Guidelines to Consolidate/Clarify Existing Regulations on: (1)The Sale of Foreign Exchange (FX) for Non-Trade Transactions by Authorized Agent Banks (AABs), Non-Bank BSP-Supervised Entities (NBBSEs) and their Subsidiary/Affiliate Forex Corporations; and (2)the Authority to Sell FX by NBBSEs and Subsidiary/Affiliate Forex Corporations of AABs And NBBSEs

May 26, 2003 BSP CIRCULAR NO. 388-03 GUIDELINES TO CONSOLIDATE/CLARIFY EXISTING REGULATIONS ON: (1)THE SALE OF FOREIGN EXCHANGE (FX) FOR NON-TRADE TRANSACTIONS BY AUTHORIZED AGENT BANKS (AABs), NON-BANK BSP-SUPERVISED ENTITIES (NBBSEs) AND THEIR SUBSIDIARY/AFFILIATE FOREX CORPORATIONS; AND (2)THE AUTHORITY TO SELL FX BY NBBSEs AND SUBSIDIARY/AFFILIATE FOREX CORPORATIONS OF AABs AND NBBSEs The Monetary Board, in its Resolution No. 679 dated May 15, 2003, approved the following guidelines that consolidate/clarify existing regulations on: (1) the sale of foreign exchange (FX) for non-trade transactions by Authorized Agent Banks (AABs), Non-Bank BSP-Supervised Entities (NBBSEs) and their subsidiary/affiliate forex corporations; and (2) the authority to sell FX by NBBSEs and subsidiary/affiliate forex corporations of AABs and NBBSEs. HEcIDa 1. The definition of terms for purposes of this Circular is shown in Annex "A". 2. For sale of FX to residents to cover payments to foreign beneficiaries for non-trade purposes, other than those that are foreign currency loan-/investment related, the following documents shall be required: a. Sale not exceeding US$5,000 application to purchase FX using the attached format b. Sale exceeding US$5,000 notarized application using the format in Attachment 1 and supported by documents listed in Item A of Annex B 3. The AABs/NBBSEs/Forex Corporations shall see to it that this limit on sale of FX is not breached by the splitting of an FX purchase into smaller amounts so as to make it appear that the purchase does not violate the prescribed limit. There is deemed to be a splitting of FX purchase if the total sales of FX to any one purchaser within a 20 calendar-day period exceeds US$5,000. This limit shall be applied on a consolidated basis for AABs/NBBSEs/Forex Corporations. 4. For sale of FX, regardless of amount , for payment of non-trade obligations that are foreign currency loan- or foreign investment-related, the documents listed in Items B and C of Annex B, together with the application to purchase FX (using the attached format), shall be required . 5. NBBSEs, including Forex Corporations shall not sell foreign exchange to: a. Non-residents; and b. Residents for 1) Investment purposes (whether domestic or abroad) including capital repatriation and remittance of profits and dividends thereon; 2) Payment of FX obligations to residents other than AABs; 3) Payment of unregistered foreign currency loans/obligations to non-resident financial institutions. However, outstanding unregistered loans/obligations as of October 27, 2000 (effectivity date of Circular No. 264) may continue to be serviced by forex corporations; and 4) Payment of FCDU loans not eligible to be serviced with FX purchased from the banking system. However, FCDU loans outstanding as of October 27, 2000 may continue to be serviced by forex corporations. 6. AABs shall not sell foreign exchange to residents for payment of FX obligations to residents other than AABs. 7. Regardless of amount, sale of FX by NBBSEs including forex corporations for payment of importations shall be subject to the documentation requirements under Items I.c.1, I.c.2, II.b.2 and II.c of BSP Circular-Letter dated January 24, 2002. Payments for unregistered importations of residents shipped under DA/OA arrangements prior to the effectivity of this Circular may be serviced by forex corporations. 8. Unless otherwise indicated, original documents shall be presented to the AAB/NBBSE/Forex Corporation on or before maturity/delivery date of spot/forward contract to sell FX and stamped "FX SOLD", indicating the date and amount of FX sold and signed by the sellers authorized signatory . Copies of all duly marked supporting documents for the sale of FX, including proofs of payment shall be retained by AABs/NBBSEs/Forex Corporations and shall be made available to the BSP for verification. Said copies shall be marked "Original Documents Presented as Required" and duly signed by the sellers authorized signatory. 