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    CREATE

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    30 views59 pages

    CREATE Briefing With Vetoed Provisions

    Uploaded by

    grace
    CREATE

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 59
    Deloitte. ite alge U er Legislative history 12 26 November - Senate approved on shrd and ina reading the create oi “214 December - House formes a conference committee and ‘sented conferees ‘2 30 January ~Blcam concludes deliberations on CREAT bill (203 February House of Representatives and Senate ratified the (CREATE bil (924 February ~ Enole bil transmitted tothe Ofce ofthe Present 1226 March~ Signed nt aw (Republic Act 11534) wit ne (227 March ~Publshes in Business Mitra, effective on 11 Apr Extension of ITR filing for corporations Genes tre | ae nm = BIR to extend ITR filing deadline for companies April deadline of ITR filing stays despite extended quarantine, delayed CREATE passage en oer epee Frey et o0ee BIR urged: Extend income tax filing ceacing to May ele amid new lockdown ps Ae cpr Corporate Income Tax Reforms Corporate income tax reforms Reduction in corporat income tax rates 1 Domestic corporations -Eecive 1 ly 2020, domestic ‘corporations with taal assets no exceeding P100 milion and net ‘arable income of PS millon an beiow wl be subject to 20% tax {3nd 25% tox fr other comes corpertions 2. Resident foreign corporations» 30% to 25%, fective 1 July 2020, 3. Nonresident foreign corporations ~ 307% 10 25% elective January 2021 + Toral assets excludes the land on which the particular business ‘enty’s ofc, plant, and equipment ar shuated during the taxable yea for which the toxis imposed ‘Corporate income Tax Rate 0 2s v country Corporate income tax rate (1997 - CREATE) oa » —_ g — RA9337 i mi ¥ 29 NK ra . i. zh 8 creare » Corporate income tax reforms ‘Section 27, Rates of income Tox an Domestic Comocation ~ “(A) n General.~ Except as otherwise provided in this Code, an income tax rate of twenty ive percent (25%) effecve July 2, 202016 hereby imposed upon the taxable come cewee dating each taxable year fom all sources within ane without te Philpines by every corporation, a defined in Section 22(8) of his Code anc arabe under {his Tile 32» corporat, orgaize ho existing under she Ws ofthe Prilgpines “Provided, that corporations with net taable income not exceeding Five milan pesos (5,000,000 0) an with total assets rot exceeding One hundred milion gesos{?100,000,000.00), excluding lnc on whic zhe partcusr business tenis office, pant and equipment are stuates during the txabe year fr which the tax s imposed, shall be taxed twenty percent (20%, Inthe case of corporations adontine the fiscaLyeor accountng period, the arable income shal be computed wit ‘regard t the apeife cate when spectic sles, purchases and othe transactons occur Theirincome and expenses farthe fecal year shall be deemed to have been earned and epent equally or each month ofthe oslo, “he corporate income tax rate shall be applied onthe smourt computes by mulipving the numberof months he new rte within the fica yearby the taxable income of he orporstion forthe period, cd ‘eive Corporate income tax reforms fxperence with changes in taxrate 2005: 84.9537 eased the corporate ncometax ate rom 52% t0 35% efetve November 2005 C16 2006-0 the cmputation of he tnble nee, hare Should no rear othe cates ofthe vansactons win ze {Glenda yeas The nzame and expenses othe yea hall be onsidered earned and spent equal fr each month or peri Income taxa Titec nme oferty SAMPLE COMPUTATION: Keorporaton nas an income fr calendar ye" 2005, ‘oF P2000. The income tax due or 200 shale computed flows “ex due for 2005 fortress Corporate income tax reforms SAMPLE COMPUTATION: If2 corporation is under fiscal year accounting Perod (Apr 2005 to March 2006), the income tax fr Fszl year 2005 Sha be computed sfllows if the taxable income forthe year's 109,000, reocon.oax7 . 3% Piges6.7 100.000 05 s 3% masa 2 “ax for fac year 205 bore anyone fortaccredse ‘aol 2005 to October 2005 = 7 months Corporate income tax reforms Adjstmentin the Interest expense arbitrage ate Duet the gradual reduction in IT ate, Interest atoitage shal be recuces 19 20% Current interest expense arbitrage: CTT Rate 30} - FAT Rate (20) Cr ate (30) Interest expense arbitrage under CREATE Cr Rate 25) -FWT Rate (20) = 20% rT te 25) Corporate income tax reforms + Temporary lowering ofthe minimum corporate Income tax (MCT from 2% to 1%, effective LJuly 2020 0 30 June 2023, + Proprietary educational institutions and hospitals wil be subject to lower corporate income tax from 10% 018 from 1 July 2020 t030 une 2023 + The 10% preferential tax on retlonal operating headquarters (RONG) small continue upto 31 December 2021, Starting January 2022, ROHOS shal be subject o regular corporate income tax + emovalof the 105 preferential taxrate on income of Ofsnore Banking Unis (083Us) Corporate income tax reforms Regional Operating Headquarters (ROHQ) CREATE [Section 17(b)] (@) Thoprevcins ofthe flowing lame, neluding he tex incentives, that are ioconsistent with this Act are hereby repealed: ) Articles: 40,41, 42, 61,62 68,6 series of 1987, of 1987, as amended