IT-BPOs working from home must give up tax perks – DOF

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  • IT- business process management companies in ecozones and registered with investment promotion agencies are free to adopt work-from-home office arrangements but should give up their tax breaks, says Finance Secretary Carlos Dominguez III
  • He says it is unfair to companies outside ecozones that pay regular taxes to allow those in ecozones to implement WFH while enjoying tax incentives

The Department of Finance on March 23 said information technology-business process management (IT-BPM) companies in economic zones and registered with investment promotion agencies (IPA) can adopt work-from-home (WFH) office arrangements but will have to give up their tax incentives.

“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,” Finance Secretary Carlos Dominguez III said in a statement.

Companies registered with an IPA like the Philippine Economic Zone Authority (PEZA) enjoy incentives such as an income tax holiday or a 5% special corporate income tax in lieu of all taxes, including 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 granting IT-BPMs’ request to work from home 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%, while big corporations pay 25%,” Dominguez added.

Fiscal Incentives Review Board Resolution No. 19-21, dated August 2, 2021, allowed registered IT-BPM enterprises to continue implementing WFH arrangements without adversely affecting their fiscal incentives under Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, until March 31.

Being a time-bound measure, the FIRB rejected earlier requests to extend the resolution.

READ: FIRB rejects WFH extension for IT-BPM sector

Dominguez also noted the increasing vaccination rate nationwide allows companies to undertake safety measures that make on-site work possible, especially if workplaces are in Alert Level 1 areas.

By returning to work in their respective offices, Dominguez said IT-BPM firms would be helping not only the economy recover but also areas in the vicinity of ecozones.

He said the government’s economic team has highlighted the importance of fully opening up and increasing productivity of the economy to bounce back from the pandemic and offset external risks spawned by the Ukrainian 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.

PEZA and the IT & Business Process Association of the Philippines earlier requested the FIRB to allow a hybrid WFH setup (employees can work from onsite and offsite locations) from April 1 to December 2022.

PEZA said the recommendation is consistent with RA 11165 or the Telecommuting Law – a legislation that since 2018 has recognized “working from an alternative workplace with the use of telecommunication and/or computer technologies”.