DTI sees more deals being sealed with CREATE signing

WITH the signing of the corporate tax reform, the Department of Trade and Industry (DTI) is expecting more deals in the pipeline from various sectors to be settled.

DTI Undersecretary Ceferino Rodolfo said in a statement on Monday that the agency anticipates sealing more projects following the enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. These include motorcycle engine assembly, data centers and information technology infrastructure network, advanced metal/plastic packaging manufacturing facility and modern textile assembly.

Trade Secretary Ramon Lopez said the recently signed measure is a “game changer” because it slashed the corporate income tax substantially, benefiting the micro, small and medium enterprises and large companies.

Following the enactment of CREATE, the CIT rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below, effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.

Lopez said the “drop is very significant as it will open up cash flows to support efforts of businesses to rebuild during this pandemic.”

The Trade department also welcomed the granting of four to seven years of income tax holidays, which is followed by 10 years of special corporate income tax or enhanced deductions (ED) for exporters, or five years ED for domestic firms.

Lopez noted that removing restrictions for providing incentives to foreign companies is a boon for the economy. It can attract more foreign direct investments and support the Philippines’s export market as well, he said.

“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,” Lopez explained.

“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 added.

Other amendatory bills

WITH this, DTI also expressed support towards the amendment of the Retail Trade Liberalization Act, Foreign Investments Act and the Public Service Act to invite more investments in the country.

The Trade department, meanwhile, said it will coordinate with the Department of Finance in the issuance of the measure’s implementing rules and regulations and the Strategic Investment Priorities Plan (SIPP).

“The BOI [Board of Investments] is mandated under CREATE Act to craft the SIPP and at the moment, we are formulating a transitional SIPP that will be based on the current Investment Priorities Plan [IPP] which was signed by the President in December 2020,” said Rodolfo, who is also the BOI managing head.

SIPP is a list of investment sectors qualified for fiscal incentives under CREATE. The critical industries include electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.

Last year, BOI approved P1.02 trillion worth of investments, which is 10.9 percent lower than the P1.14 trillion in 2019.