by Tepale Act amended by Republic Act No. 8156; © D), B,D, @), Ly and 61 of Bxecutive Order No. 226, Executive Order No. 226, INCENTIVES TO THE REGIONAL HEADQUARTERS. Article 63. Exemption from Income Tax. Regional or area headquarters estblsned inthe Philnpines by muttnational Corporations and which Neadguarters do not eatn or dive income from the Philippines and which act as supervisory, communications and coordinating center for their afte, Subsiaiaries, or branches inthe Ask Pcie Regional shall not be subject to income ax, ‘Article 64. Exerption from Contractor's Tax The regional or area headquarters establshed Inthe Philppines by rukinaional corporations, incusing their alien executives, ae exempted rom the contractor's ta ‘ticle 65. Exemstion from all Kinds of Local Licenses Fees, Dues, The regional or area headquarters of multinational companies shall be exert from all kinds of local eens, fees, dues, imposts or any other local taxes or burdens. Corporate income tax reforms — Offshore Banking Units (OBUs) CREATE Tax Code (Prior to CREATE) eapcREs Bh ate af monme tx on Porton Si sean anf Canes (rane i Coane SHS atl umm saroamaeomeni oats 22a een aes franc dpe Bd onset Sc EBC ed SpE aaa Sgt pe Selman ec hte Poo a each Semon a tg a ort ‘hecho ae ut rnin bac abcan Sapo Monmepreeprmento rman ronnoecentaee See oeeeioewerreeres Eee ee ee ‘Sele wr pose nal go eae ed ep ae ened» re ieee Corporate income tax reforms + Repeal ofthe 10% improperly accumulated earrings ‘ax (iAET) + Additonal deduction of of labor taining expense (outnot to exceed 10% of direct labor wage) or sls evelopment of enterprse-based trainees enrolled in public senio high choos, publichigher educational Institutions, or aublicteemnical and vocational institutions duly covered by an apprenticeship agreement and certified by the echnical Education and Sells Development Authority (TESDAY, the CCommissan on higher Ecucation (CHEDI, 0° ‘he Department of Education (De9=<) + Inclusion of Home Development Mutual Fund (HOME) inthe Ist of tacexempt government-owned and -cantraleg corporations (GOCCs), agencies, and instrumentalies + Inclusion of “one person corporation” in the afintion of corporation Reforms on taxation of passive income Reforms on taxation of passive income ‘Taxexemption of foreign-sourced dividends = Domestic corporation holds directly at least 20% of the Current tox veotment ‘outstanding shares of the foreign corporation and hele the shareholdings or 2 minmum af swo years rom Forelgn-souced dividends received bya domestic time of didend detrbution corporation are included as part of taable income subject to reuiar income tax. Any tax imposed on the foreign- ‘ured dividend is alowed astax rect against, Philippine income tax payable of domestic eorporation subject te conditions and limitations Tox Treatment under CREATE + Foreign sourced dividends shal be exempt fom a4 subjet to the following conditions: ~ Foreign sourced dvdends are reinvested inthe business operations ofa domestic eorporation| within the net taxable year from te time the ‘eveign sourced dvicends were recewee — Dividene fund sal be used o fund working capital capital expenstures, nrastucure projects, investment in domestic subsiianies and Gividend payments Reforms on taxation of passive income ‘aon gains on sale of shares of stock ot listed and traded he stockexchange and final withholding taxon intrest neome on forelgn currency bank depos + Exemtion from tax of Phippine Charity Sweepstakes Office (CSO) game winnings not exceeding 71000, + Replaced the two-tiered rates of 5% and 10% taxon received by 3 nonresident alien india! ‘he sal, tafe, oF exchange a shares of tock not ‘waded inthe stock exchange by rsien: end nonresident foreign corporations (NRCS) with a fied rate of 1586 + Increased the final withholding taxon incest income erved by resident foreign corporations fom foreign currency depests rom 7.5% 9 15% “Tyoe of corporation Corporation Comoran ~, Rationale: To adres the inequity inthe tx treatment of fans on he sale of shares of stock rat liste and raced in the local stock exchange, nd fal withholding tax on fore gn cureney bank depois between domestic and foreign corporations due te TRAIN au, Summary of corporate income tax reform measures with retroactive effect and/or specific effectivity or period of duration Reduction fom 305 to 25% of corporate income tax appliable to July 2020 domestic corporations and resident foreign corporations eduction rom 20% to 25% of tax on income of non-resident foreign 2 January 2022 corporations Reduced MII rom 2% 10 1% (01 Ju 2020 t0 30 June 2023 oy Lowering of tax on proprietary educational institutions and hospitels 01 Jly 2020 0:30 une 2023 from 10% to 1% Imposition of regular corporate income taxon income of ROHOs 01 January 2022 CREATE Disclosure in the AFS Philippine interpretations Committee: cv20205S + cument and deferred tanes fr FS reporting purposes wil sti be measured using the appiable income tax rates a of 31 December 2020 since the CREATE bil was not yet enacted / substantively enactes as of such date there wil be eilerence between the provision for curren income tax per CY2020 FS an the amount of income tax due per 