Department of Tourism-Investment Promotion Unit (DOT-IPU) as of
November 2005
PRIMER ON TOURISM INVESTMENT IN THE
PHILIPPINES
FOREWORD
This primer provides answers to frequently asked questions about
investing in tourism in the country. Provided are the laws and
regulations that govern tourism investments and the incentives
available. Other materials such as area-specific folders,
statistics and list of opportunities may be secured upon
request. This primer is revised each year reflecting changes
made in economic policies and regulations. Changes occurring in
midyear would be provided as inserts. Otherwise, questions may
be directed: Investment Promotion Unit
Department of Tourism - Office of Tourism Coordination
Telephone Nos.: (63 2) 524-2103/521-7560
E-mail: otc@tourism.gov.ph,
Chapter I
GENERAL
A. Who may invest?
Anyone, regardless of nationality, is welcome to invest in the
Philippines. 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..
B. What requirements must be complied with before a foreign
corporation can do business in the Philippines?
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 Securities and Exchange Commission
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.
C. What is the general policy of the government for foreign
investments?
The government recognizes the pivotal role of private sector
investments and, thereby, commits to continuously enhance the
business climate. Foreign investments are encouraged to fill in
capital gaps, help provide employment, increase production, and
provide a base for the overall development of the economy.
Investment rules and regulations have thus been liberalized to
facilitate entry of foreign investments.
D. Are foreigners allowed to lease land?
Foreign investors investing in the Philippines can now lease
private lands up to 75 years. Based on R.A. No. 7652, entitled
Investor's Lease Act, lease agreements may be entered into with
Filipino landowners. Lease period is 50 years, renewable once
for another 25 years. For tourism projects, the lease shall be
limited to projects with an investment of not less than US$5M,
70% of which shall be infused in said project within years from
signing of the lease contract.
Chapter II
STATE OF TOURISM
What is the general state of tourism in the Philippines?
After a series of declines from 2000-2003, tourism in the
Philippines bounced back in 2004. From 2000- 2003, visitor
arrivals in the Philippines decrease by an average of 2.9% but
increased by 18.8% for the year 2003 to 2004. For the year 2004,
visitor arrivals reached 2.291 million, which in turn resulted
in visitor receipts totaling US$1.99 billion. Over the years
tourism has been a top foreign exchange generator. Tourism
investments endorsed by the Department to concerned agencies
(i.e. Board of Investments and Land Transportation, Franchising
and Regulatory Board ) reached over Php937.897 million in 2004
with new projects in land transport and in hotel development.
This figure, however, can easily double if we include investment
projects that did not go through the Department of Tourism for
endorsement purposes. By and large, the tourism industry
continues to be a major contributor to the growth of the
Philippine economy.
Chapter III
TOURISM INVESTMENT OPPORTUNITIES
What are the investment opportunities in the Philippine tourism
industry?
As the Philippine tourism industry is expected to continue to
grow, there will invariably be greater demand for tourism
superstructures, facilities and services. Hotels, resorts and
other types of accommodation facilities especially in the
regions will have to be built to address the lodging
requirements of both foreign and domestic travelers. The need
for improved accessibility will likewise open investment
opportunities in air, water and land transport operations. In
response to worldwide demand for integrated tourism development,
the Department of Tourism is also encouraging investments in
tourism estates, historico-cultural heritage projects and
ecotourism and agri-tourism projects.
Chapter IV
TOURISM INVESTMENTS LAWS
What are the laws and incentives covering tourism investments?
The government has passed the following laws aimed at
encouraging more investments:
A. Executive Order No. 63
This Executive Order grants incentives to foreigners investing
at least US$50,000 in a tourist-related project or in any
tourist establishment as determined by the Committee created in
the same law. E. O. 63 grants the foreign investor a Special
Investor's Resident Visa (SIRV) for as long as the investment
subsists. The E. O. also recognizes the right of the investor to
remit earnings from his investment in the currency in which the
investment was originally made and at the exchange rate
prevailing at the time of remittance. In case of liquidation,
the investor is also allowed to repatriate the entire proceeds
of the liquidation of the investment in which the investment
originally made. Lastly, the right of succession is also
recognized. An investor may apply for SIRV at the Philippine
Embassy or Consulate in his home country or place of residence.
If already in the Philippines, the investor may file the
application at the Department of Tourism for endorsement to the
Bureau of Immigration.
