Title XIII, Chapter IV – Qualified Project Activities for Tax Incentives

Sec. 300. Strategic Investment Priority Plan –  The Board of investments, in coordination with the Fiscal Incentives Review Board, Investment Promotion Agencies, other government agencies, other government agencies administering tax incentive, and the private sector, shall formulate the Strategic Investment Priority Plan to be submitted to the President for approval, which may contain recommendations for types of non-fiscal support needed to create high-skilled jobs to grow a local pool of enterprises, particularly Micro, Small and Medium Enterprises (MSMEs), that can supply to domestic and global value chains, to increase the sophistication of products and services that are produced and/ or sourced domestically, to expand domestic supply and reduce dependence on imports, and to attract significant foreign capital or investment. The Strategic Investment Priority Plan shall be valid for a period of three (3) years, subject to review and amendment every three (3) years thereafter unless there would be a supervening event that would necessitate its review.

The Strategic Investment Priority Plan shall contain the following:

(A) Priority projects or activities that are included in the Philippine development plan or its equivalent, or other government programs, taking into account any of the following:

1. Substantial amount of investments:
2. Considerable generation of employment, especially towards less developed areas;
3. Considerable amount of net exports;
4. Use of modern, advance, or new technology;
5. Processes and innovations that will lead towards the attainment of the sustainable development goals, shall include, but not be limited to, adoption of adequate environmental protection systems and sustainability strategies;
6. Addressing missing links and other gaps in the supply or value chain or otherwise moving up the value chain or product ladder;
7. Promotion of market competitiveness;
8. Enhancement of the capabilities of Filipino enterprises and professionals to produce and offer increasingly sophisticated products and services;
9. Contribution to Philippine food security and increased incomes in the agriculture and fisheries sector; or
10. Services and activities that can promote regional and global operations in the country.

(B) Scope and coverage of location and industry tiers in Section 296; and

(C) terms and conditions on the grant of enhanced deductions under Section 294 (C).

All sectors or industries that may be included in the Strategic Investment Priority Plan shall undergo an evaluation process to determine the suitability and potential of the industry or the sector in promoting long-term growth and sustainable development, and the national interest. In no case shall a sector or industry be included in the Strategic Investment Priority Plan unless it is supported by a formal evaluation process or report.

The projects or activities must comply with the specific qualification requirements or conditions for a particular sector or industry and other limitations as set and determined by the Board of Investments, and in coordination with the Fiscal Incentives Review Board.

In no case shall the Investment Promotion Agencies accept applications unless the project or activity is listed in the Strategic Investment Priority Plan. Projects or activities not listed in the Strategic Investment Priority Plan shall be automatically disapproved.

Sec. 301. Power of the President to Grant Incentives. – Notwithstanding the provisions of Sections 295 and 296, the President may, in the interest of national economic development and upon the recommendation of the Fiscal Incentives Review Board, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate financial support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs, building new industries to diversify economic activities, and attracting significant foreign and domestic capital or investment, and the fiscal requirements of the activity or project, subject to maximum incentive levels recommended by the Fiscal Incentives Review Board: Provided, That the grant of income tax holiday shall not exceed eight (8) years and thereafter, a special corporate income tax rate of five percent (5%) may be granted: Provided, further, That the total period of incentive availment shall not exceed forty (40) years.

The Fiscal Incentives Review Board shall determine whether the benefits that the government may derive from such investment are clear and convincing and far outweigh the cost of incentives that will be granted in determining whether a project or activity is highly desirable.

The exercise by the President of his powers under this Section shall be based on a positive recommendation from the Fiscal Incentives Review Board upon its determination that the following conditions are satisfied:

• (1) The project has a comprehensive sustainable development plan with clear inclusive business approaches, and high level of sophistication and innovation; and
• (2) Minimum investment capital of Fifty billion pesos (P50,000,000,000) or its equivalent in US  dollars, or a minimum direct local employment generation of at least ten thousand (10,000) within three (3) years from the issuance of the certificate of entitlement.

