I thank the President Duterte for approving the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, a reform I first filed as a freshman Congressman in 1998, and a reform I was happy to finally help bring to the finish line as principal author and sponsor.
I have received word from friends in the Palace that the core of the reform, lower corporate income tax and fiscal incentives rationalization, is intact even with some veto items on other areas. I am yet to receive a full copy of the veto message, but I am certain that Corporate Income Tax is now 20% for MSMEs, and 25% for all other corporations.
Key pandemic relief, such as lower Minimum Corporate Income Tax (MCIT) and percentage taxes were also retained until June 2023. Proprietary educational institutions and hospitals which are nonprofit will pay a corporate income tax rate of 1% instead of the current 10%, from July 1, 2021 to June 30, 2023. This will help schools and hospitals which are crucial to the country’s post-COVID-19 recovery.
I am also happy to say that the bill has retained the pro-countryside preference of our version. Under CREATE, places like Bicol will receive the longest and biggest tax incentives, of up to 17 years for new locators, and a bonus of 3 years of income tax holiday for those relocating from NCR to these areas. We will also grant a bonus 2-year ITH to areas recovering from calamities. This brings the maximum length of incentives for less-developed, disaster-recovering areas to 22 years, among the most generous in Asia.
In the coming days, perhaps hours, I expect to receive a full copy of the President’s veto message. I have been assured, however, that the core of the reform was maintained.
As Ways and Means Chair, the lead tax policymaker in the House, I will engage in conversations with my counterpart in the Executive Branch, Secretary Dominguez, to see what we can work out on tax administration to ensure that people have enough time or leeway during the April 15 tax filing deadline. The changes in the tax code due to CREATE will clearly entail some significant accounting work on the part of businesses. If an extension is not doable, we may work out other arrangements.
CREATE has been created. This is one of the pins of light signaling the end of this dark economic tunnel.
Rep. Joey Sarte Salceda
Principal Author, Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act
March 26, 2021