Many industries have struggled during the covid-19 pandemic. Information technology and business process management (IT-BPM) firms (ie, the business process outsourcing (BPO) sector) have faced this challenge by adopting, among other things, the possibility from the Philippine Economic Zone Authority (PEZA) and the Fiscal Incentives and Review Board (FIRB) to allow for 90% of the workforce of PEZA-registered business enterprises (RBEs) to work from home (WFH), and only 10% of the workforce to work on-site.
On 2 August 2021, the FIRB, the government authority that grants tax incentives to RBEs, issued FIRB Resolution No. 19-21, which allowed RBEs to maintain their fiscal incentives under the hybrid WFH arrangement of only 10% on-site work until 31 March 2022.
As the March 2022 deadline of the WFH arrangements drew closer, the IT and Business Process Association of the Philippines and PEZA lobbied to extend the WFH arrangements until September 2022. On 21 February 2021, the FIRB denied the request to further extend the WFH arrangements for the IT-BPM sector. Carlos Dominguez, the chairman and finance secretary of the FIRB, reiterated that that the WFH arrangements granted to IT-BPM firms was merely "a time-bound temporary measure adopted during the surge of the COVID-19 pandemic" and that the return to work of IT-BPM firms would jumpstart the recovery of dependent micro, small and medium enterprises. As such, IT-BPOs returned to a maximum of 70% of the workforce working remotely, which arrangement must be applied with the PEZA.
Under FIRB Resolution 19-21, non-compliance with the conditions (including 30% of the workforce onsite beginning 1 April 2022) may result in the suspension, withdrawal or cancellation of fiscal incentives of the RBEs. Further, in the implementation of the WFH arrangements, it similarly authorises the concerned investment promotion agency (in this case, PEZA) to adopt other measures to ensure compliance with FIRB Resolution 19-20 and its guidelines.
Following the denial of its request to extend the WFH arrangements, PEZA encouraged BPOs to abide by the decision of the FIRB while it appeals the same. Despite the numerous jobs generated by the IT-BPM sector, even under WFH arrangements, the law is clear that PEZA-registered entities as a rule should operate within PEZA zones, buildings or IT parks to claim the relevant fiscal incentives. WFH arrangements, despite being largely successful in the BPO industry, remain to be a privilege that the appropriate authorities may give, modify and take away.
For further information on this topic please contact Rashel Ann C. Pomoy at Villaraza & Angangco by telephone (+63 8 988 6088) or email ([email protected]). The Villaraza & Angangco website can be accessed at www.thefirmva.com.