registered enterprise, at least sixty percent (60%) of the
Republic Act No. 7042 June 13, 1991
AN ACT TO PROMOTE FOREIGN INVESTMENTS,
PRESCRIBE THE PROCEDURES FOR REGISTERING
ENTERPRISES DOING BUSINESS IN THE PHILIPPINES,
AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of
the Philippines in Congress assembled:
Section 1. Title. - This Act shall be known as the, "Foreign
Investments Act of 1991".
Section 2. Declaration of Policy. - It is the policy of the State
to attract, promote and welcome productive investments from
foreign individuals, partnerships, corporations, and
governments, including their political subdivisions, in activities
which significantly contribute to national industrialization and
socioeconomic development to the extent that foreign
investment is allowed in such activity by the Constitution and
relevant laws. Foreign investments shall be encouraged in
enterprises that significantly expand livelihood and
employment opportunities for Filipinos; enhance economic
value of farm products; promote the welfare of Filipino
consumers; expand the scope, quality and volume of exports
and their access to foreign markets; and/or transfer relevant
technologies in agriculture, industry and support services.
Foreign investments shall be welcome as a supplement to
Filipino capital and technology in those enterprises serving
mainly the domestic market.
As a general rule, there are no restrictions on extent of foreign
ownership of export enterprises. In domestic market
enterprises, foreigners can invest as much as one hundred
percent (100%) equity except in areas included in the
negative list. Foreign owned firms catering mainly to the
domestic market shall be encouraged to undertake measures
that will gradually increase Filipino participation in their
businesses by taking in Filipino partners, electing Filipinos to
the board of directors, implementing transfer of technology to
Filipinos, generating more employment for the economy and
enhancing skills of Filipino workers.
Section 3. Definitions. - As used in this Act:
a) The term "Philippine national" shall mean a citizen of the
Philippines or a domestic partnership or association wholly
owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least
sixty percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the
Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee
is a Philippine national and at least sixty (60%) of the fund will
accrue to the benefit of the Philippine nationals: Provided,
That where a corporation and its non-Filipino stockholders
own stocks in a Securities and Exchange Commission (SEC)
capital stocks outstanding and entitled to vote of both
corporations must be owned and held by citizens of the
Philippines and at least sixty percent (60%) of the members of
the Board of Directors of both corporations must be citizens of
the Philippines, in order that the corporations shall be
considered a Philippine national;
b) The term "investment" shall mean equity participation in
any enterprise organized or existing under the laws of the
Philippines;
c) The term "foreign investment" shall mean as equity
investment made by a non-Philippine national in the form of
foreign exchange and/or other assets actually transferred to
the Philippines and duly registered with the Central Bank
which shall assess and appraise the value of such assets
other than foreign exchange;
d) The praise "doing business" shall include soliciting orders,
service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay
in the country for a period or periods totalling one hundred
eighty (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or
works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing
business: shall not be deemed to include mere investment as
a shareholder by a foreign entity in domestic corporations
duly registered to do business, and/or the exercise of rights
as such investor; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account;
e) The term "export enterprise" shall mean an enterprise
which produces goods for sale, or renders services to the
domestic market entirely or if exporting a portion of its output
fails to consistently export at least sixty percent (60%) thereof;
and
g) The term "Foreign Investments Negative List" or "Negative
List" shall mean a list of areas of economic activity whose
foreign ownership is limited to a maximum of forty ownership
is limited to a maximum of forty percent (40%) of the equity
capital of the enterprise engaged therein.
Section 4. Scope. - This Act shall not apply to banking and
other financial institutions which are governed and regulated
by the General Banking Act and other laws under the
supervision of the Central Bank.
Section 5. Registration of Investments of Non-Philippine existing law or the Foreign Investment Negative List under
Nationals. - Without need of prior approval, a non-Philippine Section 8 hereof.
national, as that term is defined in Section 3 a), and not
otherwise disqualified by law may upon registration with the A domestic market enterprise may change its status to export
Securities and Exchange Commission (SEC), or with the enterprise if over a three (3) year period it consistently exports
Bureau of Trade Regulation and Consumer Protection in each year thereof sixty per cent (60%) or more of its output.
(BTRCP) of the Department of Trade and Industry in the case
of single proprietorships, do business as defined in Section 3 Section 8. List of Investment Areas Reserved to
(d) of this Act or invest in a domestic enterprise up to one Philippine Nationals (Foreign Investment Negative List). -
hundred percent (100%) of its capital, unless participation of The Foreign Investment Negative List shall have three (3)
non-Philippine nationals in the enterprise is prohibited or component lists: A, B, and C:
limited to a smaller percentage by existing law and/or limited
to a smaller percentage by existing law and/or under the a) List A shall enumerate the areas of activities reserved to
provisions of this Act. The SEC or BTRCP, as the case may Philippine nationals by mandate of the Constitution and
be, shall not impose any limitations on the extent of foreign specific laws.
ownership in an enterprise additional to those provided in this
Act: Provided, however, That any enterprise seeking to avail b) List B shall contain the areas of activities and enterprises
of incentives under the Omnibus Investment Code of 1987 pursuant to law:
must apply for registration with the Board of Investments
1) Which are defense-related activities, requiring prior
(BOI), which shall process such application for registration in
clearance and authorization from Department of National
accordance with the criteria for evaluation prescribed in said
Defense (DND) to engage in such activity, such as the
Code: Provided, finally, That a non-Philippine national
manufacture, repair, storage and/or distribution of firearms,
intending to engage in the same line of business as an
ammunition, lethal weapons, military ordnance, explosives,
existing joint venture in his application for registration with
pyrotechnics and similar materials; unless such
SEC. During the transitory period as provided in Section 15
manufacturing or repair activity is specifically authorized, with
hereof, SEC shall disallow registration of the applying
a substantial export component, to a non-Philippine national
non-Philippine national if the existing joint venture enterprise,
by the Secretary of National Defense; or
particularly the Filipino partners therein, can reasonably prove
they are capable to make the investment needed for they are
2) Which have implications on public health and morals, such
competing applicant. Upon effectivity of this Act, SEC shall
as the manufacture and distribution of dangerous drugs; all
effect registration of any enterprise applying under this Act
forms of gambling; nightclubs, bars, beerhouses, dance halls;
within fifteen (15) days upon submission of completed
sauna and steambath houses and massage clinics.
requirements.
Small and medium-sized domestic market enterprises with
Section 6. Foreign Investments in Export Enterprises. -
paid-in equity capital less than the equivalent of five hundred
Foreign investment in export enterprises whose products and
thousand US dollars (US$500,000) are reserved to Philippine
services do not fall within Lists A and B of the Foreign
nationals, unless they involve advanced technology as
Investment Negative List provided under Section 8 hereof is
determined by the Department of Science and Technology.
allowed up to one hundred percent (100%) ownership.
Export enterprises which utilize raw materials from depleting
natural resources, with paid-in equity capital of less than the
Export enterprises which are non-Philippine nationals shall
equivalent of five hundred thousand US dollars (US$500,000)
register with BOI and submit the reports that may be required
are likewise reserved to Philippine nationals.
to ensure continuing compliance of the export enterprise with
its export requirement. BOI shall advise SEC or BTRCP, as
Amendments to List B may be made upon recommendation of
the case may be, of any export enterprise that fails to meet
the Secretary of National Defense, or the Secretary of Health,
the export ratio requirement. The SEC or BTRCP shall
or the Secretary of Education, Culture and Sports, indorsed
thereupon order the non-complying export enterprise to
by the NEDA, or upon recommendation motu propio of NEDA,
reduce its sales to the domestic market to not more than forty
approved by the President, and promulgated by Presidential
percent (40%) of its total production; failure to comply with
Proclamation.
such SEC or BTRCP order, without justifiable reason, shall
subject the enterprise to cancellation of SEC or BTRCP
c) List C shall contain the areas of investment in which
registration, and/or the penalties provided in Section 14
existing enterprises already serve adequately the needs of
hereof.
the economy and the consumer and do not require further
foreign investments, as determined by NEDA applying the
Section 7. Foreign Investments in Domestic Market
criteria provided in Section 9 of this Act, approved by the
Enterprises. - Non-Philippine nationals may own up to one
President and promulgated in a Presidential Proclamation.
hundred percent (100%) of domestic market enterprises
unless foreign ownership therein is prohibited or limited by

1
The Transitory Foreign Investment Negative List established
in Sec. 15 hereof shall be replaced at the end of the transitory
period by the first Regular Negative List to the formulated and
recommended by the NEDA, following the process and
criteria provided in Section 8 and 9 of this Act. The first
Regular Negative List shall be published not later than sixty
(60) days before the end of the transitory period provided in
said section, and shall become immediately effective at the
end of the transitory period. Subsequent Foreign Investment
Negative Lists shall become effective fifteen (15) days after
publication in two (2) newspapers of general circulation in the
Philippines: Provided, however, That each Foreign Investment
Negative List shall be prospective in operation and shall in no
way affect foreign investments existing on the date of its
publication.
Amendments to List B and C after promulgation and
publication of the first Regular Foreign Investment Negative
List at the end of the transitory period shall not be made more
often than once every two (2) years.
Section 9. Determination of Areas of Investment for
Inclusion in List C of the Foreign Investment Negative
List. - Upon petition by a Philippine national engage therein,
an area of investment may be recommended by NEDA for
inclusion in List C of the Foreign Investment Negative List
upon determining that it complies with all the following criteria:
a) The industry is controlled by firms owned at least sixty
percent (60%) by Filipinos;
b) Industry capacity is ample to meet domestic demand;
c) Sufficient competition exists within the industry;
d) Industry products comply with Philippine standards of
health and safety or, in the absence of such, with international
standards, and are reasonably competitive in quality with
similar products in the same price range imported into the
country;
e) Quantitative restrictions are not applied on imports of
directly competing products;
f) The leading firms of the industry substantially comply with
environmental standards; and
g) The prices of industry products are reasonable.
The petition shall be subjected to a public hearing at which
affected parties will have the opportunity to show whether the
petitioner industry adequately serves the economy and the
consumer, in general, and meets the above stated criteria in
particular. NEDA may delegate evaluation of the petition and
conduct of the public hearing to any government agency
having cognizance of the petitioner industry. The delegated
agency shall make its evaluation report and recommendations
to NEDA which retains the right and sole responsibility to
determine whether to recommend to the President to
promulgate the area of investment in List C of the Negative
List. An industry or area of investment included in List C of the
Negative List by Presidential Proclamation shall remain in the
said List C for two (2) years, without prejudice to re-inclusion
upon new petition, and due process.
Section 10. Strategic Industries. - Within eighteen (18)
months after the effectivity of this Act, the NEDA Board shall
formulate and publish a list of industries strategic to the
development of the economy. The list shall specify, as a
matter of policy and not as a legal requirement, the desired
equity participation by Government and/or private Filipino
investors in each strategic industry. Said list of strategic
industries, as well as the corresponding desired equity
participation of government and/or private Filipino investors,
may be amended by NEDA to reflect changes in economic
needs and policy directions of Government. The amended list
of strategic industries shall be published concurrently with
publication of the Foreign Investment Negative List.
The term "strategic industries" shall mean industries that are
characterized by all of the following:
a) Crucial to the accelerated industrialization of the country,
b) Require massive capital investments to achieve economies
of scale for efficient operations;
c) Require highly specialized or advanced technology which
necessitates technology transfer and proven production
techniques in operations;
d) Characterized by strong backward and forward linkages
with most industries existing in the country, and
e) Generate substantial foreign exchange savings through
import substitution and collateral foreign exchange earnings
through export of part of the output that will result with the
establishment, expansion or development of the industry.
Section 11. Compliance with Environmental Standards. -
All industrial enterprises regardless of nationality of ownership
shall comply with existing rules and regulations to protect and
conserve the environment and meet applicable environmental
standards.
Section 12. Consistent Government Action. - No agency,
instrumentality or political subdivision of the Government shall
take any action on conflict with or which will nullify the
provisions of this Act, or any certificate or authority granted
hereunder.
Section 13. Implementing Rules and Regulations. - NEDA,
in consultation with BOI, SEC and other government agencies
concerned, shall issue the rules and regulations to implement
this Act within one hundred and twenty (120) days after its
effectivity. A copy of such rules and regulations shall be
furnished the Congress of the Republic of the Philippines.
2
Section 14. Administrative Sanctions. - A person who
violates any provision of this Act or of the terms and
conditions of registration or of the rules and regulations
issued pursuant thereto, or aids or abets in any manner any
violation shall be subject to a fine not exceeding One hundred
thousand pesos (P100,000).
If the offense is committed by a juridical entity, it shall be
subject to a fine in an amount not exceeding ½ of 1% of total
paid-in capital but not more than Five million pesos
(P5,000,000). The president and/or officials responsible
therefor shall also be subject to a fine not exceeding Two
hundred thousand pesos (P200,000).
In addition to the foregoing, any person, firm or juridical entity
involved shall be subject to forfeiture of all benefits granted
under this Act.
SEC shall have the power to impose administrative sanctions
as provided herein for any violation of this Act or its
implementing rules and regulations.
Section 15. Transitory Provisions. - Prior to effectivity of the
implementing rules and regulations of this Act, the provisions
of Book II of Executive Order 226 and its implementing rules
and regulations shall remain in force.
During the initial transitory period of thirty-six (36) months
after issuance of the Rules and Regulations to implement this
Act, the Transitory Foreign Investment Negative List shall
consist of the following:
A. List A:
1. All areas of investment in which foreign ownership is limited
by mandate of Constitution and specific laws.
B. List B:
1. Manufacture, repair, storage and/or distribution of firearms,
ammunitions, lethal weapons, military ordinance, explosives,
pyrotechnics and similar materials required by law to be
licensed by and under the continuing regulation of the
Department of National Defense; unless such manufacturing
or repair activity is specifically authorized with a substantial
export component, to a non-Philippine national by the
Secretary of National Defense;
2. Manufacture and distribution of dangerous drugs; all forms
of gambling; nightclubs, bars, beerhouses, dance halls; sauna
and steam bathhouses, massage clinic and other like
activities regulated by law because of risks they may pose to
public health and morals;
3. Small and medium-size domestic market enterprises with
paid-in equity capital or less than the equivalent of
US$500,000, unless they involve advanced technology as
determined by the Department of Science and Technology,
and
4. Export enterprises which utilize raw materials from
depleting natural resources, and with paid-in equity capital of
less than the equivalent US$500,000.
C. List C:
1. Import and wholesale activities not integrated with
production or manufacture of goods;
2. Services requiring a license or specific authorization, and
subject to continuing regulations by national government
agencies other than BOI and SEC which at the time of
effectivity of this Act are restricted to Philippine nationals by
existing administrative regulations and practice of the
regulatory agencies concerned: Provided, That after effectivity
of this Act, no other services shall be additionally subjected to
such restrictions on nationality of ownership by the
corresponding regulatory agencies, and such restrictions
once removed shall not be reimposed; and
3. Enterprises owned in the majority by a foreign licensor
and/or its affiliates for the assembly, processing or
manufacture of goods for the domestic market which are
being produced by a Philippine national as of the date of
effectivity of this Act under a technology, know-how and/or
brand name license from such licensor during the term of the
license agreement: Provided, That, the license is duly
registered with the Central Bank and/or the Technology
Transfer Board and is operatively in force as of the date of
effectivity of this Act.
NEDA shall make the enumeration as appropriate of the
areas of the investment covered in this Transitory Foreign
Investment Negative List and publish the Negative List in full
at the same time as, or prior to, the publication of the rules
and regulations to implement this Act.
The areas of investment contained in List C above shall be
reserved to Philippine nationals only during the transitory
period. The inclusion of any of them in the regular Negative
List will require determination by NEDA after due public
hearings that such inclusion is warranted under the criteria set
forth in Section 8 and 9 hereof.
Section 16. Repealing Clause. - Articles forty-four (44) to
fifty-six (56) of Book II of Executive Order No. 226 are hereby
repealed.
All other laws or parts of laws inconsistent with the provisions
of this Act are hereby repealed or modified accordingly.
Section 17. Separability. - If any part or section of this Act is
declared unconstitutional for any reason whatsoever, such
declaration shall not in any way affect the other parts or
sections of this Act.
Section 18. Effectivity. - This Act shall take effect fifteen (15)
days after approval and publication in two (2) newspaper of
general circulation in the Philippines.
3
Approved: June 13, 1991

