To avoid penalties, the Philippine Economic Zone Authority (PEZA) instructed information technology-business process outsourcing (IT-BPO) enterprises operating in special economic zones to adhere to the government’s return to an on-site work order.
PEZA Director General Charito Plaza stated that the investment promotion agency’s locators must follow the judgment of the Fiscal Incentives Review Board (FIRB) on any penalties imposed under the law.
Any violation of the provisions of the law, including other related revenue regulations, orders, or issuances of the government, will result in the revocation or suspension of the incentives or the closure of registered business enterprises, according to Section 2 Rule 22 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law’s Implementing Rules and Regulations (IRR).
Requests to extend remote work arrangements beyond March 31 were denied by the FIRB, and staff should resume on-site tasks on April 1.
PEZA had already stated that it would challenge the FIRB’s decision.
Meanwhile, the Department of Finance (DOF), the FIRB’s parent agency, stated that IT-BPO companies in economic zones could choose to stay with the WFH setup because they have more flexibility in their working arrangements. Still, they will lose tax benefits such as income tax holidays and a 5% tax on gross income earned.
BPO employees ordered to return on-site by April 1
To qualify for tax incentives, all registered enterprises must operate within the ecozones, according to Republic Act 7916 or the Special Economic Zone Act of 1995.
Chapter 3, Section 23 of RA 7916 said, “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 to implement a hybrid work model,” she added.
According to the IT & Business Process Association of the Philippines, employees reported an “overwhelming” preference for a hybrid work arrangement.
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