Department of Trade and Industry (DTI) officials said they believe the enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill into law will usher the country’s economic recovery next year.
DTU Secretary Ramon Lopez said that as the government will continue to implement its recovery plan next year, the signing the CREATE bill into law is vital as it defines the country’s future tax reform incentive regime.
Lopez said DTI believes CREATE will also be a “big boost to attract foreign investors in the country.” Many foreign investors have put their investment plans on hold as they await the final structure of incentives under the CREATE Act, he added.
“Our MSMEs will benefit the most from CREATE, as it provides for an immediate 10% reduction in corporate income tax (CIT) rate, bringing it down to 20% from 30% at present,” Lopez said during the recent Manufacturing Summit 2020.
CREATE would also give income tax holidays of four to seven years to export and domestic enterprises in activities classified as critical industries and a 5% special corporate income tax rate (SCIT) based on gross income earned, in lieu of all national and local taxes for 10 years.
In the same virtual summit, DTI Undersecretary Ceferino Rodolfo pointed out that Senate Bill 1357 has removed the nationality and export bias of giving tax perks to investors.
Under Executive Order 226, the Board of Investments (BOI) is no longer allowed to provide tax perks to foreign firms here to manufacture products for the domestic market.
“We should be able to incentivize those who are going to locate their facilities here regardless of ownership as long as (the) value adds to, and the employment will be here in the Philippines,” Rodolfo said.
He said that once enacted into law, CREATE will help in developing local supply chain networks, while giving incentives to companies which source their raw materials locally instead of importing cheap input components from elsewhere in the world. This would also help develop and boost local micro-, small, and medium enterprises, he added.
Rodolfo added that coupled with Bayanihan to Recover as One or the Bayanihan 2, the administration’s tax reform program will help in the economic recovery amid the Covid-19 pandemic.
Both the CREATE tax reform package and Bayanihan 2 were principally crafted by Albay Rep. Joey Salceda who also chairs the House Ways and Means Committee.