4
EXECUTIVE ORDER NO. 226 July 16, 1987
THE OMNIBUS INVESTMENTS CODE OF 1987
WHEREAS, the Government is committed to encourage
investments in desirable areas of activities;
WHEREAS, to facilitate investment, there is a need to adopt a
cohesive and consolidated investments incentives law;
WHEREAS, it is imperative to integrate basic laws on
investment, to clarify and harmonize their provisions for the
guidance of domestic and foreign investors;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of
the Philippines, do hereby order and ordain the following:
Article 1. Short Title. This Order shall be known as the
"Omnibus Investments Code" of 1987.
Article 2. Declaration of Investment Policies. To accelerate
the sound development of the national economy in
consonance with the principles and objectives of economic
nationalism and in pursuance of a planned economically
feasible and practical dispersal of industries and the
promotion of small and medium scale industries, under
conditions which will encourage competition and discourage
monopolies, the following are declared policies of the State:
1. The State shall encourage private Filipino and foreign
investments in industry, agriculture, forestry, mining, tourism
and other sectors of the economy which shall: provide
significant employment opportunities relative to the amount of
the capital being invested; increase productivity of the land,
minerals, forestry, aquatic and other resources of the country,
and improve utilization of the products thereof; improve
technical skills of the people employed in the enterprise;
provide a fountain for the future development of the economy;
meet the tests of international competitiveness; accelerate
development of less developed regions of the country; and
result in increased volume and value of exports for the
economy. lawphi1.net
2. The State shall ensure the holistic development by
safeguarding the well-being of the social, cultural and
ecological life of the people. For this purpose, consultation
with affected communities will be conducted whenever
necessary. lawphi1.net
3. The Sate shall extend to projects which will significantly
contribute to the attainment of these objectives, fiscal
incentives without which said projects may not be established
in the locales, number and/or pace required for optimum
national economic development. Fiscal incentive system shall
be devised to compensate for market imperfections, to reward
performance contributing to economic development, be
cost-efficient and be simple to administer.
4. The Sate considers the private sector as the prime mover
for economic growth. In this regard, private initiative is to be
encouraged, with deregulation and self-regulation of business
activities to be generally adopted where dictated by urgent
social concerns.
5. The State shall principally play a supportive role, rather
than a competitive one, providing the framework, the climate
and the incentives within which business activity is to take
place.
6. The State recognize that there are appropriate roles for
local and foreign capital to play in the development of the
Philippine economy and that it is the responsibility of
Government to define these roles and provide the climate for
their entry and growth.
7. The State recognizes that industrial peace is an essential
element of economic growth and that it is a principal
responsibility of the State to ensure that such condition
prevails.
8. Fiscal incentives shall be extended to stimulate the
establishment and assist initial operations of the enterprise,
and shall terminate after a period of not more than 10 years
from registration or start-up of operation unless a specific
period is otherwise stated.
The foregoing declaration of investment policies shall apply to
all investment incentive schemes.
CHAPTER II
BOARD OF INVESTMENTS
Article 3. The Board of Investments. The Board of
Investments shall implement the provisions of Books One to
Five of this Code.
Article 4. Composition of the Board. The Board of
Investments shall be composed of seven (7) governors: The
Secretary of Trade and Industry, three (3) Undersecretaries of
Trade and Industry to be chosen by the President, and three
(3) representatives from other government agencies and the
private sector. The Secretary of Trade and Industry shall be
concurrently Chairman of the Board and the Undersecretary
of the Department of Trade and Industry for Industry and
Investments shall be appointed by the President for a term of
four (4) years: Provided, That upon the expiration of his term,
a governor shall serve as such until his successor shall have
been appointed and qualified: Provided, further, That no
vacancy shall be filled except for the unexpired portion of any
term, and that no one may be designated to be governor of
the Board in an acting capacity but all appointments shall be
ad interim or permanent.
Article 5. Qualifications of Governors of the Board. The
governors of the Board shall be citizens of the Philippines, at
least thirty (30) years old, of good moral character and of
recognized competence in the fields of economics, finance,
5
banking, commerce, industry, agriculture, engineering, law,
management or labor.
Article 6. Appointment of Board Personnel. The Board shall
appoint its technical staff and other personnel subject to Civil
Service Law, rules and regulations.
Article 7. Powers and Duties of the Board. The Board shall
be responsible for the regulation and promotion of
investments in the Philippines. It shall meet as often as may
be necessary generally once a week on such day as it may
fix. Notice of regular and special meetings shall be given all
members of the Board. The presence of four (4) governors
shall constitute a quorum and the affirmative vote of four (4)
governors in a meeting validly held shall be necessary to
exercise its powers and perform its duties, which shall be as
follows:
(1) Prepare annually the Investment Priorities Plan as defined
in Article 26, which shall contain a listing of specific activities
that can qualify for incentives under Book I of this Code, duly
supported by the studies of existing and prospective demands
for such products and services in the light of the level and
structure of income, production, trade, prices and relevant
economic and technical factors of the regions as well as
existing facilities;
(2) Promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this Code
relevant to the Board:
(3) Process and approve applications for registration with the
Board, imposing such terms and conditions as it may deem
necessary to promote the objectives of this Code, including
refund of incentives when appropriate, restricting availment of
certain incentives not needed by the project in the
determination of the Board, requiring performance bonds and
other guarantees, and payment of application, registration,
publication and other necessary fees and when warranted
may limit the availment of the tax holiday incentive to the
extent that the investor's country law or treaties with the
Philippines allows a credit for taxes paid in the Philippines;
(4) After due hearing, decide controversies concerning the
implementation of the relevant books of this Code that may
arise between registered enterprises or investors therein and
government agencies, within thirty (3)) days after the
controversy has been submitted for decision: Provided, That
the investor or the registered enterprise may appeal the
decision of the Board within thirty (30) days from receipt
thereof to the President;
(5) Recommend to the Commissioner of Immigration and
Deportation the entry into the Philippines for employment of
foreign nationals under this Code;
(6) Periodically check and verify, either by inspection of the
books or by requiring regular reports, the proportion of the
participation of Philippine nationals in a registered enterprise
to ascertain compliance with its qualification to retain
registration under this Code;
(7) Periodically check and verify the compliance by registered
enterprises with the relevant provisions of this Code, with the
rules and regulations promulgated under this Code and with
the terms and conditions of registration;
(8) After due notice, cancel the registration or suspend the
enjoyment of incentives benefits of any registered enterprise
and/or require refund of incentives enjoyed by such enterprise
including interests and monetary penalties, for (a) failure to
maintain the qualifications required by this Code for
registration with the Board of (b) for violation of any provisions
of this Code, of the rules and regulations issued under this
Code, of the terms and conditions of registration, or of laws
for the protection of labor or of the consuming public:
Provided, That the registration of an enterprise whose project
timetable, as set by the Board is delayed by one year, shall be
considered automatically cancelled unless otherwise
reinstated as a registered enterprise by the Board;
(9) Determine the organizational structure taking into account
Article 6 of this Code; appoint, discipline and remove its
personnel consistent with the provisions of the Civil Service
Law and Rules;
(10) Prepare or contract for the preparation of feasibility and
other pre-investment studies for pioneer areas either upon its
own initiative; or upon the request of Philippine nationals who
commit themselves to invest therein and show the capability
of doing so; Provided, That if the venture is implemented,
then the amount advanced by the Board shall be repaid within
five (5) years from the date the commercial operation of said
enterprise starts;
(11) When feasible and considered desirable by the Board,
require registered enterprises to list their shares of stock in
any accredited stock exchange or directly offer a portion of
their capital stock to the public and/or their employees;
(12) Formulate and implement rationalization programs for
certain industries whose operation may result in dislocation,
overcrowding or inefficient use of resources, thus impeding
economic growth. For this purpose, the Board may formulate
guidelines for progressive manufacturing programs, local
content programs, mandatory sourcing requirements and
dispersal of industries. In appropriate cases and upon
approval of the President, the Board may restrict, either totally
or partially, the importation of any equipment or raw materials
or finished products involved in the rationalization program;
(13) In appropriate cases, the subject to the conditions which
the Board deems necessary, suspend the nationality
requirement provided for in this Code or any other
nationalization statute in cases of ASEAN projects or
investments by ASEAN nationals in preferred projects, and
6
with the approval of the President, extend said suspension to
other international complementation arrangements for the
manufacture of a particular product on a regional basis to take
advantage of economies of scale;
(14) Extend the period of availment of incentives by any
registered enterprise; Provided, That the total period of
availment shall not exceed ten (10) years, subject to any of
the following criteria:
(a) The registered enterprise has suffered operational force
majeure that has impaired its viability;
(b) The registered enterprise has not fully enjoyed the
incentives granted to it for reasons beyond its control;
(c) The project of the registered enterprise has a gestation
period which goes beyond the period of availment of needed
incentives; and
(d) The operation of the registered enterprise has been
subjected to unforeseen changes in government policies,
particularly, protectionalism policies of importing countries,
and such other supervening factors which would affect the
competitiveness of the registered firm;
(15) Regulate the making of investments and the doing of
business within the Philippines by foreigners or business
organizations owned in whole or in part by foreigners;
(16) Prepare or contract for the preparation of industry and
sectoral development programs and gather and compile
statistical, technical, marketing, financial and other data
required for the effective implementation of this Code;
(17) Within four (4) months after the close of the fiscal year,
submit annual reports to the President which shall cover its
activities in the administration of this Code, including
recommendations on investment policies;
(18) Provide, directly or through Philippine Diplomatic
Missions, such information as may be of interest to
prospective foreign investors;
(19) Collate, analyze and compile pertinent information and
studies concerning areas that have been or may be declared
preferred areas of investments; and
(20) Enter into agreements with other agencies of government
for the simplification and facilitation of systems and
procedures involved in the promotion of investments,
operation of registered enterprises and other activities
necessary for the effective implementation of this Code;
(21) Generally, exercise all the powers necessary or incidental
to attain the purposes of this Code and other laws vesting
additional functions on the Board.
Article 8. Powers and Duties of the Chairman. The Chairman
shall have the following powers and duties:
(1) To preside over the meetings of the Board;
(2) To render annual reports to the President and such special
reports as may be requested;
(3) To act as liaison between investors seeking joint venture
arrangements in particular areas of investments;
(4) Recommend to the Board such policies and measures he
may deem necessary to carry out the objectives of this Code;
and
(5) Generally, to exercise such other powers and perform
such other duties as may be directed by the Board of
Governors from time to time.
Article 9. Powers and Duties of the Vice-Chairman. The
Vice-Chairman shall have the following powers and duties:
(1) To act as Managing Head of the Board;
(2) To preside over the meetings of the Board in the absence
of the Chairman;
(3) Prepare the Agenda for the meetings of the Board and
submit for its consideration and approval the policies and
measures which the Chairman deems necessary and proper
to carry out the provisions of this Code;
(4) Assist registered enterprises and prospective investors to
have their papers processed with dispatch by all government
offices, agencies, instrumentalities and financial institutions;
and
(5) Perform the other duties of the Chairman in the absence
of the latter, and such other duties as may be assigned to him
by the Board of Governors.
BOOK I
INVESTMENTS WITH INCENTIVES
TITLE I
PREFERRED AREAS OF INVESTMENTS
CHAPTER I
DEFINITIONS OF TERMS
Article 10. "Board" shall mean the Board of Investments
created under this Code.
Article 11. "Registered Enterprises" shall mean any
individual, partnership, cooperative, corporation or other entity
incorporated and/or organized and existing under Philippine
laws; and registered with the Board in accordance with this
Book: Provided, however, That the term "registered
enterprise" shall not include commercial banks, savings and
7
mortgage banks, rural banks, savings and loan associations,
building and loan associations, developmental banks, trust
companies, investment banks, finance companies, brokers
and dealers in securities, consumers cooperatives and credit
unions, and other business organizations whose principal
purpose or principal source of income is to receive deposits,
lend or borrow money, buy and sell or otherwise deal, trade or
invest in common or preferred stocks, debentures, bonds or
other marketable instruments generally recognized as
securities, or discharge other similar intermediary, trust of
fiduciary functions.
Article 12. "Technological assistance contracts" shall mean
contracts for: (1) the transfer, by license otherwise, of patents,
processes, formulas or other technological rights of foreign
origin; and/or (2) foreign assistance concerning technical and
factory management, design, planning, construction,
operation and similar matters.
Article 13. "Foreign loans" shall mean any credit facility or
financial assistance other than equity investment
denominated and payable in foreign currency or where the
creditor has the option to demand payment in foreign
exchange and registered with the Central Bank and the
Board.
Article 14. "Foreign Investments" shall mean equity
investments owned by a non-Philippine national made in the
form of foreign exchange or other assets actually transferred
to the Philippines and registered with the Central Bank and
the Board, which shall assess and appraise the value of such
assets other than foreign exchange.
Article 15. "Philippine national" shall mean a citizen of the
Philippines or a domestic partnership or association
wholly-owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least
sixty per cent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the
Philippines, or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee
is a Philippine national and at least sixty per cent (60%) of the
fund will accrue to the benefit of Philippine nationals;
Provided, That where a registered and its non-Filipino
stockholders own stock in a registered enterprise, at least
sixty per cent (60%) of the capital stock outstanding and
entitled to vote of both corporations must be owned and held
by the citizens of the Philippines and at least sixty per cent
(60%) of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that
the corporation shall be considered a Philippine national.
Article 16. "Preferred areas of investments" shall mean the
economic activities that the Board shall have declared as
such in accordance with Article 28 which shall be either
non-pioneer or pioneer.
Article 17. "Pioneer enterprise" shall mean a registered
enterprise (1) engaged in the manufacture, processing or
production, and not merely in the assembly or packaging of
goods, products, commodities or raw materials that have not
been or are not being produced in the Philippines on a
commercial scale or (2) which uses a design, formula,
scheme, method, process or system of production or
transformation of any element, substance or raw materials
into another raw material or finished goods which is new and
untried in the Philippines or (3) engaged in the pursuit of
agricultural, forestry and mining activities and/or services
including the industrial aspects of food processing whenever
appropriate, pre-determined by the Board, in consultation with
the appropriate Department, to be feasible and highly
essential to the attainment of the national goal, in relation to a
declared specific national food and agricultural program for
self-sufficiency and other social benefits of the project or (4)
which produces non-conventional fuels or manufactures
equipment which utilize non-conventional sources of energy
or uses or converts to coal or other non-conventional fuels or
sources of energy in its production, manufacturing or
processing operations. Provided, That the final product in any
of the foregoing instances, involves or will involve substantial
use and processing of domestic raw materials, whenever
available; taking into account the risks and magnitude of
investment: Provided, further, That the foregoing definitions
shall not in any way limit the rights and incentives granted to
less-developed-area enterprises provided under Title V, Book
I, hereof.
Article 18. "Non-pioneer enterprise" shall include all
registered producer enterprises other than pioneer
enterprises.
Article 19. "Expansion" shall include modernization and
rehabilitation and shall mean increase of existing volume or
value of production or upgrading the quality of the registered
product or utilization of inefficient or idle equipment under
such guidelines as the Board may adopt.
Article 20. "Measured capacity" shall mean the estimated
additional volume of production or service which the Board
determines to be desirable in each preferred area of
investment in order to supply the needs of the economy at
reasonable prices, taking into account the export potential of
the product, including economies of scale which would render
such product competitive in the world market. Measured
capacity shall not be less than the amount by which the
measurable domestic and country's potential export market
demand exceeds the existing productive capacity in said
preferred areas. For export market industries, when
warranted the Board shall base measured capacity on the
availability of domestic raw materials after deducting the
needs of the domestic market therefor.
Article 21. "Tax credit" shall mean any of the credits against
taxes and/or duties equal to those actually paid or would have
been paid to evidence which tax credit certificate shall be
8
issued by the Secretary of Finance or his representative, or
the Board, if so delegated by the Secretary of Finance. The
tax credit certificates including those issued by the Board
pursuant to laws repealed by this Code but without in any way
diminishing the scope of negotiability under their laws of issue
are transferable under such conditions as may be determined
by the Board after consultation with the Department of
Finance. The tax credit certificate shall be used to pay taxes,
duties, charges and fees due to the National Government;
Provided, That the tax credits issued under this Code shall
not form part of the gross income of the grantee/transferee for
income tax purposes under Section 29 of the National Internal
Revenue Code and are therefore not taxable: Provided,
further, That such tax credits shall be valid only for a period of
ten (10) years from date of issuance.
Article 22. "Export products" shall mean manufactured or
processed products the total F.O.B. Philippine port value of
the exports of which did not exceed five million dollars in the
United States Currency in the calendar year 1968 and which
meet the local content requirement, if any, set by the Board,
and standards of quality set by the Bureau of Product
Standards, or, in default of such standards, by the Board or by
such public or private organization, chamber, group or body
as the Board may designate. The above definition
notwithstanding, the Investment Priorities Plan may include
other products for export subjects to such conditions and
limited incentives as may be determined by the Board.
Article 23. "Export sales" shall mean the Philippine port
F.O.B. value, determined from invoices, bills of lading, inward
letters of credit, landing certificates, and other commercial
documents, of exports products exported directly by a
registered export producer or the net selling price of export
product sold by a registered export producer to another export
producer, or to an export trader that subsequently exports the
same: Provided, That sales of export products to another
producer or to an export trader shall only be deemed export
sales when actually exported by the latter, as evidenced by
landing certificates or similar commercial documents:
Provided, further, That without actual exportation the following
shall be considered constructively exported for purposes of
this provision: (1) sales to bonded manufacturing warehouses
of export-oriented manufacturers; (2) sales to export
processing zones; (3) sales to registered export traders
operating bonded trading warehouses supplying raw
materials used in the manufacture of export products under
guidelines to be set by the Board in consultation with the
Bureau of Internal Revenue and the Bureau of Customs; (4)
sales to foreign military bases, diplomatic missions and other
agencies and/or instrumentalities granted tax immunities, of
locally manufactured, assembled or repacked products
whether paid for in foreign currency or not: Provided, further,
That export sales of registered export trader may include
commission income: and Provided, finally, That exportation of
goods on consignment shall not be deemed export sales until
the export products consigned are in fact sold by the
consignee.
Sales of locally manufactured or assembled goods for
household and personal use to Filipinos abroad and other
non-residents of the Philippines as well as returning Overseas
Filipinos under the Internal Export Program of the government
and paid for in convertible foreign currency inwardly remitted
through the Philippine banking systems shall also be
considered export sales.
Article 24. "Production cost" shall mean the total of the cost
of direct labor, raw materials, and manufacturing overhead,
determined in accordance with generally accepted accounting
principles, which are incurred in manufacturing or processing
the products of a registered enterprise.
Article 25. "Processing" shall mean converting of raw
materials into marketable from through physical, mechanical,
chemical, electrical, biochemical, biological or other means or
by a special treatment or a series of actions, such as
slaughtering, milling, pasteurizing, drying or dessicating, quick
freezing, that results in a change in the nature or state of the
products. Merely packing or packaging shall not constitute
processing.
Article 26. "Investment Priorities Plan" shall mean the over-all
plan prepared by the Board which includes and contains:
(a) The specific activities and generic categories of economic
activity wherein investments are to be encouraged and the
corresponding products and commodities to be grown,
processed or manufactured pursuant thereto for the domestic
or export market;
(b) Specific public utilities which can qualify for incentives
under this Code and which shall be supported by studies of
existing and prospective regional demands for the services of
such public utilities in the light of the level and structure of
income, production, trade, prices and relevant economic and
technical factors of the regions as well as the existing facilities
to produce such services;
(c) Specific activities where the potential for utilization of
indigenous no-petroleum based fuels or sources of energy
can be best promoted; and
(d) Such other information, analyzes, data, guidelines or
criteria as the Board may deem appropriate.
The specific and generic activities to be included in the
Investment Priorities Plan with their status as pioneer or
non-pioneer shall be determined by the Board in accordance
with the criteria set forth in this Book.
CHAPTER II
INVESTMENT PRIORITIES PLAN
Article 27. Investment Priorities Plan. Not later than the end
of March of every year, the Board of Investments, after
consultation with the appropriate government agencies and
the private sector, shall submit to the President an Investment
9
Priorities Plan: Provided, however, That the deadline for
submission, may be extended by the President.
Article 28. Criteria in Investment Priority Determination. No
economic activity shall be included in the Investment Priority
Plan unless it is shown to be economically, technically and
financially sound after thorough investigation and analysis by
the Board.
The determination of preferred areas of investment to be
listed in the Investment Priorities Plan shall be based on
long-run comparative advantage, taking into account the
value of social objectives and employing economic criteria
along with market, technical, and financial analyses.
The Board shall take into account the following:
(a) Primarily, the economic soundness of the specific activity
as shown by its economic internal rate of return;
(b) The extent of contribution of an activity to a specific
developmental goal;
(c) Other indicators or comparative advantage;
(d) Measured capacity as defined in Article 20; and
(e) The market and technical aspects and considerations of
the activity proposed to be included.
In any of the declared preferred areas of investment, the
Board may designate as pioneer areas the specific products
and commodities that meet the requirements of Article 17 of
this Code and review yearly whether such activity, as
determined by the Board, shall continue as pioneer,
otherwise, it shall be considered as non-pioneer and
accordingly listed as such in the Investment Priorities Plan or
removed from the Investment Priorities Plan.
Article 29. Approval of the Investment Priorities Plan. 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 Investment for revision.
Upon the effectivity of the plan or portions thereof, the
President shall issue all necessary directives to all
departments, bureaus, agencies or instrumentalities of the
government to ensure the implementation of the plan by the
agencies concerned in a synchronized and integrated
manner. No government body shall adopt any policy or take
any course of action contrary to or inconsistent with the plan.
Article 30. Amendments. 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 or the designation of measured capacities, or
terminate the status of preference. In no case, however, shall
any amendment of the plan impair whatever rights may have
already been legally vested in qualified enterprises which
shall continue to enjoy such rights to the full extent allowed
under this Code. The Board shall not accept applications in
an area of investment prior to the approval of the same as a
preferred area nor after approval of its deletion as a preferred
area of investment.
Article 31. Publication. Upon approval of the plan, in whole or
in part, or upon approval of an amendment thereof, the plan
or the amendment, specifying and declaring the preferred
areas of investment and their corresponding measured
capacity shall be published in at least one (1) newspaper of
general circulation and all such areas shall be open for
application until publication of an amendment or deletion
thereof, or until the Board approves registration of enterprises
which fill the measured capacity.
CHAPTER III
REGISTRATION OF ENTERPRISES
Article 32. Qualifications of a Registered Enterprises. To be
entitled to registration under the Investment Priorities Plan, an
applicant must satisfy the Board that:
(1) He is a citizen of the Philippines, in case the applicant is a
natural person, or in case of a partnership or any other
association, it is organized under Philippine laws and that at
least sixty percent (60%) of its capital is owned and controlled
by citizens of the Philippines; 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 as
defined under Article 15 of this Code, and at least sixty per
cent (60%) of the members of the Board of Directors are
citizens of the Philippines. If it does not possess the required
degree of ownership as mentioned above by Philippine
nationals, the following circumstances must be satisfactorily
established:
(a) That it proposes to engage in a pioneer projects as
defined in Article 17 of this Code, which, considering the
nature and extent of capital requirements, processes,
technical skills and relative business risks involved, is in the
opinion of the Board of such a nature that the available
measured capacity thereof cannot be readily and adequately
filled by Philippine nationals; or, if the applicant is exporting at
least seventy per cent (70%) of is total production, the export
requirement herein provided may be reduced in meritorious
cases under such conditions and/or limited incentives as the
Board may determine;
(b) That it obligates itself to attain the status of a Philippine
national, as defined in Article 15, within thirty (30) years from
the date of registration or with such longer period as the
Board may require taking into account the export potential of
the project: Provided, That a registered enterprise which
exports one hundred percent (100%) of its total production
need not comply with this requirement;
10
(c) That the pioneer are it will engage in is one that is not Article 35. Criteria for Evaluation of Applications. The
within the activities reserved by the Constitution or other laws following criteria will be considered in the evaluation of
of the Philippines to the Philippine citizens or corporations applications for registration under a preferred area:
owned and controlled by Philippine citizens;
(a) The extent of ownership and control by Philippine citizens
(2) The applicant is proposing to engage in a preferred project of the enterprises;
listed or authorized in the current Investment Priorities Plan
within a reasonable time to be fixed by the Board or, if not so (b) The economic rates of return;
listed, at least fifty percent (50%) of its total production is for
export or it is an existing producer which will export part of (c) The measured capacity Provided, That estimates of
production under such conditions and/or limited incentives as measured capacities shall be regularly reviewed and updated
the Board may determine; or that the enterprise is engaged or to reflect changes in market supply and demand conditions;
proposing to engage in the sale abroad of export products Provided, Further, That measured capacity shall not result in
bought by it from one or more export producers; or the a monopoly in any preferred area of investment which would
enterprise in engaged or proposing to engage in rendering unduly restrict trade and fair competition nor shall it be used
technical, professional or other services or in exporting to deny the entry of any enterprise in any field of endeavor or
television and motion pictures and musical recordings made activity;
or produced in the Philippines, either directly or through a
registered trader. (d) The amount of foreign exchange earned, used or saved in
their operations;
(3) The applicant is capable of operating on a sound and
efficient basis of contributing to the national development of (e) The extent to which labor, materials and other resources
the preferred area in particular and of the national economy in obtained from indigenous sources are utilized;
general; and
(f) The extent to which technological advances are applied
(4) If the applicant is engaged or proposes to engage in and adopted to local condition;
undertakings or activities other than preferred projects, it has
installed or undertakes to install an accounting system (g) The amount of equity and degree to which the ownership
adequate to identify the investments, revenues, costs, and of such equity is spread out and diversified; and
profits or losses of each preferred project undertaken by the
(h) Such other criteria as the Board may determine.
enterprise separately from the aggregate investment,
revenues, costs and profits or losses of the whole enterprise
Article 36. Appeal from Board's Decision. Any order or
or to establish a separate corporation for each preferred
decision of the Board shall be final and executory after thirty
project if the Board should so require to facilitate proper
(30) days from its promulgation. Within the said period of
implementation of this Code.
thirty (30) days, said order or decision may be appealed to the
Office of the President. Where an appeal has been filed, said
Article 33. Application. Applications shall be filed with the
order or decision shall be final and executory ninety (90) days
Board, recorded in a registration book and the date appearing
after the perfection of the appeal, unless reversed.
therein and stamped on the application shall be considered
the date of official acceptance.
Article 37. Certificate of Registration. A registered enterprise
under this Code shall be issued a certificate of registration
Whenever necessary, the Board, through the People's
under the seal of the Board of Investments and the signature
Economic Councils, shall consult the communities affected on
of its Chairman and/or such other officer or employee of the
the acceptability of locating the registered enterprise within
Board as it may empower and designate for the purpose. The
their community.
certificate shall be in such form and style as the Board may
Article 34. Approval and Registration Procedures. The Board determine and shall state, among other matters:
is authorized to adopt rules and regulations to facilitate action
(a) The name of the registered enterprise;
on applications filed with it; prescribe criteria for the
evaluation of several applications filed in one preferred area;
(b) The preferred area of investment in which the registered
devise standard forms for the use of applicants and delegate
enterprise is proposing to engage;
to the regional offices of the Department of Trade and
Industry the authority to receive and process applications for
(c) The nature of the activity it is undertaking or proposing to
enterprises to be located in their respective regions.
undertake, whether pioneer or non-pioneer, and the
registered capacity of the enterprise; and
Applications filed shall be considered automatically approved
if not acted upon by the Board within twenty (20) working
(d) The other terms and conditions to be observed by the
days from official acceptance thereof.
registered enterprise by virtue of the registration.

