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CREATE bill up for Duterte’s signature

/ 05:00 PM February 03, 2021
Duterte

President Rodrigo Duterte. RICHARD MADELO/ PRESIDENTIAL PHOTO

MANILA, Philippines — The proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act now only needs the signature of President Rodrigo Duterte after Congress ratified the final version of the measure on Wednesday.

In their respective plenary sessions, the Senate and the House of Representatives ratified the bicameral conference committee report on the disagreeing provisions of Senate Bill No. 1357 and House Bill No. 4157, which are the two chamber’s own version of the CREATE bill.

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The measure seeks to reform corporate income taxes and incentives in the country.

Lower taxes 

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Under the proposed law, the corporate income tax will be immediately reduced from the current 30 percent to 20 percent for domestic corporations with total assets not exceeding P100 million, excluding land, and total net taxable income of not more than P5 million, Senator Pia Cayetano said prior to the bicam report’s ratification.

Cayetano sponsored the bill on the floor as chair of the ways and means committee chair and led the Senate contingent to the bicam.

The corporate income tax of all other corporations, meanwhile, will be lowered to 25 percent.

The bill would also lower the minimum corporate income tax (MCIT) from 2 percent to one percent effective July 2021 until June 30, 2023.

Other key provisions of the CREATE bill include:

  • One percent tax rate for Proprietary Educational Institutions and Hospitals which are non-Profit effective July 1, 2021 until June 30, 2023
  • Value-added tax (VAT) exemption threshold for socialized and low-cost housing to P2.5 million and P4.2 million for house and lot
  • VAT exemption for medicines for cancer, mental illness, tuberculosis, and kidney diseases
  • VAT-free importation and sale of COVID-19 medicines, PPEs beginning until December 31, 2023
  • Reduced preferential tax rates from 10 percent to 1 percent for non-profit hospitals and educational institutions effective July 1, 2021 to June 30, 2023.

“We ratify this unprecedented measure that will serve as our roadmap to a more sustainable future, as well as our fulfillment of the overdue reforms in the country’s tax and fiscal incentives system,” Cayetano said.

“Some 25 years ago, the first bill was filed on the rationalizing of incentives. A quarter of a century ago. We’ve come a long way since then,” she added.

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“The pandemic has changed us. It has changed the way we work, the way we live, and the way we do business. Necessarily, such an important fiscal measure would change, too,” she further said.

Cayetano said reducing corporate income tax will also enable the country to keep pace with its Southeast Asian neighbors in attracting foreign direct investments.

Fiscal incentives

According to Cayetano, the reconciled bill “remains consistent with our objective to make our fiscal incentives system more performance-based and time-bound.”

“Our new incentives package aims to attract businesses that will create more jobs for our people and bring in technologies and innovations,” she said.

“It likewise promotes inclusive growth by offering higher incentives for those that will choose to invest in the countryside, as well as in areas recovering from disasters or conflict,” she added.

The measure grants up to 17 years of incentives—including four to seven years of income tax holiday and 10 years of special corporate income tax or enhanced deductions—for exporters and for “critical” domestic market enterprises, which will be defined by the National Economic and Development Authority.

Meanwhile, it gives up to 12 years of incentives—including four to seven years of income tax holiday and five years of special corporate income tax or enhanced deductions—for other domestic market enterprises.

“CREATE would be a fulfillment of previous attempts by past administrations to rationalize and instill accountability into our tax and fiscal incentives system,” Cayetano went on.

“This will ensure that the benefits of the incentives we grant to various businesses will ricochet back to the Filipino public,” she said.

Senator Richard Gordon, however, manifested a negative vote on the bicam report.

While Gordon said he generally agreed with most of the provisions of the bill, he manifested his reservations for some of them.

“Its passage deserves congratulations on the part of everyone but we cannot vote all together at the same time,” he said.

Nevertheless, he congratulated his colleagues for their hard work on the measure’s passage.

To recall, Gordon was also the lone senator to oppose the third reading approval of the bill last November before the measure went through the bicam discussions.

He had proposed then that the Subic Bay Metropolitan Authority and other freeport zones be exempted from the coverage of CREATE. His proposal, however, was rejected.

JPV
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TAGS: Create, Nation, News, Senate, Senator Pia Cayetano
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