PRESIDENTIAL DECREE No. 1034
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.
(f) "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)
Sec. 22 of Commonwealth Act No. 466, as amended, is
hereby amended to include an additional subsection (d) to read as follows:
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 Sec. 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
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