Gov’t doubles down on threat vs call centers defying on-site work order: Comply or lose tax perks
MANILA, Philippines—The government doubled down on its threat against business process outsourcing (BPO) companies who won’t heed an order to require on-site work for all their employees, warning these companies of losing their tax perks starting April 1.
The Bureau of Internal Revenue (BIR) has been tasked with collecting monthly income tax from BPOs whose workforce will fall short of the full-capacity requirement to be implemented next month.
Internal Revenue Commissioner Caesar Dulay noted in Revenue Memorandum Circular No. 23-2022 issued last Feb. 18 that the interagency Fiscal Incentives Review Board (FIRB), chaired by the Department of Finance (DOF), last year allowed work-from-home (WFH) for 75-90 percent of registered information technology-business process management (IT-BPM) firms’ employees until March 31 of this year.
The circular, which was published on the BIR’s website only on Wednesday (March 9), noted that the current WFH setup allowed by the FIRB until this month’s end will not adversely affect the tax-exempt perks extended to BPO firms under their registration with investment promotion agencies (IPAs).
However, Dulay warned that beginning April 1, BPO firms that won’t comply with FIRB rules mandating “total workforce” on-site “shall be meted with suspension of the income tax incentive on the revenue corresponding to the months of non-compliance.”
The BIR defined total workforce as “total employees that are directly or indirectly engaged in the registered project or activity of the [registered BPO company], but excludes third-party contractors, if any, such as service contractors rendering janitorial or security services and other similar services.”
“[BPO firms] shall pay the income tax using the regular rate of either 25 percent or 20 percent based on the taxable net income corresponding to the months the registered business enterprise has a violation,” Dulay said.
Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the annual corporate tax rate slapped on micro, small and medium enterprises (MSMEs) was cut to 20 percent, faster than the reduction among large firms to 25 percent from 30 percent previously.
“For registered business enterprises with no existing transactions subject to the regular income tax rate, BIR Form 1702-MX shall be used for the voluntary payment of the income tax due on the months with reported violation,” Dulay said.
“However, for [firms] which have existing transactions subject to regular income tax rate, the voluntary payment shall be made through BIR Form 0605 and bank-validated copy of which shall be attached in the annual income tax return (AITR) to be filed,” Dulay added.
Dulay warned that non-compliant IPA-registered BPO players that would not pay voluntarily or have insufficient payments will be audited upon the BIR’s issuance of a letter of authority (LOA). The LOA is an official document that empowers revenue officers to examine and scrutinize taxpayers’ books to determine their correct tax liabilities.
Last Wednesday, FIRB chair and Finance Secretary Carlos Dominguez III pointed out that the current work-from-home arrangement was “only a time-bound temporary measure” while the country fought COVID-19.
But with a rising vaccination rate and declining number of infections, Dominguez said BPO firms needed to resume on-site work at their ecozone or freeport facilities to not only comply with their tax incentives’ requirement but also help MSMEs located around BPOs resume their operations.
Last February, the FIRB denied the request of the BPO industry to extend work-from-home arrangements beyond the end of this month. The Information Technology and Business Process Association of the Philippines (IBPAP) had wanted WFH arrangements for some employees to stay until September of this year.
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