11
 TITLE II
BASIC RIGHTS AND GUARANTEES
Article 38. Protection of Investments. All investors and
registered enterprises are entitled to the basic rights and
guarantees provided in the Constitution. Among other rights
recognized by the Government of the Philippines are the
following:
(a) Repatriation of Investments. In the case of foreign
investments, the right to repatriate the entire proceeds of the
liquidation of the investment in the currency in which the
investment was originally made and at the exchange rate
prevailing at the time of repatriation, subject to the provisions
of Section 74 of Republic Act No. 265 as amended;
For investments made pursuant to Executive Order No. 32
and its implementing rules and regulations, remittability shall
be as provided therein.
(b) Remittance of Earnings. In the case of foreign
investments, the right to remit earnings from the investment in
the currency in which the investment was originally made and
at the exchange rate prevailing at the time of remittance,
subject to the provisions of Section 74 of Republic Act No.
265 as amended;
(c) Foreign Loans and Contracts. The right to remit at the
exchange rate prevailing at the time of remittance such sums
as may be necessary to meet the payments of interest and
principal on foreign loans and foreign obligations arising from
technological assistance contracts, subject to the provisions
of Section 74 of Republic Act No. 265 as amended;
(d) Freedom from Exploriation. There shall be no
expropriation by the government of the property represented
by investments or of the property of the enterprise except for
public use or in the interest of national welfare or defense and
upon payment of just compensation. In such cases, foreign
investors or enterprises shall have the right to remit sums
received as compensation for the expropriated property in the
currency in which the investment was originally made and at
the exchange rate at the time of remittance, subject to the
provisions of Section 74 of Republic Act No. 265 as amended;
(e) Requisition of Investment. There shall be no requisition of
the property represented by the investment or of the property
of enterprises, except in the event of war or national
emergency and only for the duration thereof. Just
compensation shall be determined and paid either at the time
of requisition or immediately after cessation of the state of war
or national emergency. Payments received as compensation
for the requisitioned property may be remitted in the currency
in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to
the provisions of Section 74 of Republic Act No. 265 as
amended.
TITLE III
INCENTIVES TO REGISTERED ENTERPRISES
Article 39. Incentives to Registered Enterprises. All
registered enterprises shall be granted the following
incentives to the extent engaged in a preferred area of
investment;
(a) Income Tax Holiday.
(1) For six (6) years from commercial operation for pioneer
firms and four (4) years for non-pioneer firms, new registered
firms shall be fully exempt from income taxes levied by the
National Government. Subject to such guidelines as may be
prescribed by the Board, the income tax exemption will be
extended for another year in each of the following cases:
i. the project meets the prescribed ratio of capital equipment
to number of workers set by the Board;
ii. utilization of indigenous raw materials at rates set by the
Board;
iii. the net foreign exchange savings or earnings amount to at
least US$500,000.00 annually during the first three (3) years
of operation.
The preceding paragraph notwithstanding, no registered
pioneer firm may avail of this incentive for a period exceeding
eight (8) years.
(2) For a period of three (3) years from commercial operation,
registered expanding firms shall be entitled to an exemption
from income taxes levied by the National Government
proportionate to their expansion under such terms and
conditions as the Board may determine; Provided, however,
That during the period within which this incentive is availed of
by the expanding firm it shall not be entitled to additional
deduction for incremental labor expense.
(3) The provision of Article 7 (14) notwithstanding, registered
firms shall not be entitled to any extension of this incentive.
(b) Additional Deduction for Labor Expense. For the first five
(5) years from registration a registered enterprise shall be
allowed an additional deduction from the taxable income of
fifty percent (50%) of the wages corresponding to the
increment in the number of direct labor for skilled and
unskilled workers if the project meets the prescribed ratio of
capital equipment to number of workers set by the Board:
Provided, That this additional deduction shall be doubled if
the activity is located in less developed areas as defined in
Art. 40.
(c) Tax and Duty Exemption on Imported Capital Equipment.
Within five (5) years from the effectivity of this Code,
importations of machinery and equipment and accompanying
spare parts of new and expanding registered enterprise shall
be exempt to the extent of one hundred percent (100%) of the
12
customs duties and national internal revenue tax payable
thereon: Provided, That the importation of machinery and
equipment and accompanying spare parts shall comply with
the following conditions:
(1) They are not manufactured domestically in sufficient
quantity, of comparable quality and at reasonable prices;
(2) They are reasonably needed and will be used exclusively
by the registered enterprise in the manufacture of its
products, unless prior approval of the Board is secured for the
part-time utilization of said equipment in a non-registered
activity to maximize usage thereof or the proportionate taxes
and duties are paid on the specific equipment and machinery
being permanently used for non-registered activities; and
(3) The approval of the Board was obtained by the registered
enterprise for the importation of such machinery, equipment
and spare parts.
In granting the approval of the importations under this
paragraph, the Board may require international canvassing
but if the total cost of the capital equipment or industrial plant
exceeds US$5,000,000, the Board shall apply or adopt the
provisions of Presidential Decree Numbered 1764 on
International Competitive Bidding.
If the registered enterprise sells, transfers or disposes of
these machinery, equipment and spare parts without prior
approval of the Board within five (5) years from date of
acquisition, the registered enterprise and the vendee,
transferee, or assignee shall be solidarily liable to pay twice
the amount of the tax exemption given it.
The Board shall allow and approve the sale, transfer or
disposition of the said items within the said period of five (5)
years if made:
(aa) to another registered enterprise or registered domestic
producer enjoying similar incentives;
(bb) for reasons of proven technical obsolescence; or
(cc) for purposes of replacement to improve and/or expand
the operations of the registered enterprise.
(d) Tax Credit on Domestic Capital Equipment. A tax credit
equivalent to one hundred percent (100%) of the value of the
national internal revenue taxes and customs duties that would
have been waived on the machinery, equipment and spare
parts, had these items been imported shall be given to the
new and expanding registered enterprise which purchases
machinery, equipment and spare parts from a domestic
manufacturer: Provided, That (1) That the said equipment,
machinery and spare parts are reasonably needed and will be
used exclusively by the registered enterprise in the
manufacture of its products, unless prior approval of the
Board is secured for the part-time utilization of said equipment
in a non-registered activity to maximize usage thereof; (2) that
the equipment would have qualified for tax and duty-free
importation under paragraph (c) hereof; (3) that the approval
of the Board was obtained by the registered enterprise; and
(4) that the purchase is made within five (5) years from the
date of effectivity of the Code. If the registered enterprise
sells, transfers or disposes of these machinery, equipment
and spare parts, the provisions in the preceding paragraph for
such disposition shall apply.
(e) Exemption from Contractor's Tax. The registered
enterprise shall be exempt from the payment of contractor's
tax, whether national or local.
(f) Simplification of Customs Procedure. Customs procedures
for the importation of equipment, spare parts, raw materials
and supplies, and exports of processed products by
registered enterprises shall be simplied by the Bureau of
Customs.
(g) Unrestricted Use of Consigned Equipment. Provisions of
existing laws notwithstanding, machinery, equipment and
spare part consigned to any registered enterprises shall not
be subject to restrictions as to period of use of such
machinery, equipment and spare parts Provided, that the
appropriate re-export bond is posted unless the importation is
otherwise covered under subsections (c) and (m) of this
Article. Provided, further, that such consigned equipment shall
be for the exclusive use of the registered enterprise.
If such equipment is sold, transferred or otherwise disposed
of by the registered enterprise the related provision of Article
39 (c) (3) shall apply. Outward remittance of foreign exchange
covering the proceeds of such sale, transfer or disposition
shall be allowed only upon prior Central Bank approval.
(h) Employment of Foreign Nationals. Subject to the
provisions of Section 29 of Commonwealth Act Number 613,
as amended, a registered enterprise may employ foreign
nationals in supervisory, technical or advisory positions for a
period not exceeding five (5) years from its registration,
extendible for limited periods at the discretion of the Board:
Provided, however, That when the majority of the capital stock
of a registered enterprise is owned by foreign investors, the
position of president, treasurer and general manager or their
equivalents may be retained by foreign nationals beyond the
period set forth herein.
Foreign nationals under employment contract within the
purview of this incentive, their spouses and unmarried
children under twenty-one (21) years of age, who are not
excluded by Section 29 of Commonwealth Act Numbered
613, as amended, shall be permitted to enter and reside in
the Philippines during the period of employment of such
foreign nationals.
A registered enterprise shall train Filipinos as understudies of
foreign nationals in administrative, supervisory and technical
13
skills and shall submit annual reports on such training to the
Board.
(i) Exemption on Breeding Stocks and Genetic Materials. The
importation of breeding stocks and genetic materials within
ten (10) years from the date of registration or commercial
operation of the enterprise shall be exempt from all taxes and
duties: Provided, That such breeding stocks and genetic
materials are (1) not locally available and/or obtainable locally
in comparable quality and at reasonable prices; (2)
reasonably needed in the registered activity; and (3) approved
by the Board.
(j) Tax Credit on Domestic Breeding Stocks and Genetic
Materials. A tax credit equivalent to one hundred percent
(100%) of the value of national internal revenue taxes and
customs duties that would have been waived on the breeding
stocks and genetic materials had these items been imported
shall be given to the registered enterprise which purchases
breeding stocks and generic materials from a domestic
producer: Provided, 1) That said breeding stocks and generic
materials would have qualified for tax and duty free
importation under the preceding paragraph; 2) that the
breeding stocks and genetic materials are reasonably needed
in the registered activity; 3) that the approval of the board has
been obtained by the registered enterprise; and 4) that the
purchase is made within ten (10) years from date of
registration or commercial operation of the registered
enterprise.
(k) Tax Credit for Taxes and Duties on Raw Materials. Every
registered enterprise shall enjoy a tax credit equivalent to the
National Internal Revenue taxes and Customs duties paid on
the supplies, raw materials and semi-manufactured products
used in the manufacture, processing or production of its
export products and forming part thereof, exported directly or
indirectly by the registered enterprise: Provided, however, that
the taxes on the supplies, raw materials and semi-
manufactured products domestically purchased are indicated
as a separate item in the sales invoice.
Nothing herein shall be construed as to preclude the Board
from setting a fixed percentage of export sales as the
approximate tax credit for taxes and duties of raw materials
based on an average or standard usage for such materials in
the industry.
(l) Access to Bonded Manufacturing/Trading Warehouse
System. Registered export oriented enterprises shall have
access to the utilization of the bonded warehousing system in
all areas required by the project subject to such guidelines as
may be issued by the Board upon prior consultation with the
Bureau of Customs.
(m) Exemption from Taxes and Duties on Imported Spare
Parts. Importation of required supplies and spare parts for
consigned equipment or those imported tax and duty free by a
registered enterprise with a bonded manufacturing warehouse
shall be exempt from customs duties and national internal
revenue taxes payable thereon, Provided, However, That at
least seventy percent (70%) of production is exported;
Provided, further, that such spare parts and supplies are not
locally available at reasonable prices, sufficient quantity and
comparable quality; Provided, finally, That all such spare parts
and supplies shall be used only in the bonded manufacturing
warehouse of the registered enterprise under such
requirements as the Bureau of Customs may impose.
(n) Exemption from Wharfage Dues and any Export Tax, Duty,
Impost and Fee. The provisions of law to the contrary
notwithstanding, exports by a registered enterprise of its non-
traditional export products shall be exempted of its
non-traditional export products shall be exempted from any
wharfage dues, and any export tax, duty, impost and fee.
TITLE IV
INCENTIVES TO LESS-DEVELOPED-AREA REGISTERED
ENTERPRISE
Article 40. A registered enterprise regardless of nationality
located in a less-developed-area included in the list prepared
by the Board of Investments after consultation with the
National Economic & Development Authority and other
appropriate government agencies, taking into consideration
the following criteria: low per capita gross domestic product;
low level of investments; high rate of unemployment and/or
underemployment; and low level of infrastructure
development including its accessibility to develop urban
centers, shall be entitled to the following incentives in addition
to those provided in the preceding article:
(a) Pioneer incentives. An enterprise in a less-developed-area
registered with the Board under Book I of this Code, whether
proposed, or an expansion of an existing venture, shall be
entitled to the incentives provided for a pioneer registered
enterprise under its law of registration.
(b) Incentives for necessary and Major Infrastructure and
Public Utilities. Registered enterprise establishing their
production, processing or manufacturing plants in an area that
the Board designates as necessary for the proper dispersal of
industry or in area which the Board finds deficient in
infrastructure, public utilities, and other facilities, such as
irrigation, drainage or other similar waterworks infrastructure
may deduct from taxable income an amount equivalent to one
hundred percent (100%) of necessary and major
infrastructure works it may have undertaken with the prior
approval of the Board in consultation with other government
agencies concerned; Provided, That the title to all such
infrastructure works shall upon completion, be transferred to
the Philippine Government: Provided, further, That any
amount not deducted for a particular year may be carried over
for deduction for subsequent years not exceeding ten (10)
years from commercial operation.
14
 TITLE V
GENERAL PROVISIONS
Article 41. Power of the President to Rationalize Incentives.
The President may, upon recommendation of the Board and
in the interest of national development, rationalize the
incentives scheme herein provided; extend the period of
availment of incentives or increase rates of tax exemption of
any project whose viability or profitability require such
modification.
Article 42. Refund and Penalties. In case of cancellation of
the certificate granted under this Code, the Board may, in
appropriate cases, require the refund of incentives availed of
and impose corresponding fines and penalties.
Article 43. Benefits of Multiple Area Enterprises. When a
registered enterprise engages in activities or endeavors that
have not been declared preferred areas of investments, the
benefits and incentives accruing under this Code to registered
enterprises and investors therein shall be limited to the
portion of the activities of such registered enterprise as is a
preferred area of investment.
BOOK II
FOREIGN INVESTMENTS WITHOUT INCENTIVES
TITLE I
CHAPTER I
DEFINITIONS AND SCOPE OF THIS BOOK
Article 44. Definition of terms. As used in this Book, the term
"investment" shall mean equity participation in any enterprise
formed, organized or existing under the laws of the
Philippines; and the phrase "doing business" shall include
soliciting orders, purchases, service contracts, opening
offices, whether called "liaison" offices or branches;
appointing representatives or distributors who are domiciled in
the Philippines for a period or periods totalling one hundred
eighty (180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that
imply a continuity of commercial dealings or arrangements
and contemplate to that extent the performance of acts or
works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business
organization.
Article 45. Non-Applicability to Banking Institutions. This
Book shall not apply to banking institutions which are
governed and regulated by the General Banking Act and
other laws which are under the supervision of the Central
Bank.
CHAPTER II
INVESTMENTS
Article 46. Permitted Investments.
(1) Without need of prior authority, anyone not a Philippine
national as that term is defined in Article 15 of this Code, and
not otherwise disqualified by law, may invest:
(a) In any enterprise registered under Book One hereof, to the
extent that the total investment of non-Philippine nationals
therein would not affect its status as a registered enterprise
under the law;
(b) In an enterprise not registered under Book One hereof, to
the extent that the total investment of non-Philippine nationals
herein shall not exceed forty percent (40%) of the outstanding
capital of that enterprise, unless existing law forbids any non-
Philippine ownership in the enterprise or limits ownership by
non-Philippine national to a percentage smaller than forty
percent (40%).
(2) Within thirty (30) days after notice of the investment is
received by it, the enterprise in which any investment is made
by a non-Philippine national shall register the same with the
Board of Investments for purposes of record. Investments
made in the form of foreign exchange or other assets actually
transferred to the Philippines shall also be registered with the
Central Bank. The Board shall assess and appraise the value
of such assets other than foreign exchange.
Article 47. Permissible Investments. If an investment by a
non-Philippine national in an enterprise not registered under
Book One hereof is such that the total participation by
non-Philippine nationals in the outstanding capital thereof
shall exceed forty percent (40%), the enterprise must obtain
prior authority from the Board of Investments, which authority
shall be granted unless the proposed investment
(a) Would conflict with existing constitutional provisions and
laws regulating the degree of required ownership by
Philippine nationals in the enterprise; or
(b) Would pose a clear and present danger of promoting
monopolies or combinations in restraint of trade; or
(c) Would be made in enterprise engaged in an area
adequately being exploited by Philippine nationals; or
(d) Would conflict or be inconsistent with the Investment
Priorities Plan in force at the time the investment is sought to
be made; or
(e) Would not contribute to the sound and balanced
development of the national economy on a self-sustaining
basis.
Investments made in the form of foreign exchange or other
assets actually transferred to the Philippines shall also be
registered with the Central Bank. The Board shall assess and
appraise the value of such assets other than foreign
exchange.
15
 CHAPTER II
LICENSE TO DO BUSINESS
Article 48. Authority to Do Business. No alien, and no firm
association, partnership, corporation or any other form of
business organization formed, organized, chartered or
existing under any laws other than those of the Philippines, or
which is not a Philippine national, or more than forty per cent
(40%) of the outstanding capital of which is owned or
controlled by aliens shall do business or engage in any
