Tags: CREATE Law Philippines, BIR CREATE updates, tax incentives 2025, business taxation, corporate income tax Philippines
Introduction: What Is the CREATE Law?
The CREATE Law, or the Corporate Recovery and Tax Incentives for Enterprises Act, is a landmark tax reform measure enacted as Republic Act No. 11534. It was signed into law by President Rodrigo Duterte on March 26, 2021, with the goal of supporting businesses in the Philippines amid the economic downturn caused by the COVID-19 pandemic.
This law amended several provisions of the National Internal Revenue Code (NIRC) of 1997, particularly those concerning corporate income tax and the administration of fiscal incentives. It is administered by the Bureau of Internal Revenue (BIR) and the Fiscal Incentives Review Board (FIRB).
Let’s unpack what the CREATE Law is, its most recent updates, its implications for business owners and taxpayers, and how it reflects values of stewardship, fairness, and national recovery.
The Purpose and Spirit Behind CREATE
CREATE is designed to:
- Reduce the corporate income tax rate to improve business viability.
- Modernize the fiscal incentives system to make it performance-based, time-bound, targeted, and transparent.
- Encourage investments in priority industries and underdeveloped regions.
- Stimulate job creation and recovery from the economic effects of the pandemic.
As Christians and business professionals, we can see in CREATE a call to economic stewardship and compassion. By lightening tax burdens, it opens opportunities for more inclusive growth and financial resilience.
Key Provisions of the CREATE Law
Here are the core elements of the CREATE Law as implemented by the BIR:
1. Corporate Income Tax (CIT) Reduction
- From 30% to 25% for corporations with net taxable income over PHP 5 million and assets over PHP 100 million (excluding land).
- From 30% to 20% for small corporations with net taxable income not exceeding PHP 5 million and assets not exceeding PHP 100 million.
This reduction was applied retroactively starting July 1, 2020, giving businesses much-needed tax relief.
2. Minimum Corporate Income Tax (MCIT)
- Reduced from 2% to 1% of gross income, applicable from July 1, 2020 to June 30, 2023.
- This temporary relief aimed to ease pressure on corporations experiencing losses.
3. Improved Incentives Framework
Under the reformed incentives system, eligible enterprises can now avail of:
- Income Tax Holiday (ITH) for 4 to 7 years depending on location and industry.
- Followed by a special corporate income tax rate of 5% gross income or enhanced deductions for the next 10 years.
Incentives are now evaluated based on investment priorities, employment, location, and economic impact.
Updates to CREATE and Implementation by BIR
1. Revenue Regulations (RRs) and BIR Guidance
The BIR issued several Revenue Regulations (RRs) to clarify and implement the provisions of CREATE, such as:
- RR No. 5-2021 – Implementing the retroactive CIT reduction.
- RR No. 21-2021 – Guidelines on computing gross income for those under special tax regimes.
- RR No. 7-2021 – Rules on VAT exemption for health equipment and vaccines during the pandemic.
2. Incentive Application Process
CREATE centralized the review and approval of incentives under the Fiscal Incentives Review Board (FIRB). Businesses applying for tax incentives must register and comply with performance monitoring systems through the Philippine Board of Investments (BOI) and other Investment Promotion Agencies (IPAs).
Implications for Businesses in the Philippines
1. Tax Savings and Increased Capital
By reducing the tax burden, the CREATE Law allows corporations to reinvest savings into operations, workforce development, and innovation. For small and medium enterprises (SMEs), this can mean survival and expansion.
2. More Competitive Investment Climate
With a lower tax rate, the Philippines is now more attractive to foreign and local investors. Before CREATE, the country had one of the highest corporate income tax rates in ASEAN. The reform corrects this disadvantage and promotes long-term investments.
3. Compliance and Reporting
While CREATE offers benefits, it also increases accountability. Registered enterprises must now submit detailed reports to justify their incentives and fulfill performance metrics. Non-compliance can result in penalties or revocation of tax privileges.
4. Sectoral Support
CREATE prioritizes investments in strategic sectors such as:
- Infrastructure and logistics
- Renewable energy
- Health and medical care
- Innovation and digital services
- Education and human resource development
This allows businesses to align with national goals and enjoy enhanced incentives.
Real-Life Application: A Christian Business Perspective
As Christian entrepreneurs and professionals, CREATE presents an opportunity to:
- Exercise integrity in tax compliance, knowing that reduced rates are a privilege granted for national good.
- Redirect savings toward community impact, such as job creation, charity programs, and fair wages.
- Plan wisely by seeking professional tax advice and complying with BIR and BOI rules to legally avail of benefits.
The Bible says in Romans 13:6–7 (KJV):
“For for this cause pay ye tribute also: for they are God's ministers, attending continually upon this very thing. Render therefore to all their dues: tribute to whom tribute is due...”
CREATE supports the principle of just taxation—not excessive, but equitable and responsive to societal needs.
Challenges and Areas of Caution
While CREATE is beneficial, it’s not without challenges:
- Complex incentive qualifications: Businesses must navigate detailed requirements and approval processes.
- Coordination among agencies: Conflicting interpretations by the BIR and IPAs can cause delays.
- Compliance burden: Smaller enterprises may struggle with documentary requirements.
Thus, businesses should work with experienced accountants and legal counsel to ensure they take full advantage of the law without risking non-compliance.
The Way Forward: Stewardship and Growth
The CREATE Law is more than a tax reform—it is a platform for economic redemption and stewardship. It recognizes that businesses, when supported with the right policies, can become agents of healing, employment, and transformation.
Let us not waste the opportunity it brings. Whether you're a business owner, employee, student, or professional, we are all stakeholders in national development. By understanding the CREATE Law, we are better equipped to make informed decisions and honor God through our work.
Conclusion
The BIR’s implementation of the CREATE Law is a monumental shift in Philippine tax policy. With reduced corporate income tax rates and a streamlined incentive system, businesses are encouraged to grow, innovate, and contribute more meaningfully to the economy.
As Christians, professionals, and citizens, we are called to be good stewards—not only of our personal finances but also of the opportunities granted to us by laws like CREATE. Let us continue to build businesses that are lawful, ethical, and generous, shining God’s light in the world of commerce.
0 Comments