Investment incentives

Under Book I of the Omnibus Investments Code, an investor may enjoy certain benefits and incentives, provided he invests in preferred areas of investments found in the current Investment Priorities Plan (IPP).

The IPP, issued annually by the Board of Investments (BOI), is a list of promoted areas of investments eligible for government incentives in consultation with related government agencies and the private sector.

An enterprise may still be entitled to incentives even if the activity is not listed in the IPP so long as:

• At least 50% of production is for exports if Filipino-owned enterprise; and
• At least 70% of production is for exports if majority foreign-owned enterprise (more than 40% foreign equity)

The BOI in certain instances as indicated in the IPP may completely or partially limit the incentives available to export products.

Under Book I of the Omnibus Investments Code, BOI-registered enterprises are given a number of incentives in the form of tax exemptions and concessions. These are:

• Fiscal Incentives
• Non-Fiscal Incentives
• Incentives for Regional Headquarters and Regional Operating Headquarters in the Philippines

The 2007 Investment Priorities Plan (IPP) shall continuously support the Administration's vision of "Propelling the Nation to 1st World Country Status in 20 Years". It shall remain in representing the development thrust of the government for sustained and equitable economic growth as espoused in the 10-point agenda of the Macapagal-Arroyo administration. The IPP was prepared by the Board of Investments (BOI), as the national lead agency in promoting investments, in cooperation with concerned government agencies.

The 2007 IPP shall continue to focus on sustaining the economic momentum the country has attained while persistently pushing towards a strong, stable and sustainable republic. It shall carry on the task of fulfilling the realization of the Administration's goal of generating jobs, providing food and delivering basic services to the people.

This year's IPP contains the following list of priority areas:

• Preferred Activities - covers the identified eleven (11) investment areas that were recommended by the concerned agencies and private sector to support their respective programs.
• Mandatory Inclusions - covers all areas/activities where the inclusion in the IPP and/or the grant of incentives under E.O. 226 is mandated by law.
• Export Activities - covers the manufacture of non-traditional export products and activities in support of exporters.
• Projects under the Retention, Expansion, and Diversification (R.E.D.) Program - refers to activities of existing investors either considered as global players or engaged in strategic industries that are encouraged for retention, expansion or diversification of their operations in the country.

In general, activities under these lists shall be eligible to incentives prescribed under E.O. 226, as amended, subject to the General Policies and Specific Guidelines issued by the BOI.

This year's IPP will continue to utilize the Industry Cluster Approach to enhance industrial competitiveness, promote investments in the countryside, develop micro, small and medium enterprises (MSMEs) and support the One Town, One Product (OTOP) Program as it applies to the activities listed in the IPP. The modernization of existing activities, as well as the establishment and operation of Centers of Excellence and Training Institutions to support the human resources requirements of the preferred activities, are also encouraged.

Finally, the ARMM List covers priority areas that have been independently determined by the Regional Board of Investments (RBOI) of the Autonomous Region of Muslim Mindanao (ARMM) in accordance with E.O. 458. The economic activities listed in the ARMM shall be entitled to incentives only when said activities are undertaken within the ARMM region. However, the economic activities listed in the Preferred Activities, Mandatory Inclusions, Export Activities, and Projects under the R.E.D. Program, may also be undertaken within the ARMM.

The preparation and formulation of the 2007 IPP was undertaken through the concerted efforts of the IPP Inter-Agency Working Group headed by the Board of Investments (BOI), in coordination with the BOI-Autonomous Region of Muslim Mindanao (BOI-ARMM), Presidential Management Staff (PMS), the National Economic Development Authority (NEDA), the Departments of Finance (DOF), Agriculture (DA), Environment and Natural Resources (DENR), Transportation and Communications (DOTC), Tourism (DOT), Energy (DOE), Science and Technology (DOST), National Telecommunications Commission (NTC), Housing and Urban Development Coordinating Council (HUDCC), Education (DepED), National Book Development Board (NBDB), Philippine Retirement Authority (PRA), Export Development Council (EDC), and Trade and Industry (DTI). Consultative meetings with various government agencies were held including public hearings attended by representatives from various sectors in Manila, Cebu, and Davao.

A. Income Tax Holiday

The BOI-registered enterprise shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial operations, as follows:

• New projects with a pioneer status for six (6) years;
• New projects with a non-pioneer status for four (4) years;
• Expansion projects for three (3) years. As a general rule, the exemption is limited to incremental sales revenue/volume;
• New or expansion projects in less developed areas (LDAs) for six (6) years, regardless of status;
• Modernization projects for three (3) years. As a general rule, the exemption is limited to incremental sales revenue/volume.

Newly registered pioneer and non-pioneer enterprises and those located in LDAs may avail of a bonus year in each of the following cases:

• The indigenous raw materials used in the manufacture of the registered product must at least be fifty percent (50%) of the total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage;
• The ratio of total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one (1) worker; or
• The net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three (3) years of operation. In no case shall the registered pioneer firm avail of the ITH for a period exceeding eight (8) years.

