Before the coronavirus pandemic, the Philippines was an economic rising star in SE Asia. When covid struck, businesses deemed non-essential were ordered to close, and the people were told to quarantine at home for two weeks. People and businesses were forced to adapt and make changes. Those changes included working from home and government tax incentives for BPO businesses. The Philippines has two major tax incentive authorities tasked with promoting investment in the country and awarding tax incentives to qualified businesses. The first is the Philippine Economic Zone Authority (PEZA), and the second is the Board of Investment (BOI). Both are two separate government agencies. Other government agencies may promote investment through fiscal and non-fiscal incentives, but these two are the main ones.
The main difference between these two agencies (PEZA and BOI) is that PEZA tax incentives offer an additional benefit of VAT exemption on all purchases made in the Philippines (with Value Added Tax (VAT) at 12%, which can be significant). The other difference is that PEZA beneficiaries must be located in what is known as a PEZA zone. These tax incentive zones can be whole economic zones set up for manufacturing and export, as well as buildings located in central business districts specifically designed to provide the infrastructure for call centers and other Business Process Outsourcing (BPO) operations. Companies receiving tax incentives from the BOI can locate anywhere in the country.
The pre-pandemic Philippines tax incentive programs worked for nearly two decades, but as businesses transitioned to a hybrid or complete work-from-home setup, PEZA started requiring that companies must force employees to return to the office to qualify for receiving their tax incentives and other benefits from the government. This has caused quite a rift in the BPO industry as some companies opted to forgo their benefits to meet their employees’ needs by allowing them to continue to work from home.
After many months of debate, the government has recently clarified that companies can transfer their projects from PEZA to BOI-related projects so that they may still receive the majority of their government benefits. The recent announcement from the department of finance has been widely welcomed by the BPO industry here in the Philippines.
Triple i Consulting assists countless BPOs with their initial business registration in the Philippines and can help them determine which government benefits might fit them and how to avail of these benefits.