Work-from-home arrangements were a necessity especially at the height of the Covid-19 pandemic in 2020 with the national government enacting policies to support workers and business, and businesses reconfiguring their operations to keep afloat.
Aside from the pandemic, WFH was already becoming popular among Filipinos as jobs gradually digitalize. According to online employment portal JobStreet's 2022 report, out of over 11,000 Filipino respondents, 46 percent said they prefer a hybrid work setup (combining onsite and online work) while 28 percent prefer fully remote work.
However, as the country recovers and enters the new normal, people are going back to work at offices, putting into question whether these policies should be abandoned or sustained.
Last Jan. 3, the Department of Justice (DOJ) issued a legal opinion regarding the applicability of tax incentives for registered business enterprises (RBEs) that have WFH arrangements since the Covid-19 state of emergency status has been lifted in the country.
Justice Secretary Jesus Crispin C. Remulla cited Section 309 of Republic Act (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which states that RBEs under Investment Promotion Agencies (IPAs) such as the Philippine Economic Zone Authority (PEZA) must employ on-site work operations to avail of the tax incentives. RBEs are allowed to adopt WFH arrangements, but are no longer eligible for the tax incentives.
However, this locational prohibition does not apply to RBEs registered with the BOI.
During the pandemic, the Fiscal Incentives Review Board (FIRB) issued resolutions allowing RBEs of the IT-BPM sector to adopt WFH set ups. However, the DOJ said this was issued as a temporary measure under Rule 23 of the CREATE implementing rules and regulations (IRR).
In relation to this, the national government also passed Republic Act No. 11165 or the Telecommuting Act that allows business to conduct alternative workplace arrangements. However since the Telecommuting Act was passed in 2018 before CREATE which was approved in 2021, the terms of the latter law would be recognized, said the DOJ.
This legal opinion was met with general positive reactions from fellow government agencies and business groups. However, trade-related government agencies and a business outsource processing (BPO) group stressed the need for WFH flexibility to appeal to prospective investors and workers.
The Information Technology and Business Process Association Philippines (IBPAP), which targets to grow its revenue to $39 billion this year and around two million jobs, expressed its appreciation to the Department of Justice (DOJ) for clarifying the tax incentives eligibility of businesses, which affects many business outsource processing (BPOs) jobs and operations.
"This was I thought a very good legal solution. I'm happy to receive confirmation that the DOJ opinion will not affect the work flexibility of those currently enjoying 100 percent work flexibility from the paper transfer to BOI. That's a significant clarification," said IBPAP President and CEO Jack Madrid.
However, he emphasized his concern over the way the opinion is being shared, pertaining specifically to headlines that "could discourage" employees and investors from entering the industry.
"The Philippines doesn't have a demand problem. What we have is a challenge of talent supply. So when we have a supply problem and they read a headline that constraints them from work flexibility, this could damage the reputation of our industry and country. Our investors also see headlines, and when they see any notion of changing the rules, it damages the country," said Madrid.
Trade Undersecretary and Board of Investments (BOI) Head Ceferino S. Rodolfo said that they also welcome the clarification from the DOJ. He emphasized that the government wants the transfer Of PEZA locators to BOI "to be seamless and as facilitated as possible."
The opinion just "confirmed that the existing mechanism that we have allowed for the Philippines to continually benefit from the BPO investments, and that we have continued to attract because of this policy of allowing WFH arrangements for BOI-registered companies," he remarked.
Meanwhile, PEZA Director General Tereso Panga emphasized the agency's position to “allow for hybrid or flexible work arrangement in order to retain our valued ecozone locators and ascribe to the President’s call for Red Carpet treatment for all current and potential investors.”
He said it is the “right thing to do” since many economies have accepted WFH as the new workplace reality after the pandemic.
“If at all the position of PEZA is changed despite the enabling Telecommuting Act and the favorable resolution of this issue by the FIRB, we hope that the recent DOJ opinion will be addressed with the enactment of CREATE More to formalize government’s policy and legal framework for WFH,” he added.