GENERAL FACTS ON FOREIGN TELECOMMUNICATION INVESTMENT

1. What are foreign corporations?

Answer:
A foreign corporation exists mainly due to the laws of another state and generally,
has no existence in another state. Under the Corporation Code, it is one formed,
organized and existing under any laws other than those of the Philippines and
whose laws allow Filipino citizens and corporations to do business in the Philippines.
2. What are foreign investments?
Answer:
Defined in E.O. No. 226, "foreign investments" shall mean equity investments
owned by a non-Philippine national made in the form of feoreign exchange or other
assets actually transferred to the Philippines and registered with the Central Bank
and the Board, which shall assess and appraise the value of such assets other than
foreign exchange.
3. What is Telecommunications?
Answer:
Defined in Republic Act No. 7925, Telecommunications is any process which enables
a telecommunications entity to relay and receive voice, data, electronic messages,
written or printed matter, fixed or moving pictures, words, music or visible or
audible signals or any control signals of any design and for any purpose by wire,
radio or other electromagnetic, spectral, optical or technological means.
4. Is Telecommunications business a public utility?
Answer:
Yes. "Public utility" refers to a business or service which is engaged in regularly
supplying the public with some commodity or service of public consequence, such
as electricity, gas, water, transportation or telephone or telegraph service. It implies
a public use and service to the public. (DOJ Opinion No. 011, s. 1992, dated 28
January 1992)
5. What are the investment opportunities in the telecommunications
sector?
Answer:
The Philippines telecommunication industry is evolving. Mobile has been the
primary mode of telecommunication in the country as shown by its over 100%

penetration rate. Since most people have multiple subscriber identification module
(SIM) cards, the actual penetration rate is estimated to be around 80 percent.

The needs of the Filipino consumers in communication are shifting, it demands more
from the telecommunication companies. From a purely text and call culture, mobile
connectivity to the Internet is now driving demand. Growth projections for the
telecommunications industry is based on the following sub-sectors:

(1) Mobile: the mobile industry has reached maturity with its 109 million subscriber
base (Globe 36.5 million, SMART 72.5 million). Fierce competition between Globe
Telecom and SMART Communications has led to lower average revenue per user
(ARPU) for voice and short message service (SMS). The traditional mobile revenue is
expected to slow as consumers shift to wireless broadband.

(2) Broadband: the broadband sub-sector has over five million subscribers (Globe
2.2 million, SMART 3.3 million). There is tremendous growth potential for the
broadband sub-sector, both fixed and wireless. Wireless broadband is seen as the
growth area for the mobile industry. This is based on the continuous increase of
smartphone ownership that is becoming more affordable and the growing demand
for high-speed Internet access.

The challenge for the Philippines is to continue to upgrade its telecom infrastructure
to keep up with the growing demand for broadband. In its State of the Internet
report published in the third quarter of 2013, Akamai, a content delivery network,
states that the Philippines average connection speed is 1.8 Megabits per second
(Mbps)2, wellbelow the global average of 3.6 Mbps. Akamai ranked the Philippines
at 114th from 185 countries.

(3) Fixed Line: fixed line penetration is at 4 percent with an estimated 4 million
subscribers. This sub-sector is expected to remain stagnant.

Foreign investment in the Philippine Telecommunication is one way of innovating

our telecommunication industry. Investors can establish advance technologies for
faster communication and connection. Internet opportunity is also a necessity today.
Investing in people by providing digital literacy can also uplift the industry.

