The Department of Finance (DOF) is optimistic the Corporate Income Tax and Incentives Reform Act (CITIRA) will be passed by the Senate when it resumes session after the Lenten break.
The DOF earlier requested the Senate to prioritize the passage of the second tax package under the administration’s Comprehensive Tax Reform Program. However, Congress will go on break starting tomorrow, March 13, until May 4.
“I believe so,” Carlos Dominguez, DOF secretary, said when asked by reporters via Viber if there’s a better chance the CITIRA will be passed when Congress resumes in May.
The bill had been passed by the House of Representatives, and currently awaits approval by the Senate.
President Duterte has also certified as urgent the passage of CITIRA, or Senate Bill 1357, which will reduce corporate income tax (CIT) rates by one percentage point every year from the current 30 percent to 20 percent by 2029.
Firms with qualified activities may avail of two to four years of income tax holiday, and another three to four years of the Special Corporate Income Tax (SCIT) rate, which shall be eight percent of gross income by 2020, nine percent by 2021, and 10 percent by 2022, in lieu of all taxes. The SCIT may be extended by three or four years at a time for a maximum of 12 years.
Firms with qualified activities may also avail of the regular CIT tax regime with enhanced deductions for five to eight years, which may be extended by three or four years at a time for a maximum of 12 years.
Enhanced deductions include up to 50-percent additional deduction on power expense, which is a new provision not found in earlier versions of the bill; up to 50-percent additional deduction on labor expense; up to 100-percent additional deduction on research and development; up to 50 percent additional deduction on domestic input expense; a deduction for reinvestment allowance to the manufacturing industry (up to 50 percent of reinvestment); depreciation allowance of the assets acquired for the entity’s production of goods and services (additional 10 percent for buildings and 20 percent for machinery); and enhanced net operating loss carry over.
The Senate version also extends the sunset period for firms currently paying the rate of five percent of gross income earned in lieu of all taxes, from five years in the House to seven years for firms that export 100 percent of output, employ 10,000 Filipino workers in the incentivized activity, or are engaged in “footloose” manufacturing.
The bill defines “footloose”as a manufacturing activity or project with a direct labor expense to asset ratio of at least 70 percent for three consecutive years immediately preceding the year of implementation of CITIRA, exports 100 percent of its manufactured goods, and whose actual area of operation is outside Metro Manila.
