Philippines’ Department of Finance Plans Flexible Incentives for Investors

May 2020

The Department of Finance (DOF) in the Philippines is looking to offer customized fiscal and non-fiscal perks to investors under the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE (formerly known as the Corporate Income Tax and Incentives Reform Act or CITIRA), to stimulate post COVID-19 economic recovery.

Finance Secretary Carlos Dominguez III said that the government should discard its old “one-size-fits-all” incentives program. The DOF is proposing a more proactive investment promotion strategy which requires identifying key industries that the country needs to flourish, targeting the key players in those industries and approach them to understand their specific requirements in order to set up operations in the country. They may be granted flexible incentive packages suited for them noting that each industry has its own unique needs. These industries should serve the public interest, and would include industries which are labor-intensive and will generate stable jobs, and also induce technology transfer to upgrade the skills of the workforce.

Provisions in the CREATE bill will accord certain powers to the President, upon recommendation of the Fiscal Incentives Review Board (FIRB), to grant a mix of incentives that suit the investors’ needs. The FIRB is an inter-agency committee led by the DOF that grants incentives to government-owned or controlled corporations (GOCC), but will expand to oversee all Investment Promotion Agencies (IPA) covering all private businesses once CREATE bill has been passed.

The CREATE Bill aims to drastically cut the corporate income tax (CIT) rate from 30% to 25% and subsequent reduction of one percent each year starting 2023 cutting the CIT further to only 20% in 2027. It also includes extending the net operating loss carryover (NOLCO) from 3 to 5 years for small businesses that incurred losses in 2020. The DOF and National Economic Development Authority (NEDA) hope that the bill will passed in June this year.

(Sources: Department of Finance, Philippines; UNTV)

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