CREATE MORE Law Set to Attract More Foreign Investment
The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act, commonly known as the CREATE MORE Act (Republic Act No. 12066), was signed into law on November 11, 2024. This legislation builds upon the earlier CREATE Act, aiming to further enhance the Philippines' economic competitiveness by refining tax policies and incentive structures to attract both domestic and foreign investments.
Key Provisions of the CREATE MORE Act:
Reduced Corporate Income Tax Rate: The law reduces the corporate income tax rate for Registered Business Enterprises (RBEs) under the Enhanced Deduction Regime (EDR) from 25% to 20%, effectively lowering the overall tax liabilities for qualifying companies.
Simplified Local Taxation: To alleviate administrative burdens, the act imposes a local tax of up to 2% of gross income for RBEs during their Income Tax Holiday (ITH) or Enhanced Deduction Regime (EDR) periods. This measure replaces various local taxes and fees, simplifying compliance and allowing businesses to focus more on operations.
Value-Added Tax (VAT) Zero-Rating: Sales to export-oriented enterprises, defined as those with at least 70% export sales, are now VAT zero-rated if directly attributable to export activities. This provision aims to bolster the competitiveness of Philippine exports in the global market.
Extended Tax Incentives for Strategic Investments: The law extends tax perks for strategic investments to up to 27 years, providing long-term fiscal incentives to attract and retain significant investments in key sectors.
Flexible Work Arrangements: The act institutionalizes provisions allowing up to 50% of employees in RBEs to work from home while still maintaining their incentives. This flexibility addresses modern workforce trends and supports business continuity.
Objectives and Impact:
The CREATE MORE Act is designed to refine the policy and administration of tax incentives in the Philippines, aiming to:
Enhance Global Competitiveness: By lowering corporate income taxes and simplifying tax compliance, the law seeks to make the Philippines a more attractive destination for both domestic and international investments.
Stimulate Economic Growth: The act aims to invigorate the economy by encouraging business expansion, job creation, and increased economic activities through favorable tax policies.
Address Implementation Issues: By clarifying and improving upon provisions in the original CREATE Act, the new law addresses previous ambiguities and implementation challenges, ensuring a more predictable and accountable tax incentives regime.
Overall, the CREATE MORE Act represents a significant step in the Philippines' ongoing efforts to create a more investment-friendly environment, fostering economic resilience and growth in the face of global challenges.