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Two-Year Tax Breaks Proposed for Philippines' Startups

By Dezan Shira & Associates
Posted: 12th June 2014 09:08
Paolo Benigno Aquino, Chairman of the Senate Committee on Trade, Commerce, and Entrepreneurship, has filed a bill that would grant a tax exemption for startup businesses in the Philippines during their first two years of establishment. According to Aquino, Senate Bill 2217, known as the Startup Business Bill, would provide the opportunity for startups to “get organized and establish their business operations and market base.”

The passing of the bill would legitimize the role of startups in the economy, and acknowledge the state’s commitment to innovation. The bill states: “Startup enterprises (“Startups”) have the potential to spur and spread such innovation. As these enterprises have likewise the appetite to take on more risks, they would fuel creativity and challenge existing ways of doing business. The establishment and growth of startups would therefore be beneficial for more Filipinos who have the innate talent for shaping contemporary ideas while working with limited resources.”

The two-year tax exemption would only apply to startups that are not an affiliate, a subsidiary, or a franchise of any existing company. They must also not have any other existing registered companies, partnerships or businesses in the case of a sole proprietorship.

“They should have at least five percent share with no nominal stockholders and in case of a corporation, a venture capitalist should only have up to fifteen percent of total outstanding shares,” Aquino said.
“Let them grow, and by the end of two years, they will be able to pay the right taxes and join the formal economy,” Aquino stressed. “The idea is not to exempt businesses, but to give them space to grow.”

Chris Devonshire-Ellis of Dezan Shira & Associates comments “This sort of incentive is great news for Philippines entrepreneurs and should also lead to the introduction of seed capital into the Philippines SME market. The country tends to encourage a lot of innovation and imagination amongst many of its bright students and the fact the Government recognises this is a major step forward to enable young talent to develop into tomorrow’s generation of successful and innovative Asian businesses.”
This article was first published on ASEAN Briefing.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy and the United States.
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