The Philippine Economic Zone Authority (PEZA) is confident it can resolve with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) whatever incentives issue in the implementation of the 70-30 (onsite-work from home) ratio hybrid work arrangement for its registered business enterprises (RBEs).
“We’ll be writing the BIR and BOC of PEZA’s legal basis of the ratio as this is the regular policy and ratio,” said PEZA Director General Charito B. Plaza.
Plaza noted that the PEZA Board-approved 70-30 ratio means PEZA is just going back to its policy after the 90-10 (offsite-onsite) ratio assistance to their RBEs during the pandemic expired last March 31. With that, Plaza said there will be no diminution of incentives granted to their RBEs.
“BIR/BOC have been computing our RBEs sales allowance and WFH ratio since 2017 when we allow as policy WFH not more than 30 percent without diminution of incentives,” she added. PEZA is just applying the 30 percent domestic sales of their export-oriented RBEs for the hybrid work arrangement.
Plaza said this after Trade and Industry Secretary Ramon M. Lopez, who has softened his position on the 70-30 work ratio arrangement, also raised the possibility of the BIR questioning the RBEs incentives later on.
“Registered enterprises who keep to this (70-30) will continue to enjoy incentives. However, what can be questioned later by the BIR is whether the incentives should apply to all of the project’s revenues, or only to the revenues associated with the 70 percent done onsite,” said Lopez, who is also PEZA chairman.
So far, 400 of RBEs have already submitted requests for Letter of Authority (LOA) for their implementation of 70-30 hybrid work arrangement.
“This WFH policy started in 2017 with OPTUM applying the first WFH which was also the trend in India and other countries,” said Plaza.
Aside from the 70-30 domestic sales allowance, PEZA cited the Telecommuting Act of 2018 as basis for the hybrid work ratio.
“Hence, BIR/ BOC have been computing taxes recognizing the policies and practices which was approved by the Board,” Plaza pointed out. The PEZA Board approved the 70-30 ratio in January this year until September this year in time for the expiration of the declaration of state of national health emergency by President Duterte.
“What was approved by the Board becomes a policy especially that these are policies prior to the CREATE law,” she said.
Still, Plaza said the CREATE law also provides a sunset provision for existing industries, which means that those covered are still under the PEZA policies. In addition, a business continuity plan provision is also provided during the state of calamities, which continued to be experienced in the country.
Despite the preference for the 70-30 ratio among its RBEs, Plaza said its IT Centers Group reported of increasing capacities in PEZA IT Parks/Buildings/Centers. “This means there are new ITBPO companies which grew during the pandemic as virtual/digitalized economy is now the world’s normal,” she pointed out.
Meantime, Plaza said that its RBEs are neither leaving their host agency nor transferring their registration elsewhere.
Plaza made this clear amid claims that its RBEs, particularly the IT-BPO firms, were leaving PEZA-administered ecozones/IT buildings/parks/centers, and transferring their registration with the Board of Investments (BOI), which RBEs are allowed WFH work setup.
“There is no truth that our registered IT-BPOs and RBEs have left our ecozones,” said Plaza.
Despite having the same fiscal incentives with the BOI, she said, it is not easy to cancel a registration. “We also have a protocol that prohibits an enterprise for a double registration,” said Plaza. But she also said that if the export-oriented RBEs decide to be 100 percent domestic service oriented then, they can cancel their registration and transfer to BOI, which is registering domestic-oriented projects.
This has been seconded by PEZA Deputy Director Tereso Panga who said, “Moving out of our economic zones can be tedious and costly.”
Panga, however, assured that “PEZA is working closely with BOI on institutionalizing the WFH in the Strategic Investment Priority Plan (SIPP) to further promote the growth of the IT sector and to ensure regulatory coherence especially on the WFH policy.”
Nonetheless, Plaza said that PEZA RBEs still prefer to be with them because they enjoy the incentives and the security and safety of the ecozones, the amenities and ambience being provided to them.
In fact, PEZA is now being transformed into townships (industrial, commercial & residential facilities) to serve all the needs of locators.