Rajah & Tann Regional Round-Up

your snapshot of key legal developments in Asia

Issue 1 - Jan/Feb/Mar 2021


Major Revisions Made to the Tax Code to Provide Relief to Businesses and Boost Investments in the Philippines Especially for Knowledge-Based Industries

On 26 March 2021, President Rodrigo R. Duterte signed Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act ("CREATE") into law. CREATE aims to provide fiscal relief and serve as a recovery measure for Filipino businesses which are still reeling from the impact of the COVID-19 pandemic. The law has reduced corporate income tax rates in the Philippines, which have been considered as one of the highest in the Association of Southeast Asian Nations ("ASEAN") region.

Domestic and foreign corporations will now pay an income tax rate of 25% of their net taxable income, compared to the previous 30% rate. However, for domestic corporations whose net taxable income does not exceed PHP 5 million and whose total assets do not exceed PHP 100 million, the income tax rate is 20%. Beginning 1 July 2020 until 30 June 2023, proprietary educational institutions shall pay at a rate of 1% of their net taxable income. For those opting to pay the Minimum Corporate Income Tax ("MCIT"), the MCIT rate shall be 1% from 1 July 2020 until 30 June 2023.

Another focal point of the law is to increase the competitiveness of the Philippines in knowledge-based industries to recover from the country's slumping innovation performance. Section 294 (C)(3) of CREATE provides an incentive by way of an additional 100% deduction on research and development expenses incurred within the taxable year. Through this incentive, the government hopes to attain breakthroughs in science and health, create high-paying jobs, usher in a generation of new knowledge and intellectual property registered and/or licensed in the Philippines, as well as a commercialisation of patents, industrial designs, copyrights, and utility models owned or co-owned by a registered business enterprise.

With CREATE, the Philippine government will be able to strengthen its partnership with India to put up science and technology joint ventures following the signing of three Memoranda of Understanding between Batangas State University and several Indian companies. Through this partnership, the government sees the possibility of the Philippines becoming India's ASEAN startup regional base.

However, President Duterte exercised his line-item veto power over nine provisions of the CREATE bill. The President disallowed the move to increase the threshold for value-added tax-exempt sales of real property from PHP 2.5 million to PHP 4.2 million. Another vetoed provision was on granting the Chief Executive the power to exempt any Investment Promotion Agency from complying with the provisions of the new law as this could become a highly political tool. President Duterte likewise vetoed the automatic approval of applications for incentives to ensure that the applications would be based on merit and presentation of empirical evidence. The President noted that it would be fiscally irresponsible to enact redundant incentives and to allow existing registered activities to apply for new incentives for the same activity.

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Anti-Red Tape Authority Issues Guidelines for the Mandatory Onboarding to the TradeNet platform

On 6 March 2021, the Anti-Red Tape Authority released Memorandum Circular No. 2021-01 providing guidelines for the mandatory onboarding of all Trade Regulatory Government Agencies ("TRGAs") to the TradeNet platform. TradeNet is an inter-operable online platform developed by the Department of Finance and the Department of Information and Communications Technology in 2017, aimed at reducing processing time and harmonising the permitting and licensing processes concerning imports and exports. Its implementation is in line with Republic Act No. 11032 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, as well as Administrative Order No. 23 issued in February 2020 directing all agencies to eliminate overregulation for efficient delivery of services. TradeNet is also envisioned to serve as the Philippines' link to the Association of Southeast Asian Nations ("ASEAN") Single Window to advance interconnectivity within the region and facilitate ease of trade among ASEAN member nations.

Memorandum Circular No. 2021-01 has enumerated TRGAs per cluster, which are included in the coverage of the mandate such as:

  1. the Logistics and Port Operations Sector;
  2. the Agriculture and Food Cluster;
  3. the Chemical, Oils Minerals, Environment Cluster;
  4. the General Merchandise and Retail Cluster;
  5. the Tax and Duty Exempt Cluster;
  6. the Relief Consignment and Foreign Donations Cluster;
  7. the Monitoring and Oversight Cluster; and
  8. the Ecozones and Freeport Zones Cluster, including a list of Priority Agencies which still use the old National Single Window.

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IPOPHL Expands Enforcement Powers Against Online Counterfeiting and Piracy through its Revised Rules of Procedure

The Intellectual Property Office of the Philippines ("IPOPHL") has issued Memorandum Circular 2020-049 or the Revised Rules of Procedure on Administrative Enforcement of Intellectual Property Rights ("Revised Rules") which came into effect on 3 March 2021. The Revised Rules intend to expand the power of the Intellectual Property Rights Enforcement Office ("IEO") in curbing online counterfeiting and piracy, the rates of which have surged significantly in 2020 since the COVID-19 lockdown compelled a massive shift to online transactions.

