Doing business in the Philippines

Corporate Recovery and Tax Incentives for

Enterprises (CREATE) Act (Salient Features)

March 2021
On March 26, 2021, President Duterte signed the Corporate Recovery and Tax Incentives for
Enterprises (CREATE) as Republic Act No. 11534 with certain line items vetoed. The CREATE
law is seen as a fiscal relief and recovery measure for Filipino business still suffering from
the COVID 19 pandemic. The law also aims to make the Philippines more competitive in
ASEAN by lowering the corporate income taxes to 25% and 20% for small, medium and micro
enterprises. It also aims to plug tax leakages by rationalizing the fiscal incentives granted to
investors and shifts the administration of such investments towards a performance-based,
targeted and time bound system.

Salient Features

01 Corporate income tax is reduced 08 Domestic market enterprises shall be

from 30% to 25% for domestic and
resident foreign corporations. Domestic
corporations with net taxable income
not exceeding P5million and with total
assets not exceeding P100million is taxed
at 20% effective July 1, 2020. MCIT rate
reduced from 2% to 1% effective July 1,
2020 to June 30, 2023
entitled to 4 to 7 years ITH (Income Tax
Holiday) to be followed by 5 years ED.
09 Registered enterprises are exempt from
customs duty on importation of capital
equipment, raw materials, spare parts, or
accessories directly and exclusively used
in the registered project or activity.

02 Income tax rate for nonresident foreign
corporation is reduced from 30% to 25%
effective January 1, 2021.
03 Percentage tax reduced from 3% to 1 %
effective July 1, 2020 to June 30, 2023.
10 VAT exemption on importation and VAT
zero-rating on local purchases shall only
apply to goods and services directly and
exclusively used in the registered project
or activity by a Registered Business
Enterprise (RBE).

04 Rate of tax for proprietary educational 11 For investments prior to effectivity of

institutions and hospital reduced from
10% to 1% effective July 1, 2020 to June
30, 2023.
05 Improper Accumulation of Earnings Tax is
repealed.
CREATE: RBEs granted only an ITH -
continue with the availment of the ITH
for the remaining period of the ITH. RBEs
granted an ITH + 5% GIT or currently
enjoying 5% GIT - allowed to avail of the
5% GIT for 10 years.

06 Definition of reorganization for purposes

of applying the tax free exchange
provision under Section 40(C)(2) is
expanded. Prior BIR ruling or confirmation
shall not be required for purposes
of availing the tax exemption of the
exchange.
The law is set to take effect 15 days after
its complete publication in the Official
Gazette or in a newspaper of general
circulation.

07 Qualified export enterprises shall be

entitled to 4 to 7 years ITH to be followed
by 10 years 5% Special Corporate Income
Tax (SCIT) OR Enhanced Deductions (ED).

2 Mazars Doing Business in the Philippines - March 2021

Contacts
Jacqueline Villar
Managing Partner
Tel. : +63 2 8864 0896
Mobile: +63 917 897 1892
jacquie.villar@mazars.ph

Maricel Baltazar
Tax Principal
Tel. : +63 2 8864 0896
mache.baltazar@mazars.ph

Angelica Lorraine Tobillo

Tax Compliance Manager
Tel. : +63 2 8864 0896
Mobile: +63 919 004 6864
lorraine.tobillo@mazars.ph

www.mazars.ph

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