Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law

Case Overview and Summary

Summary of Republic Act No. 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE)

Short Title and Declaration of Policy (Sections 1-2)
• The Act is known as the "Corporate Recovery and Tax Incentives for Enterprises Act" or "CREATE".
• It aims to develop the national economy towards global competitiveness by implementing tax policies to attract investments, enhance productivity, generate employment, promote inclusive growth, and maintain fiscal prudence.

Amendments to the National Internal Revenue Code (Sections 3-16)
• Amends various sections of the National Internal Revenue Code of 1997 related to:
- Submission of tax-related information to the Department of Finance (Section 20)
- Definition of "corporation" (Section 22)
- Tax on cash and property dividends, interest income, and capital gains (Section 25)
- Corporate income tax rates (Section 27)
- Tax rates for foreign corporations (Section 28)
- Repeal of the improperly accumulated earnings tax (Section 29)
- Deductions from gross income (Section 34)
- Tax-free exchange of property (Section 40)
- Withholding of tax at source (Section 57)
- Exempt transactions from value-added tax (VAT) (Section 109)
- Tax on persons exempt from VAT (Section 116)
- Authority of the Commissioner to refund taxes (Section 204)
- Congressional Oversight Committee (Section 290)

New Title XIII on Tax Incentives (Section 16)
• Introduces a new Title XIII on Tax Incentives, covering the following:

General Provisions on Tax Incentives (Chapter I)
- Scope and coverage of the Act (Section 291)
- Extent of authority to grant tax incentives (Section 292)
- Definitions of key terms (Section 293)

Tax and Duty Incentives (Chapter II)
- Types of tax incentives that may be granted (Section 294):
• Income Tax Holiday (ITH)
• Special Corporate Income Tax (SCIT) Rate of 5% for export enterprises, domestic market enterprises with minimum investment capital of ₱500 million, and critical domestic market enterprises
• Enhanced Deductions (ED) for various expenses
• Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories
• VAT exemption on importation and VAT zero-rating on local purchases
- Conditions for availing tax incentives (Section 295)
- Period of availment of incentives (Section 296):
• For export enterprises and critical domestic market enterprises: 4-7 years ITH + 10 years SCIT/ED
• For domestic market enterprises: 4-7 years ITH + 5 years SCIT/ED
• Additional incentives for enterprises in conflict/disaster areas or relocating from NCR

The Fiscal Incentives Review Board (Chapter III)
- Expanded functions and powers of the Fiscal Incentives Review Board (Section 297)
- Reconstituted composition of the Board (Section 298)
- Organizational structure and staffing pattern (Section 299)

Qualified Projects or Activities for Tax Incentives (Chapter IV)
- Strategic Investment Priority Plan (Section 300)
- Power of the President to grant incentives for highly desirable projects (Section 301)
- Amendments to the Strategic Investment Priority Plan (Section 302)
- Publication requirements (Section 303)
- Qualifications of registered business enterprises (Section 304)

Tax Incentives Management and Transparency (Chapter V)
- Filing of tax returns and submission of tax incentives reports (Section 305)
- Monitoring, evaluation, and reporting of tax incentives (Section 306)
- Conduct of impact evaluation on tax incentives (Section 307)
- Penalties for non-compliance with filing and reporting requirements (Section 308)

Transitory and Miscellaneous Provisions (Chapter VI)
- Prohibition on registered activities outside designated zones/freeports (Section 309)
- Establishment of one-stop action centers (Section 310)
- Treatment of investments prior to the Act's effectivity (Section 311)

Repealing and Amendatory Clauses (Sections 17-18)
• Repeals and amends various provisions of existing laws that are inconsistent with the Act.

Separability Clause, Appropriation, Implementing Rules and Regulations, and Effectivity (Sections 19-22)
• Includes standard provisions on separability, appropriation, implementing rules and regulations, and effectivity date.