Under the Revised Rules, the exercise of IPOPHL's enforcement powers shall cover even the electronic, digital, or online means of manufacturing, production, importation, exportation, distribution, trading, displaying, broadcasting, streaming, importing of sale and other preparatory steps necessary to carry out the sale of counterfeit and pirated goods or contents to the public. IEO is empowered to monitor establishments, digital platforms, or individuals for the purpose of ensuring compliance with the Intellectual Property Code ("IP Code"). Monitoring can be conducted either at IEO’s initiative, or based on a report, information or complaint received, and through physical, digital, or electronic means.

Furthermore, IEO may now issue an Enforcement Order in response to a report or administrative complaint filed by a rights holder. An Enforcement Order may include:

  1. an order requesting the removal or blocking of access to counterfeit or pirated goods including advertisements in relation thereto, in coordination with the appropriate agency, body or intermediary service provider;

  2. a cease and desist order;

  3. an order to remove counterfeit and pirated goods from physical establishments;

  4. an endorsement or referral to other government offices for the cancellation of permits and licenses; and

  5. an other order issued to implement a decision of the IEO.

A Mission Order may then be issued to any IPOPHL personnel or designated law enforcement officer to implement or carry out a specific Enforcement Order. A Visitorial Order may be handed relative to the conduct of visits to establishments, business premises, and/or similar areas which are the subject of a complaint alleging an IP code violation. Lastly, a Compliance Order may also be directed to any person or business entity to comply with the provisions of the IP Code.


Such person or business entity is given a period of 72 hours to comply, unless otherwise stated in such Compliance Order, to avoid being subjected to administrative action.

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House Consolidates Bills to Amend and Modernize the Intellectual Property Code

The House of Representatives ("HoR") Committee on Trade and Industry created a technical working group ("TWG") to consolidate House Bill Nos. 8062, 1597 and 8620 which all aim to modernise the Intellectual Property ("IP") Code in accordance with global trends and international standards. The TWG agreed to use House Bill No. 8620 as its working draft which reflects the proposed priority amendments of the Intellectual Property Office of the Philippines ("IPOPHL"). 


For enforcement and adjudication, salient proposed amendments include:

  1. the imposition of steeper fines for infringers;
  2. the power of the IPOPHL to order the takedown of websites with infringing material;
  3. the removal of the PHP200,000 damage claim threshold so that even claims falling below such amount may be adjudicated by IPOPHL;
  4. the recognition of alternative dispute resolution mechanisms as official modes for dispute settlement; and
  5. the institutionalisation of the IP Rights Enforcement Office.

 For patents, significant proposed amendments include:

  1. the establishment of a parallel-protection system, which would allow inventors to file a utility model ("UM") simultaneously with their registration for a patent grant for the same invention;

  2. the grant of provisional patents which would provide immediate protection for patent applications on the date of filing, even while inventors are making refinements and studying commercial viability;

  3. the alignment of the definition of "industrial design" with the Trade-Related Aspects of the IP Rights Agreement; and

  4. the protection for partial designs or designs that make part of a certain product or article. Since the duration for UM applications are shorter compared to an exhaustive patent application, investors will already be able to commercialise their works in the meantime and while waiting for a chance at a patent.

 Other priority amendments include:

  1. the protection for non-visual (i.e., sound) marks and certification marks under the trademark regime;

  2. the extension of collective licensing and expansion of the limitations for copyright;

  3. the transfer of the registration and deposit function for copyright works from the National Library and its centralisation in IPOPHL to avoid confusion; and

  4. the creation of the Bureau of Innovation and Business Development and institutionalisation of the IP Academy to promote innovation, creativity, and research.

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SEC Issues Beneficial Ownership Transparency Guidelines

Beginning 29 January 2021, all nominee directors, trustees or shareholders, incorporators or applicants for incorporation, and all concerned corporations subject to the supervision and jurisdiction of the Securities and Exchange Commission ("SEC") shall comply with the guidelines provided in SEC Memorandum Circular No. 1, series of 2021, or the Beneficial Ownership Transparency Guidelines ("Guidelines"). These were issued to promote transparency of beneficial ownership and prevent the misuse of corporations for illicit activities.

Under the Guidelines, a "nominee" is a natural person who acts for and on behalf of another person as an incorporator, director, trustee or stockholder. A nominee director, trustee, or stockholder, as well as an incorporator or applicant for incorporation, will be required to disclose the identities of its principal/s or person/s on whose behalf he or she is acting. As such, a nominee must submit the following disclosure forms: (i) Beneficial Ownership Transparency Declaration Form, and (ii) Consent Agreement Form.  These must be uploaded in the online form set up by SEC. Nominees are given until 31 May 2021 to submit the disclosure forms.

The Guidelines prohibit the issuance, sale, or offer for sale or distribution of bearer shares and bearer share warrants. Bearer shares are defined as (i) equity securities owned by the person or entity that holds the physical certificate which enables the transfer of ownership of shares of stock by mere delivery of such certificate, and (ii) instruments that accord ownership in a juridical person to the person or entity who possesses it or is the holder of the bearer share certificate. Bearer share warrants are defined as documents certifying that the bearer is entitled to a certain amount of the fully paid shares of stock of a corporation.

