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Return to workplace or lose tax incentives, DOF tells IT-BPM firms

Information technology-business process management (IT-BPM) firms can continue to operate on work-from-home (WFH) arrangements although they will lose their tax incentives, the Department of Finance (DOF) clarified Tuesday.

According to Finance Secretary Carlos Dominguez III, the industry can opt to stay with the WFH setup because they are given the freedom to determine their working arrangements.

“No one is prohibiting them or impinging on their management prerogative to continue implementing the WFH setups. However, they must give up the tax incentives they currently enjoy because the law is clear on this,” he said in an emailed statement.

This comes as the Fiscal Incentives Review Board (FIRB) rejected requests to extend remote work arrangements beyond March 31, 2022, and workers should return to on-site duties starting April 1, 2022.

The Philippine Economic Zone Authority (PEZA) said it would appeal the FIRB's decision.

Firms in economic zones which fail to comply will not be able to enjoy fiscal incentives such as income tax holidays and a 5% tax on gross income earned.

Citing the Tax Code, Dominguez said tax incentives are provided on the condition that operations are "exclusively conducted or operated within the geographical boundaries of the zone or freeport."

Dominguez also said that it is “unfair” for other companies outside ecozones as micro, small, and medium enterprises (MSMEs) pay a regular corporate income tax (CIT) rate of 20%, while big corporations pay 25%.

“We hope that IT-BPM companies registered with the IPAs can support us in this whole-of-nation effort of helping Filipinos recover from the pandemic and easing the impact on them of the current crisis,” Dominguez said.

Major businesses on Monday expressed support for the return of employees to their workplace, calling it a “significant step” towards the country’s path to post-pandemic “normalcy” two years after the COVID-19 pandemic hit.

For its part, the Information Technology and Business Process Association of the Philippines (IBPAP) proposed a gradual transition from remote work to on-site arrangements.

“We support the need to fully reopen the economy," IBPAP president & CEO Jack Madrid said in a statement earlier this month.

"But as IT-BPM employees have an overwhelming preference for a balanced, hybrid work arrangement, we are working with our government partners to provide the industry a smooth transition to onsite operations towards a WFH/hybrid model in the longer term,” he said. — VBL, GMA News