With the COVID-19 pandemic declared over, work-from-home (WFH) arrangements of registered business enterprises (RBEs) in economic zones should no longer get tax incentives under Republic Act (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.
The Department of Justice (DOJ) rendered this legal opinion dated Jan. 3 following a request made by Presidential Management Staff (PMS) Undersecretary for Legal and Monitoring Rodolfo John Robert Pallatao IV.
Justice Secretary Jesus Crispin Remulla cited Section 309 of the CREATE Law, which said that a qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport must conduct its businesses within their geographical boundaries.
“Any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to incentives in this Act, unless such project or activity is conducted or operated under another Investment Promotion Agency,” the law stated.
“Business enterprises located in the economic or freeport zone must continue to conduct their activities within the zone boundaries if they wish to continue availing of their tax incentives under the CREATE Act,” Remulla emphasized.
Pallatao sought the legal opinion of the DOJ due to the conflicting stance of five government agencies: the Department of Trade and Industry (DTI), the Philippine Economic Zone (PEZA), the National Economic and Development Authority (NEDA), the Fiscal Incentives Review Board (FIRB), and the Office of the Presidential Adviser on Investment and Economic Affairs (OPAIEA).
They have different positions on whether the WFH arrangements of RBEs, particularly in the Information Technology and Business Process Management (IT-BPM) sector, should get tax incentives under the CREATE Law now that the state of emergency for the COVID-19 pandemic has been lifted.
According to Remulla, these enterprises are not prohibited from adopting a WFH arrangement but will no longer be eligible to continue enjoying the tax incentives.
But he acknowledged that RA 11165, or the Telecommuting Act that was signed into law on Dec. 20, 2018, exists. It concerns “work from an alternative workplace with the use of telecommunications and/or computer technologies.”
In the event of a conflict between the two laws, Remulla said the provisions of RA 11534, which was signed into law on Mar. 26, 2021, should prevail “being the last expression of the legislative will.”
“In enacting a statute, the legislative is presumed to have been aware of, and have taken into account, prior laws on the subject of legislation,” he explained.
Remulla noted that even the FIRB recognized the provisions of RA 11534 when its board issued two separate resolutions that allowed RBEs of the IT-BPM sector to adopt the WFH arrangement. He said these were issued as “a temporary measure” pertinent to the implementing rules of the law.
“Once the exceptional circumstance, such as pandemic, epidemic, war, armed conflict, state of national emergency, outbreak of diseases, international or regional financial crisis, or analogous circumstances, ceases to exist, or in this case, the issuance of Proclamation No. 297 dated 21 July 2023, lifting the State of Public Health Emergency throughout the Philippines, the temporary measure shall also cease to exist,” he explained.
The FIRB resolutions, which allowed RBEs in the IT-BPM sector that have remaining tax incentives under Section 311 of the CREATE Act or those with approved incentives on or before September 2022 have the option to register with the Board of Investments (BOI) from an ecozone or freeport zone Investment Promotion Agency (IPA) and adopt up to 100 percent WFH arrangement.
“This locational prohibition does not apply to enterprises registered with the BOI as it does not administer an ecozone or freeport,” Remulla said.
