DOF to LGUs: Stop collecting business tax from work-from-home employees

The Department of Finance (DOF) will order local government units to stop collecting business tax from employees working from home, as these taxes can only be imposed on their employers.

In an interview, Finance Undersecretary Antonette Tionko said the DOF recently found out that some local government units (LGUs) had been collecting local business tax from business process outsourcing (BPO) employees in work-from-home set-up. Some of these BPO workers are also being required to secure a mayor’s permit, Tionko said on the sidelines of the 7th joint economic briefing organized by European business chambers late Monday.

“It causes trouble for some” BPO workers, Tionko said, although she did not identify which LGUs were doing this.

The Finance official said local taxes should not  be levied on BPO employees working from home. “There are certain LGUs which have a wrong interpretation” of tax laws, she said.

As such, the DOF will come out with a local finance circular, through its Bureau of Local Government Finance (BLGF), which will clarify to LGUs the taxation of BPOs with work-from-home set-up.

Tionko said the situs or place of taxation of the business local tax remained the company or business, not its workers.

The DOF official said LGUs could impose business tax on a company located within its jurisdiction, but not on the individual worker. “It’s not where the individual lives. It’s still where the business of the company [is located] that is the situs of local tax,” Tionko told European business chambers.

Referring to the upcoming BLGF circular she drafted, to be signed by Finance Secretary Benjamin Diokno, Tionko said “this will help a lot of the BPOs who have work-from-home setup so their workers don’t get bothered” by unnecessary local taxation.

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