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Congress to ratify CREATE bicam report

THE Bicameral Conference Committee officially approved the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

Senate Majority Leader Juan Miguel F. Zubiri said this measure reconciled the disagreeing provisions of Senate Bill No. 1357 and House Bill No. 4157.

The House of Representatives and the Senate are expected to ratify the report today

CREATE is the new version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA), which was revised to address the economic impact of the pandemic. It will grant incentives to exporters and “critical” domestic enterprises for up to 17 years.

"The incentives scheme for registered enterprises under the Senate version would also be retained, save for some changes in the incentives to be granted for both exporters and ‘critical’ domestic market enterprises, and for general domestic market enterprises,” Senator Pia S. Cayetano said in a statement.

Under the measure, four to seven years of income tax holiday (ITH) and 10 years of special corporate income tax (SCIT) will be granted to exporters and “critical” domestic enterprises identified by the National Economic and Development Authority (NEDA).

Other domestic enterprises with investment capital of at least P500 million may enjoy four to seven years of ITH and 5 years of SCIT, and 5 years of enhanced deductions.

The measure also immediately lowers the corporate income tax (CIT) to 25% from the current rate of 30%.

Moreover, the bicameral panel agreed to retain the Senate proposal to lower the CIT further to 20% for micro, small, and medium enterprises with net taxable income below P5 million and total assets below P100 million.

The bill also retained the P1-billion investment threshold for projects that will need to secure approval from the Fiscal Incentives Review Board (FIRB). Investment projects below P1 billion will only be evaluated by investment promotion agencies.

Enterprises that will fully relocate outside Metro Manila will be entitled to additional three years of ITH, while those that will locate in conflict- or disaster-stricken areas will have two additional years of ITH.

The CREATE bill also will lower the minimum CIT to 1%, effective July 1, 2021 to June 30, 2023, after which it will revert to its original rate of 2%. Nonprofit proprietary educational institutions and hospitals will pay 1% CIT in the same period, instead of 10%.

“The passage of CREATE will guide our economic recovery, following the contraction of our gross domestic product last year by 9.5%, the worst on record since the post-World War II era,” Ms. Cayetano said.