Amendments made by CREATE MORE (RA No. 12066)

CREATE MORE or Republic Act No.  12066, is one of the most significant developments for tax laws in the Philippines, it was signed onNovember 11, 2024, bythe President Marcos. The act was created as an update to the previous CREATE Act, which was released back in 2021.

CREATE MORE adds to the initial provisions provided by the original CREATE Act, alongside the further lowered tax income rates and increased tax incentives, it also provided even more developments to the Philippine economy that would motivate potential clients into doing business in the Philippines.

Amendments made by RA 12066 (CREATE MORE) 

1.) Tax on Domestic and Foreign Registered Business Enterprises under Section 294 (C) of the Tax Code.  

• Registered Business Enterprises under the enhanced deductions regime (EDR) as provided in Section 294(C) of this Code, shall be subject to a tax rate equivalent to twenty percent (20%) of their taxable income derived from registered projects or activities during each taxable year. 

 2.) Exclusion from gross income 

• Income of any kind, to the extent required by any treaty obligation, including agreements entered into by the President with economies and administrative regions, subject to the concurrence of the Senate, binding upon the Government of the Philippines. 

3.) Deduction from Gross Income 

• Input tax paid on local purchases attributable to VAT-exempt sales shall be deductible from the gross income of the taxpayer. 

4.) Creditable withholding tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not more than fifteen percent (15%) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year. 

5.) Zero-rated VAT transactions 

• Sale of raw materials or packaging materials sold to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
• Sale of goods to an export-oriented enterprise whose export sales are at least seventy percent (70%) of the total annual production of the preceding taxable year: [Any export-oriented enterprise that fails to meet the threshold shall be disqualified from availing of VAT zero-rating on local purchases in the immediately succeeding year: input tax otherwise due on VAT zero-rated local purchases attributable to VAT-exempt sales shall be paid and deductible from the gross income of the taxpayer.] 
• The term 'directly attributable' shall refer to goods and services that are incidental to and reasonably necessary for the export activity of the export-oriented enterprise, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting; 
• The sale of goods, supplies, equipment, and fuel to persons engaged in international shipping or international air transport operations: Provided, That the goods, supplies, equipment, and fuel shall be used for international shipping or air transport operations;  
• Sales to bonded manufacturing warehouses of export-oriented enterprises.

Sale of Services at zero percent VAT (0%) 

• Services performed for an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production of the preceding taxable year: Provided, That such services are directly attributable to the export activity of the export-oriented enterprise: 
• Sales subject to zero percent (0%) VAT under special laws. 

6.) Petroleum Products exempt from excise tax 

• Those sold to international carriers of Philippine or foreign registry directly importing petroleum products, on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
• Suppliers of petroleum products to international carriers shall be allowed to file a claim for refund of excise tax paid on such products, upon presenting proof that the petroleum products were sold to international carriers of Philippine or foreign registry, for their use or consumption outside the Philippines, following the procedure under Section 135-A of the Tax Code. 

7.) Introduction of a new Section 135-A of the Tax Code providing for refund of excise tax on petroleum products 

8.) Introduction of a new Section 135-A of the Tax Code providing for refund of excise tax on petroleum products 

9.) Enhanced deduction schemes for export and domestic market enterprise. 

• One hundred percent (100%) additional deduction on power expense incurred in the taxable year; 
• Deduction for reinvestment allowance to manufacturing and tourism industries  no more than fifty percent (50%) of the amount reinvested shall be allowed as a deduction from its taxable income within a period of five (5) years from the time of such reinvestment; 
• Fifty percent (50%) additional deduction on expenses relating to exhibitions, trade missions, or trade fairs;
• NOLCO of the registered project or activity during the first three (3) years from the start of commercial operation, which had not been previously offset as deduction from gross income, may be carried over as deduction from gross income within the next five (5) consecutive taxable years immediately following the last year of the ITH entitlement period of the project. 

10.) Local Tax on RBEs 

• local tax at the rate of not more than two percent (2%) of an RBE's gross income, during the ITH and EDR, which shall be in lieu of all local taxes and local fees and charges imposed by the local government unit under the Local Government Code of 1991, as amended: No local tax shall not be imposed on RBEs under Special Corporate Income Tax (SCIT). 

11.) Tax Incentives Availment 

• Registered Export Enterprises may avail the following tax incentives 
  (1) ITH, which shall be followed by SCIT or EDR; or 
  (2) SCIT, which shall be in lieu of all national and local taxes and local fees and charges, and may be granted immediately at the start of commercial operations; or  
  (3) EDR, which may be granted immediately at the start of commercial operations. 
  The elected incentive package shall be irrevocable for the entire duration of entitlement to such incentives . In no case shall the EDR be granted simultaneously with the SCIT. 
   
• Registered domestic market enterprise 
  (1) ITH, which shall be followed by EDR; or 
  (2) EDR, which may be granted immediately at the start of commercial operations. 
  
  The elected incentive package shall be irrevocable for the entire duration of entitlement to such incentives under Sections 296 and 296-A of this Code. 

12.) Registered Business Enterprise taxpayer Service. Establishment of a separate service within the BIR to support the end-to-end tax compliance of RBEs. For ease of compliance with tax rules and regulations, simplified filing and payment processes shall be implemented for RBEs. 

Tax Services in the Philippines

Keeping up to date with the constant changes and amendments to tax laws can become quite tedious to manage. At Forvis Mazars, we work closely with clients – offering solutions that simplify their compliance and help them navigate complex tax situations with confidence, including helping bypass certain processes like online tax filing requirements.  

Our professionals have deep experience in multiple areas of tax, providing businesses at all stages of their life cycle with specialist advice. Our expertise ranges from corporate and employment tax, transfer pricing and corporate structuring, national and international transactions, and assessing tax implications when setting up new operations overseas, among others. 

Our solutions include outsourced tax compliance, tax advisory and expert opinions, application for incentives, and handling BIR tax assessments and audits, among others. 

For more information on Yu Villar Tadeja’s tax services in the Philippines, contact us for an initial call or follow the link below.