Under the rules, Philippine Economic Zone Authority (PEZA) registered companies are required to operate within the economic zones to be entitled to tax incentives. However, due to the pandemic, the Fiscal Incentives Review Board (FIRB) temporarily allowed PEZA companies to adopt a work-from-home (WFH) arrangement for up to a certain percentage of the workforce, while still enjoying tax incentives.
As we slowly transition back to normal, the FIRB has issued several extensions during the year for the continued implementation of the WFH setup for Information Technology and Business Process Management (IT-BPM) firms registered with the PEZA. Despite extending the WFH setup of 70%-30% ratio until September 12, 2022, PEZA warned the risk of losing skilled employees due to an overwhelming preference of employees for a flexible work arrangement. There is also the risk of companies cancelling their registration and setting up their businesses outside the Philippines instead.
To finally resolve the issue, the FIRB issued Resolution No. 026-2022 on September 14, 2022, which not only extended the 70-30 WFH arrangement until December 31, 2022, but also provided an option for PEZA companies under the IT-BPM sector to transfer their registration to the BOI to avail of the 100% WFH arrangement without incurring penalties and losing tax incentives.
In line with this, the Department of Trade and Industry (DTI) issued Memorandum Circular No. 22-19 on October 18, 2022, which provided the finalized guidelines on the transfer of registration to the BOI of existing Registered Business Enterprises (RBEs) in the IT-BPM sector. To disseminate the guidelines, the FIRB and the Bureau of Internal Revenue (BIR) issued FIRB Advisory 008-2022 (dated October 19, 2022) and Revenue Memorandum Circular No. 142-2022 (issued on November 2, 2022), respectively. In addition, PEZA also issued MC No. 2022-067 (dated October 21, 2022) and MC No. 2022-070 (dated October 24, 2022) 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 September 14, 2022, under the CREATE Act with the concerned IPA. They have until December 31, 2022, within which 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 shall 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 December 16, 2022. The highest ranking official of the RBE shall sign the certification of Annex A and the same need not be notarized.
The email address firstname.lastname@example.org will no longer be accessible after December 16, 2022, and PEZA will not accept hard copies of the applications and attachments.
RBEs that already submitted their applications to the Office of the Director General (ODG) are required to re-submit their applications using the same email address.
2. PEZA shall 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 shall be done through email and PEZA shall furnish the RBEs with the endorsement.
3. Once the RBEs receive the email from PEZA, the RBEs shall pay the fee amounting to P 2,250.00 to BOI. The date indicated in the official receipt shall be the date of the effectivity of registration with the BOI.
4. Upon issuance of the BOI COR, RBEs must furnish PEZA a copy of the same for annotation in their PEZA COR, to be sent to email@example.com. The BOI Certificate of Registration shall likewise include annotation of the Certificate of Registration issued by PEZA.
5. Within thirty (30) days from issuance of the BOI COR, the RBEs shall 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 shall continue to administer the fiscal incentives and maintain the 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 guideline is described as a ‘paper transfer’ since it does not involve any physical relocation of operations. Hopefully, the process on the transfer of registration will truly be seamless for affected RBEs as we are only a little over a month away from the deadline set on December 31, 2022. It is also worth noting that while the deadline for transfer is on or before December 31, 2022, PEZA will only accept submissions of application forms until December 16, 2022. 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.
As published BusinessWorld, dated 15 November 2022