DOF backs proposed amendments to CREATE law

The Department of Finance (DOF) supports a proposal to amend the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which is aimed at addressing issues of incentives for qualified enterprises.

“The proposed amendments to the CREATE Act will enhance the incentives, clarify the rules and policies on the grant and administration of incentives to qualified enterprises, and address issues affecting the country’s investment climate,” Finance Secretary Benjamin Diokno said in a statement on Wednesday.

The proposed amendments to the CREATE law were contained in House Bill 8968 filed by Albay 2nd District Representative Joey Salceda.

The proposed CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) seeks to clarify the transitory provision in the law “by expressly exempting transitory registered business enterprises (RBEs) under the 5% gross income earned (GIE) regime from all national and local taxes, including VAT and duty incentives.”

The bill also seeks the establishment of a streamlined tax refund system for registered business enterprises (RBEs) and the institutionalization of a risk-based classification of claims and audit framework in a bid to improve the timeliness, efficiency, and predictability of the VAT refund process.

The CREATE law lowered the corporate income tax (CIT) and rationalized fiscal incentives, making it performance-based, time-bound, targeted, and transparent.

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, it was immediately reduced to 20%.

The Cabinet-level Fiscal Incentives Review Board (FIRB) is mandated to oversee the grant and administration of incentives by investment promotion agencies (IPAs). 

As of August 2023, the FIRB has approved a total of 45 big-ticket tax incentive applications from various Registered Business Enterprises (RBEs), with a total investment capital of P721.29 billion, according to the DOF.

The approved investment projects are expected to create 31,421 job opportunities, primarily in capital-intensive industries such as information and telecommunications infrastructure, transportation, manufacturing, and real estate projects. 

As of July 2023, the various IPAs have approved a total of 752 projects, with an investment capital of P175.67 billion and 49,170 committed jobs. 

In total, 797 projects have already been approved under the CREATE Act, resulting in a total investment capital of P896.95 billion and 80,591 committed jobs for Filipinos, according to the DOF.

The FIRB implements an evaluation and impact analysis system before granting such incentives to RBEs to ensure that the fiscal support that the government grants to private enterprises leads to greater benefits to the people and the economy through new employment generation, innovation, capital infusion, and the adoption of advanced technology. —VBL, GMA Integrated News