The enactment of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act in 2024 is one of the government’s biggest Christmas and New Year’s gifts to local and foreign investors and the Filipino people, according to the Department of Finance.
Signed into law on Nov. 11, 2024, Republic Act No. 12066, or the CREATE MORE Act, transforms the Philippines into an attractive destination for business by making the tax incentives regime more globally competitive, investment-friendly, predictable and accountable.
“CREATE MORE is definitely among the best gifts for our current and future investors as well as the whole nation this year,” Finance Secretary Ralph Recto said.
“The economic outlook for 2025 is brighter as we see foreign investment pledges materialize and local businesses grow stronger because of this law. This is a true win-win for everyone — not only for the businesses but especially for Filipinos, who will reap the bigger benefits of CREATE MORE,” he said.
Among the exciting features of the law is a more competitive and generous incentive package that awaits strategic and highly desirable investments.
Registered business enterprises (RBEs) will have the option to choose between the Special Corporate Income Tax (SCIT) of 5 percent or the enhanced deductions regime (EDR) right from the start of their commercial operations.
The SCIT and EDR incentives, initially capped at a maximum of 10 years, are now extended to a period of up to 17 or 27 years. Labor-intensive projects will be allowed to apply for an extension of another five or ten years.
More incentives are given to registered export enterprises (REEs) and high-value domestic market enterprises (DMEs) with investment capital exceeding P15 billion and are engaged in sectors considered import-substituting or export sales in the immediately preceding year of at least $100 million.
CREATE MORE also expands the EDR to provide additional relief to RBEs by reducing the CIT rate to 20 percent from 25 percent.
The law also increased to 100 percent from 50 percent the additional deduction on power expenses, significantly cutting costs for the manufacturing sector.
To boost the tourism industry, an additional 50 percent deduction for expenses related to trade fairs and tourism reinvestments will be provided until 2034.
The law also maximized the benefits of the net operating loss carry-over (NOLCO) by changing the reckoning period from “year of loss” to the “last year of the project’s income tax holiday (ITH) entitlement period”.
It also provides tax and duty exemption on donations of capital equipment, raw materials, spare parts or accessories to the government, government-owned or -controlled corporations (GOCCs), the Technical Education and Skills Development Authority (TESDA), State Universities and Colleges (SUCs), and the Department of Education (DepEd) or the Commission on Higher Education (CHED)-accredited schools.
CREATE MORE provides an optional imposition of an RBE local tax (RBELT) at a rate not exceeding 2 percent of gross income, in lieu of all local taxes, fees, and charges during the ITH or EDR.
The reform acknowledges the evolving business model as it institutionalizes the adoption of flexible work arrangements for RBEs operating within economic zones and freeports, without compromising their tax incentives.
Export-oriented enterprises’ local purchases are zero-rated while importations are value-added tax (VAT)-exempt.
The law liberalizes the condition for the availment of VAT incentives by shifting from “direct and exclusive use” to “directly attributable” requirements for goods and services. This broadens the scope of VAT incentives covering necessary services such as janitorial, security, financial consultancy, marketing, and administrative services.
