Omnibus Investments Code of 1987

Policy, purpose, and key objectives

Article 2 declares State policies to accelerate sound development of the national economy consistent with economic nationalism and a planned economically feasible and practical dispersal of industries.
The State must encourage private Filipino and foreign investments in industry, agriculture, forestry, mining, tourism and other sectors, provided they:
- provide significant employment opportunities relative to capital invested;
- increase productivity and improve utilization of natural resources;
- improve technical skills of employed people;
- provide a foundation for future economic development;
- meet international competitiveness tests;
- accelerate development of less developed regions; and
- increase the volume and value of exports.
The State must ensure holistic development safeguarding the social, cultural, and ecological life of the people, and conducts consultation with affected communities whenever necessary, under Article 2(2).
The State extends fiscal incentives to projects that significantly contribute to objectives, devising systems to compensate for market imperfections, reward performance, and remain cost-efficient and simple to administer, under Article 2(3).
The State adopts a supportive role (framework, climate, incentives) rather than a competitive role, under Article 2(5).
Industrial peace is treated as essential to economic growth, and ensuring its condition prevails is a principal responsibility of the State under Article 2(7).
The declared policies apply to all investment incentive schemes, under Article 2 (last paragraph).

Board of Investments: structure and governance

The Board of Investments is created to implement Books One to Five under Article 3.
The Board consists of seven (7) governors under Article 4:
- 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 of Trade and Industry is concurrently Chairman, while the Undersecretary for Industry and Investments is concurrently Vice-Chairman and Managing Head, under Article 4.
The Board’s non-ex officio governors serve a term of four (4) years, with holdover until successor appointment and qualification under Article 4.
No vacancy is filled except for the unexpired portion of the term; governors cannot be designated in an acting capacity, and appointments are ad interim or permanent, under Article 4.
Governors must be Filipino citizens, at least thirty (30) years old, of good moral character, and of recognized competence in specified fields (economics, finance, banking, commerce, industry, agriculture, engineering, law, management or labor), under Article 5.
The Board appoints technical staff and other personnel subject to Civil Service Law, under Article 6.

Board powers, duties, and decision mechanisms

The Board is responsible for regulation and promotion of investments and meets as often as necessary, generally once a week, with notice of regular and special meetings to all members, under Article 7.
Quorum requires the presence of four (4) governors, and exercise of powers requires an affirmative vote of four (4) governors in a validly held meeting under Article 7.
The Board prepares an annual Investment Priorities Plan under Article 7(1).
The Board promulgates rules and regulations needed to implement intent and provisions relevant to the Board under Article 7(2).
The Board processes and approves applications for registration, imposing terms and conditions including:
- refund of incentives when appropriate;
- restricting availment of certain incentives not needed by the project;
- requiring performance bonds and other guarantees; and
- requiring payment of application, registration, publication and other necessary fees under Article 7(3).
The Board decides controversies through due hearing concerning implementation between registered enterprises and government agencies within thirty (30) days from submission, under Article 7(4), and allows appeal by the investor/enterprise to the President within thirty (30) days from receipt.
The Board recommends to the immigration authority the entry of foreign nationals for employment under this Code under Article 7(5).
The Board must periodically check and verify:
- the proportion of Philippine nationals participating in registered enterprises for continued qualification under Article 7(6); and
- compliance with Code provisions, rules and regulations, and registration conditions under Article 7(7).
After due notice, the Board may cancel registration or suspend incentives and require refund of incentives including interests and monetary penalties for:
- failure to maintain required qualifications for registration; or
- violation of Code provisions, rules, registration terms/conditions, or laws protecting labor or the consuming public under Article 7(8).
If an enterprise’s project timetable set by the Board is delayed by one year, registration is automatically cancelled unless reinstated by the Board under Article 7(8).
The Board prepares or contracts feasibility and pre-investment studies for pioneer areas upon its initiative or request of Philippine nationals who commit to invest and show capability; amounts advanced must be repaid within five (5) years from start of commercial operation if the venture is implemented, under Article 7(10).
The Board may require listing of shares in an accredited stock exchange or public/employee offering of portions of capital stock when feasible and desirable, under Article 7(11).
The Board may formulate and implement rationalization programs and may restrict, with President approval, the importation of equipment or raw materials or finished products involved in the rationalization program, either totally or partially, under Article 7(12).
For ASEAN projects/investments, the Board may suspend the nationality requirement in the Code or other nationalization statute, subject to conditions the Board deems necessary and with President approval under Article 7(13).
The Board may extend the period of availment of incentives, but total availment cannot exceed ten (10) years, if any listed criteria apply under Article 7(14) (force majeure; reasons beyond control for not fully enjoying incentives; gestation beyond availment period; unforeseen changes in government policies and other supervening factors affecting competitiveness).
The Board must submit annual reports to the President within four (4) months after the close of the fiscal year, covering administration activities and recommendations on investment policies, under Article 7(17).
The Board must provide relevant information to prospective foreign investors through diplomatic missions when needed under Article 7(18).
The Board may enter into agreements with other government agencies to simplify and facilitate systems and procedures for promotion and operation of registered enterprises under Article 7(20).
The Board exercises all powers necessary or incidental to attain purposes of the Code and other laws vesting additional functions on the Board under Article 7(21).

