Affected registered business enterprises (RBEs) in the IT-business process management (IT-BPM) sector that intend to transfer registration from the Philippine Economic Zone Authority (PEZA) to the Board of Investments (BOI)/Department of Trade and Industry (DTI) to adopt 100 percent work from home (WFH) arrangement without losing their tax incentives are given until December 31 this year to exercise such option.

The transferee RBEs, however, are still required to maintain an office in a PEZA IT Building/Center to maintain their registration and incentives.

This was contained in similar but separate guidelines issued by investment promotion agencies (IPAs) – Board of Investments (BOI/DTI) and Philippine Economic Zone Authority as both agencies are effectiving the “paper transfer” of registration of IT-BPM RBEs.

Memorandum Circular No. 22-19, which was issued by DTI Secretary Alfredo E. Pascual on Oct. 18, 2022, on the “Guidelines on the Registration with the BOI of existing RBEs in the IT-BPM sector by virtue of Fiscal Incentives Review Board Resolution No. 026-22 dated 14 September 2022” will take effect after publication in a newspaper.

The DTI MC covers all affected RBEs in the IT-BPM sector that have remaining incentives under Section 311 of the National Internal Revenue Code of 1997, as amended, or those with approved incentives on or before September 14, 2022 under the CREATE Act with the concerned IPA, particularly those currently registered with the PEZA, that intend to register with the BOI.

The Fiscal and Incentives Review Board has ruled in favor of the transfer of registration of affected RBEs to BOI/DTI because the PEZA law does not allow WFH work arrangement, but the BOI rule allows 100 percent WFH and does not require enterprises to locate in an economic zone. By allowing the transfer, the affected RBEs can continue availing of their remaining tax incentives.

Under the MC, transferees to BOI are required to file their request with the concerned IPA and submit an endorsement from the IPA. The endorsement by the concerned IPA shall be treated as a certification of its no-objection on the registration with the BOI and that the RBEs endorsed are compliant with the terms and conditions of registration and are in good standing.

On the availment of incentives, the DTI guidelines stated that the concerned IPA will continue to administer the remaining tax incentives of the RBE with the period of entitlement.

The transfer of registration however will not affect other incentives and non-fiscal incentives that the covered RBEs are enjoying under their original registration with the concerned IPA, which will continue monitoring compliance of the RBEs on the provisions of the CREATE Law, and Omnibus Investments Code of 1987 and other requirements of relevant government agencies.

Within 30 days from issuance of the BOI certificate of registration, the transferee RBEs are required to submit a list of equipment and other assets brought out of the economic or freeport zones, including the quantity of laptops, desktops and other assets with no bond requirement. They are also required to disclose the total number of employees and number of employees under the WFH arrangement.

Meantime, the PEZA issued MC No. 2022-067 on Oct. 21, 2022 the guidelines on the registration with the BOI of existing RBEs in the IT-BPM sector supports the DTI MC 22-19.

Notably, the PEZA MC stated that transferee RBEs are still required to maintain an office inside PEZA-registered IT Centers/Buildings. Failure to comply with this mandatory requirement will result in the cancellation of its registration with PEZA as an IT enterprise and subsequently, its registration with BOI.

PEZA Officer In Charge Deputy Director General Tereso O. Panga explained that this requirement is just for the transferee RBE to maintain a small office in the PEZA registered IT center. “This is necessary in order for PEZA to retain its authority/jurisdiction over the transferee RBEs, which are required under the rules to operate inside the economic zone.

“Otherwise, if the locators will vacate and move out their operations from the IT center to the domestic market, they will be disqualified from availing of the ‘paper transfer’ arrangement with the BOI. As such, they will automatically lose their incentives and registration with the BOI and PEZA,” Panga said.

PEZA will still continue to administer the fiscal incentives of the RBEs, including the validation of ITH incentive and issuance of CETI, VAT certifications and other applicable certificates. This means that while simultaneously registered with the BOI, the RBEs are still under the administrative supervision and monitoring of PEZA.

Non-fiscal incentives such as the PEZA Visa, automated importation, issuance of building permits, and others will still be provided by PEZA to the RBEs registering with BOI.

Both the BOI/DTI and PEZA MCs, however, were silent in terms of the investment credit or whether the project cost would be counted under BOI or still with PEZA or its original IPA host.

For now, the arrangement is just a paper transfer of registration. But Panga said that future IT-BPMs will already be registered with the BOI. When that happens, he said, PEZA will have to disengage with their involvement with these enterprises or joint registration with the BOI.