2014 Investment Priorities Plan (IPP)

BPO Philippines BOI Registration IPPIn an effort to attract prospective investors in the Philippine economy, the Department of Trade and Industry (DTI) has submitted the 2014 Investment Priorities Plan (IPP) to Malacañang for approval last July 2014. Unlike previous years where the IPP changed on a yearly basis, the 2014 IPP will be valid until 2016 or 3 years.

The IPP identifies sectors and economic activities that can qualify for government fiscal incentives. The plan is based on recommendations from the government and private sectors.

This year, there are seven preferred economic activities that will benefit potential investors. These sectors are the following:

1. Manufacturing

• This covers motor vehicle assembly, engineered products such as body panel stamping and engines; chemicals including fertilizers, pesticides, oleochemicals, and petrochemicals, and derivatives.

2. Agro business and fishery

• This covers activities including extraction of natural ingredients, mechanized agricultural support services, and agricultural support infrastructure.

3. Services

• This covers integrated circuit (IC) design, ship repair, testing facilities, and charging stations for e-vehicles.

4. Economic and low cost housing

• This covers both horizontal and vertical housing development.

5. Energy

• This covers exploration and development of energy resources and power generation plants.

6. Public infrastructure and logistics

• This covers development in airports, seaports including RO-RO ports for both cargo and passengers. This may be limited to newly bought ships, aircraft, and seaplanes.

7. Public-Private Partnership (PPP) projects.

This year’s proposed IPP did not include some of the preferred activities included in the previous year, including creative industries or knowledge-based services, research and development, green projects, hospital and medical services, and disaster prevention, mitigation, and recovery projects.

Meanwhile, under existing laws, the following activities are also covered by the 2014 IPP. These are included in the mandatory list of the proposed IPP:

1. Industrial tree plantation
2. Mining, limited to capital equipment incentives
3. Oil refining
4. Storage and distribution of petroleum products
5. Tourism
6. Rehabilitation self-development and self-reliance of persons with disability
7. Publication and printing of books

Last year’s IPP included the exploration, mining, quarrying, and processing of minerals, which is revised in this year’s plan to only include capital equipment incentives. Likewise, the 2013 IPP covered clean water projects and renewable energy, both of which are not included in this year’s mandatory list.

There were no changes in the Exports list, which covers manufacturing of export products and exportation of services and activities in support of exporters. The 2014 proposed IPP also did not indicate the priorities in the Autonomous Region in Muslim Mindanao (ARMM).

Incentives

Once approved, prospective investors looking at establishing their presence in the Philippines will benefit from fiscal incentives and tax breaks, including three to eight year income tax holiday, as provided under the Omnibus Investments Code of 1987.

How to qualify for the incentives

To qualify for the 2014 IPP, an economic activity should meet these criteria:

1. Potential to create employment
2. Potential to move up the value chain
3. Potential to create horizontal and vertical spillover effects
4. Backward and forward linkages and output multipliers
5. Potential to create a competitive market

To learn if your company qualifies for this year’s IPP and to know the process of registering a business in the Philippines, contact Dayanan Business Consultancy for more information.

9th Regular Foreign Investment Negative List A

9th Regular Foreign Investment Negative List A

LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE OF THE CONSTITUTION AND SPECIFIC LAWS