Chairman and Vice-Chairman authority

The Chairman presides over Board meetings, under Article 8(1).
The Chairman must render annual reports to the President and special reports when requested, under Article 8(2).
The Chairman serves as liaison between investors seeking joint venture arrangements in particular investment areas, under Article 8(3).
The Chairman recommends policies and measures to the Board for carrying out Code objectives, under Article 8(4).
The Vice-Chairman acts as Managing Head and presides in the Chairman’s absence, under Article 9(1)-(2).
The Vice-Chairman prepares the Board agenda and submits for approval policies and measures necessary to carry out Code provisions, under Article 9(3).
The Vice-Chairman assists registered enterprises and prospective investors in having papers processed with dispatch by all government offices, agencies, instrumentalities and financial institutions, under Article 9(4).

Investment Priorities Plan and registration

Preferred areas of investments are economic activities the Board declares as such under Article 16, classified as non-pioneer or pioneer.
Registered enterprise means an entity incorporated/organized under Philippine laws and registered with the Board under this Book, but excludes entities whose principal purpose or principal source of income is intermediary functions (e.g., commercial banks, savings and mortgage banks, rural banks, savings and loan associations, development banks, trust companies, investment banks, finance companies, brokers and dealers in securities, consumers cooperatives, credit unions, and similar intermediary trust or fiduciary functions) under Article 11.
The Code defines Technological assistance contracts as contracts for transfer of foreign-origin patents/processes/formulas/technological rights and/or foreign assistance in technical and factory management, design, planning, construction, operation and similar matters under Article 12.
The Code defines Foreign loans as credit facilities/financial assistance other than equity investment denominated and payable in foreign currency or where creditor may demand payment in foreign exchange, and registered with the Central Bank and the Board, under Article 13.
The Code defines Foreign investments as equity owned by a non-Philippine national made in the form of foreign exchange or other assets actually transferred to the Philippines and registered with the Central Bank and the Board, under Article 14.
The Code defines Philippine national for ownership and voting rules, including a minimum sixty percent (60%) ownership and voting ownership by citizens, and a trustee rule for pension/retirement funds, under Article 15, with additional corporate cross-ownership and directors rules under the provisos.
Pioneer enterprise means a registered enterprise engaged in specified manufacturing/processing/production not merely assembly/packaging; or using new and untried production systems; or pursuing agricultural/forestry/mining activities and related industrial aspects in consultation with the appropriate Department; or producing non-conventional fuels/manufacturing equipment utilizing non-conventional sources; with conditions on substantial use and processing of domestic raw materials where available and risk/magnitude of investment considered, under Article 17.
Non-pioneer enterprise includes all registered producer enterprises other than pioneer enterprises under Article 18.
Expansion includes modernization, rehabilitation, and increases in volume/value/quality or utilization of inefficient or idle equipment under guidelines adopted by the Board, under Article 19.
Measured capacity means estimated additional volume of production/service desirable for each preferred area and must not be less than the measurable domestic market and export market demand exceeding existing productive capacity, with special export market basis rule after deducting domestic raw material needs, under Article 20.
Tax Credit means credits against taxes and/or duties equal to those actually paid or would have been paid, evidenced by a tax credit certificate issued by the Secretary of Finance or representative or by the Board if delegated, usable to pay National Government taxes/duties/charges/fees; tax credits issued under the Code are not part of gross income for income tax purposes and are not taxable; and tax credits are valid for ten (10) years from issuance under Article 21.
Investment Priorities Plan is the over-all plan prepared by the Board including:
- specific encouraged activities and generic categories and the corresponding products for domestic or export markets;
- specific public utilities qualifying for incentives and supported by regional demand studies;
- activities for utilization of indigenous non-petroleum-based fuels or sources/energy; and
- other Board-determined guidelines/criteria/data/analysis under Article 26.
The Board must submit the Investment Priorities Plan to the President by the end of March annually after consultation, under Article 27.
