EXECUTIVE ORDER NO. 226 OF INTERNET SERVICE PROVIDERS

I. DEFINITION

Internet Service Provider (ISP) refers to a business that provides access to and/or internetworking connectivity via the Internet, usually for a monthly fee and may include other Internet-based value added services.

II. COVERAGE UNDER THE YEAR 2000 IPP

Internet Service Provider will fall under IT-enabled Services of the Guidelines for Information Technology Services.

III. REGISTRATION UNDER E.O. 266

A. QUALIFICATIONS

1. It must be registered with the National Telecommunications Commission (NTC) as Value-added Service (VAS) Provider. All applications for registration shall be filed with an endorsement from NTC.

2. To be eligible for non-pioneer status, a project must comply, with all of the following:

a. The project cost should be at least P50 million

b. The following facilities must be present:

· A network which conforms with good engineering standards and practices

· Total bandwidth to the Internet of at least 4 Mbps

· Broadband services or minimum five (5) Points of Presence (PoP) in art least two (2) regions

Companies with non-pioneer status must be at least 60% Filipino-owned.

To be eligible for pioneer status, a project must comply with all of the following:

a. The project cost should be at least P100 million or it must utilize new or untried technology.

b. The following facilities must be present:

· A network which conforms with good engineering standards and practices

· Total bandwidth to the Internet of at least 10 Mbps

· Broadband services not only in the National Capital Region but also in regional markets or minimum ten (10) Points of Presence (PoP) in at least two (2) regions

3. It must provide world-class standards in supporting its individual and corporate clients, such as 24 x 7 Help Desk facilities for technical and administrative support, scalable billing system, technical advisories on viruses, and/or automated web sign-up facilities.

Note:

Registered firms shall be monitored on their compliance with the aforementioned criteria during project implementation.

· Projects which fall to comply with the minimum conditions set on investments cost and technical requirements for pioneer status shall be downgraded to non-pioneer status.

· Projects which fall to comply with the minimum conditions set on investments cost and technical requirements for non-pioneer status shall be required to refund the incentives availed of.

B. ADMINISTRATION OF INCENTIVES

1. All registered enterprise engaged in Internet Services shall be entitled to the following incentives:

a. Income Tax Holiday

Art. 39 (a) of the Omnibus Investments Code of 1987 fully exempts a new engaged firm from income taxes levied by the National Government for a period of six (6) years from commercial operation of pioneer enterprises and four (4) years for non-pioneer, with possible extension of two (2) years but not to exceed eight (8) years subject to compliance with the guidelines for the grant of bonus year.

An expanding activity will be eligible to three (3) years income tax holiday.

b. Employment of Foreign National under Article 39 (h) of E.O. 226

The provisions of the Revised Joint Circular of the Department of Tourism, Department of Labor and Employment and the Bureau of Immigration and Deportation on the foreign nationals in the functions specified hereto, however, shall be strictly observed.

c. Additional Deduction on Labor Expense

d. Unrestricted Use of Consigned Equipment

2. If the center of operations of the registered project is located in less developed area as identified in the Investment Priorities Plan, the firm shall be granted pioneer incentives, i.e. Income Tax Holiday (ITH) for six (6) years.

C. MONITORING AND SUPERVISION

In accordance with the provisions of E. O. 226, registered enterprises shall strictly adheres to the general and specific terms and conditions of registration. Non-compliance shall be subject to fines and penalties in accordance with the Rule XXVIII of E.O. 226 Implementing Rules and Regulations.