Statement of Senator Pia S. Cayetano
Chairperson, Senate Committee on Ways and Means
On the passage of the CREATE Bill in the Senate

I am elated that the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill, which I have been working on since the start of the 18th Congress last year, has now passed the Senate on third reading. In fact, this bill's earlier versions date back two decades ago.

In July of 2019, what we started with was t he Corporate Income Tax and Incentives Reform Act (CITIRA) bill, which was passed by our counterparts in the House of Representatives. Shortly after the cou ntry was hit by the COVID-19 pandemic, the measure then evolved into the CREATE Bill, which seeks to (1) drastically reduce the Corporate Income Tax from 30 to 25 percent - to give businesses respite from the global crisis; and (2) ensure that tax incentives granted to qualified investors contribute to job generation.

The CREATE Bill that we finally passed in the Senate is the best version thus far, with more favorable tax rates granted to taxpayers, especially to our micro, small, and medium enterprises (MSMEs), VAT exemptions on critical medicines and PPEs, and more competitive incentives packages to attract the right kinds of investments into the country. Moreover, it would enable the Philippines to be at par with many of our ASEAN neighbors in attracting foreign direct investments, and firm up our efforts to build a stronger economy as we prepare for the challenges of the New Normal and beyond.

The major features of the bill are as follows:

Corporate Income Tax (CIT)

•  25% - General CIT Rate

• 20% - For domestic corporations with total assets not exceeding P100 Million and total net taxable income not exceeding P5 Million

Minimum Corporate Income Tax (MCIT)

• 1% MCIT effective July 1, 2020 until June 30, 2023

• After 3 years back to 2%

Imposition of Improperly Accumulated Earnings Tax

• Repealed

Deductible Interest Expense

• 20%

3% Percentage Tax

• 1% effective July 1, 2020 until June 30, 2023

• After 3 years back to 3%

Proprietary Educational Institutions and Hospitals which are Non-Profit

• 1% effective July 1, 2020 until June 30, 2023

• After 3 years back to 10%

VAT Exemptions

• Housing (Change in threshold amount)

- Residential Lot: From P1.5 Million to P2.5 Million and below

- House and Lot and other residential dwellings: From P2.5 Million to P4.2 Million and below

- Deleted provision limiting threshold amount to P2 Million beginning January 1, 2021

• E-Books

- Sale, importation, printing or publication of books, and any newspaper, magazine, journal, review bulletin on digital or electronic format

• Medicines and PPEs

1) Sale or importation of medicines for cancer, mental illness, tuberculosis, and kidney diseases

- Effectivity of tax exemption moved from 2023 to 2021

2) Beginning January 1, 2021 to December 31, 2023 sale and importation of the following shall be VAT exempt:

(i) Capital equipment, its spare parts and raw materials, necessary for the production of PPEs

(ii) All drugs, vaccines, and medical devices specifically prescribed and directly used for the treatment of COVID-19

(iii) Drugs for the treatment of COVID-19 approved by the FDA for use in clinical trials

Approval of Incentives

Projects or activities with investment capital of:

• P1 Billion and below - IPAs will approve

• Above P1 Billion - FIRB will approve