7202018), + the CREATE bili enacted prior t0€12020 audited FS issue date and before the actual fling ofthe C¥2020 TR ths sano ‘sjusting even but significant effects of enanges in tox ates on ‘current anc cefere tax aeets anc lain should be diclosed {Companies in tis ease wl have to compute fr current and defered tomes based on adjusted tax rates to determine the impact ofthe change ine aerate}, frame: APS issued on 5 Apt 2021, Ifthe CREATE bills enacted ater the C2070 audted FSissve date bu before the actual fling ofthe 12020 TR, this no longer subsequent ever, but companies may consider dsciosing the general ey Features ofthe proposed bllans the ‘expected impact in its audited FS ample: APS issued on 20 March 202 CREATE Disclosure in the AFS cv2021 5 + PAS 12 provides that components of tax expense income) mey include “any _adjustmants recognized in the period for current tx of prior periods” anc “the “amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes", among others (PAS 12.80.8 and PAS 12.80), [An explanation of changes inthe applicable tx rates) compared tothe previous accounting perio i also requirecto be disclosed, (PAS 12.81.4) Hence, the provision for current income tax for CY2021 will include the diference between income tax per C¥2020 FS and C¥2020 TR (since the latter wil not be taken up in the CY2020 FS ane thus be taken up inthe C¥2021 FS} + Deferred taxassets and Iablites as 031 December 2021 willbe remeasured using the new sax ates, The impact of remeasurement is recogn zed in roti oF loss (i.e, provision forfoeneft from deferred income ax, unlessit can be recognized in otner comprenensive near or another equity account as provided forin PAS 12.610, + Any movement in deferred taxes arising from the change in tax rates that will form part af the provision for/oenefit from defered taxes willbe included as well in the effective tax rate reconciliation. Value-added tax and percentage tax reforms Value-added tax and percentage tax reforms + Reduetion of percentage tax for non- VAT taxpayers from 2% t9 1% fora period of three year staring 1 ly 2020030 June 2023 pact: 1. Many ndviuals engaged in business andlor practice ‘of pression are curently aang of 8% tax, which s in ie ofthe income tox anc percentage tax, 2nd therefore, wll ot bene from the redution of percentage tx. 2, Only those which opted to he subject to regular income taxand hence, subject alo to percentage tax ‘wil bane from she recuction to 1% of the percentage 4. Reduction in percentage tx from 3810 1% may not be sucent fo ence those avoing of 85 tax to shift to graduated income tax Value-added tax and percentage tax reforms (COVID-19 Related Tax Relies + Sxemation from impor duties, taxes, nd other fees of imported CCOVID-18 vaccines approve ane eens bythe Department af Health [Dot and the Face ang Drug Adminstration (FA) + Sxemation from VAT starting 1 January 2021 t0 31 December 2023 cf te following Capital equipment is spare parts, an raw materials necessary forthe precucton of personal protective equipment components such as cover, gown, surgical ca, sugial mask, N'95 mask scrub sus, goggles, and fae shield, double cr sugia gloves, deceated shoes, and snoe covers, for COVID- 18 prevention Al drugs, vaccines, anc mesical devices specially prescribed an dvectly use for the weatmeat of COvID-28 — rugs for the treatment of COVID-19 aparoved by the FDA for use clinical vials including aw materals directly necessary forthe preeueton ef such ous Value-added tax and percentage tax reforms VAT exemption of publications, medicines and crude il, + Exemption from VAT of ale or importation of dgtal or electronic easing materials (ncatig journal nd a feduetional reading materials covered by the UNESCO “=e agreement on the importation of education, & scenic, and cultural rates) + Gxemation fom VAT of ale or importation of medicines for cancer, mental ines, tuberculss, and Kidney ceeaes, effective 1 January 2023 stead of 2 January 2023} + cruge oll tacisimtenced tobe ene at a ees) refinery, including the volumes that are lst and nat converted to petroleum products when the crude il actually undergoes the refining proces, shal be exempt fom payment of applieabieeutes an taxes Other reform measures Other reform measures ‘Tax exemption of transactions under Section 40(C)(2) + Canis the types of reorganizations covered by tae free exchanges under Section 40{C(2}, whien shall incl the folowing caution by a corporation of stock of another corporation in exchange for shares, immediately after te acquiston, the acquiring corporation had ‘control ofthe acquited corporation ‘gulsion bya corporation n exchange for shares of substantily lof the posertes of anther corporation Recapitalzation Reincorporaton Noor BIR canfrmation of tax ruling willbe required to wal of exemption, Cafes that in determining the presence of “contol the colectve and not the Inaividual ownership of alleasses of stocks ented to vole of the transferor or ransfeors shal be used others Submislon of tax related information tothe Department a Finance - The BIR, upon the order ofthe Secretary of Finance, shal furnish he Secretary pertinent informacion on ents recehng ncentives Unde the Tx Cade provided thatthe Secretary and the relevant officers hansling such speci information Salle covered by the proisions of Section 270 unless ‘he taxpayer consentsin wring sch disclosure, ‘Mandates the Department of Finance to review fence every three years the regulations and processes for he withholding of eredtable ‘thong tx Fiscal incentives reforms Fiscal incentive reforms ‘Tax incentives for registered enterprises under CREATE. 