BIR Provided Additional Guidelines for the Payment of Penalties Relative to Violations Incurred by Registered Business Enterprises in the IT-BPM Sector

On 18 August 2022, the Bureau of Internal Revenue (“BIR”) issued Revenue Memorandum Circular (“RMC”) No. 120-2022 which prescribes additional guidelines and procedures on the manner of payment of penalty relative to violations incurred by Registered Business Enterprises (“RBEs”) in the Information Technology Business Process Management (“IT-BPM”) sector on the conditions prescribed regarding Work From-Home (“WFH”) arrangement, for the period 1 April 2022 until 12 September 2022.

Penalty to be Paid

Pursuant to the said RMC, RBEs in the IT-BPM sector adopting WFH arrangement exceeding the thirty percent (30%) threshold for at least one day shall result in the suspension of its income tax incentives for the month when the violation took place. In such case, the RBE shall pay, as penalty, the regular income tax of either twenty-five percent (25%) or twenty percent (20%), whichever is applicable, for the aforesaid month. In addition, violations committed beyond 13 September 2022 onwards may subject the RBEs to applicable taxes.

Manner of Payment

The RBE which committed violation shall pay the penalty using BIR Form No. 0605, by choosing “Others” under “Voluntary Payment” and by indicating in the field provided the phrase “Penalty pursuant to FIRB Res. No. 017-22”. The tax type code shall still be “IT” and the ATC to be indicated is “MC200”. 

For Quarterly Income Tax Return, a separate computation for the penalty on the WFH arrangement shall be provided in an additional schedule to be attached to BIR Form No. 0605, to present the actual tax due. As regards to the filing of their Annual Income Tax Return, the RBE shall continue using BIR Form No. 1702-EX for those with Income Tax Holiday incentive and using BIR Form No. 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.

Timing of Payment

The penalty shall be paid using BIR Form No. 0605 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 have already ended, and returns have been filed, RBEs shall file and/or pay their penalty within ten (10) days after the issuance of this Circular, or until 28 August 2022. Administrative penalties shall be imposed if the same is paid beyond the said period.