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CREATE vetoes seen ‘make, break’ factor

RBE will have to make do with the 10-year sunset period or the timeframe for income tax holidays before they graduate to the regular 25 percent corporate income tax rate

Raffy Ayeng

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Vetoed provisions in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will be a “make or break” factor for foreign investors as locators in the economic zones may either expand or leave the country totally and choose other nations to pour their investments, a ranking official of the Philippine Economic Zone Authority (PEZA) said yesterday.

One of the items vetoed by the President which may impact the country’s existing foreign direct investors is the removal of the extension of availment of tax incentives by existing registered business enterprises (RBE), as the President indicated that such “extension of incentives for existing projects is unfair to ordinary taxpayers and un-incentivized enterprises and further, only new activities and projects deserve fresh incentives.”

Under CREATE, RBE will have to make do with the 10-year sunset period or the timeframe for income tax holidays (ITH) before they graduate to the regular 25 percent corporate income tax (CIT) rate.

PEZA is now preparing its inputs to the Implementing Rules and Regulations (IRR) of the new law through plans to conduct dialogues with locator companies.

As explained by Technical Education and Skills Development Authority Deputy Director General for Policy and Planning Tereso Panga, such a scenario could be a make or break situation as affected ecozone locators have the choice of retaining their facilities and invest in new projects to be entitled to a longer ITH and special corporate income tax rate (SCIT) period with a total of 14 to 17 years.

“Or worse, they might just pack up and transfer to a more willing host-country that can offer better incentives for their investments as their availment of more advantageous incentives for sunk projects with the Investment Promotion Agencies (IPA) prior to CREATE were cut short by the mandatory sunset period for RBE,” Panga said.

Plaza confident

For her part, PEZA Director General Charito “Ching” Plaza noted the signing of Republic Act 11534 or the CREATE law that aims to gradually lower the corporate income tax from 30 percent to 25 percent and streamline the government’s fiscal incentives for investments both covering foreign and domestic enterprises will prove beneficial to the country.

Plaza has thanked the President and Congress for considering most of the concerns and suggestions from the industry associations and PEZA-registered export industries which were incorporated in the CREATE Law.

“We are happy with the final CREATE Act after all those years of struggle.

We recognize the need to gradually change and reform the national tax or revenue system yet at the same time address the need to maintain and attract investors’ confidence in the Philippines, especially during the pandemic,” Plaza said.

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