2 Income taxincentives Income tax holiday (67) ane 5% special corporate income tax or enhanced Seductions under Regus’ Coxporate income Tax(S 10 year) ‘The 5% special corporate income tax (CI) shall be based ‘on rossineome, and in iu of nations and ea tees Sharing of ISU an investment promotion agencies (185) under special laws stall be observed 2 \aTandothertaxincentves VAT exempion on impartation and VAT 2er-ating on local purchases of goods ad series drectiy and cexcusivly used inthe registered projector acy by ‘ea\stered business enterprises iacated inside an economic one a free port Duty exetion on importation af eaptal equipment, ‘aw materials, spare parts or accessories Fiscal incentive reforms Ls of enhanced deductions Depreciation allowance aditional 10% for bulings and 20% for mach nries and equioment 50% addtional deduction on labor expense 200% adatonal deduction an research and development 200% adatonal deduction on traning 50% addtional deduction on domestic input expense 50% deduction on power expense ‘50% deduction for ranvesiment allowance to ‘manufacturing enterrse Net operating lsses carryover {NOLO} curing the fist tyes years fom start of commercial operations may be carried forward wih the next five years flowing the year af ss Fiscal incentive reforms ‘Qualifications of Registered Business Enterprises — Engage ina project or acts incuded in the Strategie Investmen: Prony Pian Meet the target performance metric after the agreed tine period ~ Install adequate accountng system capable ofidentiving Investments, revenues, coss and profs of each registered projector actvey Comaly withthe e-eceipting and esses requirement Submit annual reports ofthe beneficial ownership ofthe lorgenestion and este paris, Section 237, Tax Code within five (5) years from the effectivity ofthis Act and upon the establishment ofa system capable of storing and processing the required data, the Bureau shal require taxpayers engaged inthe ‘export of goods and services, taxpayers engaged in e-commerce, and taxpayers under the jurisdiction ofthe Large Taxpayers Service to isue electronic receipts or sales or commercial invoices in leu of ‘manual receipts or sales or commercial invoices, subject to rules and regulations tobe isued by the Secretary of Finance upon ‘recommendation of the Commissioner and aftr a public hearing shall ave been held for this purpose The Manila Times! DoF eyes to start e-invoicing system pilot project in 2021 Fiscal incentive reforms ‘oualiicatons of Repltered Susness Encerprises Categories of Riseed Busines Enterprises and Tax icenives — Engage ina project or acts incuded in the Strategie 1. Bapor enterprises Investmene Prony lan Por emere Income tax holiday (4-7 years, depending on locaton and inust'y Meet the target performance metric after the agreed tine Priore}, and period 15% special corporate income tax or enhanced deductions for 10 ~ Install adequate accountng system capable ofdentiying vears eeceatve costs and profs of gach repsterse ‘At the option of export enterprise the special income tax rate or fnhanced deduction shall be granted ~~ Comply with the e-receipting and e-sales requirement 2. Domestic enterprises under Strategie Investment Priority Pan (si Submit annual reports ofthe beneficial ownership ofthe aa lorpization and elated partis Income tx holiday (47 years, depencing on locaton and industry Priore), and nanced decuctons fr five (8) years + An export enterpnis isan entity engaged m manufacturing, essembng or processing act, ona series such as information rechalogy (I acories Gard business process outsourcing (BPO), and resulting inthe direct exportation, and/or sole of its manufactured, assembled or processed product oF /BP0 serees to another registered export entergnse that wil frm part of the final export product or export sence ofthe later, af atleast seventy percent (70%) of ts total production or output. Fiscal incentives reforms ‘Summary of income tax incentives for registered enterprises under CREATE 1. Export Enterprise a7 10 2. Domestic Enterprise a7 Not available Fiscal incentive reforms + strategic investment Priority Plan (IPP) —sts the priory project or actives Incudae in the Priippine Development Plan, taking into account, among ote, ‘the amount of investments; generation of employment: Use of moder, advance ar new technology, and promotion of market comsetveress. +The iP shall be formulated by he Board of Investment (0) 19 coordination withthe Fiscal Incentives Review Boar, Investment Promotion ‘Agencies, ard ther government agencies administering tax incentives, and private sector an approved by the President. ‘he SPP wali fora period of thee years, subject to review and emendment every tree years treater, + Priority projects or acts shall be erouped