Task force to check IT-BPM compliance with return-to-work order

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A task force will conduct oculars to ensure compliance with the return-to-office setup in economic zones.
  • Task force to check IT-BPM compliance with return-to-work order
  • The task force will conduct oculars to ensure compliance with the return-to-office setup in economic zones
  • Fiscal Incentives Review Board temporarily allowed IT-BPM firms to adopt work-from-home arrangements during the pandemic

A task force will check compliance of information technology-business process management (IT-BPM) enterprises located in economic zones with the return-to-office order.

Bureau of Internal Revenue Deputy Commissioner Arnel Guballa reported to Finance Secretary Carlos Dominguez III that the agency ordered ocular inspections of registered business enterprises (RBEs) to determine their compliance with conditions for the grant of incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, particularly those relating to on-site work rules.

The Fiscal Incentives Review Board (FIRB) temporarily allowed IT-BPM firms to adopt work-from-home arrangements without losing incentives granted to them as economic zone locators so they could continue doing business offsite at the height of the pandemic. The WFH arrangement for RBEs was allowed until March 31, 2022.

Under Section 309 of the National Internal Revenue Code (NIRC) of 1997, as amended by CREATE Act, RBEs and/or registered activities must be conducted within the geographical boundaries of the ecozone or freeport where they are located so they can avail of fiscal incentives.

Dominguez, who is also FIRB chairman, earlier clarified that RBEs in the IT-BPM sector are free to adopt WFH arrangements beyond the March 31 deadline, and that the decision on which particular work arrangement to approve is an exercise of corporate management discretion.

“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,” Dominguez said.

Department of Finance assistant secretary and FIRB Secretariat head Juvy Danofrata has pointed out that as separate customs territories, ecozones and freeports were established to promote export activities and allow the free flow of goods and services (including IT-BPM services) within the boundaries of said zones or freeports.

Toward this end, tax incentives are granted to priority projects or activities located in these zones, she said.

“The government has exercised significant caution in balancing the economy’s needs and the health requirements to address concerns the pandemic caused. However, we believe that the current situation already allows us to direct our policies towards fully reopening the economy,” said Danofrata.

“Given the increasing vaccination rate of Filipinos nationwide, we can now undertake safety measures for the physical reporting of employees. In fact, the President has ordered all government agencies and instrumentalities to adhere to the 100% on-site workforce under Alert Level 1,” she said.

Danofrata earlier issued this statement amid calls from certain sectors for the continued adoption of flexible or off-site work arrangements for the IT-BPM sector without them losing their tax perks, which is a privilege of RBEs operating in special ecozones or freeports.

Earlier, the Philippine Economic Zone Authority (PEZA) and the IT & Business Process Association of the Philippines had requested the FRIB to allow the implementation of a hybrid work scheme until December 2022 due to concerns of investors and workers amid the ongoing pandemic.

READ: PEZA backs hybrid WFH scheme for IT-BPOs

With the FIRB’s denial of the request in February, PEZA has urged IT-business process outsourcing (BPO) companies to follow the return to office order, but has also started accepting applications from registered IT-BPOs and RBEs who want to implement a hybrid work arrangement until September 2022.

PEZA had earlier said it has been issuing letters of authority to interested RBEs that are applying for a hybrid operation even before the pandemic.

“We are just going back to the regular ratio of our hybrid work model arrangement of not more than 30% WFH.” As of May 5, PEZA had issued 444 letters of authorization to registered IT-BPOs and RBEs.