BOI cites better tax perks in CREATE
Published May 24, 2020 12:00 am
By Bernie Cahiles-Magkalat
The Board of Investments (BOI), the government’s premier investment generation and promotion arm, cited the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) stressing the bill enhances tax perks to investors under the Corporate Income Tax Incentives Reform Act (CITIRA) making the Philippines more responsive to the needs of companies devastated by COVID- 19 pandemic and position the country as better destination for scarce foreign capital.
Ceferino S. Rodolfo
As such, the objectives of the CITIRA bill has added a third goal in the CREATE bill: “To provide support to business to aid in their recovery from the COVID-19 pandemic and strengthen our capability for similar circumstances in the future.”
BOI Managing Head Ceferino S. Rodolfo, who is also trade and industry undersecretary, said CREATE will provide better and longer sunset period for incentives availment. This will be on top of the proposed drastic cut in the corporate income tax to 25 percent effective July 1, 2020, once passed into law, from the current 30 percent. CREATE aims to reach a CIT rate of 20 percent by 2027. For instance, he said, export-oriented companies, particularly those registered with the Philippine Economic Zone Authority (PEZA), will get additional two more years of incentives based on their classification under CITIRA.
This means, those firms that fall under the category with 3-year remaining incentives under CITIRA will get 5 years under CREATE.
In addition, the bill sponsored by Senator Pia Cayetano, seeks to provide flexibility for the President to grant incentives that are not provided under the law.
This will be made possible by granting powers to the Fiscal Incentives Review Board to “recommend to the President the grant of appropriate non-fiscal support based on the Strategic Investment Priority Plan for highly desirable projects or very specific industrial activities.”
One example of support for such desirable investment is the grant of power subsidy, Rodolfo said. This kind of incentive was granted by former President Gloria Arroyo to the three mega investors – Texas Instruments Philippines, and Phoenix Semiconductors Philippines Corp. in Clark Freeport Zone, and Hanjin Heavy Industries Corp. Philippines in Subic Freeport.
With the power subsidy, estimated to hit ₱15 billion, the Philippines was able to win the huge investment that created thousands of jobs for Filipinos. The subsidy, however, was terminated during the term of President Benigno Simeon Cojuangco Aquino III.
In addition, the BOI favored the bill’s net operating loss, which provides that: “The net operating loss for taxable year 2020 incurred by taxpayers not identified by the Commissioner as large taxpayers, which had not been previously offset as deduction from gross income, may be carried over as a deduction from gross income for the next 5 consecutive taxable years immediately following the year of such loss or up to taxable year 2025.”
To support countryside development, there will be a bias in terms of location in the grant of incentives.
“The location of the registered project or activity shall be prioritized according to the economic level of development as follows: Less developed areas as determined by the National Economic Development Authority; areas outside of the National Capital Region and outside of metropolitan areas such as Bulacan, Cavite, Laguna, and Rizal and all other areas that are not less developed; and NCR and other metropolitan areas.”
Rodolfo cited Senator Cayetano for crafting a very responsive CREATE bill to aid companies after the pandemic. He expects a smooth passage of the bill sooner from the bicameral level.
Ceferino S. Rodolfo
As such, the objectives of the CITIRA bill has added a third goal in the CREATE bill: “To provide support to business to aid in their recovery from the COVID-19 pandemic and strengthen our capability for similar circumstances in the future.”
BOI Managing Head Ceferino S. Rodolfo, who is also trade and industry undersecretary, said CREATE will provide better and longer sunset period for incentives availment. This will be on top of the proposed drastic cut in the corporate income tax to 25 percent effective July 1, 2020, once passed into law, from the current 30 percent. CREATE aims to reach a CIT rate of 20 percent by 2027. For instance, he said, export-oriented companies, particularly those registered with the Philippine Economic Zone Authority (PEZA), will get additional two more years of incentives based on their classification under CITIRA.
This means, those firms that fall under the category with 3-year remaining incentives under CITIRA will get 5 years under CREATE.
In addition, the bill sponsored by Senator Pia Cayetano, seeks to provide flexibility for the President to grant incentives that are not provided under the law.
This will be made possible by granting powers to the Fiscal Incentives Review Board to “recommend to the President the grant of appropriate non-fiscal support based on the Strategic Investment Priority Plan for highly desirable projects or very specific industrial activities.”
One example of support for such desirable investment is the grant of power subsidy, Rodolfo said. This kind of incentive was granted by former President Gloria Arroyo to the three mega investors – Texas Instruments Philippines, and Phoenix Semiconductors Philippines Corp. in Clark Freeport Zone, and Hanjin Heavy Industries Corp. Philippines in Subic Freeport.
With the power subsidy, estimated to hit ₱15 billion, the Philippines was able to win the huge investment that created thousands of jobs for Filipinos. The subsidy, however, was terminated during the term of President Benigno Simeon Cojuangco Aquino III.
In addition, the BOI favored the bill’s net operating loss, which provides that: “The net operating loss for taxable year 2020 incurred by taxpayers not identified by the Commissioner as large taxpayers, which had not been previously offset as deduction from gross income, may be carried over as a deduction from gross income for the next 5 consecutive taxable years immediately following the year of such loss or up to taxable year 2025.”
To support countryside development, there will be a bias in terms of location in the grant of incentives.
“The location of the registered project or activity shall be prioritized according to the economic level of development as follows: Less developed areas as determined by the National Economic Development Authority; areas outside of the National Capital Region and outside of metropolitan areas such as Bulacan, Cavite, Laguna, and Rizal and all other areas that are not less developed; and NCR and other metropolitan areas.”
Rodolfo cited Senator Cayetano for crafting a very responsive CREATE bill to aid companies after the pandemic. He expects a smooth passage of the bill sooner from the bicameral level.