Implementing Rules and Regulations of Republic Act No. 7652

) ,, ' : ---'-. / \ c 'I L, 'l eJt/j' --:-/ :sis r the i l:et' I. I a} i re l h I , I I j Qr') REPUBLIC OF THE PHILIPPINES DEPARTMENT OF TRADE AND INDUSTRY ~ // IMP ~ULA1'IONS.Q!? UBLIC ACT NO. 7652, OTHERWISE OWN AS THE "11'\VESTORS' LEASE ACT" • 1 . WHEREAS, on May 31, 1993, the Congress of the Philip­ . · · pine-s e nacte~ the '1nv.estors'- -Lease-Ac-t"· which was subsequently : 1 . · signed into law by the President of the Philippines; !· WHEREAS, under SEC, 51(2) in relation with SEC. 7(3) of ,, ---said Act;the Dep<irtnient of Trade and Industry (DTI) has the man- date to approve the area covered by lease agreement entered into under the provisions of the "Investors' Lease Act"; , 'VHE~EAS, under SEC. 6 of the same Act, the Secretary or' Trade a.'1d Industry, subject to condirions stated therein, is empow­ ered to terminate any lease contract entered into under the prov!­ sions thereof; · V/HEREAS, for the DTI, and other agencies concerned to I.· properly implement said Act, there is a need to.promulgate rules and regulations to clarify the intent and provisions thereof; WHEREAS, Republic Act No. 7227, otherwise known as the Bases ConverSion and DevelopmentAf!t ofl992, empowers the Bases l Conversion and DevelopmentAuthority(BASECON)to own, hold and/or adniinisterspe;cified militarY reservations. Further, the SU.bic Bay Metropolitan Authority (SBMA) and the Clark Development C'?rpOr¥J,tiQ:n .(CDC). as the-operating and implementing arms of the BASECOM. are mandated to exercise said powers over the lands within the Subic Special Economic Zone and the Clark Special Eco­ nomic Zone. NOW, THEREFORE, for andjn consideration oftheforego­ ing premises, the following implementing rules and regulations are hereby promulgated to implement the intent and provisions ofRe-. public Act No. 7652, otherwise known as the "Investors' Lease Act''. RULE I DEFINITION OF TERMS SECTION I. For purposes of Republic Act No. 7652 and these <Ules and regulations- (a) "Act" shall mean Republic Act No. 7652 also kno\\-n as the"Investors' Lease Act". (b) "Foreign Investor'' shall mean an individual or juridical cn!i!y net frdl1ng within ihe meanirig Of"Philippine national" as the term is defined herein. (c) "Philippine national" shall mean a citizen of the Philio- nin~" ,... .. .., ...1~---•'- .RULE II APPLICABILITY SECTION 1. Long-term leBse of private lands by foreign in­ vest~rs shall be authorized on !y for purposes of and in cOnne~tion with. the establishment· of industrial estate, factories, assembly or processing plants,.agro-industrial enterprises, land development for tOurism, industrial or commercial use and/or other similar priority productive endeavors. SEC. 2. "Privat~ agricultural lands devoted to agricultural activities, such as cultivation of soil, planting of crops, growing of fruits ·and/or plantations, covered by the provisions ofRepublic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law, (CARL) Shall not qualify for the long term lease undert.his Act .and these rules and regulations. The provisions of the preceding paragraph notwithstanding , private agricultural lands approved for conversion by DAR for non­ agricultural purposes and areas classified as non-ag.-:kultural prior to June 15, 1988 par town pl<.ns approved by the HLURB and which will be devoted to the establishment of industrial estates, factories, assembly or processing plants, agro-!Ddustrial enterprises, land de­ velopment for industrial, or commercial use, tourism and other simi­ lar priority productive endeavors shall qualify for long term lease under rhis act and these rules and r~gul.ations. SEC. 3. Foreign investors with pre-existing lease agreements entered into prior to the effectivitY ofthe Act and which lease a.?ee­ ments were entered into for any one or a combination of the purposes stated in Section I~ Rule II hereof, may opt to be governed by this Act and these rules and regulations, provided, however, that in no case shall the total