The Omnibus Investments Code of 1987

(Executive Order No. 226)

CHAPTER 1 TITLE AND DECLARATION OF POLICY

O Article 1 Short Title
O "Omnibus Investments Code of

1987"
O Article 2
O Declaration of Investment

Policies.

CHAPTER II
BOARD OF INVESTMENTS

ART. 3. The Board of Investments.

O The Board of Investments shall

implement the provisions of Books One to Five of this Code.

ART. 4. Composition of the Board.

O The Board of Investments shall be

composed of seven (7) Governors

O The Secretary of Trade and Industry O three (3) Undersecretaries of Trade and

Industry to be chosen by the President O three (3) Undersecretaries of Trade and Industry to be chosen by the President

BOI DIRECTORS

Gregory L. Domingo DTI Secretary BOI Chairman Phone: (+632) 890.9333 Fax : (+632) 896.1166/899.5518 E-mail : [email protected]

BOI DIRECTORS

Adrian S. Cristobal, Jr. DTI Undersecretary for Industry Development and Trade Policy Group Vice-Chairman and BOI Managing Head Phone : (+632) 890.4898/890.4891 TeleFax : (+632) 895.3993 E-mail : [email protected]

Ponciano C Manalo, Jr. DTI Undersecretary for Trade and Investment Promotions Group BOI Governor Phone : (+632) 890.9332 Fax : (+632) 895.3512 E-mail : [email protected]

BOI DIRECTORS

Zenaida C. Maglaya DTI Undersecretary for Consumer Welfare and Business Regulation Group & Regional Operations and Development Group BOI Governor Phone : (+632) 751.3336/ 751.3334 Fax :(+632) 751.3335 E-mail : [email protected]

Lucita P. Reyes BOI Governor Phone : (+632) 895.3983/ 897.6682 Locs.326/325 Fax :(+632) 895.3978 E-mail : [email protected]

BOI DIRECTORS

Pelagio Tan Ricalde BOI Governor Phone : (+632) 897.2830 Fax : (+632) 897.2830

Oliver B. Butalid BOI Governor Tel. No. (+632) 896.9285 TeleFax : (+632) 896.9285 E-mail : [email protected]

ART 5. Qualifications of Governors of the Board.

O 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, banking, commerce, industry, agriculture, engineering, law, management or labor.

ART. 6. Appointment of Board Personnel.

O The Board shall appoint its technical staff

and other personnel subject to Civil Service Law, rules and regulations.

ART 7. Powers and Duties of the Board.

O The Board shall be responsible for the

regulation and promotion of investments in the Philippines. O 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. O 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

ART. 8. Powers and Duties of the Chairman.

To preside over the meetings of the Board; 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 investment; 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.
1) 2)

ART. 9. Powers and Duties of the Vice-Chairman.

1) 2)
3)

4)

5)

To act as Managing Head of the Board; To preside over the meetings of the Board in the absence of the Chairman; 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; Assist registered enterprises and prospective investors to have their papers processed with dispatch by all government offices, agencies, instrumentalities and financial institutions; and 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.

INVESTMENTS WITH INCENTIVES

TITLE I PREFERRED AREAS OF INVESTMENTS

CHAPTER I DEFINITION OF TERMS

O Article 10 - 26

CHAPTER II
INVESTMENT PRIORITIES PLAN

Investments Priorities Plans

O Article 26

Investment Priorities Plan shall mean the overall plan prepared by the Board which includes and contains:
a)

b)

c)

d)

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; 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; Specific activities where the potential for utilization of indigenous non-petroleum based fuels or sources of energy can be best promoted; and Such other information, analyses, data, guidelines or criteria as the Board may deem appropriate.

ART. 27. Investment Priorities Plan.

O 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 Priorities Plan: Provided, however, that the deadline for submission may be extended by the President.

ART. 28. Criteria in Investment Priority Determination.

O No economic activity shall be included in the

Investment Priorities Plan unless it is shown to be economically, technically and financially sound after thorough investigation and analysis by the Board. O 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.

ART. 28. Criteria in Investment Priority Determination. (Cont.)

O The Board shall take into account the following:
a)

b)
c) d) e)

Primarily, the economic soundness of the specific activity as shown by its economic internal rate of return; The extent of contribution of an activity to a specific development goal; Other indicators of comparative advantage; Measured capacity as defined in Article 20; and The market and technical aspects and considerations of the activity proposed to be included.

O ART. 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.

