Business Process Outsourcing (BPO)Industry in the Philippines: List of Incentives

            Today, the Philippines isknown globally for its booming business process outsourcing (BPO) industry. Labor costs are not only cheap in the country, but the Filipinos are very talented as well. The premium given by their culture to education gives birth to knowledge workers that are armed with multiple degrees, thus making the workforce highly reliable in terms of quality of outputs. The minimal language barrier likewise provides them a competitive edge over the nationals of non-English speaking countries. 

            Legal and medical transcriptioncompanies, call center businesses, and similar others are few examples ofbusiness process outsourcing activities rampant in the country. Since the onslaught of these businesses contribute much to the increase of employment opportunities as well as corresponding increases in revenues, the government through the Philippine Economic Zone Authority (PEZA) has implemented several measures aiming to attractmore foreign investments in the BPO industry.

            With respect to immigration, registration in the Philippine Economic Zone Authority (PEZA) entitles the BPO company to the following incentives under the PEZA Act:

• Permanent resident status—foreign investors, their spouses and dependent children under 21 years of age with initial investments of at least USD 150,000.00 shall be granted an immigrant status.  Therefore, they are allowed to enter freely and travel within the Philippines even without prior authorization from the Bureau of Immigration.
• Temporary working visa—aliens or foreign executives possessing highly technical skills not possessed by any Filipino employee as certified by the Department of Labor and Employment, are eligible for this type of visa.
• Temporary resident visas—aliens who have been issued working visas may likewise be issued temporary resident visas together with their spouses, and dependent children under 21 years of age. Their residences may be established within the economic zone.
• Special Visa for Employment Generation—aliens may likewise avail of this type of visa provided the following conditions mandated by MEMORANDUM CIRCULAR NO. MCL-09-001 are met:
1. Interest in the entity, firm, partnership or corporation that conducts business process outsourcing activities;
2. Interest involves an exercise of acts of management with authority to employ, promote, and dismiss employees;
3. The entity, firm, partnership or corporation above employs at least 10 full-time/ regular Filipino workers on a long term basis and must be a real and on-going affair requiring daily supervision; and
4. Genuine intention on the part of the alien to remain indefinitely in the country.

Other incentives provided by the PEZA Act that are relevant to the growth of BPO companies in the country are as follows:

• Income Tax Holiday—successfully registered outsourcing companies shall be granted an exemption from corporate income tax for four (4) years for Non-Pioneer IT Enterprises, or six (6) years for Pioneer IT Enterprises;
• Option to pay a special 5% tax after the period of Income Tax Holiday—the 5% rate shall be deducted from the company’s gross income. This shall be in place of all national and local taxes, except for real property taxes imposed on land owned by developers;
• Exemption from payment of import duties and taxes--imported machinery and equipment as well as raw materials are covered by the exemption from the mentioned customs duties;
• Additional deduction equivalent to 50% of training expenses—said deduction shall be chargeable against the 3% share of the national government in the special 5% tax on gross income; and
• Other incentives, as may be determined by the PEZA Board

Indeed, the benefits and incentives awaiting a foreign company interested in establishing another BPO-related business in the Philippines are not only numerous but also quite helpful in implementing cost-cutting measures.