LAWS GOVERNING INVESTMENTS IN THE PHILIPPINES

1. OMNIBUS INVESTMENTS CODE OF 1987

Implemented by the Board of Investments (BOI), the Omnibus Investments Code of 1987 provides a comprehensive set of incentives for local and foreign enterprises engaged in activities considered by the government as high priority for national development.

How do you qualify for BOI incentives?
To qualify for BOI incentives, a project must cover an area of activity listed in the Investment Priorities Plan (IPP)

What are the investment activities under the IPP?
The IPP, formulated by BOI annually and approved by the President, lists the priority activities for investment. The 2005 IPP supports the governments objectives of eradicating poverty, providing for a healthy business environment, creating equal economic opportunities for all Filipinos, and addressing the high cost of business. For 2005, investment areas eligible for incentives include the following: agribusiness; healthcare and wellness products, ICT, electronics, motor vehicle, energy, infrastructure, tourism, shipbuilding/shipping, jewelry, fashion garments.

What are the incentives available to BOI-registered enterprises?
Fiscal Incentives

- Income tax holiday
- Additional deduction of labor expenses from taxable income
- Tax credit for taxes and duties on raw materials used in the manufacture, processing, or production of export products
- Additional deduction of necessary and major infrastructure expenses from taxable income
- Access to bonded manufacturing/trading warehouse system
- Exemption from taxes and duties on imported supplies and spare parts for consigned equipment
- Exemption from wharfage dues and any export tax, duty fee, and impost.

Nonfiscal Incentives

- Simplication of customs procedure
- Unrestricted use of consigned equipment
- Employment of foreign nationals

2. FOREIGN INVESTMENT ACT OF 1991 (FIA)

R.A. No. 7042, also known as the Foreign Investments Act of 1991, is the basic law that governs foreign investments in the Philippines. It is a landmark piece of legislation that reversed years of protection for domestic companies and enabled the liberalized entry of foreign investments into the country.

Serving as a guideline for foreign investment in the Philippines, it encourages the growth of foreign investments that will contribute to the countrys economic progress and/or the advancement of science and technology. It allows foreign investments to enter the country with greater ease and convenience.

Foreign investors are allowed to invest up to 100% of the equity in companies engaged in almost all types of business activities subject to certain restrictions as prescribed in the Foreign Investments Negative List (FINL).

What is the Foreign Investment Negative List (FINL)?
The FINL is a short list of investment areas where foreign investment is restricted or limited by the constitution and existing laws, rules and regulations.

What are significant accomplishments of the FINL?

- concept of a negative list

a. more areas opened to foreign investments
b. investment policies made more transparent and stable

- re-defined export enterprise to mean at least 60% export
- opened domestic economy to 100% foreign investment except those in the negative list
- reduced layer of bureaucracy
- allows 100% foreign ownership of business activities outside the FINL but without incentives

What are areas of investment covered by FIA?
The FIA covers all investment areas except banking and other financial
institutions which are governed and regulated by the Bangko Sentral ng Pilipinas
(BSP)

When can foreigners do business or invest in a domestic enterprise up to
100% of its capital?

a. The domestic activity he intends to venture in is not among those listed in the

FINL

b. Paid-up capital for domestic market enterprise must be at least US$200,000, which may be lowered to US$100,000 if the following conditions are met:
(i) introduction of advanced technology or;
(ii) employment of at least 50 direct employees

How does one apply for registration of investments?
a. For Single Proprietorship Submit an application, together with the required documents, to the Bureau of Trade Regulation and Consumer Protection (DTI-BTRCP), an office under the Department of Trade and Industry

Where to file application?
DTI-BTRCP in Sen. Gil J. Puyat Ave., Makati City, if within Metro
Manila or at any of the DTI Provincial Offices, if outside Metro Manila

b. For Corporations/Partnership- Submit application form together with required documents to the Securities and Exchange Commission (SEC).

Where to file application?
Securities and Exchange Commission, EDSA Greenhills, San Juan, if within Metro Manila or SEC Extension Offices outside Metro Manila

How does a company remit its profits and dividends and repatriate capital abroad?
Enterprises seeking to repatriate its capital and remit its profits and dividends abroad may register their inward remittance with the Bangko Sentral ng Pilipinas (BSP) after registration with the SEC or BTRCP. For this purpose, BSP rules and regulations covering procedures for registration of foreign investments are observed.

What are investment rights of a former natural born Filipino?
The FIA recognizes the rights of former natural born Filipinos. They are granted same investment rights as Filipino citizens in activities such as cooperatives, thrift banks and private development banks, rural banks and financing companies.