according tothe National Industry Strategy in terms ef location and industry ers Location of the Projeet/activty 1, National apt Region 2 Metropolitan aeas er areas contiguous and adjacent tthe atonal Cptal Region 3 later areas Metropolitan areas refer to Metro Cebu and Metro Davao or loal {government units which at ater qualfied o° grouped as such by ‘the National Economic and Development Authonty (NED) or "rough laws or executive Suances, Fiscal incentive reforms + indus ers Ter incudes atte that) have high potenti fries treacon (2 tate place nsectors wth raat ales esting in Under previon of ase gods ana sence (3) generate alot treaton through novation, upgrading or mown up the value ‘has prowde essential suppr: for sectors tha te ete! 1o industria eveloprene or (5) ae emerging owing potent compare average includes acts that produce supplies, parts and Component, aa intermediate services that ae not ely produce or manulactred out are eral onus fleveopment and impor svossutig acti, nudge raining. = Hert ncuces: 1) research 4 development esting demonstaiy sana value ade, higher prosutiaty, Improves eflercy, eaktroupns science and hea, and high-paying jobs 2 gereation af ne evomleage and inelctua propery repstered andor ieense inthe Pliopines 3) commerciazaton of pater, ncustal desns, copra on uty mode's ores or co-owred 23 ‘epsores buses nterpie (hen teens ‘ranutacurng of (5) arectieltothe tutu ‘ansformatin ofthe economy ani requiesbstaval atch one Fiscal incentive reforms ‘Duration of taxincentves based on locaton and industy tiers For exporters For domestic enterpses Lecatien/indstryTies Tie er_—_Tiertt Location/ndustryTers Tier! Teri Teri! National Capa Region 41TH +10, SiTH6I0 6TH a0 Nationa Captal Region 4ITHeSED SMHS 6ITH 4S. eoiscir foiscir_eoyScir to fo Mevopoltanareasor STH IOEDSGT 6 mTH=10._ 7TH 10 TMelropollan aeasor SNHTSED GMS 7S. seas contiguous and Eoscr—eDySCT tresseontguonsand fo fo fcacent othe Nationa steewtne CoptalRepon Nationa Captal Region Dilother areas GI iOEDSCT 7iwed0 7iHea0 ‘alother reas gmissto mies ae eoscr esc 0 rp Fiscal incentive reforms Fiscal incentives Review Board FRB) Role Responsiiies © Brereise policy making and oversight functions onthe {asminstration and grant of ax ncenives by the investment promotion agencies © Determine the micimur contiguous areas that vertical econome rons should campy with © Conduct regular monitanng and evaluation of investments and nom inestment tax incentives nd determine thei impact onthe economy © Check and very the compliance of regstores ‘enterprises withthe terms arc conditions oftheir valent agrees target perfarmance/meties} © Aoprove or disapprove the grant of ex incentive to the extent of the registered project or ctvty upon the recommendation ofthe investment promation agencies (PA) 9 Tocancel suspend or withdraw the fiscal incentives ‘enjoyed by regstered business enterprses due a rater vltions of conditions onthe grant of tax ‘Compostin Chaiperson Secretary of France Ce-Chaiperson ~ Secretary of Trade ard Industy Members: Executive Secretary ef the Office ofthe President “Secretary of Department of Budget and Management Director General of NEDA Secretariat: Assistant Secretary of OOF and assisted bythe National Tox Research Center Fiscal incentive reforms Delegated Authority For egstered projets or activites with investment capital of PI bilion ane below, the spprova or cisspprova of tx mcentives shal be delegates by the FIRB tothe PAS More than P2 bilan — FR PaBilion ard ess PAS “Te data that was sibmiteto the DOF shows that, fom 2017 to the fs quarter ef 2013, ony 3 cut of 409 applications tothe Phippine Economie Zone Authority (PEZA} reached the PI-billon threshold, From 2015 to 202, around 27 percent of investment apnlcstions wth the Board af vestments (20 | excasced th ‘Hvesholg” he said Statement of Congressman Saleda, Chain, House Committee on \Woys and Means on the application of Pt blion threshold whieh ‘apneored in the 16 December 2020 seve ofthe Business Mirror Fiscal incentive reforms Power ofthe President to grant incentives ‘The President may, inthe intrest of national economic evelopment and upon recommendation of FIRS, may the ‘mix, pelos or manner of avalimertofincatives for bighly esiabe projects nlung 9 min um investment capital of 50 tilion pesos, ar minimum dress local emsloyment generation of at least 19,000 within thre year fom the 'ssuance of certfcate of enstiement Transition rules Fiscal incentive reforms ‘Transition rules under Section 311 for existing enterprises enjoying taxincentives (either under ITH or 5% gross income taxregime) 1. sting estore business enterprises uncer ITH ony [eetion 321) ready under ITH ~ Continue to aval of TH ual remaining IT period per repstration agreement — Emiied but have not avaied of TH Use TH or the peo per reistaton agreement 2, Regltered business enterprises granted ITH but entitled to 58 ‘rons ncome ta (Section 33318) Complete under egstration agreement and aftr ITH, va (0 5% fora perio of 20 years under Section 321(C) 3, Existing registered business enterpeses under 53 ross ncome 1 [Section 321(0) “on years ransion perio, regardless of umber af years under SGT. Fiscal incentive reforms