The government has released the implementing rules and regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Act, which contains details on the new menu of tax perks available to investors.
The IRR was uploaded to the Official Gazette website on June 23.
The IRR on Title XIII of CREATE, which covers the expanded functions of the Fiscal Incentives Review Board and the fresh menu of tax incentives available to investors and enterprises under this law, has been signed by finance secretary Carlos Dominguez and trade secretary Ramon Lopez.
The IRR was done within the 90-day deadline set under the law, or until July 11.
Under the IRR, export enterprises may be granted an income tax holiday (ITH) of four to seven years, depending on location and industry priorities, and followed by special corporate income tax rate or enhanced deductions for 10 years.
Domestic market enterprises may be granted an ITH for four to seven years, followed by enhanced deductions for five years.
The IRR states that the location of the registered project or activity will be prioritized according to the level of development as follows: National Capital Region (NCR), metropolitan areas or areas adjacent to NCR, to be determined by the National Economic and Development Authority, and all other areas.
“The industry of the registered project or activity shall be prioritized according to the national industry strategy specified in the Strategic Investment Priority Plan (SIPP),” the IRR says.
“The SIPP shall define the coverage of the tiers and provide the conditions for qualifying the activities,” it adds.
Meanwhile, in a statement yesterday, the DOF said provisions in the CREATE Act eliminating the preferential tax rates given to regional operating headquarters (ROHQs) of multinational corporations has cleared the way for the Philippines’ removal by January 2022 from an international list of “harmful” tax regimes.
The DOF said the Organisation for Economic Co-operation and Development’s Forum on Harmful Tax Practices (FHTP) has granted the Philippines’ appeal to assess its ROHQ regime as “potentially harmful but not actually harmful” until December 3, 2021, and then have the country’s ROHQ regime status declared as “abolished” by January 1, 2022.
The FHTP considers as “harmful tax features” the special tax rates given to ROHQs because these gave undue tax advantages to foreign taxpayers and discriminates against local taxpayers; and recipients were not required to show “adequate substance for the activities carried out.”
Antonette Tionko, DOF undersecretary, said in her report to Dominguez that the FHTP had initially recommended that the Philippines’ ROHQ regime be assessed as “harmful” until December 31 this year, but the DOF successfully appealed that this be changed to “potentially harmful but not actually harmful” owing to the enactment of CREATE, which removes the tax perks given to ROHQs beginning January 1, 2022.
From the previous preferential rate of 10 percent, ROHQs will be taxed the general corporate income tax rate as those imposed on other companies by January 1 under CREATE. (A. Celis)