6. Which Telecommunication
Philippines?

products

are

in

demand

in

the

Answer:
In the Philippine settings, telecommunication companies provide Unlimited
services and Promos in call and texts also in Internet connections other than the
Regular Load to their service consumers. Customers usually consume these
products because they are more practicable to use than the regular load. Mobile
phones are the number one source or mode of telecommunication nowadays,
people tend to use their phones regularly for texting and calling, also in surfing the
Internet. These products are very useful to consumers who regularly text, call and
surf the Internet for unlimited time. Telecommunication companies also provides
Postpaid plans to those consumers who does not prefer to use Prepaid services.
They also provide Combinations for example Internet connections are already
connected to the telephone lines. This is more likely in favor on the part of the
consumers wherein telecommunication companies are profiting.
7. What is the role of Foreign Investments in the Philippines in its
Telecommunications Sector?
Answer:
Telecommunications is one of the most strategic industries of national economic
control. It plays dual role in economic activities, not only itself a distinct circle in
economic system but also a supplying mean for other sectors. Having this special
kind of character, telecommunications cover and relate to many other industrial and
economic sectors. Foreign investment has been one of the most important driving
force in the exploration od natural resources and improvement of economic
conditions in the underdeveloped and developing countries for centuries. Recently,
foreign investments has not only increased rapidly but also covered a wide
spectrum of industries around the world. The role of foreign investments has played
a more and more important role in the Philippines. Generally speaking, money will
spur economic growth and create a better living standard in our country. Foreign
investment on telecommunications will bring advance technological skills, large
amount of funds, as well as market competition and will benefit national
telecommunication development.
8. What is the procedure for setting up/establishing a foreign business
in the Philippines?

Answer:
Under the Philippine system, businesses can be organized as proprietorship,
partnership, corporation, regional head quarters or regional operating headquarters.

A foreign corporation must first secure the necessary licenses or registrations from
the appropriate government bodies. In the case of corporations or partnerships, the
necessary incorporation papers from the SEC must first be obtained. In the case of
single proprietorship, registration from the Bureau of Trade Regulation & Consumer
Protection of the Department of Trade and Industry must be secured.
9. Can a Foreign Company invest in the Philippine Telecommunication
sector?
Answer:
A foreign investment company can invest in the Philippine telecommunications
sector. The Foreign Investments Act of 1991 (R.A. 7042, 1991, amended by R.A.
8179, 1996) attracts, promotes and productive investments from foreign individuals,
partnerships, corporations, and governments, including their political subdivisions,
in activities which significantly contribute to national industrialization and
socioeconomic development to the extent that foreign investment is allowed in such
activity by the Constitution and relevant laws. Foreign investors are free to set up
investment projects in all sectors of the Philippine economy, such as
Telecommunication companies. Under the FIA, foreign investors are generally
treated like their domestic counterparts and must register with the Securities and
Exchange Commission (SEC) (in the case of a corporation or partnership) or with the
Department of Trade and Industrys Bureau of Trade Regulation and Consumer
Protection (in the case of a sole proprietorship).
10.
What is the percentage of foreign equity allowed under the
FIA?
With the liberalization of the foreign investment law, 100% foreign equity may be
allowed in all areas of investment except those reserved for Filipinos by mandate of
the Philippine Constitution and existing laws.
11.
Are there any restrictions in a business with foreign
investment?
Answer:
It is stated in the Foreign Investment Act the two negative list, also known as the
Foreign Investment Negative List. These are Negative List A and Negative List B,
which are limited or restricted by the Constitution and specific laws.

12.

What are the Coverage of Negative List A?

Answer:
In Negative List A, foreign ownership is limited by mandate of the Constitution and
specific laws. These are:

No Foreign Equity
1. Mass Media except recording
2. Practice of professions
3. Retail trade enterprises with paid-up capital of not less than US$ 2,500,000.00
4. Cooperatives
5. Private Security Agencies
6. Small-scale Mining
7. Utilization of Marine Resources in archipelagic waters, territorial sea, and
exclusive economic zone
8. Ownership, operation and management of cockpits
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and
radiological weapons and anti-personal mines
11. Manufacture of firecrackers and other pyrotechnic devices

Up to Twenty Percent (20%) Foreign Equity

12. Private radio communication network

Up to Twenty-Five Percent (25%) Foreign Equity

13. Private recruitment, whether for local or overseas employment
14. Contracts for the construction and repair of locally-funded public works, except:
a. infrastructure/development projects covered in RA 7718; andb. projects which are
foreign funded or assisted and required to undergo international competitive
bidding (Sec. 2(a) of RA 7718)

