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REPUBLIC ACT No.

6426
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND FOR
OTHER PURPOSES.
Section 1. Title. This act shall be known as the "Foreign Currency Deposit Act of the Philippines."
Section 2. Authority to deposit foreign currencies. Any person, natural or juridical, may, in accordance
with the provisions of this Act, deposit with such Philippine banks in good standing, as may, upon
application, be designated by the Central Bank for the purpose, foreign currencies which are acceptable as
part of the international reserve, except those which are required by the Central Bank to be surrendered
in accordance with the provisions of Republic Act Numbered two hundred sixty-five (Now Rep. Act No.
7653).
Section 3. Authority of banks to accept foreign currency deposits. The banks designated by the Central
Bank under Section two hereof shall have the authority:
(1) To accept deposits and to accept foreign currencies in trust Provided, That numbered accounts
for recording and servicing of said deposits shall be allowed;
(2) To issue certificates to evidence such deposits;
(3) To discount said certificates;
(4) To accept said deposits as collateral for loans subject to such rules and regulations as may be
promulgated by the Central Bank from time to time; and
(5) To pay interest in foreign currency on such deposits.
Section 4. Foreign currency cover requirements. Except as the Monetary Board may otherwise
prescribe or allow, the depository banks shall maintain at all times a one hundred percent foreign currency
cover for their liabilities, of which cover at least fifteen percent shall be in the form of foreign currency
deposit with the Central Bank, and the balance in the form of foreign currency loans or securities, which
loans or securities shall be of short term maturities and readily marketable. Such foreign currency loans
may include loans to domestic enterprises which are export-oriented or registered with the Board of
Investments, subject to the limitations to be prescribed by the Monetary Board on such loans. Except as
the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in the same
currency as that of the corresponding foreign currency deposit liability. The Central Bank may pay interest
on the foreign currency deposit, and if requested shall exchange the foreign currency notes and coins into
foreign currency instruments drawn on its depository banks. (As amended by PD No. 1453, June 11,
1978.)
Depository banks which, on account of networth, resources, past performance, or other pertinent criteria,
have been qualified by the Monetary Board to function under an expanded foreign currency deposit
system, shall be exempt from the requirements in the preceding paragraph of maintaining fifteen percent
(15%) of the cover in the form of foreign currency deposit with the Central Bank. Subject to prior Central
Bank approval when required by Central Bank regulations, said depository banks may extend foreign
currency loans to any domestic enterprise, without the limitations prescribed in the preceding paragraph
regarding maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign
currency cover prescribed in the preceding paragraph. (As added by PD No. 1035.)
Section 5. Withdrawability and transferability of deposits. There shall be no restriction on the
withdrawal by the depositor of his deposit or on the transferability of the same abroad except those
arising from the contract between the depositor and the bank.
Section 6. Tax exemption. All foreign currency deposits made under this Act, as amended by PD No.
1035, as well as foreign currency deposits authorized under PD No. 1034, including interest and all other
income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective
of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible
or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not
they are engaged in trade or business in the Philippines. (As amended by PD No. 1246, prom. Nov. 21,
1977.)
Section 7. Rules and regulations. The Monetary Board of the Central Bank shall promulgate such rules
and regulations as may be necessary to carry out the provisions of this Act which shall take effect after
the publications in the Official Gazette and in a newspaper of national circulation for at least once a week
for three consecutive weeks. In case the Central Bank promulgates new rules and regulations decreasing
the rights of depositors, rules and regulations at the time the deposit was made shall govern.
Section 8. Secrecy of foreign currency deposits. All foreign currency deposits authorized under this Act,
as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are
hereby declared as and considered of an absolutely confidential nature and, except upon the written
permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked
into by any person, government official, bureau or office whether judicial or administrative or legislative,
or any other entity whether public or private;Provided, however, That said foreign currency deposits shall
be exempt from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further
amended by PD No. 1246, prom. Nov. 21, 1977.)
Section 9. Deposit insurance coverage. The deposits under this Act shall be insured under the
provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance Corporation), as well as its
implementing rules and regulations: Provided, That insurance payment shall be in the same currency in
which the insured deposits are denominated.
Section 10. Penal provisions. Any willful violation of this Act or any regulation duly promulgated by the
Monetary Board pursuant hereto shall subject the offender upon conviction to an imprisonment of not less
