11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

EVERYTHING YOU NEED TO KNOW ABOUT CREATE ACT IN THE PHILIPPINES

Home  Legal Articles 
Everything You Need to Know About CREATE Act in the Philippines

Legal Articles
05/18/2021

Everything You Need to Know About

CREATE Act in the Philippines
 ESTIMATED READ TIME: 4 MINS

What this article will cover:

Corporate Income Tax (CIT) Reforms under CREATE Act

Fiscal Incentive Reforms under CREATE Act 
Vetoed Provisions in CREATE Act

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 1/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

Republic Act (RA) No. 11534, otherwise known as the Corporate Recovery and Tax
Incentives for Enterprises (CREATE) Act was created by the Philippine Congress in
response to the COVID-19 pandemic as a fiscal relief to domestic and foreign
corporations doing business in the Philippines. It seeks to amend several provisions in
the old Tax Code, with a central focus on lowering corporate income tax rates and
rationalizing fiscal incentives to better attract local and foreign investments in the
Philippines.

President Rodrigo Duterte signed CREATE into law on March 26, 2021, with a number of
vetoed provisions. It was published in the Business Mirror on March 27 and took effect
on April 11, 2021.

Before the COVID-19 pandemic, CREATE Act was initially known as TRABAHO bill (or
Tax Reform for Attracting Better and Higher-quality Opportunities). When the bill failed
to pass Congress, it was renamed to CITIRA (or Corporate Income Tax and Incentives
Reform Act), which also failed to pass Congress because it was deemed as a non-
priority and non-urgent bill during the outbreak of COVID-19. The addition of COVID-19
related provisions propelled the passage of the bill into law.

Corporate Income Tax (CIT) Reforms under CREATE

Act
The corporate income tax (CIT) rates for domestic corporations and resident foreign
corporations (RFCs) under the CREATE Act will be reduced from the current 30% to
25%, retroactive to July 1, 2020. The CIT will be reduced further by 1% annually in the
next six years. And shall eventually reach 20% by 2027 onwards.

Summary of CIT rates and their effectivity under CREATE Act

Taxpayer Old Rate New Rate Effectivity

Domestic
30% 25% July 1, 2020
Corporations
Minimum
Corporate Income
July 1, 2020 - June
Tax (MCIT) for 2% 1%
30, 2023
Domestic
Corporations 

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 2/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

Domestic
Corporations with
Net Taxable
Income not
30% 20% July 1, 2020
exceeding ₱5M
and total assets
not exceeding
₱100M
Non-Profit
Proprietary
July 1, 2020 - June
Educational 10% 1%
30, 2023
Institutions and
Hospitals
Resident Foreign
Corporations 30% 25% July 1, 2020
(RFCs)
MCIT Resident
July 1, 2020 - June
Foreign 2% 1%
30, 2023
Corporations
Non-Resident
Foreign
30% 25% January 1, 2021
Corporations
(NRFCs)
Regional
Operating
10% 25% July 1, 2020
Headquarters
(ROHQs)

Changes on rates of certain passive income

Type of Tax Old Rate New Rate

Capital Gains Tax on 5% / 10% 15%
capital gains derived by
RFCs on sale of shares of 

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 3/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

stocks not traded in the

stock exchange
Regional Operating
7.5% 15%
Headquarters (ROHQs)

Fiscal Incentive Reforms under CREATE Act

Corporate Income Tax (CIT) Incentives
CIT incentives under CREATE Act shall include:

Income Tax Holiday (ITH) granted for a period of 4 to 7 years, followed by the
Special Corporate Income Tax Rate of 5% on gross income earned (GIE), in lieu of
all national and local taxes, or enhanced deductions (ED) for 5 or 10 years (the
incentive period varies depending on which area the registered project or activity
will be located)
Duty exemption on importation of capital equipment, raw materials, spare parts,
or accessories
VAT exemption on importation and VAT zero-rating on local purchase (partly
vetoed by the President)
The Strategic Investment Priority Plan (SIPP) shall define the coverage of the tiers
and provide the conditions for qualifying activities:
For export enterprises:

Location/Industry
Tier I Tier II Tier III
Tiers
National Capital
4 ITH + 10 ED/SCIT 5 ITH + 10 ED/SCIT 5 ITH + 10 ED/SCIT
Region (NCR)
Metropolitan areas
or areas
5 ITH + 10 ED/SCIT 6 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT
contiguous and
adjacent to NCR
All other areas 6 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT

For domestic market enterprises: 

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 4/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

