This paper provided the tax implications of Sections 16 and 17 of Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which was enacted into law on 26 March 2021, and took effect on 11 April 2021. Section 16 of the CREATE Act introduced a new Title XIII in the National Internal Revenue Code (NIRC) of 1997, as amended, which provides a general provision for tax incentives regime in the country. On the other hand, Section 17 thereof amended and repealed specific provisions of various investment laws in the country that are inconsistent with the provisions of the new Title XIII of the NIRC of 1997, as amended.
The CREATE Act provided a time-bound single menu of incentives based on location and industry tiers to encourage investments, generate more jobs, engage in sophisticated sectors, and locate in less developed areas. These tax incentives include an income tax holiday for four to seven years, followed by enhanced deductions for 10 years for export-oriented projects/activities, five years for domestic market enterprises, and duty exemption on the importation of capital equipment, raw materials, spare parts, or accessories.
The tailor-made set of incentives creates a more equitable tax incentives regime to allow inclusive growth and generation of jobs and opportunities in all the country’s regions. Another essential feature of the CREATE Act is the formulation of the Strategic Investment Priority Plan (SIPP), which will contain the priority projects or activities eligible for incentives to ensure a more targeted list of projects and activities with significant positive externalities and that will make the Philippines globally competitive. The expanded functions and powers of the Fiscal Incentives Review Board under the law are to ensure that the grant of fiscal incentives is time-bound, performance-based, transparent, and targeted to priority industries and areas; and to strengthen the management and monitoring of tax incentives granted so that the government will not unnecessarily forego its much-needed revenues.