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Atty. Rodel C. Unciano discusses the conditions for availment of tax incentives under the newly signed CREATE law.

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Tax incentives under CREATE (Part II)

By: Atty. Rodel C. Unciano

"Subject to certain conditions, the tax incentives under the CREATE law may be granted to registered enterprises only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (SIPP) to be formulated by the Board of Investments, in coordination with the Fiscal Incentives Review Board, Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, and subject to the approval of the President. Projects or activities not listed in the SIPP shall be automatically disapproved."

In a previous column, I discussed the bundle of tax incentives that enterprises may avail under the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE which are generally categorized into five types as follows: 1) Income Tax Holiday (ITH), 2) Special Corporate Income Tax (SCIT), 3) Enhanced Deductions (ED), 4) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, and 5) Value Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases.

Subject to certain conditions, the tax incentives under the CREATE law may be granted to registered enterprises only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (SIPP) to be formulated by the Board of Investments, in coordination with the Fiscal Incentives Review Board, Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, and subject to the approval of the President. Projects or activities not listed in the SIPP shall be automatically disapproved.

746BMArticleApri27TaxIncentives underCREATEPT2RCUAPR27 IMG 46312 optimized 1The SIPP shall contain list of priority projects or activities taking into account the amount of investments, generation of employment especially in less developed areas, considerable amount of net exports, use of new technology, as well as processes and innovations that will lead to the attainment of sustainable development goals, including but not limited to the adoption of adequate environmental protection systems and sustainability strategies.

The SIPP shall also take into account the promotion of market competitiveness, enhancement of the capabilities of Filipino enterprises and professionals to produce and offer sophisticated products and services. Contribution to Philippine food security, generation of incomes in the agriculture and fisheries sector and creation of services and activities that can promote regional and global operations in the country are likewise paramount considerations.

Notwithstanding the foregoing, the President may modify the mix, period or manner of availment of incentives or craft the appropriate financial support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs, among others. This is however subject to maximum incentive levels recommended by the Fiscal Incentives Review Board and in no case that the period of incentive availment shall exceed forty (40) years.

With the effectivity of CREATE, what will happen to the incentives currently being enjoyed by enterprises pursuant to the provisions of existing laws?

Registered business enterprises whose projects or activities were granted only an income tax holiday prior to CREATE shall be allowed to continue with the availment of the income tax holiday for the remaining period of the income tax holiday as specified in the terms and conditions of their registration. Enterprises that have been granted the income tax holiday but have not yet availed of the incentive upon the effectivity of CREATE may use the income tax holiday for the period specified in the terms and conditions of their registration.

Registered enterprises whose projects or activities were granted an income tax holiday and the five percent (5%) tax on gross income after the income tax holiday shall be allowed to avail of the five percent (5%) tax on gross income for ten (10) years. Registered business enterprises currently availing of the five percent (5%) tax on gross income prior to the effectivity of CREATE shall also be allowed to continue availing the said tax incentive at the rate of five percent (5%) for ten (10) years.

The reformed tax incentives under CREATE are expected to provide relief to small businesses, attract new investments and create new employment opportunities especially in less developed areas resulting to countrywide development and a more inclusive economic growth.

The author is a partner of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice son any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 140.