lease period, including that of the pre-existing lease agreement, exceed a total of75 years. SEC. 4. Long-tenn lease of private lands for tourism projects shall be limited to those involving investments of not Jess than Five . Million US Dollars (US$5,000,000.00), seventy percent (70% of wh,ch must be infused into said project within three (3) years from the signing of the lease agreement. · RULE III AREAOFLEASEANDAPPROVALTHEREOF SECTION l. Any foreign investor investing in the Philippines shall be illowed to lease private lands which shall comprise such ar~a as may reasonably be required for the purpose of the invest­ ment, subject, however, to the Comprehensive Agrarian Refonn Law and the Local Government Code. The area ofthe leased private land as approved by the DTI or the BASECOM/CDC/SBMA shall be used solely for the purpose of the investment. a. Application letter signed by the owner(sy lessor(s) and the foreign investor/leasee signifying their intention to enter. , into a long-term lease agreement under the provisions of· Republic Act No. 7652; b. A copy of the parties proposed long-tenn lease agreement which, in addition to othPr tprrnc. , ... ...1 --~~..t:•=--- -'· '' Malaya • December 27, 1994; Page il RULEY GROUNDS FOR TERMINATION OF LEASE AGREEMENTS SECTION I. The Secretary of DTJ or the Chairman-of BASECON and/or the Managing Heads of its implementing arms. whenever appropriate, may terminate or cancel ariy lease agreement entered into under the provisions O{'tUeXct or these rules and regu­ lation assigned on any of the foi16.~)..g~ounds: 1. Failure by the lessors to initiate the investment project within three (3) years from the signing of the lease ~ree- ment; or 2. \Vilhdrawal of approved investment; 3. Use ofthe leased· premises other than th[l.t authorized by the DTI o'/he BASECO"!ICDCISBMA; 4. ·/ioiatiollfby ~he parties of any ?rovision ~f the Act or thes~ mlc:'t::nd regulations. RULE VI 3CHE.DULE OF :!-"EES SECTION I. The following fees shall be collected by <he DTI/ BOI: Provided, that the BASECON and its implementing arms such as the CDC and ihe SBMA may impose their own sc~eduie of fees on long ter!!l lease agreements covering lands ur:.de;- \!":.eir man:!ge­ ment and controL (a) F..:es for the application of original ion~:; ~e!.m lease con tmct Ill 0 of I% taro.! capital, but not loWerthan.Five Thousand Pesos (P5,000.00) nor to exceed Fif­ teen Thousand Pesos (PI5,000.00) For purposes of this sub-section, the term capital cost shall mean capital in case of single proprietorship or partnership and au­ thorized capital in c:lSe of corporations and/Or associations. (b) Fees for reoewal of the long term lease contract P5,000.00. (c) Fees for the application of transfers, assignment, sub-lease and/or sale of leasehold.Rights acquired under this Act P5,000.00. (d) Fees for the amendmenV modificationireformation ofthe original long term lease contract P5,000.00. RULE VII SCHEDULE OF FINES Section 1. Without prejudice to the provisions of Rule VIH of thk ~'''""' "-...1 ---···· .• i I l ' t j i I I' ., ~~ ':l..- o.C\ ;;!;:.-, ~~ ro A..ljj .1'~ j-,J;.I -, ~ Jr, Jl<l; 'l~ ~}g. ')-). " .J '' ~· \ ( • -~ \. "-.. ., 'I'} i, ~ :j j '1 1 ,, ' 1 ., 1 • 4 - - --· ~ ..... ~ .·~~,n-~c;parana:~~-(i!SJ.1V.h~.th~truste6isaPhiJ- I · ippine "na~ti0nal 3nd at Ii::a.5fsixty per cent (60% "of the fund wiH ac­ . ciue to the b~riefit OfPhiJippin~ 'national$) ProVided., That where a , . .corporatiot,l.1?Jl~ its noii~Filipin<>: stockholders own stock in a Securi­ ties and Exchange Commission (SEC) re&istered enterPrise, at least sixty per cent (60%) of the capital s tock ol!tstanding and entitled to vote .ofboth corporations must be owned and held by the citizens of the Philippin~s and at ieast siity per cent (60%) ofthe members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shau·be considered ~Phil- ippine national. · (d) "Private Lands" shall refer to those lands which have been segregated from the general mass ofthe public domain and distrib­ uted by any form of grantuitous or onerous grant by the State, such ·as but rtot limited to, a deed of sale,.adjustment title, special grant or possessory infonniltion title converted into a record of ownership. The definition h~rein sh~l include patrinlOni~ properties of the state owned, held, controlled, supervised or managed by- government­ owned or controlled corporations such as but not limited to the Ex­ port Processing Zone Authority, the Phividec Industrial Authority, the Bases Conversion anns, such as Clark Development Corpora- . tion.