B. Exemption from taxes and duties on imported spare parts

A registered enterprise with a bonded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes on its importation of required supplies/spare parts for consigned equipment or those imported with incentives.

C. Exemption from wharfage dues and export tax, duty, impost and fees

All enterprises registered under the IPP will be given a 10-year period from date of registration to avail of the exemption from wharfage dues and any export tax, impost and fees on its non-traditional export products.

D. Reduction of the rates of duty on capital equipment, spare parts and accessories by virtue of E.O. 528

Effective June 17, 2006, BOI-registered enterprises of good standing with project registered as new or expanding under Executive Order 226, otherwise known as the Omnibus Investments Code of 1987, may import machinery, equipment, spare parts and accessories subject to 0% duty for BOI-registered enterprises, classified under AHTN Chapters 40, 59, 68, 69, 70, 73, 76, 82, 83, 84, 85, 87, 89, 90, 91 and 96 of the Tariff and Customs Code of the Philippines.

The capital equipment incentive provided under E.O. 528 shall be availed of by the registered enterprise for a period of 5 years from its effectivity or until 17 June 2011.

E. Tax exemption on breeding stocks and genetic materials

Agricultural producers will be exempt from the payment of all taxes and duties on their importation of breeding stocks and genetic materials within 10 years from the date of registration or commercial operation.

F. Tax credits

• Tax credit on tax and duty portion of domestic breeding stocks and genetic materials: a tax credit equivalent to 100% of the value of national internal revenue taxes and customs duties on local breeding stocks within 10 years from date of registration or commercial operation for agricultural producers.
• Tax credit on raw materials and supplies: a tax credit equivalent to the national internal revenue taxes and duties paid on raw materials, supplies and semi-manufacture of export products and forming part thereof shall be granted to a registered enterprise.

G. Additional deductions from taxable income

• Additional deduction for labor expense (ADLE). For the first 5 years from registration, a registered enterprise shall be allowed an additional deduction from taxable income equivalent to 50% of the wages of additional skilled and unskilled workers in the direct labor force. The incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio and shall not be availed of simultaneously with the ITH. This additional deduction shall be doubled if the activity is located in an LDA.
• Additional deduction for necessary and major infrastructure works. Registered enterprises locating in LDAs or in areas deficient in infrastructure, public utilities and other facilities may deduct from their taxable income an amount equivalent to the expenses incurred in the development of necessary and major infrastructure works. The privilege, however, is not granted to mining and forestry-related projects, as they would naturally be located in certain areas to be near their sources of raw materials.

A. Employment of foreign nationals

A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for 5 years from date of registration, extendible for limited periods at the discretion of the Board. The positions of President, General Manager and Treasurer of foreign-owned registered enterprises (more than 40%) or their equivalent shall, however, not be subject to the foregoing limitations.

B. Simplification of customs procedures

This applies for the importation of equipment, spare parts, raw materials and supplies and exports of processed products.

C. Privilege to operate a bonded manufacturing/trading warehouse

Incentives are subject to rules and regulations.

Regional Headquarters (RHQ) is entitled to the following incentives:

Fiscal tax incentives:

• Tax and duty-free importation
• Exemption from all kinds of local taxes, fees or charges
• Equipment and training materials not locally available
• Equipment disposed within two (2) years after importation (subject to payment of taxes and duties)
• Importation of brand new motor vehicles (subject to payment of taxes and duties)

Regional Operating Headquarters (ROHQ) can avail of the following incentives:

Fiscal tax incentives:

• Exemption from all kinds of local taxes, fees or charges (except real property tax on land improvements and equipment)
• Tax and duty-free importation of equipment and materials for training and conferences
• Equipment and training materials not locally available
• Equipment disposed within two (2) years after importation (subject to payment of taxes and duties)
• Importation of brand new motor vehicles (subject to payment of taxes and duties)

Exemptions common for both RHQ and ROHQ - non-fiscal tax incentives for expatriates:

• Multiple Entry Visa for expatriates, including their spouse and unmarried children below the age of twenty-one (21)
• Exemption from payment of fees except for reasonable administrative costs
• Exemption from securing Alien Certificate of Registration
• Non-immigrant visa will be processed within seventy-two (72) hours upon submission of requirements to the Bureau of Immigration (BI)
• Preferential tax rate of 15% on salaries, annuities, and other types of compensation applicable for expatriates
• Travel tax exemption
• Tax and duty-free importation of used household goods and personal effects

Download the provincial primer and ordinance for full details on local incentives administered by the Bulacan Local Investment Incentive Council.

Each city and municipality offers its own investment incentives under its local ordinance or measure. Download the file for the locality you are interested in.