Telecommuting in light of tax incentives
By: Atty. Donn Marie Isabelle M. Balina on August 21,2025
THE Covid-19 pandemic forced the world to adapt to new ways of living and working. Employers implemented work-from-home schemes, hybrid arrangements and shortened work weeks. While the global health emergency is now over, alternative work setups remain integrated in many workplaces.
Alternative working arrangements are not new to the Philippines. In 2019, Republic Act (RA) 11165, also known as the Telecommuting Act, was passed into law affirming the right of private sector employers to offer telecommuting arrangements to employees. Section 3 of the law defined “telecommuting” as working from an alternative workplace with the use of telecommunications and/or computer technologies.
For businesses registered in economic zones or freeports administered by an investment promotion agency (IPA), however, there are additional conditions for them to be allowed to proceed with a telecommuting program and at the same time maintain their incentives.
Section 309 of the National Internal Revenue Code (Tax Code), as amended by RA 11534, or the Corporate Recovery and Tax Incentives for Enterprises (Create) Act in 2021, and reiterated in Rule 19 of the Tax Code’s implementing rules and regulations, provided that the registered project or activity under an IPA administering an ecozone or freeport should be exclusively conducted or operated within the geographical boundaries of the zone or freeport. Thus, any project or activity conducted or performed outside the zone or freeport will not be entitled to incentives under the Tax Code.
The provision proved to be problematic when the Covid-19 pandemic started in 2020, when employees were working from home and the registered zone or freeport enterprises were at risk of being considered not operating within the zone or freeport areas. This resulted in the Fiscal Incentives Review Board temporarily allowing registered business enterprises (RBEs) to implement work-from-home arrangements.
This issue was finally addressed when RA 12066, or the Create More Act, was promulgated last Nov. 8, 2024, and amended Section 309 of the Tax Code. The amended section now allows RBEs to adopt telecommuting programs as defined under the Telecommuting Act, including work-from-home arrangements, for not more than 50 percent of the total workforce at any given time, subject to the rules and regulations to be promulgated by the IPA and still be entitled to incentives under the Tax Code.
The amendment also provides that double registration for purposes of availing of other incentives under special laws is not allowed. An RBE that fails to meet the 50-percent requirement in cases of force majeure or fortuitous events, as provided in the business continuity plan approved by the concerned IPA, will not be subject to the penalty provided under the implementing rules of the Create More Act.
The Create More Act IRR defined “total workforce” to refer to employees engaged in the registered project or activity of an RBE.
It is important to note that a telecommuting program must be given on a voluntary basis, and on terms and conditions mutually agreed upon by the employer and employee. Terms and conditions must meet minimum labor standards including, but not limited to, compensable work hours, minimum number of work hours, overtime, rest days and entitlement to leave benefits. The Telecommuting Act also states that employers must ensure that telecommuting employees are given the same treatment as that of employees working at the employer’s premises.
This acceptance of alternative work arrangements shows the continued support of the government of businesses registered with IPAs and operating in the ecozones and freeports. It is a welcome change that will surely pique the interest of potential stakeholders.
Donn Marie Isabelle M. Balina is an associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice. If you have any question or comment, you can email the author at info@mtfcounsel.com or visit the MTF website at www.mtfcounsel.com.