The key amendments in the Tax Code under the CREATE bill include changes to corporate income tax rates, fiscal incentives for registered business enterprises, and value-added tax exemptions. Specifically, the bill lowers corporate income tax rates, provides longer tax holidays and deductions for new businesses, expands VAT exemptions for essential goods, and reduces percentage taxes for non-VAT taxpayers. It aims to stimulate investment and economic activity by simplifying tax rules and reducing tax burdens for corporations and businesses.
The key amendments in the Tax Code under the CREATE bill include changes to corporate income tax rates, fiscal incentives for registered business enterprises, and value-added tax exemptions. Specifically, the bill lowers corporate income tax rates, provides longer tax holidays and deductions for new businesses, expands VAT exemptions for essential goods, and reduces percentage taxes for non-VAT taxpayers. It aims to stimulate investment and economic activity by simplifying tax rules and reducing tax burdens for corporations and businesses.
The key amendments in the Tax Code under the CREATE bill include changes to corporate income tax rates, fiscal incentives for registered business enterprises, and value-added tax exemptions. Specifically, the bill lowers corporate income tax rates, provides longer tax holidays and deductions for new businesses, expands VAT exemptions for essential goods, and reduces percentage taxes for non-VAT taxpayers. It aims to stimulate investment and economic activity by simplifying tax rules and reducing tax burdens for corporations and businesses.
The key amendments in the Tax Code under the CREATE bill include, but not limited to,
the following:
1. Corporate income tax (CIT)
a. Adoption of graduated CIT rate effective 1 July 2020:
i. 20% CIT for domestic corporations with total assets of PHP100m and below, and with net taxable income of PHP5m and below ii. 25% CIT for other domestic corporations b. 25% CIT for resident and non-resident foreign corporations effective 1 July 2020 c. Reduction of minimum corporate income tax (MCIT) to 1% from 1 July 2020 to 30 June 2023 d. Reduction of CIT for proprietary, non-profit educational institutions and hospitals to 1% from 1 July 2020 to 30 June 2023 e. Tax exemption of foreign-sourced dividends of domestic corporations subject to certain conditions f. Clarification on the types of reorganizations covered by tax-free exchanges under Section 40(C)(2) of the Tax Code g. Repeal of improperly accumulated earnings tax (IAET) h. Repeal of 10% special income tax rate on regional operating headquarters (ROHQ) starting 1 January 2022
2. Fiscal incentives
a. Uniform fiscal incentives for newly registered business enterprises (RBE)
i. Income tax holiday (ITH) for 4 to 7 years ii. 5% gross income tax (GIT) or enhanced deductions for 10 years b. Total period of incentive availment has been increased to a maximum of 17 years. The length of the period of incentives takes into account the location and type of the registered activity c. Highly-desirable projects with a minimum investment capital of PHP50bn or those that can generate at least 10,000 employees, can enjoy a superior incentive package for up to 40 years which includes ITH for a maximum of 8 years d. Sunset period for existing RBEs: i. Firms enjoying ITH can continue to enjoy the same within the remaining ITH period ii. Firms enjoying 5% GIT can continue to enjoy the same for 10 years e. Existing RBEs may re-apply for the fiscal incentives under the CREATE bill after the lapse of the sunset period f. Approval of fiscal incentives for new projects or activities with investment capital of PHP1bn and below shall be delegated to their respective Investment Promotion Agencies (IPA). Fiscal incentives application for projects or activities with investment capital exceeding PHP1bn shall be subject to the approval of the Fiscal Incentives Review Board (FIRB) g. Duty exemption on certain importations, VAT exemption on importations, and VAT zero- rating on local purchases shall still apply
3. Value-added tax (VAT) and Percentage Tax
a. VAT-exemption on the sale or importation of digital or electronic reading materials
b. VAT-exemption on the sale or importation of drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-19 registered with and approved by the FDA from 1 January 2021 to 31 December 2023 c. VAT-exemption on the sale or importation of medicines for cancer, mental illness, tuberculosis, and kidney diseases to take effect on 1 January 2021 instead of 1 January 2023 d. Adjustment on the threshold of VAT-exemption on sale of real property to account for inflation, as follows: i. Residential lots from PHP1.5m to PHP2.5m ii. House and lot, and other residential dwellings from PHP2.5m to PHP4.2m e. Reduction of percentage tax for non-VAT taxpayers from 3% to 1% starting 1 July 2020 to 30 June 2023