EXECUTIVE ORDER NO. 226 July 16, 1987
THE OMNIBUS INVESTMENTS CODE OF 1987
WHEREAS, the Government is committed to encourage investments in desirable areas of activities;
WHEREAS, to facilitate investment, there is a need to adopt a cohesive and consolidated investments incentives law;
WHEREAS, it is imperative to integrate basic laws on investment, to clarify and harmonize their provisions for the guidance of domestic and foreign investors;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do hereby order and ordain the following:
Article 1. Short Title. This Order shall be known as the "Omnibus Investments Code" of 1987.
Article 2. Declaration of Investment Policies. To accelerate the sound development of the national economy in consonance with the principles and objectives of economic nationalism and in pursuance of a planned economically feasible and practical dispersal of industries and the promotion of small and medium scale industries, under conditions which will encourage competition and discourage monopolies, the following are declared policies of the State:
1. The State shall encourage private Filipino and...
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Executive Orders
The Omnibus Investments Code of 1987
Executive Order No. 226
The Omnibus Investments Code of 1987
I. Declaration of Investment Policies (Article 2)
- Accelerate economic development through private investments in industries, agriculture, forestry, mining, tourism, etc. that:
- Provide employment opportunities
- Increase productivity and resource utilization
- Improve technical skills
- Meet international competitiveness
- Accelerate development in less developed regions
- Increase exports
- Ensure holistic development by safeguarding social, cultural and ecological well-being
- Provide fiscal incentives to contribute to economic development objectives
- Encourage private sector as prime mover for economic growth
- Government to play supportive role and provide favorable climate for business
- Recognize roles for local and foreign capital in economic development
- Ensure industrial peace for economic growth
- Fiscal incentives to stimulate establishment and assist initial operations for up to 10 years
II. Board of Investments (Articles 3-9)
- Implement provisions of the Code
- Composed of 7 governors appointed by the President
- Qualifications: Filipino citizen, at least 30 years old, competent in relevant fields
- Powers and duties include:
- Prepare annual Investment Priorities Plan
- Promulgate rules and regulations
- Process and approve applications for registration
- Decide controversies related to implementation
- Recommend entry of foreign nationals
- Verify compliance of registered enterprises
- Cancel registration or suspend incentives for non-compliance
- Prepare feasibility studies for pioneer areas
- Require public listing of registered enterprises
- Formulate rationalization programs for industries
- Suspend nationality requirement for ASEAN projects
- Extend period of incentive availment up to 10 years
- Regulate foreign investments
- Prepare industry development programs
- Submit annual reports to the President
- Provide information to prospective investors
- Collate information on preferred investment areas
- Enter agreements for investment promotion
III. Investments with Incentives (Book I)
A. Preferred Areas of Investments (Title I)
- Definitions of terms (Articles 10-26)
- Registered enterprises, technological assistance contracts, foreign loans, foreign investments, Philippine national, preferred areas, pioneer/non-pioneer enterprises, expansion, measured capacity, tax credit, export products, export sales, production cost, processing, Investment Priorities Plan
B. Investment Priorities Plan (Chapter II)
- Board to submit annual Investment Priorities Plan to the President (Article 27)
- Criteria for determining preferred areas (Article 28):
- Economic soundness
- Contribution to developmental goals
- Comparative advantage indicators
- Measured capacity
- Market and technical considerations
- President to approve the Plan or return for revision (Article 29)
- Board may amend the Plan, subject to criteria and publication (Articles 30-31)
C. Registration of Enterprises (Chapter III)
- Qualifications for registration (Article 32):
- Filipino ownership criteria or pioneer project
- Engage in preferred project or export at least 50%
- Capable of sound and efficient operation
- Separate accounting for preferred projects
- Application and approval process (Articles 33-34)
- Criteria for evaluation of applications (Article 35):
- Ownership by Filipino citizens
- Economic rates of return
- Measured capacity
- Foreign exchange earnings/savings
- Use of local resources
