Philippines: Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act (RA 12066)

The Act introduced amendments to the provision of the NIRC of 1997 on Corporate Income Tax (CIT), Value-added Tax (VAT) and incentives to be enjoyed by a Registered Business Enterprises (RBEs), among others.

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RBEs under the Enhance Deduction Regime (EDR) will be subjected to twenty percent (20%) CIT on the RBEs taxable income derived from the registered activities during the taxable year. Prior to the amendment, the 20% tax generally applied to corporations with net taxable income not exceeding P5 million and with total assets not exceeding P100 million.

As amended, Sections 106 and 108 provide specific conditions for VAT exemptions and qualify for a zero-rating as follows:

• Importation of goods by enterprises that export at least 70% of their previous year’s annual production is VAT-exempt.
• The sale of goods and services to enterprises that export at least 70% of their previous year’s annual production is qualified for zero-rating.

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In addition, Section 295(D) of the Tax Code was also amended to provide that only activities "directly attributable" to the registered project or activity shall benefit from VAT exemption on importation and VAT zero-rating on local purchases of goods and services, regardless of the location of these enterprises. This broadens the scope of VAT incentives covering services such as janitorial, security, finance consultancy, and administrative services, including legal and accounting services.

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Reference/ Citation

Official gazette of the Republic of the Philippines

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