Importation of critical medical medicines, including vaccines, are exempted from value added tax under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act starting January 1, 2021, according to Trade and Industry Secretary Ramon M. Lopez.
Lopez said at the Health and the Economic Outlook for 2020 virtual forum the exemption is in view of the ongoing health crisis. “The coverage of VAT-exempt transactions under CREATE has been expanded to cover drugs and medicines for cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2021,” said Lopez, who expressed hope that the legislative measure will be signed by President Duterte within this month of December.
In addition, under CREATE, export enterprises and domestic enterprises engaged in activities classified as critical industries will enjoy an Income Tax Holiday for 4 to 7 years. There will also be a 5 percent Special Corporate Income Tax Rate (SCIT) based on Gross Income Earned, in lieu of all national and local taxes for 10 years.
He said the Board of Investments will formulate the Strategic Investment Priorities Plan (SIPP), which will define the coverage of the sectoral tiers and provide the conditions for qualifying economic activities. This will give premium to projects or activities that have substantial amounts of investments, considerable job generation capacity, and modern technology.
It was also his understanding that COVID-19 coming from members of the RCEP (Regional Comprehensive Economic Partnership) has also zero duty.
Aside from CREATE, the signing of RCEP among ASEAN member states, Australia, New Zealand, Japan, Korea, and China will offer trade and investment opportunities for the Philippine manufacturing sector.
Specifically, he said RCEP will benefit the Philippines in four key areas: cheaper costs, convenience, competitiveness, and complementation.
With regard to cheaper cost, it is expected that the RCEP will increase the movement
of goods throughout the region. With regard to Convenience, our MSMEs and exporters can engage in seamless transactions through RCEP for all Free Trade Agreement (FTA) partners.
On competitiveness, Lopez said that RCEP presents a more stable and predictable business environment that is expected to attract more investments in the Philippines.
With regard to Complementation, RCEP supports MSME development and participation
in global value chains.
For instance, in terms of enhanced market access for goods, many of the country’s local products will enjoy significant tariff concessions to enter China, Japan, and Korea. For instance, within the next 10 to 20 years or less, depending on the product, preserved pineapple and car head lights will enter China at 0% tariff; chocolate products and canned fruit juice can be exported to Japan also at 0%; and fresh papaya, beer, and bicycle products can enter Korea at 0%.
“We look forward to maximizing the opportunities presented by CREATE and RCEP in the years
ahead,” he said.