9. The seller/remitter of FX shall ensure that applicable Philippine taxes related to the: a) sale of FX; b) remittance of FX; and c) the underlying FX transaction have been paid and that the remittance is net of such taxes. For this purpose, the seller/remitter of FX shall require submission of receipt(s) evidencing payment of applicable taxes. Any violation of this Circular shall be subject to the penalty provisions under R.A. No. 7653 (The New Central Bank Act) and other existing banking laws and regulations. The provisions of Circular No. 287 dated July 26, 2001, Circular-Letters dated September 17, 1997, October 2, 1997, October 31, 2000, July 26, 2001, August 9, 2001 (non-trade transactions) and May 17, 2002 are hereby repealed. The provisions under Items 1, 2 and 3 of Circular No. 264 dated October 27, 2000, Item 3 of Circular-Letter dated August 24, 2000, Sections 2, 29 and Appendix 11 of Circular No. 1389 dated April 13, 1993, as amended, and other BSP issuances that may be inconsistent with the provisions of these implementing guidelines are hereby amended. This Circular shall take effect immediately. AHDacC FOR THE MONETARY BOARD: (SGD.) RAFAEL B. BUENAVENTURA Governor DEFINITION OF TERMS FOR PURPOSES OF THIS CIRCULAR, the following terms shall mean: 1. Trade transactions shall refer to export and/or import transactions. 2. Non-trade transactions shall refer to all other FX transactions not included in the definition of trade transactions. These shall include foreign currency loans and foreign investments. 3. Authorized Agent Banks (AABS) shall refer to all categories of banks (except Offshore Banking Units (OBUs) duly licensed by the Bangko Sentral ng Pilipinas. It is understood that each category of bank should function within the operational parameters defined by existing laws/regulations for the specific bank category to which they respectively belong. A rural bank or a thrift bank cannot engage in transactions which may involve opening/negotiating export or import letters of credit or such other type of banking transactions as these do not form part of the normal banking operations of banks in their category as provided under existing laws, rules and regulations (Circular-Letter dated July 17, 1992). 4. Non-Bank BSP-Supervised Entities (NBBSEs) shall refer to non-bank entities that fall under the supervisory authority of the Bangko Sentral ng Pilipinas under R.A. No. 7653 (The New Central Bank Act), R.A. No. 8791 (The General Banking Law of 2000) and other special laws. These include Non-Bank Financial Institutions Performing Quasi Banking Function (NBQBs), subsidiary/affiliate of AABs/NBQBs engaged in allied activities and trust entities. 5. Subsidiary shall refer to an entity as defined in Appendix 9 of the Manual of Regulations for Banks and Subsection 4654Q.1 of the Manual of Regulations for Non-Bank Financial Institutions. 6. Affiliate shall refer to an entity as defined in Appendix 9 of the Manual of Regulations for Banks and Subsection 4654Q.1 of the Manual of Regulations for Non-Bank Financial Institutions. 7. Forex Corporations , whether or not named as such, shall refer to entities which are subsidiaries/affiliates of Authorized Agent Banks (AABs)/Non-bank BSP-Supervised Entities (NBBSEs) whose business include buying and selling of foreign exchange. 8. Resident shall refer to a. an individual citizen of the Philippines residing therein; or b. an individual who is not a citizen of the Philippines but is permanently residing 1/ therein; or c. a corporation or other juridical person organized under the laws of the Philippines; or d. a branch, subsidiary, affiliate, extension office or any other unit of corporations or juridical persons which are organized under the laws of any country and operating in the Philippines. 9. Non-resident shall refer to an individual, a corporation or other juridical person not included in the definition of resident. 