The Philippine Chamber of Commerce and Industry (PCCI), representing some 30,000 large, medium, small, and micro-enterprises (MSMEs) nationwide, strongly supports the immediate passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
CREATE includes enhanced provisions from its previous version, the Corporate Income Tax and Incentives Reform Act (CITIRA), to respond to the challenges brought about by the COVID-19 pandemic and help MSMEs get back on their feet.
The measure proposes a longer transition period for firms currently enjoying the 5 percent tax on gross income earned (GIE) incentive. The 4-9 years of status quo under CREATE is two years longer than the transition period under CITIRA, which gave firms 2 to 7 years.
By extending the transition period for firms registered with investment promotion agencies (IPAs), the Department of Finance (DOF) directly addresses some businesses’ requests for ample time to adjust to the new incentive scheme. The extension also allows firms more time to rebalance their finances after COVID-19.
Even with the extended transition period, the DOF believes that many, if not most, firms will find the modernized incentives system more attractive and better suited to their needs. Thus, we have maintained the option to shift to the new tax incentives regime immediately without exhausting the transition period.
Other enhancements in CREATE include:
✅a faster reduction of the corporate income tax (CIT) rate and longer net operating loss carryover (NOLCO) for losses of small businesses in 2020; and
✅more flexibility in the grant of incentives, including tax and non-tax incentives.
PCCI said the enhancements made to CITIRA under CREATE will help firms recover from the current economic slowdown. (Department of Finance)