Senator Pia S. Cayetano sees an end to investor uncertainty in the country with the impending passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill by the Senate and the House of Representatives.
The Senate Ways and Means Committee Chair issued the remark after she met informally with the members of both Houses led by the House Ways and Means Chair to discuss the disagreeing provisions in the versions of the two chambers.
“I would like to report to the Filipino people and to our business community that the CREATE bill, the landmark legislation that the Senate passed in November last year, is finally moving forward,” she said.
“I can now say more confidently that the cloud of uncertainty that has hovered over our country’s investment climate due to unwarranted delays in CREATE’s passage is about to end. The wait-and-see period would soon be over and investors can look forward to doing business in our country under a tax and fiscal incentives regime that favors job generation, ensures flexibility and accountability, and promotes sustainable and inclusive growth,” she added.
Based on the discussions, Cayetano said the Senate version mandating the immediate and substantial lowering of the Corporate Income Tax (CIT) will be retained.
Under the Senate version, the current 30% CIT rate will be reduced to 25% for all enterprises, and to 20% for qualified micro, small, and medium enterprises (MSMEs) with a net taxable income below P5 million and total assets below P100 million.
“The CIT reduction will bring much-needed economic relief to businesses, especially to MSMEs. This will also allow the Philippines to be more competitive in the ASEAN region and position itself more firmly as a viable investment location,” she said.
The incentives scheme for registered enterprises under the Senate version would also be retained, save for some changes in the incentives to be granted for both exporters and “critical” domestic market enterprises, and for general domestic market enterprises.
The National Economic and Development Authority (NEDA) shall be tasked with determining which domestic industries should be classified as “critical.”
Also to be retained is the threshold set by the Senate version on the value of investment projects that would have to go through the approval of the Fiscal Incentives Review Board (FIRB), and the different investment promotion agencies (IPA), respectively.
Under the Senate version, investments with a value above P1 billion would go through the evaluation and approval of FIRB, while those that fall below the P1 billion threshold would be evaluated for approval by the IPAs.
Cayetano said other key features of the Senate version would likely be retained, including:
-reduction of the 2% Minimum Corporate Income Tax (MCIT) to 1% effective July 1, 2020 until Jine 30, 2023, after which the tax rate shall be raised back to 2%;
-repeal of the imposition of the Improperly Accumulated Earnings Tax;
-setting of the Deductible Interest Expense at 20%
-reduction of the 3% Percentage Tax to 1% effective July 1, 2020 until June 30, 2023, after which the tax rate shall be raised back to 3%; and
-reduction of the 10% special tax rate on Proprietary Educational Institutions and Hospitals which are Non-Profit to 1% effective July 1, 2020 until June 30, 2023, after which the tax rate shall be raised back to 10%.
Cayetano is hopeful that the bicameral conference committee report could be formally discussed soon and finalized.
“The passage of CREATE will guide our economic recovery, following the contraction of our Gross Domestic Product last year by -9.5%, the worst on record since the post-World War II era. We need to act decisively to turn our economy around, bring in more investments and jobs, and position ourselves more strategically for the challenges of the future and the rapidly changing times,” she concluded. #