November 29, 2022

The Department of Trade and Industry and the Board of Investments hailed the signing of the landmark Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (Create) Act.

“We thank President Rodrigo R. Duterte and Congress for enacting the Create Act. This is one the most important policy reforms initiated about two decades ago, but has only been successfully legislated under our current administration,” DTI Sec. and BOI Chairperson Ramon Lopez said. 

He said the law is a game-changer as it significantly brought down corporate income taxes that benefit micro, small, and medium enterprises the most and even the large firms.  It has also modernized and improved the investment incentive regime to one that is performance-based, focused and innovation-oriented.   

“For business in general, we cannot overemphasize the impact of the reduction in corporate income tax from 30 percent to 25 percent for big firms and for SMEs to 20 percent. The drop is very significant as it will open up cash flows to support efforts of businesses to rebuild during this pandemic,” Lopez said. 

He said second is the granting of a clearer set of incentives with four to seven years of income tax holidays and followed by 10 years of special corporate income tax/enhanced deductions for exporters, or five years enhanced deductions for domestic market enterprises.

“Equally important is the removal of restriction for providing incentives to foreign companies that will attract more foreign direct investments as multinationals are not only going to target the domestic market but also boost the country’s export market,” Lopez said. 

The restriction dates back to Executive Order 226, which was issued more than 35 years ago when there was no free trade in ASEAN nor was there a World Trade Organization, and amid the current context where imported goods are coming in duty-free, and factories are just set up in other countries where they are given incentives and then exported to the Philippines at duty-free rates. 

“The Create Act rationalizes, modernizes, and offers more relevant incentives to investors in line with the times. Rather than locate in other countries and export to our domestic market, we have to capture those investments as long as they are in the prioritized sectors and allow them to target the domestic market.  This can also encourage higher local content for our manufacturers sourcing from abroad, as part of value chain enhancement. What’s more, we are also committed in supporting further liberalization to enhance our country’s competitiveness and create more jobs,” he said. – Press release