Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 1034)
Offshore Banking refers to the conduct of banking transactions in foreign currencies involving the receipt of funds from external sources and the utilization of such funds as provided in the Decree.
Only banks organized under the laws other than those of the Republic of the Philippines, including their branches, subsidiaries, or affiliates, are qualified to operate offshore banking units in the Philippines as per regulatory guidelines prescribed by the Monetary Board.
An Offshore Banking Unit means a branch, subsidiary or affiliate of a foreign banking corporation authorized by the Central Bank of the Philippines to conduct offshore banking business in the country.
The Monetary Board considers the applicant's liquidity and solvency, net worth, resources, management, international banking expertise, contribution to the Philippine economy, equity participation in local banks, and geographic representation.
Willful violations may subject the bank to administrative sanctions under Section 34-A of Republic Act No. 265, as amended, and other applicable provisions.
Offshore banking units are exempt from all forms of local licenses, fees, dues, imposts, or any other local taxes or burdens.
A five percent (5%) tax on net income from such transactions is imposed, which is in lieu of all other taxes on these transactions.
Yes, foreign personnel may be assigned to work in offshore banking units. They and their qualified dependents are entitled to a multiple entry special visa valid for one year and are exempt from various immigration fees and registration requirements provided certain conditions are met.
Offshore banking units must maintain a minimum amount of one million US dollars (US$1,000,000) as net office funds.
No, the Usury Law (Act No. 2566), Uniform Currency Law, and Deposit Insurance Law do not apply to transactions and deposits in offshore banking units, although the Secrecy of Bank Deposits Law still applies.
Offshore banking units accept deposits in foreign currencies received from external sources with the obligation to return an equivalent amount to the owner, with or without interest.
They must start operations within 180 days from the receipt of the certificate of authority to operate.
Interest income from such loans is subject to a ten percent (10%) withholding tax as a final tax.
The Central Bank of the Philippines supervises the operations and activities of offshore banking units.