With the Covid-19 pandemic over, registered business enterprises, or RBEs, in economic zones allowing a work from home setup should not get tax incentives under Republic Act, or RA,11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises, or CREATE, Act.
Justice Secretary Jesus Crispin Remulla in a legal opinion dated 3 January 2024, said that “Section 309 of RA 11534 specifically requires registered projects or activities under an Investment Promotion Agency, or IPA, administering an economic zone or freeport to be exclusively conducted or operated within the geographical boundaries of the zone or freeport, and any project or activity conducted or performed outside the zone or free port shall not be entitled to the incentive under the CREATE Act.”
The DoJ chief issued the legal opinion at the request of Presidential Management Staff Undersecretary for Legal and Monitoring Rodolfo John Robert Pallatao IV.
The legal opinion was sought due to the conflicting stand of five government agencies, the Department of Trade and Industry, or DTI, the Philippine Economic Zone, or PEZA, the National Economic and Development Authority, or NEDA, the Fiscal Incentives Review Board, or FIRB and the Office of the Presidential Adviser on Investment and Economic Affairs on remote work among RBEs, particularly in the Information Technology and Business Process Management, or IT-BPM, sector after the state of emergency due to the pandemic has been lifted.
Must be within zone
In issuing the legal opinion, Remulla cited Section 309 of RA 11534 which stated: “A qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered…any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act, unless such project or activity is conducted or operated under another Investment Promotion Agency.”
“Business enterprises located in the economic or freeport zone must continue to conduct their activities within the zone boundaries if they wish to continue availing of their tax incentives under the CREATE Act,” Remulla said.
He pointed out that “these enterprises are not prohibited from adopting a WFH arrangement but will no longer be eligible to continue enjoying the tax incentives.”
Remulla, however, acknowledged that there exists RA 11165, the Telecommuting Act, that was signed into law on 20 December 2018 and concerns “work from an alternative workplace with the use of telecommunications and/or computer technologies.”
He said that in the event of conflict between the two laws, the provisions of RA 11534 which was signed into law on 26 March 2021 should prevail “being the last expression of the legislative will.”
