Special InTAX: October 2022 Issue 1 | Volume 2
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
Department of Trade and Industry
The Department of Trade and Industry (DTI) issued DTI Memorandum Circular No. 22-19, dated 18 October 2022, by virtue of Fiscal Incentives Review Board (FIRB) Resolution No. 026-22 dated 14 September 2022, to provide the guidelines on the registration with the Board of Investments (BOI) of existing Registered Business Enterprises (RBEs) in the Information Technology-Business Process Management (IT-BPM) sector and allow them to adopt up to 100% Work From Home arrangement.
This Circular covers all affected RBEs in the IT-BPM sector with either of the following incentives below:
| 1) | Remaining tax incentives under Section 311 of the National Internal Revenue Code of 1997, as amended (Tax Code); or |
| 2) | Approved incentives on or before 14 September 2022 under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) with the concerned Investment Promotion Agency (IPA). |
Other salient points in the Circular include the guidelines on the following:
| • | General Procedure (Section 2) in the filing of the request, the concerned Investment Promotion Agency’s Endorsement to BOI and the issuance of the BOI Certificate of Registration |
| • | Availment of Incentives (Section 3); |
| • | Compliance Monitoring (Section 4); |
| • | Movement of Capital Equipment within and outside the ecozones or freeports (Section 5); |
| • | Cancellation of BOI Certificate of Registration (Section 6); and |
| • | IPA Reporting Requirement (Section 7). |
This Circular will be effective immediately upon publication in a newspaper of general circulation.
(RGM & Co. Note: The circular was published in the Philippine Star on 19 October 2022.)
Department of Finance
The Department of Finance (DOF) issued Revenue Regulations (RR) No. 13-2022, 07 October 2022, to prescribe more definitive guidelines, procedures, and requirements for the proper income tax treatment of equity-based compensation of any kind, pursuant to the provisions of Sections 244 and 245, in relation to Section 4, of the Tax Code.
The common types of equity-based compensation (i.e., stock options, restricted share awards, stock appreciation rights and restricted stock units) are defined under Section 3 of the RR.
Other salient points of the RR are as follows:
| • | Equity grants under the applicable equity schemes of the grantor for services being rendered will give rise to a realized benefit on the part of the grantee-employees. |
| • | The equity grants, once exercised or availed of by the grantee-employees, are considered compensation to be taxed under Section 32 of the Tax Code and implemented by RR No. 2-98, as amended. |
| • | The compensation shall be subject to withholding tax on compensation regardless of the employment status of the grantee-employee who could either be rank-and-file or occupying a supervisory or managerial position. |
The RR shall take effect 15 days after its publication in Manila Times on 14 October 2022.
(RGM & Co. Note: Why it matters? Most companies nowadays are offering equity-based compensation in order to retain high-performing employees, attract new talents and align the long-term interest of employees with the business goals.
Companies must now revisit their equity plans and explore ways to provide tax support to the affected employees whose tax liability will shift from Fringe Benefits Tax to withholding tax on compensation. A review should be made on how the change in tax regime will impact tax compliance and company costs.)
Attached is the full text of the issuance.
Annex A - Request to Register with BOI Form as of 06 October 2022
Annex B - IPA List of Endorsed RBEs - 06 October 2022
Annex B - IPA Cover Letter of List of Endorsed RBEs - 06 October 2022
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