No Foreign Equity

1. Mass Media except recording (Art. XVI, Sec.11 of the Constitution; Presidential Memorandum dated 04 May 1994)

2. Practice of all professions *1 (Art. XII, Sec.14 of the Constitution, Sec. 1 of R.A. 5181)

a) Engineering
i. Aeronautical engineering (P.D. 1570)
ii. Agricultural engineering (R.A. 8559)
iii. Chemical engineering (R.A. 9297)
iv. Civil engineering (R.A. 1582)
v. Electrical engineering (R.A. 7920)
vi. Electronics and Communication engineering (R.A. 9292)
vii. Geodetic engineering (R.A. 8560)
viii. Mechanical engineering (R.A. 8495)
ix. Metallurgical engineering (P.D. 1536)
x. Mining engineering (R.A. 4274)
xi. Naval Architecture and Marine engineering (R.A. 4565)
xii. Sanitary engineering (R.A. 1364)
b) Medicine and Allied Professions
i. Medicine (R.A. 2382 as amended by R.A. 4224)
ii. Medical Technology (R.A. 5527 as amended by R.A. 6318, P.D. 6138, P.D. 498 and P.D. 1534)
iii. Dentistry (R.A. 9484)
iv. Midwifery (R.A. 7392)
v. Nursing (R.A. 9173)
vi. Nutrition and Dietetics (P.D. 1286)
vii. Optometry (R.A. 8050)
viii. Pharmacy (R.A. 5921)
ix. Physical and Occupational Therapy (R.A. 5680)
x. Radiologic and X-ray Technology (R.A. 7431)
xi. Veterinary Medicine (R.A. 9268)
c) Accountancy (R.A. 9298)
d) Architecture (R.A. 9266)
e) Criminology (R.A. 6506)
f) Chemistry (R.A. 754)
g) Customs Brokerage (R.A. 9280)
h) Environmental Planning (P.D. 1308)
i) Forestry (R.A. 6239)
j) Geology (R.A. 4209)
k) Interior Design (R.A. 8534)
l) Landscape Architecture (R.A. 9053)
m) Law (Art. VIII, Sec. 5 of the Constitution; Rule 138, Sec. 2 of the Rules of Court of the Philippines)
n) Librarianship (R.A. 9246)
o) Marine Deck Officers (R.A. 8544)
p) Marine Engine Officers (R.A. 8544)
q) Master Plumbing (R.A. 1378)
r) Sugar Technology (R.A. 5197)
s) Social Work (R.A. 4373)
t) Teaching (R.A. 7836)
u) Agriculture (R.A. 8435)
v) Fisheries (R.A. 8550)
w) Guidance counseling (R.A. 9258)
x) Real estate service (R.A. 9646)
y) Respiratory therapy (R.A. 10024)
z) Psychology (R.A. 10029)

3. Retail trade enterprises with paid-up capital of less than US$2,500,000
(Sec. 5 of R.A. 8762) *2
4. Cooperatives (Ch. III, Art. 26 of R.A. 6938)
5. Private Security Agencies (Sec. 4 of R.A. 5487)
6. Small-scale Mining (Sec. 3 of R.A. 7076)
7. Utilization of Marine Resources in archipelagic waters, territorial sea, and exclusive economic zone as well as small scale utilization of natural resources in rivers, lakes, bays, and lagoons (Art. XII, Sec. 2 of the Constitution)
8. Ownership, operation and management of cockpits (Sec. 5 of P.D. 449)
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons (Art. II, Sec. 8 of the Constitution) *3
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines (Various treaties to which the Philippines is a signatory and conventions supported by the Philippines) *3
11. Manufacture of firecrackers and other pyrotechnic devices (Sec. 5 of R.A. 7183)

Up to Twenty Percent (20%) Foreign Equity

12. Private radio communications network (R.A. 3846)

Up to Twenty-Five Percent (25%) Foreign Equity

13. Private recruitment, whether for local or overseas employment (Art. 27 of P.D. 442)
14. Contracts for the construction and repair of locally-funded public works (Sec. 1 of CA 541, LOI 630) except:

a) Infrastructure/development projects covered in R.A. 7718; and
b) Projects which are foreign funded or assisted and required to undergo international competitive bidding (Sec. 2a of R.A. 7718)