than one year nor more than five years or a fine of not less than five thousand pesos nor more than
twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the court.
Section 11. Separability clause. The provisions of this Act are hereby declared to be separable and in
the event one or more of such provisions are held unconstitutional, the validity of other provisions shall
not be affected thereby.
Section 12. Repealing clause. All acts, executive orders, rules and regulations, or parts thereof, which
are inconsistent with any provisions of this Act are hereby repealed, amended or modified accordingly,
without prejudice, however, to deposits made thereunder.
Section 12-A. Amendatory enactments and regulations. In the event a new enactment or regulation is
issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to
foreign currency deposits already made or existing at the time of issuance of such new enactment or
regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after
its issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.)
Section 13. Effectivity. This Act shall take effect upon its approval.
Approved, April 4, 1974
MALACAANG
M a n i l a
PRESIDENTIAL DECREE No. 1034 September 30, 1976
AUTHORIZING THE ESTABLISHMENT OF AN OFFSHORE BANKING SYSTEM IN THE PHILIPPINES
WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political stability, a
growing economy and adequate communication facilities, among others, exist in the Philippines;
WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of capital
funds for economic development;
WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country
by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating
employment opportunities and expertise in international finance, and contributing to the national development effort.
WHEREAS, the geographical location, physical and human resources, and other positive factors provide the
Philippines with the clear potential to develop as another financial center in Asia;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me
vested by the Constitution, do hereby decree and make the following part of the law of the land:
Section 1. Definition of Terms. As used in this Decree, unless the context otherwise indicates:
(a) "Offshore Banking" shall refer to the conduct of banking transactions in foreign currencies involving the
receipt of funds from external sources and the utilization of such funds as provided in this Decree.
(b) "Offshore Banking Unit" shall mean a branch, subsidiary or affiliate of a foreign banking corporation
which is duly authorized by the Central Bank of the Philippines to transact offshore banking business in the
Philippines.
(c) "Deposits" shall mean funds in foreign currencies which are accepted and held by an offshore banking
unit in the regular course of business, with the obligation to return an equivalent amount to the owner
thereof, with or without interest.
(d) "Resident" shall mean
1. an individual citizen of the Philippines residing therein; or
2. an individual who is not a citizen of the Philippines but is permanently residing therein; or
3. a corporation or other juridical person organized under the law of the Philippines.
(e) "Non-resident" shall mean an individual, corporation or other juridical person not included in the above
definition of "resident": Provided, however, that branches, subsidiaries, affiliates, extension offices or any
other units of corporation or juridical person organized under the laws of any foreign country operating in the
Philippines shall be considered residents of the Philippines.
"Branch" shall mean a separately managed department or unit of a foreign corporation.
Section 2. Qualification Requirements. Subject to such regulatory guidelines as the Monetary Board may prescribe,
only banks which are organized under any law other than those of the Republic of the Philippines their branches,
subsidiaries or affiliates, shall be qualified to operate offshore banking units in the Philippines. However, local
branches of foreign banks already authorized to accept foreign currency deposits under the provisions of R.A. No.
6426 may opt to apply for authority to operate an offshore banking unit under the provisions of this Decree:
Provided, that, upon their receipt of a corresponding certificate of authority to operate as an offshore banking unit,
the license to transact business under the provisions of R.A. No. 6426 shall be deemed automatically withdrawn.
Section 3. Certificate of Authority to Operate. The Monetary Board of the Central Bank of the Philippines is hereby
authorized to issue certificates of authority to operate offshore banking units: Provided, however, that, in issuing
such certificates, the Monetary Board shall take into consideration the applicant's liquidity and solvency position,
networth and resources, management, international banking expertise, contribution to the Philippine economy, and
other relevant factors such as participation in equity of local commercial banks and appropriate geographic
representation.
The Central Bank of the Philippines is hereby authorized to collect a fee of not less than US$ 20,000.00 upon
issuing any certificate of authority to operate and annually thereafter on the anniversary date of such certificate.
Section 4. Corporate Undertaking. No application to operate as an offshore banking unit under the provisions of this
Decree shall be considered unless the applicant shall have first submitted to the Central Bank of the Philippines a
sworn undertaking of its head office or parent or holding company, duly supported by an appropriate resolution of its
board of directors, that, among other things: (a) it will, on demand, provide the necessary specified currencies to
