The government will suspend the tax perks enjoyed by registered business process outsourcing (BPO) companies that will not comply with the 100-percent return-to-workplace order starting April 1.

The Bureau of Internal Revenue (BIR) has been tasked to collect monthly income tax from BPOs whose workforce will fall short of the full-capacity requirement to be implemented next month.

Internal Revenue Commissioner Caesar Dulay noted in Revenue Memorandum Circular No. 23-2022 issued last Feb. 18 that the interagency Fiscal Incentives Review Board (FIRB), chaired by the Department of Finance, last year allowed work-from-home for 75-90 percent of registered information technology-business process management firms' employees until March 31 of this year.

The circular, which was published on the BIR's website only on March 9, noted that the current work-from-home setup allowed by the FIRB up to this month's end will not adversely affect the tax-exempt perks extended to BPO firms under their registration with investment promotion agencies (IPAs).

However, Dulay warned that beginning April 1, BPO firms that won't comply with FIRB rules mandating "total workforce" in office premises "shall be meted with suspension of the income tax incentive on the revenue corresponding to the months of noncompliance."

The BIR defined total workforce as "total employees that are directly or indirectly engaged in the registered project or activity of the [registered BPO company], but excludes third-party contractors, if any, such as service contractors rendering janitorial or security services and other similar services."

Regular rate

"[BPO firms] shall pay the income tax using the regular rate of either 25 percent or 20 percent based on the taxable net income corresponding to the months the registered business enterprise has a violation," Dulay said. Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the annual corporate tax rate slapped on micro, small and medium enterprises (MSMEs) was cut to 20 percent, faster than the reduction among large firms to 25 percent from 30 percent previously.

"For registered business enterprises with no existing transactions subject to the regular income tax rate, BIR Form 1702-MX shall be used for the voluntary payment of the income tax due on the months with reported violation. However, for [firms] which have existing transactions subject to regular income tax rate, the voluntary payment shall be made through BIR Form 0605 and bank-validated copy of which shall be attached in the annual income tax return to be filed," Dulay said.

Dulay warned that noncompliant IPA-registered BPO players that would not pay voluntarily or have insufficient payments will be audited upon the BIR's issuance of a letter of authority (LOA). The LOA is an official document that empowers revenue officers to examine and scrutinize taxpayers' books to determine their correct tax liabilities.

Last Wednesday, FIRB chair and Finance Secretary Carlos Dominguez III pointed out that the current work-from-home arrangement was "only a time-bound temporary measure" while the country fought COVID-19.

But with a rising vaccination rate and declining number of infections, Dominguez said BPO firms needed to resume in-person work at their ecozone or freeport facilities to not only comply with their tax incentives' requirement but also help MSMEs located around BPOs resume their operations. INQ @bendeveraINQ By Ben O. de Vera