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The Omnibus investments code of 1987

The Omnibus investments code of 1987. Cue, Charmaine Joyce Del Rosario, Pia. Executive Order No. 226 The Government is committed to encourage investments in desirable areas of activities To facilitate investment, there is a need to adopt a cohesive and consolidated investments incentives law

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The Omnibus investments code of 1987

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  1. The Omnibus investments code of 1987 Cue, Charmaine Joyce Del Rosario, Pia

  2. Executive Order No. 226 • The Government is committed to encourage investments in desirable areas of activities • To facilitate investment, there is a need to adopt a cohesive and consolidated investments incentives law • It is imperative to integrate basic laws on investment, to clarify and harmonize their provisions for the guidance of domestic and foreign investors • Ordered and Ordained by Corazon C. Aquino General Overview

  3. “Omnibus Investments Code” of 1987 Article 1: Short title Chapter 1Title and declaration of policy

  4. Goals: • To accelerate the sound development of the national economy • Promotes small and medium scale industries • Encourages competition and discourage monopolies • Improve technical skills of people employed • Increase volume and value of exports for the economy Article 2: Declaration of investment policies Chapter 1Title and declaration of policy

  5. The Board of Investments shall implement the provisions of Books One to Five of this Code Article 3: The board of investments Chapter 2Board of investments

  6. 7 Governors • The Secretary of Trade and Industry • Chairman of the Board • 3 Undersecretaries of Trade and Industry • Vice-Chairman of the Board and its Managing Head • 3 representatives from other government agencies and the private sector • Appointed by the President • Has a term of 4 years Article 4: Composition of the board Chapter 2Board of investments

  7. Requirements • Filipino Citizen • At least 30 years old • Of good moral character • Of recognized competence in the fields of economics, finance, banking, commerce, industry, agriculture, engineering, law, management or labor Article 5: qualifications of governors of the board Chapter 2Board of investments

  8. The Board shall appoint its technical staff and other personnel subject to Civil Service Law, rules and regulations Article 6: appointment of board personnel Chapter 2Board of investments

  9. The Board shall be responsible for the regulation and promotion of investments in the Philippines • The presence of 4 governors shall constitute a quorum and the affirmative vote of 4 governors in a meeting validly held shall be necessary to exercise its powers and perform its duties • Prepare annually the Investment Priorities Plan • Periodical compliance check with the Code Article 7: Powers and duties of the board Chapter 2Board of investments

  10. To preside over the meetings of the Board • To render annual reports to the President • To act as liaison between investors seeking joint venture arrangements • Recommend to the Board such policies and measures deemed necessary to carry out the objectives of this Code Article 8: Powers and duties of the chairman Chapter 2Board of investments

  11. To act as Managing Head of the Board • Proxy when the Chairman is absent • Prepare the Agenda for the meetings of the Board • Assist enterprises and investors to have their papers processed Article 9: Powers and duties of the vice-chairman Chapter 2Board of investments

  12. Title 1: preferred areas of investments • Board • Board of Investments created under this Code • Registered Enterprise • Any individual, partnership, cooperative, corporation. Does not include banks • Technological Assistance Contracts • Contracts for the transfer of patents, processes, formulas, or other technological rights of foreign origin • Foreign assistance Chapter I: Definition of terms Book IInvestment with incentives

  13. Title 1: preferred areas of investments • Foreign Loans • Any credit facility or financial assistance payable in foreign currency • Foreign Investments • Equity investments owned by a non-Philippine national. In the form of foreign exchange or other assets • Philippine National • A citizen of the Philippines or a corporation owned mostly by citizens of the Philippines Chapter I: Definition of terms Book IInvestment with incentives

  14. Title 1: preferred areas of investments • Preferred Areas of Investments • The economic activities declared by the Board, which can be non-pioneer or pioneer • Pioneer Enterprise • Engaged in manufacture, processing or production • Non-Pioneer Enterprise • All registered producer enterprises other than pioneer enterprises Chapter I: Definition of terms Book IInvestment with incentives

  15. Title 1: preferred areas of investments • Expansion • Modernization, Rehabilitation, Increase in volume or value of production, or upgrading the quality of the registered product • Measured Capacity • Estimated additional volume of production or service • Tax Credit • Any of the credits against taxed and/or duties equal to those actually paid Chapter I: Definition of terms Book IInvestment with incentives

  16. Title 1: preferred areas of investments • Export Products • Manufactured or processed products which meet the standard requirements • Export Sales • The Philippine port Free on Board (FOB), determined from documents, invoices, landing certificates • Production Cost • The total of the cost of direct labor, raw materials, and manufacturing overhead Chapter I: Definition of terms Book IInvestment with incentives

  17. Title 1: preferred areas of investments • Processing • Converting raw materials into marketable form • Investment Priorities Plan • Over-all plan prepared by the Board • Activities that encourage investments & growth in domestic and export market Chapter I: Definition of terms Book IInvestment with incentives

  18. Title 1: preferred areas of investments • Deadline for Submission: End of March every year • Submitted to the President Chapter 2: investment priorities plan Article 27: investment priorities plan Book IInvestment with incentives

