PEZA extends COVID-19 assistance and reprieves to its registered enterprises, BIR approves the move
17 November 2020 (Monday)
Pasay City – While COVID-19 pandemic continues towards the end of year 2020, the Philippine Economic Zone Authority (PEZA) has extended its assistance and reprieves to its registered business enterprises (RBEs) cushion the perilous impact of the COVID-19 pandemic.
PEZA Director General Plaza said on Monday, “This is a great way to help our RBEs who, despite being hit by the pandemic, they are the ones keeping our economy afloat. With sound economic and legal policies, we must continue to do our best to keep these companies in our country despite the present uncertainties.”
“Since the start of the lockdown in March in the country, PEZA’s registered companies have implemented strict COVID-19 measures to protect the health and safety of the Filipino workforce while continuing to contribute in the global supply and demand,” Plaza noted.
Assistance and Reprieves
PEZA Memorandum Circular no. 2020-011 titled “PEZA assistance to Ecozone IT Enterprises in Responding to COVID-19”, which was extended under MC No. 2020-040 dated 31 July 2020, has been further extended until 31 December 2020, subject to guidelines and requirements that PEZA will issue for WFH and other work arrangements outside PEZA-registered IT Centers.
The said memo circular aims to further assist PEZA Ecozone IT Enterprises in their operations during the COVID-19 pandemic and to facilitate the continued ease in movement of their IT equipment and other assets for the purpose of setting up work-from-home (WFH) operations and other work arrangements outside their PEZA-registered IT Center facilities.
The PEZA Board has also approved on October 2 the extension of the effectivity of the 90% limit on the WFH arrangement until 12 September 2021.
Moreover, the PEZA Board approved the consideration of the following as direct costs for RBEs entitled to the 5% GIT incentive:
1. Cost of temporary (near-site) housing/accommodations to employees of the enterprise, including accommodations inside the facility of the enterprise for stay-in employees;
2. Cost for shuttle services for the employees;
3. Port charges in MICP, Port of Manila, and NAIA arising from delays in the release of shipments at the said ports immediately after the implementation of the ECQ in NCR;
4. Costs for disinfecting conducted by the company to its work area/facility/premises, and cost of PPEs and sanitation requirements; and
5. COVID tests for their employees.
However, this assistance or consideration is only applicable for the COVID-19 quarantine period of ECQ, MECQ, and GCQ and it is without prejudice to the Bureau of Internal Revenue’s (BIR) inherent power to audit the expenses.
BIR response to PEZA
In support of the move, the BIR has okayed PEZA’s assistance to the RBEs that are enjoying the 5% gross income tax (GIT) incentive.
In BIR’s letter response to PEZA dated 27 October 2020, it has noted that “If the enumerated expense can be directly attributed in providing the PEZA-registered services, then it should be treated as direct cost, otherwise, it is non-deductible.”
For the cost of temporary housing/accommodation to PEZA RBEs’ employees as well as the shuttle services, BIR said “only the cost of temporary accommodation [and for shuttle services] for Operations and Maintenance personnel may be considered as direct cost, as they are the employees whose work can directly be attributed to the PEZA-registered services.”
BIR also noted that the port charges may be considered direct costs pursuant to Section 27 (a) of the National Internal Revenue Code of 1997. They have stated that “Port charges arising from delays in the release of shipments only for finished goods or raw materials used in providing the PEZA-registered services.”
Further, the “cost for disinfecting and cost for PPEs and sanitation requirements, for as long as incurred for Operations and Maintenance personnel and the work area/facility/premises which such personnel work in, may be considered direct costs.”
As for the COVID tests however, BIR has found that “It is not directly related to the rendition of its registered service, since the enterprise can still carry on its PEZA-registered services without having to incur cost for the COVID-19. Hence, unless it can be proven that such COVID tests are directly related to the registered services, then they should be classified as operating expenses and must be disallowed as a direct cost.”
On her part, PEZA Director General expressed gratitude to the BIR for supporting PEZA’s initiative to assist its locator companies that help to keep the Philippine economy afloat and keep jobs of thousands of Filipinos in various ecozone industries.
“Let us do our best to keep and even attract foreign direct investors to our country. Let us be one in making a competitive and positive business environment in order to attain our goal of making the Philippines an investment haven in Asia,” Plaza noted.