Provided, That the threshold shall be subject to a periodic review by the Fiscal Incentives Review Board every three (3) years, taking into consideration international standards or other economic indicators: Provided, further, That if the project fails to substantially meet the projected impact on the economic indicators: provided, further, that if the project fails to substantially meet the projected impact on the economy and agreed performance targets, the Fiscal Incentives Review Board shall recommend to the President the cancellation of the tax incentive or financial support package or the modified period or manner of availment of incentives, after due hearing and an adequate opportunity to substantially comply with the agreed performance targets and outputs.

For the purpose, financial support includes utilization of government resources such as land use, water appropriation, power provision, and budgetary support provision under the annual General Appropriations Act.

This power of the President in as far as it commands additional public sector expenditures in support of investors, is suspended during fiscal years when, an unimaginable fiscal deficit is declared by the President on the advice of the Development Budget Coordination Committee with a consequence that even core budgetary obligations, such as, but not limited to, mandatory revenue allotments for local government units and budget for the National Economic and Development Authority’s core public investments program cannot be fully financed.

The President may, upon request of an Investment Promotion Agency, exempt the later from the coverage of the provisions of Title XIII of this Code with respect to the review and approval of applications for incentives, or modify the policy on thresholds for Fiscal Incentives Review Board approvals, pursuant to Section 297, should any of the following conditions exist:

• A. When incentives system provided herein cause a significant, demonstrable, and attributable damage to the performance of an investment promotion agency;
• B. When it is reasonably evident that the incentives granted are no longer adequate, necessary, or appropriate;
• C. When there is need to modify incentive privileges in the light of the technological, economic, and social changes; or
• D. When there is need to redesign the tax incentive schemes to obviate unemployment and avoid economic and social dislocation:

Provided, That the above mentioned request is approved by a majority vote of its governing board:

Provided, further, That such request is supported by a cost- benefit analysis reviewed by the fiscal incentives review board, and other quantitative and qualitative evidence demonstrating the investment promotion agency’s performance.

Provided, finally, That the investment promotion agency shall abide by the incentives regime provided herein. (Vetoed by the President)

Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies.

Sec. 302. Amendments to the Strategic Investment Priority Plan –  Subject to publication requirements and the criteria for investment priority determination, the Board of Investments may include additional areas in the Strategic Investment Priority Determination, the Board of Investments may include additional areas in the Strategic Investment priority may include additional areas in the Strategic Investment Priority Plan, alter any of the terms of the declaration of an investment area, and temporarily suspend projects or activities on the Strategic Investment Priority Plan if it considers that such project or activity is no longer a priority within the effectivity of the Strategic Investment Priority Plan.

Sec. 303. Publication. –  Upon approval of the Strategic Investment Priority Plan, in whole or in part, or upon approval of an amendment thereof, the plan or the amendment, specifying and declaring the areas of investments shall be published in at least one (1) newspaper of general circulation or the Official Gazette: Provided, That all such areas in the existing Strategic Investment Priority Plan shall be open for application until publication of amendment or deletion thereof.

Sec. 304. Qualifications of a Registered Business Enterprise for Tax Incentives. – In the review and grant of tax incentives, the registered business enterprise must:

(A) Be engaged in a project or activity included in the Strategic Investment Priority Plan;

(B) Meet the target performance metrics after the agreed time period;

(C) Install an adequate accounting system that shall identify the investments, revenues, costs and profits or losses of each registered project or activity undertaken by the enterprise separately from the aggregate investments, revenues, costs and profits or losses of the whole enterprise; or establish a separate corporation for each registered project or activity if the Investment Promotion Agency should so require;

(D) Comply with the e-receipting and e-sales requirement in accordance with Sections 237 and 237(A) of this Code; and (E) Submit annual reports of beneficial ownership of the organization and related parties.