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v. MISCELLANEOUS INFORMATION
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As mentioned, the government’s with the participation of
the business sector, seeks to develop the country’s potential
to become Asia’s E-Services Hub. In the 2001 Philippine Investments
Priority Plan, information and communication technology (ICT, for
brevity), particularly IT services, IT-enabled services, ICT support
activities, and IT parks, are included in the national priority list.
Any firm desiring to undertake investment and development projects
in this field shall be entitled to the incentives provided for in
the Omnibus Investments Code of 1987 (i.e., those given to BOI-registered
firms; see discussion above). This echoes the government’s commitment
to use IT as one of its strategies in achieving industrial and technological
development as envisioned by the Philippine MTPDP 1998-2004.
Consistent with this strategy, the Information Technology and
Electronic Commerce Council (ITECC) was formed by the government
to spearhead the efforts in turning the country into a major IT
center. The ITECC is a government-private sector partnership composed
of high-level officials from the government and private sectors.
It establishes comprehensive plans, strategies, and policies that
shape the Philippine IT environment. To emphasize the government’s
determination in developing the IT sector, the President of the
Philippines herself has chosen to chair the ITECC (for more information,
visit http://www.itecc.gov.ph).
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A. |
I.T. Services |
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Pursuant to the policy of encouraging more investments
in the Philippine IT sector, the government recently issued a framework
of guidelines for the registration and administration of incentives
for IT services under the Omnibus Investments Act of 1987. The guidelines
cover the following projects offering services domestically and internationally
which are eligible for BOI registration: |
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Software development projects |
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a. Application software -- refers to the development
of packaged software programs that provide solutions to specific industry
of business problems and to problems across industries
b. Middleware projects -- refers to the development of computer programs
that are used as interface among disparate application systems, or
to develop and manage new applications that are robust, scalable,
and highly available
c. System software -- refers to the development of operating system-type
and software tools-type packaged programs |
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2. |
IT-enabled services |
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3. |
Support and knowledge-based services |
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4. |
Business process outsourcing services |
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Individuals, partnerships, and corporations interested to engage in
IT services not yet registered with the BOI, and businesses that plan
to expand its existing BOI registered projects may qualify for registration
under the Omnibus Investments Code. Enterprises the majority of which
equities are owned by foreigners, shall be allowed to engage in IT-related
endeavors in the Philippines, provided that they undertake pioneer
projects or export 70% of their output. An enterprise/project is granted
a pioneer status when any of the following circumstances is met: |
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1. |
It utilizes new or untried technology; |
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It has substantial venture capital; |
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It introduces major innovation in software development; or |
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Project cost is at least PhP100 million. |
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An application for registration under the guidelines for IT services
must be accompanied by a project feasibility study and must strictly
comply with the requirements provided in the Omnibus Investments Act
of 1987, its implementing rules and regulations, and the 2001 Investments
Priority Plan. As soon as such application is approved, the registered
IT enterprise shall be entitled to the following incentives: |
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1. |
Income tax holiday |
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a. Income tax exemption for --
· Six (6) years from commercial
operation of pioneer enterprises
· Four (4) years from
commercial operation of non-pioneer enterprises
b. Possible extension of said periods for two (2) to eight (8) years
in any of the following instances:
· Ratio of imported
and domestic capital equipment to the number of workers to the project
does not exceed US$10,000.00 to one (1) worker
· Net foreign
exchange savings or earnings amount to at least US$500,000.00 annually
during the first three (3) years of operation |
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2. |
Employment of foreign nationals under the circumstances
provided in the Omnibus Investments Code of 1987 (see discussion above) |
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Additional deduction on labor expense |
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4. |
Unrestricted use of consigned equipment |
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It should be noted that the aforementioned incentives shall be in
addition to the incentives given under the Omnibus Investments Act
of 1987 provided that the firm in question is a BOI-registered enterprise. |
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B. |
I.T. Parks |
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Aside from the incentives extended by the BOI to certain
IT enterprises and projects, the PEZA also provides for similar privileges
to enterprises that undertake IT activities and/or situate themselves
in approved IT parks.
The PEZA Board of Directors issued a resolution (Resolution No.
99-264, October 1999) setting the guidelines for the establishment
and operation of IT parks. An IT park is an area, classified as
a special economic zone, that has been developed into a complex,
capable of providing infrastructure and other support facilities
required by IT enterprises, including amenities required by professionals
and workers involved in IT enterprises. To date, there are nine
(9) approved and/or proclaimed IT parks, covering a total area of
approximately 113 hectares, the majority of which are situated in
the Metropolitan Manila area. The following is a list of approved/proclaimed
IT parks.Click Here.
