FIRB, Peza again at loggerheads over WFH setup of BPOs

The Interagency Fiscal Incentives Review Board (FIRB) says business process outsourcing firms will have to resume onsite work beginning Sept. 12, countering the ecozone regulator’s plans to extend the work-from-home (WFH) setup until March next year.

“The Philippine Economic Zone Authority (Peza)’s decision to extend the work-from-home arrangement of information technology-business process management (IT-BPM) enterprises until March 2023 lacks legal basis,” FIRB secretariat head and Finance Assistant Secretary Juvy Danofrata told Finance Secretary Benjamin Diokno in a position paper. Diokno is also FIRB chair.

“To date, the current and effective resolution issued by the FIRB states that the work-from-home arrangement for IT-BPM companies within ecozones is only until September 12, 2022,” Danofrata said.

She said neither the Cabinet-level FIRB nor the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act gave Peza the power to unilaterally adopt WFH arrangements for BPOs.

The FIRB will meet to decide whether or not to extend the setup by the middle of the month, she said, adding that until then, the original plan stays.

State of calamity

Sept. 12 marks the end of the state of calamity extended by former President Rodrigo Duterte due to the COVID-19 pandemic.

Danofrata also pointed out that any changes to the FIRB’s earlier decision “should be anchored on the extension of the state of calamity or a declaration of the President of an exceptional circumstance” like the prolonged COVID-19 pandemic, as mandated under the CREATE Law’s guidelines.

“The FIRB secretariat is already coordinating with the Board of Investments (BOI) in studying options to allow the work-from-home arrangements for Peza’s locators in the IT-BPM sector,” Danofrata said.

For Diokno, FIRB stakeholders, including BPOs operating within ecozones, should comply with CREATE’s provisions “to achieve an effective tax incentives regime in the country.”

“It is crucial that the locators in economic zones comply with the ongoing terms and conditions of their registration in order to continue receiving tax incentives as [investment promotion agency]-accredited businesses,” Diokno said.

Temporary

The FIRB had earlier ruled that the WFH arrangement for BPO players operating inside economic zones was only a temporary measure amid the stringent COVID-19 lockdowns in the previous two years. It said BPO companies would only be able to enjoy their tax incentives if 100 percent of their personnel returned to their physical offices.

Under Section 309 of the Tax Code, as amended by the CREATE Law last year, projects and activities registered with IPAs like Peza must be conducted within the geographical boundaries of the ecozone or freeport to be entitled to tax-free perks.

Since April, the Bureau of Internal Revenue (BIR) has been checking on BPOs’ compliance with the return-to-office order.

Diokno also said in a separate statement Thursday that the interagency board early this month approved to streamline IPAs’ reporting requirements as well as rationalize the fees that they collect from registered investors.

“Previously, the FIRB required the submission of 10 reports, which is now reduced to eight. This aims to capture the outcome of the cost and benefits of incentivized projects and the compliance on performance commitments by the registered business enterprises. The overall impact and realization of CREATE’s target outcomes such as productivity enhancement, job generation and countryside development are also measured through the reduced number of required submissions,” Diokno said.