The amended implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Law, which will hopefully address some of its inconsistencies, are expected to be announced this week, the Department of Finance said Tuesday.
“We are in the process of amending the IRR so that it would be consistent with the interpretation [mentioned by the chairman], wherein the 10-year sunset provision should be followed,” Finance Assistant Secretary Karlo Adriano told a House of Representatives tax panel.
Lawmakers in the Lower House earlier noted inconsistencies in the CREATE Law’s IRR.
Albay 2nd District Rep. Joey Salceda, who heads the House Ways and Means Committee, particularly cited the continued availment of registered business enterprises for a period of 10 years the tax incentives given before the law took effect.
Salceda said the IRR ignored this transitory provision. He even said this could be one of the reasons why the country failed to attract more foreign direct investments in the past several years.
“The BIR really mangled the interpretation of that law,” Salceda said, adding the agency removed the “zero-rating” provision.
Earlier, BIR issued Revenue Regulations (RR) No. 3-2023 that amended the VAT zero-rating guidelines.
CREATE requires business enterprises to prove that the local purchases of goods and services are directly and exclusively used in their registered activities in order to avail themselves of the VAT zero-rating. Otherwise, they are subject to 12 percent VAT.
Under the BIR revenue regulation, local suppliers of goods and services of registered export enterprises are no longer required to apply for approval of VAT zero-rating with the BIR.
Instead, the VAT zero-rating on local purchases of goods or services is to be availed of on the basis of a certification issued by the investment promotion agency, such as the Philippine Economic Zone Authority, the Board of Investments, among others.
For his part, Surigao del Norte 2nd District Rep. Robert Ace Barbers said the interpretation of the IRR was in conflict with the intent of the CREATE law. House resolutions were earlier filed in the 19th Congress seeking an inquiry into the implementation of the CREATE law.
CREATE Law that took effect in April 2021 cut the country’s corporate income tax from 30 to 25 percent. For domestic companies with a taxable income of P5 million and below, and with total assets of not more than P100 million, their corporate income tax was cut from 30 to 20 percent.