Tax Alert No. 14 [Revenue Memorandum Circular (RMC) No. 45-2023 dated 19 April 2023]

Publishes the Full Text of Fiscal Incentives Review Board Advisory No. 004-2023 Clarifying the Issues Covering the Transfer of Registration with the Board of Investments (BOI) of Registered Business Enterprises (RBEs) in the Information Technology - Business Process Management (IT-BPM) Sector

RMC No. 45-2023 has been issued to publish the full text of FIRB Advisory No. 004-2023 dated 15 February 2023 which clarifies the issues covering the transfer of registration with the BOI of RBEs in the IT-BPM Sector. This is in view of the issuance of the FIRB Administrative Order 001-2023 prescribing the supplemental guidelines to operationalize FIRB Resolution Nos. 026-22 and 033-22 dated 14 September 2022 and 23 December 2022, respectively. We highlight below some salient provisions:

Clarifications on the coverage of FIRB Resolution Nos. 26-2022 and 33-2022

• All registration of new or expansion projects from September 15, 2022 onwards shall be with the BOI if the IT-BPM RBEs wish to avail of the 100% work- from-home (WFH) arrangements. Prior to this period, IT-BPM projects may register with the BOI.
  
• IT-BPM RBEs that implemented WFH arrangements in 2023 but failed to register with the BOI by 31 January 2023 shall be subject to a penalty on the regular corporate income tax (RCIT). This, however, is without prejudice to the suspension or withdrawal of tax incentives or cancellation of the corresponding Certificate of Registration, upon further assessment by the concerned Investment Promotion Agencies (IPAs) or the FIRB.
  
• The penalty on RCIT, in case of non-compliance with Section 309 of the Tax Code, as amended, shall be computed based on 100% or the entirety of the RCIT for the month/s of noncompliance and not merely on the percentage of non-compliance.
  
• The BOI-Certificate of Registration (BOI-COR) cannot be amended after January 31, 2023 to include expansions or new projects in order to allow these new projects or expansions to implement WFH arrangements. New or expansion projects or activities of IT-BPM RBEs should be separately registered with the BOI in order to avail of WFH arrangements.
  

Clarifications on the availment of incentives/registration with the BOI

• Upon the issuance of the BOI-COR, the IT-BPM RBE must submit the BOI-COR to the original or concerned IPA for the annotation of the original COR issued by the said concerned IPA, For the Philippine Economic Zone Authority (PEZA)-registered IT-BPM RBEs, the BOI-COR shall be submitted to the PEZA's Office of the Board Secretary for proper annotation.
  
• The BIR and Bureau of Customs (BOC) shall accept the official receipt as proof that the BOI-COR will be secured by the company. Generally, in lieu of the BOI-COR, the BOI-issued official receipt shall be accepted as an alternative. The date indicated in the official receipt shall be the effective date of registration with the BOI, which marks the beginning of the IT-BPM RBE's eligibility to implement 100% WFH arrangements.
  

Clarifications on the submission of reports and compliance monitoring

• The Certificate of Authority to Import (CAI), Certificate of Entitlement to Tax Incentives (CETI), and Value-Added Tax (VAT) Zero-rating certificate shall still be processed with the original or concerned IPA, using their existing procedures. Nonetheless, coordination shall be made with the concerned IPA for any additional reportorial requirements or for any adjustments in existing process flows.
  
•  An amended VAT zero-rating certificate for 2023 should be requested from PEZA, with the required annotation as specified in the Administrative Order, to ensure that all stakeholders are guided by the changes in the registration of the subject IT-BPM RBE. 
  

Clarifications on the allocation of five percent (5%) tax on gross income earned

• There is no change in the corresponding share of the existing recipient-Local Government Unit (LGU), provided that the IT-BPM RBE does not change its registered address or registered location. 

The FIRB Advisory also clarified questions covering the following issues: 

• Movement of capital equipment and other assets within and outside the economic zones and/or freeport zones;
  
• Transitory period for the movement of capital equipment and other assets within and outside the economic zones and/or freeport zones;
  
• Valuation methods of the BOC for the sale, transfer, donation, or disposal of the related assets of the covered RBE, whether local or imported;
  
• Treatment of existing capital equipment and other assets with lost or missing documents specific to the requirements needed for the DOF-RO’s Tax Exemption Indorsement (TEI);
  
• Allowable ratio of WFH arrangements for covered RBEs; and
  
• Processing of TEI for New Goods
  

You may access the full version of this issuance through the BIR website.