cover liquidity needs that may arise or other shortfall that is offshore banking unit may incur; (b) the operations of its
offshore banking unit shall be managed soundly and with prudence; (c) it will train and continually educate a specific
number of Filipinos in international banking and foreign exchange trading with a view to reducing the number of
expatriates; (d) it will provide and maintain in its offshore banking unit net office funds in the minimum amount of
US$ 1,000,000.00 and (e) it will start operations of its offshore banking unit within 180 days from receipt of its
certificate of authority to operate such unit.
Section 5. Supervision. The operations and activities of offshore banking units shall be conducted under the
supervision of the Central Bank of the Philippines.
Section 6. Transactions of Offshore Banking Units: Regulations. Transactions of offshore banking units with non-
residents or with other offshore banking units shall be freely allowed: Provided, that the Central Bank of the
Philippines may establish such safeguards as may be necessary to prevent circumvention of applicable foreign
exchange regulations. Transactions of offshore banking units with resident of the Philippines, including those with
local commercial banks and local branches of foreign banks authorized to receive foreign currency deposits under
Republic Act No. 6426, shall be subject to applicable law and regulations.
The Monetary Board of the Central Bank of the Philippines shall promulgate such rules and regulations as may be
necessary to carry out and implement the provisions of this Decree.
Section 7. Tax and Other Incentives.
(a) The provisions of any law to the contrary notwithstanding, the transactions of offshore banking unit
authorized hereunder with non-residents and other offshore banking units shall be subject to a five per cent
(5%) tax on the net, income from such transactions which shall be in lieu of all taxes on the said
transactions: Provided, however, that transactions of offshore banking units with local commercial banks,
including branches of foreign banks that may be authorized by the Central Bank to transact business with
offshore banking units, shall likewise be subject to the same tax, except net income from such transactions
as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be
subject to the usual income tax payable by banks. Any income of non-residents from transactions with said
offshore banking units shall be exempt from any tax.
(b) In the case of transaction with residents (other than other offshore banking units or local commercial
banks including local branches of foreign banks that may be authorized by the Central Bank of the
Philippines to transact business with offshore banking units), interest income from loans granted to such
residents shall be subject only to a ten per cent (10%) withholding tax as final tax.
(c) Notwithstanding the provision of any law to the contrary, foreign personnel may be assigned by any
foreign bank to work in its offshore banking unit in the Philippines. Such foreign personnel, their spouses
and unmarried children under twenty-one years of age, shall be issued a multiple entry special visa, valid for
a period of one year, to enter the Philippines: Provided, however, that a responsible officer of such foreign
bank submits a certificate of the effect that the person who seeks entry in the Philippines is an employee of
the said foreign bank and will work exclusively for its offshore banking unit in the Philippines and that he will
be paid by the foreign bank in the Philippines compensation in foreign currencies: Provided, further, that in
the case of the spouse and unmarried children mentioned herein the certificate shall be to the effect that
they are dependents of the foreign personnel working in the offshore banking unit.
The admission and stay of the foreign personnel and their dependents mentioned in the next preceding
paragraph shall be co-terminous with the validity of the multiple entry special visa: Provided, however, that
their stay may be extended yearly upon submission to the Commission on Immigration and Deportation of a
sworn certification by a responsible officer of the offshore banking unit in the Philippines that such bank's
authority to operate as an offshore banking unit is valid and subsisting and that the personnel concerned has
been paid in the Philippines, from the date of original admission, the compensation mentioned in the next
preceding paragraph, for which that tax due thereon has been withheld and paid to the Bureau of Internal
Revenue.
The foreign personnel and their respective spouses and dependents mentioned in this Section shall be
exempt from: the Payment of all fees due under the immigration and alien registration laws; securing alien
certificates of registration; and obtaining emigration clearance certificates, and all types of clearances
required by any government department or agency, except that upon their final departure from the
Philippines, the employer of the said foreign personnel shall so advice in writing the Commission on
Immigration and Deportation at least five (5) working days prior to such departure, and the finally departing
personnel shall be required to submit to the said office a tax clearance from the Bureau of Internal Revenue.
(d) Section 22 of Commonwealth Act No. 466, as amended, is hereby amended to include an additional
subsection (d) to read as follows:
"(d) Aliens employed by offshore banking units. There shall be levied, collected and paid for each
taxable year upon the gross income received by every alien individual employed by offshore banking
units established in the Philippines as salaries, wages, annuities, compensations, remunerations and
