E-Commerce & Infotech Matters

GUIDELINES for the ESTABLISHMENT and
OPERATION of IT Parks
(Resolved under PEZA BR No. 99-264)

A. DEFINITION. Information Technology or IT is the collective term for the various technologies involved in processing and transmitting information which include computing, multimedia, telecommunications, microelectronics and their interdependencies. Also called "informatics" or "telematics", the term IT now more often refers to the convergence of various information-based, broadcast, and mass media communication technologies (NTC, 1997).

B. LOCATION. IT Parks may be located in any suitable location provided that in the National Capital Region (NCR), IT Parks shall be allowed to serve as locations only for service-type projects with no manufacturing operations.

C. AREA. IT Parks shall have a minimum area of five (5) hectares.

D. REGISTRABLE ACTIVITIES. IT Parks shall serve as locations for the following PEZA registrable activities:

1. Software development for business, e-commerce, education and entertainment;

2. Content development for multimedia or internet purposes;

3. Hardware design, prototype production and related activities;

4. Knowledge and computer-based support services activities such as, but not limited to, the following:

Regional/worldwide software support Data encoding and conversion Internet facilitation Systems integration § Project implementation IT consultancy Call center

5. Research and development services;

6. Other related IT and computer-based services / activities as may be identified and approved by the PEZA Board;and

7. Manufacturing facilities for IT Parks outside of NCR.

E. INFRASTRUCTURE REQUIREMENTS. Developers of IT Parks shall install sufficient infrastructures and utilities to ensure that IT service exporters shall have access to the following:

1. High-speed fiber-optic telecommunication backbone and high-speed international gateway facility or wide-area network (WAN);

2. Clean, uninterrupted power supply;

3. Computer security and building monitoring systems (e.g. computer firewalls, encryption technology, fluctuation controls, etc.);

4. IT Research and development center and educational facilities;

5. IT business and technology incubation centers which will provide prospective locators not only with ready-to-occupy physical facilities for office and production spaces but also services needed by IT service exporters (e.g. secretarial, communications, administrative and other support services).

The IT Park may also provide facilities and services catering to the needs of IT service exporters, and their executives and personnel, as follows:

1. Executive and staff housing/accommodations;

2. Conference facilities, seminar/training/exhibit rooms and other facilities and services for business group activities;

3. Physical fitness, health improvement, medical and sport facilities;

4. Facilities and services for social and recreational activities; and

5. Other facilities that complement the IT community's educational, social and cultural requirements.

F. INCENTIVES FOR IT PARKS DEVELOPERS / OPERATORS. IT Parks Developers/Operators shall qualify for availment of the following incentives, subject to such conditions as may be prescribed by the PEZA Board:

1. Income Tax Holiday (ITH), subject to the provisions of Executive Order No. 226 (E.O. 226) and the Investment Priorities Plan (IPP)

a. Four (4) years for IT Parks located outside the National Capital Region, the Provinces of Cavite and Laguna, as provided under EO 226 and the IPP;

b. Six (6) years for IT Parks located in less developed areas identified in the IPP. Developers/Operators of IT Parks not entitled to the ITH may avail of the Special 5% tax on gross income incentive in lieu of national and local taxes.

2. For IT Park Developers/Operators entitled to the ITH, option to waive the ITH in favor of immediate availment of the five percent (5%) gross income tax incentive, in lieu of all national and local taxes, except real property tax on land owned by developers. Otherwise, the said 5% gross income tax scheme shall apply after the expiration of the ITH period;

3. Permanent resident status for foreign investors and immediate family members with initial investment of at least US $ 150,000.00, subject to such guidelines as may be prescribed by the PEZA Board

4. Employment of foreign nationals; and

5. Simplified Customs procedures.

G. INCENTIVES FOR IT SERVICE EXPORTERS AND EXPORT PROCEDURES OF IT-RELATED PRODUCTS. IT service exporters and export procedures of IT-related products shall quality for availment of the following incentives, subject to such conditions as may be prescribed by the PEZA Board:

1. Income Tax Holiday (ITH) for firms located in IT Parks for the period as follows:

New registered pioneer firms - six (6) years from commercial operations New registered non-pioneer firms - four (4) years from commercial operations Expanding firms - three (3) years from commercial operations

IT service type exporters locating in the National Capital Region may also qualify for availment of the ITH.

2. Exemption from all local government imposts, fees, licenses and taxes. However, during the ITH period, the enterprise shall pay Real Property Tax except on:

(a) machinery owned by zone registered enterprises which are actually installed and operated in the park for the first 3 years of operation; and

(b) production equipment or machinery, not attached to real estate, used directly or indirectly in the production, assembly or manufacture of the registered product of the zone registered enterprise;

3. After the ITH period, the option to avail of exemption from National and local taxes, in lieu thereof, the enterprise shall pay 5% tax on gross income earned;

4. Exemption from duties and taxes on imported capital equipment, spare parts, raw materials and supplies;

5. Exemption from wharfage dues, export tax, impost or fee;

6. Additional deduction equivalent to 50% of training expenses, chargeable against the 3% national government share in the 5% gross income;

7. Unrestricted use of consigned equipment;

8. For the five years of operation, additional deduction equivalent to 50% of the wages paid corresponding to the increment in the number of direct labor for skilled and unskilled workers, subject to such conditions as may be prescribed by the PEZA Board.

9. Permanent resident status for foreign investors with initial investment of at least US $150,000.00, subject to such guidelines as may be prescribed by the PEZA Board;

10. Employment of foreign nationals;

11. Domestic sales allowances equivalent to 30% of total export sales, subject to such conditions as may be prescribed by the PEZ Board;

12. Exemption from SGS inspection; and

13. Simplified Customs procedures.

H. INCENTIVES FOR FACILITIES/UTILITIES ENPERPRISES WITHIN THE IT PARK. Subject to certain conditions that may be prescribed by the PEZA Board, a facility and/or utility enteprise within the IT Park shall be granted the following incentives:

1. Option to pay a special 5% tax on gross income earned, in lieu of all national and local taxes;

2. Additional deduction equivalent to 50% of training expenses, chargeable against the 3% national government share in the 5% tax on gross income, subject to PEZA Board approval;

3. Permanent resident status for foreign investors with initial investment of US $150,000.00, subject to such guidelines as may be prescribed by the PEZA Board;

4. Employment of foreign nationals;

5. Simplified Customs procedures; and

6. Incentives under Book 1 of EO 226 as may be determined by the PEZA Board in accordance with the pertinent provisions of EO 226 and the Investment Priorities Plan.

Should the Developer/Operator decide to provide the utility requirements (power, telecommunications, water, etc.) of the IT Park, it should be required to create a new and separate entity to handle the said undertaking. The said entity, upon registration with PEZA, shall be entitled to the above-mentioned incentives.