(<;QC}Md fue.Subic-BayMetrop<iTitari Authority (S8MA ), (e) "Industrial Estates" shall me"an large and suitable tracts of land which wiii be developed primarily for the use of a commu'nity cfindustries a:nd prOvided with roads, water supply facilities, elec­ trical facilities, communication facilities, sewage an·d drainage sys­ tems, and other infrastructures. The term "industrial estates" shall . include within its meaning "sci;;mce and technology parks", described · · as knowledge-based centers, set-up in proxiffiity to scientific or in- . dustrial communities such as university campuses, research insti­ tutes, export processing zones or industrial estate areas providing means of technology transfer .from research laboratories to iridustry. The term likewi,se includes within its purview lands under the con­ trol,' supervision and management of EPZA, PHIVIDEC,-and BASE CON and its implementing anns, such as CDC and SBMA, ·- intended for that purpose;. {f) "Priority Prod~s;tiY~.Eo.de:av.ors'~haH referto1he·piefeire·d areas of activity listed in the Investments Priorities Plan (IPP) pre~ pared by tbe Board oflnvestments jn accordan~e with the provbions , . Rf E.'{ecuti\' e Order-No-:·226 othenvise known as the Omnibus In- ·-11 yestmentCode of 1987 as amended. Further, the tenn shall likewise include endeavors certified by the 8ASECON/S8MNCDC, EPZA . ·> or PHIVIDEC as preferred areas of activity. ,,L . (g) "Appro\·eCI Inve~tment" shall mean investment by a for­ eign inv?stors approved by· government as evidenced hy any of the' following: · I. Ge~ificate of Registration in' case of a BOI fegistered en­ ·. itrprise or Certificate of EPZA or PHIVIDEC registra­ tion or BASECON/CDC/SB MA registration or penn it to operate .. 2. Bureau of Trade Regulaiiori and Consumer Protec'tion / . (BTRCP) Certificate of Registration for Sole Proprietor­ ·· ship of SEC Certificate of Registration in ccise ofinvest­ ments not registrable with the 'BOJ. but registrable und~r the Foreign lnvestmeritS Act of 1991; .. 3. Any other simifa; dOcument purporting to show gove~- - mcnr approval or~ny b!JSin~ss u od,eJtakjng-in-th~ Phi~p- pines. · •· -· ....... pu1auuu as to me area of the premises to be leased; ·3::A stipul~tion ·as tO the ·purp~5e of the investffient iqr :-• which the IOng-tenn lease agreement is being entered into; 4. A stipulation-by the parties recognizing the unequivo­ cal aUthority of the Secretary C?f DTI Or the Chairman of BASECON/and or the Managing Heads of CDC/ SBMAwhenever appropriate, to tenniilate or cancel the long-term lease agreemerit ifthe investment project is not initiated within three (3) years from the signing of the lease agreement or in case of withdrawal of ap­ proved investment or in case of use ofthe leased area for purposes other than that authorized by the DTI or theBASECON/CDC/SBMA or in case ofviolation by th~ parties of any ofthe provisions of the Act and these ruleS and regulations. c. DAR approval of land use conversion of the leased area into commercial and/orindustrial use, whenever applicable. d. Locational clearance from the City/Municipality or the HOusing and Land Use Regulatory Board pursuant to the provisions ofE.O. 72 dated March 25, 1993. SECTION 3. The authority to evaluate, process, approve or disapprove application for long term lease contracts over lands lo­ cated within the fanner US baselands or the-special economic zones, as provided for in R.A. 7227 and other pertinent presidential issu­ ances, is hefeby delegated to BASECOM and its implementing arms, such ciS the CDC and SBMA within their zonal Jurisdiction. For pur­ poses of this provisiOn any long term lease agreement entered into by the BASECON/CDC/SBMA aS lessor with an investor for lease of lands wiht1n their zonal jurisdiction shall be construed as ap­ proval of the long term lease agreement under ·the Act, rules and regulations. SECTION 4, The DTf-801 or the 8ASECON/CDC/S8MA shall render its decision within twenty (20) working days after offi~ ciai acceptanceof~e application. Where an aPplication for leasehold ·rights is not acted upon by the DT!