Philippine Economic Zone Authority (PEZA) registered companies are required to operate within economic zones in order to be entitled to tax incentives. However, due to the pandemic, the Fiscal Incentives Review Board (FIRB) temporarily allowed PEZA companies to adopt work-from-home (WFH) arrangements for a certain percentage of the workforce, while still enjoying tax incentives.
With the slow transition back to normal, the FIRB issued several extensions allowing Information Technology and Business Process Management (IT-BPM) firms registered with PEZA to continue offering their employees WFH. Despite extending the WFH setup on the basis of 70%-30% of headcount until Sept. 12, PEZA warned of the risk of losing skilled employees due to the overwhelming preference in the industry for flexible work arrangements. There is also the risk of companies cancelling their registrations and establishing operations outside the Philippines.
To finally resolve the issue, the FIRB issued Resolution No. 026-2022 on Sept. 14, which not only extended the 70-30 WFH arrangement until Dec. 31, but also provided an option for PEZA companies in the IT-BPM industry to transfer their registration to the BoI to operate on a 100% WFH basis without penalty or the loss of tax incentives.
As such, the Department of Trade and Industry (DTI) issued Memorandum Circular No. 22-19 on Oct. 18, which provided the final guidelines on the transfer of registration to the BoI of IT-BPM Registered Business Enterprises (RBEs). To disseminate the guidelines, the FIRB and the Bureau of Internal Revenue (BIR) issued FIRB Advisory 008-2022 (dated Oct. 19) and Revenue Memorandum Circular No. 142-2022 (issued on Nov. 2), respectively. In addition, PEZA also issued MC No. 2022-067 (dated Oct. 21) and MC No. 2022-070 (dated Oct. 24) which provided supplemental guidelines to the DTI-issued memorandum.
The guidelines cover PEZA-registered IT-BPM firms that have remaining tax incentives under Section 311 of the 1997 Tax Code, as amended, or those with approved incentives on or before Sept. 14, 2022, under the CREATE Act with the concerned IPA. They have until Dec. 31 to process their registration with the BoI.
Listed below are the consolidated procedures for the transfer of registration to the BoI:
1. The covered RBEs must file their request with PEZA using the prescribed Request to Register with BoI Form (Annex A of PEZA MC No. 2022-067) together with the scanned copies of their PEZA Certificate of Registration (CoR) and Registration and Supplemental Agreements, to be sent to email@example.com on or before Dec. 16. The highest ranking official of the RBE must sign the certification of Annex A and the same need not be notarized.
The e-mail address firstname.lastname@example.org will no longer be accessible after Dec. 16, and PEZA will not accept hard copies of the applications and attachments.
RBEs that have already submitted their applications to the Office of the Director General (ODG) are required to re-submit their applications using the e-mail address.
2. PEZA is to endorse the request to the BoI Infrastructure and Services Industries Service (ISIS) using the prescribed template IPA List of Endorsed RBEs (Annex B of PEZA MC No. 2022-067) under the condition that the RBEs are compliant with the terms and conditions of their registration with PEZA and are in good standing. This will be conducted via e-mail with PEZA furnishing the RBEs with the endorsement.
3. Once the RBEs receive the e-mail from PEZA, the RBEs are to pay a fee of P2,250.00 to the BoI. The date indicated in the official receipt is to be the date of the effectivity of registration with the BoI.
4. Upon issuance of the BoI CoR, RBEs must provide PEZA a copy of the same for annotation in their PEZA CoR, to be sent to email@example.com. The BoI Certificate of Registration will likewise include annotation of the Certificate of Registration issued by PEZA.
5. Within 30 days from issuance of the BoI CoR, the RBEs must submit to PEZA the following:
a. List of all equipment and/or other assets containing the following information: (i) those brought out of the IT Centers/Park and those that remain in the registered facility of the RBE; (ii) quantity; (iii) year of acquisition; (iv) acquisition costs; and (v) book value; and
b. Total number of employees and number of employees under the WFH arrangement.
Despite the transfer, PEZA is to continue administering the fiscal incentives and maintain administrative supervision and monitoring of the RBEs. The transferee RBEs will also continue to comply with PEZA’s rules and regulations in relation to the availment of fiscal incentives. They are required to maintain an office inside PEZA-registered IT Centers/Buildings to avoid cancellation of their registration with PEZA as IT enterprises and subsequently, their registration with BoI.
The detailed guidelines are described as a “paper transfer” not involving any physical relocation of operations. It is hoped that the process is truly seamless for affected RBEs as we are only a little over a month away from the deadline of Dec. 31. It is also worth noting that even with such a deadline, PEZA will only accept application forms until Dec. 16. Hence, all covered RBEs that wish to apply should submit as early as possible their application forms to PEZA to ensure that the agency will have sufficient time to endorse them to the BoI.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Juvy De Jesus-Tibay is a senior manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.