Dominguez asks BPOs: tax incentives or WFH? (Sabong News)

The Department of Finance (DOF) wants Information Technology Business Process Management (IT-BPM) companies registered with investment promotion agencies (IPAs) such as the Philippine Economic Zone Authority (PEZA) can choose to continue work from home (WFH) arrangements but give up their tax incentives. Finance Secretary Carlos G. Dominguez III said IT-BPM firms in economic zones and are registered with investment promotion agrncies (IPAs) are free to adopt work from home office arrangements, but they must give up their tax perks. “IT-BPM companies in ecozones are allowed to adopt WFH arrangements,” Dominguez III said in a statement on Tuesday, March 22. “No one is prohibiting them or impinging on their management prerogative to continue implementing their WFH setups. However, they must give up the tax incentives they currently enjoy because the law is clear on this.” Companies registered with an IPA such as the Philippine Economic Zone Authority (PEZA) enjoy incentives such as an income tax holiday or a five percent special corporate income tax in lieu of all taxes, such as the value-added tax (VAT), income tax, and local business tax. As a condition for enjoying these incentives, they have to comply with Section 309 of the Tax Code. The law state that “a qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered.” Dominguez pointed out that it is also unfair to other companies outside ecozones that are paying regular taxes. “Other companies such as micro, small and medium enterprises (MSMEs) pay the regular corporate income tax (CIT) rate of 20 percent, while big corporations pay 25 percent,” Dominguez added. Fiscal Incentives Review Board Resolution (FIRB) No. 19-21, dated Aug. 2, 2021, allowed registered business enterprises of the IT-BPM sector to continue implementing WFH arrangements without adversely affecting their fiscal incentives until March 31, 2022. Being a time-bound measure, the FIRB rejected the request to extend the said resolution. Dominguez also noted that the increasing vaccination rate of Filipinos nationwide now allows companies to undertake safe measures to let their employees physically report for work in their respective offices, especially if their workplaces are in Alert Level 1 areas. “In fact, even the President has ordered all government agencies to adhere to the 100-percent on-site workforce in areas under Alert 1 level,” he said. By returning to work in their respective offices, Dominguez explained that IT-BPM firms would be helping not only the economy recover, but also small and medium enterprises that provide support to these companies. Dominguez pointed out that President Duterte’s economic team has highlighted the importance of fully opening up and increasing the productivity of the economy to bounce back from the pandemic and offset the external risks spawned by the Russia-Ukraine crisis. “We hope that IT-BPM companies registered with the IPAs can support us in this whole-of-nation effort of helping Filipinos recover from the pandemic and easing the impact on them of the current crisis,” Dominguez said.