Definitions (Section 1)
- "Offshore Banking": Banking transactions in foreign currencies with funds from external sources.
- "Offshore Banking Unit (OBU)": Branch, subsidiary, or affiliate of foreign banks authorized to transact offshore banking.
- "Deposits": Foreign currency funds accepted and held by OBUs.
- "Resident": Philippine citizens, permanent resident aliens, or domestic juridical persons.
- "Non-resident": Any person or entity not a resident, including foreign corporate units operating in the Philippines except those defined as residents.
- "Branch": Separately managed unit of a foreign corporation.
Qualification Requirements (Section 2)
- Only banks organized under foreign laws are qualified to operate OBUs.
- Local branches of foreign banks authorized under R.A. No. 6426 may apply for OBU status.
- Issuance of OBU authority results in automatic withdrawal of previous foreign currency deposit license.
Certificate of Authority to Operate (Section 3)
- The Monetary Board of the Central Bank issues certificates of authority for OBUs.
- Considerations include liquidity, solvency, net worth, management expertise, economic contribution, and equity participation.
- A minimum fee of US$20,000 is collected upon issuance and annually thereafter.
Corporate Undertaking (Section 4)
- Applicants must submit a sworn undertaking from parent company stating:
- Provision of necessary liquidity in specified currencies on demand.
- Prudent and sound management of OBU operations.
- Commitment to train Filipino personnel in international banking.
- Maintain minimum net office funds of US$1,000,000.
- Commence operations within 180 days of certificate issuance.
Supervision (Section 5)
- OBUs operate under the supervision of the Central Bank of the Philippines.
Transaction Regulations (Section 6)
- Transactions with non-residents and other OBUs are freely allowed, subject to safeguards to prevent foreign exchange violations.
- Transactions with Philippine residents, including local banks, are subject to applicable laws.
- The Monetary Board shall promulgate necessary implementing rules and regulations.
Tax and Incentives (Section 7)
- Transactions with non-residents and other OBUs taxed at 5% on net income, in lieu of all other taxes.
- Transactions with local banks are subject to similar tax except specified cases.
- Income earned by non-residents from OBU transactions is tax-exempt.
- Interest income from loans to residents is subject to 10% withholding tax as final tax.
- Foreign personnel assigned to OBUs are granted special multiple entry visas valid for one year.
- Foreign personnel and dependents enjoy exemptions from immigration fees, alien registration, and emigration clearances.
- Alien employees pay 15% tax on gross income earned from OBUs annually.
- Alien executives benefit from privileged customs tariff provisions.
- OBUs are exempt from local licenses, fees, dues, imposts, or taxes.
Effect of Existing Laws (Section 8)
- Usury Law (Act No. 2566), Uniform Currency Law (R.A. No. 529), and Deposit Insurance Law (R.A. No. 3591) do not apply to OBU transactions and deposits.
- Secrecy of Bank Deposits Law (R.A. No. 1405) applies to OBU deposits.
Sanctions for Violations (Section 9)
- Willful violations by banks of the Decree, regulations, or terms of authority may result in administrative sanctions under R.A. No. 265.
Repealing Clause (Section 10)
- Laws inconsistent with this Decree are modified, amended, or repealed accordingly.
Effectivity (Section 11)
- The Decree takes effect immediately upon approval.