BPO firms’ tax perks to stay under tax reform package, says finance exec

The Department of Finance yesterday said business process outsourcing (BPO) companies need not worry about the government’s first tax reform package as they would continue to enjoy a number of fiscal perks enough to sustain their robust growth.

In a statement, the DOF said foreign services of BPO firms operating within special economic zones (SEZs) would stay exempt from the value-added tax (VAT) while those outside SEZs, especially those that had been registered at the Board of Investments, would keep their zero-rated status.

In particular, Finance Undersecretary Karl Kendrick T. Chua said that the proposed first package of the Duterte administation’s comprehensive tax reform program dubbed Tax Reform for Acceleration and Inclusion Act (Train) aimed “to limit the zero VAT rating to exporters and remove such a preferential treatment similarly accorded to suppliers of exporters, or what are referred to as ‘indirect exporters.’”

“The fear that the Philippine BPO industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill. There is no change in tax policy here for exporters,” Chua said.

The finance official said they have no plans to change the status quo wherein receipts from domestic services are slapped with a 12-percent VAT. “This has already been the case even before we proposed the Train bill,” he pointed out, referring to House Bill No. 5636 approved by the Lower House before Congress adjourned in May.

According to Chua, “receipts from foreign services within the SEZs of the Philippine Economic Zone Authority will remain VAT-exempt, as is the case now, because they are outside customs territory by (law), or zero-rated if the exporters are outside the special economic zone, including those that are BOI-registered.” —BEN O. DE VERA