The saga of the Create law continues


On December 2, 2021, the Ministry of Finance (DoF) and the Ministry of Trade and Industry (DTI) released the latest version of the changes to the Rules and Regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises (Create) law.

By way of overview, the changes focus on the following: first, Section 4, Rule 2 of the amended Creation TRI includes the maximum period of enjoyment of the exemption from customs duties on the importation of goods equipment, raw materials, spare parts or accessories for the registered projects or activities of registered export enterprises up to 17 years, and domestic market enterprises up to 12 years from the date registration, unless otherwise extended under the Strategic Priority Investment Plan (SIPP).

A similar amendment was also indicated in section 5, rule 2 for the exemption from import VAT and the zero rate of VAT on local purchases applicable to goods and services directly and exclusively used in the project or the project. activity registered only by registered export companies, which is also up to 17 years.

Second, the definition of “direct and exclusive use for the project or recorded activity” has been broadened to include “packaging materials, services, including the provision of basic infrastructure, utilities and maintenance, repair and overhaul of equipment ”other than raw materials, inventories, supplies, equipment, goods and other expenses. Conversely, the zero rate of VAT on local purchases will be granted after the approval of the investment promotion agency (IPA) concerned, in addition to the documentary requirements of the Bureau of Internal Revenue (BIR).

It is important to note, however, that the requirement to obtain certification from the BIR was not stated in the Create Act, nor in the previous version of the Create IRR. Based on the existing rules, in order for local purchases of registered business enterprises (EBRs) to benefit from the zero rate, they must ensure that their sale of goods / services is justified by a zero rate VAT certificate from the IPA concerned, in addition to billing requirements under VAT regulations. However, to avoid any misperception, the BIR should identify the specific documentary requirements for the need to separately request certification from the BIR and whether this will only apply to new RBEs or also include existing RBEs.

Another difficult situation here is that although the IRR related to zero VAT has been updated, it is still not clear whether the previous Revenue Regulation (RR) 9-2021 has been permanently revoked. Note that it was only reported in RR 15-2021 and so far the BIR has not published a program to clarify this issue.

Third, the “subsidized deductions or special corporation tax (SCIT), as the case may be” were added as a result of the income tax exemption (ITH) for three years during which the Expansion project or activity may also qualify for duty relief, import VAT exemption, and VAT relief on local purchases for qualifying expansion projects or activities.

Fourth, RBEs holding a valid Import Authorization Certificate (CAI) or admission will benefit from duty exemption until the expiration of the CAI registration / admission whose goods equipment, raw materials, spare parts or accessories have been ordered, as indicated on the date of the purchase order or on the date of opening of the corresponding letters of credit; or loaded, as indicated in the date of the bill of lading; or are still in transit during the entry into force of Legislative Decree 85, 2019 series. The expression “or the transitional period under Article 311 of the Code” has been deleted under Article 2, rule 17 of the modified creation IRR.

Fifth, with regard to investments prior to the entry into force of the Create Law, the amendment to Section 5, Rule 18 concerns the inclusion of “the exemption from import VAT and the zero rate of VAT on local purchases, as provided in their respective IPA registrations ”in in addition to the duty exemption, among the incentives of the registered export and domestic market enterprises.

However, this will only apply to goods and services directly attributable and exclusively used in the registered project or activity of said registered export companies located within ecozones and free ports until the expiration of the transitional period. In addition, the importation of capital goods, spare parts and accessories by existing export enterprises and domestic market enterprises registered with the Investment Board before the entry into force of the law will continue to apply. be exempt from duties for a period of five years from the date of registration.

Finally, following the recent publication of Republic Law Enforcement Rules (RA) 11590 revenue, “An Act Taxing Philippine Offshore Gaming Operations” in RR 20-2021 on December 1, 2021, the Create IRR amended has been updated with the insertion of an additional provision on transitional rules for offshore gaming licensees and accredited service providers, which provides that an offshore gaming licensee or service provider accredited duly registered with an IPA and benefiting from the incentives granted by the latter under its charter before the entry into force of RA 11590 continue to benefit from said incentives until the expiration of the transitional period under the Articles 1, 2 and 3, Rule 18 of the creation of the TRI or the expiration of the license or accreditation of the registered business, whichever comes first. Thereafter, the offshore gaming licensee or an accredited service provider will be subject to applicable taxes in accordance with RA 11590.

While some parts of the Create Act require further clarification, the changes to the Create IRR may be intended to provide a systematic approach to properly execute and enforce its provisions to serve its purpose, especially as the Philippines begins to reopen their economy amid the coronavirus. pandemic.

The author is Deputy Director of the Tax and Corporate Services division of Navarro Amper & Co., member of the Deloitte Asia Pacific Network. For comments or questions, email [email protected] Deloitte Asia Pacific Ltd. is a company limited by guarantee and a member firm of Deloitte Touche Tohmatsu Ltd. Members of Deloitte Asia Pacific Ltd. and their related entities, each separate and independent legal entities, provide services in over 100 cities across the region including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo and Yangon.


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