What's next after the expiration ofthe transition period _Mterexsiation ofthe transitory pio unde ectin 311) ‘he export enterprises repstere prior othe ect of CREATE shall nae the otto apply an aaa the tax Incentives uncer Secon 2341 forthe sare sred under ‘ths Secion sujet othe canons an qua iealons Set, fortninthe SP®[Seevon 2960) ‘See 38110 = Reitered bsnees enterprises cently ang ofthe fe percent (5) taxon gross income earned granted orto the effect of ths Act shal be alowed continue Sling he sid ox incentive thera five peeent (55) forten 0) yess ‘Section 2848) Special Corporate nce Tax (SCI rate for ‘export enterprise a tax at equivalent ove percent (SX) ‘ectve ly, 2020, based onthe gross income eared in ‘iw of national and oc! es Fiscal incentive reforms 4. TH only (322(4)) 2. Under ITH but entitled to 59 GIT ITH > 5% SEIT (10 years) ——— > ir (a18)) 3. Under 5% SCI [Transition under Section _$% GIT (10 years) ~~--—-> 5% SCITIS or 10 years} cit 321{C} plus re-application under Section (Re-appiy) 2968) Fiscal incentive reforms Expansion or new project of exiting registered enterprises Section 2968) Export enterprises (ald expansion o ently ‘ew projec °actvty) Evitingreistered projects or actties prior to the effectivity ofthis ‘ct may quay to register and ava of te incentives granted under this At for the prescribed period, subject othe erterla and candit.ons set forth inthe Sate Investment Prony Pan Section 295 (8) Domestic market enterprise Exiting registered projects or actos prior tote effectivity ofthis ‘et may quay to Falster and aval ofthe incentives granted under this Act fo the prescribed period, subject tothe erteria and conditions set fort inte Srategle vestment Prony Pn. Aelocated projects of existing registered enterprises Section 296 Projects or activites pra tothe efecity ofthe Ac, or under the Incentive system provided here that shal, nthe curation of thei Incentives, completely relocate rom the National Cpital Region, shall be entitled 0 three atonal years af income fax holiday, prowded ‘hat the adiional incentive shall commence atthe completion ofthe relocation of operations VETOED provisions 1. VAT onsale of residential house and lot and other dwellings (©) Sale of real properties nat primarily helé fr sale to Customers or hele fr lease inthe ordinary course of trade or business or real property utiles fr low-cost and socialized housing as defined by Republic Act No. 7278, otherwise known as the Urban Development and Housing Act of 1982, and other related laws, residential lot valued at One milion five hundred thousand pesos °1,500,000) and below, house and lot, and other residential dwellings valued at Two milion five hundred thousand pesos (P2,500,000) anc velow: Provided, that beginning January 1, 2022, the VAT exemption shall only appy to sale of real properties not primariy held ‘or sale to customers or hes for lease in the ordinary course of trade or business, sale of real property utlzed for socialized housing as defined by Republic Act No. 7279, sale cot house and lat, and other residential dwelings with seling ‘rice of not more than Two milion pesos (92,000,000) Provided, further, That every three (3) years thereafer, the amount herein stated shal be adjusted to its present value Using the Consumer Price Index, 2s published by the Philippine Statsties Authority (PSA) Currently, the VAT threshold as Implemented is 3,919,500 for residential lot and P3,199,200 ‘or residential nouse and lator other residential cwelings. 1,919,500 vs F2,500,000 3,199,200 vs P4,200,000 Fiscal incentive reforms SE CE [impact | 2, 0-day period to refund erroneously pad taxes {C) Creditor refune taves erronecusy or illegally received or penaltiesimposed without authority, refund the value of internal revenue stamps wien ‘they re returned in good condition by the purchaser, and, nis elscretion, redeem or change unusee stamps that have been rendered unfit for use and refund their value upon proof of destruction. No creditor refund of taxes er penalties sll be alowed unless the taxpayer les in writing withthe ‘Commissioner a claim for credit or refund within two {2} years ater the payment ofthe tax or penay Provide, however, That 2 return filed showing 3n ‘overpayment shall be consideredas 2 writen lim for erect or refund {6}. Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are retured in good condition by the purchaser, and, in his discretion, redeem or change unused stamps ‘that have been rendered unfit for use and refund ther value upon proof of destruction, No creditor efund of taxes or penaties smal bbe allowed unless the taxpayer fs in writing with the Commissioner a claim fr eect or refund within two (2) years after the payment ofthe tax or penalty: Provided, however, That a return fled showing an overpayment shall be considered as @ writen cai for credit oF refund. Provided-further-That-n-proper-cases-the Currently, there is 290- day aracessng pring for VAT refund claims on excessunutilzed input Vat atrioutable to 2er0- ‘ted sales under the fenhanees refund VAT system. This equires Feview of numerous ocuments, Refund of erroneously ald taxes requires less Feview of documents but 80-day period to arocess valine