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PEZA to IT-BPO firms: Return to on-site work by April 1 or face penalties

The Philippine Economic Zone Authority (PEZA) on Tuesday directed information technology-business process outsourcing (IT-BPO) companies operating in special economic zones to follow the government’s return to on-site work order to avoid penalties.

In a statement, PEZA Director General Charito Plaza said the investment promotion agency’s locators must adhere to the Fiscal Incentives Review Board’s (FIRB) decision on any penalties as provided under the law. 

Section 2, Rule 22 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law’s Implementing Rules and Regulations (IRR) provides that any violation of the provisions of the law, including other related revenue regulations, orders or issuances of the government shall result in revocation or suspension of the incentives or business closure of registered business enterprises.

The FIRB rejected requests to extend remote work arrangements beyond March 31, and workers should return to on-site duties starting April 1.

The PEZA previously said it would appeal the FIRB’s decision.

Meanwhile, the Department of Finance (DOF), the parent agency of the FIRB, said that IT-BPO companies in economic zones can opt to stay with the WFH setup as they are given freedom to determine their working arrangements, but risk losing their tax incentives such as income tax holidays and a 5% tax on gross income earned.

Republic Act 7916 or the Special Economic Zone Act of 1995 requires that all registered companies operate within the ecozones in order to enjoy tax incentives.

Chapter 3, Section 23 of RA 7916 states that “business establishments operating within the ecozones shall be entitled to the fiscal incentives as provided for under P.D. No. 66 or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987."

“The allowance of the 90:10 WFH (work-from-home) setup was just a temporary measure during the pandemic. Now that we’re reopening the economy, we’re going back to the regular ratio required of registered business enterprises (RBEs) inside the ecozones,” Plaza said.

“Hence, PEZA abides by the decision of the FIRB for 100% on-site work for IT-BPOs, while there is a need to review and establish a legal framework in order to implement a hybrid work model,” she said.

Plaza noted that “at present, PEZA cannot change the ratio unless the laws will be amended to incorporate the adaptation of the hybrid schemes. In the future, we hope to follow the practice of India and the other countries and provide specific ratio on WFH and on-site work arrangements.”

“PEZA supports the hybrid work scheme as it’s been proven effective in the last three years of pandemic. What we can do is to recommend this for the next administration to address. As of now, we have to abide by the existing laws and the decision of the FIRB and help to put the economy back to normal,” Plaza said.

“[W]e hear the concerns of our investors and their individual workers affected by this order; however, we need to follow the regulations as mandated by the law,” she said.

The IT & Business Process Association of the Philippines earlier said employees had an “overwhelming” preference for a hybrid work arrangement.

The Alliance of Call Center Workers said last week that a "significant number" of workers in the IT-BPO sector are considering leaving their jobs after the government ordered a return to on-site duties starting next month.

Likewise, the Inter-Call Center Association of Workers said the government should consider the gradual return to the workplace as it called for a dialogue with Labor Secretary Silvestre Bello III to come up with a solution, adding they were not consulted before the order was released. — VBL, GMA News