emoluments from such offshore banking units a tax equal to fifteen per centum of such gross
income."
(e) The alien executives of offshore banking units shall enjoy the privileges extended to foreigners coming to
settle in the Philippines for the first time as provided for under Section 105(h) of the Tariff and Customs
Code, as amended.
(f) The offshore banking units shall be exempt from all forms of local licenses, fees, dues, imposts, or any
other local taxes or burdens.
Section 8. Effect of Certain Laws. The provisions of Act No. 2566 (Usury Law), Republic Act No. 529, as amended
(Uniform Currency Law), and Republic Act No. 3591, as amended (Deposit Insurance Law), shall not apply to
transactions and/or deposits in offshore banking units in the Philippines: Provided, however, that the provisions of
R.A. No. 1405 (Secrecy of Bank Deposits Law) shall apply to deposits in offshore banking units.
Section 9. Sanctions for Violations. Any willful violation by any bank authorized to engage in offshore banking in the
Philippines of any of the provisions of this Decree, or its implementing rules and regulations, or other terms and
conditions of the authority to engage in offshore banking in the Philippines may be subject to the administrative
sanctions provided for in Section 34-A, as well as to other applicable provisions, of Republic Act No. 265, as
amended.
Section 10. Repealing Clause. Any provisions of existing general or special laws inconsistent with the provisions of
this Decree shall be deemed modified, amended or repealed accordingly.
Section 11. Effectivity. This Decree shall take effect upon approval.
DONE in the City of Manila, this 30th day of September, in the year of Our Lord, nineteen hundred and seventy-six.
MALACAANG
M a n i l a
PRESIDENTIAL DECREE No. 1035 September 30, 1976
EXPANDING THE AUTHORITY OF CERTAIN DEPOSITORY BANKS UNDER R.A. NO. 6426 AND FOR
OTHER PURPOSES
WHEREAS, the establishment of an offshore banking system in the Philippine has been authorized under a
separate decree;
WHEREAS, a number of local commercial banks, as depository banks under the Foreign Currency Deposit
Act (R.A. No. 6426), have the resources and managerial competence to more actively engage in foreign
exchange transactions and participate in the grant of foreign currency loans to resident corporations and
firms;
WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under
R.A. 6426 and apply to their transactions the same taxes as would be applicable to transaction of the
proposed offshore banking units:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me
vested by the Constitution, do hereby decree and make the following part of the law of the land:
Section 1. A second paragraph is hereby added to Section 4 of Republic Act No. 6426 which shall read as
follows:
"DEPOSITORY BANKS WHICH, ON ACCOUNT OF NETWORTH, RESOURCES, PAST PERFORMANCE, OR
OTHER PERTINENT CRITERIA, HAVE BEEN QUALIFIED BY THE MONETARY BOARD TO FUNCTION UNDER
AN EXPANDED FOREIGN CURRENCY DEPOSIT SYSTEM SHALL BE EXEMPT FROM THE REQUIREMENT IN
THE PRECEDING PARAGRAPH OF MAINTAINING FIFTEEN PER CENT (15%) OF THE COVER IN THE FORM
OF FOREIGN CURRENCY DEPOSIT WITH THE CENTRAL BANK. SUBJECT TO PRIOR CENTRAL BANK
APPROVAL WHEN REQUIRED BY CENTRAL BANK REGULATIONS, SAID DEPOSITORY BANKS MAY EXTEND
FOREIGN CURRENCY LOANS TO ANY DOMESTIC ENTERPRISE, WITHOUT THE LIMITATIONS PRESCRIBED
IN THE PRECEDING PARAGRAPH REGARDING MATURITY AND MARKETABILITY, AND SUCH LOANS SHALL
BE ELIGIBLE FOR PURPOSES OF THE 100% FOREIGN CURRENCY COVER PRESCRIBED IN THE PRECEDING
PARAGRAPH."
Section 2. Subject to such regulations as may be promulgated by the Central Bank, depository banks
qualified by the Monetary Board to function under an expanded foreign currency deposit system may
obtain foreign currency loan from, and may conduct foreign currency transactions with, non-residents,
offshore banking units in the Philippines and other depository banks under said expanded system. The net
income from such foreign currency transactions shall be subject to a five percent (5%) tax which shall be
in lieu of all taxes on said transactions, except net income from such transactions as may be specified by
the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the usual income
tax payable by banks.
Interest income from foreign currency loans granted by such depository bank under said expanded system
to residents (other than offshore banking units in the Philippines or other depository banks under the
expanded system) shall be subject to a ten per cent (10%) withholding tax as a final tax.
Income of non-residents not engaged in trade or business in the Philippines from foreign currency loans to
depository banks under the expanded system shall be exempt from income tax.
Section 3. Section 8 of the same Act is hereby amended to read as follows:
"Sec. 8. Secrecy of deposits(.); NON-APPLICABILITY OF THE LAWS ON USURY AND UNIFORM CURRENCY.
The secrecy of deposits under this Act shall be governed in accordance with the provisions of Republic Act
Numbered One Thousand Four Hundred Five. THE PROVISIONS OF REPUBLIC ACT NUMBERED TWO
THOUSAND FIVE HUNDRED SIXTY-SIX (USURY LAW), AS AMENDED, AND REPUBLIC ACT NUMBERED FIVE
HUNDRED TWENTY-NINE (UNIFORM CURRENCY LAW), AS AMENDED, SHALL NOT APPLY TO DEPOSITORY
BANKS IN RESPECT TO THEIR FOREIGN CURRENCY TRANSACTIONS AUTHORIZED UNDER THIS ACT."
Section 4. The Monetary Board of the Central Bank of the Philippines shall promulgate the necessary
regulations for the implementation of this Decree.
Section 5. This Decree shall take effect upon approval.
DONE in the City of Manila, this 30th day of September, in the year of Our Lord, nineteen hundred and
seventy-six.

