QuestionsQuestions (EXECUTIVE ORDER NO. 226)
It declares State policies to accelerate sound national economic development by encouraging private Filipino and foreign investments in specified sectors, promoting competition and discouraging monopolies, ensuring holistic social/cultural/ecological development (including consultation with affected communities when necessary), extending fiscal incentives for viable projects, supporting the private sector as the prime mover (with deregulation/self-regulation where appropriate), clarifying roles of local and foreign capital, ensuring industrial peace, and providing that fiscal incentives generally terminate after not more than 10 years from registration/start-up unless a specific period is stated.
The BOI is the agency created to implement Books One to Five of the Omnibus Investments Code of 1987.
The BOI has seven (7) governors: the Secretary of Trade and Industry; three (3) Undersecretaries of Trade and Industry chosen by the President; and three (3) representatives from other government agencies and the private sector appointed by the President. The Secretary is Chairman; the Undersecretary for Industry and Investments is Vice-Chairman. Quorum is the presence of four (4) governors, and affirmative vote of four (4) governors in a meeting is required.
They must be Philippine citizens, at least 30 years old, of good moral character, and of recognized competence in fields such as economics, finance, banking, commerce, industry, agriculture, engineering, law, management, or labor.
Examples include: (1) preparing annually the Investment Priorities Plan; (2) promulgating rules and regulations to implement the Code; (3) processing and approving applications for registration; (4) deciding controversies after due hearing (with appeal to the President); (5) recommending entry of foreign nationals for employment; (6) verifying Filipino participation and compliance; (7) canceling registration/suspending incentives and ordering refunds in cases of failure to maintain qualifications or Code violations; (8) preparing studies for pioneer areas; and more.
The Chairman presides over meetings, renders annual/special reports to the President, acts as liaison for joint venture arrangements, recommends policies/measures, and performs other duties directed by the Board. The Vice-Chairman acts as Managing Head, presides in absence of the Chairman, prepares the agenda and submits policies/measures to the Board, assists investors to process papers with dispatch, and performs other Chairman duties in the latter’s absence.
A Registered Enterprise is an individual/partnership/cooperative/corporation or other entity organized and existing under Philippine laws and registered with the BOI under Book I. Excluded are entities such as commercial banks, savings and mortgage banks, rural banks, savings and loan associations, development banks, trust companies, investment banks, finance companies, brokers/dealers in securities, consumers cooperatives, credit unions, and other organizations whose principal purpose/source of income is receiving deposits, lending/borrowing, buying/selling/dealing in common/preferred stocks, bonds/debentures, or performing similar intermediary/trust/fiduciary functions.
A pioneer enterprise is a registered enterprise that (among others) manufactures/produces/ processes goods not produced in the Philippines on a commercial scale (not merely assembly/packaging), or uses new/untried production systems/processes in the Philippines, or is engaged in specified agricultural/forestry/mining activities/services/food processing essential to national goals/programs, or produces non-conventional fuels or equipment using non-conventional sources—provided the final product involves substantial use/processing of domestic raw materials where available and considering risks/magnitude of investment. Non-pioneer enterprises are all registered producer enterprises other than pioneer enterprises.
Expansion includes modernization and rehabilitation; it means an increase in existing volume or value of production, upgrading the quality of the registered product, or utilization of inefficient/idle equipment under guidelines adopted by the Board.
Measured Capacity is the estimated additional volume of production or service that the BOI determines desirable to supply the economy’s needs in each preferred area at reasonable prices, considering export potential/economies of scale. It should not be less than the amount by which measurable domestic and export market demand exceeds existing productive capacity. For export industries, the Board considers availability of domestic raw materials after deducting domestic market needs.
A Tax Credit is a credit against taxes and/or duties equal to taxes/duties actually paid or would have been paid, evidenced by a tax credit certificate issued by the Secretary of Finance or the BOI if delegated. It is used to pay taxes/duties/charges/fees due to the National Government. It shall not be part of gross income for income tax purposes and is not taxable. It is valid only for 10 years from issuance.
Constructive exports include (1) sales to bonded manufacturing; (2) sales to export processing zones; (3) sales to registered export traders operating bonded trading warehouses supplying raw materials used in manufacturing export products under BOI/BIR/Customs guidelines; (4) sales to foreign military bases, diplomatic missions, and other tax-immunized agencies/instrumentalities, of locally manufactured/assembled/repacked products whether paid in foreign currency or not. It also clarifies that export sales of consignment are not deemed until sold by the consignee.
The IPP is the overall plan prepared by the BOI listing encouraged activities and public utilities, activities promoting utilization of indigenous non-petroleum fuels/energy sources, and other criteria. The BOI submits it to the President; the President proclaims the whole or part as effective or returns it to the BOI for revision.
Preferred areas must be economically/technically/financially sound after thorough investigation/analysis. The determination is based on long-run comparative advantage plus social objectives, using economic criteria and market/technical/financial analysis. The Code specifically lists: economic internal rate of return (primarily), contribution to development goals, other comparative advantage indicators, measured capacity, and market/technical aspects.
The Board may amend (add, alter, or terminate preference status) subject to publication and investment priority criteria. Amendments cannot impair rights already legally vested in qualified enterprises; those enterprises continue to enjoy rights to the extent allowed by the Code. The Board shall not accept applications in an area before it is approved as preferred, nor after approval of its deletion.
The applicant must: (1) satisfy Philippine ownership/control requirements (or establish exceptions such as pioneer projects, a commitment to become a Philippine national within specified years, eligibility where activity is not reserved to Filipinos, etc.); (2) propose to engage in a preferred project listed/authorized in the current IPP within a reasonable time fixed by the Board or meet other conditions like exporting at least 50% (or other listed modes of export/related services); (3) be capable of operating on a sound and efficient basis and contribute to national development; and (4) have adequate accounting systems to identify investments and profits/losses per preferred project or establish separate corporations if required.