CREATE amendments to improve Philippines investment climate, says DOF

MANILA, Philippines — Amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law are expected to address the issues hounding the Philippines’ investment climate, according to the Department of Finance (DOF).

Finance Secretary Benjamin Diokno has thrown his support to the proposed amendments to the more than two-year- old law as doing so would help the Philippines realize its potential as a global investment hub.

The CREATE Law cuts the corporate income tax rates to make them comparable with the ASEAN region.

The law also adopted a simpler and more effective fiscal incentives system, ensuring that incentives are performanced-based, time-bound, targeted, and transparent.

“The proposed amendments to the CREATE Act will enhance the incentives, clarify the rules and policies on the grant and administration of incentives to qualified enterprises, and address issues affecting the country’s investment climate,” Diokno said.

Economists have been flagging the lack of growth in investments entering the Philippines as this could impact the momentum of economic expansion in the country.

Banks also noted that the investment outlook for the Philippines remains challenging due to the very high interest rate environment globally as central banks continue with their monetary policy tightening stance.

Under the CREATE to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, major areas of reform include the establishment of a streamlined tax refund system for registered business enterprises (RBEs) and institutionalization of risk-based classification of claims and audit framework.

This is aimed at improving the timeliness, efficiency, and predictability of the value added tax (VAT) refund process.

The bill is also seeking to expand the enhanced deduction regime in a bid to improve the country’s presence and share in the foreign market.

This increases the deduction for power expenses from 150 percent to 200 percent, and 200 percent deduction on expenses relating to approved trade fairs, exhibitions, and missions.

Further, the CREATE MORE bill proposes to clarify the transitory provision by expressly exempting transitory RBEs under the five percent gross income earned regime from all national and local taxes, including VAT and duty incentives.

The enactment of CREATE also paved the way for the Cabinet-level Fiscal Incentives Review Board (FIRB) to oversee the grant and administration of incentives of investment promotion agencies.

As of August, FIRB has approved 45 big-ticket tax incentive applications from various RBEs with a total investment capital of P721.29 billion.

The projects are expected to create 31,421 jobs in information and telecommunications infrastructure, transportation, manufacturing, and real estate.