Ashley Uy Understanding the Innovative Startup Act

Understanding The Innovative Startup Act

I was at a rustic cafe in Bohol drinking some local sikwate and was looking for something to do while thinking back on my experience in the previous months’ Techstars APAC Summit in Thailand. That event gave me a lot of perspective, as you’ve noticed in my last few posts, and being with the people there made me realize that I didn’t know enough about the Philippine government’s plans on supporting and developing startups in the legislative level.

I decided then to spend that afternoon to do some studying and I was pleasantly surprised that I had a starting point. In my research, I found this press release from the official website of the Philippine Senate announcing the approval of the Innovative Startup Act. It was recent, in May, and I recall having the opportunity to review the bill before it was passed as community members were encouraged to do so by The Office of Senator Bam Aquino, the senator who authored the bill. Unfortunately at the time, I was admittedly too ignorant so now I hope to make up for it by sharing what I’ve learned.

The blogpost is quite long. Want to go straight to reading the benefits? Click me.

When can a bill be passed as a law?

A big shoutout to Jose Cortez for promptly answering my questions. From him, I got a quick crash course on the country’s legislative process and I found this article that supplemented my learning.

In summary, the proposal of a bill can be written by someone in one of two houses: the House of Representatives or the Senate. Anyone can suggest a bill, be it the President or the masses, but only a Congressman or a Senator can file a bill.

Once a bill is filed, it goes through two sets of three readings. The first set of three readings will be through the house that filed the bill. In this case, the Innovative Startup Act was submitted by Senator Bam Aquino so it first goes through three readings with the Senate. This process alone takes some time to finish. To give some context, the bill was authored on July 2017 and has only finished it’s round of three readings in the Senate on May 2018. That’s 10 months.

Now, the bill will be sent to the other house, in this case to the House of Representatives, and go through the same three readings again. This is where the Innovative Startup Act is right now.

After both houses have assessed the bill, it is sent to the Bicameral Conference Committee to settle any debates or conflicts, if any. And once that’s done, the bill is ratified and sent to the President for his approval.

What does the Innovative Startup Act say?

I’ve broken down the act in five parts so that we’re able to better grasp the contents and understand the effects of each section. Again, the objective of this blogpost is to provide more clarity to the most number of people interested in learning more about this bill so we may have a conversation and better help the implementation of this bill when, or if, it gets passed as a law.

The Innovative Startup Act establishes the Innovative Startup Development Program

This section of the bill mandates the Department of Science and Technology (DOST), Department of Information and Communications Technology (DICT), and/or the Department of Trade and Industry (DTI) to create programs under the Innovative Startup Development Program banner to provide benefits and incentives to Innovative Startups and Support Service Providers.

The bill only defines the objectives of the program. Steps on implementation and decisions on how the program is implemented will depend on the DOST, DICT, and DTI.

Goals for the program are related to:

  • Creating platforms for startups that introduces them to possible government and corporate partners that can hopefully help their businesses scale
  • Providing support to startups in international competitions
  • Promoting local startups in international conferences
  • Amending policy and regulations to remove undue restrictions the affect the growth of startups

The benefits of being an Innovative Startup or a Support Service Provider

Being recognized as an Innovative Startup or a Support Service Provider by the DOST, DICT, or DTI will entitle you to a lot of benefits. The whole of Article 2 of the bill talks about this but just to give a quick rundown:

  • Waived or refunded fees when applying for government permits or certification
  • Processing of government documents and permits are done faster
  • Exemption from fees for using government facilities
  • Access to grants for research and subsidy for Visa application
  • Access to subsidies or reimbursement for expenses to join international competitions
  • Income Tax exemptions, VAT exception for the sale of goods, Creditable withholding tax exemptions, and Expanded withholding tax exemptions

On top of all that is the creation of the Innovative Startup Venture Fund amounting to ten billion pesos administered by the DOST. The fund will be used to provide initial or supplemental financial support to Innovative Startups and Support Service Providers. Details on how DOST will administer this fund will be left to the DOST.

Qualifying as an Innovative Startup or a Support Service Provider

These definitions are essentially the Philippine government’s formal descriptions of startups, accelerators, incubators, or other institutions that were built to help startups.

An Innovative Startup is a registered Philippine business that has been operating for five years or less whose core business function involves a new kind of product, process, or business model.

Further bylines explain that the product of the startup has to be the primary source of revenue of the business, 15% of the business’ efforts are for research and development, and their gross annual revenue does not exceed fifty million pesos.

A Support Service Provider is any business entity that provides goods or services that are identified to be crucial in supporting the operation and growth of innovative startups. They can also be enterprises whose core business function involves the targeted or exclusive provision of goods and services to innovative startups.

So that means entities that range from accelerators or incubators to coworking and maker spaces.

Again, even if a company falls under either category’s requirements, they still have to be recognized by either the DOST, DICT, or DTI through an application process that each department will have to agree upon after the bill is passed.

The Innovative Startup Visa replacing the Alien Employment Permit

The main difference between the two kinds of visas is that the Innovative Startup Visa has an initial five years of validity as opposed to the Alien Employment Permit’s one year validity. People who can apply for the Innovative Startup Visa are foreign nationals who either own, work at, or invest in Innovative Startups. Another difference is that these individuals still have to be recognized by either DOST, DICT, or DTI.

These three agencies are then tasked to facilitate the filing of the visa of the foreign national they are endorsing. They are responsible in helping appeal the application if it is denied, and the reapplication of said visa if there are necessary corrections or improvements.

There are also important bylines for foreign investors specifically. These regulations will be fleshed out upon the bill’s passing by the Board of Investments in partnership with the Bureau of Immigration, the implementing department of the Innovative Startup Visa.

Information about anything “Philippine Startup” in one website

And lastly, the bill formalizes the creation of the Startup PH website where all statistical information and reports relating to Innovative Startups registered in the Philippines is listed.

  • Startups are able to use the website to inquire for updates, register, and see results for endorsements they have applied for
  • Anyone is able to apply for funding or participation in startup programs or events
  • The website will list all opportunities even if they are organized by non-government entities

Conclusion

The bill is still a tiny step towards a more startup-friendly Philippines. Even if this bill is passed into a law, it is then still our responsibility to support the implementing departments in making the right decisions and rulings that can affect the accessibility of the benefits of this law to many local startups.

Share your thoughts, if you want this bill to pass, talk to your Congressman to vote for the bill and champion it through its readings.

You can call the House of Representatives through their hotline at  931-5001 or you can look up the specific Representative that you’re like to talk to here. You can also use the website to look up who your immediate Representatives are and send them a good ol’ Facebook message. Chances are, they have their own Facebook pages where they make announcements.

Hopefully now that we’re better informed, we can play a more proactive role as the beneficiaries of this bill.

Additional Readings:

Philippine law on setting up Go Negosyo centers to make filing documents for a business easier

A list of general business laws in the Philippines

Philippines laws for online businesses

Philippine bill that makes setting up corporations easier and hopefully make PH more investment-friendly

Philippine law that encourages the creation and maintenance of a program that educates and supports young Filipino entrepreneurs (18-30 years old)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s