BPO Companies Call for extended Work-From-Home, as Govt. threatens to take away Tax Perks

The Philippine government has intensified its stance against business process outsourcing (BPO) companies that don’t heed the order to require on-site work for all employees. To emphasize their seriousness, the government has threatened that companies that do not comply will lose their tax perks starting April 1.

The BIR has been assigned with collecting monthly income tax from BPOs whose workforce falls short of the full-capacity requirement. BIR Commissioner Ceasar Dulay stated that the interagency Fiscal Review Board (FIRB) allowed work-from-home for 75-90 % of registered information technology-business process management (IT-BPM) firms’ employees until March 31, 2022.

According to the BIR website, the work-from-home setup will not affect the tax exemptions extended to BPO firms. However, Dulay notes that by April first, BPO firms that fail to comply with on-site workforce rules “shall be meted with [the] suspension of the income tax incentive on the revenue corresponding to the months of non-compliance.”

The BIR defines the total workforce as “total employees that are directly or indirectly engaged in the registered project or activity of the [registered BPO company], but excludes third-party contractors, if any, such as service contractors rendering janitorial or security services and other similar services.”

“[BPO firms] shall pay the income tax using the regular rate of either 25 percent or 20 percent based on the taxable net income corresponding to the months the registered business enterprise has a violation,” Dulay said.

According to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, annual corporate taxes for MSMEs were cut to 20%.

“For registered business enterprises with no existing transactions subject to the regular income tax rate, BIR Form 1702-MX shall be used for the voluntary payment of the income tax due on the months with [a] reported violation,” Dulay said.

“However, for [firms] which have existing transactions subject to [the] regular income tax rate, the voluntary payment shall be made through BIR Form 0605 and bank-validated copy of which shall be attached in the annual income tax return (AITR) to be filed,” Dulay added.

Last Wednesday, Finance Secretary Carlos Dominguez III noted that work-from-home arrangements were a temporary measure as the country struggled with the COVID-19 pandemic. However, as vaccination rates rise and cases fall, Domingues stated that BPO firms needed to resume on-site work to comply with tax incentives and help MSMEs resume their operations.

Last February, the FIRB denied the request of BPO companies to extend work-from-home arrangements beyond March 2022.

Source: Inquirer