- Application of technology
- Equity ownership and diversification
- Appeal process for Board's decisions (Article 36)
- Certificate of Registration issued with terms and conditions (Article 37)
D. Basic Rights and Guarantees (Title II)
- Protection of investments, including repatriation, remittance of earnings, foreign loans, freedom from expropriation, and requisition of investment (Article 38)
E. Incentives to Registered Enterprises (Title III)
- Income tax holiday (Article 39(a)):
- 6 years for pioneer firms, 4 years for non-pioneer firms
- 1 year extension for meeting criteria (up to 8 years max for pioneers)
- 3 years for expanding firms, proportionate to expansion
- Additional deduction for labor expense (Article 39(b)):
- 50% of wages for incremental direct labor, up to 5 years
- Doubled if located in less developed areas
- Tax and duty exemption on imported capital equipment (Article 39(c)):
- 100% exemption for 5 years
- Conditions and penalties for disposal
- Tax credit on domestic capital equipment (Article 39(d)):
- 100% of taxes/duties that would have been waived on imports
- Conditions and penalties for disposal
- Exemption from contractor's tax (Article 39(e))
- Simplified customs procedures (Article 39(f))
- Unrestricted use of consigned equipment (Article 39(g))
- Employment of foreign nationals (Article 39(h)):
- Up to 5 years, extendable
- Entry and residence for foreign nationals and dependents
- Training of Filipino understudies required
- Exemption on breeding stocks and genetic materials (Article 39(i)):
- Tax and duty free importation for 10 years
- Tax credit on domestic breeding stocks and genetic materials (Article 39(j))
- Tax credit for taxes and duties on raw materials for exports (Article 39(k))
- Access to bonded manufacturing/trading warehouse system (Article 39(l))
- Exemption from taxes and duties on imported spare parts (Article 39(m)):
- If at least 70% of production is exported
- Exemption from wharfage dues and export taxes/fees (Article 39(n))
F. Incentives to Less-Developed-Area Registered Enterprises (Title IV)
- Entitled to pioneer incentives regardless of activity (Article 40(a))
- Deduction for necessary infrastructure works up to 100% (Article 40(b))
G. General Provisions (Title V)
- President may rationalize incentives (Article 41)
- Refund of incentives and penalties for cancellation (Article 42)
- Benefits limited to preferred area portion for multiple activities (Article 43)
IV. Foreign Investments without Incentives (Book II)
A. Definitions and Scope (Chapter I)
- Definitions of investment, doing business, banking institutions excluded (Articles 44-45)
B. Investments (Chapter II)
- Permitted investments without prior authority up to 40% (Article 46)
- Prior authority required for over 40% foreign ownership (Article 47)
C. License to Do Business (Chapter III)
- Requirements for foreign entities to obtain license (Articles 48-49)
- Grounds for cancellation of license or payment of fine (Article 50)
D. General Provisions
- Applicability to mergers and consolidations (Article 51)
- No conflicting local government action allowed (Article 52)
- Automatic registration if not acted upon within 10 days (Article 53)
- Publication and posting of notices (Article 54)
- Limited authority for temporary operations (Article 55)
- Periodic reports on compliance (Article 56)
- Penal clause for violations (Article 57)
V. Incentives to Multinational Companies (Book III)
A. Regional or Area Headquarters
- Qualifications for multinational companies (Article 58)
- Multiple entry visa for expatriates and dependents (Article 59)
- 15% tax on gross income of expatriates (Article 60)
- Tax and duty free importation of personal effects (Article 61)
- Travel tax exemption (Article 62)
- Exemption from income tax and contractor's tax (Articles 63-64)
- Exemption from local licenses, fees and taxes (Article 65)
- Tax and duty free importation of training materials (Article 66)
- Importation of motor vehicles for expatriates (Article 66)
- Exemption from Book II registration requirements (Article 67)
B. Regional Warehouses
- Qualifications for multinational companies (Article 68)
- Tax treatment of goods for re-exportation and local market (Article 69)
- Exemption from maximum storage period (Article 70)
- Rules on handling, storage and re-exportation (Article 71)
- Penalties for violations (Article 72)
- Exemption from Book II registration requirements (Article 73)
VI. Special Investors Resident Visa (Book V)
- Qualifications, including investment amount of at least $75,000 or $50,000 for certain cases (Article 74)
- Annual report to maintain visa status (Article 75)
VII. Export Processing Zone Enterprises (Book VI)
- Employment of foreign nationals (Article 76)
