Incentives for investors, FIRB functions to be issued May
THE government would issue new details on the new menu of tax perks awaiting investors and also the expanded functions of the agency granting the incentives, the Department of Finance (DOF) announced in a statement.
The DOF said these would be contained in the implementing rules and regulations (IRR) of the recently-signed Republic Act (RA) 11534, or the Corporate Recovery and Tax Incentives for Enterprises Act (Create). The DOF said the newly-reconstituted Fiscal Incentives Review Board (FIRB) is targeting to finish the IRR by the third week of May, two months before the 90-day deadline set under the law.
The DOF said that the IRR will include details on the new menu of tax perks awaiting investors and also the FIRB’S expanded functions as overseer of the grant of investment incentives.
According to the law, the IRR should be completed by July 11. In the same period, the finance and the trade secretaries, the FIRB chairman and co-chairman, respectively, should also jointly promulgate the
provisions under Title XIII of the law. This section covers the expanded functions of the Board and the fresh menu of tax incentives available to investors and enterprises under this law.
The DOF said the FIRB held its first meeting last April 14 to discuss the board ’s broader functions and the proposed set of industries qualified to get tax breaks in the upcoming Strategic Investment Priority Plan (SIPP).
The DOF said that during the meeting, Trade Secretary Ramon M. Lopez agreed to set May 17 as the target date for the signing of the IRR on Title XIII of RA 11534.
Finance Assistant Secretary Juvy C. Danofrata, who was designated as head of the FIRB Secretariat, said the board aims to submit the IRR of Title XIII by May 10 for final review by the FIRB chairmen.
Two initial discussions on the draft IRR have been held this week by the DOF together with the Bureau of Internal Revenue and the Board of Investments (BOI), an attached agency of the Department of Trade and Industry. They are also set to hold their final meeting next week.
Meanwhile, the DOF and the DTI will also be consulting the various investment promotion agencies (IPAS) in the final week of April to discuss the draft IRR.
The FIRB is in charge of the grant of tax incentives to projects or activities with investment capital of over P1 billion while applications for tax incentives for projects or activities with investment capital of P1 billion and below will be approved by the IPAS.
As the new SIPP has yet to be completed, the DOF said the FIRB agreed that the current 2020 Investments Priorities Plan (IPP) will be adopted as the transitional list of priority sectors to be promoted for investments and qualified for tax incentives.
In December last year, President Duterte approved the 2020 IPP through Memorandum Order 50. It listed the preferred areas and activities for investment including all qualified activities relating to government’s program addressing the Covid-19 pandemic; investment activities supportive of programs to generate employment opportunities outside of congested urban areas; all qualified manufacturing activities including agro-processing agriculture, fishery and forestry; and, strategic services, including integrated circuit design, creative industries, and maintenance, repair and overhaul of aircraft.
The list of preferred activities also includes healthcare and disaster risk reduction management services; mass housing; infrastructure and logistics; innovation drivers; inclusive business models; environment or climate change-related projects; energy; export activities; those covered by special laws; and, those cited by the Bangsamoro Autonomous Region in Muslim Mindanao.
Aimed to encourage more foreign direct investments in the country, RA 11534 reduced the corporate income tax rate (CIT) in the country and rationalized the tax incentives system by making it “performancebased, time-bound, targeted and transparent.”
It drastically cut the 30 percent corporate income tax rate to 20 percent for small-scale and mediumscale corporations. The CIT rate for large corporations, meanwhile, was also cut to 25 percent from 30 percent.
Officials expect cutting the CIT would cost the government P1 trillion in foregone revenues over the next 10 years. However, Finance Secretary Carlos G. Dominguez said they believe the entities given incentives would “reinvest” the tax savings into the economy.