President Rodrigo Duterte has signed into law the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act that mandates tax and other fiscal incentives reforms in a bid to attract more foreign investments and help the economy recover from the pandemic.
CREATE would lower the corporate income tax rate to 25 percent for big firms and 20 percent for small enterprises from 30 percent – the highest in Southeast Asia – by 2029.
The chairman of the House of Representatives Committee on Ways and Means welcomed the signing even as some items were vetoed.
“I thank President Duterte for approving the CREATE Act, a reform I first filed as a freshman congressman in 1998, and a reform I was happy to finally help bring to the finish line as principal author and sponsor,” Albay Rep. Joey Sarte Salceda said in a statement.
“I have received word from friends in the Palace that the core of the reform, lower corporate income tax, and fiscal incentives rationalization, is intact although some items on other areas were vetoed. I am yet to receive a full copy of the veto message, but I am certain that Corporate Income Tax is now 20 percent for MSMEs, and 25 percent for all other corporations,” he added.
Salceda said he received information that provisions on key pandemic relief, such as lower Minimum Corporate Income Tax (MCIT) and percentage taxes, were also retained until June 2023.
On the other hand, proprietary educational institutions and hospitals which are nonprofit will pay a corporate income tax rate of 1 percent instead of the current 10 percent, from July 1, 2021 to June 30, 2023.
“This will help schools and hospitals which are crucial to the country’s post-COVID-19 recovery,” he said.
“I am also happy to say that the bill has retained the pro-countryside preference of the House version. Under CREATE, places like Bicol will receive the longest and biggest tax incentives, of up to 17 years for new locators, and a bonus of three years of income tax holiday for those relocating from Metro Manila to these areas. We will also grant a bonus two-year ITH to areas recovering from calamities. This brings the maximum length of incentives for less-developed, disaster-recovering areas to 22 years, among the most generous in Asia,” Salceda said.
