In its effort to encourage investment, the government has instituted investment incentives. This makes investing in the area more attractive, at the same time, making it easier to penetrate the local market. These incentives are either fiscal or non fiscal.


A. National Government Investment Incentives
Investors may enhance their investment edge through incentives offered by the national government. Qualified enterprises may avail of the different incentive packages provided by the national government.

Under Book I of the Omnibus Investments Code, an investor may enjoy certain benefits and incentives, provided he invests in preferred areas of investments found in the current Investment Priorities Plan (IPP).

The IPP, issued annually by the Board of Investments (BOI), is a list of promoted areas of investments eligible for government incentives in consultation with related government agencies and private sector.

An enterprise may still be entitled to incentives even if the activity is not listed in the IPP so long as:

1. at least 50% of production is for exports, if Filipino-owned enterprise; and

2. at least 70% of production is for exports, if majority foreign-owned enterprise (more than 40% foreign equity),

The BOI in certain instances as indicated in the IPP may completely or partially limit the incentives available to export products.

Under Book I of the Omnibus Investments Code, BOI-registered enterprises are given a number of incentives in the form of tax exemptions and concessions. These are


Fiscal incentives

• Income Tax Holiday

• Exemption From Taxes And Duties On Imported Spare Parts

• Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees

• Tax Exemption On BreedingStocks And Genetic Materials

• Tax Credits

• Additional Deductions from Taxable Income.


A. Income Tax Holiday (ITH)

1. BOI-registered enterprise shall be exempt from the payment of income taxes reckoned from
the scheduled start of commercial operations, as follows:

a. New projects with a pioneer status for six (6) years;

b. New projects with a non-pioneer status for four (4) years;

c. Expansion projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume;

d. New or expansion projects in less developed areas (LDAs) for six (6) years, regardless of status;

e. Modernization projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume.


2. The ITH is limited in the following cases:

a. Export traders may be entitled to the ITH only on their income derived from the following:

Export of new products, i.e. those which have not been exported in excess of US$100,000 in any of the two (2) years preceding the filing of application for registration, or

Export to new markets, i.e., to a country where there has been no recorded import of a specific export product in any of the two (2) years preceding the filing of the application for registration.

b. Mining Activities
The exploration and development of mineral resources are not entitled to an ITH;

    Mining and/or quarrying without mineral processing is not entitled to an ITH;

    Mining and processing of aggregates is not entitles to ITH.

3. New registered pioneer and non-pioneer enterprises and those located in LDAs may avail themselves of a bonus year in each of the following cases:

a. the indigenous raw materials used in the manufacture of the registered product must at least be fifty percent (50%) of the total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage; or

b. the ratio of total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one (1) worker; or

c. the net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three (3) years of operation. In no case shall the registered pioneer firm avail of the ITH for a period exceeding eight (8) years.


B. Exemption From Taxes And Duties On Imported Spare Parts
A registered enterprise with a bonded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes on its importation of required supplies/ spare parts for consigned equipment or those imported with incentives.


C. Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees
All enterprises registered under the IPP will be given a ten (10) year period from the date of registration to avail of the exemption from wharfage dues and any export tax, impost and fees on its non-traditional export products.

D. Tax Exemption On BreedingStocks And Genetic Materials
Agricultural producers will be exempted from the payment of all taxes and duties on their
importation of breeding stocks and genetic materials within ten (10) years from the date of
registration or commercial operation.


E. Tax Credits

1. Tax credit on tax and duty portion of domestic breeding stocks and genetic materials.
A tax credit equivalent to one hundred percent (100%) of the value of national internal
revenue taxes and customs duties on local breeding stocks within ten (10) years from
date of registration or commercial operation for agricultural producers.

2. Tax credit on raw materials and supplies A tax credit equivalent to the national internal
revenue taxes and duties paid on raw materials, supplies and semi-manufacture of export
products and forming part thereof shall be granted to a registered enterprise.


F. Additional Deductions from Taxable Income.

1. Additional deduction for labor expense (ADLE) For the first five (5) years from registration, a registered enterprise shall be allowed an additional deduction from taxable income equivalent to fifty percent (50%) of the wages of additional skilled and unskilled workers in the direct labor force.

The incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio and shall not be availed simultaneously with ITH. This additional deduction shall be doubled if the activity is located in an LDA.

2. Additional deduction for necessary and major infrastructure works. Registered enterprises
locating in LDAs or in areas deficient in infrastructure, public utilities and other facilities may
deduct from taxable income an amount equivalent to the expenses incurred in the development of necessary and major infrastructure works. The privilege, however, is not granted to mining and forestry-related projects as they would naturally be located in certain areas to be near their sources of raw materials.

b. Non-Fiscal Incentives
Non-fiscal incentives are as follows:


A. Employment Of Foreign Nationals
A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from date of registration. The position of President, General Manager and Treasurer of foreign-owned registered enterprises or their equivalent shall however not be subject to the foregoing limitations.

B. Simplification of customs procedures for the importation of equipment, spare parts, raw materials and supplies and exports of processed products.

