Amendment to CREATE’s IRR no impact on PEZA, says chief

The approved amendment to the implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will have no impact on the enterprises registered under the Philippine Economic Zone Authority (PEZA), its chief Director General Tereso Panga said Wednesday.

“There’s not much value to us on the recent amendment introduced by FIRB (Fiscal Incentives Review Board) because it caters more to domestic market oriented companies that are located in the eco-zones,” Panga told reporters on the sidelines of an event in Pasay City.

Finance Secretary Benjamin Diokno and Trade Secretary Alfredo Pascual have given their thumbs up to the amendment to the CREATE’s IRR.

Specifically, the amendment was on Rule 18, Section 5 of the CREATE Act IRR, which refers to “non-income related tax incentives" of RBEs enjoying tax incentives prior to CREATE law's effectivity.

Under the said section of the CREATE IRR, 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 investment of the registered enterprises until the expiration of the 10-year transition period.

With the amendment, transitory registered domestic market enterprises (DMEs) inside the economic or freeport zones availing of the 5% gross income tax (GIT) regime will now have the option to register as VAT taxpayers.

“We cater predominantly to export-oriented companies so right now their purchases from the local market are entitled to zero VAT rating already,” Panga said.

“No [impact], but nonetheless we support that,” he added.

The amendment will enable VAT-registered DMEs covered by the transitory provisions of CREATE to either charge output VAT to domestic customers or receive a refund from the Bureau of Internal Revenue (BIR) for the input VAT directly attributable to their zero-rated sales.

“We support because of that provision on sunset so anything that we have already extended to our locators prior to CREATE should be honored by the government,” Panga said, referring to the 10-year transitory period under the CREATE law for those already enjoying fiscal incentives prior to the law’s effectivity.

The CREATE law lowered the corporate income tax (CIT) and rationalized fiscal incentives.

It reduced the CIT to 25% from 30% effective July 1, 2021, followed by a one-percentage-point cut annually from 2023 until it reaches 20% in 2027.

For small local companies, an outright reduction to 20% was implemented.—AOL, GMA Integrated News