The Omnibus Investments Code of 1987
However,
(Executive Order No. 226, as amended), which
is implemented by the Philippine Board of
Investments (the "BOI"), provides a
comprehensive set of incentives for local and
foreign enterprises engaged in activities
considered by the Philippine government as
high priority for national development.
Investment In Areas Under The
Investments Priorities Plan
The Omnibus Investments Code (the "Code")
mandates the BOI to submit annually, for the
President's approval, an Investments Priorities
Plan ("IPP) which lists the preferred area for
investment. These preferred areas are
classified as either pioneer or non-pioneer1.
Persons or entities that engage in the priority
areas of investment under the IPP may avail of
the incentives provided under the Code upon
registration with the BOI2.
If the applicant for incentives is a natural
person or individual, he must be a citizen of
the Philippines. If the applicant is a
partnership or any other association, it must
be organized under Philippine laws and at
least sixty percent (60%) of its capital must be
owned and held by Philippine nationals; or in
case of a corporation or a cooperative, it is
organized under Philippine laws and that at
least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and
held by Philippine nationals and at least sixty
per cent (60%) of the members of the Board of
Directors are citizens of the Philippines.
However, enterprises which do not meet the
required degree of Philippine ownership may
still register with the BOI for investment
incentives under the following conditions:
1. They are engaged in a pioneer project in
which the measured capacity of the project
cannot be adequately filled by Filipino
nationals; or if they export at least seventy
percent (70%) of their total production, but
this export requirement may be reduced in
meritorious cases and under such conditions
and/or limited incentives as the BOI may
determine; and
2. They obligate themselves to attain the
citizenship requirement within thirty (30)
years from the date of registration.
for enterprises which export seventy percent
(70%) of their total production, they need not
comply with this requirement; and
3. They will not engage in a pioneer area
which is within the activities reserved by the
Constitution or other laws of the Philippines to
Philippine citizens or corporations owned and
controlled by Philippine citizens.
The following incentives are available to a BOI-
registered enterprise:
1. Tax Exemptions
a. Income Tax Holiday (ITH)
o New projects with a pioneer
status for six(6) years;
o New projects with a non-pioneer
status for (4) years;
o Expansion projects for three (3)
years, limited to incremental
sales revenue/volume as a
general rule;
o New or expansion projects in less
developed areas ("LDAs")3 for six
(6) years, regardless of status;
and,
o Modernization projects for three
(3) years, limited to incremental
sales revenue/volume, as a
general rule.
o The ITH is restricted with respect
to certain Export Traders and
Mining Activities
o New registered pioneer and non-
pioneer enterprises and those
located in LDAs may avail
themselves of a bonus year
subject to certain conditions
b. A registered enterprise with a bonded
manufacturing warehouse shall be
exempt from customs duties and
national internal revenue taxes on its
importation of required supplies/spare
parts for consigned equipment or those
imported with incentives. The privilege
to operate a bonded
manufacturing/trading warehouse
subject to Customs rules and
regulations.
 c. 10-years exemption from wharfage
dues and export tax, duty, impost and
fees for exports of non-traditional
export products.
d. For agricultural producers, 10-years
exemption from the payment of all taxes
and duties on their importation of
breeding stocks and genetic materials.
2. Tax Credits
a. For agricultural producers, 10-years
tax credit equivalent to one hundred
percent (100%) of the value of national
internal revenue taxes and customs
duties on domestic breeding stocks and
genetic materials.
b. Tax credit equivalent to the national
internal revenue taxes and duties paid
on raw materials, supplies and semi-
manufacture of export products and
forming part thereof.
3. Additional Deductions form Taxable Income
a. 5-years additional deduction for
labor expense, equivalent of fifty
percent (50%) of the wages of additional
skilled and unskilled workers in the
direct labor force. This incentive shall
be granted only if the enterprise meets
a prescribed capital to labor ratio and
shall not be availed simultaneously
with ITH.
b. Registered enterprises locating in
LDAs or in areas deficient in
infrastructure, public utilities and other
facilities may deduct from taxable
income an amount equivalent to the
expenses incurred in the development
of necessary and major infrastructure
works. This privilege is not granted to
mining and forestry-related projects.
4. Non-fiscal Incentives
a. Employment of foreign nationals in
supervisory, technical or advisory
positions for five (5) years form date of
registration. The position of president,
general manager and treasurer of
foreign-owned registered enterprises or
their equivalent shall however not be
subject to the foregoing limitations.
b. Simplification of customs producers
for the importation of equipment, spare
parts, raw materials and supplies and
export of processed products.
c. Importation of consigned equipment
for a period of 10 years from date of
registration, subject to posting of a re-
export bond.
Incentives To Multinational Companies
Establishing Regional Headquarters In The
Philippines
Regional or Area headquarters ("RHQ")
established by multinational corporations in
the Philippines, which act as supervisory,
communications and coordinating centers for
their affiliates, subsidiaries, or branches in
the Asia-Pacific Region and other foreign
markets and do not earn or derive income
from the Philippines shall not be subject to
income tax. A Regional Operating Headquarter
("ROHQ") established by a multinational in the
Philippines to service its affiliates, subsidiaries
or branches in the Philippines, in the Asia-
Pacific Region or other foreign markets, may
be allowed to derive income from the
Philippines in the performance of the following
qualifying services:
