House panel OKs amendment lowering corporate income tax to 20%

The House Committee on Ways and Means on Tuesday approved a bill that would amend the CREATE law and further decrease income tax for domestic and resident foreign corporations from 25% to 20%.

The unnumbered substitute bill, dubbed as CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE More) bill, provides that domestic and resident foreign corporations elected under the enhanced deductions regime as provided in Section 294.C of the bill will be imposed a 20% income tax annually.

Section 294.C states that an export enterprise and domestic market enterprise elected under the enhanced deductions regime may receive the following benefits:

• depreciation allowance of the assets acquired for the entity's production of goods and services (qualified capital expenditure) which include additional 10% for buildings and additional 20% for machineries and equipment;
• 50% additional deduction on the labor expense incurred in the taxable year;
• 100% additional deduction on research and development expense incurred in the taxable year;
• 100% additional deduction on training expense incurred in the taxable year;
• 50% additional deduction on domestic input expense incurred in taxable year;
• 50% additional deduction on power expense incurred in the taxable year,

The deduction on power expense, however, will only be granted provided that:

• the rate of additional deduction on power expense will be increased to 100% from January 1, 2024 to December 31, 2028,
• the President may extend the period of grant of the increased deduction by another five years and additional deduction on power expenses incurred during the availment of the income tax holiday will be creditable against income tax dues during the period of availment of enhanced deductions.

The bill’s principal author, Albay lawmaker Joey Salceda, said the CREATE More bill will address the decrease of foreign direct investments resulting from misinterpretation of the CREATE law passed in 2021.

“May naglayasan ng mga investor kasi namisinterpret iyong VAT (Value Added Tax) provision ng original CREATE... iyong application ng BIR (Bureau of Internal Revenue) noong VAT,” Salceda said.

(Some investors left because of misinterpretations of the VAT provision of the CREATE law... concerning BIR’s application of the VAT.)

“We need to go through the iteration of the VAT where it occures and ensure that it is faithful to the original intention of Congress with respect to the VAT provision,” Salceda added. — DVM, GMA Integrated News