RA 11534: Corporate Recovery and Tax

Incentives for Enterprises (CREATE) Act &

RA 11569: An Act Extending the Estate Tax
Amnesty and for Other Purposes, Amending
Section 6 of RA 11213 (The Tax Amnesty Act)

Prepared by: Leyla B. Malijan

J19-65663
RA 11534: Corporate Recovery and Tax
Incentives for Enterprises Act (CREATE)
 An act reforming the Corporate Income Tax and
Incentives System, amending for the purpose
Sections 20, 22, 25, 27, 28, 29, 34, 40, 57, 109, 116,
204 and 290 of the National Internal Revenue Code
of 1997, as amended, and creating therein New Title
XIII and for other purposes.
 2nd package of Comprehensive Tax Reform Program
which will help businesses recover from the effects
of Covid-19 pandemic
RA 11534: CREATE ACT
 Signed into law last March 26, 2021
 Effective April 11, 2021
Sec. 1 – Title
Sec. 2 – Declaration of Policy
-to develop the national economy towards global
competitiveness by implementing tax policies instrumental
in attracting investments which will result in productivity
enhancement, employment generation, countrywide
development and a more inclusive economic growth, while
at the same time maintaining fiscal prudence and stability.
Important Features of CREATE Act
 Effective July 1, 2020, CIT rate is reduced from
30% to 20% for domestic corporations with net
taxable income not exceeding P5 Million and with
total assets not exceeding P100 Million. All other
domestic corporations and resident foreign
corporations will be subject to 25% Income Tax.
(Section 6 of this Act, Sec. 27 and 28 of NIRC
amended).
Important Features of CREATE Act
 Effective January 1, 2021, Income Tax rate for
non-resident foreign corporation is reduced from
30% to 25%. (Section 7 of this Act, Sec. 28 (B) of
NIRC amended).

 Minimum Corporate Income Tax (MCIT) rate is

reduced from 2% to 1% effective July 1, 2020 to
June 30, 2023. (Section 6 (E) for domestic corp.
and Section 7 for resident foreign corporations).
Important Features of CREATE Act
 Percentage tax is reduced from 3% to 1% effective
July 1, 2020 to June 30, 2023. (Section 13 of this
Act, Section 116 of NIRC amended).

 Rate of proprietary education institutions and

hospital is reduced from 10% to 1% effective July
1, 2020 to June 30, 2023. (Section 6 (B) of this
Act, Section 27 of NIRC amended).
Important Features of CREATE Act

 Imposition of Improperly Accumulated Earnings

Tax (IAET) is repealed. (Section 8, Section 29 of
NIRC amended).
Section 16 – Tax Incentives
 A new Title XIII shall be introduced in the NIRC of
1997 as amended.
 Includes the following:
 Chapter 1 – Gen. Provisions on Tax Incentives
 Chapter 2 – Tax and Duty Incentives
 Chapter 3 – The Fiscal Incentives Review Board
 Chapter 4 – Qualified Projects or Activities for Tax
Incentives
 Chapter 5 – Tax Incentives Management and Transparency
 Chapter 6 – Transitory and Miscellaneous Provisions
Section 16 – Tax Incentives
Definition of Terms:
Capital equipment – refers to machinery, equipment,
major components thereof, tools, devices, applications or
apparatus, which are directly or reasonably needed in the
registered project or activity.
Direct local employment – refers to full and decent
employment of Filipinos under employer-employee
relationship to perform functions that are directly related
to the production of goods or performance of services.
Section 16 – Tax Incentives
Definition of Terms:
Domestic market enterprise – refers to any enterprise registered
with the Investment Promotion Agency other than export enterprise.
Export enterprise – refers to any individual, partnership,
corporation, Philippine branch of a foreign corporation or other
entity organized and existing under Philippine laws and registered
with the Investment Promotion Agency to engage in manufacturing,
assembling or processing and services such as IT and BPO and
resulting in the direct exportation and/or sale of its manufactured
products to another registered export enterprise that will form part
of the final product or service of the latter of at least 70% of its
total production output.
Section 16 – Tax Incentives
Definition of Terms:
Investment Promotion Agencies – refer to government
entities created by law, executive order, decree or other
issuances, in charge of promoting investments, granting
and administering tax and non-tax incentives and
overseeing the operations of the different economic zones
and freeports in accordance with their special laws.
- Includes BOI, PEZA, RBOI-ARMM, SBMA, JHMC, APECO
Section 16 – Tax Incentives
Definition of Terms:
Registered business enterprise – refers to any individual,
partnership or corporation, Philippine branch of a foreign
corporation or other entity organized and existing under
Philippine laws and registered with an Investment
Promotion Agency excluding service enterprises such as
those engaged in customs brokerage, trucking or
forwarding services, janitorial, security, insurance,
banking and other financial services, cooperatives, credit
unions, consultancy services and other similar services as
may be determined by the Fiscal Incentives Review Board.
Section 16 – Tax Incentives
Definition of Terms:
Freeport zones – refer to an isolated and policed area
adjacent to a port of entry, which shall be operated and
managed as a separate customs territory to ensure free
flow of goods, except those expressly prohibited by law,
within, into and exported out of the freeport zone where
imported goods maybe unloaded for immediate shipment
or stored, repacked, sorted, mixed or manipulated
without being subject to import duties.
Section 16 – Tax Incentives
Definition of Terms:
Special economic zone – refers to a selected area which
shall be operated and managed as a separate customs
territory that is highly developed or has the potential to
be developed into an agro-industrial, industrial,
information technology or recreational area whose metes
and bounds are fixed or delimited by presidential
proclamation and within a specific geographical area.
Important Features of CREATE Act
Types of Tax Incentives:
 Income Tax Holiday (ITH)
 Special Corporate Income Tax (SCIT)
 Enhanced Deductions
 Duty exemption
 VAT exemption
Important Features of CREATE Act
Enhanced Deductions:
Important Features of CREATE Act