15. Contracts for construction of defense-related structure

Up to Thirty Percent (30%) Foreign Equity

16. Advertising

Up to Forty Percent (40%) Foreign Equity

17. Exploration, development and utilization of natural resources
18. Ownership of Private Lands
19. Operation and management of public utilities
20. Ownership/establishment and administration of educational institutions
21. Culture, production, milling, processing, trading excepting retailing, of rice and
corn and acquiring, by barter, purchase or otherwise, rice and corn and the byproducts thereof
22. Contracts for the supply of materials, goods and commodities to governmentowned or controlled corporation, company, agency or Municipal Corporation
23. Project Proponent and facility Operator of a BOT project requiring a public
utilities franchise
24. Operation of deep-sea commercial fishing vessels
25. Adjustment Companies
26. Ownership of condominium units where the common areas in the condominium
projects are co-owned by the owners of the separate units or owned by a
corporation

Up to Sixty Percent (60%) Foreign Equity

27. Financing companies regulated by the Securities and Exchange Commission
28. Investment housed regulated by the SEC

13.
Where can a foreign corporation file for permits, licenses, and
clearances?

Answer:
Here is the list of offices or government agencies where a foreign corporation may
file for its permits, licenses, and clearances:

AGENCY

CONTACT
Investment Assistance Center (IAC)
Ground Floor Industry and Investments
Bldg

Philippine Board of
Investments

385 Sen. Gil Puyat Ave., Makati City

TL. 895.36.40 / 895.36.41 / 895.36.57
DL. 895.83.22
Email : bossac@boi.gov.ph

ADDRESS
Board of Investments
Industry and Investments
Building
385 Senator Gil Puyat
Avenue, Makati City
1200 Metro Manila,
Philippines

Atty. Raul V. Angeles

Executive Director Investment
Assistance Center
Telefax: 897-3079

Dr. Lilia B. De Lima

Director General
Philippine Economic Zone
Authority

Tel No: 551-3454

Fax No: 891-6380
E-mail: dglbl@peza.gov.ph
Mr. Elmer H. San Pascual
Group Manager Promotions
and Public Relations Group
Tel No.551-3438
(0917) 822-0326
Fax No: 551-3436
E-mail: info@peza.gov.ph
Ms. Mary Grace Celestino-Perez
Tel No: 551-3438
Email:mgcelestino@peza.gov.ph

PEZA Building
Roxas Boulevard corner
San Luis Street
Pasay City, Metro Manila

maecelestino@yahoo.com

Deogracias G.P. Custodio

Chairman & Administrator
E-mail: deo.custodio@afab.gov.ph
deo.custodio@gmail.com
Authority of the
Freeport Area of
Bataan

2/F AFAB Administration

Bldg.,
Free Port Area of Bataan,
Mariveles, Bataan 2106

Mr. Francis Theodore Initrio

Email: francis.initrio@afab.gov.ph
finitrio@yahoo.com
finitrio@gmail.com
Tel No: (047) 935-4004
Fax No: (047) 935-4009
3rd floor, Languages
Mr. Gerardo D. Erguiza

Aurora Special Economic

Zone Authority

President and CEO

Email: mis_jr@yahoo.com
Tel No: 813-4381
813-4384
Fax No: 813-3674
Mr. Leo Angelo C. Salinel

International Bldg.,
926 A. Arnaiz Avenue, San
Lorenzo, Makati CityAurora
Special Economic Zone
Authority
2/F SSS Makati Bldg.,
6782 Ayala Ave.,
Makati City

Business Development Manager

Tel No: 813-4381
Fax No: 813-3674
E-mail: leosalinel@gmail.com

Mr. Arnel Paciano D. Casanova, Esq.

