More commonly known as the BOI Law, the Omnibus Investments Code of 1987 governs the grant of incentives by the BOI to priority investment activities. Those who wish to avail of incentives must invest in areas prescribed in the annual Investment Priorities Plan (IPP) formulated by the BOI and approved by the President of the Philippines. These preferred areas are classified as either pioneer or non-pioneer.

     A preferred pioneer area is one which, in addition to being important to national economic development:

1. Is involved in the production of goods that are not yet available in the Philippines on a commercial scale;
2. Uses a design, formula, scheme, method or process, or system of production that is new and untried in the Philippines;
3. Is engaged in activities and/or services that are feasible and highly essential to the attainment of the national goal, in relation to a declared specific national food and agricultural program for self-sufficiency and other social benefits of the project; or
4. Produces non-conventional fuels or manufactures equipment that utilizes non-conventional fuels or sources of energy or uses non-conventional sources of energy in its production operations.

     The final product in any of the foregoing instances should involve the use of domestic raw materials whenever possible, taking into account the risks and magnitude of investment.

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

• At least 50% of production is for export (For Filipino-owned enterprises); or
• At least 70% of production is for export (for enterprises with more than 40% foreign equity)

     Registration with the BOI will entitle qualified projects to the following incentives, among others:

Fiscal Incentives

1. Income Tax Holiday

        Newly registered pioneer projects are exempt from income taxes for six years from the start of commercial operations, and non-pioneer firms for four years from the start of commercial operations. The exemption period may be extended for another year in each of the following cases:

   • The project uses indigenous raw materials;
   • The project meets the BOI-prescribed ratio of capital equipment to number of workers;
   • The net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three years of the project's commercial operations.

2. Additional Deduction for Labor Expenses

        For the first five years from the date of registration, a BOI-registered enterprise is allowed an additional deduction from taxable income of 50% of the wages corresponding to the incremental direct labor that the project hires if it meets the prescribed ratio of capital equipment to number of workers.

3. Tax Credit for Taxes and Duties on Raw Materials Used in the Manufacture, Processing, or Production of a Project's Export Products

4. Access to Bonded Manufacturing/Trading Warehouse System

5. Exemption from Taxes and Duties on Imported Supplies and Spare Parts for Consigned Equipment

6. Exemption from Wharfage Dues and Any Export Tax, Import Duties and Fee.

Nonfiscal Incentives

1. Simplification of Customs Procedures

        Under Executive Order No. 226, customs procedures for the importation of equipment, spare parts, raw materials and supplies, and the export of products by BOI-registered enterprises have been simplified by the Bureau of Customs.

2. Unrestricted Use of Consigned Equipment

        There are no restrictions on the use by BOI-registered enterprises of consigned equipment provided a re-export bond is posted. Executive Order No. 226 provides further that if the consigned equipment and spare parts were imported tax and duty-free, the re-export bond may be waived.

3. Employment of Foreign Nationals

        Foreign nationals may be employed in supervisory, technical, or advisory positions within five years from a registered project's registration, extendible for limited periods to be determined by BOI. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals for a longer period.

     To be eligible for registration with the BOI, applicants must have the following qualifications:

1. Form of business organization:
   • If a natural person, he or she must be a Philippine citizen;
   • If a partnership or any other association, it must be organized under Philippine laws and at least 60% of its capital is owned and controlled by citizens of the Philippines;
   • If a corporation, it must be organized under Philippine laws and at least 60% of the capital stock outstanding and entitled to vote is owned and held by Philippine nationals, and at least 60% of the members of the Board of Directors are citizens of the Philippines. If the corporation does not possess the required degree of ownership by Philippine nationals, the following circumstances must be satisfactorily established:
     • It proposes to engage in a pioneer project which cannot be readily and adequately filled by Philippine nationals, or the applicant is exporting at least 70% of its total production;
     • It obligates itself to attain the status of a Philippine national within 30 years from date of registration, but a registered enterprise which exports 100% of its total production need not comply with this requirement;
     • The pioneer area it will engage in is one that is not within the activities reserved by the Constitution to Philippine citizens or corporations owned and controlled by citizens.

2. The applicant is proposing to engage in a preferred project listed in the Investment Priorities Plan within a reasonable time, or if not so listed:
   • At least 50% of its total production is for export or it is an existing producer which will export part of its production; or
   • The enterprise is engaged or proposing to engage in rendering technical, professional, or other services or in exporting television and motion pictures and musical recordings made or produced in the Philippines by or through a registered trader.

3. The applicant can capably operate on a sound and efficient basis and can contribute to the national development of the preferred area and the national economy.

4. If the applicant is engaged or proposes to engage in activities other than preferred projects, it has installed an accounting system adequate to identify the investments, revenues, costs, and profits or losses of each preferred project undertaken by the enterprise separately from the aggregate investment.

     Multinationals setting up regional headquarters are also entitled to BOI registration under Executive Order No. 226. Foreign companies organized and existing under foreign laws, engaged in international trade, and supplying spare parts or manufactured components and raw materials to distributors or markets in the Asia-pacific region and other foreign areas may establish their regional headquarters in the Philippines. The regional headquarters principally acts as a supervisory, communication, and coordination center for subsidiaries, branches, or affiliates of the multinational company in the Asia-Pacific region. They do not earn or derive income from the Philippines or participate in any manner in the management of Philippine subsidiaries. All operating expenses are financed by the head office or parent company.

     A multinational company with registered regional headquarters may also establish a regional bonded warehouse which will serve as a regional storage and distribution center for the company's products.

     Expatriates assigned to BOI-registered regional headquarters and warehouses are granted the following incentives:

• Multiple-entry visas
• Lower withholding tax of 15% on compensation
• Tax- and duty-free importation of personal and household effects.

     Registration with the BOI may be initiated by filing an application that will contain the following, among others:

• Duly filled out application form that is notarized by a notary public;
• Project feasibility study including five-year financial projections and information on the technical and market aspects of the project; and
• Documented information on the background of the proponents.

     Under Executive Order No. 226, the BOI has to render action on applications for registration within 20 working days after official acceptance of the application.