  19. Title 1: preferred areas of investments • All economic activities shall be proven to be economically, technically, and financially sound after thorough investigation and analysis by the Board Chapter 2: investment priorities plan Article 28: criteria in Investment priority determination Book IInvestment with incentives

  20. Title 1: preferred areas of investments • The President shall proclaim the whole or part of such plan as in effect; or alternatively, return the whole or part of the plan to the Board of Investments for revisions Chapter 2: investment priorities plan Article 29: Approval of the investment priorities plan Book IInvestment with incentives

  21. Title 1: preferred areas of investments • Subject to publication requirements and the criteria for investment priority determination, the Board of Investments may, at any time, add additional areas in the plan, alter any of the terms of the declaration of an investment area of the designation of measured capacities, or terminate the status of preference Chapter 2: investment priorities plan Article 30: amendments Book IInvestment with incentives

  22. Title 1: preferred areas of investments • The plan shall be published in at least 1 newspaper of general circulation and all such areas shall be open for application Chapter 2: investment priorities plan Article 31: Publication Book IInvestment with incentives

  23. Title 1: preferred areas of investments • Requirements: • A citizen of the Philippines • At least 60% of the owners are citizens of the Philippines • The applicant is proposing to engage in a preferred project authorized by the Investment Priorities Plan • Capable of operating on a sound and efficient basis of contributing to the national development Chapter 3: registration of enterprises Article 32: qualifications of a registered enterprise Book IInvestment with incentives

  24. Title 1: preferred areas of investments • Shall be filed with the Board • Recorded in a registration book • Date stamped on the application = Date of official acceptance Chapter 3: registration of enterprises Article 33: application Book IInvestment with incentives

  25. Title 1: preferred areas of investments • The Board is authorized to adopt rules and regulations to facilitate action on applications • Applications filed shall be considered automatically approved if not acted upon by the Board within 20 working days from official acceptance thereof Chapter 3: registration of enterprises Article 34: approval and registration procedures Book IInvestment with incentives

  26. Title 1: preferred areas of investments • The extent of ownership and control by Philippine citizens of the enterprises • The economic rates of return • The measured capacity • The amount of foreign exchange earned, used or saved in their operations • The extent of the utilization of resources • The extent of technological advances adopted • The amount of equity and degree to which the ownership of such equity spread out and diversified Chapter 3: registration of enterprises Article 35: Criteria for evaluation of application Book IInvestment with incentives

  27. Title 1: preferred areas of investments • Any order or decision of the Board shall be final and executory after 30 days from its promulgation • Said order or decision may be appealed to the Office of the Presidents within the said period of 30 days • When an appeal has been filed, the order or decision will be final 90 days after perfection of the appeal Chapter 3: registration of enterprises Article 36: appeal from board’s decision Book IInvestment with incentives

  28. Title 1: preferred areas of investments • A registered enterprise under this Code shall be issued a certificate of registration under the seal of the Board of Investments and the signature of its Chairman and/or other officer or employee of the Board • Name of the registered enterprise • Preferred area of investment • Nature of the activity & capacity of enterprise • Other terms & conditions to be observed by the enterprise Chapter 3: registration of enterprises Article 37: certificate of registration Book IInvestment with incentives

  29. Title 2: basic rights and guarantees • All investors and registered enterprises are entitled to the basic rights and guarantees provided in the Constitution • Repatriation of Investments • Remittance of Earnings • Foreign Loans and Contracts • Freedom from Expropriation • Requisition of Investments Article 38: Protection of investments Book IInvestment with incentives

  30. Title 3: incentives to registered enterprises • Amended by Republic Act No. 7918 • Income Tax Holiday • New registered firms shall be fully exempted from income taxes • Registered expanding firms shall be entitled to an exemption from income taxes • Additional Deduction for Labor Expense • A registered enterprise shall be allowed an additional deduction from the taxable income for the first 5 years from registration Article 39: incentives to registered enterprises Book IInvestment with incentives

  31. Title 3: incentives to registered enterprises • Tax and Duty Exemption on Imported Capital Equipment • Within 5 years, importations of machinery and equipment and accompanying spare parts of new and expanding registered enterprise shall be exempted to the extent of 100% of the custom duties and national internal revenue tax payable thereon • Tax Credit on Domestic Capital Equipment • Waived taxes to up to 100% on domestic equipment for new and expanding registered enterprises Article 39: incentives to registered enterprises Book IInvestment with incentives

  32. Title 3: incentives to registered enterprises • Exemption from Contractor’s Tax • Whether national or local • Simplification of Customs Procedure • For the importation of equipment • Unrestricted use of Consigned Equipment • Employment of Foreign Nationals • Not exceeding 5 years from registration • Exemption on Breeding Stocks and Genetic Materials • Tax Credit on Domestic Breeding Stocks and Genetic Materials Article 39: incentives to registered enterprises Book IInvestment with incentives

  33. Title 3: incentives to registered enterprises • Tax Credit for Taxed and Duties on Raw Materials • Access to Bonded Manufacturing/Trading Warehouse System • Exemption from Taxed and Duties on Imported Spare Parts • Exemption from Wharfage Dues and any Export Tax, Duty, Impost and Fee Article 39: incentives to registered enterprises Book IInvestment with incentives

