BPO and ITES fall under Gov’t Investment Priorities

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BPO and ITES INCENTIVES

The business process outsourcing (BPO) and information technology-enabled services (ITES) sectors fall under the government’s Investment Priorities Plan, a list of promoted areas of investments issued annually by the Board of Investments (BOI) under the Department of Trade and Industry (DTI). As such, investors in the local information and communications technology (ICT) industry enjoy fiscal incentives such as income-tax holidays, exemption from taxes and duties on spare parts, additional deductions from taxable income, and exemption from wharfage dues and export taxes, duties, imposts, and fees. The government’s investment policies likewise provide non-fiscal incentives to ICT investors, which include employment of foreign nationals in supervisory, technical, or advisory positions; simplified customs procedures; and duty-free importation of consigned equipment.

The Philippine Economic Zone Authority (PEZA, www.peza.gov.ph) is a government corporation set up to oversee the promotion of world-class economic zones (ecozones) and the establishment of ready-to-occupy locations for foreign investments. The agency has put in place additional incentives for ecozone locators and IT investors, developers, and operators.

For ecozone developers and operators, the following incentives are available:

* Income-tax holiday
* Incentives under the Build-Operate-Transfer Law (BOT Law), including government support for accessing official development assistance and other sources of financing
* Vital off-site infrastructure facilities
* Option to pay a special 5% gross income tax, in lieu of all national and local taxes
* Permanent resident status for foreign investors and immediate family members
* Employment of foreign nationals
* Assistance in the promotion of economic zones to local and foreign locator enterprises

For ecozone and IT locators, the following incentives are offered:

* Income-tax holiday or a four-year exemption from corporate income tax, extendable up to eight years, with the option to pay a special 5% tax on gross income in lieu of all national and local taxes after the tax holiday
* Exemption from duties and taxes on imported capital equipment, spare parts, supplies, raw materials
* Domestic sales allowance equivalent to 30% of total sales
* Exemption from wharfage dues and export taxes, imposts, and fees
* Permanent resident status for foreign investors and immediate family members
* Employment of foreign nationals
* Simplified import and export procedures
* Other incentives under Executive Order 226 (Omnibus Investment Code of 1987), as may be determined by the PEZA Board

(Source: “PEZA Incentives”)

The Board of Investments, an attached agency of the Department of Trade and Industry (DTI), is the lead government agency tasked with promoting investments in the Philippines. The BOI assists local and foreign investors in appropriate and profitable areas of economic activities and offers a separate range of incentives to ICT investors, which include the following:

* Income-tax holiday
* Exemption from taxes and duties on imported spare parts
* Exemption from wharfage dues and export taxes, duties, imposts, and fees
* Tax credits
* Additional deductions from taxable income

(Source: “BOI Incentives”)