UPDATE ON CREATE | Bicam lists key features; ratification seen Tuesday
THE head of the Senate panel in the bicameral conference committee on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill revealed late Monday an updated list of the key features of the measure, which both chambers are expected to ratify on Tuesday.
The economic managers had been prodding Congress to rush passage of the measure, seen to boost economic recovery with the outright reduction of corporate income tax (CIT), amid continued criticism of its other key plank, the rationalized fiscal incentives.
The Senate passed its version on November 26, 2020 and the House, eight months earlier.
Senate Ways and Means Chair Pia Cayetano was joined at Monday’s bicameral meeting by Majority Leader Juan Miguel Zubiri and Sen. Sherwin Gatchalian.
Per Cayetano’s office, here are the highlights of CREATE as approved by the bicameral teams:
I. LOWER TAXES
– Lowered corporate income tax from 30% to 20% for small and medium corporations (with net taxable income of P5 million and below, and with total assets of not more than P100 million excluding land)
– Lowered corporate income tax from 30% to 25% for all other corporations
– Lowered percentage tax from 3% to 1% for small businesses whose gross sales or receipts do not exceed the VAT-exempt threshold of P3 million (effective July 1, 2021 to June 30, 2023)
– Lowered minimum corporate income tax from 2% to 1% (effective July 1, 2021 to June 30, 2023)
II. FISCAL INCENTIVES
– Up to 17 years of incentives (4-7 years of income tax holiday + 10 years of special corporate income tax or enhanced deductions) for exporters and for “critical” domestic market enterprises, which will be defined by NEDA
– Up to 12 years of incentives (4-7 years of income tax holiday + 5 years of special corporate income tax or enhanced deductions) for other domestic market enterprises
*Note: Domestic market enterprises may only qualify for SCIT if they have a minimum investment capital of P500M
III. COUNTRYSIDE DEVELOPMENT
– Higher incentives for registered enterprises located outside of metropolitan areas to attract more investors and create more jobs in the countryside
– Additional 3 years of income tax holiday for registered enterprises that will fully relocate outside of NCR
– Additional 2 years of income tax holiday for registered enterprises in areas recovering from disasters or conflict
IV. COVID-19 AND HEALTH INCENTIVES
– VAT-free sale and importation of COVID-19 drugs, vaccines, medical devices, and components of personal protective equipment (PPEs) until December 2023
– VAT exemption for medicines for cancer, mental illness, tuberculosis, and kidney diseases
– Reduced preferential tax rates from 10% to 1% for non-profit hospitals and educational institutions (effective July 1, 2021 to June 30, 2023)
V. OTHER TAX RELIEF
– Higher VAT exemption threshold from P1.5 million to P2.5 million for socialized and low-cost housing, and from P2.5 million to P4.2 million for house and lot and other residential dwellings
– VAT exemption on sale, importation or publication of e-books