EFFECT

OF
CREATE LAW
IN
INCOME
TAXATION
ABDUL BARRI INDOL GATO, CPA
MINDANAO STATE UNIVERSITY
MARAWI CITY
09452146094
 POST-CREATE LAW PRE-CREATE LAW

CREATE #1 Addition of OPCs to the coverage No provision

CREATE #2 Effective July 1, 2020 the tax rate for DCs shall be based on the ff criteria: Tax on DCs shall be 30% RCIT

TOTAL ASSETS* TAXABLE INCOME TAX RATE

100M and below 5M and below 20%
All other DCs 25%
* Does not include the land on which business entity’s office / PPE are situated
Effective July 1, 2020: the tax rate for RFCs shall be 25% on taxable income
Effective July 1, 2020: the tax rate for NRFCs shall be 25% on GROSS income
CREATE #3 This provision has been repealed / revoked Provision on 15% Gross Income Tax
CREATE #4 Interest arbitrage shall be 20% Interest arbitrage shall be 33%
CREATE #5 Effective July 1, 2020 until June 30, 2023: MCIT rate is at 2%
the MCIT rate shall be 1% both to DCs and RFCs
Thereafter, it shall revert to 2% MCIT rate
CREATE #6 Foreign-sourced dividends received by DCs shall be exempt subject to ff conditions: Foreign-sourced dividends received by DCs are 100% taxable
⑥ DC holds directly at least 20% of outstanding shares of the FC and
held the shareholdings for at least 2 yrs from dividend distribution
⑥ Funds are reinvested in the business operations of the DC

⑥ Funds are reinvested within the next taxable year from the time

dividends were received

⑥ Reinvestment shall be limited to funding the:

- working capital requirements

- capital expenditures
- dividend payments
- investment in domestic subsidiaries
- infrastructure projects
CREATE #7 Effective January 1, 2022: ROHQs shall be subject to RCIT ROHQs shall be subject to 10% tax on taxable income
CREATE #8 The tax on interest income (foreign currency) by RFCs shall now be 15% The tax on interest income (foreign currency) by RFCs shall be 7.5%
First 100k: 5%
CREATE #9 The CGT on sale of shares of stock (not listed) shall now be 15% The CGT on sale of shares of stock (not listed) shall be Excess of 100k: 10%

CREATE #10 This provision has been removed Interest Income of OBUs from foreign currency loans
granted to residents shall be subject to 10% FINAL Tax
CREATE #11 This provision has been repealed / revoked Provision on IAET
 POST-CREATE LAW PRE-CREATE LAW

CREATE #12 Effective July 1, 2020 until June 30, 2023: Proprietary educational institutions and Non-profit hospitals
Proprietary educational institutions & Non-profit hospitals shall pay 10% tax on their taxable income
shall now pay 1% tax on their taxable income
Thereafter, it shall revert to 10%

CREATE #13 The following GOCCs shall be exempt from income tax: The following GOCCs shall be exempt from income tax:
⑥ GSIS (Government Ser vice Insurance System)
⑥ GSIS (Government Ser vice Insurance System)
⑥ SSS (Social Security System)
⑥ SSS (Social Security System)
⑥ PHIC (Philippine Health Insurance Corporation)
⑥ HMDF (Home Development Mutual Fund)
⑥ LWDs (Local Water Districts)
⑥ PHIC (Philippine Health Insurance Corporation)

⑥ LWDs (Local Water Districts) All other GOCCs: 30% RCIT

All other GOCCs: 20% or 25% RCIT
CREATE #14 Additional deduction of 1/2 of value of labor training expenses incurred No provision
for skills development of enterprise-based trainees enrolled in:
- public senior high schools
- public higher education institutions
- public technical and vocational institutions
Provided that they are:
covered by an Apprentice Agreement under the Labor Code
with proper certification from DepEd, TESDA or CHED
deduction must not exceed 10% of direct labor wage