2nd Half of 2010 in the Semiconductor Industry

It's mid-June and before you know it, it's gonna be the start of the 2nd Half of 2010. Time really flies fast when your busy with business and stuffs.

Just to recap, Q1 and Q2 has tremendously made a 360 degrees turn around in terms of my business. The once slow and flat line industry for the past 2 years, made a huge turn around and is now on a ramp up. Due to expansion projects, left and right by our key customers, business has been so blessed with orders and more orders. Industry news says that buying of capital equipments in the Semiconductor industry shall continue until 2011.

And for equipment suppliers like me, that is really music to the ears. Really hoping that the 2nd half of 2010 shall indeed be merrier than the 1st half.

TAX BREAKS AND INCENTIVES

DID YOU KNOW THAT...

Enterprises registered with the Philippine Economic Zone Authority (PEZA) are entitled to a holiday from income tax and local taxes for three or eight years. After that, they are subject to 5% tax on gross income (sales less direct costs) in lieu of all local and national taxes. Enterprises that are registered with the Subic Bay Metropolitan Authority (SBMA) or Subic Bay Freeport Zone , which administers the economic zone established by the conversion of the former United States military base in Subic, are also subject to the special 5% tax, but are not entitled to tax holidays. The same benefits are accorded to qualified industries registered with the Clark Development Corporation and located in the Clark Freeport Zone .

To avail of the tax breaks and incentives offered by PEZA an enterprise must register with PEZA and locate their operation in one of the PEZA zones, buildings, IT Parks or Technology Parks. PEZA registrants must generally be export-oriented, with enterprises located inside the zones required to export 100% of their production. In some cases PEZA may approve the sale of up to 30% of production in the domestic market. Full foreign ownership of a PEZA enterprise is allowed provided they are not engaged in activities that appear on the Foreign Investment Negative List . PEZA approval and specific incentives granted are on a case by case basis. Applicants must supply an application for providing information on capital structure, nationality of investors and a feasibility report in accordance with a PEZA prescribed format. Applicants should then expect fast turn around once the application is submitted.

On the other hand, the Board of Investments (BOI) provides tax breaks and other incentives registered entities that engage in activities identified as investment priorities or those which promote the general economic development of the Philippines and those that are exported oriented (where export is more than 50% of production or 70% if the enterprise is more than 40% owned by foreign investors). The BOI, in consultation with the public sector comes up with an Investment Priorities Plan listing these industries.

The main advantage for an eligible BOI registered firm are 3-8 year income tax holidays and 4-6 year exemption from local business taxes for pioneer and non-pioneer industries. To be eligible for BOI incentives foreign investors will need to have an equity investment in a Philippine corporation.

Pioneer and Non pioneer projects have different requirements. 100% foreign owned enterprises may avail of incentives if they engage in pioneer projects, export at least 70% of their total production or undertake projects less-developed areas of the country as identified by the BOI. These enterprises are obliged to attain 60% Filipino ownership within 30 years from registration unless they export or will be exporting 100% of their production. For enterprises engaged in non-pioneer projects, foreign ownership is limited 40%, unless the enterprise will export more than 70% of its annual production.