Board of Investments (BOI)

Mandate
The Philippine Board of Investments (BOI) is an attached agency of the Department of
Trade and Industry in charge of investment regulation and promotion in the Philippines. The BOI
is responsible for encouraging both domestic and foreign investors to invest in desirable areas
of activities by formulating and implementing investment promotion strategies, as well as
supervising and administering investment incentives to registered enterprises.
Enabling Law
Executive Order No. 226, also known as The Omnibus Investments Code of 1987, was
signed by President Corazon Aquino on July 16, 1987, laid down policy for domestic and foreign
investment, to be supervised by the Board of Investments created under the Order.
Incumbent Chairman
Ramon M. Lopez, DTI Secretary and BOI Chairman
Who can qualify for incentives under EO 226? What is the IPP?
Qualified proponents who will invest in priority areas of activity listed in the Investment
Priorities Plan (IPP) can qualify for incentives. The Investment Priorities Plan (IPP) is a plan
prepared annually by the Board of Investments, containing a listing of specific activities that can
qualify for incentives under the code. The priority areas include: preferred activities; export
activities; special laws; and BARMM list. President Rodrigo Duterte, through Memorandum
Order No. 50, has approved the 2020 Investment Priorities Plan (IPP) which includes qualified
activities relating to the Covid-19 pandemic response and the “Balik Probinsya” program. The
2020 IPP has a validity of three years (2020-2023) subject to annual review to accommodate
any changes.
What is a pioneer status?
A preferred area of investments may be declared Pioneer if the activity:

 Involves the manufacturing or processing (not merely assembly or packaging) of goods

or raw materials that have not been produced in the Philippines on a commercial scale;
or
 Uses a design, formula, scheme, method, process or system of production or
transformation of any element or raw material or finished good which is new and untried;
or
 Engages in agricultural activities/services essential to the achievement of the country’s
self-sufficiency program; or
 Produces non-conventional fuels or manufactures equipment which utilize non-
conventional sources of energy; or
 Conforms to other specific criteria as provided for in the annually drawn investments
Priorities Plan
Incentives and Benefits of BOI Registration in the Philippines
Fiscal Incentives
Tax Exemption
1) Income Tax Holiday (ITH)
A tax holiday is a government incentive program that offers a tax reduction or
elimination to businesses. It is commonly used by governments in developing countries
to help stimulate foreign investment.
a) BOI registered enterprises shall be exempt from the payment of income tax
reckoned from the approved target or actual date of commercial operations,
whichever comes first, but in no case earlier than the date of registration, as
follows:
 Six (6) years for new projects granted pioneer status;
 Six (6) years for projects located in Less Developed Areas (LDAs),
regardless of status (pioneer or non-pioneer) or type of projects (new or
expansion);
 Four (4) years for new projects granted non-pioneer status; and
 Three (3) years for expansion and modernization projects. (As a general
rule, ITH shall be limited only to incremental sales given a specified base
year.)
b) New registered pioneer and non-pioneer enterprises, expansion enterprises
granted pioneer incentives under Article 40 of EO 226, and those located in LDAs
may be granted one (1) bonus year of ITH incentive for each of the following
criterion:
 Capital Equipment to Labor Ratio Criterion. The ratio of derived dollar cost
of capital equipment to the average number of direct labor does not exceed
US$10,000; or
 Net Foreign Exchange Earnings/Savings Criterion. The net foreign
exchange savings or earnings for the first three (3) years of commercial
operation should at least be US$500,000; or
 Indigenous Raw Material Cost Criterion. The indigenous raw materials used
in the manufacture or processing of the registered product is at least fifty
percent (50%) of the total cost of raw materials for each of the taxable year
beginning the start of commercial operation up to when the extension using
this criterion was applied for.
In no case shall a registered firm avail of ITH for a period exceeding eight (8) years.
2) Duty free importation of capital equipment, spare parts and accessories, subject to
conditions

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. The
availment period shall not exceed ten (10) years from date of registration.