ART. 28. Criteria in Investment Priority Determination. (Cont.)

O 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.

ART. 17. Pioneer enterprise shall mean a registered enterprise O 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 of O 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 O 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 O 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 1 hereof. O ART. 18. Non-pioneer enterprise shall include all registered producer enterprises other than pioneer enterprises.

ART. 29. Approval of the Investment Priorities Plan.

O 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 Investments for revision. O 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.

ART. 30. Amendments.

O 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.

ART. 31. Publication.

O 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

ART. 32. Qualifications of a Registered Enterprise.

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 percent (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 percent (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:

O ART. 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 corporation 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 percent (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.

ART. 32. Qualifications of a Registered Enterprise. (cont.)

a) That it proposes to engage in a pioneer project 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 percent (70%) of its 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;

ART. 32. Qualifications of a Registered Enterprise. (cont.)

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 within 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; c) That the pioneer area it will engage in is one that is not within the activities reserved by the Constitution or other laws of the Philippines to Philippine citizens or corporations owned and controlled by Philippine citizens;
b)

ART. 32. Qualifications of a Registered Enterprise. (cont.)

2)

The applicant is proposing to engage in a preferred project listed or authorized in the current Investment Priorities Plan within a reasonable time to be fixed by the Board or, if not so listed, at least fifty percent (50%) of its total production is for export or it is an existing producer which will export part of production under such conditions and/or limited incentives as the Board may determine; or that the enterprise is engaged or proposing to engage in the sale abroad of export products bought by it from one or more export producers; or the enterprise is engaged or proposing to engage in rendering technical, professional or other services or in exporting television and motion pictures and musical recordings made or produced in the Philippines, either directly or through a registered trader.

ART. 32. Qualifications of a Registered Enterprise. (cont.)

The applicant is capable of operating on a sound and efficient basis and of contributing to the national development of the preferred area in particular and of the national economy in general; and 4) If the applicant is engaged or proposes to engage in under takings or activities other than preferred projects, it has installed or undertakes to install an accounting system adequate to identify the investments, revenues, costs, and profits or losses of each preferred project undertaken by the enterprise separately from the aggregate investment, revenues, costs and profits or losses of the whole enterprise or to establish a separate corporation for each preferred project if the Board should so require to facilitate proper implementation of this Code.
3)

ART. 33. Application.

O Applications shall be filed with the Board, recorded in

a registration book and the date appearing therein and stamped on the application shall be considered the date of official acceptance. O Whenever necessary, the Board, through the People's Economic Councils, shall consult the communities affected on the acceptability of locating the registered enterprise within their community.

ART. 34. Approval and Registration Procedures.

O The Board is authorized to adopt rules and

regulations to facilitate action on applications filed with it, prescribe criteria for the evaluation of several applications filed in one preferred area; devise standard forms for use of applicants and delegate to the regional offices of the Department of Trade and Industry the authority to receive and process applications for enterprises to be located in their respective regions. O Applications filed shall be considered automatically approved if not acted upon by the Board within twenty (20) working days from official acceptance thereof.

ART. 35. Criteria for Evaluation of Applications.

O The extent of ownership and control by Philippine citizens of the

O O

O O

O
O O

enterprises; The economic rates of return; The measured capacity: Provided, That estimates of measured capacities shall be regularly reviewed and updated to reflect changes in market supply and demand conditions: Provided, further, That measured capacity shall not result in a monopoly in any preferred area of investment which would unduly restrict trade and fair competition nor shall it be used to deny the entry of any enterprise in any field of endeavor or activity; The amount of foreign exchange earned, used or saved in their operations; The extent to which labor, materials and other resources obtained from indigenous sources are utilized; The extent to which technological advances are applied and adopted to local conditions; The amount of equity and degree to which the ownership of such equity is spread out and diversified; and Such other criteria as the Board may determine.

ART. 36. Appeal from Board's Decision.

O Any order or decision of the Board shall be final and

executory after thirty (30) days from its promulgation. Within the said period of thirty (30) days, said order or decision may be appealed. to the Office of the President. Where an appeal has been filed, said order or decision shall be final and executory ninety (90) days after the perfection of the appeal, unless reversed.

ART. 37. Certificate of Registration.

