Tax Notes: Additional guidelines, procedures on payment of penalties due to violations of WFH rules incurred by RBEs

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Through the issuance of Revenue Memorandum Circular (RMC) 120-2022, the Bureau of Internal Revenue (BIR) has reiterated that the non-compliance of the Registered Business Enterprises (RBEs) in the Information Technology Business Process Management (IT-BPM) sector on the prescribed conditions under Work From-Home (WFH) arrangement from April 1, 2022 to Sept. 12, 2022 for at least one day shall result in the suspension of the RBEs income tax incentives, pertaining to the month when the violation took place.

In such a case, additional guidelines and procedures are prescribed:

(1) The RBEs shall pay, as penalty, the regular income tax of either 25 percent or 20 percent, whichever is applicable, for the aforesaid month. In addition, violations committed beyond Sep. 13, may subject the RBEs to applicable taxes.

(2) The penalty shall be paid using BIR Form 0605, by choosing “Others” under “Voluntary Payment” and by indicating in the field provided the phrase “Penalty pursuant to FIRB Resolution No. 017-22.” The tax type code shall still be “IT” and the ATC to be indicated is “MC 200.”

(3) Quarterly income tax return shall be filed and paid in its usual procedure of computation of the tax due as if no violation was committed. A separate computation for the penalty on the WFH arrangement shall be provided in an additional schedule to be attached to BIR Form 0605, to present the actual tax due. For annual income tax return, RBEs shall continue to file using BIR Form 1702-EX for those with income tax holiday incentive and BIR Form 1702-MX for those enjoying gross income tax incentive or those with mixed transactions. However, they are mandatorily required to complete the required information pertaining to allowable deductions pursuant to existing tax laws and regulations.

(4) Net operating loss carryover shall not be a part of the computation for penalty and shall not be deducted from the total taxable income. If the violation happened during the last quarter of the fiscal year, the penalty shall be computed based on the manner prescribed in RMC 39-2022 presented as follows:

Likewise, the same manner of computation, filing and payment of the penalty as indicated shall be applied for RBEs with violation of the provisions of FIRB Resolution 19-21.

(5) The filing and payment of penalty shall be made on or before the due date prescribed for the filing or payment of the quarterly income tax, subject to adjustment upon the filing of the annual income tax return. For the fiscal quarter with month/s subject to penalty that already ended, and returns have been filed, RBEs shall file and/or pay their penalty within 10 days after the issuance of RMC 120-2022 on Aug. 18, 2022. If the same is paid beyond the said period, administrative penalties shall be imposed considering that the penalty pertains to income tax.

(6) For the deployment of the list of RBEs with violation to the concerned Revenue District Office/Division in the Large Taxpayer Service, the applicable procedures prescribed in Item IV of RMC 23-2022 shall be followed.

These shall take effect immediately and remain in force until Sept. 12 pursuant to FIRB Resolution 017-22.

Please be guided accordingly.


P&A Grant Thornton

Certified Public Accountants