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The PEZA allows the establishment of an IT park in any
suitable location, the only limitation being that if the same shall
be established within the Metropolitan Manila area, i.e., Manila,
Quezon City, Caloocan City, Makati City, Pasay City, Mandaluyong City,
Las Piñas, Marikina, Pasig City, Valenzuela, Parañaque,
Muntinlupa, Malabon, Navotas, Pateros, San Juan, and Taguig, only
service-type projects are allowed with no manufacturing operations.
Generally, an IT park must at least have a minimum area of five (5)
hectares. However, those to be established in the Metropolitan Manila
area must have an available business area of at least 5,000 square
meters. The following PEZA-registrable activities may be situated
in an IT park: |
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Software development for business, e-commerce, education,
and entertainment |
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Content development for multimedia or internet purposes |
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Hardware design, prototype production, and other related activities |
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Knowledge and computer-based support activities (e.g., software
support, data encoding and conversion, internet facilitation, systems
integration, project implementation, IT consultancy, call center) |
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Research and development services |
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Manufacturing facilities (for IT parks established outside Metro
Manila) |
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Any person or entity interested in developing an IT
park may do so by following the procedure prescribed by the PEZA.
Generally, an IT park must have the following amenities and features: |
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High-speed fiber-optic telecommunication backbone and
high-speed international gateway facility or wide-area network, or
any high-speed data telecommunications system that may become available
in the future |
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Clean and uninterrupted power supply |
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Computer security and building monitoring and maintenance system |
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May provide for IT business and technology incubation centers |
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An IT park becomes operational as soon as the required
Presidential Proclamation is issued.
Owners/developers of IT parks located within Metro Manila are not
entitled to PEZA incentives, unless said owners/developers are already
covered by Presidential Proclamations or had secured a PEZA approval
prior to these guidelines. On the other hand, owners/developers
of IT parks located outside of Metro Manila are entitled to PEZA
incentives, which include: |
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1. |
Income tax holiday |
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a. Generally, for four (4) years
b. Six (6) years when IT park located in less developed areas, as
determined in the Investments Priority Plan |
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After the lapse of income tax holiday period, optional
special tax of 5% on gross income earned from enterprises located
in the IT park in lieu of all national and local taxes except real
property taxes |
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Permanent resident status for foreign investors with initial investments
of US$150,000.00 |
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Employment of non-resident aliens required in the IT operations |
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Simplified customs procedures |
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May avail of incentive under the Build-Operate-Transfer Law (includes
government support for accessing Official Development Assistance and
other financing sources) |
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C. |
I.T. Enterprises |
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For IT enterprises, i.e., company operating or offering IT services,
they can seek PEZA Board Approval and registration for availment of
incentives under the Omnibus Investments Code of 1984 provided that
the following registration requirements are met: |
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1. |
Duly accomplished PEZA application form |
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Corporate profile |
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Certificate of Registration with the Securities and Exchange Commission
and updated Articles of Incorporation |
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Board resolution authorizing the filing of application with PEZA
and designating authorized representative/s |
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Project brief |
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Upon registration, said enterprise shall be entitled
to the following incentives, aside from the incentives provided for
in the Omnibus Investments Code of 1987 and the Special Economic Zone
Act of 1995 as may be determined by the PEZA Board: |
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Income tax holiday |
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a. Four (4) years for non-pioneer IT enterprises
b. Six (6) years for pioneer IT enterprises |
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After the lapse of income tax holiday period, optional
special tax of 5% on gross income earned, in lieu of al national and
local taxes, except real property tax |
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a. A deduction of equivalent to 50% of the training expenses, charged
against the 3% national government share in this optional special
tax |
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Exemption from import duties and taxes imposed on imported machinery,
equipment, and raw materials |
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Permanent resident status for foreign investors with initial investments
of at least US$150,000.00 |
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Due regard must also be given to the prevailing wage
rates. In the Philippines, such rates may vary across regions. As
of May 2003, the National Capital Region, i.e., Metropolitan Manila,
imposes the highest daily minimum wage rate at PhP250.00 (approximately
US$4.75), with a ceiling of PhP290.00, while the Autonomous Region
in Muslim Mindanao (composed of the provinces of Lanao del Sur, Maguindanao,
Sulu, and Tawi-Tawi) the lowest at PhP140.00 (approximately US$2.50).
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D. |
Summary Checklist Prior to setting up Business
in the Philippines |
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In fine, investors setting up business in the country have to comply
with the above general requirements. The following checklists identify
the requisites and the agencies in charge. Businesses must check
if they comply with registration for the following. Click
Here.
Checklist for Utilities and Pre-Operation Requirements. Click
Here.
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