Last September 2019, the House of Representatives on the third and final reading voted in favor of House Bill (HB) 4157 or CORPORATE INCOME TAX AND INCENTIVES RATIONALIZATION (CITIRA) which will amend certain provisions of the National Internal Revenue Code (NIRC) of 1997.

On March 9, 2020, President Rodrigo Duterte certified as urgent Senate Bill 1357 which is the upper house’s version of the bill. However, further bicameral deliberations on the matter have suddenly stopped due to the COVID-19 pandemic that saw restrictions and lockdowns on the Philippine capital and provinces.

Now, that the Philippines is starting to lift some of its restrictions the immediate concern is how to help businesses get back on their feet. May senators have spoken that the passage of CITIRA, especially its provision for reduced corporate income tax, shall be a big help for businesses.


Businesses in the Philippines is mostly composed of small and micro, small, and medium enterprises (MSMEs), with their number at around 99% of the total companies and big enterprises at more or less at 1%. It is mostly big enterprises that are qualified for incentives and as a result, they only pay around 6% to 13% corporate income tax. In contrast, MSMEs pay 30% corporate income tax which is one of the highest in the ASEAN region. The CITIRA’s aim is to strengthen MSMEs to encourage local business to expand or put up new investments and also to attract foreign investors alike.


  1. The CITIRA aims to lower the corporate income tax (CIT) rate of the Philippines to 20% of the net income gradually in a span of ten (10) years or until the year 2029. This both included under HB 4157 and SB 1357, however, the latter bill did not place any restrictions on the decrease of CIT for the first five (5) years.
  2. With regards to the Optional Standard Deduction under Section 34(L) of the National Internal Revenue Code, House Bill 4157 proposes the same be amended from changing its base for individuals from gross revenue to gross income. Further, businesses classified by the DTI as Micro, Small, Medium Enterprises (MSMEs) shall have the choice to have its optional standard deduction in an amount not exceeding 40% of its gross income.
  3. Both HB 4157 and SB 1357 propose income tax holidays. For HB 4157 business activities that are under the Strategic Investment Priority Plan will have income tax holidays from three to six years depending on the location. Under the SB 1357 qualified business will have two to four years of income tax holiday and another three to four years of Special CIT. The special CIT shall have a tax rate of eight percent and will be increased to ten percent in the year 2022 and the same shall be in lieu of all taxes.
  4. With regards to Value-Added Tax (VAT), HB 4157 proposes that registered enterprises whose export meet the ninety percent threshold and are located within an ecozone, freeport, or those utilizing customs bonded manufacturing warehouse shall be exempt. On the other hand, SB 1357 proposes VAT and zero-rating on all local purchases.
  5. The CITIRA as proposed by HB 4157 aims to remove the difference in the incentives given by the Philippine Economic Zone Authority (PEZA) and by the Board of Investment (BOI). Under the proposed amendments to Section 294-A of the NIRC, the following are the additional deductions in taxes after the initial tax holidays:
    • Depreciation allowance for qualified capital expenditures (10% for buildings and 20% for machineries and equipment).
    • Up to 50% additional deduction for the labor expense
    • Up to 100% additional deduction for research and development.
    • Up to 100% additional deduction on trainings for the employees.
    • Up to 100% additional deduction in infrastructure development.
    • Deduction for reinvestment allowance to the manufacturing industry.
    • Enhanced Net Operating Loss Carry-Over
    • Up to 50% additional deduction on domestic expenses.
  6. The CITIRA as proposed by HB 4157 aims to give incentives to companies in agribusiness with projects outside Metro Manila, or with activities in areas recovering from armed conflict. Further, additional incentives are given to companies who will relocate outside of Metro Manila.

Written by: Atty. Jon Dominic Penaranda

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