economic activity in the Philippines or be registered, licensed,
or permitted by the Securities and Exchange Commission or
by any other bureau, office, agency, political subdivision or
instrumentality of the government, to do business, or engage
in any economic activity in the Philippines without first
securing a written certificate from the Board of Investments to
the effect:
(1) That the operation or activity of such alien, firm,
association, partnership, corporation or other form of business
organization, is not inconsistent with the Investment Priorities
Plan;
(2) That such business or economic activity will contribute to
the sound and balanced development of the national
economy on a self-sustaining basis;
(3) That such business or economic activity by the applicant
would not conflict with the Constitution or laws of the
Philippines;
(4) That the field of business or economic activity is not one
that is being adequately exploited by Philippine nationals; and
(5) That the entry of applicant therein will not pose a clear and
present danger of promoting monopolies or combinations in
restraint of trade.
Article 49. Requirements to be Imposed by the Board. Upon
granting said certificate, the Board shall impose the following
requirements on the alien or the firm, association, partnership,
corporation or other form of business organization that is not
organized or existing under the laws of the Philippines
(1) To appoint a citizen of the Philippines, of legal age, good
moral character and reputation, and sound financing standing,
as resident agent, who shall be authorized to accept
summons and other legal process in behalf of the applicant;
(2) To establish an office in the Philippines and to notify the
Securities and Exchange Commission in writing of the
applicant's exact address and of every contemplated transfer
thereof or of the opening of new offices, at least fifteen (15)
days before the same are to be effected; and once effected,
not later than ten (10) days afterwards;
(3) To bring assets into the Philippines to constitute the capital
of the office or offices, of such kind and value as the Board
may deem necessary to protect those who may deal with the
applicant, and to maintain that capital unimpaired during the
period it does business in the Philippines;
(4) To present prior proof that citizens of the Philippines and
corporations or other business organizations organized or
existing under the laws of the Philippines are allowed to do
business in the country or individual state within the federal
country of which applicant is a citizen or in which it is
domiciled: Provided, however, That if the state or country of
domicile of the applicant imposes on, or requires of, Philippine
nationals other conditions, requirements or restrictions
besides those set forth in this Code, the Board of Investments
shall impose the said other conditions, requirements or
restrictions on the applicant, if in its judgment, the imposition
thereof shall foster the sound and balanced development of
the national economy on a self-sustaining basis;
(5) To submit to the Securities and Exchange Commission
certified copies of applicant's charter and by-laws and all
amendments thereto, if any, with their translation into an
official language within twenty (20) days after their adoption or
after the grant of the prescribed certificate by the Board of
Investments and annually of applicant's financial statements
showing all assets, liabilities and net worth and results of
operations, setting out separately those pertaining to the
branch office;
(6) To keep a complete set of accounting records with the
resident agent, which shall fully and faithfully reflect all
transactions within the Philippines, and to permit inspections
thereof by the Securities and Exchange Commission, the
Bureau of Internal Revenue and the Board of Investments;
(7) To give priority to resident creditors as against
non-resident creditors and owners or stockholders in the
distribution of assets within the Philippines upon insolvency,
dissolution or revocation of the license;
(8) To give the Securities and Exchange Commission at least
six (6) months advance notice in writing of applicant's
intention to stop doing business within the Philippines; and to
give such public notice thereof as the Securities and
Exchange Commission may require for the protection of
resident creditors and others dealing with the applicant; and
(9) Not to terminate any franchise, licensing or other
agreement that applicant may have with a resident of the
Philippines authorizing the latter to assemble, manufacture or
sell within the Philippines the products of the applicant, except
for violation thereof or other just cause and upon payment of
compensation and reimbursement of investment and other
expenses incurred by the licensee in developing a market for
the said products: Provided, however, That in case of
disagreement, the amount of compensation or reimbursement
shall be determined by the country where the licensee is
domiciled or has its principal office who shall require the
applicant to file a bond in such amount as, in its opinion, is
sufficient for this purpose.
16
The above requirements shall be in addition to those set forth
in the Corporation Code of the Philippines for authorizing
foreign corporations to transact business in the Philippines.
Article 50. Cause for Cancellation of Certificate of Authority
or Payment of Fine. A violation of any of the requirements set
forth in Article 49 or of the terms and conditions which the
Board may impose shall be sufficient cause to cancel the
certificate of authority issued pursuant to this Book and/or
subject firms to the payment of fines in accordance with the
rules and regulations issued by the Board: Provided, however,
That aliens or foreign firms, associations, partnerships,
corporations or other forms of business organization not
organized or existing under the laws of the Philippines which
may have been lawfully licensed to do business in the
Philippines prior to the effectivity of R.A. 5455, shall, with
respect to the activities for which they were licensed and
actually engaged in prior to the effectivity of said Act, not be
subject to the provisions of Article 48 and 49 but shall be
subject to the reporting requirements prescribed by the Board:
Provided, further, That where the issuance of said license has
been irregular or contrary to law, any person adversely
affected thereby may file an action with the Regional Trial
Court where said alien or foreign business organization
resides or has its principal office to cancel the said license. In
such cases, no injunction shall issue without notice and
hearing; and appeals and other proceedings for review shall
be filed directly with the Supreme Court.
TITLE II
GENERAL PROVISIONS
Article 51. Mergers and Consolidations. The provisions of
this Book Two shall apply to any merger, consolidation,
syndicate or any other combination of firms, associations,
partnership or other forms of business organization that will
result in ownership or control by persons or entities that are
not Philippine nationals or have foreign equity participation, of
more than forty per cent (40%) of the outstanding capital of
whatever organizations results from the merger,
consolidation, syndicate or other combination.
Article 52. Local Government Action. No agency,
instrumentality or political subdivision of the Government shall
take any action in conflict with or which will nullify the
provisions of Book Two of this Code, or any certificate of
authority granted hereunder.
Article 53. Automatic Registration. Application filed under this
Book shall be considered automatically approved if not acted
upon within ten (10) working days from official acceptance
thereof.
Article 54. Publication and Posting of Notices. Immediately
after the application has been given due course by the Board,
the Secretary of the Board or any official designated by the
Board shall require the applicant to publish the notice of the
action of the Board thereon at his expense once in a
newspaper of general circulation in the province or city where
the applicant has its principal office, and post copies of said
notice in conspicuous places, in the office of the Board or in
the building where said office is located; setting forth in such
copies the name of the applicant, the business in which it is
engaged or proposes to engage or invest, and such other
data and information as may be required by the Board. No
approval or certificate shall be valid without the publication
and posting of notices as herein provided.
Article 55. Limited Authority to do Business. When
appropriate, the Board may grant permissible investments or
authority to do business under Book Two of this Code for a
limited period where the need to prove economic viability of
such activity warrants the issuance of a temporary
authorization.
Article 56. Periodic Reports. The Board shall periodically
check and verify compliance with these provisions, either by
inspection of the books or by requiring regular reports from
aliens or foreign firms, domestic enterprises with foreign
investments and new entities licensed to do business under
Article 48 of this Code.
A summary of said reports shall be periodically submitted by
the Board to the President. For this purpose, the Board may
require other government agencies licensing and/or regulating
foreign enterprises or domestic firms with foreign equity, to
furnish the Board with reports on such foreign investments.
Article 57. Penal Clause.
(1) Without prejudice to the provisions of Articles 42 and 50
hereof a violation of any provision of Books I and II of this
Code, or of the terms and conditions of registration, or of the
rules and regulations promulgated pursuant thereto, or the act
of abetting or aiding in any manner any such violation, shall
be punished by a fine not to exceed one hundred thousand
pesos (P100,000.00) or imprisonment for not more than ten
(10) years, at the discretion of the Court.
(2) No official or employee of the government, its subdivisions
or instrumentalities shall appear as counsel for or act as
agent or representative of, or in any manner intervene or
intercede, directly or indirectly, in behalf of any party in any
transaction with the Board regarding any application under
Books I and II of this Code. The penalty for violation of this
prohibition is the same as that provided for in the preceding
paragraph. If the offender is an appointive official or
employee, the maximum of the penalty herein prescribed
shall be imposed, and the offender shall suffer the additional
penalty of perpetual disqualification from public office, without
prejudice to any administrative action against him.
(3) If the offense is committed by a juridical entity, its
president and/or other officials responsible therefor shall be
subject to the penalty prescribed above. If the offender or the
president/official, in cases where the offense was committed
17
by a juridical entity, is an alien, he shall be deported without
further proceedings on the part of the Deportation Board in
addition to the penalty herein prescribed and shall, if
naturalized, be automatically denaturalized from the date his
sentence becomes final.
(4) Payment of the tax due after apprehension shall not
constitute a valid defense in any prosecution for violation of
any provision of this Code.
BOOK III
INCENTIVES TO MULTINATIONAL COMPANIES
ESTABLISHES REGIONAL OR AREA HEADQUARTERS IN
THE PHILIPPINES
CHAPTER I
LICENSING OF THE MULTINATIONAL COMPANY
Article 58. Qualifications of Multinational Company. Any
foreign business entity formed, organized and existing under
any laws other than those of the Philippines whose purpose,
as expressed in its organizational documents or by resolution
of its Board of Directors or its equivalent, is to 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 therefor from the Securities and
Exchange Commission, upon the favorable recommendation
of the Board of Investments.
The Securities and Exchange Commission shall, within thirty
(30) days from the effectivity of this Code, issue the
implementing rules and regulations. The following minimum
requirements shall, however, be complied with by the said
foreign entity.
(a) A certification from the Philippine Foreign Trade Senior
Officer or in the absence of such an official, a Philippine
Consul in the foreign firm's home country that said foreign firm
is an entity engaged in international trade with affiliates,
subsidiaries or branch offices in the Asia-Pacific Region.
(b) A certification from a principal officer of the foreign entity to
the effect that the said foreign entity has been authorized by
its Board of Directors or governing copy to establish its
regional headquarters in the Philippines, specifying that:
1. The activities of the regional headquarters shall be limited
to acting as a supervisory, communications and coordinating
center for its subsidiaries, affiliates and branches in the
region;
2. The 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;
3. The 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 or
terminate the services of any expatriate at least fifteen (15)
days before the same is effected.
(c) 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. Within thirty (30) days
from receipt of Certificate of Registration from the Securities
and Exchange Commission, the multinational company will
submit to the Securities and Exchange Commission a
Certificate of inward remittance from a local bank showing
that it has remitted to the Philippines the amount of at least
thirty thousand United States dollars or its equivalent in other
foreign currencies and converted the same to Philippine
currency. Annually, within thirty (30) days from the anniversary
date of the multinational company's registration as a regional
or area headquarters with the Securities and Exchange
Commission, it will submit proof to the Securities and
Exchange Commission of inward remittance amounting to at
least fifty thousand United States dollars or its equivalent in
other foreign currencies during the past year.
(d) Any willful 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 II
INCENTIVES TO EXPATRIATES
Article 59. Multiple entry visa. Foreign personnel of regional
or area headquarters of multinational companies, their
respective spouses, and unmarried children under twenty-one
years of age, if accompanying them or if following to join them
after their admission into the Philippines as non- immigrant
shall be issued a multiple entry special visa, valid for a period
of one year, to enter the Philippines: Provided, That a
responsible officer or the applicant company submits a
certificate to the effect that the person who seeks entry into
the Philippines is an executive of the applicant company and
will work exclusively for applicant's company and will work
exclusively for applicant's regional or area headquarters
which is duly licensed to operate in the Philippines, and that
he will receive a salary and will be paid by the headquarters in
the Philippines an amount equivalent to at least twelve
thousand United States dollars, or the equivalent in other
foreign currencies per annum.
The admission and stay shall be co-terminus with the validity
of the multiple entry special visa. The stay, however, is
extendible yearly upon submission to the Commission on
Immigration and Deportation of a sworn certification by a
responsible officer of the regional or area headquarters; that
its license to operate remains valid and subsisting; that he
18
has been paid in the Philippines from the date of original
admission, the equivalent of at least one thousand United
States dollars per month, or its equivalent in other foreign
currencies; and that the regional or area headquarters has
withheld the tax due on said compensation and the same has
been paid to the Bureau of Internal Revenue.
Non-immigrant who have been admitted under the multiple
entry special visa, as well as their respective spouses and
dependents, shall be exempt from: the payment of all fees
due under the immigration and alien registration laws;
securing alien certificates of registration; and obtaining
immigration clearance certificates, and all types of clearances
required by any government department or agency, except
that upon final departure from the Philippines the employer of
the said non-immigrants shall so advise in writing the
Commission on Immigration and Deportation at least five (5)
working days prior to the non-immigrant's departure, and the
finally departing non-immigrant employee shall be required to
submit to the said office a tax clearance from the Bureau of
Internal Revenue.
Article 60. Withholding Tax of 15 %. Aliens employed by
regional or area headquarters of multinational corporations
shall be subject for each taxable year upon their gross income
received from the regional or area headquarters established
in the Philippines by multinational companies as salaries,
wages, annuities, compensations, remunerations, and
emoluments to a tax equal to fifteen percentum of such gross
income.
Article 61. Tax and Duty Free Importation. An alien executive
of the regional or area headquarters of a multinational
company shall enjoy tax and duty free importation of personal
and household effects as provided for under Section 105 (h)
of the Tariff and Customs Code, as amended, and Section
169 (b) (4) of the Internal Revenue Code, as amended.
Article 62. Travel Tax Exemption. Personnel of multinational
companies performing technical and supervisory functions
with regional headquarters at, but not engaged in business in
the Philippines and the dependents of such foreign personnel
if joining them during the period of their assignment in the
Philippines, as certified to by the Board of Investments, shall
be exempted from the payment of travel tax imposed under
Section 1 of Presidential Decree No. 1183, by securing a
Travel Tax Certificate from the Philippine Tourism Authority.
CHAPTER III
INCENTIVES TO THE REGIONAL HEADQUARTERS
Article 63. Exemption from Income Tax. Regional or area
headquarters established in the Philippines by multinational
corporations and which headquarters do not earn or derive
income from the Philippines and which act as supervisory,
communications and coordinating center for their affiliates,
subsidiaries, or branches in the Asia-Pacific Regional shall
not be subject to income tax.
Article 64. Exemption from Contractor's Tax. The regional or
area headquarters established in the Philippines by
multinational corporations, including their alien executives,
are exempted from the contractor's tax.
Article 65. Exemption from all Kinds of Local Licenses Fees,
Dues. The regional or area headquarters of multinational
companies shall be exempt from all kinds of local licenses,
fees, dues, imposts or any other local taxes or burdens.
Article 66. Tax and Duty Free Importation of Training
Materials; Importation of Motor Vehicles. Regional or area
headquarters shall also enjoy tax and duty free importation of
equipment and materials for training, conferences which are
needed for the functions of the regional or area headquarters
and which are not locally available subject to the prior
approval of the Board of Investments.
Regional or area headquarters shall be entitled to the
importation of motor vehicles subject to the prior approval of
the Board and the payment of the corresponding taxes and
duties: Provided, That such motor vehicles shall be for the
exclusive use of its expatriate executives and that the number
thereof shall not exceed the number of its expatriate
executives and that such motor vehicles may be replaced
every three (3) years from their importation.
Article 67. Exemption from Registration Requirements. The
regional or area headquarters of multinational companies
shall be exempt from the provisions of Book II of this Code.
BOOK IV
INCENTIVES TO MULTINATIONAL COMPANIES
ESTABLISHING REGIONAL WAREHOUSES TO SUPPLY
SPARE PARTS OR MANUFACTURED COMPONENTS AND
RAW MATERIALS TO THE ASIA-PACIFIC REGION AND
OTHER FOREIGN MARKETS
Article 68. Qualifications. A multinational company organized
and existing under any laws other than those of the
Philippines 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 in accordance with the provisions of Book III of
this Code and the rules and regulations implementing the
same may also establish regional warehouse or warehouses
in the Philippines, after securing a license therefor from the
Board of Investments.
The following minimum requirements shall be submitted or
complied with by the said foreign entity in accordance with the
rules and regulations to be issued by the Board of
Investments as provided for in Article 7 (2) of this Code.
(a) A certification from the Foreign Trade Officer or in the
absence of such an official, a Philippine Consul in the foreign
19
firm's home country that said foreign firm is engaged in
international trade and supplies or will supply spare parts or
manufactured components and raw materials to its
distributors or markets in the Asia-Pacific Region.
(b) A certification from a principal officer of the foreign entity to
the effect that said foreign entity has been authorized by its
