CREATE likely retroactive — DOF

MANILA, Philippines — The proposed reduction in corporate income tax under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill would likely be implemented retroactively effective July 2020, the Department of Finance (DOF) said.

“As of now, the version of the bill in the Senate is that the effectivity of the corporate income tax reduction is July 1, 2020,” DOF director for the Information and Liaison Office Juvy Danofrata said.

One of the salient points of the CREATE bill is the immediate cut in the corporate income tax rate from 30 percent to 25 percent this year.

The proposed reduction was scheduled for July this year, but the bill is still pending in the Senate.

Following President Duterte’s renewed call for the bill’s passage during his State of the Nation Address, Finance Secretary Carlos Dominguez expressed hope that lawmakers would finally approve the measure.

Senate President Vicente Sotto III had said that the CREATE bill, along with the Bayanihan to Recover as One Act (Bayanihan 2) and other proposed economic stimulus plans, was among the priorities of the Senate.

According to DOF estimates, the measure may generate P42 billion in tax savings for corporations in the second half alone. Over the next five years, the figure is expected to reach P625 billion.

Aside from this provision, the CREATE bill also seeks to rationalize the fiscal incentives system, and allow the government to “tailor-fit” fiscal and non-fiscal incentives based on investor needs.

The proposal also pushes for the extension of the net operating loss carry over (NOLCO) from three to five years, for losses incurred in 2020 by all businesses that are not large taxpayers.

Meanwhile, DOF director for the Strategy, Economics and Results Group Euvimil Nina Asuncion said the agency, in cooperation with the Senate, is currently reviewing Package 4 of the Comprehensive Tax Reform Program (CTRP) to make it more responsive to the needs of taxpayers amid the COVID-19 pandemic.

“We’re reviewing the whole package with the Senate staff. There will be changes of course because of the pandemic. And we’re basically making Package 4 somewhat a response also to the pandemic. So it’s something that would be more of a recovery bill as well,” she said.

The package, as contained in the Passive Income and Financial Intermediary Taxation Act (PIFITA), seeks to rationalize taxes in the financial sector.