- Tax treatment of merchandise in the zone (Article 77)
- Additional incentives (Article 78):
- Exemption from local taxes and licenses
- Exemption from real estate taxes for 3 years
- Exemption from real property taxes on production equipment
VIII. Final Provisions
- Interpretation in favor of investors (Article 79)
- Vested rights for existing registered enterprises (Article 80)
- Confidentiality of applications (Article 81)
- Judicial relief and appeals to Supreme Court (Article 82)
- Effectivity of implementing rules and regulations (Article 83)
- Separability clause (Article 84)
- Repealing clause (Article 85)
- Effectivity (Article 86)
I. Declaration of Investment Policies (Article 2)
- Accelerate economic development through private investments in industries, agriculture, forestry, mining, tourism, etc. that:
- Provide employment opportunities
- Increase productivity and resource utilization
- Improve technical skills
- Meet international competitiveness
- Accelerate development in less developed regions
- Increase exports
- Ensure holistic development by safeguarding social, cultural and ecological well-being
- Provide fiscal incentives to contribute to economic development objectives
- Encourage private sector as prime mover for economic growth
- Government to play supportive role and provide favorable climate for business
- Recognize roles for local and foreign capital in economic development
- Ensure industrial peace for economic growth
- Fiscal incentives to stimulate establishment and assist initial operations for up to 10 years
II. Board of Investments (Articles 3-9)
- Implement provisions of the Code
- Composed of 7 governors appointed by the President
- Qualifications: Filipino citizen, at least 30 years old, competent in relevant fields
- Powers and duties include:
- Prepare annual Investment Priorities Plan
- Promulgate rules and regulations
- Process and approve applications for registration
- Decide controversies related to implementation
- Recommend entry of foreign nationals
- Verify compliance of registered enterprises
- Cancel registration or suspend incentives for non-compliance
- Prepare feasibility studies for pioneer areas
- Require public listing of registered enterprises
- Formulate rationalization programs for industries
- Suspend nationality requirement for ASEAN projects
- Extend period of incentive availment up to 10 years
- Regulate foreign investments
- Prepare industry development programs
- Submit annual reports to the President
- Provide information to prospective investors
- Collate information on preferred investment areas
- Enter agreements for investment promotion
III. Investments with Incentives (Book I)
A. Preferred Areas of Investments (Title I)
- Definitions of terms (Articles 10-26)
- Registered enterprises, technological assistance contracts, foreign loans, foreign investments, Philippine national, preferred areas, pioneer/non-pioneer enterprises, expansion, measured capacity, tax credit, export products, export sales, production cost, processing, Investment Priorities Plan
B. Investment Priorities Plan (Chapter II)
- Board to submit annual Investment Priorities Plan to the President (Article 27)
- Criteria for determining preferred areas (Article 28):
- Economic soundness
- Contribution to developmental goals
- Comparative advantage indicators
- Measured capacity
- Market and technical considerations
- President to approve the Plan or return for revision (Article 29)
- Board may amend the Plan, subject to criteria and publication (Articles 30-31)
C. Registration of Enterprises (Chapter III)
- Qualifications for registration (Article 32):
- Filipino ownership criteria or pioneer project
- Engage in preferred project or export at least 50%
- Capable of sound and efficient operation
- Separate accounting for preferred projects
- Application and approval process (Articles 33-34)
- Criteria for evaluation of applications (Article 35):
- Ownership by Filipino citizens
- Economic rates of return
- Measured capacity
- Foreign exchange earnings/savings
- Use of local resources
- Application of technology
- Equity ownership and diversification
- Appeal process for Board's decisions (Article 36)
- Certificate of Registration issued with terms and conditions (Article 37)
D. Basic Rights and Guarantees (Title II)
- Protection of investments, including repatriation, remittance of earnings, foreign loans, freedom from expropriation, and requisition of investment (Article 38)
E. Incentives to Registered Enterprises (Title III)
- Income tax holiday (Article 39(a)):
- 6 years for pioneer firms, 4 years for non-pioneer firms
- 1 year extension for meeting criteria (up to 8 years max for pioneers)
- 3 years for expanding firms, proportionate to expansion
