THE IT and Business Process Asso-ciation of the Philippines (IBPAP) has hailed the decision of the Fiscal Incentives Review Board (FIRB) to transfer registration of IT and Business Process Management (IT-BPM) enterprises from Philippine Economic Zone Authority (PEZA) to the Board of Investments (BOI).
The move is seen as a win-win solution to the months-long standoff on FIRB restrictions on IT-BPM firms extending their employees’ work-from-home set-up. With the transfer from PEZA to BOI, these firms can continue accessing fiscal incentives without violating Section 309 of the National Internal Revenue Code of 1997, as amended by the CREATE law.
“It is great news that the FIRB will be facilitating a smooth transfer of the registration of IT-BPM enterprises from PEZA to BOI,” IBPAP President and CEO Jack Madrid said in a post on LinkedIn, a professional networking platform, on Saturday.
The IBPAP chief, however, said “this will not involve physically relocating their operations or giving up the incentives that they are currently enjoying.”
Madrid stressed that FIRB’s decision is a “wonderful outcome” to IBPAP’s staunch advocacy for work-from-home or hybrid work setup.
On Thursday, on the second day of the Development Budget Coordination Committee (DBCC)’s briefing on the 2023 National Expenditure Program in the Senate, the FIRB said it has decided to allow IT-BPM or commonly known as business process outsourcing (BPO) firms to transfer their registration to the BOI in order for them to continue enjoying their incentives. The FIRB is a Cabinet-level interagency body with the authority to grant tax incentives to registered business enterprises (RBEs).
The Department of Finance (DOF), which cochairs the FIRB, explained that during the transfer, there will be no diminution in the incentives of these firms.
As for the transfer of their registration, Finance Undersecretary Antonette Tionko said, it would not require any physical transfer of these firms. Tionko also noted that under the Corporate Recovery and Tax Incentives for Enterprises (CREATE), firms registered under the BOI and PEZA will enjoy the same incentives.
The only difference is that those firms registered under the PEZA will be required to operate onsite, which Tionko said is an important feature of PEZA rules.
According to a DOF statement on Friday, Finance Secretary and FIRB Chairperson Benjamin E. Diokno had said at the FIRB Board meeting on Wednesday that the decision establishes a more permanent solution to the issue, allowing the RBEs to continue accessing fiscal incentives without violating Section 309 of the National Internal Revenue Code of 1997, as amended by the CREATE law.
“The provision specifically states that to be entitled to incentives, the conduct of registered projects or activities must be within the geographical boundaries of the ecozone or free port administered by the concerned investment promotion agency [IPA],” read the DOF statement.
The BOI is the only IPA not affected by the boundary constraints or zone limits, hence, the transfer from PEZA to BOI.
Further, FIRB has decided to extend the 70-30 WFH arrangement for the IT-BPM sector until December 31,2022. This, the DOF said, is pursuant to Presidential Proclamation No. 57 which extends the declared state of calamity through the country until year-end.
Diokno said the extension will allow the “seamless” transfer of RBEs in the IT-BPM sector to the BOI.
For his part, Trade Secretary Alfredo E. Pascual said, “The procedure for transfer of registration from PEZA to BOI will be seamless —to be carried out expeditiously.” Pascual co-chairs the FIRB and is chairman of both PEZA and BOI.
Recognizing the IT-BPM sector’s contributions to generating jobs and foreign exchange revenues for the country, the Trade chief stressed, “From the beginning our priority has been to secure a solution for the sector’s WFH setup, which has become the new normal post-pandemic.”
The Department of Trade and Industry (DTI) said in a statement on Saturday that registered firms must signify with PEZA their intention to shift registration to the BOI.
Thereafter, PEZA will endorse the request to BOI for the issuance of a Certificate of Registration, which will indicate the remaining incentives.
As for PEZA, the DTI said, it shall administer the incentives and continue monitoring the transferee firms’
Meanwhile, the IBPAP chief has cited the advantages of adopting the WFH or Hybrid work arrangement.
“WFH/Hybrid work is a game-changer for the Philippines and the sustainability of the IT-BPM sector, and it will be a contributing factor to our ability to create 1.1 million new direct jobs for Filipinos, generate billions more in annual investment revenues and foreign exchange, and significantly increase our countryside footprint by 2028,” IBPAP President and CEO Jack Madrid said in his post on LinkedIn on Saturday.