15. Contracts for the construction of defense related structures (Sec. 1 of CA 541)

Up to Thirty Percent (30%) Foreign Equity

16. Advertising (Art. XVI, Sec. 11 of the Constitution)


Up to Forty Percent (40%) Foreign Equity

17. Exploration, development and utilization of natural resources (Art. XII, Sec. 2 of the Constitution) *4
18. Ownership of private lands (Art. XII, Sec. 7 of the Constitution; Ch. 5, Sec. 22 of CA 141; Sec. 4 of RA 9182)
19. Operation and management of public utilities (Art. XII, Sec. 11 of the Constitution; Sec. 16 of CA 146)
20. Ownership/establishment and administration of educational institutions (Art. XIV, Sec. 4 of the Constitution)
21. Culture, production, milling, processing, trading excepting retailing, of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof (Sec. 5 of P.D. 194) *5
22. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation (Sec. 1 of R.A. 5183)
23. Project Proponent and Facility Operator of a BOT project requiring a public utilities franchise (Art. XII, Sec. 11 of theConstitution; Sec. 2a of R.A. 7718)
24. Operation of deep sea commercial fishing vessels (Sec. 27 of R.A. 8550)
25. Adjustment Companies (Sec. 323 of PD 612 as amended by P.D. 1814)
26. Ownership of condominium units where the common areas in the condominium project are co-owned by the owners of the separate units or owned by a corporation (Sec. 5 of R.A. 4726)

Up to Forty-Nine Percent (49%) Foreign Equity

27. Lending Companies (SEC.6 of R.A. 9474) *6

Up to Sixty Percent (60%) Foreign Equity

28. Financing companies regulated by the Securities and Exchange Commission (SEC) (Sec. 6 of R.A. 5980 as amended by R.A. 8556) *6
29. Investment houses regulated by the SEC (Sec. 5 of P.D. 129 as amended by R.A. 8366) *6 (Sec. 6 of R.A. 5980 as amended by R.A. 8556) *6

*1 This is limited to Filipino citizens save in cases prescribed by law

*2 Full foreign participation is allowed for retail trade enterprises: (a) with paid-up capital of US$2,500,000 or more provided that investments for establishing a store is not less than US$830,000; or (b) specializing in high end or luxury products, provided that the paidup capital per store is not less than US$250,000 (Sec. 5 of R.A. 8762)

*3 Domestic investments are also prohibited (Art. II, Sec. 8 of the Constitution; Conventions/Treaties to which the Philippines is a signatory)

*4 Full foreign participation is allowed through financial or technical assistance agreement with the President (Art. XII, Sec. 2 of the Constitution)

*5 Full foreign participation is allowed provided that within the 30-year period from start of operation, the foreign investor shall divest a minimum of 60 percent of their equity to Filipino citizens (Sec. 5 of P.D. 194; NFA Council Resolution No. 193 s. 1998)

*6 No foreign national may be allowed to own stock in lending companies, financing companies or investment houses unless the country of which he is a national accords the same reciprocal rights to Filipinos (Sec. 6 of RA 9474; Sec. 6 of R.A. 5980 as amended by R.A. 8556; P.D. 129 as amended by R.A. 8366)

Philippines Foreign Investment Negative List B

PEZA BOI Comparison

PEZA vs BOI Registration for your Company     PEZA Philippines Economic Zone Authority

The Government of the Philippines has put in place several incentive programs and tax breaks to attract foreign and local investors. The two main agencies implementing those incentives are  BOI and  PEZA. Dayanan Business Consultancy will assist you in choosing and registering with the correct agency for your business to receive the appropriate benefits. There are several things to take into consideration, such as whether your main activities will be export or domestic oriented, if they are part of the Investment Priorities Plan (IPP)  in effect, and where your project will be located and operated.

Requirements and Registration Procedure

  • Corporate Location:
    In order to register with PEZA a company must be located in one of the PEZA assigned Ecozones, whereas the BOI does not have any location requirements (if not part of the IPP program).
  • Registration :
    • PEZA:
      • Required Documents part of PEZA application:
      • Project brief
      • Anti-graft certificate
      • Board Resolution commissioning the designation of a representative
      • SEC Certificate of Registration
      • Project feasibility study
      • Evaluation of Application, this step can be relatively quick depending on the availability of the the board.
      • Presentation to PEZA for review by the board, which will decide on the exact incentives granted to the project.
    • BOI:
      • Required Documents part of BOI application:
      • Three copies of the BOI application Form 501
      • Three copies of the project report and supporting documents
      • Feasibility Plan
      • 5 year financial outline
      • Preparation of Project Evaluation report by the Project Evaluation and Registration Department Project (PERD) and its presentation to the BOI management committee
      • The registration procedure can take from 2 to 3 weeks depending on the project.

