In line with President Ferdinand R. Marcos, Jr.’s directive for the government to roll out a ‘red carpet’ for investors, the Fiscal Incentives Review Board (FIRB) has unanimously approved a resolution increasing the investment capital threshold for projects handled by Investment Promotion Agencies (IPAs) from PHP 1 billion to PHP 15 billion.
“I commend the FIRB for its swift action in improving the Philippines’ global competitiveness. IPAs play a vital role in attracting more productivity-enhancing investments to the country, and we will continue to support them by acting fast on measures that will further promote ease of doing business and cultivate an investment-friendly climate,” said Finance Secretary and FIRB Chairperson Ralph G. Recto.
On February 2, 2024, the FIRB increased the investment capital threshold for projects delegated to IPAs to PHP 15 billion through FIRB Resolution No. 003-24 to enhance the ease of doing business in response to concerns expressed by certain IPAs. This is expected to usher in more critical investments into the country.
Under the previous set-up, IPAs were responsible for approving incentives for projects with investment capital below PHP 1 billion, while the FIRB was tasked with selecting tax perks for projects exceeding PHP 1 billion, as mandated by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. The FIRB may exercise the authority to increase the threshold without the need to amend the Tax Code.
The recent adjustment aligns with policy proposals in Congress, which aim to empower IPAs with greater authority in granting incentives.
Moreover, the move will boost the IPAs’ responsibility and accountability in managing the country’s incentive system and ensure steadfast compliance among registered business enterprises (RBEs) regardless of the amount of investment capital.
The revised threshold is likewise aligned with the Public-Private Partnership (PPP) Code of the Philippines, which states that PPP projects amounting to PHP 15 billion or higher shall be approved by the National Economic and Development Authority (NEDA) Board.
As such, applications for tax incentives involving investment capital exceeding PHP15 billion will continue to fall under the purview of the FIRB.
Moreover, all pending applications for tax incentives previously endorsed by IPAs to the FIRB involving investment capital of PHP15 billion will be returned to the respective IPA for necessary actions.
The IPAs will now incorporate approved projects with investment capital of PHP 15 billion and below in their monthly reports to the FIRB Secretariat.
Nevertheless, the FIRB, in collaboration with IPAs, retains the authority to oversee the compliance of all registered business entities with their performance commitments, irrespective of the investment capital amount.
Government’s Efforts to Build Investor Confidence
Signed into law on March 26, 2021, the CREATE Act establishes a performance-based, time-bound, targeted, and transparent tax incentives regime in the country.
Pursuant to the law, the Cabinet-level FIRB is mandated to oversee the grant and administration of incentives of IPAs to ensure that incentivized projects or activities achieve performance metrics and that the grant of fiscal support to RBEs leads to higher economic returns.
Among the initiatives led by the FIRB to improve the country’s investment climate are the review of existing policies and drafted clarificatory guidelines on the value-added tax (VAT) and local taxation concerns of RBEs.
It also backs some of the proposed amendments being introduced in the CREATE Act, which includes enhancing the tax incentive packages, and clarifying the rules and policies on the tax incentives of RBEs under the transitory provision.
To ensure that tax incentives are judiciously granted and properly monitored, the FIRB further intensifies its collaborative efforts with key stakeholders through a series of online and onsite engagements.
The FIRB also continuously develops and enhances the Fiscal Incentives Registration and Monitoring System (FIRMS), a web-based platform for incentives application and monitoring, as part of its digitalization efforts.
As of December 31, 2023, the estimated total investment capital from the 1,011 CREATE-incentivized projects has now reached a record PHP 1.1 trillion, generating a committed employment count of 112,464 jobs varying across priority industries under the Strategic Investment Priority Plan (SIPP).