Business process outsourcing companies may choose between work-from-home arrangements or the tax incentives they enjoy as locators in economic zones, Finance Secretary Carlos Dominguez III said Wednesday.
Dominguez said information technology-business process management companies registered with investment promotion agencies should comply with conditions in operating in ecozones to continue enjoying incentives, but are free to adopt WFH arrangements.
“IT-BPM companies in ecozones are allowed to adopt WFH arrangements. 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,” he said.
Companies registered with an investment promotion agency such as the Philippine Economic Zone Authority enjoy incentives such as an income tax holiday or a 5-percent special corporate income tax in lieu of all taxes, such as value added tax, income tax and local business tax.
As a condition for enjoying these incentives, they have to comply with Section 309 of the Tax Code which states 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 said it would also be unfair to other companies outside ecozones that are paying regular taxes. “Other companies such as micro, small and medium enterprises pay the regular corporate income tax rate of 20 percent, while big corporations pay 25 percent,” Dominguez said.
The Fiscal Incentives Review Board, chaired by Dominguez, issued Resolution No. 19-21 on Aug. 2, 2021 allowing registered business enterprises of the IT-BPM sector to continue implementing WFH arrangements without adversely affecting their fiscal incentives under CREATE until March 31, 2022.
Being a time-bound measure, the FIRB rejected the request to extend the said resolution.
Dominguez said 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.
Dominguez said that by returning to work in their respective offices, the IT-BPM firms would be helping not only the economy recover, but also MSMEs that provide support to these companies, such as convenience stores, food and service providers and transport services in the respective ecozones’ vicinity.
He said President Rodrigo Duterte’s economic team 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.