In the first half of 2022, the Philippine Economic Zone Authority (PEZA) and Fiscal Incentives Review Board (FIRB) introduced notable changes regarding the implementation of Republic Act (RA) No. 11534 or the CREATE Law.
In an advisory dated April 28, the FIRB announced the availability of updated Annual Tax Incentives Report (ATIR) and Annual Benefits Report (ABR), among others, for submission by Registered Business Enterprises (RBEs) to PEZA.
A month later, an FIRB advisory dated June 1 addressed the frequently asked questions regarding the Fiscal Incentives Registration and Monitoring Systems (FIRMS), ATIR, and ABR. Several issuances were circularized thereafter on the deadlines and extensions for submission of the updated PEZA reports for 2021.
With the frequent release of advisories, RBEs may be wondering — how can RBEs track the PEZA-mandated requirements? What reports are needed, and when are these due?
For easy reference, below is the list of reporting requirements and deadlines set by the PEZA Implementing Rules and Regulations (IRR):
The non-filing and late submission of the above requirements are subject to the following penalties under Section 8 Rule XXV of the PEZA IRR:
ATIR and ABR requirements under RA No. 10708 or Tax Incentives Management and Transparency Act (TIMTA)
Under the CREATE Law’s IRR, RBEs availing of tax incentives must submit to PEZA the updated ATIR and ABR templates, superseding the old TIMTA forms, within the following deadlines:
The MS Excel soft copies of these reports should be e-mailed to email@example.com and furnished to firstname.lastname@example.org.
The penalty for non-submission of these reports, based on Section 7 of the TIMTA law, is as follows:
WORK-FROM-HOME (WFH) COMPLIANCE REPORTUnder PEZA Memorandum Circular (MC) No. 2022-018, all Information Technology – Business Process Management (IT–BPM) enterprises must submit a monthly WFH compliance report every fifth day of the following month to the online Information Technology Sector – Report Compliance System (ITS–RCS).
As per FIRB Resolution No. 017-2022, 70% of the total work force is required to render work within the ecozone, while employees working remotely under the WFH arrangement may not exceed 30% of the work force during the period April 1-Sept. 12. RBEs that fail to comply with the prescribed WFH threshold will have their fiscal and non-fiscal incentives suspended corresponding to the months of noncompliance, pursuant to Revenue Memorandum Circular (RMC) No. 23-2022.
CERTIFICATE OF ENTITLEMENT TO TAX INCENTIVES (CETI)To avail of the Income Tax Holiday and/or preferential rate granted by the CREATE Law, RMC No. 28-2022 requires all RBEs to secure the CETI before filing the Annual ITR. The CETI forms part of the other attachments to the Annual ITR for submission to the BIR starting with the taxable year 2022, as per FIRB Advisory 004-2022.
CETI applications should be filed within 90 days prior to the Annual ITR filing deadline, and will be processed through the online registration and incentives application portal (FIRMS) where RBEs can submit and monitor applications for incentives granted by any Investment Promotion Agency.
VALUE-ADDED TAX (VAT) ZERO-RATING CERTIFICATEUnder MC No. 2022-046, there is no need for RBEs to request a certified true copy of the PEZA-issued VAT zero-rating certificate. Each certificate contains an electronically generated QR code, which, when scanned, shows the Certificate Number, Company Name, and Date of Issuance — features for authentication purposes.
Even before the CREATE Law took effect, PEZA was already endorsing to the BIR a monthly list of RBEs, which were issued VAT zero-rated certificates.
WHAT’S NEXT FOR RBES?It is worth mentioning that payment of fines for noncompliance with the reporting requirements does not exclude the imposition of other administrative penalties such as suspension of incentives and permits and/or cancellation/revocation of registration, among others.
Thus, keeping abreast of the latest issuances and advisories is key to ensuring that RBEs can comply with mandated requirements. However, it might also help if the government could also look at the journey of RBEs using the same lens as investors. With the many compliance requirements, one might wonder — is the journey aligned with the government’s objective of making doing business easier, or have we already gone down a bumpy road?
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Marian Angeli P. Castillo is a Senior Associate at the Client Accounting Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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