GUIDELINES FOR THE REGISTRATION
AND ADMINISTRATION OF INCENTIVES UNDER
E.O. No. 226 OF INFORMATION TECHNOLOGY SERVICES

I. COVERAGE

The following Information Technology projects offering service both in the domestic and international market are eligible for BOI registration:

► IT Services

► IT-enabled Services

► ICT Support Services

II. DEFINITION OF TERMS

1. IT-Services include activities such as IT project management, application systems development, applications services providers, web development and management, database design and development, computer networking and data communications, software development (system software, middleware, application software), and ICT facilities operation/management.

2. IT-enabled Services refer to business lines that can be transformed through the means of information technology. These include activities such as business process outsourcing and shared services, engineering design, animation and content creation, knowledge management, remote education, market research, travel services, finance and accounting services, human resource services, and other administrative service (e.g., purchasing).

3. ICT Support Activities cover activities such as research and development of high value-add ICT products and services, education and manpower development in ICT, incubation of IT service providers, provision of Internet services, community access, and electronic governance in support of GISP.

III. REGISTRATION UNDER E.O. 226

A. QUALIFICATIONS:

· Individuals, partnerships or corporations interested to engage in Information Technology Services (ITS) not yet registered and the expansion of existing BOI-registration/non-registered projects may qualify for registration under E.O. 226 and shall be eligible for incentives thereof.

· All ITCS projects will be considered preferred areas of investments for the next four years starting from the effectivity of the 2001 IPP.

· Since the activity is listed in the IPP, for Filipino entities (at least 60% Filipino-owned), export commitment is not required.

· For foreign entities (more than 40% foreign-owned), at least 70% of total services rendered must be exported. If pioneering, 100% of services rendered to the domestic market. Provided, however, that the firm complies with the requirement under the Foreign Investments Act that the paid – up capital is at least US $200,000 which will be lowered to US $100,00 if (1) the project involves advanced technology as determined by the Department of Science and Technology or (2) hires at least fifty (50) direct employees.

B. PROCEDURE FOR REGISTRATION:

· The application shall include beside the information required under BOI Form No. 501 (Application for Registration), a project feasibility study,

· 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:

· It must utilize new or untried technology.

· It will introduce a major innovation in software development.

· The project cost should be a least P100 million.

D. NEW AND EXPANSION PROJECTS

To adopt policies on project type as defined under the 2001 Investment Priorities Plan for purposes of classifying projects as new or expansion.

IV. ADMINISTRATION OF INCENTIVES
1. 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 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; or

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 SUPERVISION

In accordance with the provision of E.O. 226, registered enterprises shall strictly adhere to the general and specific terms and conditions of registration. Non-compliance shall be subject to fines and penalties in accordance with Rule XXVIII of E.O. 226 Implementing Rules and Regulations.