Changes in CREATE IRR approved

MANILA, Philippines — The government has approved changes in the implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act amid concerns related to value-added tax (VAT).

In a statement, Finance Secretary Benjamin Diokno said he and Trade Secretary Alfredo Pascual have approved amendments to the IRR of CREATE in a bid to address VAT issues raised by transitory registered business enterprises (RBEs).

The amendment, specifically to Rule 18 Section 5 of the CREATE Act IRR, was made in response to the Office of the President’s directive to review and address the VAT-related issues concerning both domestic market enterprises (DMEs) and registered export enterprises (REEs).

Last month, President Marcos vowed to propose amendments to CREATE to address concerns raised by investors.

Transitory registered DMEs inside the economic or freeport zone availing of the five percent gross income tax (GIT) regime will now have the option to register as VAT taxpayers.

This will enable VAT-registered DMEs covered by the transitory provisions of CREATE to either charge output VAT to domestic customers or receive a refund from the Bureau of Internal Revenue for the input VAT directly attributable to their zero-rated sales.

Meanwhile, transitory REEs whose income tax-based incentives have expired may now continue to enjoy VAT zero-rating on their local purchases.

This is until the electronic sales reporting system under the Tax Code is fully operational or until the expiration of the 10-year transitory period, whichever comes earlier.

“We welcome this amendment in support of our RBEs and in alignment with the government’s efforts to establish a more conducive investment climate in the country,” Diokno said.

CREATE was dubbed as the “largest fiscal stimulus package for businesses in the country” as it aims to provide private firms more than P1 trillion worth of tax relief over the next 10 years.

It lowered the regular corporate income tax rate from 30 to 20 percent for domestic corporations with a taxable income of P5 million and below and with total assets of not more than P100 million.

The corporate income tax for big corporations with assets of above P100 million was reduced from 30 to 25 percent.

The Cabinet-level Fiscal Incentives Review Board (FIRB) has approved 25 projects worth P288 billion since the Marcos administration took office.

The 25 projects are expected to generate around 24,617 jobs with forgone revenue of nearly P30 billion.