Now that the Covid-19 pandemic has ended, work-from-home (WFH) arrangements of registered business enterprises (RBEs) located in economic zones should no longer get tax incentives under Republic Act (RA) No. 11534, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

In a  legal opinion issued last Jan. 3, Justice Secretary Jesus Crispin C. Remulla said that “Section 309 of R.A. No. 11534 specifically requires registered projects or activities under an Investment Promotion Agency (IPA) administering an economic zone or freeport to be exclusively conducted or operated within the geographical boundaries of the zone or freeport, and any project or activity conducted or performed outside the zone or free port shall not be entitled to the incentive under CREATE Act.”

The legal opinion was issued at the request of Presidential Management Staff Undersecretary for Legal and Monitoring Rodolfo John Robert C. Pallatao IV.

Pallatao sought the legal opinion due to the conflicting stance of five government agencies -- the Department of Trade and Industry (DTI), the Philippine Economic Zone (PEZA), the National Economic and Development Authority (NEDA), the Fiscal Incentives Review Board (FIRB), and the Office of the Presidential Adviser on Investment and Economic Affairs (OPAIEA) -- on whether WFH arrangements of RBEs, particularly in the Information Technology and Business Process Management (IT-BPM) sector, should get tax incentives under the CREATE Law now that the state of emergency for the Covid-19 pandemic has been lifted.

Remulla cited that Section 309 of RA 11534 states: “A qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered…any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act, unless such project or activity is conducted or operated under another Investment Promotion Agency.”

Thus, he said, “business enterprises located in the economic or freeport zone must continue to conduct their activities within the zone boundaries if they wish to continue availing of their tax incentives under the CREATE Act.”

He pointed out that “these enterprises are not prohibited from adopting a WFH arrangement but will no longer be eligible to continue enjoying the tax incentives.”

He, however, acknowledged that there exists RA 11165, the Telecommuting Act, that was signed into law on Dec. 20, 2018 and concerns “work from an alternative workplace with the use of telecommunications and/or computer technologies.”

In the event of conflict between the two laws, Remulla said the provisions of RA 11534 which was signed into law on March 26, 2021 should prevail “being the last expression of the legislative will.”

“In enacting a statute, the legislative is presumed to have been aware of, and have taken into account, prior laws on the subject of legislation,” he explained.

He noted that even the FIRB recognized the provisions of RA 11534 when the board issued FIRB Resolution Nos. 003-22 and 017-22 that allowed RBEs of the IT-BPM sector to adopt the WFH arrangement.

But he explained that the FIRB resolutions were issued as “a temporary measure as provided under Rule 23 of the CREATE IRR (implementing rules and regulations).”

“Once the exceptional circumstance, such as pandemic, epidemic, war, armed conflict, state of national emergency, outbreak of diseases, international or regional financial crisis, or analogous circumstances, ceases to exist, or in this case the issuance of Proclamation No. 297 dated 21 July 2023, lifting the State of Public Health Emergency throughout the Philippines, the temporary measure shall also cease to exist,” he said.

He recounted that FIRB issued Resolutions 026- 226 and 033-227 that allowed RBEs in the IT-BPM sector that have remaining tax incentives under Sec. 311 of the CREATE Act or those with approved incentives on or before September 2022 the option to register with the Board of Investments (BOI) from an ecozone or freeport zone Investment Promotion Agency (IPA) and adopt up to 100 percent WFH arrangement.

“This locational prohibition does not apply to enterprises registered with the BOI as it does not administer an ecozone or freeport,” he said.