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A Comprehensive Guide on the Salient Features of CREATE Act in the Philippines
Comprehensive Guide on the Salient Features of CREATE Act in the Philippines

A Comprehensive Guide on the Salient Features of CREATE Act in the Philippines

On March 26, 2021, President Rodrigo Duterte signed into law Republic Act (RA) No. 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. The law seeks to amend several provisions in the old Tax Code, primarily focusing on lowering corporate income tax rates and rationalizing fiscal incentives to better attract local and foreign investments in the Philippines. 

Previously known as the Corporate Income Tax and Incentives Reform Act (CITIRA), CREATE Act is the second package of the Comprehensive Tax Reform Program (CTRP), a fiscal stimulus program of the Duterte administration.  

CREATE Act shall take effect 15 days from its publication in the Official Gazette or in a newspaper of general circulation in the Philippines.  

Corporate Income Tax (CIT) Reforms under CREATE Act

Under the CREATE Act, the CIT rate for domestic corporations and resident foreign corporations (RFCs) will be reduced from the current 30% to 25% effective July 1, 2020. The CIT will be reduced further by 1% every year from 2023 to 2027.

ProvisionCITIRACREATE (Revised CITIRA)
Tax Benefit for Business Enterprises
Accelerated CIT rate reduction

1% per year:


29% – 2020
28% – 2021
27% – 2022
26% – 2023
25% – 2024
24% – 2025
23% – 2026
22% – 2027
21% – 2028
20% – 2029 onwards

Outright drop to 25% until 2022; followed by 1% reduction yearly until 2027:

25% – July 1, 2020
25% – 2021
25% – 2022
24% – 2023
23% – 2024
22% -2025
21% – 2026
20% – 2027 onwards

CIT rates for other entities shall also be reduced from 30% to the following:

  • 20% for domestic corporations with total assets of ₱100M and below, and with net taxable income of ₱5M and below (effective July 1, 2020)
  • 25% for non-resident foreign corporations (NRFCs) (effective January 1, 2021)

Other salient provisions for CIT rates under the law include:

  • Regional operating headquarters (ROHQs) shall be subject to a CIT rate of 25% (effective January 1, 2022)
  • Repeal of the optional CIT of 15% of gross income for domestic corporations and RFCs
  • Repeal of the 10% special income tax rate of offshore banking units (OBUs)
  • Repeal of improperly accumulated earnings tax (IAET)
  • Reduction of Minimum Corporate Income Tax (MCIT) rate from 2% to 1% (effective July 1, 2020 to June 30, 2023
  • Final income tax rate on interest income of RFCs derived from a depository bank under the expanded foreign currency deposit system is increased from 7.5% to 15% 

Fiscal Incentive Reforms under CREATE Law

Income Tax 

Income Tax Holiday (ITH) shall be granted for a period of 4 to 7 years, followed by the Special Corporate Income Tax (SCIT) rate of 5% on the gross income earned, in lieu of all taxes, both national and local, or enhanced deductions for 5 or 10 years. The incentive period varies depending on which area the registered project or activity will be located. 

Customs Duty Incentives

Five-year maximum period to avail exemption from customs duty on importation of capital equipment, raw materials, spare parts, or accessories directly and exclusively used in the registered activity. 

Value-Added Tax (VAT) Incentives

VAT-exemption on importation and VAT zero-rating on local purchases shall apply to goods and services directly and exclusively used in the registered project or activity by the registered business enterprise. 

Transitory Provisions for Existing Registered Activities

  • Those granted only with an ITH prior to the effectivity of CREATE Law shall be allowed to continue with its availment for the remaining period
  • Those that have been granted the ITH but have not yet availed of the incentive upon the effectivity of the law may use the ITH for the period specified in the terms and conditions of their registration
  • Those granted an ITH prior to the effectivity of the law and are entitled to 5% tax on Gross Income Earned (GIE) shall be allowed to continue to avail of the 5% GIE incentive for 10 years
  • Those availing of the 5% tax on GIE prior the effectivity of the law shall be allowed to continue availing the said incentive for 10 years

VAT and Percentage Tax Reforms under CREATE Act

  • VAT-exemption on the sale or importation of medicines for cancer, mental illness, tuberculosis, and kidney diseases (shall be effective on January 1, 2021 instead of January 1, 2023)
  • VAT-exemption of COVID-19 health-related materials and drugs (shall be effective from January 1, 2021 until December 31, 2023)
  • Reduction of percentage tax for non-VAT taxpayers from 3% to 1% (shall be effective from July 1, 2020 until June 30, 2023)

Vetoed Provisions in CREATE Act

The President vetoed several provisions in the CREATE Act, including:

  • Increasing the VAT-exempt threshold on sales of real property and the adjustment in the threshold amount every 3 years
  • 90-day period for processing of general tax refunds, requirements in case of denial by the Commissioner, and remedy of taxpayer in case of denial
  • Definition of investment capital
  • Domestic market enterprises’ entitlement to special corporate income tax (SCIT) rate
  • Specific share of the national government and local government units in the gross income earned using the SCIT rate
  • Availment of a new set of incentives and its corresponding period of availment for qualified expansions or entirely new project or activity
  • Allowing export enterprises registered prior to CREATE Act to avail of further extension of new incentives for the same activity
  • Exercise of power by the Fiscal Incentives Review Board (FIRB) in granting incentives to registered projects or activities with a total investment capital of more than ₱1B
  • Specific industries mentioned under activity tiers
  • Provision granting the President the power to exempt any investment promotion agency (IPA) from coverage of Title XIII of CREATE Act
  • Automatic approval of applications for incentives in case of inaction

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