DTI Hopeful for CREATE Bill to be Similar to House’s CITIRA
The Department of Trade and Industry (DTI) hopes for the final version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill will have a close similarity with the house’s version of the Corporate Income Tax and Incentives Reform Act (CITIRA).
DTI Undersecretary Ceferino S. Rodolfo stated that the Senate’s CREATE Bill and the elements of CITIRA of the Lower House will be a good combination.
Rodolfo noted that the Senate included the CITIRA’s framework that incentives will be time-bound, performance-based, and transparent. Such inclusion also balances the ability to attract investments and generate the needed revenue for the government.
At present, the local government unit (LGU) hosting an economic zone receives a 2% share of the company locator’s 5% gross income. However, there are revenue implications on the part of the host LGU under the proposed CREATE bill.
Moreover, the final bill’s transition period will allow companies to migrate to the corporate income tax (CIT) system.
Rodolfo announced, “Of course, we are fully aware that both Houses have their legislative prerogative to advocate elements. We fully trust the wisdom of both Houses to consolidate and work on whatever provisions they deemed convergent.”
Rodolfo also mentioned that stakeholders are already pleased with the balance achieved under CREATE Bill.
The CREATE Bill was approved on third and final reading on November 26, 2020. Congress is expected to resume its session on January 14.
The bill states that starting July 1, 2020, the CIT rate for corporations will be reduced to 20% from 30% for domestic corporations with net taxable income not exceeding ₱5,000,000 and with total assets not exceeding ₱100,000,000 (excluding land on which the business entity’s office, plant, and equipment are situated).
The reduced CIT rate of 25% shall apply to all other domestic and foreign corporations. Additionally, starting July 1, 2020, until June 30, 2023, the minimum corporate tax rate shall be 1% instead of 2%.