No economic activity is included in the Investment Priorities Plan unless shown economically, technically and financially sound after thorough Board investigation and analysis under Article 28.
Preferred areas must be based on long-run comparative advantage, incorporating social objectives and economic criteria with market, technical, and financial analysis, under Article 28.
The Board bases determinations on criteria including:
- economic internal rate or return;
- contribution to specific development goal;
- other indicators of comparative advantage;
- measured capacity; and
- market and technical aspects under Article 28.
The Board may designate as pioneer areas specific products/commodities meeting Article 17 requirements and must review yearly whether an activity continues as pioneer; otherwise it becomes non-pioneer or is removed, under Article 28.
The President must proclaim the whole or part of the plan as effective or return it for revision, under Article 29.
After effectivity, the President issues directives so government agencies implement the plan synchronously and integratively, and no government body may adopt policies inconsistent with the plan under Article 29.
The Board may amend the plan by adding areas, altering terms, designating measured capacities, or terminating preference, subject to publication requirements and criteria; amendments cannot impair vested rights of qualified enterprises, under Article 30.
The Board must not accept applications in an area prior to approval of its preferred status and must not accept after approval of its deletion under Article 30.
Publication: after approval of the plan or any amendment, the plan/amendment specifying preferred areas and corresponding measured capacity must be published in at least one (1) newspaper of general circulation; preferred areas are open for applications until publication of an amendment/deletion, or until the Board approves registration of enterprises that fill measured capacity under Article 31.
Qualification for registration requires Board satisfaction of:
- Philippine national ownership/control rules and related conditions for cases where required Philippine ownership is not met (including pioneer project nature, export requirement reduction in meritorious cases, obligation to attain Philippine national status within thirty (30) years, and constitutional reserved activity conditions) under Article 32(1);
- proposing to engage in preferred project listed/authorized in the current plan within a Board-fixed reasonable time, or meeting export/other Board-determined criteria, and/or qualifying through sale abroad or services or exporting television/motion pictures/music recordings under Article 32(2);
- capability to operate on a sound and efficient basis and contribute to national development under Article 32(3);
- adequate accounting systems to identify investments/revenues/costs/profits/losses for each preferred project or separate corporation if required by the Board under Article 32(4).
Applications must be filed with the Board and recorded in a registration book; the stamped date of acceptance is the official acceptance date, under Article 33.
Whenever necessary, the Board consults affected communities via the People’s Economic Councils on acceptability of locating the enterprise in their community, under Article 33.
The Board may adopt rules to facilitate action, prescribe evaluation criteria when several applications are filed in one preferred area, devise standard forms, and delegate to regional offices of the Department of Trade and Industry authority to receive and process applications, under Article 34.
Applications are automatically approved if the Board does not act within twenty (20) working days from official acceptance, under Article 34.
Application evaluation criteria include:
- extent of Philippine ownership/control;
- economic rates of return;
- measured capacity (subject to regular review and update, and subject to measured capacity not resulting in monopoly or unduly restricting trade/fair competition, and not used to deny entry) under Article 35;
- foreign exchange earned/used/saved;
- use of indigenous resources;
- application of technological advances to local conditions;
- amount of equity and diversification/spread; and
- other Board criteria under Article 35.
Board orders/decisions become final and executory after thirty (90) days from promulgation; an appeal can be filed to the Office of the President within the stated thirty (30) days window, and if appealed, the decision becomes final and executory ninety (90) days after perfection of appeal unless reversed, under Article 36.
Registered enterprises receive a Certificate of Registration bearing the Board seal and signatures of the Chairman and/or other empowered officers, under Article 37, and it must contain at least:
- name of the enterprise;
- preferred area of investment;
- activity nature (pioneer or non-pioneer) and registered capacity; and
- other terms and conditions required by registration under Article 37.

