BOI Project Pegistration Procedures and Incentives

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BOI PROJECT REGISTRATION PROCEDURES AND INCENTIVES

byDOMINGO I. BAGAPORO

DirectorProject Evaluation and Registration Dept., BOI

ENERGY INVESTMENT FORUM 2009

20 May 2009

Crown Regency Hotel, Fuente Osmena, Cebu City

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• BOI Registration• Incentives Availment of BOI Registered Firms

• Investment Priorities Plan (IPP)

Presentation Outline

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Qualifications for Registration

1. Citizen of the Philippines; or anEntity organized under Philippine laws, at least 60% Filipino owned **

2. Activity must be listed in the Investments Priorities Plan (IPP) **

** exemptions per Qualification

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1. Citizen of the Philippines; or an Entity organized under Philippine laws, at least 60% Filipino owned

**If not Filipino, the following must be complied with:

a) Proposes to engage in a Pioneer project; or

b) Commits to export at least 70% of production.


**

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2. Activity must be listed in the Investments Priorities Plan (IPP)

**If not listed, the project must be export‐oriented:

• Filipino owned ‐ at least 50% or• Foreign owned ‐ 70% of its total production is for export

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Type of Project: • New• Expansion• Modernization/Rehabilitation • Existing

Project Status:• Pioneer • Non‐Pioneer

Type of Project/Status

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• What is a Pioneer Enterprise?

1. Engaged in the manufacture, processing or production of goods, products, commodities or raw materials that have not been/not being produced in the Philippines on a commercial scale; or

2. Which uses a design, formula, scheme, method, process or system of production, which is new and untried in the Philippines; or

3. With magnitude of investment as determined by the Board.

Project Status

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Minimum equity to finance the project is 25%of total project cost

This could be in the form of paid‐up capital or retained earnings

This requirement is a post‐registration condition

Equity Requirement

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Required Documents

1. Properly accomplished Application Form

2. Project Study/Project Report

3. Copy of the SEC Cert. of Reg., Articles of Incorporation/Partnership, and By‐laws

4. Bd. Res. authorizing an officer to transact, execute, and sign in behalf of the applicant firm

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Required Documents

5. Proof of publication of the “Notice of the filing of Application”

6. AFS and ITR for the past 3 years or for the period the applicant has been in operation if less than 3 years (for existing firms); or Sworn Statement of Assets & Liabilities of Major Stockholders (for new corporations)

7. Other documents that may be required by the specific activity in the IPP

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1. Checklisting of application document

2. Publication of the NOTICE

2. Official filing

3. Evaluation of application / project

4. Presentation to the ManCom/Board for decision

5. Notify applicant of Board action

6. Compliance with the pre‐registration requirements

7. Issuance of Certificate of Registration

Registration Process

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Client Receives Certificate of Registration

Client prepares the required documents

Incomplete

Application (with complete info & supporting documents) is officially accepted by BOI; PERD evaluates application & presents to MANCOM *

Client receives Notice

of Board Action

Denied

Client waits for the release of the Certificateof Registration

Documents are checked by PERD for completeness/ consistency of information/ documents

Complete

Client receives Order of Payment and pays application fee to the cashier

Client presents documents to Project Evaluation and Registration Department (PERD) for check listing

Approved

Client receives Notice of Approval & pre-registration requirements; Client subsequently complies w/ pre-registration requirements (including payment of reg’n fee) w/in 30 days/max of 90 days

Approved

- If not complete, Letter containing deficiencies will be sent to firm

Project is presented by PAG to the Board

* Within 20 working days from date of

official filing/acceptance

Application/ Registration Procedures

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1. Board Resolution Accepting the Terms and Conditions

2. Board of Directors’ Sworn Statement: Affirming all representations made by the firm

3. Certification of Non‐arrearages : …applicant is not in arrears in the payment of outstanding obligations, loans, to the government or any government instrumentality

4. Undertaking ‐ Commitment to comply with 25% minimum equity requirement

5. Payment of registration fee

Pre‐Registration Requirements

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FEES

Filing Fee:Project Cost (in million Php) Fee (Php)

4 1,510.00>4‐20 3,010.00>20‐50 4,510.00>50 6,010.00

Registration Fee:1/10 of 1% of the total project cost (not lower than P3,000.00 or not

more than P15,000.00) (for existing projects, a fixed fee of P3,000.00)

Micro Enterprises – exempted from filing and registration feesSmall Enterprises – 25% of applicable filing and registration fees

Note: Micro Enterprise: Not more than 3,000,000*Small Enterprise: P 3,000,001 to P 15,000,000*Total Assets exclusive of the cost of land; and,