 Qualified export enterprises shall be entitled to 4-

7 years Income Tax Holiday (ITH) to be followed
by 10 years 5% Special Corporate Income Tax
(SCIT) or Enhanced Deductions. (Chapter II -
Section 294 A, B and C and 296).
Important Features of CREATE Act
 Qualified domestic market enterprises shall be
entitled to 4-7 years ITH followed by 5 years
Enhanced Deduction. (Chapter II - Section 294 A,
B and C, Section 295 and 296.

 Domestic market enterprises which has an

investment capital of not less than P500 Million
shall be eligible for the 5% special corporate
income tax. (Chapter II - Section 296 B).
Important Features of CREATE Act

 Registered enterprises are exempt from customs

duty on importation of capital equipment, raw
materials, spare parts or accessories directly and
exclusively used in the registered project or
activity. (Chapter II - Section 294 D).
Important Features of CREATE Act
 VAT exemption on importation and VAT zero-
rating on local purchases shall only apply to goods
and services directly and exclusively used in the
registered project or activity by a Registered
Business Enterprise (RBE). (Chapter II - Section
294 D).
Important Features of CREATE Act

 The importation of Covid-19 vaccines shall be

exempt from import duties, taxes and other fees
subject to the approval or licenses issued by DOH
or FDA. (Chapter II - Section 294 E).
Important Features of CREATE Act
 The importation of petroleum products by any
person, including RBE shall be subject to the
payment of applicable duties and taxes as
provided under RA 10863 otherwise known as the
Customs Modernization and Tariff Act. (Section
294 F under Tax Incentives).
Important Features of CREATE Act
 For investments prior to effectivity of CREATE –
RBEs granted only an ITH shall continue with the
availment of the ITH for the remaining period
while RBEs granted an ITH + 5% Gross Income Tax
(GIT) or currently enjoying 5% GIT shall be
allowed to avail of the 5% GIT for 10 years.
(Chapter VI – Section 311 A, B and C).
Fiscal Incentives Review Board (FIRB)
The following are the expanded functions of FIRB:
(A)To exercise the policy making and oversight functions on the
administration and grant of tax incentives by the Investment Promotion
Agencies and other government agencies administering tax incentives.
 Determine the target performance metrics as conditions to avail tax
incentives:
 Review and audit the compliance of other government agencies
administering tax incentives and impose sanctions such as, but not limited
to withdrawal, suspension or cancellation of their power to grant tax
incentives.
 Conduct regular monitoring and evaluation of investment and non-
investment tax incentives such as using cost-benefit analysis to determine
their impact on the economy and whether target performance metrics are
met.
Fiscal Incentives Review Board (FIRB)
(B) To approve or disapprove the grant of tax
incentives to the extent of the registered project or
activity upon the recommendation of Investment
Promotion Agency.
(C) To approve applications for tax subsidies to
government-owned or controlled corporations,
government instrumentalities, government
commissaries and state universities and colleges.
Fiscal Incentives Review Board (FIRB)
(D) To formulate place-specific strategic investment
plans during periods of recovery from calamities and
post-conflict situations and where the FIRB
determines that there is a need to attract firms that
would accelerate the growth of a region’s flagship
industries, in accordance with Medium-term
Development Plan.
(E) To submit annual reports to the Office of the
President as part of the budget process, covering its
policy and activities in the administration of this act.
RA 11569: An Act Extending the Estate Tax
Amnesty and for Other Purposes, Amending Section