10. Financial Institutions shall refer to business organizations that offer a broad base of financial services or specialize in specific financial functions, products, or services, e.g. banks, investment houses, pension funds, pawnshops, credit unions, investment companies, insurance companies, securities brokers and dealers, stock exchanges, mutual funds, trust corporations, leasing companies, financing companies, credit card companies, companies engaged in foreign exchange dealership/brokerage and others that deal in money. ANNEX B MINIMUM DOCUMENTATION REQUIREMENTS FOR THE SALES OF FX FOR NON-TRADE PURPOSES BY AUTHORIZED AGENT BANKS (AABSs)/NON-BANK BSP-SUPERVISED ENTITIES (NBBSEs) AND THEIR SUBSIDIARY/AFFILIATE FOREX CORPORATIONS A. Sales of Foreign Exchange for Non-trade purposes under Section 2 of Circular No. 1389 s. 1993, as amended Purposes Documents Required 1. Travel Funds (Only for Presentation of applicant's passport, and permanent residents of the passenger ticket, copies of which shall be Philippines) retained. For travel funds over US$10,000, the following shall be additionally required: a. Copy of applicants/Sponsor's Income Tax Return (ITR) duly stamped by the BIR; b. Travel authority from the applicant's company/office/agency if he is being sponsored by said company/office/agency; and c. Invitation from foreign sponsoring institution, if applicable. 2. Educational Expenses/ 1. Statement of enrollment or acceptance by the Student Maintenance school abroad; 2. School bills/statements of account covering tuition and other school fees; and 3. Applicant's notarized certification that he is not under scholarship, or if under scholarship, a notarized certification that the amount applied for is to cover his expenses, not being covered by the scholarship. 3. Correspondence Studies AABs/NBBSEs/Forex Corp. 1. Proof of admission or enrollment in may sell foreign exchange to correspondence school; and cover tuition fees for 2. Billings from the school abroad which shall correspondence studies, include assessment of fees and other charges which shall be directly related to the course. remitted to the correspondence school. Issuance of draft may be allowed but it should be made payable to the correspondence school. 4. Medical Expenses 1. Travel documents of patient; and 2. Certification issued by hospital abroad on the treatment to be administered to the patient including cost estimate; or statement of account with the hospital/bills of expenses from hospital/treatment center abroad, whichever is applicable. 5. Support of Dependents 1. Consular certificate or its equivalent Abroad documents to prove that the dependent is AABs may sell foreign residing abroad dated not earlier than one year exchange covering the from FX application date; monthly living allowance 2. Certified true copy of birth certificate, abroad of a child not more marriage contract, adoption papers, whichever than 21 years of age, spouse is applicable, to prove that dependent is the or parent of a Philippine wife, husband, child or parent of the remitter resident. applicant; 3. Applicant's notarized certification that the dependent is not gainfully employed abroad; and 4. Copy of remitter's ITR duly stamped the BIR. 6. Emigrants' assets 1. Proof of residence of emigrant/beneficiary abroad; 2. Proof of ownership of the asset(s) by emigrant/beneficiary abroad; 3. In case of income from real properties, a statement of rentals/income earned; 4. In case of transfer of proceeds of capital assets, copy of deed of sale; 5. In case of capital transfer of testate and intestate inheritance and legacies: a. Copy of court order approving the partition and distribution of estate; b. Copy of the extra-judicial settlement and partition duly registered with Register of Deeds. 6. For transfer of proceeds of life insurance benefits, proof of receipt of the proceeds of the policy; 7. For remittance of proceeds of sales of personal property, copy of deed of sale; 8. In case of transfer of proceeds of sale of shares of stock, deed of sales or broker's sales invoice; and 9. In case of retirement benefits, evidence of retirement benefits. 