‘No tax breaks for eco-zone work-from-home firms’

Work-from-home setups of business enterprises in economic zones should no longer get tax incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act as the public health emergency status for COVID-19 has already been lifted, Justice Secretary Jesus Crispin Remulla clarified in a legal opinion.

Remulla explained that Section 309 of the CREATE law specifically requires registered projects or activities under an Investment Promotion Agency administering an economic zone or freeport “to be exclusively conducted or operated within the geographical boundaries of the zone or freeport.”

“Any project or activity conducted or performed outside the zone or free port shall not be entitled to the incentive under CREATE Act,” Remulla said.

To continue availing themselves of the tax incentives under CREATE law, business enterprises located in the economic or freeport zone should continue to conduct activities within their boundaries, he added.

Remulla was responding to a request for legal opinion by Rodolfo John Robert Pallatao IV, the Presidential Management Staff Undersecretary for legal and monitoring.

Pallatao sought the legal opinion due to the conflicting stance of different government agencies on whether the work-from-home (WFH) setup of registered business enterprises, particularly in the information technology and business process management sector, should get tax incentives under the CREATE law, considering that the state emergency for the COVID-19 pandemic has already been lifted.

“Business enterprises located in the economic or freeport zone are not prohibited from adopting a WFH arrangement but will no longer be eligible to continue enjoying the tax incentives,” Remulla said.

He noted that while the Fiscal Incentives Review Board allowed the registered business enterprises to adopt the WFH setup, this was only a “temporary measure.”

“Once the exceptional circumstance – such as pandemic, epidemic, war, armed conflict, state of national emergency, outbreak of diseases, international or regional financial crisis or analogous circumstances – ceases to exist, or in this case the issuance of Proclamation No. 297 dated 21 July 2023 lifting the State of Public Health Emergency throughout the Philippines, the temporary measure shall also cease to exist,” he said.