The Fiscal Incentives Review Board (FIRB) approved a resolution increasing the investment capital threshold for projects handled by investment promotion agencies (IPAs) from P1 billion to P15 billion.
“I commend the FIRB for its swift action in improving the Philippines’ global competitiveness. IPAs play a vital role in attracting more productivity-enhancing investments to the country, and we will continue to support them by acting fast on measures that will further promote ease of doing business and cultivate an investment-friendly climate,” Finance Secretary and FIRB chairperson Ralph Recto said.
Business groups welcomed the adjustment, saying this would lead to more investments into the Philippines.
The Philippine Chamber of Commerce and Industry (PCCI) said FIRB Resolution No. 003-24 would not only align certain processes in government, but also empower IPAs to perform better particularly in generating investments and granting tax incentives.
“The PCCI welcomed this recent issuance of FIRB. This would mean more projects will have to be decided quickly at the IPA level without going through the approval of FIRB, which became the bottleneck for incentives,” said PCCI president Enunina Mangio.
Under the previous set-up, IPAs were responsible for approving incentives for projects with investment capital below P1 billion, while the FIRB was tasked with selecting tax perks for projects exceeding P1 billion, as mandated by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. The FIRB may exercise the authority to increase the threshold without the need to amend the Tax Code.
The recent adjustment aligns with policy proposals in Congress, which aim to empower IPAs with greater authority in granting incentives.
The move is seen to boost the IPAs’ responsibility and accountability in managing the country’s incentive system and ensure steadfast compliance among registered business enterprises regardless of the amount of investment capital.
It is also aligned with the Public-Private Partnership (PPP) Code of the Philippines, which states that PPP projects amounting to PHP 15 billion or higher shall be approved by the National Economic and Development Authority (NEDA) Board.
As such, applications for tax incentives involving investment capital exceeding P15 billion will continue to fall under the purview of the FIRB.
All pending applications for tax incentives previously endorsed by IPAs to the FIRB involving investment capital of P15 billion will be returned to the respective IPA for necessary actions.
The IPAs will now incorporate approved projects with investment capital of P15 billion and below in their monthly reports to the FIRB Secretariat.
Signed into law on March 26, 2021, the CREATE Act establishes a performance-based, time-bound, targeted and transparent tax incentives regime in the country.
Pursuant to the law, the Cabinet-level FIRB is mandated to oversee the grant and administration of incentives of IPAs to ensure that incentivized projects or activities achieve performance metrics and that the grant of fiscal support to RBEs leads to higher economic returns.
As of Dec. 31, 2023, the estimated total investment capital from the 1,011 CREATE-incentivized projects reached a record P1.1 trillion, generating a committed employment count of 112,464 jobs varying across priority industries under the Strategic Investment Priority Plan (SIPP).
Mangio said the new FIRB resolution would encourage more local and foreign investors to infuse their resources and enter into big-ticket projects of the government through Public-Private Partnerships (PPP).
“One of the bottlenecks we have in government is the ease of doing business. We need to streamline our processes and policies so we become an attractive investment destination,” Mangio said, adding that the Philippines needed to catch up with ASEAN neighbors in terms of investments.
The PCCI earlier identified some of the major industries that are ideal and attractive for local and foreign investments and could amplify the economic growth and competitiveness of the country.
These sectors include agribusiness, IT-BPO and creative industries, manufacturing, mining and mineral resources and tourism.
