The Philippine Tax Whiz discusses the features in the recently signed CREATE MORE Act, which aims to help the Philippines become more friendly to foreign investors and address their concerns with the current tax system.
As a Registered Business Enterprise (RBE) Taxpayer, how does the CREATE MORE impact the corporate Income tax rate to be used and what are the incentives to consider?
Generally, the corporate income tax rate is at 25%, however, a reduced corporate income tax rate of 20% can now be availed by RBEs under the Enhanced Deductions Regime (EDR).
The CREATE MORE Act introduced the option between Special Corporate Income Tax (SCIT) or the EDR from the beginning of their business operations instead of availing it after the Income Tax Holiday (ITH) period. Both the SCIT and the EDR have also extended their incentives for up to a maximum of 17 and 27 years as approved by IPAs and the FIRB, respectively.
How did the CREATE MORE Act address issues and concerns of RBEs related to the availment of VAT incentives?
The CREATE MORE Act addressed the main concerns of RBEs when it came to the eligibility of VAT incentives.
In the original CREATE Law, VAT incentives could only be availed if the purchase was “directly and exclusively used” for the project it was specified for. The CREATE MORE Act changes it to “directly attributable” which includes support services such as:
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- Janitorial
- Security
- Administrative operations (HR, accounting and legal)
- Marketing
- Consultancy
- Financial
- Promotion services
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How does CREATE MORE aim to improve the Ease of Doing Business in the Philippines?
The CREATE MORE Act implemented a RBE Taxpayer Service for tax incentives application, with 20 processing days, as an improvement to Ease of Doing Business. Also, the law enhances VAT refund processing by moving to an electronic system, which is expected to reduce delays in receiving refunds. Alongside the electronic VAT refund system, the Department of Finance (DOF) will set up a separate VAT refund center through the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC).
Are there any transitional provisions for businesses registered before CREATE or CREATE MORE?
Yes, RBEs registered under previous laws can transition to the current provisions until December 31, 2034. Meanwhile, registered export enterprises may continue to avail of duty and VAT exemptions even after the transitory period.
These changes are summarized in the infographic below:
By Mon Abrea, Founding Chairman and CEO of the Asian Consulting Group (ACG).
The information provided in the article above is for general knowledge and information. We’re always happy to hear from you! If you want to know how these regulations affect your business, CONSULT ACG or send an email to consult@acg.ph.