Ecozone firms get tax perks for COVID-19 costs

by Louella Desiderio (The Philippine Star), 18 Nov 2020

MANILA, Philippines — Ecozone locators will now be able to avail of the five percent gross income tax incentive to include COVID-related expenses as direct costs to maintain operations during the quarantine period.

In a statement yesterday, the Philippine Economic Zone Authority (PEZA) said the Bureau of Internal Revenue (BIR) has approved the assistance being provided by the investment promotion agency to firms availing of the five percent gross income tax incentive.

PEZA is allowing registered enterprises to consider as direct costs expenses incurred to maintain operations during the enhanced community quarantine (ECQ), modified ECQ and general community quarantine such as temporary housing or accommodations to employees; shuttle services; port charges; disinfection requirements and personal protective equipment (PPE); as well as coronavirus disease (COVID) tests for employees.

“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,” the BIR said in its letter to the PEZA dated Oct.27.

The BIR said only the cost of temporary accommodation and 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.

For the cost for disinfecting, PPE and sanitation requirements, the BIR said these may be considered as direct costs as long as these are incurred for operations and maintenance personnel and their work area.

For the COVID tests, however, the BIR has found it is not directly related to the rendition of the registered service.

“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,” the BIR said.

PEZA director general Charito Plaza lauded the BIR for supporting PEZA’s initiative to assist locators which help support the economy and keep jobs.

Apart from this initiative, PEZA is also providing other forms of support to locators, particularly to information technology (IT) enterprises by allowing them to have work-from-home operations and other work arrangements outside the PEZA-registered IT facilities until Dec. 31 of this year.

PEZA has also extended the effectivity of the 90 percent limit on the work-from-home arrangement until Sept. 12 of next year.

“This is a great way to help our registered business enterprises who, despite being hit by the pandemic, 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,” Plaza said.