Gatchalian seeks to further enhance CREATE Act

MANILA, Philippines — Senator Sherwin Gatchalian on Thursday sought to amend the unclear provisions of the Corporate Recovery and Tax Incentives for Enterprises, or the CREATE Act.

During the Senate committee hearing on ways and means, Gatchalian said that the changes will address concerns such as lack of clarity and inconsistency in the measure’s implementing rules and regulations (IRR).

READ: Duterte signs CREATE bill into law

“The intention here is to further enhance CREATE Act. I’m of the opinion that CREATE MORE should enhance CREATE, clarify CREATE, and improve CREATE but not go back to the old regime. The top complaint of these investors is we keep on changing,” Gatchalian said in his opening speech.

He was referring to Senate Bill No. 2654, or an Act Enhancing Philippine Tax Incentives (CREATE More), which Gatchalian himself proposed.

Three years after the CREATE law was passed, he noted that its IRR has resulted in ambiguity on the tax liabilities of registered business enterprises (RBEs).

He stressed that one of the major issues in the implementation of the law is the entitlement to the VAT-zero rating on the local purchases incentive, which requires the taxpayer to prove that their purchases are “directly and exclusively” used in their registered activities.

READ: House, Senate approve corporate tax breaks

Another issue discussed was the denial of a request to allow RBEs in the information technology and business process management sectors to shift to a work-from-home arrangement.

Gatchalian added that corporations are facing delays in receiving their VAT refunds, prompting some companies to consider pulling out of the market.

Last February 2021, both the Senate and the House of Representatives ratified the CREATE law, which was aimed at giving companies a “much needed tax break” by lowering the corporate income tax, after the two chambers agreed on a consensus version.

It was signed into law by former President Rodrigo Duterte on March 27, 2021.