-
New Bureau of Internal Revenue rules say registered IT- business process management firms that violate the Fiscal Incentives Review Board’s work-from-home threshold must pay tax income tax on revenue for the period of violation
-
FIRB Resolutions 19-21 and 23-21 will suspend registered firms’ tax perks on revenue during period of non-compliance
-
RMC 23-2022 is now in effect and will last until March 31, 2022
The Bureau of Internal Revenue says registered business enterprises (RBEs) that violate the work-from-home (WFH) threshold prescribed by the Fiscal Incentives Review Board should pay income tax on revenues for the period that they are in breach of the rule.
BIR’s Revenue Memorandum Circular No. 23-2022 dated February 18 but released only recently covers RBEs in the information technology-business process management (IT-BPM) sector that continued with WFH arrangements amid the COVID-19 pandemic in spite of FIRB resolutions. The circular took immediate effect and is in force until March 31.
Under RMC 23-2022, RBE non-compliance with conditions prescribed under FIRB Resolutions 19-21 and 23-21 will come with suspension of the income tax incentive on revenue in the months they did not comply.
Last August, FIRB issued Resolution No. 19-21, which allows RBEs of the IT-BPM sector to carry on with WFH arrangements until March 31 without jeopardizing their fiscal incentives under Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
The resolution allows up to 90% of an RBE’s total workforce to WFH to avoid the contagion, leaving at least 10% working on-site.
Last October, FIRB issued Resolution No. 3-21 denying a request of the Philippine Economic Zone Authority (PEZA) and its enterprises for exemption from the WFH arrangement under Resolution 19-21.
In a meeting last February, FIRB also denied requests by PEZA and stakeholders to extend the WFH arrangements for the IT-BPM sector beyond March.
READ: FIRB rejects WFH extension for IT-BPM sector
The IT &Business Process Association of the Philippines, in particular, urged the national government to allow as many employees as possible to be placed under WFH to avoid contracting COVID-19 at work.
Finance Secretary and FIRB Chairman Carlos Dominguez III had said earlier given the population’s increasing vaccination rate nationwide employees, including those working in the IT-BPM firms operating within ecozones and freeports, can now physically report for work.
Under RMC 23-2022, RBEs should pay income tax calculated using the regular rate of either 25% or 20% based on taxable net income in the months when the businesses breached the rule.
For RBEs with no existing transactions subject to the regular income tax rate, BIR Form 1702-MX will be used for voluntary payment of income tax due for the months with reported violation.
RBEs with transactions subject to the regular income tax rate should make their voluntary payment using BIR Form 0605 and attach a bank-validated copy of the form to the annual income tax return that they would file.
In both cases, income tax due should be the net taxable income for the year or 12 months times the applicable rate of either 25% or 20%.
In the absence of voluntary payment or sufficient payment by RBEs, they will be subjected to an audit pursuant to a Letter of Authority.
For the uniform understanding of the term “total workforce”, RMC 23-2022 said this refers to the total number of employees directly or indirectly engaged in the registered activity of an RBE. The resolution excludes third-party contractors such as service contractors rendering janitorial, security or other similar services.
