& Infotech Matters
for the Registration and Adminsitration
Incentives of IT Services
COVERAGE. Projects offering services
both in the domestic and international markets, in the following
activities are eligible for BOI registration:
Software development projects
a. Application software
2. IT enabled services
3. Support and knowledge-based services
4. Business process outsourcing
DEFINITION OF TERMS
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)
as interface 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.
are Operating Systems and Internet browsers and search engines.
IT enabled services cover 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. These also cover services related to
Internet Data Centers.
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
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.
REGISTRATION UNDER E.O. 226
QUALIFICATIONS. Individuals, partnerships or corporations interested
to engage in Information Technology Services (ITS) not yet registered
and the expansion of existing BOI-registered/non-registered projects
may qualify for registration under E.O. 226 and shall be eligible
for incentives thereof.
ITS projects will be considered preferred areas of investments for
the next four years starting from the effectivity of the 2000 IPP.
the activity is listed in the IPP, for Filipino entities (at least
60% Filipino-owned), export commitment is not required.
foreign-owned entities (more than 40% foreign-owned) at least 70%
of total service rendered must be exported. If pioneering, 100%
of services may be 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$200,000.00 which will
be lowered to US$100,000 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.
PIONEER STATUS. To be eligible for pioneer status, a project
must comply with any of the following:
It must utilize new or untried technology
2. It must have a substantial venture capital
3. It will introduce a major innovation in software development
The project cost should be at least P100 Million.
ADMINISTRATION OF INCENTIVES
All registered enterprises engaged in the eligible IT-related projects
shall be entitled to the following incentives:
a. Income Tax Holiday. Article 39(a) of E.O. 226 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 enterprise 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
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 operations.
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.
Additional Deduction on Labor Expense
d. Unrestricted Use of Consigned Equipment
If registered projects are located in a less-developed area as identified
in the Investment Priorities Plan (IPP), the firm shall be granted
pioneer incentives, i.e., an income tax holiday for six