Micro, small and medium enterprises will continue to get government support in the form of tax incentives and easy processing of application for registration with the Board of Investments (BOI) under the 2009 Investment Priorities Plan (IPP).

As stressed in the 2009 IPP specific guidelines, the BOI, the government’s incentives giving body, is promoting the development of MSMEs due to the sector’s contribution to employment generation, countryside development, and in the cultivation of the Filipino entrepreneurial spirit.

“MSMEs are the backbone of economic activity in the Philippines as they constitute more than 98 percent of total enterprises, and also because they are huge employment generator. So it is incumbent upon the government to provide full support to MSME development. In case of the BOI, this is not just a lip service as our full support is reflected in the IPP,” Trade Undersecretary and BOI managing head Elmer C. Hernandez told Entrepreneur.

The Omnibus Investment Code (Executive Order 222) outlines the kinds of fiscal and non-fiscal incentives that registered firms may secure from the IPP. Hernandez added that MSME’s are entitled to full incentives under the law.

BENEFITS

Income tax holiday (ITH) for up to eight years, additional deduction for labor expense, tax and duty exemption on imported capital equipment, tax credit on domestic capital equipment, exemption from contractor’s tax, simplification of customs procedures, unrestricted use of consigned equipment, employment of foreign nationals;

The list also includes: exemption on breeding stocks and genetic materials, tax credit on domestic breeding stocks and genetic materials, tax credit for taxes and duties on raw materials, access to bonded manufacturing/trading warehouse system, exemptions from taxes and duties on imported spare parts, exemption from wharfage dues and any export tax, duty, impost and fee.

The BOI, under the 2009 IPP specific guidelines, is mandated to give assistance to micro, small and medium-sized projects right from the filing of their application for incentives.

This is to ensure that entrepreneurs belonging to the MSME sector will not have a difficult time securing the incentives that they are entitled to either because of bureaucratic red tape, technicalities and documentary requirements, or application fees.

Hernandez said an entrepreneur only needs to go to a BOI field office and fill up the simplified application form. Within the same day, the BOI will approve its registration for incentives.

The filing fee has also been greatly reduced to only P500 for micro enterprises, and P1,000 for small enterprises. The issuance fee, meanwhile, will not go beyond P500 for small enterprises and not more than P1,000 for small-scale businesses. Also, micro entrepreneurs are exempted from application and registration fees, while small enterprises enjoy a 75-percent discount.

“They only need to go to their barangay or town halls and post their notice of filing of application,” Hernandez said.

As added services, Hernandez said the BOI can also assist the MSMEs in the crafting of their feasibility studies, connect them with other investors, match them with prospective buyers here and abroad, and in the sourcing of financing support.

EXPORTERS, TOO

An interesting component of this is the “Homestay” business, covering the development of a chain of accommodation for travelers that would include restoration of historical infrastructures and upgrading of homes and other facilities, implementing a quality system for the homestay network.

Health spas, which covers the establishment and operation of destination spa, resort/hotel spa, and traditional healing and therapeutic centers such as “Philippine Hilot”, “Dagdagay”, and “Ventossa” are also included in the incentives package.

Exporters, hard hit by the global economic downturn, are also qualified. Falling under this category are the production and manufacture of export products, export services, and activities in support of exporters. Hernandez said about 60 percent of the MSMEs that sought incentives from the BOI are export-oriented, mostly in the food processing business.

To help enterprises that are losing money due to the crisis, the BOI included in the 2009 IPP the “Contingency List,” which gives incentives to companies if they would retain investments and maintain the current number of workers, retain investments and increase current number of workers, increase investments and maintain current number of workers, and increase investments and increase the current number of workers.

To qualify under the contingency list, MSMEs need to submit proof showing their number of workers before the crisis and the number of workers at the time of the application for incentives such as certified true copies of SSS contribution and payment return, and BIR Form 1601 – C.

MSMEs must also prove that their operations have been affected by the global economic crisis that impaired their viability as reflected in their audited financial statements.

In areas where there are no BOI field units, entrepreneurs may file their application for incentives in the nearby DTI office.