Investment Plan
Investment Plan
Investment Plan
1. Business Climate
Business climate in the Philippines
Business environment in the Philippines significantly improved this year
following a series of reform measures implemented by the government,
pulling the countrys standing 30 notches higher to 108th, according to the
latest World Bank survey on the Ease of Doing Business.
The Washington-based lender noted that the Philippines is among the Asian
economies that registered the biggest gains in terms of enhancing its
business environment.
The annual WB survey on the ease of doing business in 189 economies
worldwide, examines 10 government rules obtaining permits to start up a
business, access to credit, trading across borders, tax system as well as
insolvency procedures.
WB noted that the Philippines instituted regulatory reforms in key areas
resolving insolvency, online filing of taxes helped improve the countrys
ranking to 108th from 138th spot in 2012.
This signals that the gap between the developed nations and the Philippines
is narrowing as it improves regulations to foster entrepreneurship and trade.
Without going to specifics, the Philippines would have ranked 133rd in 2012
survey but WB apparently overlooked some of the reform measures
implemented.
The Philippines is joined by nine other economies, namely: Ukraine, Rwanda,
the Russian Federation, Kosovo, Djibouti, Cte dIvoire, Burundi, the former
Yugoslav Republic of Macedonia, and Guatemala that saw significant gains in
this years ranking.
Singapore remains the most business-friendly economy, followed by Hong
Kong, New Zealand, the US, Denmark, Malaysia, the Republic of Korea,
Georgia, Norway, and the United Kingdom.
Among its regional peers, the Philippines still runs behind its Southeast Asian
neighbors Malaysia (6), Thailand (18), Brunei (59), and Vietnam 99).
However, its standing is better than Indonesia (120) and Cambodia (137).
The World Bank, meanwhile, noted that the primary hindrance for
entrepreneurs in the Philippines is the governments start-up regulation,
which requires 15 permits that would take up to 35 days before business can
start actual operation.
2. History
The monetary board of the Central Bank of the Philippines is authorized to issue
certificates of authority to operate offshore banking units.
Qualifications requirements
Upon their receipt of a corresponding certificate of authority to operate an offshore
banking unit, the license to transact business under the provisions of the
aforementioned Republic Act shall be deemed automatically withdrawn.
Classification
Paper center - acts as a location of record, but little or no actual banking is carried
out there, whereas a functional center is one where deposit taking or final lending is
actually carried on.
Functional centers - serve as important links between Euro-currency markets,
helping to channel funds from major international centers (such as London and New
York) to final borrowers.
Common Characteristics
1st - virtually all of the centers, local capital requirements - which must be held in
the form of onshore assets, whether government paper or bank premises - are low
or non-existent for offshore banks.
2nd - licenses and fees are generally low.
3rd - entry is relatively easy, especially for large international banks, in contrast to
the situation in neighboring countries, which may strictly limit or prohibit the entry
of foreign banks.
4th - and most important, taxes and levies on offshore centers, are virtually nonexistent in these centers, in marked contrast to the situation in alternative
locations.
4. How to do business
Corporate undertaking
4. Labor Requirements
These are the important articles for the Labor Employment Requirements for a
Foreign Bank Employer and Employees. It is the Labor Code that will apply, not the
Civil Service Law because a foreign bank subsidiary or branch is not a Government
owned and controlled corporation, it is a private one.
Art. 40. Employment permit of non-resident aliens. Any alien seeking
admission to the Philippines for employment purposes and any domestic or foreign
employer who desires to engage an alien for employment in the Philippines shall
obtain an employment permit from the Department of Labor.
The employment permit may be issued to a non-resident alien or to the applicant
employer after a determination of the non-availability of a person in the Philippines
who is competent, able and willing at the time of application to perform the services
for which the alien is desired.
For an enterprise registered in preferred areas of investments, said employment
permit may be issued upon recommendation of the government agency charged
with the supervision of said registered enterprise.
Art. 82. Coverage. The provisions of this Title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations.
5. Tax Exemptions
Under R.A. 6426, Foreign Currency Deposit Act of the Philippines:
Section 6. Tax exemption. All foreign currency deposits made under this Act, as
amended by PD No. 1035, as well as foreign currency deposits authorized under PD
No. 1034, including interest and all other income or earnings of such deposits, are
hereby exempted from any and all taxes whatsoever irrespective of whether or not
these deposits are made by residents or nonresidents so long as the deposits are
eligible or allowed under aforementioned laws and, in the case of nonresidents,
irrespective of whether or not they are engaged in trade or business in the
Philippines.
CHAPTER IV - TAX ON CORPORATIONS
Republic Act No. 8424 AN ACT REPUBLIC ACT NO. 9294 AN ACT
AMENDING
THE
NATIONAL RESTORING THE TAX EXEMPTION
INTERNAL REVENUE CODE, AS OF OFFSHORE BANKING UNITS
AMENDED,
AND
FOR
OTHER (OBUs) AND FOREIGN CURRENCY
PURPOSES.