O A registered enterprise under this Code shall be issued a

certificate of registration under the seal of the Board of Investments and the signature of its Chairman and/or such other officer or employee of the Board as it may empower and designate for the purpose. The certificate shall be in such form and style as the Board may determine and shall state, among other matters:
a) b) c)

d)

The name of the registered enterprise; The preferred area of investment in which the registered enterprise is proposing to engage; The nature of the activity it is undertaking or proposing to undertake, whether pioneer or non-pioneer, and the registered capacity of the enterprise; and The other terms and conditions to be observed by the registered enterprise by virtue of the registration.

TITLE II
BASIC RIGHTS AND GUARANTEES

ART. 38. Protection of Investment.

O 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:

ART. 38. Protection of Investment. (cont.)

O Repatriation of Investments.
O 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.

ART. 38. Protection of Investment. (cont.)

O Remittance of Earnings.
O 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;

ART. 38. Protection of Investment. (cont.)

O Foreign Loans and Contracts.
O 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;

ART. 38. Protection of Investment. (cont.)

O Freedom from Expropriation.
O 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;

ART. 38. Protection of Investment. (cont.)

O Requisition of Investment.
O 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

ART. 39. Incentives to Registered Enterprises.

O 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. ii.

iii.

the project meets the prescribed ratio of capital equipment to number of workers set by the Board; utilization of indigenous raw materials at rates set by the Board; 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Income Tax Holiday.

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.
2.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Additional Deduction for Labor Expense.
O 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 ration 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax and Duty Exemption on Imported Capital

Equipment.
O Within five (5) years from the effectivity of this Code,

importations of machinery and equipment and accompanying spare parts of new and expanding registered enterprises shall be exempt to the extent of one hundred per cent (100%) of the 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:

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax and Duty Exemption on Imported Capital Equipment. 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax Credit on Domestic Capital Equipment.
O 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:

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax Credit on Domestic Capital Equipment.

Provided, that
1.

2. 3.

4.

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; that the equipment would have qualified for tax and duty-free importation under paragraph (c) hereof; that the approval of the Board was obtained by the registered enterprise; and 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Exemption from Contractor's Tax.
O The registered enterprise shall be exempt from the

payment of contractor's tax, whether national or local.

O Simplification of Customs Procedures.
O Customs procedures for the importation of equipment,

spare parts, raw materials and supplies, and exports of processed products by registered enterprises shall be simplified by the Bureau of Customs.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Unrestricted Use of Consigned Equipment.
O Provisions of existing laws notwithstanding, machinery,

equipment and spare parts consigned to any registered enterprise 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 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. O 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Employment of Foreign Nationals.
O 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 positions of president, treasurer and general manager or their equivalents may be retained by foreign nationals beyond the period set forth herein.
O 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 skills and shall submit annual reports on such training to the Board.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Exemption on Breeding Stocks and Genetic

Materials.
O 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax Credit on Domestic Breeding Stocks and Genetic

Materials.
O 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 stock and genetic materials from a domestic producer: Provided, (1) That said breeding stocks and genetic 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 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Tax Credit for Taxes and Duties on Raw Materials.
O 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.
O 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Access to Bonded Manufacturing/Trading

Warehouse System.
O 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Exemption from Taxes and Duties on Imported Spare

Parts.
O 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.

ART. 39. Incentives to Registered Enterprises. (cont.)

O Exemption from Wharfage Dues and any Export

Tax, Duty, Impost and Fee.

O The provisions of law to the contrary notwithstanding,

exports by a registered enterprise 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 LESSDEVELOPED-AREA REGISTERED ENTERPRISE

INCENTIVES TO LESSDEVELOPED-AREA REGISTERED ENTERPRISE

O ART. 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 and 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 developed urban centers, shall be entitled to the following incentives in addition to those provided in the preceding article:

INCENTIVES TO LESSDEVELOPED-AREA REGISTERED ENTERPRISE

O Pioneer Incentives.
O An enterprise in a less-developed-area registered with

the Board under Book 1 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 registration.

INCENTIVES TO LESSDEVELOPED-AREA REGISTERED ENTERPRISE

O Incentives for Necessary and Major Infrastructure and

Public Facilities.
O Registered enterprises establishing their production,

processing or manufacturing plants in an area that the Board designates as necessary for the proper dispersal of industry or in an 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.

TITLE V
GENERAL PROVISIONS

ART. 41. Power of the President to Rationalize Incentives.

O 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.

ART. 42. Refund and Penalties.

O In case of cancellation of the certificate granted

under this Code, the Board may, in appropriate cases, require the refund of incentives availed of the impose corresponding fines and penalties.

ART. 43. Benefits of Multiple Area Enterprises.

O 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.