Board of Directors or governing body to establish its regional
warehouse in the Philippines, specifying that:
1. The activities of the regional warehouse shall be limited to
serving as a supply depot for the storage, deposit,
safekeeping of its spare parts or manufactured components
and raw materials including the packing, covering, putting up,
marking, labelling and cutting or altering to customer's
specification, mounting and/or packaging into kits or
marketable lots thereof, to fill up transactions and sales made
by its head offices or parent companies and to serving as a
storage or warehouse of goods purchased locally by the
home office of the multinational for export abroad; Provided,
That said locally purchased goods for export may be stored in
the regional warehouse only after they have been cleared for
export in accordance with the laws and regulations, including
those of the Central Bank and simplified procedures
governing exports. The regional warehouse shall not directly
engage in trade nor directly solicit business, promote any
sale, nor enter into any contract for the sale or disposition of
goods in the Philippines.
2. The regional warehouse will not derive any income from
the sources within the Philippines and its personnel will not
participate in any manner in the management of any
subsidiary, affiliate or branch office it might have in the
Philippines.
3. The personnel of the regional headquarters shall be
responsible for the operation of the regional warehouse
subject to the provisions of this Code.
(c) The multinational company shall pay the Board of
Investments and the appropriate Regional Collector of
Customs the corresponding license fees and storage fees to
be determined by said offices.
(d) An application for the establishment of a regional
warehouse shall be made in writing to the Board of
Investments upon recommendation of the Bureau of
Customs. The application shall describe the premises, the
location and capacity of the regional warehouse and the
purpose for which the building is to be used.
The jurisdiction and responsibility of supervising the regional
warehouses shall be vested on the Bureau of Customs.
The Board of Investments, in consultation with the Regional
Director of Customs of the district where the warehouse will
be situated shall cause an examination of the premises to be
made with reference particularly to the location, construction
and means provided for the safekeeping of its articles and if
found satisfactory, it may authorize its establishment without
complying with the requirements of any other government
body and aimed at providing speedy procedure for its
establishment, subject to the following conditions:
1) That the articles to be stored in the warehouse are spare
parts or manufactured components and/or raw materials of
the multinational company operator for distribution and supply
to its Asia-Pacific markets including packaging, coverings,
brands, labels and warehouse equipment as provided in Art.
69 (a) hereof;
2) That the entry or importation, storage or re-export of the
goods destined for or to be stored in the regional warehouse
will not involve any dollar outlay from Philippine sources;
3) That they are of such character as to be readily identifiable
for re-export; and in case of local distribution they shall be
subject to Article 69 paragraph (b) and the guidelines
implementing Book IV of this Code;
4) That they shall be allowed provisional entry expeditiously
by means of a pro forma invoice of the parent company,
identified, examined and appraised by the Regional Collector
of Customs and they shall be directly delivered to and kept in
the regional warehouses and released therefrom only in
accordance with Article 69 paragraphs (a) and (b) and the
guidelines implementing Book IV of this Code;
In the absence of a Regional Collector of Customs where the
volume of the establishment of regional warehouses does not
yet warrant the creation of said offices, the duties of the
Regional Collector of Customs shall be performed by the
Collector of Customs of the district where the regional
warehouse will be located.
5) Each shipment of goods which will be stored in the regional
warehouse shall be covered by an affidavit of the
multinational company operator setting forth that said articles
shall be exclusively used as supply for its Asia-Pacific
markets and stating the C & F price thereof;
6) That it shall file an ordinary warehousing bond in an
amount equal to ONE HUNDRED PER CENT (100%) of the
ascertained customs duties on the articles imported without
prejudice to its filing a general warehousing bond in lieu of the
ordinary warehousing bond.
7) The percentage of annual allowable withdrawal for
domestic use shall be subject to the approval of the Board of
Investments; Provided, however, That in no case shall such
withdrawals exceed thirty per cent (30%) of the value of
goods it has brought in for any given year and the payment of
the corresponding taxes and duties.
Article 69. Tax Treatment of Imported Articles in the Regional
Warehouse.
20
(a) Tax Incentives for Qualified Goods Destined for
Re-exportation to the Asia-Pacific and other Foreign Markets.
Except as otherwise provided in this Code, 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 Board of
Investments for the use exclusively on the goods stored,
except those prohibited by law, brought into the regional
warehouse from abroad to be kept, stored and/or deposited or
used therein and re-exported directly therefrom under the
supervision of the Regional Collector of Customs for
distribution to its Asia-Pacific and other foreign markets in
accordance with the guidelines implementing Book IV of this
Code 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, the provisions of law to the contrary notwithstanding.
(b) Payment of Applicable Duties and Taxes on Qualified
Goods subject to Laws and Regulations Covering Imported
Merchandise if destined for the Local Market. Any spare
parts, manufactured components, raw materials and other
items sent, delivered, released or taken from the regional
warehouse to the local market in accordance with the
guidelines implementing Book IV of this Code shall be subject
to the payment of customs duties, taxes and other charges
and for which purpose, the proper commercial invoice of the
head offices or parent companies shall be submitted to the
Regional Collector of Customs; and shall be subject to laws
and regulations governing imported merchandise, Provided,
that in case any of the foregoing items are sold, bartered,
hired or used for purposes other than they were intended for
without prior compliance with the guidelines implementing
Book IV of this Code and without prior payment of the duty,
tax or other charge which would have been due and payable
at the time of entry if the articles had been entered without the
benefit of this decree, shall be subject to forfeiture and the
importation shall constitute a fraudulent practice against
customs revenue punishable under Section 3602, as
amended, of the Tariff and Customs Code of the Philippines;
Provided, further, that a sale pursuant to a judicial order shall
not be subject to the preceding proviso without prejudice to
the payment of duties, taxes and other charges.
Article 70. Exemption from the Maximum Storage Period
under the Tariff and Customs Code; Period of Storage in the
Regional Warehouse. The provision of the law in Section
1908 of the Tariff and Customs Code of the Philippines, as
amended, to the contrary notwithstanding, articles duly
entered for warehousing may remain in the regional
warehouses for a period of two (2) years from the time of their
transfer to the regional warehouse, which period may be
extended with the approval of the Board of Investments for an
additional period of one (1) year upon payment of the
corresponding storage fee on the unexported articles, as
provided for under Article 68 paragraph (c) for each extension
until they are re-exported in accordance with the guideline
implementing Book IV of this Code. Any article, withdrawn,
release or removed contrary to the provisions of said
guidelines shall be forfeited pursuant to the provisions of
Article 69, paragraph (b) hereof.
Article 71. Rules and Regulations on the Jurisdiction,
Operation and Control over Qualified Goods Stored in the
Regional Warehouse. The Board of Investments and the
Bureau of Customs shall jointly issue special rules and
regulations on the receiving, handling, custody, entry,
examinations, classifications, delivery, storage, warehousing,
manipulation and packaging, release for re-exportation and
for the safekeeping, recording, inventory and liquidation of
said qualified goods, any existing law notwithstanding. Such
rules and regulations shall be formulated in consultation with
the applicants/operators of regional warehouses in order to be
responsive to the objective of providing a procedure for the
speedy inflow and outflow of the qualified goods which are
destined for the Asia-Pacific and other foreign markets and
keeping a proper balance between promoting the Philippines
as a center for multinational regional warehouses and
safeguarding the revenue laws of the country. lawphi1.net
The Commissioner of customs is directed is directed to
expedite the immediate re-exportation or transhipment of the
foregoing goods destined for regional warehousing to their
Asia-Pacific and other foreign markets, including the
emergency withdrawal for re-exportation by air and ship and
the partial liquidation of bonds adopting simplified export
procedures therefor.
Article 72. Penalties. Any willful violation by the regional or
area headquarters of a multinational company which has
established regional warehouse or warehouses of the
provisions of existing laws and the implementing guidelines of
Book IV of this Code shall constitute a sufficient cause for the
cancellation of its license or registration in addition to the
penalties hereinabove provided in Article 69, paragraph (b)
hereof.
Article 73. The regional or area headquarters of multinational
companies establishing regional warehouses shall be exempt
from the provisions of Book II of this Code.
BOOK V
SPECIAL INVESTORS RESIDENT VISA
Article 74. Qualifications. Any alien who possesses the
following qualifications may be issued a Special Investors
Resident Visa.
1. He had not been convicted of a crime involving moral
turpitude;
2. He is not afflicted with any loathsome, dangerous or
contagious disease;
3. He has not been institutionalized for any mental disorder or
disability;
21
4. He is willing and able to invest the amount of at least
US$75,000.00 in the Philippines; Provided, That the foregoing
invested amount shall be lowered to US$50,000 for aliens
availing of Executive Order No. 63 and Executive Order No.
1037 subject to the conditions imposed by said legislations:
Provided, further, That for purposes of compliance with this
particular condition, the alien-applicant should prove that he
has remitted such amount in acceptable foreign currency to
the Philippines.
Article 75. Reportorial Requirements. As a holder of the
Special Investors Resident Visa, an alien shall be entitled to
reside in the Philippines while his investment subsists. For
this purpose, he should submit an annual report, in the form
fully prescribed for the purpose, to prove that he has
maintained his investment in the country. Should said alien
withdraw his said investment from the Philippines, then the
Special Investors Resident Visa issued to him will
automatically expire.
BOOK VI
INCENTIVES OF EXPORT PROCESSING ZONE
ENTERPRISES
Article 76. Employment of Foreign Nationals. The provisions
of law to the contrary notwithstanding, Export Processing
Zone Authority, hereinafter referred to as the "Authority" may
authorize an alien or an association, partnership, corporation
or any other form of business organization formed, organized,
chartered or existing under any law other than those of the
Philippines, or which is not a Philippine national, or the
working capital of which id fully owned or controlled by aliens
to do business or engage in an industry inside the export
processing zone.
Subject to the provisions of Section 29 of Commonwealth Act
No. 613, as amended, an enterprise, a zone registered
enterprise may employ foreign nationals in supervisory,
technical or advisory positions for a period not exceeding five
(5) years from its registration, extendible for limited periods at
the discretion of the Authority: Provided, however, That when
the majority of the capital stock of a zone registered
enterprise is owned by foreign national, the positions of
president, treasurer, and general manager or their equivalents
may be retained by foreign nationals beyond the period set
forth herein.
Foreign nationals employed within the purview of this Book,
their spouses, and unmarried children under twenty-one years
of age who are not excluded by Sec. 29 of C.A. No. 613, as
amended, shall be permitted to enter and reside in the
Philippines during the period of employment of such foreign
nationals. They shall be issued a multiple entry visa, valid for
a period of three years, to enter and leave the Philippines
without further documentary requirements other than valid
passports or other travel documents in the nature of
passports. The validity of the multiple entry special visa shall
be extendible yearly. Foreign Nationals who have been issued
multiple entry special visas under this provision, as well as
their respective spouses and dependents, shall be exempt
from obtaining alien certificates and all types of clearances
required by any government department or agency. For this
purpose, the Commission on Immigration and Deportation
and the authority shall jointly issue the necessary
implementing rules and regulations.
A registered enterprise shall train Filipinos as understudies of
foreign nationals in administrative, supervisory and technical
skills and shall submit annual reports of such training to the
Board.
Article 77. Tax Treatment of Merchandise in the Zone.
(1) Except as otherwise provided in this Code, foreign and
domestic merchandise, raw materials, supplies, articles,
equipment, machineries, spare parts and wares of every
description, except those prohibited by law, brought into the
zone to be sold, stored, broken up, repacked, assembled,
installed, sorted, cleaned, graded, or otherwise processed,
manipulated, manufactured, mixed with foreign or domestic
merchandise whether directly or indirectly related in such
activity, shall not be subject to customs and internal revenue
laws and regulations nor to local tax ordinances, the
provisions of law to the contrary notwithstanding.
(2) Merchandise purchased by a registered zone enterprise
from the customs territory and subsequently brought into the
zone, shall be considered as export sales and the exported
thereof shall be entitled to the benefits allowed by law for
such transaction.
(3) Domestic merchandise sent from the zone to the customs
territory shall, whether or not combined with or made part of
other articles likewise of local origin or manufactured in the
Philippines while in the export processing zone, be subject to
internal revenue laws of the Philippines as domestic goods
sold, transferred or disposed of for local consumption.
(4) Merchandise sent from the export processing zone to the
customs territory shall, whether or not combined with or made
part of other articles while in the zone, be subject to rules and
regulations governing imported merchandise. The duties and
taxes shall be assessed on the value of imported materials
(except when the final product is exempt) and the internal
revenue taxes on the values added.
(5) Domestic merchandise on which all internal revenue taxes
have been paid, if subject thereto, and foreign merchandise
previously imported on which duty or tax has been paid, or
which have been admitted free of duty and tax, may be taken
into the zone from the customs territory of the Philippines and
be brought back thereto free of quotas, duty or tax.
(6) Subject to such regulations respecting identity and
safeguarding of the revenue as the Authority may deem
necessary when the identity of an article entered into the
22
export processing zone under the immediately preceding
paragraph has been lost, such article when removed from the
zone and taken to the customs territory shall be treated as
foreign merchandise entering the country for the first time,
under the provisions of the Tariff and Customs Code.
(7) Articles produced or manufactured in the zone and
exported therefrom shall, on subsequent importation into the
customs territory, be subject to the import laws applicable to
like articles manufactured in a foreign country;
(8) Unless the contrary is shown, merchandise taken out of
the zone shall be considered for tax purposes to have been
sent to customs territory. lawphi1.net
Article 78. Additional Incentives. A zone registered enterprise
shall also enjoy all the incentive benefits provided in Article 39
hereof under the same terms and conditions stated therein. In
addition zone registered enterprises shall also be entitled to
the following:
(a) Exemption from Local Taxes and Licenses.
Notwithstanding the provisions of law to the contrary, zone
registered enterprise shall, to the extent of their construction,
operation or production inside the zone be exempt from the
payment of any and all local government imposts, fees,
licenses or taxes except real estate taxes which shall be
collected by the Province/City/Municipality responsible for the
collection thereof under the provisions of the Real Property
Tax Code: Provided, That machineries owned by zone
registered enterprises which are actually installed and
operated in the Zone for manufacturing, processing or for
industrial purposes shall not be subject to the payment of real
estate taxes for the first three (3) years of operation of such
machineries: Provided, further, That fifty percent (50%) of the
proceeds of the real estate taxes collected from all real
properties located in the Zone and such other areas owned or
administered by the Authority shall be remitted to the
Authority by the province/city/municipality responsible for the
collection of such taxes under the provisions of the Real
Property Tax Code. All real estate taxes accruing to the
Authority as herein provided shall be expanded for such
community facilities, utilities and/or services as the Authority
may determine.
(b) Production equipment or machineries, not attached to real
estate, used directly or indirectly, in the production, assembly
or manufacture of the registered product of the zone
registered enterprise shall be exempt from real property
taxes.
FINAL PROVISIONS
Article 79. Interpretation. All doubts concerning the benefits
and incentives granted enterprises and investors by this Code
shall be resolved in favor of investors and registered
enterprises.
Article 80. Vested Rights. Existing registered enterprises
which are enjoying the incentives under the laws repealed by
Books One and Six of this Code shall continue to enjoy such
incentives for the period therein stated: Provided, however,
That firms which made investments in new or expansion
projects approved or registered by the Board of the Authority
on or after December 1, 1986 but before the effectivity of this
Code may opt to be governed by the provisions of this Code.
Article 81. Confidentiality of Applications. All applications and
their supporting documents filed under this Code shall be
confidential and shall not be disclosed to any person, except
with the consent of the applicant or on orders of a court of
competent jurisdiction.
Article 82. Judicial Relief. All orders or decisions of the Board
in cases involving the provisions of this Code shall
immediately be executory. No appeal from the order or
decision of the Board by the party adversely affected shall
stay such order or decision: Provided, That all appeals shall
be filed directly with the Supreme Court within thirty (30) days
from receipt of the order or decision.
Article 83. Effectivity of Implementing Rules and Regulations.
The Board shall promulgate rules and regulations to
implement the intent and provisions of this Code and shall
have the authority to impose such fines in amounts that are
just and reasonable in cases of late submission or
non-compliance on the part of registered enterprises, with
reporting and
other requirements under this Code and its implementing
rules and regulations. Such rules and regulations shall take
effect fifteen (15) days following its publication in newspaper
of general circulation in the Philippines.
Article 84. Separability Clause. The provisions of this Code
are hereby declared to be separable and, in the event any
such provisions is declared unconstitutional, the other
provisions which are not affected thereby shall remain in force
and effect.
Article 85. Repealing Clause. The following provisions or
laws are hereby repealed:
1) Batas Pambansa 44
2) Batas Pambansa 391 (1983)
3) Presidential Decree 218
4) Presidential Decree 1419
5) Presidential Decree 1623, as amended
6) Presidential Decree No. 1789 (1981)
7) Presidential Decree 2032
23
8) Executive Order 815

