Pre-CREATE firms to enjoy longer sunset provision

Companies that had been granted tax breaks even before the enactment of the Duterte-era corporate tax law have until 2034 to enjoy such fiscal perks, giving these firms more time to transition to the revamped incentives system.

Such was provided in the implementing rules and regulations (IRR) of Republic Act (RA) 12066 or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy, popularly known as the CREATE MORE Act.

CREATE MORE amended the Duterte-era RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which cut corporate taxes and restructured tax perks deemed excessive.

According to the IRR –– which was made public this week –– projects or activities that were already entitled to income tax holiday and the 5-percent gross income tax (GIT) even before the enactment of CREATE in 2021 can enjoy such perks until Dec. 31, 2034.

At the same time, registered business enterprises that availed of the GIT prior to CREATE can also enjoy the incentive until the end of 2034.

READ: Duterte signs CREATE bill into law

Before the amendments to the law, these pre-CREATE companies could only keep such a perk until April 2031.

“On the part of the government, we are committed to making CREATE MORE not just a tool to attract more investments—but a magnet to keep them here, grow them here, and give every reason for investors to place their trust in the Philippines. Again and again,” Finance Secretary Ralph Recto said.

Apart from the longer sunset provision, the IRR of CREATE MORE also sought to tackle investor concerns regarding the issuance of the value-added tax (VAT) zero-rating certificate, providing guidelines on eligibility and compliance criteria and clarifying the certificate’s covered period.

The new law also tasked the Fiscal Incentives Review Board or FIRB to conduct impact evaluations to guide the president in deciding the grant of fiscal and non-fiscal incentives for highly desirable projects.

This is to determine whether the benefits outweigh the costs of incentives.

Additionally, the IRR prohibits double registration of projects, preventing redundant incentives and ensuring responsible fiscal management.