3) 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.

4) Tax and duty-free importation of breeding stocks and genetic materials

Agricultural production and processing projects will be exempt 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 operations.
Tax Credits
1) Tax credit on the purchase 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 that would have been waived (had these
been imported) on the purchase of local breeding stocks and genetic materials within
ten (10) years from the date of registration or commercial operations.
2) Tax credit on raw materials and supplies
Tax credit equivalent to the national internal revenue taxes and duties paid on
raw materials, supplies, and semi-manufactured products used in the manufacture of
export products and forming part thereof.
Additional Deductions from Taxable Income
1) Additional deduction for labor expense (ADLE)
For the first five (5) years from date of 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. This
incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio
and shall not be availed of simultaneously with ITH.
This additional deduction shall be doubled or become one hundred percent
(100%) if the activity is located in an LDA. 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 source of raw materials.
ADLE cannot be simultaneously availed of with ITH.
2) Additional deduction for necessary and major infrastructure work
A registered enterprise 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.
Non-fiscal Incentives
1) 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 the date of
registration. The position of president, general manager, and treasurer of foreign-
owned registered enterprises or their equivalent shall not, however, be subject to the
foregoing limitations.
2) Simplification of customs procedures for the importation of equipment, spare parts, raw
materials, and supplies and exports of processed products.
3) Importation of consigned equipment for a period of ten (10) years from the date of
registration, subject to posting of a re-export bond.
4) The privilege to operate a bonded manufacturing/trading warehouse subject to
Customs rules and regulations.

BOI Eligibility Requirements

Wholly Filipino-owned enterprises

Wholly Filipino-owned enterprises are eligible to register for BOI incentives if they
engage or propose to engage in an activity listed in the current IPP. They are allowed to engage
in any domestic-oriented activity included in the IPP regardless if it is classified as a pioneer
project or not.
Domestic foreign corporations (those that are 100% foreign-owned)
Domestic foreign corporations can avail of incentives if they engage in pioneer projects
and satisfy any of these qualifying requirements:

 at least 70% of services or products are for export, or

 proposed projects are to be undertaken in areas that are listed as less-developed
areas (LDAs) by the BOI
These enterprises are obliged to attain 60% Filipino ownership within thirty (30) years
from registration unless they export or are planning to export 100% of their production. For
enterprises that intend to engage in non-pioneer projects, foreign ownership is limited to 40%,
unless the enterprise will export more than 70% of its annual production.
Requirements for Registering with BOI
1. SEC Certificate of Registration – including Articles of Incorporation and By-Laws for
Domestic Corporations, Partnerships, Branch Offices, Representative Offices, and Regional
Headquarters; or DTI Certificate of Registration for Sole Proprietorships
2. Audited Financial Statement (feasibility report that contains projected financial reports for
the next five (5) years) and Income Tax Return (for the past three (3) years if applicable)
3. Board Resolution of a duly authorized company representative/signatory
4. Accomplished BOI Application Form 501 (has various versions per industry sector) and
Project Report (a report that contains activities listed or are related to those listed in the IPP)
BOI Registration Process
1. File BOI Application Form 501 along with supporting documents and filing fee
2. Prepare Evaluation Report (including Publication of Notice of Filing of Application and plant
visit)
3. Present to the BOI Management Committee
4. Receive confirmation and letter advice from the BOI Governing Board regarding Board
Action
5. Letter advice to Applicant of Board Action
6. If approved, send letter of approval and comply with pre-registration requirements
7. Pay Registration Fee
8. Secure Certificate of Registration from BOI
The usual processing time is ten (10) to twenty (20) working days – depending on the type
of business entity you plan to register, the nature of your proposed activities, and the time it
takes for BOI’s Management Committee to review your application.
BOI Inclusive Innovation Industrial Strategy