President and CEO
Bases Conversion and
Development Authority

Tel No: 575-1700

Fax No: 816-0915
E-mail: adcasanova@bcda.gov.ph
Mr. Eduardo G. Policarpio, Jr.
Department Manager Corporate

BCDA Corporate Center

2nd floor,
Bonifacio Technology
Center 31st St.,
Crescent Park West,
Bonifacio Global City,
Taguig 1634

Planning
Telefax. No: (632) 816-0987
Ms. Levy D. Vicente
planning Officer
Department Manager Corporate
Planning
Tel. No: 575-1731
Email: ldvicente@bcda.gov.ph
levydcvicente@gmail.com

Mr. Arthur P. Tugade

President and CEO
Clark Development
Corporation

Tel No:(045) 599-2090

Fax No: (045) 599-2507
Ms. Keann Mallari
Office Secretary
Tel No: 045-599-2092
Email: keannmallari@clark.com
Engr. Mariza O. Mandocdoc, Phd
OIC/Vice-President,
Business Development & Business
Enhancement Group
Tel No:(045) 499-1139
(045) 499-1140
Fax No:(045) 599-2616
Email: keannmallari@clark.com
Ms. Ma. Cynthia Edelita S. Chaves
Asst. Manager, Corporate Planning
Department
Fax No: (6345) 599-3855
Email:
MaCynthiaEdelitaChavez@clark.com.ph

Clark Development
Corporation
Bldg 2122, C.P. Garcia
St., Clark Freeport
Zone, Pampanga

edelitachavez@yahoo.com

Mr. Jose Mari B. Ponce

Administrator and CEO
Cagayan Economic Zone
Authory

Tel No: (02) 747-3058

7th Floor,
Westar Building 611
Shaw Boulevard,
Pasig City 1603

Tel No:(0920) 915-7521

Fax No: (02) 631-3997
E-mail: chelly_ponce@yahoo.com
Ms. Michelle
Office Secretary
Tel No: (078) 846-2165
Fax No: 631-3991
E-mail: novie_cruz@yahoo.com
Mr. Julius C. Ordoa
Department Manager Planning and
MIS
Tel No: (02) 747-3058
Fax No: (02) 631-3997
Email: jay_ordona@yahoo.com
Ms. Novelyn Cruz
Investor Relation Officer
Tel No: 747-444-6946
Fax No: (02) 631-3997
Email: novie_cruz@yahoo.com

Mr. Leo Tereso A. Magno

Administrator
PHIVIDEC Industrial
Authority

Tel No: (088) 567-0260; (088) 567-0135

Engr. Avalyn Cahulogan
Corporate Planning

Mindanao Container
Terminal, Tagoloan, 9000
Misamis Oriental

and Business Development

Port Magmt. Dept.
Tel No: (08822)740-245 loc. 221
Fax No: (08822) 740-294

Mr. Ray R. Souza

Chief, Client Relation Division

Philippine Retirement
Authority

Tel No: 848-1418

29th floor, Citibank Center,

8741 Paseo de Roxas,
Makati City, Philippines

E-mail: pra.rrs2011@gmail.com
Mr. Veredigo P. Atienza
General Manager
Tel No: 848-1412 loc. 102
Fax No: 848-7106

Atty. Ishak Mastura

Chairman and Managing Head
REGIONAL BOARD OF
INVESTMENTS ARMM

ORG Compound, Cotabato

City 9600

Fax No. (064) 421-1591

E-mail: ishakmastura@gmail.com
Mr. Larzon Santos
Chief Investment Specialist, Reseasrch
Div.
Fax No: (064) 421-1591
Email: larzonsantos@yahoo.com
Ms. Farida Biruar
Email: fmbiruar@yahoo.com.ph

Mr. Roberto V. Garcia

Chairman and Administrator
Subic Bay Metropolitan

Tel No. (047) 252-4422

Administration Building,
229 Waterfront Road,
Subic Bay Freeport Zone

Authority

Fax No. (047) 252-4428

E-mail: RVGarcia@sbma.com
rvgarcia@mobile-synergy.com
Mr. Ronnie R. Yambao
Manager
Manufacturing & Maritime Business
Department
Tel No: (047) 252-4791
(047) 252-4636
Fax No: (047) 252-4216
E-mail: rryambao@sbma.com
rryambao2003@yahoo.com

