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GUIDELINES FOR THE REGISTRATION AND ADMINISTRATION OF INCENTIVESUNDER EXECUTIVE ORDER NO. 226 OF INFORMATION TECHNOLOGY SERVICES I. COVERAGEProjects offering services both in the domestic and international market, in the following activities are eligible for BOI registration: - Software development projects
-IT enabled services -Support and knowledge - based services -Business process outsourcing II. DEFINITION OF TERMS1. Software development projects may be subdivided into three categories: a.)Application software products refer to the development of packaged software programs that provide solutions to problems specific to an industry or business (such as banking, manufacturing, research and development works, etc.). These also include programs that could address problems and functions across industries (such as human resource management, payroll system, project management and other office related activities). b.) Middleware products are computer programs that are used: (a) asinterface among disparate application systems (e.g., web – based applications and mainframe – based or legacy applications; or (b) to develop and manage new applications that are robust, scalable and highly available. c.) System software products pertain to the development of operating system-type and software tools-type packaged programs. Included are Operating Systems and Internet browsers and search engines. 2. IT - enabled services cover providers of services related to data encoding, digital directories, digital catalogues, legal records, financial and accounting records, hospital and medical records, engineering and design (e.g., computer-aided structural design), customer-interaction services (e.g., message handling, call centers, help desk), unified messaging services and voice over IP. 3. Support and knowledge - based services refer to other types of IT-related professional services, including but not limited to, provision of application or systems as in application service provider or ASP, consulting services, software maintenance services, information systems planning, computer and systems audits and other similar services. 4. Business process outsourcing (BPO) services form a significant part of major business process or operating function in a business enterprise where the services are performed by another enterprise which is located remotely from it and the services are rendered regularly and continuously, mainly at the service providers’ site and are delivered electronically to the client and/or to other recipients of the services on the clients’ behalf. III. REGISTRATION UNDER E.O. 226A. QUALIFICATIONS: Individuals, partnerships or corporations interested to engage in Information Technology Services (ITS) not yet registered and the expansion of existing BOIregistered projects may qualify for registration under E.O. 226 and shall be eligible for incentives thereof. All ITS projects will qualify for BOI registration four (4) years from 2000 IPP. For majority foreign - owned enterprises: Only projects with pioneering status shall be allowed to offer services to the local market; otherwise, the registered foreign-owned firm shall comply with the minimum 70% export commitment. B. PROCEDURE FOR REGISTRATION:1. The application shall include beside the information required under BOI Form No. 501(Application for Registration), a project feasibility study. 2. All application for registration shall be in accordance with Executive Order No. 226 and its implementing rules and regulations as well as with Investments Priorities Plan. C. PIONEER STATUS To be eligible for pioneer status, a project must comply with any of the following: 1. It must utilize new or untried technology. 2. It must have substantial venture capital. 3. It will introduce a major innovation in software development. 4. The project cost should be at least P100 million. IV. ADMINISTRATION OF INCENTIVES1. All registered enterprises engaged in the eligible IT related projects shall be entitled to the following incentives: a. Income Tax Holiday Art.39(a) of the Omnibus Investments Code of 1987 fully exempts a new registered firm from income taxes levied by the National Government for a period of six (6) years from commercial operation of pioneer enterprises and four (4) years for non – pioneer, with possible extension of two (2) years but not to exceed eight (8) years. A bonus year may be granted in each of the following cases: 1) the ratio of total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one (1) worker; or 2) the net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three (3) years of operation. b. Employment of Foreign Nationals under Article 39 (h) of E.O. 226 The provisions of the Revised Joint Circular of the Department of Tourism, Department of Labor and Employment and the Bureau of Immigration and Deportation on the foreign nationals in the functions specified hereto, however, shall be strictly observed. c. Additional Deduction on Labor Expense d. Unrestricted Use of Consigned Equipment 2. If registered projects are located in a less developed area as identified in the Investment Priorities Plan, the firm shall be granted pioneer incentives, i..e., an Income Tax Holiday (ITH) for six (6) years. V. MONITORING AND SUPERVISIONIn accordance with the provisions of E.O. 226, registered enterprises shall strictly adhere to the general and specific terms and conditions of registration. Noncompliance shall be subject to fines and penalties in accordance with Rule XXVIII of E.O. 226 Implementing Rules and Regulations. ISOID/IT Services Guidelines |
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