The Bureau of Internal Revenue (BIR) said corporations availing of the reduced 20 percent income tax rate must have annual total assets of not more than P100 million, excluding the land as prescribed in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.
It said the land exclusion from total assets refers solely to the areas where the business entity's office, plant, and equipment are situated.
"Thus, if the land is primarily held for sale, or investment purposes, the value should be included in the determination of the business entity's total assets," the guidelines stated.
BIR Commissioner Caesar R. Dulay came out with the clarification in Revenue Memorandum Circular No. 62- 2021.
The circular answers queries from both corporate accountants and revenuers themselves on certain provisions of Revenue Regulations No.5-2022 that implemented CREATE.
To determine the value of properties excluded in the computation of total assets, the percentage of the floor area devoted to the corporate space shall be multiplied with the value of the land and structure.
The circular says that if the corporate office occupies 1,000 square meters of a 5,000--square meter building worth P10 million, then the value to be excluded in the computation of total assets is P2 million.
The guidelines further stated that "the total assets shall be net of depreciation and allowance for bad debts."