-801 or the 8ASECON/CDC/ SBMA within the said period of time, the same shall be Considered automatically approved without prejudice to the imposition of usual ·'normal conditions, and limitations in respect to the use ofthe leased property as provi~ed for under Republic Act No. 7652 . RULE IV SALE, TRANSFER OR ASSIGNMENT OF · LEASEij.OLD RIGHTS SECTION I. The leasehold rights acquired under. long-term lease contracts entered into pursuant to this Act may be sold, trans­ ferred, assigned, and/or sub-leased Only with the prior apProval of the Secretary of DTI or the Chairman of BASECOM and/or the Managi ng Heads of its implementing and limitations in respect to the use of the lease property as provided for under the Act shall continue to ap'ply. PrOvided; that when the vendee, transferC:e •. as­ signee and or sub-lessee is a Philippine national, prior approval is· not required, but notice thereof shall be made to the DTI Secretary· or the Chairman of BASECOM and/or the Managing Heads of its implemCnting·arms (CDC/SBMA) whenever appropriate, within ten (10) days from the date qf sale, transfer, assignment and/or sub- , lease of the leasehold right · f~r·ili~~~~~~~i~;M-~~;~~~;~-~:I ' ::t'' . ~ ~~:~ .. ;~ -::5:~·:;:;·.-; assignment and/or ~ub-le ase · · ·- ' .. ··', . of leasehold ri,&hts undef.this . Act arid the,se rules. - P I !JOOO.OO ·' b) For failure to initiate · · ·. '.· · · the iOvestment project within three.(3)years from signing of the lease ~~·~ .. · agreement PIOO,OOO.OO c) For withdrawal of the · approved investment after the commencement of the · project P 100,000.00 d) For use ofJeased premises other than that authorized· by DTf-80! or 8ASECON/ CDC/S8MA P 100,000.00 RULEVIIt' PENALPROVISIONS SECTION I. Penal Provision. - Any contract or agree~ent made or executed in violation or any Ofthe ofthe following prohib­ ited aCts shaiJ be null and void ab intio and both contracting parties shall be punished by a fine of not less than One Hundred Thousand Pesos (P I 00,000) nor more than One Million Pesos (P 1,000,000) or imprisonment of six (6).-months to six (6) years, or both. at the discretion of the Cmm: 1) Any provision in the Ie~e agreeinent stipulating a leaSe period in excess ·or that provided. ih paragraph (I) Section 4 of Re­ public Act No. 7652, otherwise kilown as the Investor:s Lease Act.' 2) Us'eofthe leased premises for the purpose contrary to exist­ ing laws of the land, public order, publi c policy, morals, or ~good customs; 3) Any agreement or agreenients resulting in the lease ofland in excess of the area approved by the DTI or BASECON/CDC/ SBMA wheneverappropriat~: Provided, that, where the excess of the iOtality of the area Jeased ... J.:!\due·to the·acts of the lessee. the lessee shall be held solelyliabh{ti\erefor: Provided; Further That; in the case of Corporati.ons. assOCi~tions. or partnership. the President manager, director, trustee, or officers responsible for the violcitioil . hereof shall bear the criminal liability. RULE IX . EFFECTIVITY SECTION I .. These rules and·regulations shall take etli!ct af­ ter fifteen ( 15) days following ·publicatiC11 1 thereof in ~a· newsp3.Per of general circulcitiorl in th~ Philippines.. . .• : .. APPROVED. . 29 November 1(2994. , , · . . , -. , .· ... ·. . . 7. . - • ~ ~' - • . . . , . } . -· .. , '., ;' ·- • i • • OuM 9 j)/;; [.y~ -~,2-.~·:'.· : , ' " .... , •'V·.<; j .TOM;'\S I.ALC'ANTARA , · , ;;::\. . ~ .-I cling S,•,·r~·t,l(l' -·,