- Additional deduction for labor expense (Article 39(b)):
- 50% of wages for incremental direct labor, up to 5 years
- Doubled if located in less developed areas
- Tax and duty exemption on imported capital equipment (Article 39(c)):
- 100% exemption for 5 years
- Conditions and penalties for disposal
- Tax credit on domestic capital equipment (Article 39(d)):
- 100% of taxes/duties that would have been waived on imports
- Conditions and penalties for disposal
- Exemption from contractor's tax (Article 39(e))
- Simplified customs procedures (Article 39(f))
- Unrestricted use of consigned equipment (Article 39(g))
- Employment of foreign nationals (Article 39(h)):
- Up to 5 years, extendable
- Entry and residence for foreign nationals and dependents
- Training of Filipino understudies required
- Exemption on breeding stocks and genetic materials (Article 39(i)):
- Tax and duty free importation for 10 years
- Tax credit on domestic breeding stocks and genetic materials (Article 39(j))
- Tax credit for taxes and duties on raw materials for exports (Article 39(k))
- Access to bonded manufacturing/trading warehouse system (Article 39(l))
- Exemption from taxes and duties on imported spare parts (Article 39(m)):
- If at least 70% of production is exported
- Exemption from wharfage dues and export taxes/fees (Article 39(n))
F. Incentives to Less-Developed-Area Registered Enterprises (Title IV)
- Entitled to pioneer incentives regardless of activity (Article 40(a))
- Deduction for necessary infrastructure works up to 100% (Article 40(b))
G. General Provisions (Title V)
- President may rationalize incentives (Article 41)
- Refund of incentives and penalties for cancellation (Article 42)
- Benefits limited to preferred area portion for multiple activities (Article 43)
IV. Foreign Investments without Incentives (Book II)
A. Definitions and Scope (Chapter I)
- Definitions of investment, doing business, banking institutions excluded (Articles 44-45)
B. Investments (Chapter II)
- Permitted investments without prior authority up to 40% (Article 46)
- Prior authority required for over 40% foreign ownership (Article 47)
C. License to Do Business (Chapter III)
- Requirements for foreign entities to obtain license (Articles 48-49)
- Grounds for cancellation of license or payment of fine (Article 50)
D. General Provisions
- Applicability to mergers and consolidations (Article 51)
- No conflicting local government action allowed (Article 52)
- Automatic registration if not acted upon within 10 days (Article 53)
- Publication and posting of notices (Article 54)
- Limited authority for temporary operations (Article 55)
- Periodic reports on compliance (Article 56)
- Penal clause for violations (Article 57)
V. Incentives to Multinational Companies (Book III)
A. Regional or Area Headquarters
- Qualifications for multinational companies (Article 58)
- Multiple entry visa for expatriates and dependents (Article 59)
- 15% tax on gross income of expatriates (Article 60)
- Tax and duty free importation of personal effects (Article 61)
- Travel tax exemption (Article 62)
- Exemption from income tax and contractor's tax (Articles 63-64)
- Exemption from local licenses, fees and taxes (Article 65)
- Tax and duty free importation of training materials (Article 66)
- Importation of motor vehicles for expatriates (Article 66)
- Exemption from Book II registration requirements (Article 67)
B. Regional Warehouses
- Qualifications for multinational companies (Article 68)
- Tax treatment of goods for re-exportation and local market (Article 69)
- Exemption from maximum storage period (Article 70)
- Rules on handling, storage and re-exportation (Article 71)
- Penalties for violations (Article 72)
- Exemption from Book II registration requirements (Article 73)
VI. Special Investors Resident Visa (Book V)
- Qualifications, including investment amount of at least $75,000 or $50,000 for certain cases (Article 74)
- Annual report to maintain visa status (Article 75)
VII. Export Processing Zone Enterprises (Book VI)
- Employment of foreign nationals (Article 76)
- Tax treatment of merchandise in the zone (Article 77)
- Additional incentives (Article 78):
- Exemption from local taxes and licenses
- Exemption from real estate taxes for 3 years
- Exemption from real property taxes on production equipment
VIII. Final Provisions
- Interpretation in favor of investors (Article 79)
- Vested rights for existing registered enterprises (Article 80)
- Confidentiality of applications (Article 81)
- Judicial relief and appeals to Supreme Court (Article 82)
- Effectivity of implementing rules and regulations (Article 83)
- Separability clause (Article 84)
- Repealing clause (Article 85)
- Effectivity (Article 86)