The Department of Finance (DOF) is hopeful that Congress could transmit to President Rodrigo R. Duterte its unified version of the corporate recovery and tax incentives for enterprises (CREATE) law within December.

Finance Secretary Carlos G. Dominguez III said the immediate transmittal of the CREATE law to Malacanang will allow taxpayers to properly adjust their books and returns for the filing season as the reduction of the corporate tax rate will be retroactively applied to July 1, 2020.

Last Thursday, the Senate passed its version of the bill, which Dominguez has been so determined to pass to implement “long-needed reforms in the country’s corporate tax and fiscal incentives system.”

“The Senate’s timely passage of the CREATE bill will provide businesses with one of the largest economic stimulus measures in the country’s history to help them recover from the economic turmoil caused by the COVID-19 pandemic,” Dominguez said.

“We also thank the House of Representatives for passing last year its version of the corporate tax reform from which the Senate had adopted many features,” Dominguez said. 

 The House of Representatives approved the earlier version of CREATE, then known as the Corporate Income Tax and Incentives Rationalization Act bill, in September last year. 

Dominguez said the CREATE law will benefit pandemic-hit businesses, especially micro, small and medium enterprises (MSMEs), which make up 99 percent of all companies in the country.

In the Senate version, domestic corporations with total assets, excluding land, of not more than P100 million and net taxable income of P5 million and below will enjoy an immediate 10 percentage point reduction in the corporate tax from 30 percent to 20 percent.

All other corporations will benefit from an immediate reduction of the corporate tax from 30 percent to 25 percent. 

 Moreover, under the Senate version of CREATE, taxpayers whose gross sales or receipts do not exceed the value-added tax (VAT)-exempt threshold of P3 million and are subject to the 3 percent percentage tax shall only pay 1 percent instead from July 1, 2020 to June 30, 2023.

 Proprietary and non-stock educational institutions and hospitals are also among the major beneficiaries of the Senate version as it reduces the preferential tax rates enjoyed by these entities from 10 percent to 1 percent from July 1, 2020 to June 30, 2023.

 On the long-overdue fiscal incentives reform, investment promotion agencies (IPAs) maintain their key functions and powers under their respective charters, but they will now be supervised by the Fiscal Incentives Review Board (FIRB).
          

 Approvals of incentives for investments with capital exceeding P1 billion pesos will be made at the FIRB level.

Dominguez said that placing the governance of tax incentives under the body chaired by the Department of Finance and co-chaired by the Department of Trade and Industry mirrors international best practice and is a major win for the Filipino people. The FIRB ensures accountability and transparency in the grant of tax incentives.

CREATE also provides for the creation of the Strategic Investment Priority Plan (SIPP) to be formulated every three years to identify priority projects or activities that will receive incentives. 

 “CREATE also enhances the flexibility of our incentives system so that we can proactively attract investments that will bring exceptional benefits to the Filipino people,” Dominguez concluded.