The finance and trade departments signed the implementing rules and regulations (IRR) of the corporate recovery and tax Incentives for enterprises (CREATE) law, the government’s largest fiscal stimulus package for businesses in the country’s history.
Ahead of the July 10, 2021 deadline, Finance Secretary Carlos G. Dominguez III and Trade Secretary Ramon Lopez signed last June 21 the IRR of CREATE Act, which primarily reduced corporate income taxes (CIT)
According to the statement released by the Department of Finance (DOF), micro, small and medium enterprises (MSMEs) will be the biggest beneficiaries of CREATE with the CIT rate reduction.
The signing of the IRR is also seen by the Department of Trade and Industry (DTI) to attract more investors to grow their businesses in the country.
“With the release of the IRR, we expect our investment promotion agencies (IPAs) to go full steam ahead on attracting investments that will enhance investments in the country, create quality jobs, and improve the lives of Filipinos,” Lopez said.
The CREATE Act provides private enterprises more than P1 trillion worth of tax relief over the next 10 years, the DOF said.
Under the IRR, the regular CIT rate has been reduced by to 20 percent from 30 percent for domestic corporations with a taxable income of P5 million and below, and with total assets of not more than P100 million.
Meanwhile, the CIT rate for big corporations with assets of above P100 million is pegged at 25 percent.
The CREATE law also introduced an enhanced incentives package that is performance-based, time-bound, targeted, and transparent. It also reconstituted the Fiscal Incentives Review Board (FIRB), which serves as the oversight body for the country’s 13 existing IPAs.
With the issuance of the IRR covering the incentives section, the CREATE can be fully implemented given the previous Revenue Regulations (RRs) on the other tax provisions that were released by the DOF and the Bureau of Internal Revenue (BIR).
The IRR clarifies several questions that were raised during the consultations that include, among others, the scope of the enhanced deductions, the items that are allowed to be considered as deductions to arrive at the gross income about the special rate, among others.
“These provisions in the IRR are all intended to ensure that the law is properly implemented following the core principles of granting incentives based on the significant contribution of business enterprises to the economy,” Dominguez said.
The IRR takes effect immediately upon publication in a newspaper of general circulation.