Tax Alerts

Guidelines on the payment of penalties for IT-BPM RBEs violating the 70:30 WFH arrangement

(Revenue Memorandum Circular No. 120-2022, issued on August 18, 2022) 

This Tax Alert is issued to inform all concerned on the manner of payment of penalties in relation to the suspension of income tax incentives granted to Registered Business Enterprises (RBEs) in the IT-BPM sector for violating the Work-From-Home (WFH) arrangement allowed by the Fiscal Incentives Review Board (FIRB).  

FIRB Resolution No. 17-22 allowed RBEs in the IT-BPM sector to adopt a 30% WFH from April 1 to September 12, 2022.  

RBEs exceeding the 30% threshold for at least a day shall pay, as penalty, the regular income tax of 25% or 20%, as applicable, for the month/s when the violation took place.  

In paying the said penalty, the following guidelines are prescribed by the BIR: 

  • RBEs with violation shall continue to file quarterly/annual income tax return following the usual procedure as if no violation was committed. However, they are required to complete the information on allowable deductions.  
  •  Payment of penalty shall be made using BIR Form No. 0605 by choosing 'Others' under 'Voluntary Payment' and by indicating in the field provided the phrase "Penalty pursuant to FIRB Res. No. 17-2022". The tax type code shall still be "IT" and the ATC to be indicated is "MC 200".  
  • A separate computation for penalty shall be attached to the BIR Form 0605.  A sample computation of penalty is illustrated in the RMC.  
  • Net Operating Loss Carry Over (NOLCO) shall not be a part of the computation for penalty and shall not be deducted from the total taxable income.  
  • Payment of penalty must be made on or before the due date prescribed for the filing and payment of quarterly income tax return, subject to adjustment upon the filing of the annual income tax return. For the quarters that already ended, the filing and payment of penalty shall be made within 10 days after the issuance of this Circular. Late filing and payment shall be subject to penalty for late filing and payment of income tax.  
  • If the violation happened during the last quarter of the fiscal year, the penalty shall be computed based on the manner prescribed in RMC No. 39-2022. 
  • For RBEs with violation of FIRB Resolution No. 19-21, the manner prescribed on RMC No. 39-2022 shall be followed.  
  • Violations committed beyond September 13, 2022 onwards may subject the RBEs to applicable taxes.