THERE IS NOTHING to prevent the Information Technology and Business Process Management (IT-BPM) industry from continuing with remote work arrangements, but must give up their tax incentives, the Department of Finance said.
IT-BPM companies, also known as business process outsourcing (BPO) organizations, “are allowed to adopt work-from-home (WFH) arrangements,” Finance Secretary Carlos G. Dominguez III said in a statement on Tuesday. “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.”
Incentives granted to IT-BPM companies located in economic zones are tied to how much work they perform onsite. The onsite work rules were eased during the pandemic, but the relaxed regime is expiring on March 31.
Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, companies registered with investment promotion agencies (IPAs) are eligible for perks like an option to pay a 5% special corporate income tax in lieu of other taxes, an income tax holiday, and enhanced deductions.
These incentives are subject to compliance with Section 309 of the Tax Code, which requires that the company’s business must be conducted “within the geographical boundaries of the zone or freeport” in which the project or activity is registered.
Mr. Dominguez noted that extending the WFH concession would be unfair to companies outside ecozones that pay 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%.”
Resolution No. 19-21, dated Aug. 2, 2021 issued by the Foreign Investment Review Board, which regulates incentives granted to foreign investors, allowed IT-BPM companies to perform 90% of their operations remotely while remaining eligible for incentives. This is the resolution expiring on March 31, with appeals for an extension not granted.
The Philippine Economic Zone Authority, one of the IPAs, had sought to extend the relaxed enforcement of on-site work rules to September.
Increased vaccination rates now allow companies to safely resume onsite work, Mr. Dominguez said.
As of Sunday, 65 million of the target population of 90 million is fully vaccinated, Health Secretary Francisco T. Duque III said, for a vaccination rate is 72%.
Mr. Dominguez said that under the relaxed Alert Level 1 quarantine setting, all government agencies are required to have 100% of their staff working onsite.
A return to office work for IT-BPM companies will also help the economy recover by increasing foot traffic for restaurants, services, and transportation.
“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,” he added.
The IT-BPM industry generated revenue of $28.8 billion in 2021, and employed 1.4 million workers. — Tobias Jared Tomas