It is in the context of reviving manufacturing and linking it with agriculture and services in
order to create more and better jobs and attain inclusive and sustainable growth that the DTI -
BOI has formulated a new industrial policy known as Inclusive Innovation Industrial Strategy (or
3S). Inclusive Innovation Industrial Strategy (i3 S) aims at growing innovative and globally
competitive manufacturing, agriculture, and services while strengthening their linkages into
domestic and global value chains with innovation at the core of the country’s strategic policies
and programs.
Underpinning the i3 S strategy is the competition-innovation-productivity
relationship where a highly liberalized market environment leads to more competition which
spurs innovation and productivity growth. In a highly competitive market environment, inefficient
firms are likely to exit while firms that engage in innovative activities at a faster pace have a
higher probability to survive and increase their productivity. Through innovation, firms can face
competition leading to productivity increases and higher economic growth.
Innovation is crucial in addressing the challenges not only from globalization and rising
regional economic integration but also from automation, robotics, artificial intelligence and other
new technologies.
While the private sector is seen as the major driver of growth for i3 S strategy, the
government plays an important role in terms of coordinating policies and necessary support
measures that will address the obstacles to the entry and growth of domestic firms. It is
important for the government to create the right policy framework to encourage the development
of the private sector along the lines of the country’s comparative advantage. These will entail
programs and policies to address the high cost of power, high cost of domestic shipping and
logistics, inadequate infrastructure, and complex government rules and regulations affecting
business operations. Equally important are strategies including human resource development
and skills training programs, micro, small, and medium enterprise (MSME) development,
innovation, green growth, as well as investment promotion especially foreign direct investment
that would bring in new technologies.
Manufacturing resurgence is crucial in generating jobs not only for skilled workers but for
semi and low skilled workers. The transformation of the manufacturing industry would allow the
movement of workers from the informal to the formal sector as well as from low value added
activities to high value added activities where wages and compensation are much higher. The
top priorities for industry development will focus not only on manufacturing but on linking
together activities particularly through the servicification of manufacturing, which connects
services activities like design, R&D, engineering, and after-sales with manufacturing.
The i3S prioritizes the growth and development of 12 major industries covering
automotive, electronics and electrical, aerospace parts, chemicals, iron and steel and tool and
die, garments, textiles, and furniture, shipbuilding, tourism, IT-business process management
particularly knowledge process outsourcing and E-commerce, agribusiness, construction, and
infrastructure and logistics.
To complement innovation and entrepreneurship, the other major pillars of the i3S
consist of building new industries, clusters, and agglomeration; capacity building and human
resource development; MSME growth and development; and ease of doing business and
investment environment.
With the creation of the proper environment and implementation of innovation-centered
programs through the Philippine i3S, domestic firms and industries can unleash their full
potentials to take advantage of market opportunities, overcome challenges, and act as an
engine for sustained, inclusive growth, job creation, and poverty reduction.

References

 Executive Order No. 226. Retrieved from https://boi.gov.ph/wp-

content/uploads/2018/02/EO-226-omnibus-investments-code.pdf
 Board of Investments. (n.d.). BOI Board and Mancom. Retrieved from
https://boi.gov.ph/the-organization/
 PwC Philippines. (2015). More value for your business: Investment incentives in the
Philippines. Retrieved from https://www.pwc.com/ph/en/business-
guides/assets/documents/pwc-investment-incentives-in-the-philippines-2015.pdf
 Board of Investments. (n.d.). Frequently Asked Questions. Retrieved from
https://boi.gov.ph/resources/faqs/
 Board of Investments. (n.d.). The 2020 Investments Priorities Plan (IPP). Retrieved from
https://boi.gov.ph/2020-investments-priorities-plan/
 Department of Trade and Industry. (2017). Policy Briefs: Philippine Inclusive Innovation
Industrial Strategy (i3S). https://industry.gov.ph/wp-content/uploads/2017/11/DTI-Policy-
Brief-2017-05-Philippine-Inclusive-Innovation-Industrial-Strategy.pdf