Philippine DOJ: No tax perks for fully-remote BPOs in ecozones
MANILA, PHILIPPINES — The Philippine Department of Justice (DOJ) issued a legal opinion stating that Business Process Outsourcing (BPO) firms operating within special economic zones will lose their tax incentives if they implement full-time remote work arrangements.
In an opinion penned by Justice Secretary Jesus Crispin Remulla on January 3rd, the DOJ cited Section 309 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. This provision specifies that any activities conducted outside the geographical boundaries of economic zones or freeports shall not qualify for tax perks.
“Until the enactment of a new legislation amending that law, 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,” Remulla wrote.
“These enterprises are not prohibited from adopting a WFH arrangement but will no longer be eligible to continue enjoying the tax incentives,” he added.
The DOJ stance puts it at odds with the Department of Trade and Industry (DTI) and the Philippine Economic Zone Authority (PEZA), both of which supported more flexible remote work policies for BPOs operating within the special zones.
Meanwhile, the Fiscal Incentives Review Board (FIRB) is aligned with the DOJ’s strict on-site work requirement for BPOs to receive tax incentives. Industry groups have voiced concerns that this could dampen investment and hiring in the crucial BPO sector.
As a potential workaround, BPOs have the option to transfer their registration from PEZA to the Board of Investments (BOI), which allows location-flexible work. Once remote work policies are updated for zone-based BPOs, companies can then shift their registration back to PEZA if they would like to.
