BIR Releases New Revenue Regulations to Implement CREATE Act

The Bureau of Internal Revenue (BIR) recently released new revenue regulations to implement the recently-enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. 

BIR released three Revenue Regulations (RR) on April 8, imposing tax regulations applicable to all enterprises in the Philippines.

Under RR 2-2021, the following tax regulations shall be imposed in accordance with the CREATE Act:

• 20% on certain passive income received from all sources in the Philippines;
• 15% shall be imposed on any profit remitted by the Philippine Branch Office of a foreign corporation to its head office abroad;
• 20% for interest on any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and royalties derived from sources within the Philippines;
• 15% for interest income derived from a depository bank under the Expanded Foreign Currency Deposit System (EFCDS); and
• 15% for capital gains from the sale of shares of stock not traded in the stock exchange.

Moreover, BIR also released RR 4-2021, providing the rules on value-added tax (VAT) exemptions. 

RR 4-2021 states, “VAT exemption shall only apply to the sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business; sale of real property utilized for socialized housing as defined by Republic Act (RA) No. 7279, as amended; and, sale of house and lot, and other residential dwellings with a selling price of not more ₱2 million.”

Also exempted from VAT are the sale, importation, printing, or publication of books, and any newspaper, magazine, journal, review bulletin, or any such educational reading material covered by the United Nations Educational, Scientific, and Cultural Organization (UNESCO) Agreement.

Lastly, BIR released RR 5-2021 stating the reduction of income tax for domestic corporations from 30% to 25%. The corporate income tax (CIT) rate for local businesses with a net taxable income of ₱5 million and below and total assets (excluding land) of up to ₱100 million was trimmed from 30% to 20%.