FIRB upholds Resolution 19-21 and denies PEZA request to exempt its registered IT-BPM enterprises from the rules on WFH arrangements

The Cabinet-level Fiscal Incentives Review Board (FIRB) maintained during its October 15 meeting the FIRB Resolution No. 19-21 that allows registered business enterprises (RBEs) of the Information Technology and Business Process Management (IT-BPM) sector to continue implementing work from home (WFH) arrangements without adversely affecting their fiscal incentives until 31 March 2022.

Under the Resolution, up to 90 percent of the RBE’s total workforce may work from home because of the pandemic, subject to conditions provided by the FIRB.

During the meeting, Trade and Industry Secretary and PEZA Board Chairman Ramon Lopez, who is also vice-chair of the FIRB, noted that at the onset of the pandemic, the IT-BPM sector was among the first few industries that successfully put in place systems and mechanisms that effectively allowed its workers to adopt full WFH arrangements.

“The IT-BPM sector was consulted even prior to its August 2021 meeting where Resolution 19-21 was adopted noting that the IT-BPM sector is one of the key employment generators in the country and that the adoption of WFH arrangements has contributed to the creation and preservation of jobs during the pandemic,” he added.

Enterprises exceeding the 90-percent threshold cannot enjoy income tax incentives during the months of their non-compliance with the FIRB resolution.

PEZA Director-General Charito Plaza previously appealed to the FIRB to allow the investment promotion agency (IPA) to implement its previous policy of allowing WFH for ALL employees, with the limitation that only 90 percent of the enterprise’s revenues may be granted tax incentives, even if its registered enterprises are supposed to operate within the ecozones.

Finance Secretary and FIRB Chairperson Carlos Dominguez III emphasized that PEZA’s proposal is not consistent with the emerging economic strategy of the government to gradually and safely reopen the economy.

“The idea of opening the economy is allowing the people to go out and spend money in the restaurants and other businesses in the area. This (proposal) won’t achieve the goal of opening the economy,” he added.

Secretary Dominguez also reminded the members of the FIRB that the activities registered with PEZA, which is an ecozone authority, are supposed to be conducted within the economic zones.

Finance Assistant Secretary and FIRB Secretariat Head Juvy Danofrata said that the 90 percent WFH arrangement is only a temporary measure for exceptional circumstances approved by the FIRB, as authorized by the implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Assistant Secretary Danofrata added that “the PEZA rule that 90 percent of total revenue from the registered activity is entitled to incentives – revenue, rather than workforce, as basis for the 90 percent – has no reasonable connection to COVID-19 prevention and mitigation.”

The FIRB also approved, in its October 15 meeting, the penalties to be imposed on IT-BPM registered business enterprises that exceed the 90-percent threshold of the workforce allowed to work from home.