7. Salary/bonus/dividend/other 1. Employment contract/Certification of benefits of foreign expatriates employer on the amount of compensation paid (including peso savings) to the foreign national during the validity of the contract stating whether the same had been paid in foreign exchange or in pesos, and if in foreign exchange, proof that the foreign exchange was previously sold for pesos to AABs 2. Photocopy of the ACR and DOLE Alien Employment Permit of the foreign national; 3. Applicant's notarized certification that the FX remitted is net of local expenses incurred or net of previous transfers abroad; and 4. If amount to be remitted comes from sources other than salaries, information regarding the sources supported by appropriate documents should be submitted. 8. Producers' Share in Movie 1. Statement of remittable share rental; and Revenue /TV Film Rentals 2. Copy of distributorship contract. 9. Commissions on Exports due 1. Agency agreement; and Foreign Agents 2. Agent's Statement of Account/Computation of commission in accordance with agency agreement. 10. Freight Charges on Exports/ 1. Bills/Statements of account on freight Imports charges; and 2. Copy of Bill of Lading. 11. Foreign Advertising Costs 1. Copy of advertising agreement; and 2. Original statement of accounts or bills or invoices. 12. Subscriptions to foreign Billing/Statement of Account. magazines or periodicals 13. Charters and Leases of 1. Charter or Lease of Vessels/Aircrafts or lease Vessels/Aircraft and other agreement; and types of leases. 2. Billing/Statement of Account. 14. Membership dues and 1. Proof of membership in the foreign or registration fees to the international association; and association abroad 2. Billings for membership dues/registration fees. 15. Port Disbursements abroad of 1. Copy of contract or agreement; and aircraft and vessels of 2. Statement of accounts/bills/invoices. Philippine registry or chartered/leased by domestic operators. 16. Mail fees/International 1. Copy of contract or agreement; and settlement of accounts for 2. Statement of account/bills/invoices. telegraph, telegram, radio, satellite and other communication facilities. 17. Salvage fees 1. Copy of contract for salvage services; and 2. Statement of accounts/bills/invoices. 18. Income taxes due to Foreign 1. Copy of DOLE-approved contract of Governments from foreign employment; and nationals 2. Copy of income tax return covering the income tax payment sought to be remitted. 19. Services/Consultancy/ 1. Copy of the pertinent agreement; and Management/Marketing/ 2. Statement/Computation of fees due. Distributorship Fees with foreign firms or individuals 20. Retainers' fees 1. Copy of the agreement/contract; and 2. Billings/invoices from the beneficiary. Foreign exchange payments by residents to foreign professionals acting as liaison, counsel, agent or representative abroad. 21. Insurance/Reinsurance Billings/Invoices from foreign insurer/reinsurer Premium 22. Claims for losses and other Billings/Invoices of insurance companies/brokers payments of insurance abroad. companies/brokers abroad 23. Net Peso Revenues of Foreign 1. Copy of the General Sales Agency Agreement Airlines/Shipping Companies or certified copy of the Bilateral Air Agreements; and 2. Statement of Net Peso Revenues (Peso Receipts less Disbursements) for the period covered by the remittance. 24. Royalty/Copyright/Franchise/ 1. Copy of Contract/Agreement; and Patent/Licensing Fees 2. Statement/Computation of the Royalty/ Copyright/Patent /Licensing fee. 25. Remittance of Net Peso Certification from the Ambassador/Embassy Revenue collected by authorized officer that the Peso amount applied embassies of foreign countries for conversion to foreign currency is net of local expenses. 26. Payment of FX obligations by 1. Settlement report from international credit Philippine credit card card companies identifying the nature of companies to international various obligations; credit card companies (e.g. 2. Schedule showing summary of the foreign Visa International and currency billings received from international Mastercard International) credit card companies abroad and the including peso collection corresponding peso collection thereof; and from local credit card 3. Letter of undertaking or sworn certification holders as payment of stating that local credit card company has not bills received from non- purchased foreign exchange in excess of the resident merchants and amount of their foreign currency requirement. other fees/charges. B. Sales of FX for payment of foreign currency loans covered by Sections 22 to 31 of Circular 1389 s. 1993, as amended . Foreign Currency Loan Payments Documents should all be originals unless otherwise indicated. Banks shall indicate sales of FX, whether on spot or forward basis, on the prescribed documents. 