Location/Industry
Tier I Tier II Tier III
Tiers
National Capital
4 ITH + 5 ED 5 ITH + 5 ED 6 ITH + 5 ED
Region (NCR)
Metropolitan areas
or areas
5 ITH + 5 ED 6 ITH + 5 ED 7 ITH + 5 ED
contiguous and
adjacent to NCR
All other areas 6 ITH + 5 ED 7 ITH + 5 ED 7 ITH + 5 ED

Transitory Provisions for Existing Registered Activities

Those granted only with an ITH prior to the effectivity of CREATE Law shall be
allowed to continue with its availment for the remaining period
Those that have been granted the ITH but have not yet availed of the incentive
upon the effectivity of the law may use the ITH for the period specified in the
terms and conditions of their registration
Those granted an ITH prior to the effectivity of the law and are entitled to 5% tax
on Gross Income Earned (GIE) shall be allowed to continue to avail of the 5% GIE
incentive for 10 years
Those availing of the 5% tax on GIE prior the effectivity of the law shall be allowed
to continue availing the said incentive for 10 years

Value-Added Tax (VAT) Exemptions

Value-Added Tax (VAT) exemptions under CREATE Act shall include:

Sale or distribution, importation, printing, or publication of any educational

material covered by the UNESCO agreement including digital and electronic
format
All drugs, vaccines, and medical devices prescribed and used for the treatment of
COVID-19
Capital equipment, its spare parts, and raw materials for the production of
personal protective equipment for COVID-19 prevention
Drugs for the treatment of COVID-19 approved by the FDA for use in clinical trials,
including raw materials directly necessary for the production of such drugs
Sale of prescription drugs and medicines for cancer, mental illness, tuberculosis,
diabetes, high cholesterol, hypertension, and kidney disease (beginning January 1,

2021 instead of January 1, 2023)
https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 5/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

Vetoed Provisions in CREATE Act

The President vetoed several provisions in the new tax law, including:

Increasing the VAT-exempt threshold on sales of real property and the adjustment
in the threshold amount every 3 years
90-day period for processing of general tax refunds, requirements in case of denial
by the Commissioner, and remedy of taxpayer in case of denial
Definition of investment capital
Domestic market enterprises’ entitlement to special corporate income tax (SCIT)
rate
Specific share of the national government and local government units in the gross
income earned using the SCIT rate
Availment of a new set of incentives and its corresponding period of availment for
qualified expansions or entirely new project or activity
Allowing export enterprises registered prior to CREATE Act to avail of further
extension of new incentives for the same activity
Exercise of power by the Fiscal Incentives Review Board (FIRB) in granting
incentives to registered projects or activities with a total investment capital of
more than ₱1B
Specific industries mentioned under activity tiers
Provision granting the President the power to exempt any investment promotion
agency (IPA) from coverage of Title XIII of CREATE Act
Automatic approval of applications for incentives in case of inaction

Need to Stay Updated with the Latest Tax Laws and

Regulations in the Philippines?
We provide tax advisory services to local and foreign companies doing
business in the Philippines.

INQUIRE NOW

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 6/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

AUTHOR 

Admin
Carpo Law & Associates is a full service law firm strategically located in one of the
rising business centers in the Philippines, Bonifacio Global City, providing
modern practice of law. The firm engages in corporate, tax, labor, litigation, and
real estate for foreign and local companies and individuals doing business in the
Philippines.

View all posts 

Corporate Recovery and Tax Incentives for Enterprises CREATE Act in the Philippines

CREATE Law in the Philippines

 Leave A COMMENT

Message *

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 7/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

Name * 
Mail * 
Website 

SEND COMMENT

CONTACT US 

 Address:
8-B, Marajo Tower, 312 26th Street West corner 4th Avenue, BGC, Taguig City,
Philippines 1634


https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 8/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

 Phone: (+632) 7217-0206

 Email: info@carpolaw.com

  


About Us
Useful Links

News and Insights

Contact Us
Privacy Policy
Sitemap

 Contact Details

8-B, Marajo Tower, 312 26th Street

4th Avenue, Bonifacio Global City,
Taguig, Philippines 1634

Phone: (+632) 7217-0206

Mobile: (+63) 917-701-1865
Email: info@carpolaw.com

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 9/10
11/13/23, 1:22 PM Summary of the Important Provisions of CREATE Act in the Philippines

2023 © Copyright Carpo Law & Associates

https://carpolaw.com/everything-you-need-to-know-about-create-act-in-the-philippines/ 10/10