Project Cost exclusive of the cost of land

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Electronic Filing

Electronic Filing of Application• Visit the BOI website (www.boi.gov.ph), click Info

Center, then Application Forms to download application form and format for the project report

• Forward these documents to [email protected] and indicate the availability of SEC documents and Financial Statements

• Within 48 hours, PERD will send an e‐mail informing that:

– Information/documents are complete and therefore, applicant may proceed to pay filing fee; or

– Additional information/documents must be submitted

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BOI Registration Procedures

Notice is hereby given that (Name of firm)____________________

is applying for registration with the Board of Investments (BOI) as_______________

(Activity and Status)________________________________________________

with a capacity of __________________________________________________

and with project /plant site located at ___________________________________

Any person with valid objection/s to, or pertinent comment on the above-

mentioned project may file his/her objection in writing, under oath, with the BOI

within three (3) days from the date of this publication.

DOMINGO I. BAGAPORO Director, PERD

NOTICE

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‐ One day processing of application for registration‐ Micro enterprises are exempted from payment of application & registration fees

‐ Exemption from the 25% equity requirement‐ Posting of the Notice of Filing of Application in provincial, city, municipal or barangay hall in lieu of newspaper

‐ Simplified reportorial requirements‐ Simplified application for incentives availment

Assistance to Micro & Small Enterprises

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Incentives Availment of BOI‐Registered Firms

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BOI Incentives

1. Income Tax Holiday2. Additional deduction for labor expense 3. Duty‐free importation of capital equipment4. Unrestricted use of consigned equipment 5. Tax & duty‐free importation of spare parts and supplies6. Tax & duty‐free importation of breeding stocks and genetic

materials7. Tax credit on domestic breeding and genetic materials8. Tax credit on raw materials & supplies 9. Additional deduction from major infrastructure works

located in LDAs10. Exemption from wharfage dues11. Employment of foreign nationals12. Zero‐Rated Value Added Tax

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Income Tax Holiday

• Full exemption from income taxes levied by the National Government

• Entitlement reckoned from start of operation per timetable or actual start of operation whichever comes first

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Income Tax Holiday

• Firms whose registered operation/s is located within NCR are not entitled to ITH, except in the ff. cases:1. Registered operation/s is located in a

government industrial estate 2. Projects that will engage in service type

activities identified in the IPP 3. Export‐oriented projects 4. Modernization projects5. Micro and small projects6. Strategic Activities as defined in the IPP

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Income Tax Holiday

• Period of EntitlementEligible Enterprises No. of

YearsNew & Pioneer 6

New & Non‐Pioneer 4

Expanding 3

Projects located in Less Developed Areas 6

Modernizing 3

R.A. 8479 5

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Income Tax Holiday

• Criteria for ITH Bonus Year (any of the ff.):– Ratio of Cost of Capital Equipment of less than US$10,000 to 1 Direct Labor

– Cost of Indigenous Raw Materials is at least 50% of Total Cost of Raw Materials

– Net FOREX of at least US$500,000 annually for the first 3 years of operation

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Income Tax Holiday

• Filing Application – 1 month from the filing of the Annual Income Tax Return (ITR) with BIR or from the last day prescribed by law for such filing whichever comes later (no penalty)

– Within 6 months (with penalty)– Beyond 6 months (forfeiture of ITH)– For companies with tentative ITRs:

• One (1) month from the filing of the final ITR; or• Within one (1) month after the lapse of the two (2) year period within which to file the final ITR

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Income Tax Holiday

• Penalties for late filing of application

– Within the 31st and 180th day from date of filing of the annual ITR with the BIR or from the last day prescribed by law for the filing of ITR

Penalty =amount of ITH x 1% but not less than P500.00 nor more than P2.0 million

– After 6 months: Penalty= Forfeiture of ITH for the taxable year

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Additional Deduction for Labor Expense

• 50% of Incremental Direct Labor Cost Deductiblefrom Taxable Income for the first five (5) years from registration

• 100% if located in Less‐Developed Areas except those in mining and forestry sectors

• The ratio of imported and domestic capital equipment to the number of workers does not exceed US$10,000 to 1 worker

• No simultaneous availment with ITH

• For export producers, compliance with export commitment (70% for majority foreign‐owned firms, 50% for majority Filipino‐owned firms)

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Duty‐free Importation of Capital Equipment

• Duty free importation of capital equipment, spare parts & supplies for under EO 528

• Covered items are those classified under AHTN Chapters 40, 59, 68, 69, 70, 73, 76, 82, 83, 84, 85, 87, 89, 90, 91 & 96

• For firms registered with BOI on or after 06 June 2004 as New or Expanding/Modernizing.

