Senate ratifies bicam report on CREATE bill


The Senate ratified on Wednesday the bicameral conference committee report on the disagreeing provisions on the proposed Corporate Recovery and Tax Incentives (CREATE) bill, which has been certified as urgent by President Duterte.

Sen. Pia Cayetano (Senate Public Relations & Information Bureau)

Senator Pia Cayetano said that with the new version put forth by the Senate and House contingent, the CREATE bill will provide a lifeline for struggling business affected by the ongoing COVID-19 pandemic, through the immediate and substantial reduction in the corporate income tax (CIT) rate.

“This will be a game changer for all business—both big and small—who need as much as support as they can get during this time of global health and economic crisis. Businesses will have more cash at their disposal, which they can use for inventory, for capital equipment, for employee benefits and more,” Cayetano said during her privilege speech at the Senate plenary.

“We are hopeful that the revenues that the government stands to lose will provide the stimulus that our economy needs to rebound from the contraction it sustained last year,” she said.

“Reducing corporate income tax will also enable the Philippines to keep pace with our ASEAN neighbors in attracting foreign direct investments,” added the senator, who chairs the Senate Ways and Means Committee.

Among the major provisions of the bill that the bicam committee adopted are as follows:

·     Importation of COVID-19 vaccines are exempted from import duties. Under the Senate version of the bill, vaccines are already excluded from Value Added Tax (VAT);
·     Enterprises have the option to choose between the Special Corporate Income Tax of 5% or Enhanced Deductions after enjoying the Income Tax Holiday (ITH);
·     Higher incentives for enterprises located outside of metropolitan areas;
·     Additional incentives for enterprises that fully relocate outside of NCR (National Capital Region);
·     Additional incentives for those who will locate in areas that are recovering from disasters or armed conflict.

The key provisions in the Senate version that were retained in the bicam version are:

·     The immediate reduction of the CIT to 20% for domestic corporations with total assets not exceeding P100-million (excluding land) and total net taxable income not exceeding P5-million;
·     25% for all other corporations;
·     1 percent Minimum Corporate Income Tax (MCIT) effective July 1, 2020 until June 30, 2023;
·     1 percent tax rate for Propriety Educational Institutions and Hospitals which are non-profit effective July 1, 2020 until June 30, 2023;
·     VAT exemption threshold for socialized and low-cost housing to P2.5-million and P4.2-million for house and lot;
·     VAT exemption for medicines for cancer, mental illness, tuberculosis and kidney diseases beginning January 1, 2021;
·     VAT free importation and sale of COVID-19 medicines, PPEs (personal protective equipment) beginning January 1, 2021 to December 31, 2023.

Cayetano said the ratified version of the CREATE bill will help serve as the country’s roadmap “to a more sustainable future, as well as our fulfillment of the overdue reforms in the country’s tax and fiscal incentives system.”

“The pandemic has changed us. It has changed the way we work, the way we live, and the way we do business. Necessarily, such an important fiscal measure would change, too,” she said.

“Instead of just a 1% drop in CIT, we are giving an immediate 5% drop, reduction of our CIT rate, it will now stand at 25%. And for MSMEs (micro, small and medium enterprises), it will be 20% depending on certain conditions as reported earlier,” she further explained.

Cayetano said the immediate passage of the CREATE bill into law will finally help end the unpredictability that prompted many investors to adopt a “wait-and-see” attitude before investing in the Philippines.

At the same time, the CREATE bill, once passed into law, will provide the much-needed respite from the effects of the pandemic, and cultivate an economic environment that ensures more sustainable and inclusive recovery for the nation “even beyond the New Normal.”

“On the incentives side, the bicam version of CREATE remains consistent with our objective to make our fiscal incentives system more performance-based and time-bound. Our new incentives package aims to attract businesses that will create more jobs for our people and bring in technologies and innovations,” Cayetano assured.

“It, likewise, promotes inclusive growth by offering higher incentives for those who will choose to invest in the countryside, as well as in areas recovering from disasters or conflict,” she stressed.