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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Based on recent studies, the Philippines is one of the fastest growing startup centers in the world. It is not surprising, considering that Filipinos have been known in different parts of the world for their commendable work ethics and their wide range of skill sets. Conscious of this great potential to speed up the country’s economic growth, the government enacted the Republic Act (R.A.) No. 11337 or the Innovative Startup Act.
The aforesaid law aims to foster inclusive growth through an innovative economy by streamlining government and nongovernment initiatives, in both local and international spheres, to create new jobs and opportunities, improve production, and advance innovation and trade in the country. To this end, the State shall provide incentives and remove constraints aimed at encouraging the establishment and operation of innovative new businesses, businesses crucial to their growth and expansion, and to strengthen, promote, and develop an ecosystem of businesses and government and nongovernment institutions that foster an innovative entrepreneurial culture in the Philippines. (Section 2, R.A. No. 11337)
What is a startup?
According to Republic Act (R.A.) No. 11337 or the “Innovative Startup Act”, a startup is any person or registered entity in the Philippines, which aims to develop an innovative product, process, or business model.
Based on recent studies, the Philippines is one of the fastest growing startup centers in the world. It is not surprising, considering that Filipinos have been known in different parts of the world for their commendable work ethics and their wide range of skill sets.
That’s why, in recent years, we have seen an influx of foreign and local investors in our country who consider the Philippines as a strategic and viable place to start a business, especially one that is geared towards providing innovative products to consumers out there. Innovative products are those goods or services that are new or significantly improved, such as improvements in technical specifications, component materials, software in the product, user friendliness or other functional characteristics (Section 3, R.A. No. 11337).
Thus, conscious of this great potential to speed up the country’s economic growth, the government enacted the R.A. No. 11337 or the Innovative Startup Act.
The aforesaid law aims to foster inclusive growth through an innovative economy by streamlining government and nongovernment initiatives, in both local and international spheres, to create new jobs and opportunities, improve production, and advance innovation and trade in the country. To this end, the State shall provide incentives and remove constraints aimed at encouraging the establishment and operation of innovative new businesses, businesses crucial to their growth and expansion, and to strengthen, promote, and develop an ecosystem of businesses and government and nongovernment institutions that foster an innovative entrepreneurial culture in the Philippines. (Section 2, R.A. No. 11337)
The Department of Science and Technology (DOST), Department of Trade and Industry (DTI), Department of Information and Communications Technology (DICT) shall be the lead agencies that shall assess, monitor, develop and expand the Philippine Startup Development Program. The DTI shall promulgate the rules for the efficient registration and assessment of startup enablers to be registered under the Program. (Section 4, R.A. No. 11337)
Program Benefits and Incentives under the Innovative Startup Act
Section 7 of R.A. No. 11337 provides that host agencies, namely the DOST, DTI, DICT or other national government agency, local government unit, or public academic institution, shall be authorized to provide the following benefits and incentives to startups and/or startup enablers who have passed their selection and application process:
(a) Full or partial subsidy for the registration and cost in the application and processing of permits and certificates required for the business registration and operation of an enterprise with the appropriate local or national government agencies;
(b) Endorsement of the host agency for the expedited or prioritized processing of applications with other government agency;
(c) Full or partial subsidy for the use of facilities, office space, equipment, and/or services provided by government or private enterprises or institutions;
(d) Full or partial subsidy in the use of repurposed government spaces and facilities of the host agency as the registered business address; and
(e) Grants-in-aid (GIA) for research, development, training, and expansion projects.
General Benefits for Participation in Local and International Startup Events
To support and encourage participation in local or international startup events or competitions of members of startups and/or startup enablers, our host agencies shall also be authorized to provide the following benefits and incentives to support members of startups:
(a) Endorsement of the host agency for the expedited or prioritized processing of travel documents, such as, but not limited to, passport and/or visa application;
(b) Full or partial subsidy for fees and charges incurred in the application for pertinent travel documents;
(c) Full or partial subsidy for baggage allowance for materials, equipment, and/or products pertinent to the participation in the local or international startup event:
(d) Full or partial airfare subsidy for roundtrip airfare; and/or
(e) Per diem allowance.
Roles of the DTI, DICT, DOST, and other host agencies
The DTI shall be the agency tasked to initiate and coordinate with national and local government agencies involved with the registration, licensing, certification, including those who levy fees and charges for services subsidized by host agencies, and such other regulatory processes to be undertaken by startups and startup enablers endorsed by host agencies. (Section 7, R.A. No. 11337)
The DTI, DICT, DOST, and other host agencies, through their respective regional and provincial offices, shall promote and facilitate the registration of qualified startups and startup enablers in appropriate Special Economic Zones in the Philippines. (Section 9, R.A. No. 11337)
In addition, the DTI, in coordination with the DICT, DOST, and Board of Investments (BOI), shall also spearhead initiatives to develop the short, medium, and long-term strategies in order to spur investment in, and promote the growth and development of, startups and startup enablers in the Philippines. (Section 10, R.A. No. 11337)
On the other hand, the DTI, in coordination with the BOI, shall promote and facilitate the provision of applicable benefits to current and prospective investors of startups and startup enablers. (Section 10, R.A. No. 11337)
Roles of the Philippine Economic Zone Authority (PEZA) and Investment Promotion Agencies (IPAs)
In consultation and coordination with the DTI, DOST, and DICT, the PEZA shall pursue and promote the creation of Philippine Startup Ecozones, or Special Economic Zones to spur the growth and development of startups and startup enablers through either private initiative, local government initiative with the assistance of the national government, and/or national government initiative consistent with the provisions of Republic Act No 7916, as amended by Republic Act No. 8748, otherwise known as “The Special Economic Zones Act of 1995”, and its implementing rules and regulations.
IPAs are hereby authorized to extend applicable benefits to startups and/or startup enablers subject to the respective rules and regulations promulgated by the IPA for the effective implementation of this provision.
The PEZA and IPAs extending benefits to startups and/or startup enablers shall assist the DTI, DICT, and DOST in training their respective personnel assigned to assist startups and startup enablers in meeting standards and regulations for registration and compliance requirements in Special Economic Zones. (Section 9, R.A. No. 11337)
Role of the BOI
The BOI shall assist the DTI. DICT, DOST, and other host agencies in training their personnel tasked with assisting current and prospective startups and startup enablers to access and maximize benefits and incentives which may be extended consistent with the powers and mandate of the BOI.
What are the government’s sources of funds for these benefits and incentives?
Section 11 of R.A. No. 11337 provides that the government created a Startup Grant Fund (SGF) under each of the following agencies:
(a) Department of Science and Technology:
(b) Department of Information and Communications Technology: and
(c) Department of Trade and Industry.
The government also created a Startup Venture Fund (SVF) under the DTI, to be administered in coordination with the National Development Company (NDC). The SVF shall be used to match investments by selected investors in startups based in the Philippines (Section 2, R.A. No. 11337)
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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