• Available until June 6, 2009 (for those covered by EO 313; until June 16, 2011 (for those covered by EO 528)

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Duty‐free Importation of Capital Equipment

• Conditions for availment:– The capital equipment, spare parts and supplies to be imported are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices

– They are reasonably needed and will be used exclusively by the enterprise in its registered activity

– The rated capacity of the equipment is within the registered capacity subject to reasonable allowance

– Posting of a performance bond – When performance bond is lifted

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Unrestricted Use of Consigned Equipment under Re‐export Bond

• Machinery, equipment and spare parts consigned to any BOI‐registered firm shall not be subject to restrictions as to period of use

• Entitlement to apply with this incentive will not exceed 10 years from the date of registration

• Spare parts may be imported separately• Non‐production equipment such as power generation sets, transformers, compressors & boilers etc., are included

• Import documents should indicate importation is on consigned basis

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Tax and Duty‐free Importation of Spare Parts & Supplies

• Exemption from customs duties and national internal revenue taxes for importation of required supplies and spare parts

• Availment period not to exceed 10 years from date of registration

• Tax and Duty Exemption Certificate is issued

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Employment of Foreign Nationals

• Special non‐immigrant multiple entry visa given to foreign nationals – supervisory, technical or advisory positions not to exceed five (5) years from date of registration of the firm

– positions of president, treasurer and general manager may be retained by foreign nationals beyond 5 years for at least 40% foreign‐owned firms

• Extendible to spouse and unmarried children under 21 years of age

• Must submit report on 2 Filipino understudies• Option: Special Investors Resident Visa for Indefinite Period

with US$75,000 investment in shares of stocks of BOI‐registered firms

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Employment of Foreign Nationals

• Filing of application– For newly hired: before assumption of duty– For extension: at least 1 mo. before expiration date of existing employment authority

• Processing Period– New: 3 working days– Renewal: 2 working days

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2008 INVESTMENT PRIORITIES PLAN

I. PREFERRED ACTIVITIESB. InfrastructureXxx2. Power generation projects as specified inthe Power Development Plan that mayqualify for registration are:

a.Those utilizing indigenous and renewable energy sources such as biomass, waste to energy conversion, solar, wind, geothermal, hydro and tidal;

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2. Power generation projects xxx

b. Other energy sources adoptingenvironmentally‐friendly technologies except oil‐fired power generating plants;

c. Power generation projects under Small Power Utilities Group (SPUG); and

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2. Power generation projects xxx

d.Those under the National PowerCorporation (NPC) privatization plansubject to Note I.11.Note I.11: Privatized projects paying income taxes prior to or at the time of privatization except those pre‐qualified before the effectivity of the 2008 IPP with ITH factored‐in in the bids shall not be entitled to ITH.)

Only income from sale of electricity generated from the plant shall be entitled to ITH.

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The following may qualify for pioneer status:

• Power generation projects using renewable energy sources; or

• Power projects that cost at least the Philippine Peso equivalent of US$1 million per megawatt.

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New power generation projects, applied during the effectivity of this IPP, to be undertaken by the same BOI‐registered firm or an entity with the same stockholders or interlocking stockholders to the extent of 50% ownership shall be entitled to the diminishing ITH rate of exemption as follows: 1. First project – 100%2. Succeeding projects – 5% reduction for every succeeding project but the rate of ITH exemption shall not be less than 70%.

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I. PREFERRED ACTIVITIESB. InfrastructureXxx7. Projects under the BOT Law

Application for registration must include an endorsement from concerned government agency or corporation or LGU, a copy of supply contract, and other relevant supporting documents.

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I. PREFERRED ACTIVITIESB. InfrastructureXxx7. Projects under the BOT Law

In general, BOT projects with sovereign guarantee and/or government guaranteed rates of return are not entitled to ITH.

BOT projects that cost at least PhP1.0 billion may be granted pioneer status for registration purposes only.

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Investment Priorities Plan (IPP) Comparison 2008‐2009 (Proposed)

Power Generation projects‐Who may qualify for registration?‐ Pioneer Status

Pipeline Projects for Oil and Gas

Projects Under the BOT Law

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2008 IPPI.Preferred ActivitiesC.Infrastructure

1. Power Generation Projects as specified in the Power Development Plan that may qualify for registration are:a. Those utilizing

indigenous and renewable energy sources such as biomass, waste to energy conversion, solar, wind, geothermal, hydro and tidal;


2009 IPP (Proposed)

B.Regular List2.Infrastructure

d.Power Generation Projects

This covers the following:

1) Those utilizing renewable energy sources such as biomass, solar, wind, geothermal, hydro and tidal[1];

[1] Power generation projects using renewable energy shall be deleted from this list upon effectivity of the Rules and Regulations to implement R.A. 9513 or otherwise known as the Renewable Energy Act of 2008.

