BPOs with WFH setup may lose tax perks in 2023

Posted by DG, Date posted at December 27, 2022

Business Process Outsourcing (BPO) firms have had the predicament of being able to establish and maintain efficiencies in the industry during the COVID-19 outbreak by having most — if not all — employees have the work-from-home (WFH) setup. This has enabled a flexible and effective work environment amidst lockdowns and restrictions as the pandemic raged on from 2019 until recently tapering off by mid-2022.

work from home mom with her kid playing

This solution has seen conflict with BPOs under the Philippine Economic Zone Authority (PEZA). The WFH construct runs against the PEZA conditions and the agreement with PEZA will have BPOs possibly lose their tax incentives by 2023. PEZA saw that currently, those BPOs who have not fully complied with the government requirement before the deadline will fall under this category.

PEZA set a deadline for BPOs to submit requirements and complete their applications by the 16th of December. The companies who made it tallied only 446 registered businesses — comprising only 41% of the total BPOs under the PEZA conditions. Only 446 business entities were able to make it before the deadline. PEZA would need to transfer this to the Board of Investments (BOI). 

PEZA assessment of current BPO status

PEZA also released a statement saying, “Peza is still currently in the process of endorsing all applications to BOI. As of today, 70  % of the applications have been endorsed already to BOI.”

PEZA Officer in charge and Deputy Director General Tereso Panga informed the Inquirer that another application was received that was beyond the deadline but was still accepted anyway.  The latest tally now leaves up to 640 firms that are still not meeting the requirements and are not fully compliant. 

The BPOs who were unable to meet the deadline also need to immediately have all their employees work back on-site if they still want to remain eligible for tax perks. If the BPOs would still opt to continue with the WFH setup, they may do so but without government incentives.

Asked for verification on the next steps for BPOs not compliant with PEZA conditions, Panga did mention previously that PEZA-registred firms who currently have the WFH setup will not be able to continue receiving tax perks next year should they fail to transfer their registration to the other investment promotion agency. Asked if PEZA will be asked for an extension from the Fiscal Incentives Review Board (FIRB), Panga was reluctant to raise the point that even the BOI was “not keen on asking” to have a further extension on the application period. 

Clarification on the different deadlines earlier on

The deadline for submission to PEZA was the 16th of December but the original deadline in the FIRB resolution reflects as the 31st of December. This matter was clarified by PEZA Deputy Director General for Operations Vivian Santos. She told reporters last week that the December 16 deadline was adopted so that PEZA will have enough time to prepare the data and make the submission to the BOI. 

Tracing back the history of how the BPO WFH setup progressed, it can be recalled that since April of this year, PEZA-registered businesses have been given temporary leeway for the WFH option until the 12th of September — and still enjoy the tax incentives. This condition also included that there is only 30% of their total workforce working from home due to the difficult environment surrounding the pandemic. PEZA-registered companies are still obliged to conduct business operations inside the designated zones to enjoy the tax perks. 

It was also in September that the FIRB decided to have these companies transfer to the BOI if they still want to remain eligible for the tax incentives and if they will want to keep the WFH arrangement only until the end of the year to finally make a transition. 

Well, PEZA conditions are beyond the control of BPOs. Hopefully, BPOs will opt to keep the WFH option for folks in the call centre industry. Having this option is a great help beyond the pandemic condition — but further future forward with inflation biting at the heels. Truly, WFH not just maximizes the time of every employee — having work-life balance within reach but also helps cope with the rising prices of everything under the sun. What are your thoughts guys? Would WFH be a great incentive for employees to keep working? Just comment down below, we’d love to hear from you soon! Thanks!

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