Disputes Flare Again in the Philippines Over WFH Tax Breaks for Call Centers

The Filipino government reignited tensions with call centers by threatening to revoke tax incentives if they continue offering remote-working arrangements to their employees.

The country’s Department of Justice (DOJ) questioned the legality of work-from-home arrangements in call centers operating out of the country’s sprawling special economic zones (SEZ).

Justice Secretary Jesus Crispin Remulla asserted earlier this week that “section 309 of the Tax Code still prevails,” implying that call centers with remote workers remain ineligible for tax breaks.

The issue of remote work and tax incentives for BPOs has been a contentious one for over three years. Remote work was a rarity in the Philippines until the COVID-19 pandemic struck. A majority of the country’s 1.4 million BPO employees have worked remotely ever since.

The matter seemed settled by late 2022. The government allowed call centers to continue remote work setups under the condition of registering with the Board of Investments (BOI), whose regulations do not prohibit remote setups.

This solution appeared to appease industry concerns while addressing legal questions. Finance Secretary Benjamin Diokno even declared the problem “solved” at the time.

However, Remulla’s pronouncement throws the tax incentives back into uncertainty. He clarified that while SEZs won’t directly penalize companies for remote work, they will lose tax breaks under existing laws. This puts the onus on the legislature to amend the Tax Code and SEZ regulations to definitively address the evolving work landscape.