Malacanang has approved the Strategic Investment Priority Plan (SIPP), the country’s first list of priority economic activities eligible for government tax and fiscal incentives under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Law.
Evariste M. Cagatan, Board of Investments Executive Director for Investment Promotions Services, revealed during a webinar on “The Rise of Data Centers” by property management and services firm Santos Knight Frank organized by the American Chamber of Commerce of the Philippines of President Duterte’s signing of the Executive Order for the SIPP.
With the signing of the SIPP EO, Cagatan said “We will now be waiting for the publication so that it will now become effective.” Cagatan, one of the panelists at the webinar, said that data centers activity in the country is listed in the SIPP and are therefore entitled to incentives.
Trade and Industry Secretary Ramon M. Lopez thanked President Duterte for signing the EO stressing, “This builds on the gains generated from a number of major economic reforms that makes the Philippines a very attractive destination.”
The SIPP specifies the list of sectors that are being promoted for investments and are therefore given the incentives prescribed under the CREATE Law.
“This brings further optimism among those investors intending to start or expand their operations in the country,” said Lopez, who is also chairman of the BOI which spearheads the crafting of the first SIPP.
In April this year, Lopez presented the final draft of the SIPP to House chairman of the House Ways and Means Committee Albay Rep. Joey Salceda.
Lopez cited the House committee’s resolution supporting the framework, which contributed to the approval of the list by the Fiscal Incentives Review Board (FIRB). The actual draft was presented to the FIRB Technical Committee on 31 March 2022 as well as to Investment Promotion Agencies the same day.
The SIPP grants tax incentives, particularly income tax holiday (ITH) over a certain period of time, based on Tiers with Tier 1 having the shortest period of tax incentives. Industries in the SIPP can avail of fiscal incentives of 4 to 7 years of ITH for manufacturers, and even a special corporate income tax after the ITH.
For projects with over $1 billion in investments, the President has the power to grant a special set of incentives and even financial support.
Earlier, BOI Managing Head Ceferino S. Rodolfo said at the public consultation for the crafting of the first SIPP that the previous 2020 IPP will be carried over in the Tier I of the SIPP.
“Considering really our common desire for a faster recovery of the Philippines and to recover jobs, we are adopting or we are we are proposing to the Fiscal Incentives Review Board (FIRB) to adopt the IPP 2020, continue adapting it for Tier 1,” said Rodolfo.
Tier 1 grants the shortest period of tax incentives under the CREATE Law, but Rodolfo said that the adoption of 2020 IPP would also allow these projects to upgrade to Tier 2 and 3, which offer longer incentive coverage as long as they are qualified under the current regime.
Rodolfo explained that adopting the 2020 IPP into Tier 1 will preserve the commitment of the government to continue the grant of incentives for projects listed under the old IPP. “This is also in fulfillment of what we promise to you prior to CREATE Law that the 2020 IPP would be the transitional SIPP,” said Rodolfo.
This means that only the economic activities for Tier 2 and 3 would be specified and where the BOI would focus its promotions.
Under the CREATE Act, Tier 2 are activities that fill-in gaps in the value chain and import-substituting while Tier 3 are those that promote innovation and critical to structural transformation.
The CREATE law, which took effect on April 11, 2021, reduced corporate income tax (CIT) from 30 percent to 25 percent for large corporations and to 20 percent for small and medium enterprises that have net taxable income not higher than P5 million.
It also provides fiscal relief to both domestic and foreign investors doing businesses in the country, a move seen to encourage businessmen to put up domestic operations in a bid to boost economic activities and help in the continued recovery of the economy.