The Department of Trade and Industry (DTI) expressed hopes that the final Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill will be close to the Corporate Income Tax and Incentives Reform Act (CITIRA) House version that provided a good framework of time-bound, performance-based, and transparent incentives to investors.
DTI Undersecretary Ceferino S. Rodolfo said that the enhancements made by the Senate for CREATE and the elements of the CITIRA by the Lower House would be a good combination.
Rodolfo noted that the Senate included CITIRA’s good framework that incentives will be time-bound, performance-based, and transparent. The Senate has also included the use of incentives framework that balances the ability to attract investments and generate the much needed revenue for the government.
He, however, noted of some differences between the House and the Senate with the Lower House having some hesitation on the share of the revenues to the local government units. He also mentioned of some issues on the proposed creation of the Fiscal Incentives Review Board.
Under the present system, the LGU that hosts an economic zone gets a 2 percent share of the five percent gross income earned of the company locator. But, there would be revenue implications on the part of the host LGU under the proposed CREATE, depending on the transition period the final bill will allow for companies to migrate to the corporate income tax (CIT) system.
“Of course, we are fully cognizant that both Houses have their legislative prerogative to advocate elements. We fully trust the wisdom of both Houses to consolidate and work on whatever provisions they deemed convergent,” he said.
Based on consultations, Rodolfo said that stakeholders already liked the balance achieved under CREATE.
Rodolfo further cited the timing of the passage of the bill because companies have to prepare in February or March already for the filing of their income tax return in April. Congress is expected to resume session on January 14 yet.
“So, the window is very critical, not only for incentive purposes but, in general, for all business establishments,” he said.
The CREATE Bill was approved on third and final reading by the Senate on November 26, 2020.
The bill provides that starting July 01, 2020, CIT rate for corporations will be reduced to 20 percent from 30 percent to domestic corporations with net taxable income not exceeding P5,000,000 and with total assets not exceeding P100 Million (excluding land on which the business entity’s office, plant and equipment are situated).
A reduced CIT rate of 25 percent shall be applicable to all other domestic and foreign corporations. For the period beginning July 01, 2020 until June 30, 2023, minimum corporate income tax rate shall be 1 percent, instead of 2 percent.