Calls providing tax incentives to economic zone-based business process outsourcing (BPO) companies implementing work-from-home (WFH) scheme received support from the Department of Labor and Employment (DOLE).
A statement issued last Thursday quoted Labor Secretary Silvestre H. Bello III said information technology and business process management (IT-BPM) companies on WFH arrangements should be eligible to receive government incentives prescribed under the Corporate Recovery and Tax Incentives for Enterprises (Create) law, or Republic Act (RA) 11534.
“But we maintain that companies that do not produce physical goods and that are well-suited to remote work must also enjoy the benefits of the tax incentives provided in the law,” Bello said.
“We need to provide the industry the support it needs to reach its growth targets and potentials, especially now that we recover from the effects of the pandemic,” he added.
In an earlier interview with the BusinessMirror, IT and Business Process Association of the Philippines (Ibpap) President and CEO Rey E. Untal said IT-BPM firms currently operate through a blended work and service model, with 70 percent of employees working from home and 30 percent working on-site.
Untal added that the uncertainties created by the pandemic have benefited the local IT-BPM sector as it was able to secure additional accounts and clients.
Moreover, Bello said the department is particularly keen on expanding the benefits granted to firms operating in economic zones.
Under Section 309 of RA 11534, qualified registered product or activity “exclusively conducted or operated within the geographical boundaries of the zone or Freeport” are entitled to corporate recovery and tax incentives.
The DOLE secretary added that IT-BPM firms operate within ecozones even while under WFH arrangements.
“Such special working arrangements are recognized under existing DOLE guidelines,” Bello said.
The secretary was referring to various DOLE issuances, such as DOLE Department Order 202, series of 2019 (“Implementing Rules and Regulations of the Telecommuting Act”) and Labor Advisory 17 and 17-B, series of 2020 (“Guidelines on Employment Preservation upon the Resumption of Business Operation”).
DOLE has also issued Department Advisory 02-09 (“Guidelines on the Adoption of Flexible Work Arrangements”) and Department Advisory 04-12 (“Guidelines on the Implementation of Flexible Work Arrangements”), which recognize and regulate alternative work arrangements.
Noting that “the pandemic has accelerated the Fourth Industrial Revolution and the adoption of new technologies are now transforming the labor market in the new normal,” Bello said, “telecommuting has emerged as a viable and safe alternative work mode.”
“As one of the country’s key employment generators, the IT-BPM industry is one of the most important drivers of our economy,” Bello said, adding that the sector generated 1.32 million jobs in 2020, with $26.7 billion in revenues.
The IT-BPM industry sought DOLE’s position after the Departments of Finance and Trade, and Industry released the Implementing Rules and Regulations (IRR) of the Create Law.
While the IRR provides temporary measures for exceptional circumstances, specifically the current pandemic, the provisions still require the approval of the Fiscal Incentives Review Board (FIRB) upon the recommendation of the Investment Promotion Agency.
Under RA 11534, the corporate income tax rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.