Mr. Mark T. Lapid

Chief Operating Officer
Tourism Infrastructure and
Enterprise Zone Authority

142 Amorsolo St., Legaspi

Village, Makati City

Atty. Nino Rufino Aquino

Corporate Secretary
Fax No:(02) 525-3008
Email: ninoaquino@yahoo.com
Mr. Cesar B. Ladringan
Senior Analyst
Email: chin_dt11@yahoo.com
chindt11@gmail.com

Mr. Christopher Lawrence S. Arnuco

Chairperson and Administrator

Zamboanga City
Special Economic Zone
Authority

Tel. No. (062) 991-3155

Fax No. (062) 991-3155
Ms. Marilou dR. Vasquez
Corporate Sales and Locators

Zamboanga City Office

Address:
Brgy. San Ramon,
Zamboanga City
Philippines,Metro Manila
Office:Unit 1614
Torre Lorenzo

Management Division
Tel No: (062) 991-3158
Fax No: (62) 991-3155
Email: mariloudrvasquez@yahoo.com
Carma Ayn Mendoza
Manila Office
Tel No: (062) 464-9059
Fax No: (62) 464-9001

Condominium
Cor. P. Ocampo St., Vito
Cruz
Taft Ave. Manila,
Philippines27th flr.
BPI Buendia Centre
372 Sen. Gil J. Puyat Ave.,
Makati City

Email: ayn.mendoza@outlook.com

14.
Answer:

What are the costs of doing business in the Philippines?

RIGHTS OF FOREIGN INVESTORS

What are the basic rights and guarantees given for the safety of foreign
investors?
Answer:
All investors and enterprises are entitled to the basic rights and guarantees
provided in the Philippine Constitution, such as:

A.

Right to REPATRIATION OF INVESTMENTS

In the case of foreign investments, the right to repatriate the entire proceeds of the
liquidation of the investment in the currency in which the investment was originally
made at the exchange rate prevailing at the time of repatriation.
B.

Right to REMITTANCE OF EARNINGS

In the case of foreign investments, the right to remit earnings from the investments
in the currency in which the investment was originally made and at the exchange
rate prevailing at the time of remittance.
C.

Right to FOREIGN LOAN AND CONTRACTS

The right to remit, at the exchange rate prevailing at the time of remittance, such
as may be necessary to meet the payment of interest and the principal on foreign
loans and foreign obligations arising from technological assistance contracts.
D.

Right to FREEDOM FROM EXPROPRIATION

There shall be no expropriation by the government of the property represented by

the investments or of the property of enterprises except for public use or in the
interest of national welfare and defense and upon payment of just compensation. In
such cases, foreign investors of enterprises shall have the right to remit sums
received as compensation for the expropriated property in the currency in which the
investment was originally made and at the exchange rate prevailing at the time of
remittance.
E.

Right to NON-REQUISITION OF INVESTMENT

There shall be no requisition of property presented by the investment or of the

property of enterprises, except in the event of war or national emergency and only
for the duration of such. Just compensation for the requisitioned property may be
remitted in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance.

LABOR AND EMPLOYMENT

1. Should the Foreign Corporation comply with
requirements? What are these requirements?

Philippine

Labor

Answer:
Yes. Foreign Corporation are subject to Philippine laws.
The Foreign Corporation can hire and employ laborers complied with the rules and
duties under the Philippine existing law on labor.
The laws on labor standards and employment relations are consolidated in the
Labor Code of the Philippines, which is supplemented, from time to time, by
legislative issuances. The salient points of employment conditions and employee
benefits covered by Philippine labor laws are given below:

Hours of Work
Work Day
Overtime Renumeration
Night Shift Differential Pay
Service Incentive Leave Pay
Meal and Rest Periods
Minimum Wage
Employees Compensation Program
National Health Insurance
Emergency, Medical, and Dental Services
Woman and Child Labor
Paternity Leave
Termination of Employment
Unions

2. Can Foreign Corporation in the Philippines hire foreign nationals?

Answer:
Yes. They can hire foreign nationals subject to Immigration and Employment
Regulations for Foreigners in the Philippines.
The government has liberalized the visa requirements for certain categories of
foreigners to encourage foreign participation in the economic development of the

country. Foreign stockholders, investors, representatives of investment houses, and

land developers are among the categories granted this special incentive.

