Tax perks of hundreds of BPOs hang in the balance

Hundreds of business process outsourcing (BPO) projects in the Philippines’ economic zones have not yet complied with government requirements concerning work-from-home (WFH) arrangements a day before the deadline, leaving the tax incentives of a huge number of firms next year in question.

Information released on Friday by the Board of Investments (BOI), one of the Department of Trade and Industry’s investment promotion agencies, said they received only 786 endorsements as of the morning of Dec. 15, a day before the Dec. 16 deadline.

Earlier last week, the Philippine Economic Zone Authority (Peza) said they were expecting to endorse a total of 1,088 transfer applications to the BOI.

Back in September, the government mandated BPOs that wish to keep their tax incentives while having a work-from-home arrangement to transfer their registration from the Peza to the BOI.

Under the country’s tax laws, Peza-registered firms are required to conduct their business operations within designated economic zones for them to be eligible for government incentives.

Since April of this year, these registered business firms were given temporary leeway in their work arrangement until Sept. 12, continuing to enjoy tax incentives despite 30 percent of their employees working from home because of difficulties caused by the pandemic.

Policy extension

On Sept. 2, the Fiscal Incentives Review Board (FIRB) expressed hesitation to extend the policy past the initial deadline set, reasoning that such an extension lacked legal basis, unless a transfer is made to the BOI.

The FIRB said that neither the cabinet-level nor the Corporate Recovery and Tax Incentives for Enterprises Act gave Peza the power to unilaterally adopt WFH arrangements for registered firms.

The IT-BPM Process Association of the Philippines (IBPAP) has agreed with the transfer when the decision from the government came out, expressing support and appreciation for the solution offered by the FIRB.

The IBPAP had repeatedly asked the government to adopt a WFH-supportive policy for their sector, citing their significant contribution to the Philippine economy and the labor sector.

The IT-BPM sector’s annual gross revenue was at $29.49 billion in 2021, with the number projected to double to $59 billion a year by 2028. INQ