President Ferdinand Marcos Jr. on Monday signed into law Republic Act 12066, the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act.

The new law builds on the economic reforms introduced by Republic Act 11534 or the CREATE law which was passed in 2021. The original law aimed to help businesses recover losses incurred during the Covid-19 pandemic by lowering corporate income tax rates and streamlining fiscal incentives.

In his speech, Marcos described the CREATE MORE Act as a “testament” to the Philippines’ efforts to become an investment destination.

“This law stands as a symbol of the invaluable insights shared by our international partners gathered during my trips abroad,” he said.

“Their feedback has enriched this legislation, a reflection of our resolve to foster a climate where businesses will flourish and continue to meaningfully contribute to the Philippine economy,” he added.

Under the new law, the Philippines’ tax regime and incentive framework has been enhanced, encouraging businesses — both local and international — to make investments.

It also clarifies the rules for availing of the value-added tax (VAT) and duty incentives, and further extends its coverage to include non-registered exporters and high-value domestic market enterprises, as well as a more efficient VAT and excise tax refund process.

For local registered business enterprises (RBE), CREATE MORE expands the Enhanced Deductions Regime, offering greater tax relief on other fees and charges.

RBEs are entities registered with the Investment Promotion Agency (IPA) and are organized under Philippine laws. They conduct business in different sectors that contribute to the national economy.

Some of these benefits include the reduction in the income tax rate from 25 percent to 20 percent, as well as deductions on power expenses which will benefit the manufacturing sector.

For the tourism industry, a 50-percent deduction for reinvestments and trade fair expenses may be enjoyed.

It also gives RBEs the flexibility to implement work-from-home arrangements for up to half of their workforce, without jeopardizing their eligibility for incentives.

Donations of capital equipment, raw materials, spare parts, or accessories to the government, government-owned or -controlled corporations (GOCCs), TESDA, state universities and colleges, and DepEd or CHEd-accredited schools are likewise tax exempt.

Businesses established before the CREATE Act can continue to enjoy the national and local benefits, including tax incentives, until 2034. They have until December 2024 to register and avail of these incentives as prescribed in the CREATE Act.

Marcos said that with these incentives for businesses to enjoy, more job opportunities will be opened.

“CREATE MORE is tangible proof that we hear and respond to the voice of the business community.”

“This reaffirms our commitment to work hand-in-hand with enterprise, continually seeking avenues to make your investments grow and prosper,” he added.

House lawmakers welcomed the new law, saying it is expected to generate up to 140,000 high-quality jobs.

According to House Speaker Martin Romualdez, one of the law’s principal authors, CREATE MORE aims to resolve confusion and ambiguities that have arisen about tax incentives the CREATE law had granted to local corporations since its enactment in March 2021.

Romualdez cited the complaints of investors on the alleged ambiguity of some provisions of CREATE, particularly those on value-added tax incentives.

“We acted fast to make adjustments in the law to preserve existing investments and to attract additional capital,” Romualdez said. “We hope the changes will satisfy our existing investors and entice more foreign capitalists to invest in the country.”

Jobs, jobs, jobs

Albay Rep. Joey Salceda, chairperson of the House Committee on Ways and Means, is optimistic the “largest pro-labor legislation” will directly create 142,000 high-quality jobs, and indirectly induce the creation of 860,000 more.

“It increases the demand for labor by encouraging more investments. This is the only way to truly sustain higher wages,” the solon-economist said.

The Philippine economy is one of the fastest-growing in Asia but still lags behind its neighbors in attracting foreign direct investment due to foreign ownership restrictions and high power costs.

Salceda said the new law will quell the longstanding issue of expensive energy by establishing a double deduction for power expenses for those under the enhanced deduction regime.

“This lifts the largest roadblock to foreign direct investments in the country. By encouraging investments from outside, we increase the bargaining power of the Filipino workers, who are currently in the chokehold of a few domestic players who get to set wages,” he said.

Salceda added, “Foreign investors, especially export industries, also tend to pay a significantly higher wage, as much as 47 percent higher than the average employee elsewhere.”

“It also enshrines the right to work from home in the export service sector, especially the BPO sector. Companies that have work from home schemes will continue to be eligible for tax incentives,” he said.

Apart from CREATE MORE, Salceda said Congress is gearing up to reform the taxes on the capital markets, which would also spur investments.