The Fiscal Incentives Review Board (FIRB) has issued FIRB Advisory 3-2023 regarding the correct basis of the penalty imposed on Registered Business Enterprises (RBEs) engaged in Information Technology and Business Process Management (IT-BPM) for non-compliance with the work from home (WFH) threshold.
The penalty should be based on 100 percent or the whole amount of Regular Corporate Income Tax (RCIT) due for the month/s of non-compliance and not merely based on the excess of the 30 percent WFH threshold. The corresponding penalty shall be paid using BIR (Bureau of Internal Revenue) Form 0605 and shall be determined by computing the difference between the RCIT and the five percent Gross Income Tax or the five percent Special Corporate Income Tax.
Sample Computation
Income summary of RBE with a fiscal year end of Aug. 31, 2023, whose income is derived solely from its registered activity. The RBE committed a WFH violation for the month of February 2023.
*From September 2022 to February 2023
WFH arrangements were allowed starting in March 2020. However, RBEs in the IT-BPM sector in the economic or freeport zone may no longer adopt WFH arrangements beginning Jan. 1, 2023, unless it has already completed its registration with the Board of Investments (BOI) not later than Jan. 31, 2023. Hence, only those registered with the BOI on or before Jan. 31, 2023, may adopt up to a 100 percent WFH arrangement without adversely affecting their incentives.
Source:
P&A Grant Thornton
Certified Public Accountants