July 8, 2021

Resource Speakers:

Atty. Raihana Menelifa T. Lucman, Legal Division

Fidel M. Cambare, Assessment Division
EFFECTIVITY
• For those provisions that explicitly state
their effectivity date – You apply the
effectivity date as stated in the
provisions including those that have
retroactive application.
• For those provisions that did not
explicitly state the effectivity or
application date – the effectivity date is
April 11, 2021 (15 days after its publication on
March 27, 2021)
Implementing Rules and Regulations of
RA No. 11534 (CREATE Law)
Revenue
Date of
Regulations Subject Matter
Issue
(RR) No.
RR No. 2- Amends certain provisions of RR No. 2-98, as amended, to implement the amendments April 8,
2021 introduced by RA No. 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or 2021
CREATE Act) to the NIRC of 1997, as amended, relative to the Final Tax on certain passive
income
(Published in Philippine Star and Malaya Business Insight on April 9, 2021)
RR No. 3- Prescribes the Rules and Regulations to implement Section 3 of RA No. 11534 (Corporate April 8,
2021 Recovery and Tax Incentives for Enterprises Act or CREATE Act), amending Section 20 of the 2021
NIRC of 1997
(Published in Philippine Star on April 9, 2021)
RR No. 4- Implements the provisions on Value-Added Tax (VAT) and Percentage Tax under RA No. April 8,
2021 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act), which 2021
further amended the NIRC of 1997, as amended, as implemented by RR No. 16-2005, as
amended
(Published in Philippine Star on April 9, 2021)
RR No. 5- Implements the new Income Tax rates on the regular income of corporations, on certain April 8,
2021 passive incomes, including additional allowable deductions from Gross Income of persons 2021
engaged in business or practice of profession pursuant to RA No. 11534 (Corporate
Recovery and Tax Incentives for Enterprises Act or CREATE Act), which further amended the
NIRC of 1997
(Published in Philippine Star and Malaya Business Insight on April 9, 2021)
Implementing Rules and Regulations of
RA No. 11534 (CREATE Law)
Revenue
Date of
Regulations Subject Matter
Issue
(RR) No.
RR No. 8- Amends certain provisions of RR No. 4-2021, which implemented the VAT and Percentage June
2021 Tax provisions under RA No. 11534 (CREATE Act) 11, 2021
(Published in Philippine Star on June 12, 2021)

Revenue Memorandum Circular (RMC) on

RA No. 11534 (CREATE Law)
Revenue
Memorandum Date of
Subject Matter
Circular (RMC) Issue
No.
RMC No. 62- Clarifies certain provisions of Revenue Regulations No. 5-2021 relative to Corporate May 17,
2021 Income Taxation 2021

RMC No. 67- Clarifies the issues relative to the temporary reduction of Percentage Tax rate imposed May 24,
2021 under Section 116 of the NIRC of 1997, as amended by Section 13 of RA No. 11534 2021
(CREATE Act)
RR No. 5-2021
RMC No. 62-2021
RR No. 4-2021
RR No. 8-2021
RMC No. 67-2021
RR No. 2-2021
RR No. 3-2021
Frequently
Asked
Questions
(FAQs)
 F.A.Q.s
QUESTION RECOMMENDED ANSWER
Is CREATE Law only No. Although majority of the provisions
applicable for pertains to corporate tax amendments, other
Corporations (the “C” in provisions also talked about individuals and
CREATE stands for other non-corporate taxpayers particularly
Corporate) those non-VAT individual taxpayers who enjoys
3% percentage tax (now 1%).

Are owners of tricycles, No. The 1% percentage tax change is only

motorelas, jeepneys applicable to those taxpayers covered under
and transport carrier Section 116 of the Tax Code.
services can now pay
only 1% percentage tax? The owners of Domestic Carriers and Keepers
of Garages are in Section 117 of the Tax Code,
hence not covered and shall continue to pay
3% PT.
 F.A.Q.s
QUESTION RECOMMENDED ANSWER
The lower tax rate of 25 Quarterly declarations are not final because tax
percent is retroactive to is applied on annual income. Hence, the
July 1, 2020. Can we effective tax rate of 27.5 percent should be
apply the 25 percent tax applied on your taxable income in 2020.
rate on our income for
the last six months?
Is the minimum It’s not suspended, but it is temporarily
corporate income tax reduced from two to one percent retroactive
(MCIT) suspended? to July 1, 2020 up to June 30, 2023. It follows
the same manner of computation for the new
corporate income tax for 2020. So the effective
MCIT rate for calendar year 2020 is 1.5
percent.
 F.A.Q.s
QUESTION RECOMMENDED ANSWER
Is the 40 percent Yes it is, for big and small businesses and
optional standard individuals. However, individuals are still only
deduction (OSD) still allowed to use 40 percent OSD based on their sales
available? and if they use it, they cannot deduct direct costs,
unlike corporations.

Note that regulations implementing the OSD law

are deemed legislatively reenacted. Thus, you
cannot use OSD in your annual ITR if you have not
used OSD in your first quarterly tax return.
What is the new value- The CREATE law provided for the increase in the threshold of
VAT exemption for dwellings to P4.2 million. However, this was
added tax (VAT) among the provisions vetoed by the President. While the veto
exemption threshold for communication alluded that the VAT exemption shall remain at
P2.5 million as it is the Tax Reform for Acceleration and Inclusion
house and lot or
(TRAIN) law, this however is inaccurate as the threshold under
dwellings under the TRAIN law went down to P2 million beginning 2021. Since
CREATE? the President can only veto but not pass laws, fresh legislation is
needed to increase the current threshold.
 F.A.Q.s
QUESTION RECOMMENDED ANSWER
How is the sunset You can enjoy your income tax holiday (ITH)
period computed for undisturbed, but you can only avail of the five
registered enterprises? percent GIT for the next 10 years after the ITH.
Or if you are already in the five percent regime,
you can enjoy ITH for the next 10 years,
technically from the effectivity of CREATE.
Will registered In the CREATE law, so long as the activity of the
enterprises be allowed registered enterprise is in the strategic investment
to register again for priorities plan, they can reapply for incentives after
incentives after the the sunset period. This provision however has been
vetoed by the President. These companies can only
sunset period?
register again if they are engaged in a new activity
that is entitled to incentives. This brings it back to
the declared policy of government that for
incentives, there is no forever.

QUESTION
Specially in this
pandemic, does CREATE
now allow purely
electronic invoicing?
Shall I amend the last 2
quarters of 2020 in my
Percentage Tax returns so
that I can claim the tax credit
in 1st/2nd quarters of 2021?
F.A.Q.s
RECOMMENDED ANSWER
This has not been touched on in CREATE but if the
earlier TRAIN law is to be followed, the
government has until January 2023 (five years
from effectivity of TRAIN) to establish the system
that is needed to store and process data. It can
happen earlier but today, BIR rules still require
hard copies of all invoices, receipts, books of
accounts and accounting records because the BIR
is not yet prepared to conduct digital audits,
among other things.
Yes. You should amend the 3rd and 4th
quarters of 2020 to validly claim the tax
credits in 1st and 2nd quarters of 2021.
THANK YOU