apply due to vero Fiscal incentive reforms SET CE [impact | '3._ Definition of nvestment capital which excludes valve of land and working capital {) Investment Capital refers to the value of investment indicated in Piippine currency, exuding the value of land and working capital that shall be used to carry out a registered project or actvty, except that land shall be Included a5 investment capital for restered real estate development. Investment capital may include the cost of land improvements, buldings, leasehold improvements, machinery and equipment, and other noncurrent tangible assets sting PAs wll Cetermine the scale of an investment which wl Include land ane ‘operating expenses from the measure of total Inverement’s total scale Fiscal incentive reforms SET Ee 4, Taxincentives to domestic enterprises SEC. 294, Incentives. - Subject to the conditions anc period of avalment in Sections 295 anc 296, respectively, the following types of tax incentives may be granted to registeres projects or actives 1) Income Tex Holiday (TH), {8} Special Corporate Income Tax (SCIT) rate - For ‘export enterprise, domestic market enterprise with @ minimum investment capital of Five hundred milion esos (P500,000,000.00), ané domestic market enterprise under the strates investment prionty plan engaged in activities that are classified as “ertical’ a tax rate equvalent to five percent (5%) cffecve July 1, 2020, based on the gross income ‘eared, inlieu of al national andocal taxes. ‘The domestic martet enterprise under the strategic investment prirty plan engaged in activities that are classifiee as “rial” shal refer to those enterprises belonging to incustries ents by the national leconoricand development authority tobe crucial to national development SEC, 296, Incentives. ~ subject to the conditions and peri of avalment in Sections 295 and 296 respectively, the following types of tax incentives may be granted to registered projects or activities: {A Income Tax Holi (TH); (8) Special Corporate Income Tax (SIT) rate - For export lenterorse, domestic mart enterprse-wth-2-inumum “vesten capital of ive —hundead—mbion pesos 9500,600,000-00},—and domestic market enterprise cone the sategie vestonen rot pan engaged 9 _aeovtog that_arecassiieg_asentieale a tax rate equivalent to five percent (5%) effective July 2, 2020, based onthe gross income earned, in eu ofall national and local taxes, Limits the tax incentives avaliable to domestic enterprises to Income Tax Holiday and Ennanced Deductions. eto removes the 5% special corporate income tax(SCIT option ‘astaxincentive to domestic enterprises, Fiscal incentive reforms ENROLLED Ee Sec. 294 {€) Enhanced Deductions (ED) - For export enterorise, domestic market enterprise, and critical domestic market enterprise, te following may be allowed as deductions SEC. 295. Conditions of Avaliment. ~The tax incentives in the preceding section shall be governed by the following ules {A) The income tax holiday shal be flowed by the special corporate income tax rate or enhanced deductions; {8} At the option ofthe export enterprise, the domestic market enterprise witha minimum investment capital of Five hundred millon pesos {P500,000,000 0}, and the domestic market ‘enterprise engaged in activities that ae classified as “ert, the special corporate income tax rate or ‘enhanced deductions shall be granted: Provided, That inna case shall he enhanced deductions be erantes ‘simultaneously with the special corporate income tx. SEC. 294 {) Enhanced Deductions (£D)- For expor enterprise, domestic market enterprise, and erties! domestic art enterprise, the following may be alowed as deductions SEC, 295. Conditions of Avaiiment. ~The tax incentives in the preceding section small be governed by the folowing rules (8) The income tax holiday stall be followed by the special corporate income tax rate or enhanced eduction; (8) At the option ofthe export enterprise, shedomestie -smerkat-enterprisewitha minimuminvestmentcaptalot _Bvehurieed milion pesos{#500.000,000.00) ane the ‘omnesie marke enieynise engagew arias 5 ae -lassifed-asenteak the special corporate income tax ‘ate or enhanced deductions shall be granted: Provided, ‘That inno ease shall the enhanced deduction be granted simultaneously with the special coroorate income tax. Fiscal incentive reforms SEE CE int | ‘SEC. 296, Period of Avallment. ~The period of avament of incentive by the repstered business enterprise shall be 35 follows: (A) For export enterprise and fer domestic market ‘enterprise under the strategic investment prionty lan engaged in activities that are asifieg as “rica: Income Tex Holiday of four (@ to seven {7} years depending on location ane industry priorities as pectic in ths Section, anc followed by Specal Corporate Income Tax rate or Enhanced Deductions fr ten (10) yeas (8) For domestic mares enterprise under the Strategic investment Priority Plan not cassified ‘as crtial, Income Tax Holiday fr four (6) to Seven (7} years fllowed by Special Corporate Income Tax or Enhances Deductions fr five (5) years; Provided, That only domestic market ‘enterprise, which hasan westment capital of not less than Five hundred milion pesos (500,000,000.00, stall be eigise