B. Omnibus Investments Code (Executive Order No. 226)
This Executive Order authorizes the Board of Investments to
grant fiscal incentives and non-fiscal incentives for local and
foreign investors engaged in tourism activities listed under the
current Investments Priorities Plan (IPP). Incentives granted
include income tax holiday (4-6 years for non-pioneer and
pioneer projects, respectively) and the employment of foreign
nationals. (Please see insert for more details)
C. Foreign Investments Act of 1991 (Republic Act 7042 as
Amended by Republic Act No. 8179 )
With the passage of the
Foreign Investments Act, foreign nationals are now allowed to
invest up to 100% equity participation in new or existing
economic activities including restaurant operations that are
incidental to the hotel business. Foreign equity participation
of up to 40% is allowed in the operation and management of
utilities (i.e. land, air, and water transport).
D. Build-Operate-Transfer (BOT) Law (Republic Act 6957 as
Amended by Republic Act No. 7718)
The BOT Law authorizes the financing, construction, operation
and maintenance of infrastructure projects by the private
sector. It allows national implementing agencies and local
government units to enter into BOT arrangement as a means of
encouraging the participation of foreign and local companies in
the country's infrastructure development program. Tourism
estates including related infrastructure facilities and
utilities are among the priority projects eligible for BOT
implementation. Backed up by a wide range of credit enhancements
and investment incentives, the BOT Law opened to the private
sector a new window of investment opportunity. Salient points of
the amended BOT Law include the following:
1. Provides flexibility to both the government and private
sector by allowing the use of a variety of arrangements under
the BOT scheme to suit specific conditions;
2. Broadens the type and variety of projects that can be
implemented under the BOT process;
3. Recognizes the need for private investors to realize rates of
return reflective of market conditions;
4. Institutionalizes government support for BOT projects; and
5. Allows government agencies and local government units (LGUs)
to accept unsolicited proposals. The BOT Law mandates the BOT
Center to coordinate and monitor all projects undertaken under
RA 7718. The BOT Center is empowered to actively promote all
modes of private sector participation in the implementation of
development projects in the country. Under A. O. 67, the BOT
Center expands the coverage of the program to include the BOT
scheme, joint venture agreement, concession agreement, lease and
contractual management, among others.
The DOT Center is specifically involved in:
- Project development
- Policy advocacy
- Institution-building
- Marketing and promotions
- Monitoring
E. Special Economic Zone Act of 1995 (Republic Act 7916)
This Republic Act provides for the legal framework and mechanism
for the creation, operation, administration and coordination of
Special Economic Zones in the Philippines, creating for this
purpose, the Philippine Economic Zone Authority (PEZA) and for
other purposes. On October 7, 2002, the DOT entered into a
Memorandum of Agreement (MOA) with PEZA that will grant Special
Economic Zone status to tourism development zones and tourism
estates upon registration with PEZA subject to the issuance of
the required Presidential Proclamation. The PEZA shall consider
for registration tourist-oriented enterprises to be located in
PEZA-registered tourism development zones/tourism estates which
are enclosed by the DOT as enterprises that will be established
and operated with foreign tourists as primary clientele.
Incentives available are:
a. Up to 100% foreign ownership of locator enterprises;
b. Income tax holiday (ITH) for six years for ioneer firms and
four years for non-pioneer firms. If a non-pioneer firm is
located in a less developed area, it shall generally be entitled
to 6 years ITH.
c. After the ITH period, the option to pay a special 5% Tax on
Gross Income, in lieu of all national and local taxes, except
real property taxes;
d. Tax and duty-free importation of capital equipment required
for the technical viability of registered tourism activities;
e. Special Investor's Resident Visa;
f. Employment of foreign nationals; and
g. Other incentives as may be determined by the
PEZA Board.
F. Retail Trade Liberalization Act of 2000 (Republic Act No.
8762)
This is an act liberalizing the retail trade business, repealing
for the purpose Republic Act No. 1180, as amended, and for other
purposes. With the enactment or implementation of the Trade
Liberalization Act of 2000, up to 100% foreign equity
participation in restaurants is now allowed for enterprises with
a paid-up capital of US$2.5 million.
Chapter V
ADDITIONAL INFORMATION
For more details, please get in touch with:
Department of Tourism
DOT Bldg., Agrifina Circle, Rizal Parl, Manila
Tel. No. (63 2) 524-1751
www.wowphilippines.com.ph
www.visitmyphilippines.com
Office of Tourism Standards
Tel. No. (63 2) 524-9824
Fax No. (63 2) 521-1088
Email: mvjasmin@tourism.gov.ph