1. Medium/Long-term Foreign 1.a BSP registration letter and accompanying Currency Loans (with original Schedule of Principal and Interest Payments maturities of over 1 year) on BSP-registered Foreign Credits" (Schedule RA-2); and where applicable, "Schedule of Payments for Fees & Other Charges on BSP-Registered Foreign Loan" (Schedule RA- 2.1). The FX selling AAB/NBBSE/Forex Corporation shall duly fill up the originals of the appropriate schedules to record the FX sale ; and 1.b Copy of billing statement from creditor. Amounts that may be purchased shall be limited to maturing amounts on scheduled due dates indicated in the registration letter. Remittance of FX purchased shall coincide with the due dates of the obligations to be serviced, unless otherwise approved by the BSP. or: 2.a BSP letter-authority for the borrower to purchase FX to service specific loan account/s and where applicable, the "Schedule of Foreign Exchange Purchases from the Banking System". The FX selling AAS/NBBSE/Forex Corporation shall record the date/s and amount/s of FX sold on the original BSP letter-authority or where there is an accompanying schedule for FX purchases, on the original of such schedule; and 2.b Copy of billing statement from creditor. Amounts that may be purchased shall be limited to the unutilized balance of the letter authority. Remittance of FX purchased shall coincide with the due dates of the obligations to be serviced, unless otherwise approved by the BSP. 2. Short-term Foreign Currency Loans (with original maturity of up to 1 year) a. Loans from offshore 1.a BSP approval or registration letter showing creditors (banks and loan terms and borrower's receiving copy of non-banks) its report on short-term loans submitted to BSP's International Operations Department (IOD). The FX selling AAB/NBBSE/Forex Corporation shall stamp "FX SOLD", the date/s of sale and the amount/s involved on the original BSP approval/registration letter; and 1.b Copy of billing statement from creditor. Amounts that may be purchased shall be limited to: (a) amounts/rates indicated in the BSP approval or registration letter; or (b) the outstanding balance of the loan indicated in the report, whichever is lower . Remittance of FX purchased shall coincide with the due dates of the obligations to be serviced, unless otherwise approved by the BSP. b. Loans from FCDUs/OBUs 1.a BSP approval or registration letter showing loan temps or certification from the lending bank on the amount outstanding. The FX selling AAB/NBBSE/Forex Corporation shall stamp "FX SOLD", the date/s of sale and the amount/s involved on the original BSP approval/registration letter or bank certification ; and 1.b Copy of billing statement from creditor. Amounts that may be purchased shall be limited to: (a) amounts/rates indicated in the BSP approval or registration letter; or (b) the outstanding balance of the loan indicated in the bank certification, whichever is lower. Remittance of FX purchased shall coincide with the due dates of the obligations to be serviced, unless otherwise approved by the BSP. Or: 2.a For loans not requiring BSP approval/ registration, promissory Note (PN) certified as true copy by the Head of the lending bank's Loans Department and certification from the lending bank: i. on the principal amount still outstanding; ii. that the loan is eligible for servicing with FX purchased from the banking system in line with existing regulations; iii. That the loan was used to finance trade transactions (as well as pre-export costs in the case of FCDU loans of exporters) of the borrower; and iv. The date when the loan account has been reported to the appropriate BSP department/office under the prescribed forms. This may be dispensed for new loans which may not have been reported yet to BSP as of date of application to purchase FX. The FX selling AAB/NBBSE/Forex Corporation shall stamp '"FX SOLD", the date of sale and the amount/s involved on the original certification from the lending bank; and 2.b Copy