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MANILA, Philippines—The Bureau of Internal Revenue (BIR) has formed a task force that started checking on compliance with the 100-percent return-to-workplace rule among business process outsourcing (BPO) firms who had decided to keep their tax perks.
Deputy Revenue Commissioner Arnel Guballa recently reported to Finance Secretary Carlos Dominguez III that the BIR already issued mission orders to conduct ocular inspections at facilities of BPO companies registered with investment promotion agencies (IPAs).
The BIR had been tasked with collecting monthly income tax from BPOs whose workforce will fall short of the full-capacity requirement beginning in April.
The interagency Fiscal Incentives Review Board (FIRB), which oversees the grant of tax breaks to qualified businesses, earlier ruled that work-from-home among BPO firms operating inside economic zones was only a temporary measure amid lockdowns imposed during the past two years to contain the spread of COVID-19.
As such, BPO players can only keep their tax incentives intact if all of their employees return to the workplace.
FIRB secretariat head and Finance Assistant Secretary Juvy Danofrata had noted that under Section 309 of the Tax Code, as amended by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, IPA-registered projects and activities must be conducted within the geographical boundaries of the ecozone or freeport to be entitled to fiscal incentives.
Last March, Finance Secretary Carlos Dominguez III, who chairs the FIRB, said that it would ultimately be up to BPO companies if they wanted their current work-from-home operations to continue, but not retain their tax incentives.
“No one is prohibiting them or impinging on their management prerogative to continue implementing their work-from-home setups. However, they must give up the tax incentives they currently enjoy because the law is clear on this,” Dominguez had said.
Last year, the FIRB allowed the BPO industry to continue their work-from-home operations, without touching their tax incentives, until March 31 of this year. But starting April 1, BPOs will lose their fiscal perks, as mandated by the Tax Code, if their staff don’t return to onsite work.
The FIRB had thumbed down the BPO sector’s plea to extend work-from-home setup while continuing to enjoy tax exemptions.
For Dominguez, “it is also unfair to other companies outside ecozones that are paying regular taxes.”
President Rodrigo Duterte’s economic team had been pushing to place the entire country under the lowest alert level 1, if not the proposed alert level “zero” dismantling all pandemic restrictions, to reopen more productive sectors and shield the domestic economy from indirect, spillover impacts of Vladimir Putin’s mission to destroy Ukraine.