative
advantage.TheRenewableEnergyLawandtheBiofuelsAct,withtheprovisionsfromthe
Foreign InvestmentsActhave listedthe fiscalandnonfiscal incentives fortheRenewable
Energy foreigninvestments.
The following inventory of Philippine regulations would show the enormous incentives,
privilegesavailableforforeigninvestmentsinthePhilippines:
GovernmentRenewableEnergy&WTEInvestmentConcession
A.Openness toForeign InvestmentsThePhilippinegovernment iscommittedapositive
attitudetowardsforeigninvestmentanditsroleintheBoardofInvestmenttoassistforeign
and domestic investors with regulatory requirements, incentives and market guidance
transparency. Philippines being receptive to suggestions and criticisms from the private
sector.Manyforeignanddomesticbusinessescontributereforms intheeconomicsystem.
The American Chamber of Commerce in the Philippines continued to promote its socio
economicRoadmap IIMoreForeign Investmentswhich identifies theopportunities for
moreforeigninvestmentsinthePhilippines.
The
harnessing
and
utilization
of
Renewable
Energy
comprises
a
critical
concern
for
energy
supply in the country. This is evident in the energy sector where in the resources has
lessened the countrysdependencyon importedandpolluting fuel. It is thePhilippine
government policy to facilitate the energy sectors transition to a prominent, viable and
competitivefueloption.Ensuringthesuccessofthistransition.Moreover,currentinitiatives
inthepursuitofmarketbasedenvironmentthat isconducivetoprivatesector investment
andresearchanddevelopment.
Currentfiscalincentivesareavailableforalternativesourceof energy foreigninvestments.
Alternativescenariohasbeendrawnupwhichsetshighertargetsforalternativesourceof
energy capacitybasedon the realizationofmarketbased industryand theavailabilityof
newinternationalfinancingschemes to support alternativeenergysource basedcapacity.
I. The2009INVESTMENTPRIORITIESPLAN(IPP)
1. Book I. Investment with Incentives, of the Omnibus Investment Code (1987)
prescribesincentivestoqualifiedfirmsincludedintheannualinvestmentPrioritiesPlan
(IPP),administeredbytheBoardofInvestments.
2.UnderPreferredActivitiesofthe2008 InvestmentPriorityPlan, income taxholiday
covers thedevelopmentofphysicalinfrastructure,powergenerationusingrenewables,
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and other energy sources adopting environmentally friendly technologies. 3. Under
Section 2 of the Infrastructure, Power Generation projects as specified in the Power
Development Plan that may qualify for registration include those utilizing indigenous
and renewableenergy sources such asbiofuel,biomass,waste toenergy conversion,
solarwind,geothermal,hydroandtidal.
3.ThebasicincentivesofferedtoallBoardofInvestmentsregisteredcompaniesinclude:
Income Tax Holiday: new projects with pioneer statusreceivefromseven(7)yearsuptomaximumofeightyears
incometaxholiday;
Additionaldeductionforwages:forthefirstfiveyearsafterregistration,Additionaldeductionfromtaxableincome;
Income taxholidayall throughout the fulloperationwhentheforeign investmentisundertheEPIRA;
Additional deduction from taxable income for necessaryand major infrastructure works for companies located in
ruralareas;
a company may deduct from taxable income an amountequivalent toexpenses incurred in thedevelopment WTE
projects;
Employment of foreign nationals: enterprise may employforeign nationals in Supervisory, technical, or advisory
positionundersimplifiedvisarequirements.
Biofuel and Biomass foreign investments are entitled to pioneerincentives
II. INTELLECTUAL PROPERTY RIGHTS The Philippines has made progress in recent
years in protecting intellectual property rights. Foreign inventors and importers are
encouragedtoregisterpatents,trademarksattheBureau ofPatents.
TheIntellectualPropertyCode(RepublicActNo.8293)providesthelegalframeworkfor
IPRprotection inthePhilippines.TheholderoftheBiosphereProcessSystemsPatent
and Trademark is guaranteed an additional right of exclusive importation of his
invention.
III.CONVERSIONANDTRANSFERPOLICIESTherearegenerallynorestrictionsonthe
full and immediate transfer of funds associated with foreign investments like
repatriation, the payment of royalties, lease payments and similar fees. To obtain
foreign exchange from the banking system for debt servicing of foreign loans and
foreigninvestmentsmustberegisteredwiththeBangkoSentralngPilipinas.Thereisno
difficultyinobtainingforeignexchangeunderthePhilippinebankingsystem.Thereare
nomandatoryforeignexchangesurrenderrequirementsimposedonexportearners.In
amovetocurbforeignexchangespeculationandvolatility,theBSPhasrequireda90
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dayminimumpeso timedeposits since January2000,duringwhichan investor isnot
allowed to purchase foreign exchange from banks for peso proceeds from the pre
terminatedtimedepositsmaybeinvestedinotherinstruments,registeredanew.
