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Here’s what you need to know about a proposed law for innovative startups 

August 16, 2017

Digital Reporter

Cover art Samantha Gonzales

The world is seeing an onslaught of young and promising entrepreneurs, whose success, in large part, is hinged on the revolution of tech.

Social media platform Facebook founded by Mark Zuckerberg in 2004, for example, is already among the largest companies in the world, holding a market cap of $407.3 billion as of May this year. Ride‑hailing platform Uber, online music streaming Spotify, and online marketplace and hospitality service platform Airbnb are also now considered to be Unicorns in the global market.

But building a startup up to that stature is no walk in the park. Beyond the financial struggles, introducing a new enterprise involves a horrendous process of complying with government requirements, not to mention the pressure brought by market validation and constant wooing with investors.

Filipino startups, particularly the tech‑related and innovative ones, may no longer have to struggle in entering the business jungle if Senate Bill No. 1532 or the Innovative Startup Act filed by Sen. Paolo Benigno “Bam” Aquino IV gets enacted.

The bill, filed last Aug. 1, aims to “develop the country’s startup ecosystem” and reduce the barriers to the success of innovative startups by providing development program, tax breaks, and financial and technical assistance.

Under the proposed law, an innovative startup is defined as an enterprise that has been operating for not more than five years and whose gross annual revenue is not over ₱50 million. It should also have a research and development (R&D) budget equivalent to 15% of its total operational cost or a patent or registered software owner.

Here’s what it will bring to the table:


AN ‘INNOVATIVE STARTUP DEVELOPMENT PROGRAM’

The program will support the R&D initiatives of innovative startups and support service providers, promote the participation of innovative startups in international startup events, and link startups to government agencies, academic institutions, or industry partners for product development support.


FREE, EXPEDITED PROCESSES

Free and expedited business permits and certificates processing.


GOVERNMENT AGENCIES’ SERVICES

Free use of equipment, facilities, and services of government agencies, including the Intellectual Property Office of the Philippines.


RESEARCH AND DEVELOPMENT GRANT

R&D grant from the Department of Science and Technology (DOST), Department of Trade and Industry (DTI) or Department of Information and Communications Technology (DICT).


TAX EXEMPTIONS

Exemption from paying income tax, Value Added Tax, creditable withholding tax on income, and expanded withholding tax on its income payment.


VENTURE FUND

Access to “Innovative Startup Venture Fund” worth ₱10 billion, to be administered by DOST.


FIVE‑YEAR VISA

Special visa with five‑year validity to be issued by the Bureau of Immigration.


AIRFARE AND ALLOWANCE FOR INTERNATIONAL TRIPS

Incentives such as free airfare and allowance for startups joining international events or competitions.


The proposed policy also tasks DICT to launch a website that will contain information about statistics, events, programs, and benefits for startups and related enterprises in the country.

In his sponsorship speech, Mr. Aquino, who leads the Senate Committee on Science and Technology, said there are more than 200,000 startups in the Philippines that have a potential to address the country’s problems and contribute to Filipinos’ lives.

He called on lawmakers to pass the bill to “empower our innovators and entrepreneurs with a heart for nation‑building.”

“Let us pass the Innovative Startup Act and encourage our innovative entrepreneurs to create solutions for our nation,” the senator urged.

A staunch advocate for micro‑entrepreneurship in the country, Mr. Aquino has previously pushed for laws dedicated to micro, small and medium enterprises, including the Go Negosyo Act and Youth Entrepreneurship Act.

What are your thoughts about the proposed Innovative Startup Act? Let us know in the comments and we might just include it in our next story.