6 of RA 11213 (The Tax Amnesty Act)
 On June 30, 2021, Republic Act (RA) 11569 was signed into law
which extended the period for availment of estate tax amnesty
for two years, from June 15, 2021 per RA 11213 or the Tax
Amnesty Act of 2019 to June 14, 2023.
 The estate tax amnesty program provides an opportunity for
those who have unsettled tax liability for estates of decedents
who died on or before Dec. 31, 2017. Those who will avail
themselves within the prescribed period will pay either the
reduced estate tax amnesty rate of 6%, from the previous rate of
20%, of the decedent’s total net taxable estate or the minimum
amnesty tax of P 5,000, in case there is negative net estate.
 Mandatory Requirements:
• Certified true copy of the Death Certificate; (One (1) original copy
and two (2) photocopies)
• TIN of decedent and heir/s; One (1) original copy for presentation
only)
• Any of the following: (One (1) original copy and two (2) photocopies)
             a) Affidavit of Self Adjudication;
             b) Deed of Extra-Judicial Settlement of the Estate, if the estate
has been settled extra judicially;
             c) Court order if settled judicially;
            d) Sworn Declaration of all properties of the Estate;
 Mandatory Requirements:
• A certified copy of the schedule of partition and the order of the court approving the same within thirty
(30) days after the promulgation of such order, in case of judicial settlement. (One (1) original copy and
two (2) photocopies)
• Proof of Claimed Tax Credit, if applicable; (One (1) original copy and two (2) photocopies)
• CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the
amount due if the gross value of the estate exceeds five million pesos (P5,000,000) for decedent’s death
on or after January 1, 2018 or two million pesos (P2,000,000) for decedent’s death from January 1, 1998 to
December 31, 2017. (One (1) original copy and two (2) photocopies)
• Certification of the Barangay Captain for the claimed Family Home (If the family home is conjugal property
and does not exceed Php10 Million, the allowable deduction is one-half (1/2) of the amount only); (One
(1) original copy and two (2) photocopies)
• Duly notarized Promissory Note for "Claims Against the Estate" arising from Contract of Loan; (One (1)
original copy and two (2) photocopies)
• Accounting of the proceeds of loan contracted within three (3) years prior to death of the decedent; (One
(1) original copy and two (2) photocopies)
• Proof of the claimed "Property Previously Taxed"; (One (1) original copy and two (2) photocopies)
• Proof of the claimed "Transfer for Public Use"; (One (1) original copy and two (2) photocopies)
• Copy of Tax Debit Memo used as payment, if applicable. (One (1) original copy and two (2) photocopies)
 For Real Properties:
• Certified true copy/ies of the Transfer/Original/ Condominium Certificate/s of Title of real
property/ies (front and back pages), if applicable; (One (1) original copy and two (2)
photocopies)
• Certified true copy of the Tax Declaration of real properties at the time of death, if
applicable; (One (1) original copy and two (2) photocopies)
• Certificate of No Improvement issued by the Assessor's Office where declared properties
have no improvement. (One (1) original copy and two (2) photocopies)
 For Personal Properties:
• Certificate of Deposit/ Investment/ Indebtedness owned by the decedent and the
surviving spouse, if applicable; (One (1) original copy and two (2) photocopies)
• Photocopy of Certificate of Registration of vehicles and other proofs showing the correct
value of the same, if applicable; (One (1) original copy and two (2) photocopies)
• Proof of valuation of shares of stock at the time of death, if applicable: (One (1) original
copy and two (2) photocopies)
Thank you and God bless us all!