fr the ‘Special Corporate Income Taxrate For exporters and eritial domestic market activities SEC. 296, Period of Availment. — The period of avaliment of incentive by the registered business enterprse stallbe as flows: (8) For export enterprise endfor demastc market etergrise—inda—thesestagee investment ‘rioty_plan-—engagedn-actirties-that-are classiied-as “cates: Income Tax Holiday of four (4) to seven (7) years cepending on location and industry priorities as spectied in this Secton, an followed by Special Corporate Income Tax rate or Enhanced Deductions for ten (10) years (8) For domestic market enterorise under the Strategic Investment Priority Plan net assed ‘seaptea, Income Tax Holiday for four (4) 0 seven (7) years followed by Spacial-Corporate ‘ncome-an-oe Enhanced Deductions for fie (5) years; 2rowded—taetonly-domestie-mardet Tene nee a nent ‘ot_teer_ thon five _sundres-midon pesos (eseeceec00-c}, shall be eligible for the Special Corporate Income Tax ate Fo" exporters ana catia domestic marae actives ENROLLED BILL CREATE Vetoed provision int | 5. Allowing exsting registered enterprises to apaly for new taxincentives [Sec 296 (A) and (8)} ‘qualified expansion or entirely new projector activty registeres under this Act may qualify to avail fof anew set of incentives and is perod of availmert, {ranted under Sections 294 and 296 of this Act, respectively, subject to the qualifications set forth in the strategic investment priory plan anc performance review by the Fiscal Incentives Review ‘Bard: Provided, That esting registered projects or actives prior tothe effectivity ofthis act may qual fy tereg'ster and aval ofthe ncentives granted unéer this Act forthe prescribed period, subject tothe criters and cnitions eat forts in the Strategic Investment Priority Pian; | qualfied expansion or entirely new project or activity registered under thi Act may qualify to aval of a-newsel-of incentives and—tepeied of avaliment,granted-under Sections 294 and-296-of ‘is Aetsespectivey subject to the qualfiations set forth in the strategic imvestment priory plan and performance review by the Fiscal Incentives Review Board: Provided, That existing registered projects or activities prior to the effectivity of this act may qually ‘tw register and aval ofthe Incentives granted under this Act for the prescribed period, subject to the itera and conditions set forth in the Strategic Investment Prirt Plan; VETO Message ‘Allowing adeltional 14to 17 years of incentives and anather 0-year ‘extension forthe sare actity ontop ‘ofthe original period of incentives _avallment i scaly irresponsible and Uunfaic to the ordinary taxpayer and to Unincentivized enterprises EIT Eo CCOMMENTS/IMPACT SEC. 296 (8) ‘The peri of avaiment of the foregoingincentives shall commence from the actual start of commercial ‘operations with the registered business enterprise avaling ofthe tax incentives within thre (3) years ‘rom the date of regstration, unless atherwtse provided inte Strategic ivestment rity Pian and its corresponding guidelines: Provided, That after the ‘expiration ofthe transitory period under Section 311(C), export enterprises registered prir tothe effectivity ofthis Act shal have tne option to reapoly and avalof the incentives grates uncer Section 234{8) forthe same period provided under this Section, and may til be extended for 3 certain period ‘not exceeding ten (10) years at any onetime, subject to the conditions and qualfictions st ferth n the Strategic Investment iolty Plan and performance review by the Fiscal incentives Review Boar. “The period of aviiment of the foregoing incentives shall commence fram the actual start of commercal fperations with the registered business enterprise avaling of the tax incentives within three (3) years from the date of reglsttation, unless otherwise provided in the Strategic Investment Priority Plan and its corresponding. guideines: Provided, That fer the expiration of the transitory peried under Section 2:1(C), export enterprises repisteree pri to the effectivity of this Act shall ave the option to reapoly and aval of the incentives granted under Section 294(8) for the same period provided under this Section, ane-may-silt-be extended forscertan ee Subject to the conditions ané qualifications set forth in the Strategic Investment Priorty Plan and performance review by the Fiscal Incentives Review Board ENROLLED BILL (CREATE) (CREATE VETOED PROVISION ‘COMMENT/IMPACT Section 294(8) Provided, That the National Government share shall be te perce: (3%) ofthe gross income earned efecive July 1, 2020: Provided, further, That, if applicable, the {hates of the Local Government Units andthe investment Promaton Agences under the spect aws governing the latter shall be observed and shall rot ‘esutin the ciminution oftheir expec shares Provided nay, That the share of te local government unit which hs juristetion over the place ofthe registred activity of regsteed business enterose ‘outside ecozones and freeports shal be two percent (2%) and shall be directly remitted by the registered Business enterprise to such Local Government Units Provided, That the-Nationat-Government

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