Basic rights and guarantees for investors

All investors and registered enterprises are entitled to basic constitutional guarantees under Article 38.
Repatriation of investments: foreign investors may repatriate the entire proceeds of liquidation in the currency originally invested and at the exchange rate prevailing at repatriation, subject to Section 74 of Republic Act No. 265 as amended, under Article 38(a).
For investments made pursuant to Executive Order No. 32, remittability is as provided therein, under Article 38(a).
Remittance of earnings: foreign investors may remit earnings in the currency originally invested and at the exchange rate at remittance, subject to Section 74 of Republic Act No. 265 as amended, under Article 38(b).
Remittance for foreign loans/technological assistance obligations: foreign investors/enterprises may remit sums necessary to pay interest and principal on foreign loans and foreign obligations under technological assistance contracts, subject to Section 74 of Republic Act No. 265 as amended, under Article 38(c).
Freedom from expropriation: government cannot expropriate investment property or enterprise property except for public use or interest/national welfare/defense and upon payment of just compensation; in such cases, foreign investors/enterprises can remit compensation in the original currency at the exchange rate at remittance, subject to Section 24 of Republic Act No. 265 as amended, under Article 38(d).
Freedom from requisition: government cannot requisition land property represented by investment or enterprise property except in war or national emergency, and only for the duration; just compensation must be determined and paid at requisition or immediately after cessation; payments may be remitted in original currency and exchange rate at remittance, subject to Section 74 of Republic Act No. 265 as amended, under Article 38(e).