9) Executive Order 1945 (1985)

All other laws, decrees, executive orders, administrative

orders, rules and regulations or parts thereof which are
inconsistent with the provisions of this Code are hereby
repealed, amended or modified accordingly. lawphi1.net

Article 86. Effectivity. This Code shall take effect immediately

upon approval.

DONE in the City of Manila, this 16th day of July, in the year
of Our Lord, nineteen hundred and eighty-seven.

24
 [ REPUBLIC ACT NO. 11647, March 02, 2022 ] Section 2. Section 3 of R.A. No. 7042 is hereby further
amended to read as follows:
AN ACT PROMOTING FOREIGN INVESTMENTS,
AMENDING THEREBY REPUBLIC ACT NO. 7042, "Section 3. Definitions. - As used in this Act:
OTHERWISE KNOWN AS THE "FOREIGN INVESTMENTS
ACT OF 1991," AS AMENDED, AND FOR OTHER xxx
PURPOSES
(b) The term investment" shall mean equity
Be it enacted by the Senate and House of participation in any enterprise, organized or
Representatives of the Philippines in Congress existing under the laws of the Philippines and
assembled: duly recorded in the enterprise's stock and
transfer book, or any equivalent registry of
Section 1. Section 2 of Republic Act No. 7042 (R.A. No. ownership;
7042), as amended by Republic Act No. 8179, otherwise
known as the "Foreign Investments Act of 1991," is hereby (c) The term foreign investment" shall mean an
amended to read as follows: equity investment made by non-Philippine
national in the form of foreign exchange and/or
"Section 2. Declaration of Policy. - Recognizing other assets actually transferred to the
that increased capital and technology benefits Philippines and duly registered with the
the Philippines and that global and regional Bangko Sentral ng Pilipinas;
economies affect the Philippine economy, it is
the policy of the State to attract, promote and (d) x x x;
welcome productive investments from foreign
individuals, partnerships, corporations, and (e) x x x;
governments, including their political
subdivisions, in activities which significantly (f) x x x;
contribute to sustainable, inclusive, resilient,
and innovative economic growth, productivity, (g) x x x;"
global competitiveness, employment creation,
(h) The term practice of profession" shall mean
technological advancement, and countrywide
an activity or undertaking rendered and
development to the extent that foreign
performed by a registered and duly licensed
investment is allowed in such activity by the
professional or holder of a special temporary
Constitution and relevant laws, and consistent
permit as defined in the scope of practice of a
with the protection of national security. Foreign
professional regulatory law; and
investments shall be encouraged in
enterprises that significantly expand livelihood
(i) The term pipeline transaction" shall mean
and employment opportunities for Filipinos;
the sector which includes transport of goods or
enhance economic value of agricultural
materials through a pipeline such as crude,
products; promote the welfare of Filipino
refined, petroleum, natural gas, biofuels, and
consumer; expand the scope, quality and
other chemically stable substance."
volume of exports and their access to foreign
markets; and/or transfer relevant technologies
Section 3. Section 4 of R.A. No. 7042 is hereby amended to
in agriculture, industry and support services.
read as follows:
Foreign investments shall be welcome as a
supplement to Filipino capital and technology
"Section 4. Inter-Agency Investment Promotion
in those enterprises serving mainly the
Coordination Committee. - There is hereby
domestic market.
created the "Inter-Agency Investment
Promotion Coordination Committee",
The State shall promote accountability and
hereinafter referred to as the "IIPCC", which
integrity in public office, as well as the
shall be the body that will integrate all
promotion and administration of efficient public
promotion and facilitation efforts to encourage
service to entice foreign investments.
foreign investments in the country. The
Department of Trade and Industry (DTI) shall
Foreign investments shall be conducted based
act as the IIPCC's lead agency. The IIPCC
on the principles of transparency, reciprocity,
shall be composed of the:
equity and economic cooperation.
(a) Secretary of the DTI, to preside as
x x x."
Chairperson;

25
(b) Secretary/Undersecretary of the
Department of Finance (DOF) as
Vice-Chairperson;
(c) One (1) representative from the DTI-Board
of Investments (BOI);
(d) One (1) representative from the
DTI-Philippine Economic Zone Authority
(PEZA);
(e) One (1) representative from the
Department of Foreign Affairs (DFA), Office of
the Undersecretary for Multilateral Affairs and
International Economic Relations (OUMAIER);
(f) One (1) representative from the National
Economic and Development Authority (NEDA);
(g) One (1) representative from the
Department of Information and
Communications Technology (DICT);
(h) One (1) representative from the
Commission on Higher Education (CHED);
(i) One (1) representative from the Technical
Education and Skills Development Authority
(TESDA); and
(j) Four (4) representatives composed of one
(1) representative each from the National
Capital Region, Luzon, Visayas and Mindanao,
to be chosen from a list of nominees prepared
and submitted by nationally recognized leading
industry or business chambers, who shall be of
known competence, probity, integrity and
expertise in any of the fields of investment,
advertising, banking, finance management and
law, with at least ten (10) years of outstanding
management or leadership experience.
The Chairperson may from time to time, as a
particular foreign investment may require,
request the participation of other government
departments and agencies or instrumentalities,
local government units (LGUs),
nongovernmental organizations (NGOs) and
local business chambers and enterprises.
The IIPCC shall coordinate and, when
necessary, partner with and assist the Bases
Conversion nd Development Authority
(BCDA), Authority of the Freeport Area of
Bataan (AFAB), Clark Development
Corporation (CDC), Subic Bay Metropolitan
Authority (SBMA), Cagayan Economic Zone
Authority (CEZA), John Hay Management
Corporation (JHMC), Poro Point Management
Corporation (PPMC), Zamboanga City Special
Economic Zone Authority (ZCSEZA),
PHIVIDEC Industrial Authority (PIA), Aurora
Pacific Economic Zone and Freeport Authority
(APECO), Tourism Infrastructure and
Enterprise Zone Authority (TIEZA) and all
other similar existing authorities or that may be
created by law, in promoting foreign
investments to the country: Provided, That this
shall not include the administration, design,
and grant of fiscal incentives.
The BOI is designated as the secretariat of the
IIPCC, implementing its policies and
resolutions.
Section 4. A new section of R.A. No. 7042, as amended, is
inserted as Section 4-A to read as follows:
"SEC. 4-A. Powers and Functions of the
IIPCC. -
(a) To establish both a medium-and-long-term
Foreign Investment Promotion and Marketing
Plan (FIPMP), coordinating all xisting
investment development plans and programs
under the BOI, PEZA, and various investment
promotion agencies (IPAs), LGUs, and other
agencies, as delinated in Section 4-B of this
Act;
(b) To design a comprehensive marketing
strategy and campaign, promoting the country
as a desirable investment area;
(c) To support inbound and outbound foreign
direct and trade missions for new international
markets to explore the country as a possible
location to do business;
(d) To encourage and support research and
development in priority areas indicated by the
FIPMP;
(e) To monitor actual performance against
measurable and timebound targets in the
FIPMP, to include job generation;
(f) To submit annual evaluation and reports to
the President of the Philippines and the
Congress regarding the activities of the IIPCC;
(g) To establish and regularly update an online
database including a directory of ready local
partners from priority sectors under the FIPMP,
as a tool for promoting investments and
business matching in local supply chains; and
26
 (h) To support local government efforts to
promote foreign direct investments, expedite
compliance with national requirements and
address investors in their different localities
involved with said foreign investments.
Section 5. A new section of R.A. No. 7042, as amended, is
inserted as Section 4-B to read as follows:
"SEC. 4-B. Development of the Foreign
Investment Promotion and Marketing Plan
(FIPMP). - A comprehensive and strategic
Foreign Investment Promotion and Marketing
Plan (FIPMP) shall be developed by the IIPCC
for the medium five-year and the long-term
ten-year plan Provided, That it is based on
competitive advantages, natural resources,
skill and educational development, traditional
linkages, and international market potential,
and it is fully consistent with the strategic
investment priorities plan under Title XIII of the
National Internal Revenue Code, as amended:
Provided, further, That an online portal
containing the FIPMP shall thereafter be
uploaded, containing further details such as
the IIPCC's procedure, contacts, schedules,
among others.
Said database should also include a directory
of local enterprises capable and willing to
partner with potential foreign investors. The
IIPCC shall consult local chambers of
commerce, sectoral, business groups, and
other individual partners whenever foreign
applicants seek partners, subcontractors,
suppliers, and other local business
counterparts.
Similarly, Department of Education (DepEd),
CHED, TESDA, Department of Labor and
Employment (DOLE), the Professional
Regulation Commission (PRC), and other
training agencies involved in education and
skills development shall likewise direct
curriculum and training efforts toward
manpower requirements of the FIPMP.
The IIPCC shall coordinate with the concerned
government agencies to ensure their
alignment with the FIPMP.
DTI shall promulgate such rules and
regulations necessary to implement this
provision."
Section 6. Section 5 of R.A. No. 7042, as amended, is
hereby amended to read as follows:
"Section 5. Registration of Investments of
Non-Philippine Nationals. - Without need of
prior approval, a non-Philippine national, as
that term is defined in Section 3(a), and not
otherwise disqualified by law may, upon
registration with the Securities and Exchange
Commission (SEC), or the DTI in the case of
single proprietorships, do business as defined
in Section 3(d) of this Act or invest in a
domestic enterprise up to one hundred percent
(100%) of its capital, unless participation of
non-Philippine nationals in the enterprise is
prohibited or limited to a smaller percentage by
existing law and/or under the provisions of this
Act. The SEC or the DTI, as the case may be,
shall not impose any limitations on the extent
of foreign ownership in an enterprise additional
to those provided in this Act: Provided,
however, That any enterprise seeking to avail
of incentives under the Omnibus Investment
Code of 1987 must apply for registration with
the BOI, which shall process such application
for registration in accordance with the criteria
for evaluation prescribed in said Code:
Provided, finally, That a non-Philippine national
intending to engage in the same line of
business as an existing joint venture, in which
he or his majority shareholder is a substantial
partner, must disclose the fact and the names
and addresses of the partners in the existing
joint venture in his application for registration
with SEC. During the transitory period as
provided in Section 15 hereof, SEC shall
disallow registration of the applying
non-Philippine national if the existing joint
venture enterprise, particularly the Filipino
partners therein, can reasonably prove the
domestic market activities to be undertaken by
SEC shall effect registration of any enterprise
applying under this Act within fifteen (15) days
upon submission of completed requirements."
Section 7. Section 6 of R.A. No. 7042, as amended, is
hereby amended to read as follows:
"Section 6. Foreign Investment in Export
Enterprises. - Foreign investment in export
enterprise whose products and services do not
fall within Lists A and B of the Foreign
Investment Negative List provided under
Section 8 hereof is allowed up to one hundred
percent (100%) ownership.
Export enterprise which a re non-Philippine
nationals shall register with BOI and submit
the reports that may be required to ensure
continuing compliance of the export enterprise
with its export requirement. BOI shall advise
27
 SEC or STI, as the case may be, of any export
enterprise that fails to meet the export ration
requirement.ᇈWᑭHIL The SEC or DTI shall
thereupon order the non-complying export
enterprise to reduce its sales to the domestic
market to not more than forty percent (40%) of
its total production; failure to comply with such
SEC or DTI order, without justifiable reason,
shall subject the enterprise to cancellation of
SEC or DTI registration, and/or the penalties
provided in Section 14 hereof.
Export enterprise shall register and comply
with the export requirements in accordance
with Title XIII of the National Internal Revenue
Code (NIRC), as amended, for purpose of
availing any tax incentive or benefit."
Section 8. Section 8 of R.A. No. 7042, as amended, is
hereby further amended to read as follows:
"Section 8. List of Investment Areas Reserved
to Philippine Nationals (Foreign Investment
Negative List). - x x x
(a) x x x
(b) x x x
(1) which are defense-related activities,
requiring prior clearance and authorization
from Department of National Defense (DND) to
engage in such activity, such as the
manufacture, repair, storage and/or distribution
of firearms, ammunition, lethal weapons,
military ordinance, explosives, pyrotechnics
and similar materials, unless such
manufacturing or repair activity is specifically
authorized by the Secretary of National
Defense; or
(2) x x x
Excerpts as otherwise provided under
Republic Act No. 8762, otherwise known as
the Retail Trade Liberalization Act of 2000 and
other relevant laws, micro and small domestic
market enterprise with paid-in equity capital
less than the equivalent of Two hundred
thousand US dollar (US$200,000.00). are
reserved to Philippine nationals: Provided,
That if: (1) they involve advanced technology
as determined by the Department of Science
and Technology, or (2) they are endorsed as
startup or startup enablers by the lead host
agencies pursuant to Republic Act No. 11337,
otherwise known as the Innovative Startup Act;
or (3) a majority of their direct employees are
Filipinos, but in no case shall the number of
Filipino employees be less than fifteen (15),
than a minimum paid-in capital of One hundred
thousand US dollars (US$100,000.00) shall be
allowed to non-Philippine nationals: Provided,
further, That registered foreign enterprises
employing foreign nationals and enjoying fiscal
incentive shall implement an understudy or
skills development program to ensure the
transfer of technology or skills to Filipinos.
Compliance with this requirement shall be
regularly monitored by the DOLE.
Nothing in this Act shall operate as a cause for
termination of employees hired prior to the
effectivity of this Act. In all cases, the
provisions of Presidential Decree No. 442,
otherwise known as the Labor Code of the
Philippines" and other applicable laws, rules
and regulations issued by DOLE shall prevail.
Amendments to List B may be made upon
recommendation of the Secretary of National
Defense, or the Secretary of Health, endorses
by the NEDA, or upon recommendation motu
propio, of NEDA, approved by the President,
and promulgated through the issuance of the
Foreign Investment Negative List by Executive
Order.
xxx
Amendments to the Foreign Investment
Negative List shall not be made more often
than once every two (2) years: Provided, That
the NEDA, in consultation and cooperation
with the BOI, DTI, SEC, DICT, IPAs and other
pertinent government agencies, shall, every
two (2) years, (i) review the Foreign
Investment Negative List, and (ii) submit to
Congress an analysis of foreign investment
performance economic activities of the
industries under the Foreign Investment
Negative List and the reasons for the
recommended amendments, if any: Provided,
further, That NEDA shall recommend to
Congress investment-related matters requiring
necessary legislation."
Section 9. A new section of R.A. No. 7042, as amended, is
inserted as Section 16 to read as follows:
"Section 16. Review of Strategic Industries. -
Upon the order of the President, the IIPCC, in
coordination with the National Security Council
(NSC), and the NEDA, shall review foreign
investments involving military-related
industries, cyber infrastructure, pipeline
28
 transportation, or such other activities which
may threaten territorial integrity and the safety,
security and well-being of Filipino citizens,
when:
(a) Made by a foreign government-controlled
entity or state-owned enterprises except
independent pension funds, sovereign wealth
funds and multi-national banks; or
(b) Located in geographical areas critical to
national security.
Any recommendation to suspend, prohibit, or
otherwise limit a reviewed foreign investment
under this section shall be transmitted to the
Office of the President for appropriate action."
Section 10. A new section of R.A. No. 7042, as amended, is
inserted as Section 17 to read as follows:
"Section 17. Anti-Graft Practices in Foreign
Investment Promotions. - Public officials and
employees involved in foreign investment
promotions shall uphold the highest standards
of public service, accountability, and integrity.
Accordingly, any public official or employee
involved in foreign investment promotions who
sahll commit any of the acts under Section 3 of
Republic Act No. 3019, as amended,
otherwise known as the Anti-Graft and Corrupt
Practices Act, shall, in additional to the
penalties provided under Section 9(a) of the
said Act, be punished by a fine of not less than
Two million pesos (P2,000,000.00) but not
more than Five million pesos (P5,000,000.00)."
employment or practice of profession not
covered by any special law or reciprocity
agreement as provided in the previous
paragraph shall be subject to the provisions of
this Act."
Section 12. The remaining sections in R.A. No. 7042, as
amended, are hereby renumbered accordingly.
Section 13. Appropriations. - For purposes of implementing
this Act, the amount of Fifty million pesos (P50,000,000.00)
from the Contingent Fund of the General Appropriations Act
for the current fiscal year is hereby appropriated and shall be
released to the IIPCC. Thereafter, the amounts necessary to
carry out this Act shall be included in the General
Appropriations Act (GAA).
Section 14. Implementing Rules and Regulations. - The NEA,
in consultation with the DTI and the DOF, is hereby directed to
amend the existing rules and regulations necessary for the
efficient implementation of this Act.ℒαwρhi৷
Section 15. Repealing Clause. - Republic Act No. 7042, as
amended, is hereby amended, All laws, decrees, orders, rules
and regulations or other issuances or parts thereof
inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.
Section 16. Separability Clause. - If any portion or provision
of this Act is declared unconstitutional, the remainder of this
Act or any provision not affected thereby shall remain in force
and effect.
Section 17. Effectivity. - This Act shall take effect after fifteen
(15) days following its publication in the Official Gazette or in
a newspaper of general circulation in the Philippines.

Section 11. A new section of R.A. No. 7042, as amended, is

inserted as Section 18 to read as follows:

"Section 18. Non-Applicability. - This Act shall

not apply to banking and other financial
institutions which are governed and regulated
by Republic Act No. 8791, otherwise known as
The General Banking Law of 2000" and other
laws under the supervision of the Bangko
Sentral ng Pilipinas. Moreover, this Act shall
not apply to the practice of professions that are
covered by specific laws and fall under the
jurisdiction of various Professional Regulatory
Boards (PRBs) or any other equivalent
regulating body, or those subject to reciprocity
agreements with other countries.