3. What kind of visas may be granted to foreigners who will work or

render service in the Philippines?
Answer:

Treaty Traders/Investors Visa under Section 9(d) of the Philippine

Immigration Act
Prearranged Employees Visa under Section 9(g) of the Philippine Immigration
Act
Special Nonimmigrant Visa under Sec. 47(a)(2)
Special Nonimmigrant Visa under EO No. 226
Special Nonimmigrant Visa under PD No. 1034
Special Subic Work Visa

4. Other Immigration Policies

Foreign nationals who wish to come to the Philippines can either enter as a tourist
without visa under EO No. 408, or secure a temporary visitors visa under Section
9(a) before any Philippine consular post abroad. The Section 9(a) visa can either be
for business, pleasure, or health and normally entitles an alien to an initial stay of
59 days, extendible to a year. While in the Philippines, aliens are allowed by the BI
to convert their immigration status from tourist/ temporary visitor to another visa
category without having to leave the country. The foreign national must be in the
Philippines when his or her application for conversion of immigration status is
approved; otherwise, it will be invalidated. If this happens, there will be a need to
file an application for revalidation. The spouse and dependent children may likewise
qualify for the same visa category as that of the principal applicant. While the BI is
processing the expatriates application for conversion of immigration status, he or
she should apply for a Provisional Permit to Work.

INVESTMENT REGISTRATION IN THE PHILIPPINE ECONOMIC ZONE

AND/OR BOARD OF INVESTMENTS
1. How to qualify the investment registration with the BOI/PEZA?
Answer:
To qualify for registration with the BOI for incentive purposes, the proposed foreign
investment must be made in any of the following:
a)Preferred areas of investment listed in the current Investment Priorities Plan
(IPP). A preferred area may be declared pioneer if it: (1) involves the
manufacturing of processing (not merely assembly or packaging) of goods or raw
materials that have not been produced in the Philippines on a
commercial scale; (2) uses a design, formula, scheme, method, process or
system of production or transformation of any element or raw materials into
another raw materials or finished good which is new and untried; (3) engages in
agricultural activities/services essential to the achievement of the countrys selfsufficiency program; and (4) produce non-conventional fuels or manufactures
equipment which utilize non-conventional sources of energy; provided that the final
product in any of the foregoing instances involves substantial use and processing of
domestic raw materials;

b) enterprises engaged in preferred non-pioneer area and exporting at least 70% of

their output; and

c)projects in less-developed areas provided that the activities in all of the above
cases are not reserved for the Philippine nationals.

On the other hand, the project that may qualify for registration with PEZA
are
those that involve manufacturing for export and the domestic market, free trade,
tourism, utilities, facilities enterprises including those engaged in warehousing and
trading operations in the ecozones and development and operations of ecozones.

2. How does a Foreign Corporation file an application with the

BOI/PEZA?
Answer:
An application shall be made in the from prescribed by the BOI/PEZA in two(2)
copies and properly sworn to before a notary public. A project feasibility study is
required as one of the primary document supporting the application for registration.
How long will it take to obtain BOI/PEZA approval once all requirements are
complied with?
Under the 1987 Omnibus Investment Code, application filed with the BOI shall be
considered automatically approved if not acted upon by the Board within twenty
(20) working days from official acceptance thereof, subject to the usual terms and
conditions.

3. How much time is an investor allowed to start his project?

Answer:
The amount of time allotted for starting a registration project depends on the period
set by the proponent, with the approval of the BOI/PEZA.

4. Can the application for registration with the BOI/PEZA and the SEC
be filed simultaneously, or must we wait for the BOI/PEZA approval
before going to the SEC?
Answer:
Registration with the BOI/PEZA is required only for purposes of availing investment
incentives. It is preferable to first seek approval from the BOI/PEZA before filing an
application with the SEC.

