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CREATE Bill on its pending approval to become a Law

The “Corporate Recovery and Tax Incentives for Enterprises Act” or CREATE Bill was drafted with the aim to improve the structure of Taxation in the Philippines as well as attract investors to procure economic growth, in an effort to recover from Covid-19 crisis. The bill is currently pending approval by the President, as approved by the Bicameral Conference Committee of the House of Representatives and the Senate on Wednesday, February 3, 2021.

Under the proposed bill,  Corporate Income Tax (CIT) rate for Corporations will be reduced to 20% for domestic corporations with net taxable income not exceeding P5,000,000 and with total assets not exceeding P100Million (excluding land on which the business entity’s office, plant and equipment are situated), and CIT rate of 25% to all other domestic and resident foreign corporations starting July 1, 2020.

Among other proposed change on CIT are as follows: (1) Effective January 1, 2021, nonresident foreign corporations shall be subject to 25% income tax based on gross income, (2) Minimum corporate income tax rate shall be 1%, instead of 2% for the period beginning July 01, 2020 until June 30, 2023, (3) The provisions for improperly accumulated earnings tax is repealed, and (4) The option to be taxed at 15% of gross income if allowed by the President subject to certain conditions is now repealed.

Also included in the provisions of the Bill is the adjustment of threshold for VAT exempt sale of residential real property for residential lot would be P2,500,000 and below, for house and lot and other residential dwellings would be P4,2000,000 and below. Additional vat exempt transaction that includes. (a) Sale or importation of the following goods from January 1, 2021 to December 31, 2023; (a.1) capital equipment, its spare parts and raw materials, necessary to produce personal protective equipment component, (a.2) all drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-19, and (a.3) drugs, including raw materials, for the treatment of COVID-19 approved by the FDA for use in clinical trials, (b) Sale, importation, printing or publication of books, any newspaper, magazine, journal, or any educational reading material covered by the UNESCO agreement on the importation of educational, scientific and cultural materials, including the digital or electronic format thereof (requirement to appear at regular intervals is removed), (c) Making January 1, 2021 instead of January 1, 2023 for VAT exemption of sale or importation of prescription drugs and medicines for cancer, mental illness, tuberculosis, and kidney diseases.

It is expected that with the offerings in the CREATE Bill, our local corporations will be flooded with investments in the next few years. With this, we can now experience similar growth as our neighboring countries and sustain our economy.

Vincent Gabucan is an Associate of the Tax Advisory and Compliance Division of the Cebu branch of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines with 22 Partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, like us on Facebook: P&A Grant Thornton, and email your comments to or For more information, visit our website:


As published in Mindanao Times, dated 22 February 2021