C. Importation of consigned equipment for a period of 10 years from date of registration, subject to posting of a re-export bond.
D. The privilege to operate a bonded manufacturing/trading warehouse subject to Customs rules and regulations.

Incentives for Regional Headquarters and Regional Operating Headquarters in the Philippines
RHQ are entitled to the following incentives:

A. Exemption on the Payment of Corporate Income Tax. An annual information return of a tax-exempt corporation shall be filed with the Bureau of Internal Revenue (BIR) to effect exemption.

B. Exemption on the Payment of Value-Added Tax. The exemption includes the sale or lease of goods and property including the rendition of services to RHQ.


ROHQ can avail of the following incentives:

A. Payment of Corporate Income Tax. Income derived by the ROHQ from performing qualifying activities shall be subject to a preferential rate of 10% on taxable income.

B. Payment of Branch Profit Remittance Tax. Any income derived from the Philippines when remitted to the parent company shall be subject to the tax on branch profit remittances.

C. On the Payment of Value-Added Tax. ROHQ shall be subject to the ten percent (10%) value-added tax unless otherwise provided under the National Internal Revenue Code.

Exemptions common for both RHQ and ROHQ:
A. Exemption on the Payment of All Kinds of Local Taxes, Fees, or Charges. Payment however, shall be made for real property tax on land improvements and equipment.

B. Tax and Duty Free Importation of Training Materials and Equipment. Applicable to materials not locally available, subject to prior approval from the Board of Investments (BOI).
The sale or disposition of equipment within two years after importation, entered tax and duty free, shall require prior approval from the BOI and prior payment of applicable taxes and duties.

C. Entitlement to the Importation of New Motor Vehicles. The importation shall be subjected to the payment of the corresponding taxes and duties.

Under RA 8756, the following incentives are given to the expatriates of a registered RHQ/ROHQ in the Philippines:


A. Multiple Entry Visa. Issued to the expatriates, their respective spouses and unmarried children under 21 years old. A non-immigrant visa shall be issued within 72 hours upon submission of all required documents.

The multiple entry visa is be valid for a period of three (3) years and extendible for another three years upon submission to the Bureau of Immigration of a sworn certification by a responsible officer of the RHQ/ROHQ that its license to operate remains valid and that it complied with all requirements stipulated under relevant Philippine laws.

B. Withholding Tax of 15% on Compensation Income. Applied to both alien and Filipino excutives holding managerial or technical positions.

C. Tax and Duty Free Importation of Personal and Household Effects. Applicable on imports made within ninety (90) days before or after conversion of the alien executive's admission category to multiple entry visa.

D. Travel Tax Exemption. Issued by the Philippine Tourism Authority (PTA) upon recommendation by the BOI during the period of the expatriate's assignment in the country.

• Investment project or activity listed as preferred investment area in the recent Investment Priorities Plan released by the Board of Investments;

• Filipino and domestic corporations owned and controlled by Philippine Nationals; and

• Foreign firms exporting 70% of total production or engaged in a pioneering project


B. Local Government Investment Incentives

THE DAVAO CITY INVESTMENT INCENTIVE CODE OF 1994
Investors who decide to invest in Davao City by either putting up a new enterprise, expanding or diversifying existing businesses, are now granted local tax holidays on local fees and charges and basic real property tax.

Officials of the Davao City Government are encouraging investments into this fast-growing southern metropolis. The following are the City’s Preferred Investment Areas:

1. Tourism and Recreational Facilities

2. Agri-business and Food Processing

3. Light Manufacturing

4. Property Development

5. Transshipment Facilities

6. Environmental Protection and Enhancement Projects

7. Branches of Foreign Banks

8. Telecommunications

9. Educational, Medical, Training and Sports Facilities


The investor is granted fiscal and non-fiscal incentives as long as the investment has the following qualifications:

1. The investment must fall under the above-listed preferred investment areas;

2. New enterprises with capitalization of at least 1M pesos employing at least ten people from Davao City;

3. Existing companies, who plan to diversify, must locate their new facilities in the City, with a project cost of at least 1M pesos and employing at least twenty people from the City.


The following fiscal incentives are in the place to entice more investors to do business in Davao City:

Fiscal Incentives
• Exemption from payment of the Mayor’s permit fees, building permit fees, business sales taxes and other fees and charges imposed under existing city ordinances for a maximum of 3 years;

• Exemption from payment of basic real property tax for a maximum of 2 years.

Non-fiscal Incentives

Investor’s Assistance Services. The Davao City Investment Promotion Center, the implementing body of the Invest in Davao Project could do the following for investors:

a. Assist in securing business licenses and permits

b. Avail of local investment incentives

c. Business matching services

d. Find suitable sites for your business or plant location

e. Possible sources of raw materials

f. Manpower and other production needs

g. Databanking Services

Investors interested in availing of these local incentives being granted by the City Government of Davao are advised to contact

Davao City Investment Promotion Center
Magsaysa Park Complex, R. Magsaysay Avenue
Davao City, Philippines
Tel. No. (06382) 2272860 and Telefax (06382) 227-2880