5.

How long after the submission of the application and all the
required documents will approval be obtained?

Answer:
The processing and approval of the papers take around fifteen (15) working days
from official acceptance of the application.

OWNERSHIP, RESTRICTIONS AND LIMITATION (STOCK OWNERSHIP,

REAL PROPERTY, ETC.)
1. Can Foreign Investors lease land?
Answer:
Yes. They can lease lands as long as it is for the sole purpose of investing.
Investors Lease Act (RA No. 7652) RA No. 7652 allows foreign investors to lease
commercial lands in the Philippines for a maximum of 75 years (previously 50
years). Under this law, any foreign investor infusing capital into the country can
lease private lands, in observance of Philippine laws and the following:
1. Lease contract shall first be for 50 years, renewable only once for another 25
years.
2. Leased area will be used solely for investment.
3. Lease contract will conform with the Comprehensive Agrarian Reform Law and
the Local Government Code.

2. Can

Telecommunication

Entities

own

stocks

and

real

property?
Yes. Under the Security and Exchange Commission

rules, there are two

cases in determening the nationality of the Investee Corporation or in a

telecommunication entity. The first case is the liberal rule, later coined by
the Security and Exchange commission as the Control test. Control test
pertains to the portion in said Paragraph 7 of 1967 SEC rules which states,
Shares belonging to coporations or partnerships at least 60% of the capital of
which is owned by Filipino citizens shall be considered as Philippine
Nationality. Under the first case, there is no need to further trace the
ownership of the 60% Filipino stockholdings of the Investing Corporation
since a corporation which is at least 60% Filipino-owned is considered filipino.
-

Based on the corporation code of the Philipinnes, the sencond case

is the Strict rule known as the Grandfather rule.

If the

percentage of Filipino ownership in the corporation or in a

Telecommunication entity is less than 60%, only the number of
shares corresponding to such percentage will be counted as of
Philippine nationality. Under such rule Grandfather rule proper, the
combined totals in the investing Corporation and the Investee
Corporation must be traced to determin the total percentage of
filipino ownership in a particular telecommication entity.
3. What provisions are involved or related to ownership of
Telecommunication Entities?
RA 7925 (An Act to Govern the Philippine Development of the Philippine
Telecommunications and the Delivery of Public Telecommunications Services)
o ARTICLE VIII (Telecommunications Development)
o RULE 830 (Expansion/Modernization)
RA 6849 (An Act Providing for the Installation, Operation, and Maintenance of
Public Telephones in Each and Every Municipality in the Philippines,
Appropriating Funds therefor and for Other Purposes)
4. What

rule

is

applied

on

Telecommunication Entities?

public

ownership

of

stocks

of

All telecommunications entities with regulated types of services shall make a

bona fide public offering through the stock exchanges of at least thirty
percent (30%) of its aggregate common stocks within a period of five (5)
years from the entity's first start of commercial operations.
The public offering shall comply with the rules and regulations of the
Securities and Exchange Commission.
5. What if a Telecommunication Entity wants to expand or
modernized its facilities?
Expansion and upgrading of existing and previously approved plant and
facilities for purposes specified in RA7925 within the same areas covered by
the existing plant and facilities previously approved shall not require
approval by the Commission.
6. What restrictions and regulations governing expansion and/or
modernization of Telecommunication facilities?
Any financing arrangement for the purpose specified in Rule 830(a) including
increase of capital shall not require approval by the Commission.
-

The PTE who wishes to expand and/or upgrade its existing or

previously approved plant and facilities within the same approved
area shall submit to the Commission its planned expansion and/or
upgrading, the timetable of implementation and the amount needed
to carry out such expansion and/or upgrading thirty (30) days prior

to the commencement of the projects.

PTEs undertaking expansion and upgrading of facilities shall submit
a quarterly report on the status of the project implementation
incorporating therewith the list of equipment, materials and
accessories and the amount actually invested.

