THE passage of the bill amending the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will result in registered business enterprises (RBEs) saving on their tax bills, the Board of Investments (BoI) said.
During his presentation at the Philippines-South Korea Business Forum on Monday, Trade Undersecretary and BoI Managing Head Ceferino S. Rodolfo cited simulations that indicated that RBEs could reduce their taxes by as much as 75% under the CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill.
“The Department of Trade and Industry (DTI) worked with an accounting and auditing firm to simulate the possible impact on a currently registered export manufacturer in the Visayas with about 6,500 workers,” Mr. Rodolfo said.
The simulation assumed the company opted for the special corporate income tax regime under the CREATE law, producing a tax bill of P480 million, he said.
“If CREATE MORE enters into force and the company avails of CREATE MORE’s enhanced deduction regime, this P480 million will go down to P120 million,” he said.
“So it’s quite substantial, and it could really give some competitive advantage to Philippine companies and South Korean companies located in the Philippines,” he added.
In a separate event last week, Secretary Frederick D. Go said that the information technology and business process management (IT-BPM) sector is among the industries expected to benefit from CREATE MORE.
Mr. Go, who heads the Office of the Special Assistant to the President for Investment and Economic Affairs, said that certain points of the CREATE MORE bill will affect the industry, particularly the restoration of the power of investment promotion agencies (IPAs) to approve projects within a certain threshold.
“It authorizes the IPAs to approve projects within a P15 billion threshold without needing to go up to the Fiscal Incentives Review Board (FIRB) for approval. So this should speed up the process,” he said during his keynote speech at the International IT-BPM Summit.
He said that this specific amendment is necessary despite the adjustment made by the FIRB early this year, as it will make the increased threshold more permanent.
“By law, IPAs can only approve up to P1 billion (worth of investments). With the new law, IPAs can approve up to P15 billion,” he said.
“While the law was being discussed, FIRB already adjusted it. But that’s temporary. FIRB can always change it back,” he added.
Meanwhile, he said that the introduction of the RBE local tax of not more than 2% of gross income will also address many locator concerns.
He added that CREATE MORE will also address IT-BPM’s sector concerns about being taxed when donating old computers to the government.
“CREATE MORE liberalizes this by exempting donations of capital equipment, raw materials, spare parts, or accessories from taxes and duties if donated to the government,” he said.
CREATE MORE will also exempt RBEs opting for the 5% special corporate income tax rate from all national and local taxes, fees, and charges and will extend the sunset period for the incentives by more than three years or until December 2034, he added.
Asked to comment, IT and Business Process Association of the Philippines (IBPAP) President and Chief Executive Officer Jack Madrid said CREATE MORE eliminates much of the uncertainty and confusion in interpreting the CREATE law.
“We have a lot of local government units, and they occasionally have different interpretations and implementation of taxes, including the issuance of business permits,” Mr. Madrid said on the sidelines of the event.
“So, I think that is one major headache that investors will now not have because of this clarification,” he added.
However, he said that Mr. Go did not clarify the issue of flexible work arrangements, a particular concern of locators registered with the Philippine Economic Zone Authority.
“Let us just wait for the implementing rules and regulations of CREATE MORE. The good news is, it was approved at the bicameral level,” he said.
“It’s a step in the right direction, and (Mr. Go) is a very, very big supporter,” he added. — Justine Irish D. Tabile
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