INVESTMENT INCENTIVES FROM THE GOVERNMENT Two agencies under the Department of Trade and Industry, gives separate

incentives to investors as long as they meet a number of criteria. The agencies are: the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA). Board of Investments (BOI) The BOI, the lead investment promotion agency of the government issues the Investment Priority Plan (IPP) annually. Under Book 1 of the Omnibus Investment Code, an investor may enjoy certain benefits and incentives provided he invests in preferred areas of investments found in the current IPP. Incentives include tax exemptions and concessions. An enterprise may still be entitled to incentives even if its business activity is not listed in the IPP as long as it has:

READ MORE... WHY THE PHILIPPINES ECONOMIC ZONE ACT INVESTMENT INCENTIVES

At least 50% of its production is for exports, if Filipino owned At least 70% of its production is for exports, if majority foreignowned (or more than 40% equity)

Philippine Economic Zone Authority (PEZA) The PEZA was established under Republic Act 7916 or the Special Economic Zone Act of 1995. Its main mission is to spur the growth and diversification of exports by attracting foreign investors to locate their manufacturing plants, their regional warehouses or their IT companies in the country's economic zones. Currently, there are 150 economic zone locations in different sites all over the country. BOARD OF INVESTMENTS (BOI) INCENTIVES FISCAL INCENTIVES Business establishments operating within the ECOZONES shall be entitles to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating theExport Processing Zone Authority. Fiscal Incentives includes the following: A. INCOME TAX HOLIDAY (ITH) Board of Investments (BOI) registered enterprise shall be exempt from the

payment of income taxes reckoned from the scheduled start of commercial as follows:

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

B. EXEMPTIONS 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 equipments or those imported with incentives. C. EXEMPTIONS FROM WHARFAGE DUES AND EXPORT TAX, DUTY, IMPORT AND FEES All enterprises registered under the Investment Priorities Plan of Board of Investments will be given ten (10) year period from the date of registration to avail of the exemption from wharfage dues and any export tax, import and any fees on its non-traditional export products. D. TAX EXEMPTION OF BREEDING STOCKS AND GENETIC MATERIAL Agricultural producers will be exempted from the payment of all taxes and duties on their importation of breeding stocks and genetic materials within ten (10) years from the date of registration or commercial operation. E. TAX CREDITS Tax credit on tax and duty portion of domestic breeding stocks and genetic materials. A tax credit equivalent to one hundred percent (100%) of the value of the national internal revenue taxes and customs duties on local breeding stocks within ten (10) years from the 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 the registered enterprise.

F. ADDITIONAL DEDUCTIONS FROM TAXABLE INCOME

Additional deduction for labor expense (ADLE). For the first five (5) years from registration, a registered enterprise shall be allowed an additional deduction from taxable income equivalent to fifty percent (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 simultaneously with 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 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.

NON-FISCAL INCENTIVES Non-fiscal incentives are as follows: A. EMPLOYMENT OF FOREIGN NATIONALS A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from the date of registration. The position of President, General Manager and Treasurer of foreign-owned enterprises or their equivalent shall however not be subject to the foregoing limitations. B. SIMPLIFICATION OF CUSTOMS PROCEDURES for the importation of equipment, spare parts, raw materials and supplies and exports of processed products. C. IMPORTATION OF CONSIGNED EQUIPMENT for a period of ten (10) years from the date of registration, subject to posting of a re-export bond. D. THE PRIVILEGE TO OPERATE A BONDED MANUFACTURING/TRADING WAREHOUSE subject to Customs rules and regulations. INCENTIVES FOR REGIONAL HEADQUARTERS (RHQ) AND REGIONAL OPERATING HEADQUARTERS (ROHQ) IN THE PHILIPPINES Regional Headquarters (RHQ) are entitled to the following incentives:

A. EXEMPTION ON THE PAYMENT OF CORPORATE INCOME TAX An annual information return of a tax-exempt corporation shall be filed with the Bureau of Internal Revenue (BIR) to effect exemption. B. EXEMPTION ON THE PAYMENT OF VALUE-ADDED-TAX The exemption includes the sale or lease of goods and property including the rendition of services to RHQ. Regional Operating Headquarters (ROHQ) can avail of the following: A. PAYMENT OF CORPORATE INCOME TAX. Income derived by the ROHQ from performing qualifying activities shall be subject to a preferential rate of ten percent (10%) on taxable income. B. PAYMENT OF BRANCH PROFIT REMITTANCE TAX. Any income derived from the Philippines when remitted to the parent company shall be subject to the tax on branch profit remittances. C. ON THE PAYMENT OF VALUE-ADDED TAX. ROHQ shall be subject to the ten percent (10%) value-added-tax unless otherwise provided under the National Internal Revenue Code. Exemptions common to both RHQ and ROHQ: A. EXEMPTION ON THE PAYMENT OF ALL KINDS OF LOCAL TAXES, FEES OR CHARGES. Payment however, shall be made for real property tax on land improvements and equipment. B. TAX AND DUTY FREE IMPORTATION OF TRAINING MATERIALS AND EQUIPMENTS. Applicable to materials not locally available, subject to prior approval from the Board of Investments (BOI). The sale or disposition of equipment within two years after importation, entered tax and duty free shall require prior approval from the BOI and prior payment of applicable taxes and duties. C. ENTITLEMENT TO THE IMPORTATION OF NEW MOTOR VEHICLES. The importation shall be subjected to the payment of of the corresponding taxes and duties. Under the RA 8756, the following incentives are given to the expatriates of a registered RHQ/ROHQ in the Philippines; A. MULTIPLE ENTRY VISA. Issued to the expatriates, their respective spouses and unmarried children under 21 years old. A non-immigrant visa shall be issued within 72 hours upon submission of all requirements. B. WITHHOLDING OF 15% ON COMPENSATION INCOME. Applied to both alien and Filipino executives holding managerial or technical positions.

C. TAX AND DUTY FREE IMPORTATION OF PERSONAL AND HOUSEHOLD EFFECTS. Applicable on all imports made within ninety (90) days before or after conversion of the executive's admission category to multiple entry visa. D. TRAVEL TAX EXEMPTION. Issued by the Philippine Tourism Authority (PTA) upon recommendation by the BOI during the period of the expatriate's assignment in the country. PHILIPPINE ECONOMIC ZONE AUTHORITY(PEZA) INCENTIVES For Ecozone and Information Technology (IT) Locators

Income Tax Holiday (ITH) or exemption from corporate income tax for four years, extendable to a maximum of eight (8) years; after the ITH period, there is an option to pay a special five percent (5%) tax on gross income, in lieu of all national and local taxes. Exemption from duties and taxes on imported capital equipments, spare parts, supplies and raw materials. Also breeding stocks and genetic materials or the equivalent tax credit on these items, when sourced locally. Domestic sales allowance equivalent to thirty percent (30%) of total sales. Exemption from wharfage dues and export taxes, import and fees. Permanent resident status for foreign investors and immediate family members. Employment of foreign nationals. Simplified import and export procedures. Other incentives under Executive Order 226 (omnibus Investment Code of 1987), as may be determined by the PEZA Board.

2005 Key Openers Consulting Services Philippines