THE Philippine Economic Zone Authority (PEZA) said business process outsourcing (BPO) companies intending to switch their registration to the Board of Investments (BoI) have until Dec. 31 to do so. PEZA described this process as a “paper transfer.”

In a statement on Thursday, the PEZA said it issued Memorandum Circular (MC) No. 2022-067 on Oct. 21, which fixed the deadline for the end of the year.

BoI-registered BPOs, which are also known as Information Technology-Business Process Management (IT-BPM) companies, will be allowed to offer their employees unrestricted work-from-home (WFH) arrangements without losing their access to incentives.

While they were regulated by PEZA, BPOs were required to operate mostly within economic zones if they were to retain their incentives.

Regulation by the BoI was the compromise arrived at to keep BPO companies in possession of their incentives. The BoI does not enforce the economic zone requirement on the companies it oversees.

According to PEZA, MC No. 2022-067 supplements MC No. 22-19 issued by the Department of Trade and Industry on Oct. 18, which outlined the procedures for transferring registration from PEZA to the BoI.

“Under this arrangement, (the) BoI will issue a certificate of registration to transferee registered business enterprises (RBEs) for their conduct of 100% WFH and where PEZA will continue to administer to them the fiscal and non-fiscal incentives for the sunset period,” PEZA said.

PEZA added that the RBEs covered are not deemed to be cancelling their PEZA registrations, allowing PEZA to continue earning revenue from them.

“PEZA shall continue to administer the fiscal incentives of the RBEs such as validation of the income tax holiday incentive and issuance of Certificate of Entitlement to Tax Incentives (CETI), value-added tax certifications, and other applicable certificates,” according to the MC.

“Non-fiscal incentives such as the PEZA Visa, automated importation, issuance of building permits, and others shall still be provided by PEZA to the RBEs registering with the BoI,” it added.

However, PEZA said it has issued specific guidelines in the MC directing registered IT-BPM companies to maintain offices within PEZA-registered IT centers or buildings.

According to the MC, failure to comply will result in the cancellation of the PEZA and BoI registrations. 

“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.” PEZA Officer-in-Charge and Deputy Director General for Policy and Planning Tereso O. Panga said.

Mr. Panga said the so-called “paper transfer” is “an interim measure to preserve their export enterprise status as they avail of 100% WFH arrangement with full incentives” when they move to the BoI, Mr. Panga said.

Mr. Panga said PEZA is hoping for a new law or policy formally allowing unrestricted hybrid work arrangements for IT locators in economic zones. Current tax law requires economic zone locators to work mostly onsite to continue enjoying incentives.

“We expect that PEZA will retain its mandate to promote and facilitate investments and keep the separate customs territory status vested in the ecozones to ensure the competitiveness of our IT sector,” Mr. Panga said.

The Fiscal Incentives Review Board has ruled that registered IT-BPM companies in economic zones can implement 100% WFH arrangements and still avail of incentives by transferring their registration from PEZA to BoI.

Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises imposes the onsite work requirement on economic zone locators. — Revin Mikhael D. Ochave