To the extent applicable, and provided that the

necessary licenses, work permits and visas
are properly secured from the relevant
government agencies, any occupation,

29
 [REPUBLIC ACT NO. 7916]
(as amended by Republic Act No. 8748)
AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND
MECHANISMS FOR THE CREATION, OPERATON,
ADMINISTRATION, AND COORDINATION OF SPECIAL
ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR
THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE
AUTHORITY (PEZA), AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of
the Philippines in Congress assembled:
CHAPTER I
PURPOSES AND OBJECTIVES: ESTABLISHMENT
AND NATURE OF SPECIAL ECONOMIC ZONES;
COORDINATION WITH OTHER SIMILAR SCHEMES
SEC. 1. Title. – This act shall be known and cited as "The
Special Economic Zone Act of 1995."
SEC. 2. Declaration of Policy. – It is the declared policy of the
government to translate into practical realities the following
State policies and mandates in the 1987 Constitution, namely:
(a) "The State recognizes the indispensible role of the private
sector, encourages private enterprise, and provides incentives
to needed investments." (Sec. 20, Art II)
(b) "The State shall promote the preferential use of Filipino
labor, domestic materials and locally produced goods and
adopt measures that help make them competitive." (Sec. 12,
Art XII)
In pursuance of these policies, the government shall actively
encourage, promote, induce and accelerate a sound and
balanced industrial, economic and social development of the
country in order to provide jobs to the people specially those
in the rural areas, increase their productivity and their
individual and family income, and thereby improve the level
and quality of their living condition through the establishment,
among others, of special economic zones in suitable and
strategic locations in the country and through measures that
shall effectively attract legitimate and productive foreign
investments.
SEC. 3. Purposes, Intents and Objectives. – It is the purpose,
intent and objective of this Act:
(a) To establish the legal framework and mechanisms for the
integration, coordination, planning and monitoring of special
economic zones, industrial estates / parks, export processing
zones and other economic zones;
(b) To transform selected areas in the country into highly
developed agro industrial, industrial, commercial, tourist,
banking, investment, and financial centers, where highly
trained workers and efficient services will be available to
commercial enterprises;
(c) To promote the flow of investors, both foreign and local,
into special economic zones which would generate
employment opportunities and establish backward and
forward linkages among industries in and around the
economic zones;
(d) To stimulate the repatriation of Filipino capital by providing
attractive climate and incentives for business activity;
(e) To promote financial and industrial cooperation between
the Philippines and industrialized countries through
technology-intensive industries that will modernize the
country’s industrial sector and improve productivity levels by
utilizing new technological and managerial know-how; and
(f) To vest the special economic zones on certain areas
thereof with the status of a separate customs territory within
the framework of the Constitution and the national sovereignty
and territorial integrity of the Philippines.
SEC. 4. Definition of Terms. – For purposes of this Act, the
following definitions shall apply to the following terms:
(a) "Special Economic Zones (SEZ)" – hereinafter referred to
as the ECOZONES, are selected areas with highly developed
or which have the potential to be developed into
agro-industrial, Industrial tourist/recreational, commercial,
banking, investment and financial centers. An ECOZONE
may contain any or all of the following: Industrial Estates
(IEs), Export Processing Zones (EPZs), Free Trade Zones,
and Tourist/Recreational Centers.
(b) "Industrial Estate (IE)" – refers to a tract of land subdivided
and developed according to a comprehensive plan under a
unified continuous management and with provisions for basic
infrastructure and utilities, with or without pre-built standard
factory buildings and community facilities for the use of the
community of industries.
(c) "Export Processing Zone (EPZ)" – a specialized industrial
estate located physically and/or administratively outside
customs territory, predominantly oriented to export production.
Enterprises located in export processing zones are allowed to
import capital equipment and raw materials free from duties,
taxes and other import restrictions.
30
(d)"Free Trade Zone" - an isolated policed area adjacent to a
port of entry (as a seaport) and/or airport where imported
goods may be unloaded for immediate transshipment or
stored, repacked, sorted, mixed, or otherwise manipulated
without being subject to import duties. However, movement of
these imported goods from the free-trade area to a
non-free-trade area in the country shall be subject to import
duties.
Enterprises within the zone are granted preferential tax
treatment and immigration laws are more lenient.
SEC. 5. Establishment of ECOZONES. – To ensure the
viability and geographical dispersal of ECOZONES through a
system of prioritization, the following areas are initially
identified as ECOZONES, subject to the criteria specified in
Section 6:
(a) So much as may be necessary of that portion of Morong,
Hermosa, Dinalupihan, Orani, Samal, and Abucay in the
Province of Bataan;
(b) So much as may be necessary of that portion of the
municipalities of Ibaan, Rosario, Taysan, San Jose, San Juan,
and cities of Lipa and Batangas;
(c) So much as may be necessary of that portion of the City of
Cagayan de Oro in the Province of Misamis Oriental;
(d) So much as may be necessary of that portion of the City of
Iligan in the Province of Lanao del Norte;
(e) So much as may be necessary of that portion of the
Province of Saranggani;
(f) So much as may be necessary of that portion of the City of
Laoag in the Province of Ilocos Norte;
(g) So much as may be necessary of that portion of Davao
City and Samal Island in the Province of Davao del Norte;
(h) So much as may be necessary of that portion of Oroquieta
City in the Province of Misamis Occidental;
(i) So much as may be necessary of that portion of Tubalan
Cove, Malita in the Province of Davao del Sur;
(j) So much as may be necessary of that portion of Baler,
Dinalungan and Casiguran including its territorial waters and
islets and its immediate environs in the Province of Aurora;
(k) So much as may be necessary of that portion of cities of
Naga and Iriga in the Province of Camarines Sur, Legaspi and
Tabaco in the Province of Albay, and Sorsogon in the
Province of Sorsogon;
(l) So much as may be necessary of that portion of Bataan
Island in the Province of Batanes;
(m) So much as may be necessary of that portion of
Lapu-lapu in the Island of Mactan, and the municipalities of
Balamban and Pinamungahan and the cities of Cebu and
Toledo and the Province of Cebu, including its territorial
waters and islets and its immediate environs;
(n) So much as may be necessary of that portion of Tacloban
City;
(o) So much as may be necessary of that portion of the
Municipality of Barugo in the Province of Leyte;
(p) So much as may be necessary of that portion of the
Municipality of Buenavista in the Province of Guimaras;
(q) So much as may be necessary of that portion of the
municipalities of San Jose de Buenavista, Hamtic, Sibalon,
and Culasi in the Province of Antique;
(r) So much as may be necessary of that portion of the
municipalities of Catarman, Bobon and San Jose in the
Province of Northern Samar, the Island of Samar;
(s) So much as may be necessary of that portion of the
Municipality of Ternate and its immediate environs in the
Province of Cavite;
(t) So much as may be necessary of that portion of Polloc,
Parang in the Province of Maguindanao;
(u) So much as may be necessary of that portion of the
Municipality of Boac in the Province of Marinduque;
(v) So much of may be necessary of that portion of the
Municipality of Pitogo in the Province of Zamboanga del Sur;
31
(w) So much as may be necessary of that portion of Dipolog
City-Manukan Corridor in the Province of Zamboanga del
Norte;
(x) So much as may be necessary of that portion of
Mambajao, Camiguin Province;
(y) So much as may be necessary of that portion of Infanta,
Real, Polillo, Alabat, Atimonan, Mauban, Tiaong, Pagbilao,
Mulanay, Tagkawayan, and Dingalan Bay in the Province of
Quezon;
(z) So much as may be necessary of that portion of Butuan
City and the Province of Agusan del Norte, including its
territorial waters and islets and its immediate environs;
(aa) So much as may be necessary of that portion of Roxas
City including its territorial waters and islets and its immediate
environs in the Province of Capiz;
(bb) So much as may be necessary of that portion of San
Jacinto, San Fabian, Mangaldan, Lingayen, Sual, Dagupan,
Alaminos, Manaoag, Binmaley in the Province of Pangasinan;
(cc) So much as may be necessary of that portion of the
autonomous region;
(dd) So much as may be necessary of that portion of
Masinloc, Candelaria and Sta. Cruz in the Province of
Zambales;
(ee)So much as may be necessary of that portion of the
Palawan Island;
(ff) So much as may be necessary of that portion of General
Santos City in South Cotabato and its immediate environs;
(gg) So much as may be necessary of that portion of
Dumaguete City and Negros Oriental, including its territorial
waters and islets and its immediate environs;
(hh)So much as may be necessary of that portion of the
Province of Ilocos Sur;
(ii) So much as may be necessary of that portion of the
Province of La Union;
(jj) So much as may be necessary of that portion of the
Province of Laguna, including its territorial waters and its
immediate environs;
(kk) So much as may be necessary of that portion of the
Province of Rizal;
(ll) All existing export processing zones and
government-owned industrial estates; and
(mm) Any private industrial estate which shall voluntarily
apply for conversion into an ECOZONE.
These areas shall be developed through any of the following
schemes:
i. Private initiative;
ii. Local government initiative with the assistance of the
national government; and
iii. National government initiative.
The metes and bounds of each ECOZONE are to be
delineated and more particularly described in a proclamation
to be issued by the President of the Philippines, upon the
recommendation of the Philippine Economic Zone Authority
(PEZA), which shall be established under this Act, in
coordination with the municipal and / or city council, National
Land Use Coordinating Committee and / or the Regional Land
Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES.
– In addition to the ECOZONES identified in Section 5 of this
Act, other areas may be established as ECOZONES in a
proclamation to be issued by the President of the Philippines
subject to the evaluation and recommendation of the PEZA,
based on a detailed feasibility and engineering study which
must conform to the following criteria:
(a) The proposed area must be identified as a regional growth
center in the Medium-Term Philippine Development Plan or by
the Regional Development Council;
(b) The existence of required infrastructure in the proposed
ECOZONE, such as roads, railways, telephones, ports,
airports, etc., and the suitability and capacity of the proposed
site to absorb such improvements;
32
(c) The availability of water source and electric power supply
for use of the ECOZONE;
(d) The extent of vacant lands available for industrial and
commercial development and future expansion of the
ECOZONE as well as of lands adjacent to the ECOZONE
available for development of residential areas for the
ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled
trainable labor force in and around the ECOZONE;
(f) The area must have a significant incremental advantage
over the existing economic zones and its potential profitability
can be established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be
established to curtail smuggling activities.
Other areas which do not meet the foregoing criteria may be
established as ECOZONES: Provided, That the said area
shall be developed only through local government and/or
private sector initiative under any of the schemes allowed in
Republic Act No. 6957 (the build-operate-transfer law), and
without any financial exposure on the part of the national
government: Provided, further, That the area can be easily
secured to curtail smuggling activities: Provided, finally, That
after five (5) years the area must have attained a substantial
degree of development, the indicators of which shall be
formulated by the PEZA.
SEC. 7. ECOZONE to be a Decentralized Agro-Industrial,
Industrial, Commercial / Trading, Tourist, Investment and
Financial Community. - Within the framework of the
Constitution, the interest of national sovereignty and territorial
integrity of the Republic, ECOZONE shall be developed, as
much as possible, into a decentralized, self-reliant and
self-sustaining industrial,commercial/trading, agro-industrial,
tourist, banking, financial and investment center with
minimum government intervention. Each ECOZONE shall be
provided with transportation, telecommunications, and other
facilities needed to generate linkage with industries and
employment opportunities for its own inhabitants and those of
nearby towns and cities.
The ECOZONE shall administer itself on economic, financial,
industrial, tourism development and such other matters within
the exclusive competence of the national government.
The ECOZONE may establish mutually beneficial economic
relations with other entities within the country, or, subject to
the administrative guidance of the Department of Foreign
Affairs and/or the Department of Trade and Industry, with
foreign entities or enterprises.
Foreign citizens and companies owned by non-Filipinos in
whatever proportion may set up enterprises in the ECOZONE,
either by themselves or in joint venture with Filipinos in any
sector of industry, international trade and commerce within the
ECOZONE. Their assets, profits and other legitimate interests
shall be protected: Provided, That the ECOZONE through the
PEZA may require a minimum investment for any ECOZONE
enterprises in freely convertible currencies: Provided, further,
That the new investment shall fall under the priorities, thrusts
and limits provided for in the Act.
SEC. 8. ECOZONE to be Operated and Managed as
Separate Customs Territory. – The ECOZONE shall be
managed and operated by the PEZA as separate customs
territory.
The PEZA is hereby vested with the authority to issue
certificate of origin for products manufactured or processed in
each ECOZONE in accordance with the prevailing rules or
origin, and the pertinent regulations of the Department of
Trade and Industry and/or the Department of Finance.
SEC. 9. Defense and Security. – The defense of the
ECOZONE and the security of its perimeter fence shall be the
responsibility of the national government in coordination with
the PEZA. Military forces sent by the national government for
the purpose of defense shall not interfere in the internal affairs
of any of the ECOZONE and expenditure for these military
forces shall be borne by the national government. The PEZA
may provide and establish the ECOZONES’ internal security
and firefighting forces.
SEC. 10. Immigration. – Any investor within the ECOZONE
whose initial investment shall not be less than One Hundred
Fifty Thousand Dollars ($150,000.00), his/her spouse and
dependent children under twenty-one (21) years of age shall
be granted permanent resident status within the ECOZONE.
They shall have freedom of ingress and egress to and from
the ECOZONE without any need of special authorization from
the Bureau of Immigration.
The PEZA shall issue working visas renewable every two (2)
years to foreign executives and other aliens, processing
highly-technical skills which no Filipino within the ECOZONE
possesses, as certified by the Department of Labor and
Employment. The names of aliens granted permanent
resident status and working visas by the PEZA shall be
reported to the Bureau of Immigration within thirty (30) days
after issuance thereof.
33
CHAPTER II
GOVERNING STRUCTURES
SEC. 11. The Philippine Economic Zone Authority (PEZA)
Board. – There is hereby created a body corporate to be
known as the Philippine Economic Zone Authority (PEZA)
attached to the Department of Trade and Industry. The Board
shall have a director general with the rank of department
undersecretary who shall be appointed by the President. The
director general shall be at least forty (40) years of age, of
proven probity and integrity, and a degree holder in any of the
following fields: economics, business, public administration,
law, management or their equivalent, and with at least ten
(10) years relevant working experience preferably in the field
of management or public administration.
SEC. 12. Functions and Powers of PEZA Board. – The
Philippine Economic Zone Authority (PEZA) Board shall have
the following functions and powers:
(a) Set the general policies on the establishment and
operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;
(b) Review proposals for the establishment of ECOZONES
based on the set criteria under Section 6 and endorse to the
President the establishment of the ECOZONES, industrial
estates, export processing zones, free trade zones and the
like. Thereafter, it shall facilitate and assist in the organization
of said entities;

"The director general shall be assisted by three (3) deputy

(c) Regulate and undertake the establishment, operation and
directors general each for policy and planning, administration
maintenance of utilities, other services and infrastructure in
and operation, who shall be appointed by the PEZA Board,
the ECOZONE, such as heat, light and power, water supply,
upon the recommendation of the director general. The deputy
telecommunication, transport, toll roads and bridges, port
directors general shall be at least thirty-five (35) years old,
services, etc., and to fix just, reasonable and competitive
with proven probity and integrity, and a degree holder in any
rates, charges and fees therefore;
of the following fields: economics, business, public
administration, law, management or their equivalent."
(d) Approve the annual budget of the PEZA and the
ECOZONE development plans;
"The Board shall be composed of thirteen (13) members as
follows: the Secretary of the Department of Trade and
Industry as Chairman, the Director General of the Philippine
(e) Issue rules and regulations to implement the provisions of
Economic Zone Authority as Vice-Chairman, the
this Act in so far as its power and functions are concerned;
undersecretaries of the Department of Finance, the
Department of Labor and Employment, the Department of
Interior and Local Government, the Department of
(f) Exercise its powers and functions as provided for in this
Environment and Natural Resources, the Department of
Act; and
Agriculture, the Department of Public Works and Highways,
the Department of Science and Technology, the Department
of Energy, the Deputy Director General of the National (g) Render annual reports to the President and the Congress.
Economic and Development Authority, one (1) representative
from the investors / business sector in the ECOZONE. In case
SEC. 13. General Powers and Functions of the Authority. –
of the unavailability of the Secretary of the Department of
The PEZA shall have the following powers and functions:
Trade and Industry to attend a particular board meeting, the
Director General of PEZA shall act as Chairman." (a) To operate, administer, manage and develop the
ECOZONE according to the principles and provisions set forth
in this Act;
The existing Export Processing Zone Authority (EPZA)
created under Presidential Decree No. 66 shall evolve into the
PEZA in accordance with the guidelines and regulations set (b) To register, regulate and supervise the enterprises in the
forth in an executive order issued for this purpose. ECOZONE in an efficient and decentralized manner;

Members of the Board shall receive a per diem of not less
than the amount equivalent to the representation and
transportation allowances of the members of the Board and /
or as may be determined by the Department of Budget and
Management: Provided, however, That per diems collected
per month does not exceed the equivalent of four (4)
meetings.
(c) To coordinate with local government units and exercise
general supervision over the development, plans, activities
and operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;
(d) In coordination with local government units concerned and
appropriate agencies, to construct, acquire, own, lease,

