Amended Rules for Implementing Omnibus Investments Code

Key Definitions

"Decree" refers to Presidential Decree No. 66, as amended.
"Code" means Executive Order No. 226 (Omnibus Investments Code).
"Authority" is the Export Processing Zone Authority; "Board" is its Board of Commissioners.
"Zone" refers to designated export processing zones.
"Zone Export Enterprise" is a firm authorized to operate inside a zone producing export goods.
"Pioneer Enterprise" defines enterprises engaging in novel manufacturing or producing new products with substantial local raw material use.
Other definitions clarify terms like customs territory, merchandise classifications, production processes, income terms, and labor training.

Application and Registration

Open to any form of business regardless of nationality or ownership.
Applications require submission of feasibility studies, corporate documents, resolutions, lists of personnel and machinery, and brochures.
Applications filed with the Authority with fees; approval rests with the Board.
Certificate of Registration issued only after compliance with pre-registration requirements, agreement execution, and fee payment.

Provisions Common to Registration Agreements

Enterprises may lease land and buildings within zones with specified occupancy and maintenance rules.
Reservations valid for six months; building and improvement constructions must have Authority approval compliant with the National Building Code.
Buildings and improvements become Authority property after lease expiration unless otherwise agreed.
Enterprises must maintain public safety, comply with health, environmental, and waste disposal laws.
Lease terms: 15 years with a 10-year renewal option; automatic termination upon registration cancellation; options to sell or remove improvements with pre-emptive rights by Authority.
Rentals start after 90 days post-registration; fines for late payments.
Board may impose service fees related to utilities, sanitation, administrative handling, and other services.
Separate books of accounts required; periodic reports to be submitted timely.
Authority has inspection and auditing rights.
Industrial disputes may be mediated or referred for compulsory arbitration.
Withdrawal or cessation of operations require 30-day notice; cessation for two months results in automatic registration cancellation and loss of incentives.

Tax Treatment of Merchandise in the Zone

Goods entering the zone for authorized purposes exempt from customs, internal revenue laws, and local taxes.
Domestic goods sent from zone to customs territory subject to Philippine internal revenue laws.
Foreign goods unprocessed in zones and sent to customs territory are subject to import duties.
Merchandise transferred from customs territory to zone and back must preserve identity; loss of identity subjects goods to applicable duties.
Reimported goods subjected to import laws as foreign-made.
Rejects, seconds, and wastes taxed according to customs and revenue laws.
Unclaimed merchandise in the zone declared abandoned in favor of the Authority.

Rights of Investors

Repatriation of investments and remittance of earnings allowed in original currency subject to Central Bank rules and relevant laws.

Incentives to Zone Export Enterprises

Registration required for incentives application.
Eligibility for rights and incentives under relevant provisions of the Code and Decree.
Income tax holiday: 6 years for pioneer firms, 4 years for non-pioneers, 3 years for expansions.
Extensions may be granted under qualifying foreign exchange savings and labor to capital investment criteria.
Income tax holiday exemptions proportionate to incremental production increases.
Additional incentives for firms registered after Code effectivity include extra deduction for labor expenses and tax credits on domestic capital equipment.
Exemptions from contractor's tax, wharfage dues, export taxes, and local taxes (except real estate taxes with partial remittance to Authority).
Tax exemption on value added tax for local purchases related to registered activities.
Specific provisions on deduction for labor training expenses, net operating loss carry over, and accelerated depreciation for firms registered before Code.

Importation of Capital Equipment, Construction Materials, Vehicles, Office Equipment, and Furniture

Machinery, equipment, and spare parts may be imported duty and tax-free if used exclusively for registered activity.
Importation of construction materials allowed when domestic alternatives are insufficient or unsuitable.
Specialized office equipment, furniture, and vehicles may be imported tax-free upon Authority approval.

Sale or Disposition of Capital Equipment

Sale or transfer of imported capital equipment within 5 years requires Board approval subject to conditions such as transfer to eligible entities or replacement purposes.
After 5 years, no Board approval needed but governed by Authority procedures.

Importation of Professional Instruments and Personal Effects

Foreign nationals working in zones can import personal and professional items duty-free, not for commercial use.
Prior approval from Authority required before purchase orders or letters of credit.

Conditions for Availment of Incentives

Observance of Decree, Code, and these Rules required.
Compliance with directives, pre-registration/registration conditions, and reporting obligations mandatory.
Incentives apply only if the enterprise is not delinquent in payments and reports.

Duration of Incentives

Incentives apply only during the period the enterprise remains registered and in good standing.
Termination or violation may lead to loss of incentives.

Employment of Foreign Nationals

Employment of foreign nationals in supervisory, technical, advisory roles allowed up to 5 years, extendible upon Authority recommendation.
Majority foreign-owned firms may retain key officers beyond 5 years.
Training programs for Filipino understudies required.
Foreign nationals, spouses, and dependents granted special visas and exemptions.
Application for foreign employment filed with Department of Justice via Authority endorsement.

Building Permits and Inspection

Authority acts as Building Official enforcing National Building Code and issues necessary permits.
Fees collected accrue to Authority.
Use of roads or structures for construction requires Authority approval.
Plants and equipment inspected for compliance before operation permit.
Temporary permits may be granted pending correction of minor deficiencies.
Periodic inspections ensure compliance with health, safety, and pollution standards.
Authority may exclude harmful substances or operations from zone.

Security and Safety

Zone security and peace maintenance are Authority responsibilities.
Zone classified as restricted area; all persons and vehicles subject to inspection and clearance.
Security guards hired by enterprises must be supervised by Authority and comply with firearm rules.

Entry and Exit of Goods

Prior Authority approval needed before importation of goods into the zone.
Samples allowed in limited quantity for research.
Permits required for entry and exit; unauthorized removal considered illegal.
Goods inbound to zone must be marked; goods exiting to customs territory marked as "Made in the Philippines (ZoneName)."
Loading/unloading preferably at nearest port; compliance with Authority and Customs procedures mandatory.
Local sales allowed under strict conditions with payment of duties and taxes.
Sale or gifting of products to employees or visitors prohibited without Authority approval.

Inventory of Finished Products and Raw Materials

Authority may conduct inventories and reconcile discrepancies.
Shortages presumed illegal removal and tax due; overages presumed illegal introduction and subject to forfeiture.
Reasonable allowances considered based on industry standards.

Penalties

Administrative fines imposed for late filing of reports, failure to display ID, violation of entry/exit rules, late liquidation of farm-outs, and other infractions.
Suspension or revocation of permits possible for failures or violations.
Registration cancellation grounds include loss of qualifications, violations of rules or agreements, or continuous delay in project implementation.

Miscellaneous Provisions

Transitional application of prior rules until these take effect.
Authority empowered to conduct investigations and hearings with full due process.
Administrative penalties do not preclude penalties under the Decree.
Authority authorized to issue implementing memoranda and circulars.
Amendments effective 30 days after publication in newspapers.
Rules effective 30 days post-publication.