The Guidelines also provide that the alienation, sale, or transfer of shares of stock (except for shares of stock of publicly-listed companies traded over the facilities of the Philippine Stock Exchange), the date thereof, by whom and to whom made, shall be disclosed and recorded in the Stock and Transfer Book of the issuing corporation within 30 days from date of such alienation, sale, or transfer subject to compliance with the requirements for the recording or registration of transfers under applicable regulations.

Violation of these guidelines may result to administrative and criminal sanctions.

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Government Launches the Central Business Portal to Modernize Business Registration Process in the Country

On 28 January 2021, the Central Business Portal ("CBP") Phase 1 was launched by the Department of Information and Communications Technology ("DICT") and the Anti-Red Tape Authority ("ARTA"), which is envisioned to be an online one stop shop to access business-related information and transactions, such as securing business permits, licenses, and clearances. Under Republic Act No. 11032 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, DICT was tasked with establishing, operating and maintaining a CBP for purposes of eliminating bureaucratic red tape, averting graft and corruption, and promoting transparency in business transactions. Additionally, the law mandated local government units ("LGUs") to create a Business One Stop Shop ("BOSS") for the Business Permit and Licensing System of LGUs for the purpose of receiving and processing applications, receiving payments, and for the issuance of approved licenses, clearances, permits, or authorisations.

The national government agencies who have partnered up with ARTA include DICT, the Securities and Exchange Commission, Bureau of Internal Revenue ("BIR"), Social Security System ("SSS"), Philippine Health Insurance Corporation ("Philhealth"), Home Development Mutual Fund ("Pag-IBIG"), and the Food and Drug Administration ("FDA"). Following a Joint Memorandum Circular among the aforementioned agencies and the Department of Finance, Department of Trade and Industry, Department of Interior and Local Government, and the Cooperative Development Authority, ARTA was directed to oversee the implementation of the CPB and provide support to the participating agencies.

Through CBP Phase 1, a Unified Application Form is provided for all agencies involved in the business registration process, eliminating the input and submission of redundant forms to different agencies. The CBP also facilitates business registration with SEC, generation of BIR tax identification number, and payments of filing and registration fees to BIR. For employers, they may register to obtain the employer’s numbers for SSS, Philhealth, and Pag-IBIG, noting that a Unified Employee Reporting Module for SSS, Philhealth, and Pag-IBIG is provided by the CBP.

Applications for secondary license featuring FDA's License to Operate for Center for Drugs may also be done through the portal.

The CBP is now linked to the online business permitting system of several LGUs including Quezon City, Parañaque City, Baler, and Limay, among others. Developments to the CBP are underway to integrate the online business permitting systems of other LGUs together with additional features.

The CBP is accessible through this link: https://business.gov.ph/home.

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Revised Rules and Regulations for the Issuance of Employment Permits to Foreign Nationals

On 6 January 2021, the Department of Labor and Employment ("DOLE") released the new guidelines for the issuance of an Alien Employment Permit ("AEP") and related certifications.  

The Revised AEP Rules provide for new guidelines for filing dates, processing time, permit fees, penalties, documentary requirements, and employers' duties, among others. The AEP is one of the permits that must be secured by foreign nationals to legally work in the Philippines.  Some of the amendments include:

  1. employer participation in the labour market test ("LMT");
  2. reduced grace period to file applications;
  3. increased processing time of applications with DOLE;
  4. increased amount of application fees; and
  5. submission by the employer of a quarterly report on list of foreign nationals employed.

The LMT is the mechanism to determine the non-availability of a Filipino citizen who is competent, able, and willing at the time of application to perform the services for which the foreign national is desired. Under the expanded LMT, employers are now required to cause the publication of the job vacancy being applied for the foreign national in a newspaper of general circulation at least 15 calendar days prior to the application for an AEP. 

Applications for an AEP must be filed at the DOLE regional office concerned within 10 working days from the date of signing of the contract or prior to the commencement of employment. Applicants must also pay an increased application fee of PHP10,000.00 for a new AEP with a validity of one year and an additional PHP5,000.00 for every additional year. This is to avoid incurring a fine of PHP10,000.00 for both the foreign national and the employer.

Employers are now required to submit a quarterly report or an updated list of foreign nationals employed within 30 days from the reference period and change of employer’s information such as but not limited to name, address, or contact details.

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Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.


Gatmaytan Yap Patacsil Gutierrez 
& Protacio (C&G Law)
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Sedeño cor. Valero Streets
Salcedo Village, Makati City 1227

Ben Dominic R Yap
Managing Partner
D +632 8894 0377
F +632 8552 1978

Jaime Renato B Gatmaytan
D +632 8894 0377
F +632 8552 1978

Norma Margarita B Patacsil
D +632 8894 0377
F +632 8552 1978

Anthony Mark A Gutierrez
D +632 8894 0377
F +632 8552 1978

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