Finance Secretary and Fiscal Incentives Review Board (FIRB) Chairperson Ralph G. Recto has lauded the recent enactment of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE), highlighting that it is a win-win for both local and international businesses and the Filipino people.

Republic Act (RA) No. 12066 or the CREATE MORE Act makes the Philippines’ tax incentives regime more globally competitive, investment-friendly, predictable, and accountable.

“CREATE MORE will open the floodgates of more high-impact investments both from our international investors and domestic enterprises. This will not only attract new investments and grow existing businesses to make more money but also enable us to create more high-quality jobs, increase our people’s income, and reduce poverty. Through CREATE MORE, we will secure a brighter future for every Filipino,” the Finance Chief said.

“As we open new doors of opportunity, we drive businesses to reinvest their capital, build upon the workforce, and initiate a ripple effect that will be felt across generations,” President Ferdinand R. Marcos, Jr. said during his speech at the ceremonial signing event on November 11, 2024.

Overall, CREATE MORE will set the stage for investment-led growth for the Philippines.

It will enhance the ease of doing business in the country; clarify value-added tax (VAT) rules; provide more attractive tax incentives; strengthen governance and accountability; and make clear transitory rules for pre-CREATE registered business enterprises (RBEs).

“CREATE MORE will certainly fast-track the entry of more foreign investors into the Philippines, as evidenced by the bullishness and strong interest from nearly a thousand investors who attended our recent economic briefings abroad. This will help facilitate more partnerships and joint ventures with our local companies,” Secretary Recto said.

Among the exciting features of the law is a more competitive and generous incentive package that awaits strategic and highly desirable investments.

For instance, RBEs will have the option to choose between the Special Corporate Income Tax (SCIT) of 5% or the Enhanced Deductions Regime (EDR) right from the start of their commercial operations.

The SCIT and EDR incentives, initially capped at a maximum of 10 years, are now extended to a period of up to 17 or 27 years.

Labor-intensive projects will be allowed to apply for an extension of another five or ten years.

More incentives are given to registered export enterprises (REEs) and high-value domestic market enterprises (DMEs) with investment capital exceeding PHP 15 billion and are engaged in sectors considered import-substituting or export sales in the immediately preceding year of at least USD 100 million.

Meanwhile, CREATE MORE expands the EDR to provide additional relief to RBEs by reducing the CIT rate to 20% from 25%.

The law also increased to 100% from 50% the additional deduction on power expenses, significantly cutting costs for the manufacturing sector.

To boost the tourism industry, an additional 50% deduction for expenses related to trade fairs and tourism reinvestments will be provided until 2034.

The law also maximized the benefits of the Net Operating Loss Carry-Over (NOLCO) by changing the reckoning period from “year of loss” to the “last year of the project’s income tax holiday (ITH) entitlement period”.

Likewise, the law provides tax and duty exemption on donations of capital equipment, raw materials, spare parts, or accessories to the government, government-owned or -controlled corporations (GOCCs), the Technical Education and Skills Development Authority (TESDA), State Universities and Colleges (SUCs), and the Department of Education (DepEd) or the Commission on Higher Education (CHED)-accredited schools.

Moreover, CREATE MORE provides an optional imposition of an RBE local tax (RBELT) at a rate not exceeding 2% of gross income, which shall be in lieu of all local taxes, fees, and charges during the ITH or EDR.

In addition, the reform acknowledges the evolving business model as it institutionalizes the adoption of flexible work arrangements for RBEs operating within economic zones and freeports, without compromising their tax incentives.

To address investors’ pain points, export-oriented enterprises’ local purchases are zero-rated while importations are VAT-exempt.

This is expected to address the cash flow issues of direct exporters as they no longer have to tie up funds in VAT payments that would otherwise be refunded later.

This law also liberalizes the condition for the availment of VAT incentives by shifting from “direct and exclusive use” to “directly attributable” requirements for goods and services. This broadens the scope of VAT incentives covering necessary services such as janitorial, security, financial consultancy, marketing, and administrative services.

Pre-CREATE RBEs will be given until December 31, 2034 to fully transition into the CREATE Act. REEs may continue to avail of duty and VAT incentives even after the transitory period, subject to the provisions of Title IV of the Tax Code and the Customs Modernization and Tariff Act (CMTA).

To strengthen the governance and accountability over fiscal incentives, CREATE MORE mandates the government to adopt the Ease of Doing Business and Efficient Government Service Delivery Act timeline for issuing a decision on incentive applications. This includes a 20-working-day turnaround for decisions once complete documents are submitted.

Furthermore, it institutes greater responsibility for investment promotion agencies (IPAs) by increasing the investment capital approval threshold from PHP 1 billion to PHP 15 billion.

The FIRB’s regulatory functions over IPAs, in turn, will be strengthened to promote fiscal prudence and discipline.

The FIRB is the interagency government body mandated by law to oversee the grant and administration of incentives of IPAs. The DOF is the Chair of the FIRB Board, Chair of its Technical Committee, and Head of the Secretariat.

Apart from the President and Secretary Recto, present during the ceremonial signing were Executive Secretary Lucas Bersamin, Special Assistant to the President Antonio Ernesto Lagdameo, Presidential Adviser For Legislative Affairs Mark Llandro Mendoza, Special Assistant to the President for Investment and Economic Affairs Frederick Go, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan, and Department of Trade and Industry (DTI) Acting Secretary Ma. Cristina Roque.

Senate President Francis Escudero, House Speaker Martin Romualdez, and stakeholders from the business sectors and registered business enterprises also attended the event.

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