The Bangko Sentral ng Pilipinas (BSP) recently issued Circular Nos 742 and 743 (Series of 2011) amending certain provisions of the Manual of Regulations on Foreign Exchange Transactions (the manual). Under the manual, loans and equity investments must be registered with the BSP if the foreign exchange needed to service repatriation of capital, remittance of dividends, profits and earnings accruing from such investments or payment of interest and principal on foreign loans is to be sourced from the Philippine banking system.
Among other amendments, Circular No 742 added foreign loans of resident private sector borrowers (not publicly-guaranteed) to finance infrastructure projects included in the government's list of public private partnership projects to the list of loans that do not require prior BSP approval. The exemption, however, is valid only up to three years from December 11 2011.
The circular also provides that in respect of registration of inward foreign direct investments, foreign exchange funding for cash investments must be inwardly remitted but need not be converted to Philippine pesos. Before the circular became effective, foreign exchange funding for cash investments should have been converted into Philippine pesos as a condition for registration of the investment.
On the other hand, the circular provides for a prescriptive period for filing of requests for registration with the BSP of foreign direct investments. Before its introduction, there was no specified period within which inward foreign direct investments must be registered with the BSP.
The manual now requires that all applications for registration of foreign direct investments must be filed with the BSP within five years from the date of inward remittance or actual transfer of assets to the Philippines.
For existing unregistered direct investments that are recorded in an investee firm's books and whose foreign exchange funding were inwardly remitted or assets were transferred more than five years prior before December 15 2011, applications for registration may be filed with the BSP by December 15 2012. After this period, the BSP will no longer register such investments.
Jan Celine C Abano-Ranada