IT PARKS INCENTIVES

1. For IT service providers and semicon firms locating in ecozones under the Philippine Economic Zone Authority (PEZA)
2. For IT service providers and semicon firms locating in:

   1. 1. Special economic zones under the Bases Conversion Development Act Qualification:

      Filipino or foreign-owned enterprises provided at least 70% of income/ production is for export Incentives

      1. 5% on Gross Income Earned in lieu of all local and national taxes
      2. Tax- and duty-free importation of machinery, equipment, raw materials, supplies and all other articles including finished goods
      3. Free flow of articles and unlimited purchase and consumption of tax- and duty-free consumer goods within the zone
      4. Various residency visas to foreign nationals:
         • Temporary Work Permits
         • Subic/Clark Special Work Visa
         • Subic/ Clark Special Investors Visa
      5. Unrestricted entry of foreign investments (no foreign exchange restrictions)
      6. Security and infrastructure of a special economic and freeport zone
      7. Master plan for an integrated IT zone
   2. Special economic zones under the Cagayan Special Economic Zone Act Incentives are similar to those granted to export enterprises under the PEZA.
   3. Special economic zones under the Zamboanga City Special Economic Zone Act Incentives available to enterprises registered therein include those enjoyed by entities registered under the Cagayan Special Economic Zone Act and under the Bases Conversion Development Act.
3. For IT service providers and semicon firms locating outside IT zones, economic zones, freeports and special economic zones

   Qualifications:

   • For Filipino corporations/partnerships/associations (at least 60% Filipino- owned): no export commitment
   • For foreign entities (more than 40% foreign-owned): at least 70% of total production is exported; if pioneering, 100% of production may be sold to the domestic market

   Incentives

   1. Income tax holiday (ITH)
      • For new project with pioneer status: six years with possible bonus of two years
      • For new project with non-pioneer status: four years with possible bonus of three years
   2. Expansion of project for three years
   3. Additional deductions from taxable income
   4. Additional deduction for labor expense
   5. Additional deduction for necessary and major infrastructure works
   6. Others:

   Others:

   1. Tax and duty-free importation of spare parts and supplies
   2. Exemption from wharfage dues and any export tax, duty, impost and fee
   3. Unrestricted use ofconsigned capital equipment subject to posting of re-export bond
   4. Employment of foreign nationals
   5. Simplification of customs procedures

   * A bill is currently pending in Congress which proposes the grant of a maximum 12-year ITH period for pioneer projects subject to compliance with certain conditions. Pioneer IT and ITrelated activities need not comply with the conditions. The bill likewise proposes to provide additional incentives such as Net Operating Loss Carryover, tax and duty exemption of capital equipment importations, investment tax allowance, and additional deductions of R&D and training expenses.

4. For Regional Operating Headquarters (ROHQ)

   Qualifications:

   • Servicing at least two branches, affiliates or subsidiaries in the Asia- Pacific region and other foreign markets
   • Can derive income from undertaking the following qualifying services:
     1. General administration and planning
     2. Business planning and coordination
     3. Sourcing/procurement of raw materials components
     4. Corporate finance advisory services
     5. Marketing control and sales promotion
     6. Training and personnel management
     7. Logistics services
     8. Research and development services and product development
     9. Technical support and maintenance
     10. Data processing and communications; and
     11. Business development

   Incentives

   1. Subject to preferential income tax rate of 10% on taxable income
   2. Subject to applicable branch profits remittance tax
   3. Subject to 10% value-added tax
   4. Exemption from all kinds of local taxes, fees or charges imposed by a local government unit, except real property tax on land improvements and equipment
   5. Tax- and duty-free importation of equipment and materials for training and conferences needed and solely used for the ROHQ functions, and which are not locally available, subject to prior Board of Investments (BOI) approval
5. For Regional Headquarters (RHQ)

   Qualifications:

   • Servicing at least two branches, affiliates or subsidiaries in the Asia-Pacific region and other foreign markets
   • Serves as supervisory, coordination and communications center

   Incentives

   1. Exemption from income tax
   2. Exemption from branch profits remittance tax
   3. Exemption from value-added tax
   4. Sale or lease of goods and property, and zero-rated services to the RHQ
   5. Exemption from all kinds of local taxes, fees or charges imposed by a local government unit, except real property tax on land improvements and equipment
   6. Tax- and duty-free importation of equipment and materials for training and conferences needed and solely used for the RHQ functions, and which are not locally available, subject to prior BOI approval

35 Buchanan St., North Greenhills San Juan, Metro Manila 1502 PHILIPPINES
Tel. Nos. (+63 2) 725-2799, (+63 2) 727-1437 Fax Nos. (+63 2) 725-2799, (+63 2) 727-1437 ext. 104 E-Mail: info@disini.ph

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