Filing Fees
Required application fees:

  • PEZA
    • Application of a New Non-Pioneer Project                     P3,600.00
    • Application of a New Pioneer Project                              P6,000.00
    • Additional registration fee for all new projects              P6,000.00
  • BOI
    There are both an application and a registration fee to be paid, the amounts of which depend of the size of the initial investment for the project. Application fee summary:

    • Project cost below P3 million                                                              P1,500.00
    • Project cost exceeding P3 million (but not over P4million)            P1,500.00
    • Project cost exceeding P4 million (but not over P20 million)        P3,000.00
    • Project cost exceeding P20 million (but not over P50 million)      P4,500.00
    • Project cost exceeding P50 million                                                     P6,000.00

Export Commitment
In order to register with the PEZA or BOI there are some specific export commitments to respect.

  • PEZA
    • For an IT company there is no export commitment required
    • A company majority owned by Filipino citizens, must export a minimum of 50% of its total service/products annually
    • A company majority owned by foreigners, must export a minimum of 70% of its services/products annually
  • BOI
    • For Filipino owned companies there is no export commitment necessary
    • A business that is majority foreign owned (40% and more), must export at a minimum of 70% of its services/products annually
    • A business engaged in pioneer activities has no export commitment and hence may sell all of its services/products in the Philippines, as long as it complies with the Foreign Investment Act’s (FIA) requirements.

Tax Incentives
A company registering with the PEZA or the BOI can avail from a number of tax incentives and benefits.

  • PEZA
    • Offshore profit remittances, which is not subject to remittance tax.
    • Income Tax Holiday (ITH) for 4 years for Non-Pioneer IT Enterprises, or 6 years for Pioneer IT Enterprises.
    • After the ITH period is over, companies can opt  to pay a special 5% tax on gross income instead of all national/local taxes.
    • This does not apply to real property taxes for developers-owned land.
    • Exemption on import duties/taxes on imported machinery, equipment and raw materials.
    • Supplementary deduction equivalent to 50% of training expenses, which is chargeable against the 3% share of the national government of the special 5% tax on gross income;
    • Permanent resident status is granted to foreign investors when they make an initial investments of US$50,000.00 or more.
    • Exemption from Branch Profit Remittance tax for PEZA-registered branches of foreign firms.
    • Other incentives can also be granted as determined by the PEZA Board.
  • BOI
    • 3 to 8 years Income Tax Holiday (ITH)
    • 4 to 6 years exemption from local business taxes for pioneer and non-pioneer industries
    • Exemption from Taxes and Duties on imported spare parts
    • Exemption from Wharf Dues, Export Tax, Duty, Impost and Fees
    • Tax Exemption on Breeding Stocks and Genetic Materials
    • Tax Credits
    • Additional Deductions from Taxable Income

Industries Supported
PEZA and BOI each want to attract investments from the following industries in order to expand  the economic development of the Philippines.
The industries supported are :

  • PEZA
    • Software Development and Application
    • IT-enabled Services (Call centers, Data Encoding, Transcribing and Processing, Directories…)
    • Content Development for the Internet and other forms of media
    • Knowledge Based and Computer Enabled Support Services (Engineering, Architectural design services, and Consultancies)
    • Business Process Outsourcing (BPO)
    • IT research and other IT related services
  • BOI
  • Investment Priority Plan (IPP):
  • Agriculture/Agribusiness and Fishery
  • Infrastructure
  • Manufactured Products
  • Business Process Outsourcing (BPO)
  • Creative Industries
  • Strategic Activities
  • Green Projects
  • Disaster Prevention, Mitigation and Recovery Projects
  • Research and Development and Innovation
  • Mandatory List:
  • Forestry
  • Mining
  • Printing, Publication and Content Development of Books or Textbooks
  • Downstream Oil Industry
  • Ecological Solid Waste Management
  • Clean Water
  • Magna Carta for Disabled Persons
  • Renewable Energy
  • Tourism
  • Export Activities:
  • Production and Manufacture of Export Products
  • Export Services
  • Activities in Support of Exporters