The House Committee on Ways and Means on Tuesday endorsed for plenary approval the second package of the Duterte administration’s Comprehensive Tax Reform Program, which is now called “Tax Reform for Attracting Better and High Quality Opportunities” or “Trabaho.”

This after members of the committee, chaired by Rep. Dakila Carlo E. Cua of Quirino, approved House Bill 7982, or the proposed Corporate Income Tax and Incentives Reform Act, which consolidates the various proposals filed in the House to modernize the incentives regime and reduce corporate income taxes.

“Generating better opportunities for Filipinos has always been our primary objective in this exercise. We are moving to an incentives regime that is biased to development outside of Metro or urban areas. We are also lowering the burden on businesses so that they can expand and provide more employment opportunities,” said Cua.

He clarified: “Not that we [are] depriving Metro Manila…but it already has investments.”

According to Cua, the bill has several features for jobs creation.

“It gives new investments outside urban areas an additional two years of incentives. At the same time, it gradually lowers the corporate income-tax rate to 20 percent by 2029,” he said.

During the hearing of the ways and means committee, Finance Undersecretary Karl Kendrick T. Chua said lowering the corporate income tax would cost the government some P60 billion to P62 billion per percentage of reduction.

From the current 30 percent, the bill said the rate of corporate income tax shall now be:

• 28 percent beginning January 1, 2021;
• 26 percent beginning January 1, 2023;
• 24 percent beginning January 1, 2025;
• 22 percent beginning January 1, 2027; and
• 20 percent beginning January 1, 2029.

The measure, however, provided that the President may advance the scheduled reduction in the corporate income tax when adequate savings are realized from the rationalization of fiscal incentives, as certified by the secretary of finance.

Incentives

The bill is in line with the President’s priority of reviewing and modernizing the current incentives regime. At the same time, the bill proposes ways to ease the impact of moving to a new regime.

For the first two years, the bill retains the current set of incentives. This gives investors enough time to study the new regime and apply for new incentives appropriate to their respective activities.

“It sends a signal that the government, by way of this current version of the bill, is not driving away investments. In the bill there is a transition period. We understand the clamor for a longer transition period, but given the facts that we will allow the reapplication of incentives—the investors,  as long as they want to expand their business…can continue to enjoy their incentives longer than the transition period, particularly those who are really performing and creating jobs,” Cua said.

The bill said the measure shall cover all existing investment promotion agencies, and such IPAs shall maintain their functions and powers as provided under the special laws governing them, except to the extent modified by the provisions of the revenue code.

According to the measure, registered projects or activities under the Strategic Investment Priority Plan (SIPP), which will be formulated by the Board of Investments, shall be qualified for any of the following incentives:

• Income-tax holiday (ITH), which shall be granted for a period not exceeding three years; provided that after the expiration of the ITH, the following incentives may be applied for a period not exceeding five years:
• Reduced corporate income tax, with a reduced tax rate of 18 percent of taxable income.
• Depreciation allowance of the assets acquired for the entity’s production of goods and services: 10 percent for buildings and 20 percent for machineries.
• Up to 50 percent additional deduction on the increment of direct labor expense.
• Up to 100 percent additional deduction on research and development.
• Up to 100 percent additional deduction on trainings incurred. Provided that it is given to the employees enganged directly in the entity’s production of good and services.
• Up to 100 percent deduction on infrastructure development.
• Deduction up to 50 percent for reinvestment allowance to manufacturing industry.
• Enhanced net operation loss carry-over during the first three years from the start of commercial operations.

Source: https://businessmirror.com.ph/house-panel-endorses-trabaho-tax-package/