MALACAANG
M a n i l a

PRESIDENTIAL DECREE No. 1246

FURTHER AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NUMBERED SIXTY-FOUR
HUNDRED AND TWENTY-SIX, AS AMENDED BY PRESIDENTIAL DECREE NUMBERED ONE
THOUSAND THIRTY-FIVE.

WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035, certain Philippine
banking institutions and branches of foreign banks are authorized to accept deposits in foreign currency;

WHEREAS, under the provisions of Presidential Decree No. 1034 authorizing the establishment of an
offshore banking system in the Philippines, offshore banking units are also authorized to receive foreign
currency deposits in certain cases;

WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit
System and the Offshore Banking System in the Philippines, certain incentives were provided for under
the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on
the interest income of depositors who are nonresidents and are not engaged in trade or business in the
Philippines;

WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the vested rights of depositors would better
encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such
deposits in the Philippines thereby placing such institutions more in a position to properly channel the
same to loans and investments in the Philippines, thus directly contributing to the economic development
of the country;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me
vested by the Constitution, do hereby decree the following:

Section 1. Sec. 6 of Republic Act No. 6426, as amended, is hereby amended to read as follows:

"Sec. 6. Tax Exemptions. All foreign currency deposits made under this Act, as amended by
Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree
No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from
any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-
residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of
non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines."

Sec. 2. Sec. 8 of Republic Act No. 6426, as amended, is hereby amended to read as follows:

"Sec. 8. Secrecy of Foreign Currency Deposits All foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under
Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature
and, except upon the written permission of the depositors, in no instance shall such foreign currency
deposits be examined, inquired or looked into by any person, government official, bureau or office
whether judicial or administrative or private: Provided, however, that said foreign currency deposits shall
be exempt from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever."

Sec. 3. The same Act is further amended by adding the following Section immediately after Section 12
thereof to read as follows:

"Sec. 12-A. Amendatory Enactments and Regulations In the event a new enactment or regulation is
issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to
foreign currency deposits already made or existing at the time of issuance of such new enactment or
regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after
its issuance."

Sec. 4. This Decree shall take effect upon approval.

Done in the City of Manila, this 21st day of November, in the year of Our Lord, nineteen hundred and
seventy-seven.