Manila, Philippines - The House of Representatives' Ways and Means Committee has approved a bill to amend the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, aiming to improve the Philippines' tax incentives system.
According to Philippines News Agency, During a recent hearing, the committee approved the proposed amendments for the Reinvigorating the Economy (CREATE MORE) bill. The unnumbered substitute bill, as stated in the amendments, sets the income tax rates at 20 percent for domestic and resident foreign corporations that opt for the enhanced deductions regime provided in Section 294(C) of the bill. This regime includes various incentives, such as a depreciation allowance for assets acquired for production, additional deductions on labor, research and development, and training expenses, and deductions for domestic input and power expenses. The bill also proposes additional deductions related to trade fairs, exhibitions, and missions.
Furthermore, the bill encompasses the establishment of a streamlined tax refund system for registered business enterprises (RBEs) and the institutionalization of a risk-based classification of claims and audit framework, aiming to improve the VAT refund process in terms of timeliness, efficiency, and predictability.
Committee chair Joey Salceda highlighted the need for the Philippines to prepare for the implications of the Global Minimum Corporate Tax under the OECD's Inclusive Framework on Base Erosion and Profit Shifting (BEPS). This framework imposes a 15 percent global tax on multinational companies with revenues exceeding 750 million euros. Salceda noted that major Philippine trade partners like Japan and Korea have already approved legislation on this matter, and the Philippines, as the only ASEAN-6 economy yet to implement these rules, must evolve its tax incentive regime to remain compliant while still attracting foreign investment.
Salceda suggested a tax regime that combines a 15 percent corporate income tax rate with enhanced deductions for 25 years. He invited the Department of Finance and other stakeholders to propose amendments to the CREATE Law that would align the country's tax incentives with the global minimum tax scheme. The bill was moved for approval to progress on resolved issues and facilitate further deliberations at the plenary. Salceda emphasized the urgency of this legislation, citing the President's instructions and the leadership's goal to approve it by the end of the month.