Where is the Philippines?
What awaits IT and e-commerce investors in the Philippines?
Why should I outsource my business processes or software development activities in the Philippines?
How’s the state of telecommunications in the country?
How’s the power situation?
Is the cost of doing business high?
Will I be protected from software piracy, computer hacking and other cyber crimes in the country?
What quality of life can my family and I expect in the Philippines?
Are foreign investors allowed to own 100% of a business entity?
What are the basic rights and guarantees given for the safety of foreign investments?
What incentives does the government give to foreign locators?
As an investor, what visa can be issued to me?
Which multinationals are now operating in the Philippines?
Where is the Philippines?
The Philippines is an archipelago of more than 7,100 islands in Southeast Asia. It is linked to North America by the Pacific Ocean on its east, which makes it the gateway of the West to Asia. To its north is Japan, Hong Kong, Taiwan and South Korea; to its south, Singapore, Malaysia and Indonesia; and to its west, Thailand. click here for more information
What awaits IT and e-commerce investors in the Philippines?
Investors in IT and e-commerce will find a wealth of incentives and options that suit their specific corporate vision, all set up to achieve the Philippine government’s objective to make the Philippines Asia’s e-services hub. Policies and systems are in place, and the infrastructure and resources, packaged in pioneering IT Parks, for successful e-business in the Philippines are ready for the taking. Landmark legislation such as the E-Commerce Act and its implementing rules and regulations have been enacted in record speedmaking the Philippines one of the first countries in Asia Pacific to concretize the commitment to pushing the knowledge economy and provide a total environment for investors and entrepreneurs in e-commerce. click here for more information
Why should I outsource my business processes or software development activities in the Philippines?
Nowhere else in the world will you find as many highly skilled, productive, hard-working and English-speaking IT and IT-enabled professionals and managers as in the Philippines, at costs that are typically one-tenth of those in the U.S. In the Global New E-Economy Index, a recent landmark study by the leading US-based IT research, advisory services and consulting firm META Group on the technological vitality of 47 nations based on digital economy indicators, the Philippines topped the U.S., India, Australia and all other countries in availability of qualified engineers, skilled IT workers and competent senior managers. It also had the highest net enrollment in public and private higher education institutions for persons aged 17-34. click here for more information
How’s the state of telecommunications in the country?
Since the telecomm industry liberalization in 1993, tremendous growth has taken place. Phone lines are now easily available in key economic areas nationwide, and Metro Manila is widely digitized. High-speed fiber-optic backbones and international gateway facilities are among the minimum standards set for facilities in special IT parks all over the country. Cellular phone service has penetrated the grassroots level to the point that the Philippines is now the “text (or short messaging service) capital of the world” and is positioning to be the WAP capital of the world as well. Videophone services are already available in call centers of the leading carrier, and the country now also has a powerful international communications and broadcast satellite. click here for more information
How’s the power situation?
It’s now adequate in key economic areas nationwide. Foreign locators are particularly assured of clean, uninterrupted power supply in IT parks throughout the country.
Is the cost of doing business high?
Foreign companies that are now outsourcing programming and business processes to the Philippines estimate 30 to 40% business cost savings; call center services, 15 to 30%; and application systems and software development, 35 to 50%. click here for more information
Will I be protected from software piracy, computer hacking and other cyber crimes in the country?
Yes. The Philippines has an intellectual property law that classifies computer software as literary work and penalizes infringement and counterfeiting. The private sector is very vigilant as to its enforcement, getting the National Bureau of Investigation actively involved all the way up to the Presidential Inter-Agency Committee on Intellectual Property Rights. The October 1999 survey by Hong Kong’s Political and Economic Risk Consultancy (PERC) rates the Philippines fourth in Asia (behind Singapore, Japan and Hong Kong) in the strength of the protection given to the owners of intellectual property. click here for more information
Recently signed into law was the Electronic Commerce Act of 2000, which legalizes online transactions, signatures and documents and penalizes cybercrimes. click here for more information
What quality of life can my family and I expect in the Philippines?
The Philippines is the best Asian country in overall quality of expatriate life, according to the March 2000 survey of Hong Kong’s Political and Economic Risk Consultancy (PERC). It ranked third of all countries surveyednext only to Australia and the U.S.–and was ahead of Singapore and Japan. Rated highly were its cultural compatibility with expats; its nightlife; its housing, sporting and recreational facilities; and the quality of healthcare and schools in the country. click here for more information
Are foreign investors allowed to own 100% of a business entity?
Yes, except when the business in question is a financial institution, a mass media entity, an advertising agency, a real estate company, a public utilities firm, or a defense-related concern.
- www.boi.gov.ph/fia.html
What are the basic rights and guarantees given for the safety of foreign investments?
