Business process outsourcing (BPO) firms located in ecozones may carry on with the work-from-home (WFH) arrangement for up to 30 percent of their workforce until the end of this year while they work on the transfer of their registration to the Board of Investments (BOI) from the Philippine Economic Zone Authority (Peza).
This is according to the Fiscal Incentives Review Board (FIRB), which in their Sept. 14 meeting agreed to allow such transfer following the timeframe of the nationwide COVID-19 state of calamity.
The interagency body noted the state of calamity was supposed to have expired last Sept. 12, but this was extended up to Dec. 31 through Presidential Proclamation No. 57.
Allowing the transfer of registration of Information Technology and Business Process Management (IT-BPM) or BPO companies between the two incentive-giving bodies is the solution that the FIRB found in order to resolve the sector’s long-standing issue on tax incentive claims while conducting business activities outside their zone limits.
The BPOs had been allowed at the onset of the pandemic to have part of their workforce outside the ecozones—through WFH—because of constraints on people’s mobility prompted by health and safety concerns.
The state of calamity allowed a temporary respite from the requirements of the National Internal Revenue Code of 1997, as amended by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act of 2021.
The law specifically states that to be entitled to incentives, the conduct of registered projects or activities must be within the geographical boundaries of the ecozone or freeport administered by the concerned investment promotion agency (IPA), or in the case of BPOs, the Peza.
The FIRB noted the BOI was the only IPA not affected by such boundary constraints or zone limits.
“We recognize that the WFH arrangement is the new business model of most of the [IPA] registered business enterprises,” said Finance Secretary Benjamin Diokno, who is also FIRB chair. “Hence, it is high time to resolve this issue faced by IT-BPM enterprises.”
Diokno said the decision of the FIRB establishes a more permanent solution to the issue, allowing the companies to continue availing themselves of fiscal incentives without violating the law in relation to location limits.
He noted the availability of the tax incentives should be continued subject to the transitory provisions under the CREATE Act, which has no express or implied prohibition against the WFH scheme.
Thus, BPO firms will still enjoy whatever incentives they have with Peza when they transfer to the BOI.
Diokno added the extension of the WFH option would allow the seamless transfer of the affected BPOs to the BOI.
“We expect the cooperation and utmost commitment of all concerned IPAs and [registered companies] on this matter as we carry out the transition and conclusively address the enduring WFH problem,” Diokno said.