34
operate and maintain on its own or through contract,
franchise, license, bulk purchase from the private sector and
build-operate-transfer scheme or joint venture, adequate
facilities and infrastructure, such as light and power systems,
water supply and distribution systems, telecommunication and
transportation, buildings, structures, warehouses, roads,
bridges, ports and other facilities for the operation and
development of the ECOZONE;
(e) To create, operate and/or contract to operate such
agencies and functional units or offices of the authority as it
may deem necessary;
(f) To adopt, alter and use a corporate seal; make contracts,
lease, own or otherwise dispose of personal or real property;
sue and be sued; and otherwise carry out its duties and
functions as provided for in this Act;
(g) To coordinate the formulation and preparation of the
development plans of the different entities mentioned above;
(h) To coordinate with the National Economic Development
Authority (NEDA), the Department of Trade and Industry
(DTI), the Department of Science and Technology (DOST),
and the local government units and appropriate government
agencies for policy and program formulation and
implementation; and
(i) To monitor and evaluate the development and
requirements of entities in subsection (a) and recommend to
the local government units or other appropriate authorities the
location, incentives, basic services, utilities and infrastructure
required or to be made available for said entities.
SEC. 14. Powers and Functions of the Director General. –
The director general shall be the overall coordinator of the
policies, plans and programs of the ECOZONES. As such, he
shall provide overall supervision over and general direction to
the development and operations of these ECOZONES. He
shall determine the structure and the staffing pattern and
personnel complement of the PEZA and establish regional
offices, when necessary, subject to the approval of the PEZA
Board.
In addition, he shall have the following specific powers and
responsibilities:
(a) To safeguard all the lands, buildings, records, monies,
credits and other properties and rights of the ECOZONES;
(b) To ensure that all revenues of the ECOZONE are collected
and applied in accordance with its budget;
(c) To ensure that the investors/firms and employees of the
ECOZONES are properly discharging their respective duties;
(d) To give such information and recommend such measures
to the Board, as he shall deem advantageous to the
ECOZONE;
(e) To submit to the Board, the ongoing and proposed
projects, work and financial program, annual budget of
receipts, and expenditures of the ECOZONE;
(f) To represent the ECOZONE in all its business matters and
sign on its behalf after approval of the Board, all its bonds,
borrowings, contracts, agreements and obligations made in
accordance with this Act;
(g) To acquire jurisdiction, as he may deem proper, over the
protests, complaints, and claims of the residents and
enterprises in the ECOZONE concerning administrative
matters;
(h) To recommend to the Board the grant, approval, refusal,
amendment or termination of the ECOZONE franchises,
licenses, permits, contracts, and agreements in accordance
with the policies set by the Board;
(i) To require owners of houses, buildings or other structures
constructed without the necessary permit whether constructed
on public or private lands, to remove or demolish such
houses, buildings, structures within sixty (60) days after notice
and upon failure of such owner to remove or demolish such
house, building our structure within said period, the director
general or his authorized representative may summarily
cause its removal or demolition at the expense of the owner,
any existing law, decree, executive order and other issuances
or part thereof to the contrary notwithstanding;
(j) To take such emergency measures as may be necessary
to avoid fires, floods and mitigate the effects of storms and
other natural or public calamities;
(k) To prepare and make out plans for the physical and
economic development of the ECOZONE, including zoning
and land subdivision, and issue such rules and regulations
which shall be submitted to the Board for its approval; and
35
(l) To perform such other duties and exercises such powers
as may be prescribed by the Board, and to implement the
policies, rules and regulations set by the PEZA.
SEC. 15. Administration of Each ECOZONE. – Except for
privately-owned, managed or operated ECOZONES, each
ECOZONE shall be organized, administered, managed and
operated by the ECOZONE executive committee composed
of the following:
(a) The administrator who shall be appointed by the PEZA
Board upon recommendation of the director general; and
(b) One (1) deputy administrator to be appointed by the Board
upon recommendation of the director general.
An ECOZONE advisory body shall be created with the
following members:
1. The president of the association of investors in the
ECOZONE;
2. The governor of the province where the ECOZONE is
located;
3. The mayor/s of the municipality/ies or city/ies where the
ECOZONE is located;
4. The president of an accredited labor union in the
ECOZONE;
5. The representative of the business sector in the periphery
of the ECOZONE; and
6. The representative of the PEZA.
The ECOZONE advisory body shall have the following
functions:
i. Advise the ECOZONE management on matters pertaining
to policy initiatives; and
ii.Assist the ECOZONE management in setting problems
arising between labor and any enterprise in the ECOZONE.
Privately-owned ECOZONES shall retain autonomy and
independence but shall be monitored by the PEZA for the
implementation of incentives and operations for adherence to
the law.
SEC. 16. Personnel. – The PEZA Board of Directors shall
provide for an organization and staff of officers and
employees of the PEZA, and upon recommendation of the
director general with the approval of the Secretary of the
Department of Trade and Industry, appoint and fix the
remunerations and other emoluments: Provided, That the
Board shall have exclusive and final authority to promote,
transfer, assign and reassign officers of the PEZA, any
provision of existing law to the contrary notwithstanding:
Provided, further, That the director general may carry out
removal of such officers and employees.
All positions in the PEZA shall be governed by a
compensation, position classification system and qualification
standards approved by the director general with the
concurrence of the Board of Directors based on a
comprehensive job analysis and audit of actual duties and
responsibilities. The compensation plan shall be comparable
with the prevailing compensation plans in the Subic Bay
Metropolitan Authority (SBMA), Clark Development
Corporation (BCDA) and the private sector and shall be
subject to the periodic review by the Board no more than once
every two (2) years without prejudice to yearly merit reviews
or increases based on productivity and profitability. The PEZA
shall therefore be exempt from existing laws, rules and
regulations on compensation, position classification and
qualification standards. It shall however endeavor to make its
systems conform as closely as possible with the principles
under Republic Act No. 6758.
The PEZA officers and employees including all Members of
the Board shall not engage directly or indirectly in partisan
activities or take part in any election, except to vote.
No officer or employee of the PEZA subject to Civil Service
laws and regulations shall be removed or suspended except
for cause, as provided by law.
SEC. 17. Investigation and Inquiries. – Upon a written formal
complaint made under oath, which on its face provides
reasonable basis to believe that some anomaly or irregularity
might have been committed, the PEZA or the administrator of
the ECOZONE concerned, shall have the power to inquire
into the conduct of firms or employees of the ECOZONE and
to conduct investigations, and for that purpose may subpoena
witnesses, administer oaths, and compel the production of
books, papers, and other evidences: Provided, That to arrive
at the truth, the investigator(s) may grant immunity from
prosecution to any person whose testimony or whose
possessions of documents or other evidence is necessary or
convenient to determine the truth in any investigation
conducted by him or under the authority of the PEZA or the
administrator of the ECOZONE concerned.
36
SEC. 18. Prohibition Against Holding Any Other Office. – The
director general, deputy director general, administrators,
officials and staff or assistants of the PEZA shall not hold any
other office or employment within or outside the PEZA during
their tenure. They shall not, during their tenure, directly or
indirectly, practice any profession, participate in any business,
or be financially interested in any contract with, or in any
franchise, or special privilege granted by the PEZA or national
government, or any subdivision, agency, or instrumentality
thereof, including any government-owned-controlled
corporation, or its subsidiary.
SEC. 19. Disbursement of Funds. – No money shall be paid
out of the funds of any ECOZONE except in pursuance of the
budget as formulated and approved by the PEZA.
SEC. 20. Full Disclosure of Financial and Business Interests.
– Every member of the Board of the PEZA, the director
general, the deputy directors general, and their staff shall,
upon assumption of office, make full disclosure of their
financial and business Interests.
CHAPTER III
OPERATIONS WITHIN THE ECOZONE
SEC. 21. Development Strategy of the ECOZONE. - The
strategy and priority of development of each ECOZONE
established pursuant to this Act shall be formulated by the
PEZA, in coordination with the Department of Trade and
Industry and the National Economic and Development
Authority; Provided, That such development strategy is
consistent with the priorities of the national government as
outlined in the medium-term Philippine development plan.
It shall be the policy of the government and the PEZA to
encourage and provide Incentives and facilitate private sector
participation in the construction and operation of public
utilities and infrastructure in the ECOZONE, using any of the
schemes allowed in Republic Act No. 6957 (the
build-operate-transfer law).
SEC. 22. Survey of Resources. The PEZA shall, in
coordination with appropriate authorities and neighboring
cities and municipalities, immediately conduct a survey of the
physical, natural assets and potentialities of the ECOZONE
areas under its jurisdiction.
SEC. 23. Fiscal Incentives. – Business establishments
operating within the ECOZONES shall be entitled to the fiscal
incentives as provided for under Presidential Decree No. 66,
the law creating the Export Processing Zone Authority, or
those provided under Book VI of Executive Order No. 226,
otherwise known as the Omnibus Investment Code of 1987.
Furthermore, tax credits for exporters using local materials as
Inputs shall enjoy the same benefits provided for in the Export
Development Act of 1994.
● SEC. 24. Exemption from National and Local Taxes.-
Except for real property taxes on land owned by
developers, no taxes, local and national, shall be
imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent
(5%) of the gross income earned by all business
enterprises within the ECOZONE shall be paid and
remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer’s office of the
municipality or city where the enterprise is located.
SEC. 25. Applicable National and Local Taxes. – All persons
and services establishments in the ECOZONE shall be
subject to national and local taxes under the National Internal
Revenue Code and the Local Government Code.
SEC. 26. Domestic Sales. – Goods manufactured by an
ECOZONE enterprise shall be made available for Immediate
retail sales in the domestic market, subject to payment of
corresponding taxes on the raw materials and other
regulations that may be adopted by the Board of the PEZA.
However, in order to protect the domestic industry, there shall
be a negative list of Industries that will be drawn up by the
PEZA. Enterprises engaged in the industries included in the
negative list shall not be allowed to sell their products locally.
Said negative list shall be regularly updated by the PEZA.
The PEZA, in coordination with the Department of Trade and
Industry and the Bureau of Customs, shall jointly issue the
necessary implementing rules and guidelines for the effective
Implementation of this section.
SEC. 27. Applicability of Banking Laws and Regulations. –
Existing banking laws and Bangko Sentral ng Pilipinas (BSP)
rules and regulations shall apply to banks and financial
institutions to be established in the ECOZONE and to other
ECOZONE-registered enterprises. Among other pertinent
regulations, these include those governing foreign exchange
and other current account transactions (trade and non-trade)
local and foreign borrowings, foreign currency deposit units,
offshore banking units and other financial institutions under
the supervision of the BSP.
SEC. 28. After Tax Profits. – Without prior Bangkok Sentral
approval, after tax profits and other earnings of foreign
investments in enterprises in the ECOZONE may be remitted
outward in the equivalent foreign exchange through any of the
banks licensed by the Bangko Sentral ng Pilipinas in the
ECOZONE: Provided, however, That such foreign
investments in said enterprises have been previously
registered with the Bangko Sentral.
37
SEC. 29. Eminent Domain. – The areas comprising an
ECOZONE may be expanded or reduced when necessary.
For this purpose, the government shall have the power to
acquire, either by purchase, negotiation or condemnation
proceedings, any private lands within or adjacent to the
ECOZONE for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets
valuable to the prosperity of the ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any
person or group of persons who has been occupying a parcel
of land within the Zone has to be evicted, the PEZA shall
provide the person or group of persons concerned with proper
disturbance compensation: Provided, however, That in the
case of displaced agrarian reform beneficiaries, they shall be
entitled to the benefits under the Comprehensive Agrarian
Reform Law, including but not limited to Section 36 of
Republic Act No. 3844, in addition to a homelot in the
relocation site and preferential employment in the project
being undertaken.
● SEC. 30. Leases of Lands and Buildings. – Lands
and buildings in each ECOZONE may be leased to
foreign investors for a period not exceeding fifty (50)
years renewable once for a period of not more than
twenty-five (25) years, as provided for under
Republic Act No. 7652, otherwise known as the
Investors’ Lease Act. The leasehold right acquired
under long-term contracts may be sold, transferred
or assigned, subject to the conditions set forth under
Republic Act No. 7652.
SEC. 31. Land Conversion. – Agricultural lands may be
converted for residential, commercial, industrial and other
non-agricultural purposes, subjects to the conditions set forth
under Republic Act No. 6657 and other existing laws.
SEC. 32. Shipping and Shipping Register. – Private shipping
and related business including private container terminals
may operate freely in the ECOZONE, subject only to such
minimum reasonable regulations of local application which the
PEZA may prescribe.
● The PEZA shall, in coordination with the Department
of Transportation and Communications, maintain a
shipping register for each ECOZONE as a business
register of convenience for ocean-going vessels and
issue related certification.
Ships of all sizes, descriptions and nationalities shall enjoy
access to the ports of the ECOZONE, subject only to such
reasonable requirement as may be prescribed by the PEZA In
coordination with the appropriate agencies of the national
government.
SEC. 33. Protection of Environment. - The PEZA, in
coordination with the appropriate agencies, shall take
concrete and appropriate steps and enact the proper measure
for the protection of the local environment.
SEC. 34. Termination of Business. - Investors In the
ECOZONE who desire to terminate business or operations
shall comply with such requirements and procedures which
the PEZA shall set, particularly those relating to the clearing
of debts. The assets of the closed enterprise can be
transferred and the funds con be remitted out of the
ECOZONE subject to the rules, guidelines and procedures
prescribed jointly by the Bangko Sentral ng Pilipinas, the
Department of Finance and the PEZA.
SEC. 35. Registration of Business Enterprises. - Business
enterprises within a designated ECOZONE shall register with
the PEZA to avail of all incentives and benefits provided for in
this Act.
SEC. 36. One Stop Shop Center. - The PEZA shall establish
a one stop shop center for the purpose of facilitating the
registration of new enterprises in the ECOZONE. Thus, all
appropriate government agencies that are Involved In
registering, licensing or issuing permits to investors shall
assign their representatives to the ECOZONE to attend to
Investor’s requirements.
CHAPTER IV
INDUSTRIAL HARMONY IN THE ECOZONES
SEC. 37. Labor and Management Relations. - Except as
otherwise provided in this Act, labor and management
relations in the ECOZONE shall be governed by the existing
Labor Code of the Philippines. Employees and personnel in
the ECOZONE enterprises shall receive salaries and benefits
and shall enjoy working conditions not less than those
provided under the Philippine Labor Code and other relevant
laws, issuances, rules and regulations of the Philippine
government and the Department of Labor and Employment.
SEC. 38. Promotion of Industrial Peace. - In the pursuit of
Industrial harmony in the ECOZONE, a tripartite body
composed of one (1) representative each from the
Department of Labor and Employment, labor sector and
business and industry sectors shall be created In order to
formulate a mechanism under a social pact for the
enhancement and preservation of industrial peace in the
ECOZONE within thirty (30) days after the effectivity of this
Act.
38
SEC. 39. Master Employment Contracts. - The PEZA, in
coordination with the Department of Tabor and Employment,
shall prescribe a master employment contract for all
ECOZONE enterprise staff members and workers, the terms
of which provide salaries and benefits not less than those
provided under this Act, the Philippine Labor Code, as
amended, and other relevant issuances of the national
government.
● SEC. 40. Percentage of Foreign Nationals. -
Employment of foreign nationals hired by ECOZONE
enterprises in a supervisory, technical or advisory
capacity shall not exceed five percent (5%) of Its
workforce without the express authorization of the
Secretary of Labor and Employment.
SEC. 41. Migrant Worker. - The PEZA, in coordination with
the Department of Labor and Employment, shall promulgate
appropriate measures and programs leading to the expansion
of the services of the ECOZONE to help the local
governments of nearby areas meet the needs of the migrant
workers.
SEC. 42. Incentive Scheme. - An additional deduction
equivalent to one- half (1/2) of the value of training expenses
incurred In developing skilled or unskilled labor or for
managerial or other management development programs
incurred by enterprises In the ECOZONE can be deducted
from the national government's share of three percent (3%) as
provided In Section 24.
The PEZA, the Department of Labor and Employment, and
the Department of Finance shall jointly make a review of the
incentive scheme provided In this section every two (2) years
or when circumstances so warrant.
CHAPTER V
NATIONAL GOVERNMENT AND OTHER ENTITIES
SEC. 43. Relationship with the Regional Development
Council. - The PEZA shall determine the development goals
for the ECOZONE within the framework of national
development plans, policies and goals, and the administrator
shall, upon approval by the PEZA Board, submit the
ECOZONE plans, programs and projects to the regional
development council for inclusion in and as inputs to the
overall regional development plan.
SEC. 44. Relationship with the Local Government Units. -
Except as herein provided, the local government units
comprising the ECOZONE shall retain their basic autonomy
and identity. The cities shall be governed by their respective
charters and the municipalities shall operate and function In
accordance with Republic Act No. 7160, otherwise known as
the Local Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial
Estates. – Privately-owned industrial estates shall retain their
autonomy and independence and shall be monitored by the
PEZA for the implementation of incentives.
SEC. 46. Transfer of Resources. - The relevant functions of
the Board of Investments over industrial estates and
agri-export processing estates shall be transferred to the
PEZA. The resources of government-owned Industrial estates
and similar bodies except the Bases Conversion
Development Authority and those areas identified under
Republic Act No. 7227, are hereby transferred to the PEZA as
the holding agency. They are hereby detached from their
mother agencies and attached to the PEZA for policy,
program and operational supervision.
The Boards of the affected government-owned industrial
estates shall be phased out and only the management level
and an appropriate number of personnel shall be retained.
Government personnel whose services are not retained by
the PEZA or any government office within the ECOZONE
shall be entitled to separation pay and such retirement and
other benefits they are entitled to under the laws then in force
at the time of their separation: Provided, That in no case shall
the separation pay be less than one and one-fourth (1 1/4)
month of every year of service.
CHAPTER VI
MISCELLANEOUS PROVISIONS
SEC. 47. Appropriation. - Upon the effectivity of this Act, all
funds of the former Export Processing Zone Authority (EPZA)
shall be transferred to the newly-created Philippine Economic
Zone Authority, Thereafter, any sum as may be necessary to
augment its capital outlay shall be Included In the General
Appropriations Act to be treated as an equity of the national
government.
Additional funding shall come from the following:
(a) The annual subsidies, appropriations and/or other assets
of the exports processing zone, and the industrial estates and
other economic areas that have been absorbed/transferred to
the PEZA as mandate in this Act;
(b) The proceeds from the rent of lands, buildings, and other
properties of the ECOZONES concerned;
(c) The proceeds from fees, charges and other
revenue-generatlng Instruments which the PEZA is
authorized to impose and collect under this Act,
39
(d) The proceeds from bonds which the PEZA authorized to
float both domestic and abroad; and
(e) The advance rentals, license fees, and other charges
which the PEZA is authorized to impose under this Act and
which an investor is willing to advance payment for.
SEC. 48. Applicability of National Laws. - National laws shall
prevail vis-a- vis ECOZONE rules, regulations and standards,
unless there is a clear intent in this Act or other Acts of
Congress to vest the ECOZONE specific power and privileges
not otherwise allowed under existing laws.
technical staff of the Committee on Economic Affairs of both
Houses of Congress shall formulate the implementing rules
and regulations of this Act within ninety (90) days after its
approval. Such rules and regulations shall take effect fifteen
(15) days after their publication in a newspaper of general
circulation in the Philippines.
SEC. 56. Transitory Provisions. - Prior to the effectivity of the
implementing rules and regulations of this Act, the provisions
of Presidential Decree No. 66, as amended, and its
implementing rules and regulations shall remain in force.
SEC. 57. Effectivity- This Act shall take effect upon its
approval.

SEC. 49. Authority of the President to Advance Initial

Funding.-- Subject to existing laws, the President of the
Philippines is hereby authorized to advance out of the savings
of the Office of the President such funds as may be necessary
to effect the organization of an ECOZONE which shall be
reimbursed by the PEZA at reasonable term and condition.

SEC. 50. Non-Applicability on Areas Covered by Republic

Act. No. 7227. - This Act shall not be applicable to economic
zones and areas already created or to be created under
Republic Act No. 7227 or other special laws, and governed by
authorities constituted pursuant thereto.

SEC. 51. Ipso-Facto Clause. - All privileges, benefits,

advantages or exemptions granted to special economic zones
under Republic Act. No. 7227, shall ipso-facto be accorded to
special economic zones already created or to be created
under this Act. The free port status shall not be vested upon
new special economic zones.

SEC. 52. Separability Clause. - The provisions of this Act are

hereby declared separable, and in the event one or more of
such provisions or part thereof are declared unconstitutional,
such declaration of unconstitutionality shall not affect the
validity of the other provisions thereof.

SEC. 53. Interpretation / Construction. - The powers,

authorities and functions that are vested In the Philippine
Economic Zone Authority (PEZA) and the ECOZONES
concerned are intended to establish decentralization of
governmental functions and authority as well as an efficient
and effective working relationship between the ECOZONE,
the central government and the local government units.

SEC. 54. Repealing Clause. - All laws, acts, presidential

decrees, executive orders, proclamations and / or
administrative regulations which are inconsistent with the
provisions of this Act, are hereby amended, modified,
superseded or repealed accordingly.

SEC. 55. Implementing Rules and Regulations. - The

Department of Trade and Industry, the National Economic and
Development Authority, the Department of Finance, the
Bureau of Customs, the Department of Agrarian Reform, the
Department of Interior and local Government, the Philippine
Economic Zone Authority, and the representatives from the

40