Incentives for registered enterprises

All registered enterprises get incentives to the extent engaged in a preferred area of investment, under Article 39.
Income Tax Holiday under Article 39(a):
- New pioneer registered firms receive full exemption from National Government income taxes for six (6) years from commercial operation.
- New non-pioneer registered firms receive full exemption for four (4) years from commercial operation.
- The exemption may be extended for another year in each following case, subject to Board guidelines:
  - project meets prescribed ratio of capital equipment to number of workers set by the Board;
  - utilization of indigenous raw materials at Board-set rates;
  - net foreign exchange savings or earnings of at least US$500,000.00 annually during the first three (3) years of operation.
- No registered pioneer firm may avail this incentive for more than eight (8) years total.
Income tax exemption for expanding firms under Article 39(a)(2):
- expanding firms receive exemption from National Government income taxes proportionate to expansion for three (3) years from commercial operation.
- during the incentive period, expanding firms are not entitled to additional deduction for incremental labor expense.
No extension of income tax holiday: Article 7(14) notwithstanding, registered firms cannot get any extension of his incentive under Article 39(a)(3).
Additional deduction for labor expense under Article 39(b):
- for five (5) years from registration, a registered enterprise may deduct an additional fifty percent (50%) of wages corresponding to the increment in the number of direct labor for skilled and unskilled workers if the project meets Board-prescribed capital equipment-to-workers ratio.
- the additional deduction is doubled if the activity is located in less developed areas defined in Article 40.
Tax and duty exemption on imported capital equipment under Article 39(c):
- within five (5) years from Code effectivity, imports of machinery and equipment and accompanying spare parts of new and expanding registered enterprises are exempt to 100% of customs duties and National Internal Revenue tax payable thereon.
- exemption is conditioned on:
  1. items not manufactured domestically in sufficient quantity, comparable quality, and at reasonable prices;
  2. items are reasonably needed and used exclusively by the registered enterprise in manufacture of its products, unless prior Board approval is obtained for part-time utilization in non-registered activity to maximize usage or proportionate taxes/duties are paid for permanently used equipment in non-registered activities;
  3. Board approval is obtained for the importation.
Board approval process for international canvassing applies; if total cost exceeds US$4500,000.00, the Board applies Presidential Decree No. 1764 on international competitive bidding under Article 39(c).
If the registered enterprise sells/transfers/disposes these items without prior Board approval within five (5) years from acquisition, the enterprise and the vendee/transferee/assignee are solidarily liable to pay twice the amount of the tax exemption given under Article 39(c).
The Board must allow sale/transfer/disposition within the five (5) years if made:
- to another registered enterprise or registered domestic producer enjoying similar incentives;
- for reasons of proven technical obsolescence; or
- for replacement to improve/expand operations under Article 39(c)(3).
Tax credit for domestic capital equipment under Article 39(d):
- the purchase of machinery/equipment/spare parts from a domestic manufacturer gives a tax credit equal to 100% of National Internal Revenue taxes and customs duties that would have been waived had these items been imported.
- conditions apply including Board approval and exclusive use rules mirroring Article 39(c), eligibility for tax-free importation, and purchase within five (5) years from Code effectivity.
Exemption from contractor’s tax under Article 39(e):
- registered enterprises are exempt from contractor’s tax, whether national or local.
Customs procedural simplification under Article 39(f):
- Bureau of Customs must simplify customs procedures for importation of equipment spare parts, raw materials and supplies, and exports of processed products by registered enterprises.
Unrestricted use of consigned equipment under Article 39(g):
- machinery/equipment/spare parts consigned to a registered enterprise are not subject to restrictions as to period of use, provided the appropriate re-export bond is posted unless importation is otherwise covered under Article 39(c) and (m).
- the equipment must be for exclusive use by the registered enterprise.
- if the registered enterprise sells/transfers/disposes it, Article 39(c)(3) disposition rules apply.
- outward remittance covering proceeds of sale/transfer/disposition requires prior Central Bank approval.
Employment of foreign nationals under Article 39(h):
- a registered enterprise may employ foreign nationals in supervisory, technical or advisory positions for not exceeding five (5) years from registration, extendible for limited periods at the Board’s discretion.
- if majority of capital stock is owned by foreign investors, the positions of president, treasurer and general manager (or equivalents) may be retained by foreign nationals beyond the five-year period.
- foreign nationals covered by the incentive, their spouses, and unmarried children under twenty-one (21) years of age may enter and reside in the Philippines during the period of employment, subject to exclusion rules under Section 29 of Commonwealth Act No. 613 as amended.
- registered enterprises must train Filipinos as understudies and submit annual reports on such training to the Board.
Exemption on breeding stocks and genetic materials under Article 39(i):
- importation of breeding stocks and genetic materials within ten (10) years from registration or commercial operation is exempt from all taxes and duties if not locally available/obtainable in comparable quality and reasonable prices, reasonably needed, and approved by the Board.
Tax credit on domestic breeding stocks and genetic materials under Article 39(j):
- a 100% tax credit equivalent to taxes and duties that would have been waived on importation is granted when domestic purchases meet qualification under Article 39(i) and the purchase is made within ten (10) years from registration or commercial operation.
Tax credit for taxes and duties on raw materials under Article 39(k):
- a tax credit equivalent to taxes and duties paid on supplies, raw materials and semi-manufactured products used in manufacture/processing of exported products and forming part thereof, exported directly or indirectly by the registered enterprise.
- taxes on domestically purchased supplies/raw materials must be indicated as a separate item in sales invoices.
- the Board may set a fixed percentage or export sales approximate tax credit based on average/standard usage.
Access to bonded manufacturing/trading warehouse system under Article 39(l):
- registered export oriented enterprises have access to the bonded warehousing system in areas required by the project, subject to Board guidelines issued after prior consultation with Bureau of Customs.
Exempting from taxes and duties on imported spare parts under Article 39(m):
- imports of required supplies and spare parts for consigned equipment or those imported tax/duty-free with a bonded manufacturing warehouse are exempt from customs duties and National Internal Revenue taxes if:
  - at least seventy percent (70%) of production is exported;
  - spare parts/supplies are not locally available at reasonable quality;
  - they are used only in the bonded manufacturing warehouse under Bureau of Customs requirements.
Wharfage and export tax/duty/fees exemption under Article 39(n):
- exports by a registered enterprise of non-traditional export products are exempt from wharfage dues and any export tax, duty, impost and fee.

Less-developed-area incentives and infrastructure deductions

Any registered enterprise located in a less-developed-area included in the Board’s list after consultation with the National Economic & Development Authority and other appropriate agencies, considering criteria:
- low per capita gross domestic product,
- low level of investments,
- high rate of unemployment and/or underemployment,
- low infrastructure development including accessibility to developed urban centers,
  is entitled to incentives in addition to Article 39, under Article 40.
Pioneer incentives in less-developed areas under Article 40(a):
- whether proposed or expansion, an enterprise receives pioneer registered enterprise incentives under its law of registration