TAX SYSTEM OF FOREIGN TELECOMMUNICATIONS INVESTORS

1. What is Tax?

Tax is a compulsory contribution to state revenue, levied by the

government on workers' income and business profits or added to the
cost of some goods, services, and transactions. (National Revenue
Code)
2. What is a Tax Liability

Tax Liability is the total amount of tax that an entity is legally obligated
to pay to an authority as the result of the occurrence of a taxable event.
It is also considered as a debt to a government incurred by a tax payer
as accrued or assessed taxes.

3. Are franchises of telecommunications exempted from taxes?

Virtue of Section 23 of Republic Act
Telecommunications Policy of the Philippines)

No.

7925

(Public

Section 23. Equality of Treatment in the Telecommunications Industry. - Any advantage,

favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter
be granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the grantees of such
franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions
of telecommunications franchises concerning territory covered by the franchise, the life span
of the franchise, or the type of service authorized by the franchise.

SECTION 5 (RA 7678). Tax Provisions. The grantee shall be liable to

pay the same taxes on its real estate, buildings, and personal
property exclusive of this franchise as other persons or
corporations are now or hereafter may be required by law to pay.
4. What are the rates imposed on taxing domestic telecommunication
corporation ?
SEC. 27. Rates of Income tax on Domestic Corporations (National Internal
Revenue Code)

In the case of corporations adopting the fiscal-year accounting period, the

taxable income shall be computed without regard to the specific date when
specific sales, purchases and other transactions occur. Their income and
expenses for the fiscal year shall be deemed to have been earned and spent
equally for each month of the period.

The reduced corporate income tax rates shall be applied on the amount
computed by multiplying the number of months covered by the new rates
within the fiscal year by the taxable income of the corporation for the period,
divided by twelve.

5. What are the rates imposed on taxing foreign telecommunication

corporation?
SEC. 28. Rates of Income Tax on Foreign Corporations.

The reduced corporate income tax rates shall be applied on the amount
computed by multiplying the number of months covered by the new rates
within the fiscal year by the taxable income of the corporation for the period,
divided by twelve.

Provided, however, That a resident foreign corporation shall be granted the

option to be taxed at fifteen percent (15%) on gross income under the same
conditions, as provided in Section 27 (A).

6. What major tax investment incentives are available to registered

enterprises?
Answer:
Board of Investment (BOI) Incentives

1. Six year income tax holiday (ITH) for pioneer firms while four years ITH for nonpioneer firms. A non-pioneer firm will be entitled to 6 years ITH if it is located in a
less developed area. In Metro Manila, to be granted an ITH they must be within a
government industrial estate, service-type projects which has no manufacturing
facilities, power generating plants or exporters with expansion projects.
2. Tax credit on semi-manufactured product, raw materials and supplies
3. Further deduction from taxable income for expenses in labor
4. Further deduction from taxable income for major and necessary works in
infrastructure
5. Additional deductions cannot be enjoyed simultaneously with the ITH incentives

Non- Fiscal Incentives

1. Assured repatriation of foreign investment and earnings thereon,
2. Consigned equipment importation, and
3. Foreign nationals employment.

Philippine Economic Zone Authority (PEZA) Incentives

Granted to registered enterprises operating within the Ecozones
1. Incentives under the BOI incentives with additional tax and duty exemption on
importations raw materials, capital equipment and other merchandise that are
essential to its operations.
2. Benefits provided for in the Export Development Act of 1994 shall be enjoyed by
exporters using local materials.
3. A preferential rate of 5% shall be remitted to the government by the enterprises
with lapse EO226.

Other Incentives

The Cagayan Special Economic Zone and the Zamboanga City Special Economic
Zone grant the same incentive given to enterprises within the ecozone of PEZA.

Subic Bay Freeport (SBF) and the Clark Special Economic Zone allow enterprises to
pay a final tax of 5% of their gross income as long as their income from non-export
sale shall not go beyond 30% of their income coming from all sources.
27.Are investment incentives transferrable?
Answer:
They are non-transferable.

STATISTICS AND CHARTS

SOURCE: PHILIPPINE STATISTICS OFFICE