(FIRB Advisory No. 3-2023, issued on January 27, 2023)
This Tax Alert is issued to inform all concerned on the clarification issued by the Fiscal Incentives Review Boards (FIRB) regarding the correct basis of the penalty imposed to Registered Business Enterprises (RBEs) engaged in Information Technology and Business Process Management (IT-BPM) for non-compliance to the work from home (WFH) threshold prescribed by FIRB Resolution No. 17-22, as extended by FIRB Resolution No. 26-22.
The penalty should be based on the 100% or the whole amount of Regular Corporate Income Tax (RCIT) due for the month/s of non-compliance, and not merely based on the excess of the 30% WFH threshold.
Pursuant to Bureau of Internal Revenue (BIR) Revenue Memorandum Circular (RMC) Nos. 23-2022, 39-2022, and 120-22, RBEs that fail to comply with the prescribed WFH threshold shall continue to file and pay their income tax due. Meanwhile, the corresponding penalty shall be paid using BIR Form No. 0605 and shall be determined by computing the difference between the RCIT and the 5% Gross Income Tax (GIT) or the 5% Special Corporate Income Tax (SCIT). Thus, local business tax (LBT) is deemed to have been paid therewith.
Lastly, RBEs in the IT-BPM sector in the economic or freeport zone may no longer adopt WFH arrangements beginning January 1, 2023 unless it has already completed its registration with the Board of Investments (BOI) not later than January 31, 2023. Hence, only those registered with the BOI on or before January 31, 2023 may adopt up to 100% WFH arrangement without adversely affecting their incentives.
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