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President Ferdinand Marcos, Jr. signed into law the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy
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Under Republic Act No. 12066, or the CREATE MORE Act, registered business enterprises may choose between the special corporate income tax of 5% or the enhanced deductions regime right from the start of their commercial operations
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CREATE MORE clarifies the rules of availment of VAT and duty incentives, and further extends its coverage to include non-registered exporters and high-value domestic market enterprises
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Export-oriented enterprises’ local purchases are zero-rated while their importations are VAT-exempt
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The law liberalizes the condition for availment of VAT incentives by shifting from “direct and exclusive use” to “directly attributable” requirements for goods and services
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It increased to 100% from 50% the additional deduction on power expenses, significantly cutting costs for the manufacturing sector
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It institutes greater responsibility for investment promotion agencies by increasing the investment capital approval threshold from P1 billion to P15 billion
- Finance Secretary Ralph Recto said the new law “makes the Philippines’ tax incentives regime more globally competitive, investment-friendly, predictable, and accountable”
President Ferdinand Marcos, Jr. on November 11 signed into law the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE).
Republic Act (RA) No. 12066, or the CREATE MORE Act, amends certain provisions of RA 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“CREATE MORE sets the stage for a business landscape that empowers our enterprises and enhances their growth prospects,” Marcos said in a speech during the signing ceremony.
“By building on the reforms initiated through the CREATE Act, we have enhanced our tax regime [and] incentive framework, and making it more inviting for investment—while remaining steadfast in the principles of fiscal prudence and stability,” he added.
“CREATE MORE clarifies the rules of availment of VAT and duty incentives, and further extends its coverage to include non-registered exporters and high-value domestic market enterprises,” the President said in detailing the salient points of the law.
According to the Department of Finance, among RA 12066’s “exciting features” is a more competitive and generous incentive package.
For instance, registered business enterprises (RBEs) will have the option to choose between the special corporate income tax (SCIT) of 5% or the enhanced deductions regime (EDR) right from the start of their commercial operations.
The SCIT and EDR incentives, initially capped at a maximum of 10 years, are now extended to a period of up to 17 or 27 years.
Labor-intensive projects will be allowed to apply for an extension of another five or 10 years.
More incentives are given to registered export enterprises and high-value domestic market enterprises (DMEs) with investment capital exceeding P15 billion and are engaged in sectors considered import-substituting or export sales in the immediately preceding year of at least $100 million.
Meanwhile, CREATE MORE expands the EDR to provide additional relief to RBEs by reducing the CIT rate to 20% from 25%.
The law also increased to 100% from 50% the additional deduction on power expenses, significantly cutting costs for the manufacturing sector.
To boost the tourism industry, an additional 50% deduction for expenses related to trade fairs and tourism reinvestments will be provided until 2034.
The law also maximized the benefits of the net operating loss carry-over by changing the reckoning period from “year of loss” to the “last year of the project’s income tax holiday (ITH) entitlement period.”
Likewise, it provides tax and duty exemption on donations of capital equipment, raw materials, spare parts, or accessories to the government, government-owned or -controlled corporations, the Technical Education and Skills Development Authority, state universities and colleges, and the Department of Education or the Commission on Higher Education-accredited schools.
Moreover, CREATE MORE provides an optional imposition of an RBE local tax at a rate not exceeding 2% of gross income, which shall be in lieu of all local taxes, fees, and charges during the ITH or EDR.
The reform acknowledges the evolving business model as it institutionalizes the adoption of flexible work arrangements for RBEs operating within economic zones and freeports, without compromising their tax incentives.
To address investors’ pain points, export-oriented enterprises’ local purchases are zero-rated while their importations are VAT-exempt.
DOF said this is expected to address the cash flow issues of direct exporters as they no longer have to tie up funds in VAT payments that would otherwise be refunded later.
The law also liberalizes the condition for the availment of VAT incentives by shifting from “direct and exclusive use” to “directly attributable” requirements for goods and services. DOF said this broadens the scope of VAT incentives covering necessary services such as janitorial, security, financial consultancy, marketing, and administrative services.
Pre-CREATE RBEs will be given until December 31, 2034 to fully transition into the CREATE Act. REEs may continue to avail of duty and VAT incentives even after the transitory period, subject to the provisions of the Tax Code and the Customs Modernization and Tariff Act.
To strengthen the governance and accountability over fiscal incentives, CREATE MORE mandates the government to adopt the Ease of Doing Business and Efficient Government Service Delivery Act timeline for issuing a decision on incentive applications. This includes a 20-working-day turnaround for decisions once complete documents are submitted.
Furthermore, it institutes greater responsibility for investment promotion agencies by increasing the investment capital approval threshold from P1 billion to P15 billion.
Finance Secretary Ralph Recto, in a statement, said the new law “makes the Philippines’ tax incentives regime more globally competitive, investment-friendly, predictable, and accountable.”
Recto added: “CREATE MORE will open the floodgates of more high-impact investments both from our international investors and domestic enterprises. This will not only attract new investments and grow existing businesses to make more money but also enable us to create more high-quality jobs, increase our people’s income, and reduce poverty.”
The Joint Foreign Chambers (JFC) welcomed the signing of RA 12066.
“The enactment of the CREATE MORE Act is a significant milestone for the Philippines in its efforts to solidify its position as a competitive destination for investments and business expansion. This legislation addresses the urgent need to review and revise the country’s investment incentive policies, ensuring they remain aligned with international standards. We have been strongly supporting this bill to foster a business-friendly environment and spur economic growth. We commend the Philippine government for taking this important step, and look forward to the positive impact the CREATE MORE Act will have on the economy,” JFC said in a statement.
Philippine Economic Zone Authority director general Tereso Panga, in a separate statement, also welcomed the new legislation, saying it is a “pivotal law that strengthens our ability to attract foreign direct investments (FDI) and positions the Philippines as a competitive destination for export-driven industries.”
Panga noted that with the enhanced fiscal incentives under CREATE MORE, “the Philippines now has the most generous tax and investment perks for investors among ASEAN (Association of Southeast Asian Nations) economies.”
He added that domestic market enterprises will benefit as well from the new incentive regime, as it will “stimulate domestic production by local manufacturers including foreign investors going into import substitution activities to cater to our growing domestic market.”
