WFH setup for incentivized IT-BPM enterprises was a temporary measure

Finance Assistant Secretary Juvy Danofrata has reiterated that the Fiscal Incentives Review Board (FIRB) had allowed the work-from-home (WFH) setup for registered business enterprises (RBEs) only as a time-bound temporary measure to address the work constraints arising from the strict lockdowns or mobility restrictions that were imposed nationwide at the height of the pandemic to contain the spread of the deadly coronavirus.

“The government has exercised significant caution in balancing the economy’s needs and the health requirements to address concerns the pandemic caused. However, we believe that the current situation already allows us to direct our policies towards fully reopening the economy,” said Danofrata, who also heads the FIRB Secretariat.

She added, “Given the increasing vaccination rate of Filipinos nationwide, we can now undertake safety measures for the physical reporting of employees. In fact, the President has ordered all government agencies and instrumentalities to adhere to the one hundred percent (100 percent) on-site workforce under Alert Level 1.”

Danofrata issued this statement amid calls from certain sectors for the continued adoption of flexible or off-site work arrangements for the Information Technology– Business Process Management (IT-BPM) sector without them losing their tax perks, which is a privilege of RBEs operating in special economic zones (SEZs) or freeports.

She pointed out that under Section 309 of the National Internal Revenue Code (NIRC) of 1997, as amended by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, registered projects or activities must be conducted within the geographical boundaries of the ecozone or freeport to be entitled to fiscal incentives.

Danofrata noted that, as separate customs territories, economic zones and freeports were established to promote export activities and allow the free flow of goods and services (including IT-BPM services) within the boundaries of said zones or freeports.

Towards this end, she said tax incentives are granted to priority projects or activities located in these zones.

“Hence, under the law, allowing companies to have their activities be conducted from their homes or anywhere outside the zone territory while enjoying their tax incentives is an utter disregard and violation of the aforementioned provision of law,” she said.

In an earlier statement, Finance Secretary and FIRB Chairman Carlos Dominguez III clarified that RBEs in the IT-BPM sector are free to adopt WFH arrangements moving forward, and that the decision on which particular work arrangement to approve is an exercise of corporate management discretion.

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