IV.LEGALSYSTEM ThePhilippinegovernmentispursuingjudicialreformsregarding
foreigninvestmentswhentheAlternativeDisputeResolution(ADR)Actwassignedinto
law,TheADRwasbasedonthesuccessfulcourtbacklogsintheCourt.ThePhilippinesis
alsoamemberof the InternationalCenter for theSettlementof InvestmentDisputes
(CSID)andtheConventionofArbitrageAwards.
V.ACCOUNTING STANDARDS The Philippines had adopted all the international
financialreportingstandards(IFRS)andrevisedinternalaccountingrules.
These standards are now embodied in the Philippine Financial Reporting Standards
(PFRS) and Philippine Accounting Standards and the adoption of IASBprescribed
standardsin2005.TheBangkoSentralngPilipinashasalloweddebts,smallandmedium
enterprises (SMEs) and firms thatare notpublicly listed, thatarenotdebt/securities
issuers,thatarepublicutilitiesoressentialpublicserviceprovidersareexemptfromthe
newaccountingandfinancialreportingstandards.
TheSecuritiesandExchangeCommissionrequiresthatmanagementcertifyacompanys
financialstatements.ThereisanoutlineofAccreditationandReportorialCompanies.
The regulations institutedasystemofaccreditation forexternalauditorsof firmsthat
issue securities to the investors. That the auditors cannot disclose to the SEC any
materialfindings(i.e.fraud,orerror,losses,orpotentiallossesaggregating10percent
or more) within five days from receipt of the externalaudit findings. The SEC also
issued circulars on new and /or revised Philippine Standards on auditing, review
engagements, assuranceengagements statements.These circularsoutlinedadditional
measuresandpoliciesforcompliancebyexternalauditorstoimproveindependence.
A number of the larger local accountancy firms are affiliated with international
accounting firms, including Pricewaterhouse Company, and Deloite & Touche, BDO
SeidmanandGrantThornton.
VI.BILATERAL
INVESTMENT
AGREEMENTS
The
Philippine
had
signed
bilateral
investment agreements with Argentina, Australia, Austria, Bahrain, Cambodia, Chile,
China, the Czech Republic, Denmark, Equatorial Guinea, Finland, France, Germany,
India, Indonesia, Iran, Myanmar, Netherlands, Pakistan, Portugal, Romania, Russian
Federation, Saudi Arabia, Spain, Sweden, Switzerland, Taiwan, United Kingdom,
Venezuela. The general provision of the Bilateral investment agreement include: the
promotionandnondiscrimination; the free transferofcapital,paymentsofearnings,
freedomexpropriationandnationalization.
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VII.TAXATION.ThePhilippineshasaTaxTreatywiththeUnitedStatesforthepurpose
of avoiding procedures enforcing taxes of both countries. The Treaty also seeks to
encourage Bilateral trade and investments by allowing the exchange of defined tax
rulesandinsomecasespreferentialtaxrates.
Most Favored Nation Clause (royalties): Pursuant to the most favored nation (MFN)
clausebythePhilippineUStaxtreaty,thistreatyallowsalowerrateintheuseorright
touseanypatent,trademark,design,model,plan,secretformulaorprocess;ortheuse
orrighttouseinformationconcerningindustrial,commercial,orscientificexperience.
Permanent Establishments. A foreign company that renders services to Philippine
Clients without settingup a branch office is exempted to pay Philippine taxes if the
services rendered to aPhilippine client requires its personnel stay in the country for
morethan183days.
TaxesonOBUsandFCDUs:TheComprehensiveTaxReformProgram (CTRP)exempts
OBUsandFCDUs,bothPhilippineandforeignfrompaymentofdocumentarystamptax
andbranchprofitremittancetaxes.
VIII.PHILIPPINEENERGYSECTORGOALSFOR2007,under thePhilippineEnergyPlan
(PEP)
1.Reductionofcoalimportsby20%inten(10)years;
2.
Increase
renewable
energy
based
capacity
by
100%
in
ten
(10)
years;
TheEnergySectorAgendafor20052013
1.EnergyIndependence
by aggressively development of renewable energy potential such as
biomass,solar,windandoceanresources.
2.PowerSectorReforms:
3.Implementprivatization process
4.Createaninvestmentclimateattractivetoinvestors.
ThePhilippines iscommittedto formstrategicalliancewithothercountrieswithregardtorenewable
energydevelopmentintheworld.
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CompiledBy:
RUTHP.BRIONES
Chairman/ChiefExecutiveOfficer
GreenergySolutionsInc.
[email protected]+6324301725
www.greenergyph.com
Clean energy is climate change
adaptation, which must be a global
effort. It is an acknowledgment that
mankinds greenhouse gas emissions
are the ones causing dramatic climate
changes. The response must be in two
forms: for unclean energy, higher
efficiency; for clean energy, higher
economics. The inventing must benow; the investing must be now.
RuthP.Briones,PMI
July29,2010