1. Regulations
(1) According to the Mining Act, contractors under mining agreements enjoy the following investment guarantees:
1. Right to recover investment
Investors have the right to recover all profits after investment liquidation in cash at the exchange rate on the recovery date, in the currency of investment;
2. Right to remit profits
Investors have the right to remit profits from investments in cash at the exchange rate on the remittance date, in the currency of investment;
3. Right to foreign loans
Investors have the right to repay the principal and interest of foreign loans in foreign currency at the exchange rate on the remittance date, as well as foreign debts arising from financing or technical assistance contracts;
4. Right to non-confiscation
The government shall not confiscate the property of foreign investors and enterprises. In cases of expropriation for public use, national interest, or national defense, foreign investors and enterprises have the right to receive compensation equivalent to the confiscated property at the current exchange rate, in the currency of investment;
5. Right to non-expropriation
The government shall not expropriate foreign investments and enterprise assets. In cases where expropriation is necessary during wartime or emergencies, the government shall provide fair compensation to investors at the time of expropriation or after the end of the war or emergency. Foreign investors and enterprises have the right to receive compensation equivalent to the expropriated property at the current exchange rate, in the currency of investment;
6. Right to confidentiality
During the project period, the government and the Department of Environment and Natural Resources shall keep confidential any information provided by contractors in accordance with the Mining Act and its implementing regulations.
(2) Mining activities regulated by the Philippine Mining Act have always been included in the Investment Priority Plan (IPP). According to Article 90 of the Philippine Mining Act, contractors under mining agreements and Financial Technical Assistance Agreements (FTAA) may enjoy various fiscal and non-fiscal incentives as stipulated in the Comprehensive Investment Law (OIC) (exploration permits only enjoy fiscal incentives). According to the Investment Law, mining enterprises that receive preferential incentives must be registered with the Board of Investments (BOI). Only Filipinos or Philippine enterprises (with at least 60% Filipino ownership and managed by Filipinos for 30 years) can enjoy these incentives; 100% export enterprises are excluded. However, if the enterprise's products are exported at a rate of 70% or more, or if it is a pioneer project (producing products that have not been commercially produced in the Philippines or providing technologies, formulas, processing, and production plans that have not been trialed in the Philippines), it can enjoy incentives.
Enterprises registered with the Board of Investments enjoy the following tax incentives:
1. Income tax holiday: from the start of commercial operations, pioneer companies are exempt from income tax for 6 years, and non-pioneer companies for 4 years. If any of the following conditions are met, the income tax holiday may be extended by one year:
(1) Use of local raw materials in the proportion specified by the BOI;
(2) Compliance with the BOI's specified ratio of capital equipment to employees;
(3) In the first three years of operation, annual foreign exchange income of no less than $500,000.
Enterprises expanding their scale of operations may extend the holiday for an additional 3 years from the start of the new operations, but will not enjoy additional wage increase cost exemptions. In any case, the income tax exemption for pioneer enterprises shall not exceed 8 years.
2. Enterprises using bonded warehouses and exporting more than 70% of their products are exempt from import duties on spare parts and consumables;
3. Within 5 years from the date of registration, if the enterprise meets the BOI's specified ratio of capital equipment to annual employees, new employees (including skilled and unskilled workers) are exempt from 50% of income tax. However, this cannot be used simultaneously with the income tax holiday (if the enterprise is located in an economically underdeveloped area, the exemption is 75%);
4. Raw materials, spare parts, and semi-finished products required for the production of export products and their accessories are eligible for tax credits;
5. Enterprises using bonded warehouses are exempt from import duties on equipment and spare parts stored;
6. Within 10 years from the date of registration or commercial operation, they are exempt from wharfage and various export taxes;
7. From the date of registration, pioneer enterprises are exempt from local taxes for 6 years, and non-pioneer enterprises for 4 years;
8. Within 10 years from the date of registration or commercial operation, imports of breeding and genetic materials are exempt from duties.
They enjoy the following non-tax incentives:
1. Simplified customs procedures for imported equipment, spare parts, raw materials, and consumables for export processing products;
2. No restrictions on the use of stored equipment, provided that a re-export contract is signed;
3. Within 5 years from the date of registration, they may employ foreign supervisors, technicians, or consultants, with the period subject to appropriate extension. The chairman, general manager, and chief accountant of foreign-funded companies are not subject to time limits;
4. They have the right to use bonded factories and warehouses in accordance with customs regulations.
Foreign enterprises registered with the BOI and investing in economically underdeveloped areas of the Philippines, whether newly established or existing enterprises making additional investments or expanding operations, in addition to the above preferential treatments, may also enjoy:
1) An income tax exemption for 6 years from the date of registration (same as pioneer enterprises);
2) 100% exemption from income tax on the construction of basic equipment after the enterprise is approved to operate;
3) 100% exemption from income tax on new employees (including skilled and unskilled workers);
4) 100% ownership in investment priority areas.