 General administration and planning
 Business planning and coordination
 Sourcing/procurement of raw materials
and components
 Corporate finance advisory services
 Marketing control and sales promotion
 Training and personnel management
 Logistics services
 Research and development services,
and product development
 Technical support and maintenance
 Data processing and communication
 Business development
An ROHQ shall be subject to a 10% income
tax on its taxable income (instead of the
regular Philippine corporate income tax rate of
32%) plus a branch profit remittance tax of
15% on its income to be remitted to the parent
company.
RHQs and ROHQs are also entitled to the
following incentives:
 An RHQ shall be exempt from and
value-added taxes ("VAT") and the sale
or lease of goods and property and the
rendition of services to the RHQ shall
be subject to 0% VAT; An ROHQ shall,
however, be subject to the 10% VAT;
 Exemption from the all kinds of local
licenses, fees and dues imposed by
local government except real property
tax on land and improvements;
 Tax-and duty-free importation of
materials and equipment for training
and conferences which are not locally
available; and,
 Importation of new motor vehicles
subject to payment of taxes and duties.
 Alien employees of RHQs and ROHQs
are granted the following incentives:
 Multiple-entry visas for the expatriates
and their spouses and unmarried
children under twenty-one years of age,
if accompanying them or following to
join them after their admission into the
Philippines as non- immigrants, which
is valid for a period of one year
(extendible yearly).
 Tax of fifteen percent (15%) of the gross
income received as salaries, wages,
annuities, compensation,
remuneration, and emoluments for
each taxable year (instead of the regular
income tax rate of between 5-32%).
 Tax and duty-free importation of
personal and household effects
 Exemption from Travel Tax
A multinational company which is engaged in
international trade and supplies spare parts
or manufactured components and raw
materials to its distributors or markets in the
Asia-Pacific Area and other foreign areas and
which has established or will simultaneously
establish a regional or area headquarters in
the Philippines may also establish a regional
warehouse ("RW") in designated Economic
Zones in the Philippines. Imported spare parts
or manufactured components, raw materials
and other items including any packages,
coverings, brands and labels and warehouse
equipment, as may be allowed by the BOI, for
the exclusive use on the goods stored, except
those prohibited by law, brought into the RW
from abroad to be kept, stored and/or
deposited or used therein and re-exported
directly therefrom for distribution to its Asia-
Pacific and other foreign markets, including to
a bonded manufacturing warehouse in the
Philippines and eventually re-exported, shall
not be subject to customs duty, internal
revenue tax, export tax nor to local taxes.
Furthermore, articles duly entered for
warehousing may remain in the RW for a
period of two (2) years from the time of their
transfer to the RW, which period may be
extended with the approval of the BOI for an
additional period of one (1) year upon payment
of the corresponding storage fee on the
unexported articles.
Special Investor's Resident Visa
The Code further grants to foreign investors,
who are natural persons, investing at least
Seventy Five Thousand US dollars
(US$75,000.00), a special investor's resident
visa which entitles him, while his investment
subsists, to reside in the Philippines. The
foregoing invested amount shall be lowered to
US$50,000.00 for aliens availing of the
benefits of Executive Order No. 63 (Granting
Incentives to Foreign Investment in Tourist-
related Projects and Tourist Establishments)
and Executive Order No. 1037 (Creating the
Philippine Retirement Park System).
Footnotes:
1 These preferred areas are classified as either
pioneer or non-pioneer. The Code defines a
"pioneer enterprise" as an enterprise engaged
in any of the following activities:
a. The manufacture, processing or
production (not merely in
assembly and packaging) of
commodities that have not been
or are not being produced in the
Philippines on a commercial
scale;
b. The use of a design, formula,
scheme, method, process or
system of production that is new
and still untried in the
Philippines;
c. The pursuit of agricultural,
forestry or mining activities
and/or services determined by
 the BOI to be feasible and highly 3 Article 40 of the Code provides the criteria in
essential to the attainment of the determining whether an area is less-
national goal in relation to a developed, to wit: low per capita gross
declared specific national food domestic product; low level of investments;
and agricultural program for self- high rate of unemployment and/or
sufficiency and other social underemployment; and low level of
benefits of the project; or infrastructure development including its
d. The production of non- accessibility to develop urban centers.
conventional fuels, or the
manufacture of equipment which
utilizes such fuels or uses or
converts to coal or other non-
conventional fuels or sources of
energy in its production,
manufacturing or processing
operations.

In all cases, the final product

must substantially use domestic
raw materials whenever the same
are available, taking into
consideration the risks and
magnitude of investment.

Non-pioneer enterprises are

enterprises other than pioneer
enterprises.

2Article 32(2) of Executive Order No.226, as

amended, provides that an enterprise may still
be entitled to incentives even if the activity is
not listed in the IPP if:

1. the enterprise exports or plans to

export at least 50% of
production, or it is an existing
producer which will export part
of production under such
conditions and/or limited
incentives as the BOI may
determine; or
2. the enterprise is engaged or
proposing to engage in the sale
abroad of export products
bought by it from one or more
export producers; or
3. The enterprise is engaged or
proposing to engage in rendering
technical, professional or other
services or in exporting television
and motion pictures and musical
recordings made or produced in
the Philippines, either directly or
through a registered trader.