Corporate Recovery and Tax Incentives: a counter to the COVID-19 pandemic

Corporate Recovery and Tax Incentives: a counter to the COVID-19 pandemic

President Rodrigo Duterte signed into law last 26 March 2021 Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (“CREATE Act”). The law took effective on 11 April 2021. The CREATE Act was introduce to counter the effects of COVID-19 on the Philippines’ economy, it was suggested to be a time-   bound and tailor-made set of corporate and tax reforms.[1] It also reduces the financial burden on foreign and domestic companies through various tax incentives.[2] And, increase the country’s investment appeal and better compete with its ASEAN counterparts.[3]

One of the main goals of the Create Act is to lower the corporate income tax rate from 30% to 25% beginning 1 July 2020.[4]  Where the corporation’s net income does not exceed PHP 5 million and its total assets do not exceed PHP 100 million, the tax rate shall be 20%, this is excluding land where the business is situate.[5]Because for nonresident foreign corporations, the tax rate shall be 25% beginning 1 January 2021.[6] Not only that, but the Minimum corporate income tax (MCIT)  shall be imposed at the rate of 1% instead of 2% beginning 1 July 2020 until 30 June 2023.

Throughout the Create Act there are various VAT exemption such as medicines, medical supplies, and vaccines.[7] Notably, VAT-exempt taxpayers, whose gross annual sales do not exceed PHP 3 million, shall be subject to 1% tax instead of 3% percentage tax, on their gross quarterly sales or receipts beginning 1 July 2020 until 23 June 2023.[8]

With the introduction of the Create Act, the Philippine government further promotes a fair and accountable tax incentives system to make sure that every peso granted as a tax incentive yields a net positive benefit to the society.[9]

Written by: Susan Cortez Al-Khatib


[1] The Philippines CREATE Act comes into effect, pushing for accelerated economic recovery available at https://www.aseanbriefing.com/news/the-philippines-create-act-comes-into-effect-pushing-for-accelerated-economic-recovery/ (last accessed at Aug. 21, 2021).

[2] Id.

[3] Id.

[4] Philippines: Corporate recovery and tax incentives for enterprises (CREATE) Act passed into law available at https://www.globalcompliancenews.com/2021/05/07/philippines-corporate-recovery-and-tax-incentives-for-enterprises-create-act-passed-into-law-08042020/ (last accessed at Aug. 21, 2021).

[5] Id.

[6] Id.

[7] The Corporate Recovery and Tax Incentives for Enterprises Act. [CREATE Act], Republic Act No. 11534 (2021).

[8] Id

[9] Package: Corporate recovery and tax incentives for enterprises (CREATE) Act available at https://taxreform.dof.gov.ph/tax-reform-packages/p2-corporate-recovery-and-tax-incentives-for-enterprises-act/ (last accessed at Aug. 21, 2021).

Leave a Reply