  34. Requirements: • Low per capita gross domestic product • Low level of investments • High rate of unemployment • Low level of infrastructure development including its accessibility to developed urban centers • Incentives for necessary and Major Infrastructure and Public Utilities Title 4: Incentives to less-developed-area registered enterprise Article 40 Book IInvestment with incentives

  35. Title 5: general provisions • The President may rationalize the incentives scheme, extend the period of availment of incentives or increase rates of tax exemption of any project whose viability or profitability require such modification Article 41: power of the president to rationalize incentives Book IInvestment with incentives

  36. Title 5: general provisions • In case of cancellation of certificate, the Board may require the refund of incentives availed of and impose corresponding fines and penalties Article 42: Refund and penalties Book IInvestment with incentives

  37. Title 5: general provisions • When a registered enterprise engags in activities or endeavors that have not been declared preferred areas of investments, the benefits shall be limited to the portion of the activities of such registered enterprise as is a preferred area of investment Article 43: benefits of multiple area enterprises Book IIIInvestment with incentives

  38. BOOK III “INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHING REGIONAL OR AREA HEADQUARTERS AND REGIONAL OPERATING HEADQUARTERS IN THE PHILIPPINES”

  39. Multinational Company • A foreign company or a group of foreign companies with business establishments in two or more countries. Definition of terms Book III

  40. Regional or Area Headquarters (RHQ) • an office whose purpose is to act as an administrative branch of a multinational company engaged in international trade which principally serves as a supervision, communication and coordination center for its subsidiaries, branches or affiliates in the Asia-Pacific Region and other foreign markets and which does not earn or derive income in the Philippines Definition of terms Book III

  41. Regional Operating Headquarters (ROHQ) • a foreign business entity which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets. Definition of terms Book III

  42. Any foreign business entity formed, organized and existing under any laws other than those of the Philippines whose purpose,isto supervise, superintend, inspect or coordinate, its own affiliates, subsidiaries, or branches in the Asia-Pacific Region may establish a regional or area headquarters in the Philippines, after securing a license therefore from the Securities and Exchange Commission, upon the favorable recommendation of the Board of Investments. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  43. The Security and Exchange Commission shall issue the implementing rules and regulations with 30 days from the effectivity of the code and minimum requirements shall be complied by the foreign entity. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  44. Requirements • Certification from the Philippine Consulate/Embassy or from DTI that states that the foreign firm is engaged in international trades with affiliates, subsidiaries, or branch offices in the Asia-Pacific Region and other foreign markets. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  45. Requirements • A duly authenticated certification from the principal officer of the foreign entity to the effect that the said foreign entity has been authorized by its Board of Directors or governing body establish its regional or area headquarters in the Philippines, specifying that: • 1. The activities of the regional headquarters or area headquarters shall be limited to acting as a supervisory, communications and coordinating center for its subsidiaries, affiliates and branches in the region; • 2. The regional or area headquarters will not derive any income from sources within the Philippines and will not participate in any manner in the management of any subsidiary or branch office it might have in the Philippines nor shall it solicit or market goods and services whether on behalf of its mother company or its branches, affiliates subsidiaries or any other company; and • 3. The regional or area headquarters shall notify the Board of Investments and the Securities and Exchange Commission of any decision to close down or suspend operations of its headquarters at least fifteen (15) days before the same is effected. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  46. Requirements • Any undertaking that the multinational company will remit into the country such amount as may be necessary to cover its operations in the Philippines but which amount will not be less than Fifty thousand United States dollars or its equivalent in other foreign currencies annually. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  47. Requirements • Any violation by the regional or area headquarters of a multinational company of any of the provisions of this Code, or its implementing rules and regulations, or other terms and conditions of its registration, or any provision of existing laws, shall constitute a sufficient cause for the cancellation of its license or registration. CHAPTER I LICENSING OF REGIONAL OR AREA HEADQUARTERS Article 58: Qualifications of Regional of Area Headquarters Book III

  48. Any foreign business entity formed, organized and existing under any laws other than those of the Philippines to service its own affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Regional and other foreign markets. CHAPTER II Licensing of Regional Operating Headquarters ARTICLE 59 Qualification of Regional Operating Headquarters (ROHQs) Book III

  49. ROHQs of non-banking and non-financial institutions are required to secure a license from the SEC, upon the favorable recommendation of the Board of Investments. • ROHQ of banking and financial institutions are required to secure licenses from the SEC and BSP, upon the favorable recommendation of the Board of Investments. CHAPTER II Licensing of Regional Operating Headquarters ARTICLE 59 Qualification of Regional Operating Headquarters (ROHQs) Book III

  50. Requirements • Certification from the Philippine Consulate/Embassy or from DTI that states that the foreign firm is engaged in international trades with affiliates, subsidiaries, or branch offices in the Asia-Pacific Region and other foreign markets. CHAPTER II Licensing of Regional Operating Headquarters ARTICLE 59 Qualification of Regional Operating Headquarters (ROHQs) Book III

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