DEPOSIT
UNITS
(FCDUs),
CHAPTER
IV
TAX
ON AMENDING FOR THE PURPOSE
CORPORATIONS
SECTION 27 (D) AND SECTION 28,
PARAGRAPHS (A) (4) AND (A) (7)
(b) OF THE NATIONAL INTERNAL
REVENUE CODE AS AMENDED.
Section 1. Sec. 27, paragraph (D) (3)
of the National Internal Revenue Code,
as amended, is hereby further amended
to read as follows:
SEC. 27. Rates of Income tax on
Domestic Corporations. "Sec. 27. Rates of Income Tax on
(D) Rates of Tax on Certain Passive Domestic Corporations.
Incomes. "(D) Rates of Tax on Certain
(3) Tax on Income Derived under Passive Incomes.
the Expanded Foreign Currency "(3) Tax on Income Derived under
Deposit System. - Income derived by the Expanded Foreign Currency
a depository bank under the expanded Deposit System. - Income derived by
foreign currency deposit system from a depository bank under the expanded
foreign currency transactions with local foreign currency deposit system from
commercial banks, including branches foreign currency transactions with nonof foreign banks that may be authorized residents, offshore banking units in the
by the Bangko Sentral ng Pilipinas (BSP) Philippines, local commercial banks
August 1, 1996;
"(b) Intercorporate Dividends. - A
final withholding tax at the rate of
fifteen percent (15%) is hereby imposed
on the amount of cash and/or property
dividends received from a domestic
corporation which shall be collected
and paid as provided in Sec. 57(A) Of
this Code, subject to the condition that
the country in which the nonresident
foreign corporation is domiciled, shall
allow a credit against the tax due from
the nonresident foreign corporation
taxes deemed to have been paid in the
Philippines
equivalent
to
twenty
percent (20%) for 1997, nineteen
percent (19%) for 1998, eighteen
percent (18%) for 1999, and seventeen
percent
(17%)
thereafter,
which
represents the difference between the
regular income tax of thirty-five percent
(35%) in 1997, thirty-four percent
(34%) in 1998, thirty-three percent
(33%) in 1999, and thirty-two percent
(32%) thereafter on corporations and
the fifteen percent (15%) tax on
dividends
as
provided
in
this
subparagraph;
"(c) Capital Gains from Sale of
Shares of Stock not Traded in the
Stock Exchange. - A final tax at the
rates prescribed below is hereby
imposed upon the net capital gains
realized during the taxable year from
the sale, barter, exchange or other
disposition of shares of stock in a
domestic corporation, except shares
sold, or disposed sold, or disposed of
through the stock exchange;
Not over P 100,000 - 5%
On any amount in excess of P10,000 10%"
Sec. 3. Separability Clause. - If any part
or provision of this Act shall be held
unconstitutional
or
invalid,
other
provisions hereof which are not affected
thereby shall continue to be in full force
and effect.
Sec. 4. Repealing Clause. - All laws,
decrees, orders, rules and regulations
and other issuances or parts thereof
inconsistent with this Act are hereby
repealed or modified accordingly.
Sec. 5. Effectivity. - This Act shall take
effect fifteen (15) days after its
publication in the Official Gazette or in
two
(2)
newspapers
of
general
circulation. Approved: April 28, 2004
Figure 1: Matrix of R.A. 8424, AN ACT LIBERALIZING THE ENTRY AND SCOPE OF
OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES,
and R.A. 9294, AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING
UNITS (OBUs) AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUs), AMENDING FOR
THE PURPOSE SECTION 27 (D) AND SECTION 28, PARAGRAPHS (A) (4) AND (A) (7)
(b) OF THE NATIONAL INTERNAL REVENUE CODE AS AMENDED. This table shows the
tax exemptions given by the government to foreign banks.
R.A. 7721
R.A. 10641
SECTION 1. Section 2 of
Republic Act No. 7721 is
hereby amended to read as
The Monetary Board may authorize follows: SEC. 2. Modes of
foreign banks to operate in the Entry.
Philippine banking system through
any of the following modes of entry:
(i) by acquiring, purchasing or
owning up to sixty percent (60%) of
the voting stock of an existing bank;
(ii) by investing in up to sixty
percent (60%) of the voting stock of
a
new
banking
subsidiary
incorporated under the laws of the
Philippines; or
(iii) by establishing branches with
full banking authority:
Provided, That a foreign bank may
avail itself of only one (1) mode of
entry:
Provided, further, That a foreign
bank or a Philippine corporation may
own up to a sixty percent (60%) of
the voting stock of only one (1)
domestic bank or new banking
subsidiary.
Figure 2: Matrix of R.A. 7721, AN ACT LIBERALIZING THE ENTRY AND SCOPE OF
OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES,
and R.A. 10641 AN ACT ALLOWING THE FULL ENTRY OF FOREIGN BANKS IN THE
PHILIPPINES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7721. This table
shows the incentives given by the government to Offshore banking units and foreign
banks.
2.
Taxes including withholding taxes on internal income and other forms of levies are
practically non-existent.
3.
4.
License fee for registration and operation is either nil or very low.
5.
6.
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8.
9.
10.
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14.
Developing local expertise in international finance and the same time propelling and
expanding foreign trade