by: Atty. Gregorio B. Austral, CPA
The CREATE Bill has finally become a law
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill has finally become a law after President Rodrigo Duterte signed the same with item vetoes on Friday, March 26, 2021.
The law will usher in the long-needed reforms in the Philippines’ corporate tax and fiscal incentives system. At the current corporate income tax (CIT) rate of 30%, the Philippines has one of the highest corporate income tax rates which discouraged investors from investing in the Philippines.
With the passage of the law, businesses will have the largest economic stimulus measures to recover from the economic downturns brought about by the COVID-19 pandemic.
Among the beneficiaries of the law are the domestic micro, small and medium-sized enterprises with a taxable income of P5 million and below and with total assets of not more than P10 million. From the current CIT of 30%, the aforementioned MSMEs will be taxed at 20% of their taxable income while domestic corporations which earn a taxable income above P5 million will be taxed at reduced rate of 25%. Foreign corporations which are subject to the regular rate of 30% will be taxed at 25%.
Non-profit and proprietary educational institutions and hospitals will enjoy a significant tax cuts from the original preferential tax rate of 10% to a very minimal tax of 1% from July 1, 2020 to June 30, 2023.Non-stock and non-profit educational institutions will continue to enjoy their current tax exemptions.
Let us hope that the CREATE Law will serve its purpose of reforming the corporate tax system while at the same giving economic stimulus to MSMEs.