August 28, 2022

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PEZA defers approval of WFH extension for BPOs

THE PHILIPPINE Economic Zone Authority (PEZA) board has deferred the approval of the extension of the work-from-home (WFH) arrangement for information technology and business process outsourcing (IT-BPO) firms to March 2023.

Tereso O. Panga, PEZA officer-in-charge and deputy director-general for policy and planning, said in a Viber message that the WFH extension for IT-BPOs until March 2023 has been “approved in principle,” but the final approval was deferred by the PEZA board at its Aug. 26 meeting.

“The WFH 30% limit extension is approved in principle. We just need to revise our memo to include the inputs of the PEZA board — that the 30% WFH is a long-standing policy of PEZA and not just as a business continuity plan measure. We will pursue that in the ad referendum and there is no need for the PEZA board to convene,” he said.

Mr. Panga in a Facebook post on Sunday said the PEZA board wants to get “further clarification” from the Department of Finance (DoF) and the Board of Investments (BoI) regarding the extension.

However, he said they will push to approve the extension before the earlier resolution expires on Sept. 12.

On June 21, the interagency Fiscal Incentives Review Board (FIRB) issued Resolution No. 017-22, which temporarily allowed registered IT-BPO firms to have a 70% on-site and 30% WFH arrangement until Sept. 12, while still enjoying fiscal incentives under Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.   

Registered firms are usually required to conduct their business inside economic zones (ecozones) in order to avail of tax incentives. However, IT-BPO companies were allowed to implement WFH schemes during the strict lockdowns implemented amid the pandemic.

The FIRB released Resolution No. 19-21 in August 2021 that allowed registered IT-BPO firms to implement a 90% WFH and 10% on-site work arrangement and still avail of tax incentives. The resolution ended on April 1 this year.

The FIRB is in charge of granting tax incentives to registered business enterprises including IT-BPO firms.   

IT-BPO industry stakeholders such as the IT and Business Process Association of the Philippines have been pushing for the WFH arrangement while keeping their tax incentives, citing benefits to employees and productivity.   

According to Mr. Panga, the PEZA board agreed that the DoF should coordinate with the Bureau of Internal Revenue (BIR) regarding the issues affecting the ecozone industry on the application of WFH policy.

At the same time, Mr. Panga said that the PEZA board deferred and subjected to ad referendum the inclusion of ecozone logistics services activity in the Strategic Investment Priority Plan (SIPP).  

“The DoF just wanted to make sure that ecozone logistics is included in the SIPP. The BoI initially confirmed its inclusion under Tier 1 of SIPP as support to export activities. This will encourage the registration of more ecozone logistics service enterprises (ELSEs) as a critical ecozone supply chain as they cater exclusively to the requirements of export-oriented locators,” Mr. Panga said.   

“Under the old regime, PEZA has been approving ELSEs but subject only to tax- and duty-free importation and zero value-added tax rating on local purchases as their incentives. We recommended the same incentives for new ELSEs to be registered by PEZA under the CREATE law,” he added.   

He added that the DoF and BIR will also address inconsistencies in the issuances of FIRB, BIR, and Bureau of Customs regarding the grant of incentives to registered business enterprises (RBEs) under the CREATE law.

Meanwhile, Mr. Panga said that the PEZA board also approved 30 ecozone developer and locator application projects worth P8.685 billion in capital investments.   

“We will release more details on these approved applications,” Mr. Panga said.   

In first half of 2022, the PEZA’s approved investments dropped by 29.85% to P22.488 billion. The agency is eyeing to achieve a 6% to 7% investment growth for 2022. — Revin Mikhael D. Ochave