Aiming to enhance the Philippine tax incentives policy and administration, our legislature passed the CREATE MORE bill (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy), amending the present CREATE. The Bicameral Conference Committee had already approved the bill on September 10, 2024. After the same is signed into law, we will be faced with yet another change in our Tax Code. So, here is a preview of the proposed amendments affecting Registered Business Enterprises (“RBEs”).
Under CREATE MORE, RBEs opting for or covered by the Enhanced Deductions (“ED”) Regime will be subjected to income tax on their taxable income derived from registered projects or activities at a reduced rate of 20%. These enterprises availing of the ED will also enjoy 100% additional deduction on their power expense. The 5% Special Corporate Income Tax Rate (“SCIT”) that used to be paid in lieu of all national taxes and local taxes will also be considered a substitute payment for all local fees and charges imposed by the LGUs, in addition to the national and local taxes.
922 WritingIn the proposed bill, the period to enjoy ED or SCIT of RBEs was increased (10 to 27 years). The period to avail for the income tax-based incentives, including the Income Tax Holiday, depends on the granting authority (either the Fiscal Incentives Review Board or FIRB or the Investment Promotion Agency or IPA). IPAs have the power to grant incentives for investments of P15 billion and below.
An RBE local tax (“RBELT”) is introduced. The RBELT may be imposed by the LGUs through an ordinance at not more than 2% of gross income. This will be paid by RBEs enjoying ITH or ED in lieu of all local taxes, fees, and charges under the Local Government Code.
There are also changes included in the availment of incentives on VAT exemption on importation and VAT zero-rating on local purchases of RBEs. To recall, the implementing rules and regulations of CREATE limited the application of these incentives to Registered Export Enterprises (“REEs”) only. In addition, the supply and purchases of goods and services must be exclusively and directly used in the registered project or activity of REEs before the importation, and local purchases may be exempted or subjected to 0% VAT. This means that these materials, supplies, goods, and services must be necessary for the registered project or activity, and without them, such project or activity cannot be carried out.
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