Following the Senate’s approval of the repackaged Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, its immediate ratification before the year-end was seen.
Finance Secretary Carlos Dominguez III expressed his hopes for the bill’s inking into law noting on the so-called “retroactive application” of CREATE’s benefit for businesses, which was supposed to be implemented in the second semester of 2020.
“This will allow taxpayers to properly adjust their books and returns for the filing season as the reduction of the CIT (corporate income tax) rate will be retroactively applied to 1 July this year,” Dominguez said.
Under the Senate version of the bill, taxpayers whose gross sales do not exceed the value-added tax or VAT-exempt threshold of P3 million, shall only pay one percent tax instead of the previous three percent starting 1 July 2020 to 30 June 2023.
Still, businesses whose annual taxable income does not exceed P5 million will be able to enjoy an immediate 10 percent reduction in the CIT rate, from 30 to just 20 percent.
Other corporations will benefit from the immediate five percent CIT reduction, to be followed by a one percentage reduction starting 2023 until it hits the same 20 percent five years after.
Acting Socioeconomic Planning Secretary Karl Kendrick Chua earlier said that CREATE will ultimately benefit the micro, small and medium enterprises (MSME), which comprise 99 percent of all the businesses in the country.
Still, the Cabinet official highlighted the bill’s ability to attract more foreign direct investments in the country, maximizing desirable economic outcomes such as job creation and technology transfer among others.
To recall, the Department of Finance revealed in its study that taxes and discounts given to favored enterprises cost the government a hefty P477.17 billion in 2018 alone.