May 18th, 2021
Salceda defends BPO work-from-home arrangements, wants CREATE IRR to accommodate remote working for ‘virtual industries’
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) supports the call to allow business process outsourcing (BPO) enterprises to keep the work-from-home arrangements and to allow the same in the implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
In a written response to IT & Business Process Association of the Philippines (IBPAP) President Rey Untal on May 18, Salceda wrote that the “intention of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is to ensure that Philippine enterprises are competitive.”
In a letter to Salceda, Untal asked Salceda to relax the rule under Section 309 of the tax code as amended by CREATE. The condition under Section 309 is that the activity must be “conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered.”
“This appears to me to be relevant for industries that require physical transport and storage and are therefore prone to smuggling and leakage to the domestic market. Smuggling is not a BPO-sector problem,” Salceda said.
House tax chair supportive unless BIR has objections
“Unless there is a contrary DOF or BIR opinion or overriding argument, I tentatively support your request on this matter,” Salceda said.
“For industries that make use of the virtual space, a strict interpretation of Section 309 would lead to such absurd questions as “Are the airwaves part of the geographical boundaries of the zone?” or “When a BPO service is transmitted and/or stored through facilities outside the zone, does this count as a violation of the provision?””
“The complete process of rendering the service of a BPO does not happen exclusively within the boundaries of the zone, even if the workers are onsite. It appears to me that if the service is orchestrated in the ecozone by the BPO, Section 309 can be fully complied with,” Salceda added.
“I am thus inclined to support your request. However, as Chairman of the House Ways and Means Committee, it is important to me that I hear from the Bureau of Internal Revenue (BIR) or the Department of Finance (DOF) about whether such a hybrid arrangement can be abused to minimize or evade taxes,” Salceda assured IBPAP in the letter.
Work-from-home safer
The House tax chair, in statements explaining the letter, said that “CREATE wants to prevent smuggling in ecozones. You can’t smuggle via BPO.”
“Of course, the ball is in the court of the Executive, although I can do oversight. But I hope Secretary Dominguez and Commissioner Dulay consider this view, especially because it makes sense,” Salceda said.
The draft IRR for fiscal incentives, under the new Title XIII of the NIRC as amended, is expected to be issued by May.