of billing statement from creditor. Amounts that may be purchased shall be limited to amounts/rates indicated in the bank certification or PN, whichever is lower . Remittance of FX purchased shall coincide with the due dates of the obligations to be serviced, unless otherwise approved by the BSP. Note: For unregistered foreign currency loans/obligations to non-resident financial institutions and FCDU loans not eligible to be serviced with FX purchased from the banking system outstanding as of October 27, 2000 but which may be serviced by Forex corporations, copies of the following documents shall be required: a. Loan agreement/promissory notes; and b. Billing statements from creditor. C. Sales of FX for capital repatriation/remittance of dividend/profits/earnings and outward investments under Sections 32 to 44 of Circular 1389 s.1993, as amended 1. Capital Repatriation of. a. Investment in PSE-Listed 1. If directly registered with BSP or if the securities selling/remitting bank is the registering custodian bank: a. Broker's sales invoice; and b. Original Bangko Sentral Registration Document (BSRD). 2. If the selling/remitting bank is not the registering custodian bank: a. Broker's sales invoice; and b. Original BSRD Letter-Advice from the registering custodian bank. b. Direct Foreign Equity 1. Original BSRD; Investments 2. Proof of Sale or relevant documents showing the amount to be repatriated; in case of dissolution/capital reduction, proof of distribution of funds/assets such as statement of net assets for liquidation; 3. Clearance from appropriate department of the BSP-Supervision and Examination Sector (SES) for banks, or from the Insurance Commission for insurance companies, or from the Department of Energy for oil companies; 4. Detailed computation of the amount applied for in the attached format prepared by authorized officer of investee firm (Attachment 2); and 5. Pertinent audited financial statements. c. Investments in Peso 1. Original BSRD; and Government Securities, 2. Confirmation of Purchase (COP), Money Market Instruments Confirmation of Sale (COS) or Deed of Sale, or 90-day Time Deposits Matured Contract for Money Market Instruments or Matured Certificate of Time Deposit. 2. Remittance of Dividends/ 1. Original BSRD or BSRD Letter-Advice from Profits/Earnings Registering Custodian Bank (if remitting/selling bank is not the registering custodian bank for PSE-listed shares); 2. Schedule showing name/address of investor, BSRD No., gross amount of cash dividend, tax withheld and net amount (for PSE-listed shares); 3. Board Resolution covering the dividend declaration (evidenced by Corporate Secretary's Sworn Certification, for direct equity investments or Dividend Notice, for PSE-listed shares); 4. Audited/Interim Financial Statements covering the dividend declaration period (for direct foreign equity investments); and 5. For direct foreign equity investments, clearance from BSP-SES (for banks), Insurance Commission (for insurance companies), or Department of Energy or the National Power Corporation (for oil/natural gas/geothermal companies). 6. Detailed computation of the amount applied for in the attached format (Attachment 2). 3. Outward Investment 1. A project feasibility study, investment proposal/subscription agreement, bond/stock offering circular and such other documents showing the nature and place of the investment; 2. A written undertaking to inwardly remit and sell for pesos thru AABs the dividends/earnings or divestment proceeds from outward investments funded by FX purchased from AAB as required therein; 3. BSP approval and registration (for outward investment exceeding an aggregate of US$6million per investor per year funded by FX purchased from AABs; 4. Regardless of amount, submission of clearance: (a) from the appropriate department of the BSP-Supervision and Examination Sector (SES) for investments of banks; and (b) from the Insurance Commission for investments of insurance companies; and 5. Copy of investor's latest Income Tax Return (ITR) duly stamped by the BIR. ATTACHMENT Application to Purchase Foreign Exchange Computation Sheet Footnotes 1/ Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or more, as defined in the 1996 IMF Balance of Payments Textbook.