By Jocelyn Montemayor
November 12, 2024
More investments are expected to flow into the Philippines with the signing into law on Monday of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE), government and business groups said.
President Marcos Jr. in signing Republic Act (RA) No. 12066 said the law is expected to generate more jobs and spur economic growth while providing clearer and longer tax holidays and incentives and lower corporate income taxes.
CREATE MORE effectively amends the National Internal Revenue Code (NIRC) of 1997 and enhances the country’s fiscal incentives regime. The law also aims to further ease doing business in the country, increase the competitiveness of tax incentives, strengthen governance and accountability, and clarify the value-added tax (VAT) rules and transitory for pre-CREATE registered business enterprises (RBEs).
Marcos said the law focuses on strategic industries which would enjoy tax incentives which had been extended to non-registered exporters and high-value domestic market enterprises.
Specifically, the law prolongs the maximum duration of tax incentives availment from 27 years from 17 years; reduces corporate income tax rate of 20 percent from 25 percent to RBEs and; provides 100 percent additional deduction on power expenses which would benefit the manufacturing sector.
CREATE MORE also strengthens the mandates of the Fiscal Incentives Review Board (FIRB) and the investment promotion agencies (IPAs) and institutionalizes the adoption of flexible work arrangements as a business model for RBES operating inside economic zones and freeports without disruption in the enjoyment of their tax incentives.
The law raises the investment capital approval threshold for the IPAs from P1 billion to P15 billion, which means only projects exceeding the said amount will be reviewed by the FIRB.
“By establishing clear timelines and deadlines, and by limiting compliance requirements to those mandated by law, we are promoting transparency and predictability. In so doing, we create a more reliable process that instills confidence in investors and in partners alike,” Marcos said
The law likewise provides tax or duty exemption on donations of capital equipment, raw materials, spare parts, or accessories to the government, government-owned and controlled corporations, technical Education and Skills development Authority, state universities and colleges, and Department of Education and Commission on Higher Education-accredited schools.
Losses
The Philippines expects to lose P5.9 billion in tax revenue from the new law from 2025 to 2028 but Finance Secretary Ralph Recto said the amount represent current “paper losses” or projections and not actual losses.
Recto said “if there is revenue loss, then we look for another bill that would gain revenue,” adding he is in discussions with Senate President Francis Escudero and Speaker Martin Romualdez on some “financial taxes that we’re reconsidering.” He did not elaborate.
“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,” Recto said in a statement.
United Nations data show $6.2 billion in foreign direct investments flowed into the Philippines last year, smaller compared to Singapore’s $159.7 billion, Indonesia’s $21.6 billion and Vietnam’s $18.5 billion.
Recto said the passage of CREATE MORE is “timely” as the United States prepares for a new presidency.
“So you want to invite more investments in the Philippines, maybe coming from China, maybe coming from Taiwan, that can locate in the Philippines so that they can sell to the United States, among others, that’s a possibility,” he said when asked to elaborate.
Special Assistant to the President for Investment and Economic Affairs Frederick Go, who supported CREATE MORE’s journey from congressional discussions to its enactment into law, expressed much optimism about the law’s potential impact on the country’s overall business environment.
“The passage of CREATE MORE has triggered so much interest from foreign and domestic direct investors, especially the large scale ones. This is our main tool to make the Philippines an attractive investment destination.,” Go said.
The Philippine Economic Zone Authority (PEZA) said in a statement the enhanced fiscal incentives under the CREATE MORE means the Philippines now has the most generous tax and investment perks for investors among Asean economies.
PEZA said the law creates parity with that of the Philippines’ neighbors in Southeast Asia in terms of the reduced regular CIT rate.
In a separate statement, Bureau of Internal Revenue (BIR) commissioner Romeo Lumagui Jr. said the agency will implement the tax incentives under the CREATE MORE Act without delay.
The BIR said it will promote the different incentives under the law through a public information campaign.
Foreign chambers’ voice
The Joint Foreign Chambers (JFC) described CREATE MORE as pivotal in its Philippines’ drive to be a competitive investment destination as it addresses the urgent need to review and revise the country’s incentive policies, ensuring they remain aligned with international standards.
JFC said the clarification on the VAT regime, the streamlined tax processing and lower CIT rate will encourage investments.
The German-Philippine Chamber of Commerce and Industry Inc. (GPCCI) said the signing of the CREATE MORE as a demonstration of the Philippine government’s commitment to strengthening the business environment and promoting economic growth through comprehensive tax reforms.
“We share the goal of creating a more favorable business landscape to foster growth and job opportunities,” said GPCCI president Marie Antoniette Mariano.
Lawmakers’ take
Sen. Juan Miguel Zubiri said CREATE MORE is expected to cut the bureaucratic red tape that slowed down the growth of business sector.
Zubiri, author and co-sponsor of the measure, said CREATE MORE will address the problems of longtime investors in the country, including the protracted process of claiming VAT refunds which “has been an issue for many major locators in the country.”
“They go years and years without seeing the refunds that they are entitled to, and they lose billions in the process,” Zubiri said.
Sen. Sherwin Gatchalian, chair of the Senate Committee on Ways and Means and principal author and sponsor of the measure, said CREATE MORE is expected to generate more jobs that will, in turn, redound to stronger domestic consumption, one of the major drivers of the local economy.
He said the numerous incentives provided under CREATE MORE are expected to enhance the country’s competitiveness in attracting foreign investors. – Irma Isip, Angela Celis, Raymond Africa and Reuters
Source: https://malaya.com.ph/business/enterprise/create-more-to-boost-investments-jobs/