All investors and enterprises are entitled to the basic rights and guarantees provided in the Philippine Constitution, such as:
Right to REPATRIATION OF INVESTMENTS
In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investment in the currency in which the investment was originally made at the exchange rate prevailing at the time of repatriation.
Right to REMITTANCE OF EARNINGS
In the case of foreign investments, the right to remit earnings from the investments in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance
Right to FOREIGN LOANS AND CONTRACTS
The right to remit, at the exchange rate prevailing at the time of remittance, such as may be necessary to meet the payment of interest and the principal on foreign loans and foreign obligations arising from technological assistance contracts
Right to FREEDOM FROM EXPROPRIATION
There shall be no expropriation by the government of the roperty represented by the investments or of the property of enterprises except for public use or in the interest of national welfare and defense and upon payment of just compensation. In such cases, foreign investors or enterprises shall have the right to remit sums received as compensation for the expropriated property in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
Right to NON-REQUISITION OF INVESTMENT
There shall be no requisition of the property presented by the investment or of the property of enterprises, except in the event of war or national emergency and only for the duration. Just compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
What incentives does the government give to foreign locators?
- For IT service providers and semicon firms locating in ecozones under the Philippine Economic Zone Authority (PEZA)
- For IT service providers and semicon firms locating in:
- 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
- 5% on Gross Income Earned in lieu of all local and national taxes
- Tax- and duty-free importation of machinery, equipment, raw materials, supplies and all other articles including finished goods
- Free flow of articles and unlimited purchase and consumption of tax- and duty-free consumer goods within the zone
- Various residency visas to foreign nationals
- Temporary Work Permits
- Subic/Clark Special Work Visa
- Subic/ Clark Special Investors Visa
- Unrestricted entry of foreign investments (no foreign exchange restrictions)
- Security and infrastructure of a special economic and freeport zone
- Master plan for an integrated IT zone
- Qualification
- Special economic zones under the Cagayan Special Economic Zone Act
Incentives are similar to those granted to export enterprises under the PEZA.
- 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
- Special economic zones under the Bases Conversion Development Act
- 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
- Income tax holiday (ITH)
- For new project with pioneer status: 6 years with possible bonus of 2 years
- For new project with non-pioneer status: 4 years with possible bonus of 3 years
- Expansion of project for three years
- Additional deductions from taxable income
- Additional deduction for labor expense
- Additional deduction for necessary and major infrastructure works
- Others:
- Tax and duty-free importation of spare parts and supplies
- Exemption from wharfage dues and any export tax, duty, impost and fee
- Unrestricted use of consigned capital equipment subject to posting of re-export bond
- Employment of foreign nationals
- 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 IT-related 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.
- Income tax holiday (ITH)
- Qualifications
- 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:
- General administration and planning
- Business planning and coordination
- Sourcing/procurement of raw materials components
- Corporate finance advisory services
- Marketing control and sales promotion
- Training and personnel management
- Logistics services
- Research and development services and product development
- Technical support and maintenance
- Data processing and communications; and
- Business development
- Incentives
- Subject to preferential income tax rate of 10% on taxable income
- Subject to applicable branch profits remittance tax
- Subject to 10% value-added tax
- 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
- 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
- Qualifications
- 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
- Exemption from income tax
- Exemption from branch profits remittance tax
- Exemption from value-added tax
- Sale or lease of goods and property, and zero-rated services to the RHQ
- 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
- 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
- Qualifications
As an investor, what visa can be issued to me?
The Special Investor Resident Visa (SIRV) entitles the holder to reside in the Philippines for an indefinite period as long as his investment subsists. Any alien, except restricted nationals under the Foreign Service Code, may apply for an SIRV provided he meets the following requirements:
- He has not been convicted of a crime involving moral turpitude.
- He is not afflicted with any loathsome, dangerous or contagious disease.
- He has not been institutionalized for mental disorder or disability.
- He is willing and able to invest the amount of at least US$75,000.00 in the Philippines.
Which multinationals are now operating in the Philippines?
America Online, Andersen Consulting, Barnes & Noble, Bechtel, Caltex, Citibank, Complete Business Solutions, Fluor Daniel, James Martin, Procter & Gamble, Alitalia, International Red Cross, SGS, Chiyoda, Mitsubishi, Omron, Sumitomo Corporation and 30 other Japanese companies are just some of the multinationals that are outsourcing their software, systems or applications development activities or business processes (technical support, billing, accounting, inventory management, online process ordering, engineering design, human resource management and others) to the Philippines.
Many more have already expressed interest in doing the same. We hope you’ll join them.
Welcome to Asia’s New E-Services Hub.