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2008 IPPb. Other energy sources

adopting environmentally-friendly technologies except oil-fired power generating plants;

c. Power generation projects under Small Power Utilities Group (SPUG); and

d. Those under the National Power Corporation (NPC) privatization plan subject to Note I.11.Note I.11: Privatized projects paying income taxes prior to or at the time of privatization except those pre‐qualified before the effectivity of the 2008 IPP with ITH factored‐in in the bids shall not be entitled to ITH.)

2009 IPP (Proposed)

(2) Other energy sources adopting environmentally-friendly technologies;

(3)Power generating plants located in missionary areas; and

(4) Those under the Power Sector Asset and Liabilities Management (PSALM) privatization plan.

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2008 IPP• Power generation projects

using renewable energy sources; or

• Power projects that cost at least the Philippine Peso equivalent of US$1 million per megawatt.

2009 IPP (Proposed)

• Power generation projects using renewable energy sources; or

• Power generating plants located in missionary areas;

Projects that cost at least the Philippine Peso equivalent of US$1 million per megawatt may be granted pioneer status but with non-pioneer incentives.

The following may qualify for PIONEER status:

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2008 IPPNew power generation projects, applied during the effectivity of this IPP, to be undertaken by the same BOI-registered firm or an entity with the same stockholders or interlocking stockholders to the extent of 50% ownership shall be entitled to the diminishing ITH rate of exemption as follows:

1. First project – 100%2. Succeeding projects – 5%

reduction for every succeeding project but the rate of ITH exemption shall not be less than 70%

2009 IPP (Proposed)

Only income from sale of electricity generated from the plant shall be entitled to ITH.

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2008 IPP• Application for registration

on the establishment of infrastructure for transport of petroleum products and natural gas, petrochemical, and similar products, must include proof of filing of an application for Authority to Operate Pipeline System with the DOE.

2009 IPP (Proposed)

• Application for registration on the establishment of infrastructure for transport of petroleum products and natural gas, petrochemical, and similar products, must include proof of filing of an application for Authority to Operate Pipeline System with the DOE.

Pipeline Projects for Oil and Gas

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2008 IPP• Application for registration must

include an endorsement from concerned government agency or corporation or LGU, a copy of supply contract, and other relevant supporting documents.

• In general, BOT projects with sovereign guarantee and/or government guaranteed rates of return are not entitled to ITH.

• BOT projects that cost at least PhP1.0 billion may be granted pioneer status for registration purposes only.

2009 IPP (Proposed)

• Application for registration must include an endorsement from concerned government agency or corporation or LGU, a copy of supply contract, and other relevant supporting documents.

• BOT projects that cost at least PhP1.0 billion may be granted pioneer status but with non-pioneer incentives.

Projects Under the BOT Law

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Executive Order No. 661Dated September 10, 2007

”Directing the LGUs in areas near or adjacent to geothermal‐producing sites in Albay, Laguna, Leyte, Negros Oriental, Sorsogon, North Cotabato, and Negros Occidental to

develop Economic Zones.”

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Executive Order No. 661

For purposes of:‐ Addressing the need for a more reliable, economical, competitive, and efficient power supply to provide quality electricity to power‐sensitive industrial locations in the economic zones.

‐ Providing open access to private and publicly owned economic zones in sourcing their power with the end in view of lowering power cost in economic zones and to promote competitiveness.

‐ Providing alternative locations for investors through declaration of certain areas adjacent to geothermal producing sites as economic zones.

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Executive Order No. 661• Respective LGUs in areas near or adjacent to the 7 geothermal‐producing sites shall develop economic zones in coordination with PEZA.

• PEZA shall assist LGUs concerned in the creation and development of the economic zones.

1. Tiwi, Albay;2. MakBan, which borders

Makiling and Banahaw in Laguna;

3. Tongonan, which borders Ormoc and Kananga in Leyte;

4. Palinpinon in Valencia, Negros Oriental;

5. BacMan, which borders Bacon, Sorsogon and Manito, Albay;

6. Mt. Apo, in the borders of Kidapawan, North Cotabato; and,

7. Murcia, Negros Occidental

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BOI Website: http://www.boi.gov.ph

Dir. Domingo I. [email protected]

Project Evaluation and Registration Dept. [email protected]

℡ 895‐6617; 895‐3997Incentives Department℡ 895‐3568; 896‐8236

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Thank you!Thank you!