It also aims to plug tax leakages by rationalizing the fiscal incentives granted to investors and shifts the administration of such investments towards a performance-based, targeted and time bound system. President Duterte signed the CREATE act as Republic Act No. 11534 with certain line items vetoed last March 26, 2021.
Read more on the CREATE act.
Salient Features
- Corporate income tax is reduced from 30% to 25% for domestic and resident foreign corporations. Domestic corporations with net taxable income not exceeding P5million and with total assets not exceeding P100million is taxed at 20% effective July 1, 2020. MCIT rate reduced from 2% to 1% effective July 1, 2020 to June 30, 2023
- Income tax rate for nonresident foreign corporation is reduced from 30% to 25% effective January 1, 2021.
- Percentage tax reduced from 3% to 1 % effective July 1, 2020 to June 30, 2023.
- Rate of tax for proprietary educational institutions and hospital reduced from 10% to 1% effective July 1, 2020 to June 30, 2023.
- Improper Accumulation of Earnings Tax is repealed.
- Definition of reorganization for purposes of applying the tax free exchange provision under Section 40(C)(2) is expanded. Prior BIR ruling or confirmation shall not be required for purposes of availing the tax exemption of the exchange.
| - Qualified export enterprises shall be entitled to 4 to 7 years ITH to be followed by 10 years 5% Special Corporate Income Tax (SCIT) OR Enhanced Deductions (ED).
- Domestic market enterprises shall be entitled to 4 to 7 years ITH (Income Tax Holiday) to be followed by 5 years ED.
- Registered enterprises are exempt from customs duty on importation of capital equipment, raw materials, spare parts, or accessories directly and exclusively used in the registered project or activity.
- VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity by a Registered Business Enterprise (RBE).
- For investments prior to effectivity of CREATE: RBEs granted only an ITH - continue with the availment of the ITH for the remaining period of the ITH. RBEs granted an ITH + 5% GIT or currently enjoying 5% GIT - allowed to avail of the 5% GIT for 10 years.
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The law is set to take effect 15 days after its complete publication in the Official Gazette or in a newspaper of general circulation.
