Special InTAX: December 2024 Issue 1 | Volume 2

Department of Finance and Department of Trade and Industry

On 17 December 2024, the Department of Finance (DoF) and Department of Trade and Industry (DTI) have jointly promulgated the interim implementing rulings and regulations (IRR) to govern the processing of tax incentive applications and the availment of incentives for new and existing registered projects or activities prior to the effectivity of the IRR of Republic Act (RA) No. 12066, or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act. The interim IRR specifically seeks to implement the following provisions of the CREATE MORE:

a. applications for registration and availment of incentives for new and qualified expansion projects or activities;

b. transfer of registration of registered business enterprises (RBEs) granted incentives prior to the effectivity of RA No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE); and

c. availment of value-added tax (VAT) and duty incentives of RBEs.

Coverage

The interim IRR shall apply to:

a. All existing Investment Promotion Agencies (IPAs) with respect to the administration and grant of incentives;

b. RBEs with new or qualified expansion projects or activities listed in the Strategic Investment Priority Plan (SIPP) intending to avail incentives under CREATE MORE;

c. RBEs with existing projects or activities prior to the effectivity of CREATE, referred to as “pre-CREATE RBEs”;

d. RBEs with existing projects with investment capital exceeding PHP15 billion during the effectivity of CREATE, referred to as “CREATE RBEs”;

e. RBEs with pending tax incentives applications prior to 28 November 2024 that opt to avail incentives under CREATE MORE.

Application for Registration

The processing of applications for registration under CREATE MORE for new and qualified expansion projects or activities can be processed by the concerned IPA under the IRR of CREATE, provided that the processing of applications for registration shall be governed by the IRR of CREATE MORE upon its effectivity.

Transfer of Registration and Availment of Incentives

Pre-CREATE and CREATE RBEs with investment capital exceeding PHP15 billion may transfer their registration to CREATE and CREATE MORE, respectively, subject to the following conditions:

a. The RBE has either started operating or is in the pre-operating stage but has not availed of any income tax-based incentives under the terms and conditions of its registered project;

b. The RBE meets the qualifications for registration under the IRR of CREATE;

c. The RBE is not an excluded service activity under the IRR of CREATE; and

d. The RBE complies with the conditions and requirements set forth in the SIPP.

• RBEs that are qualified to transfer their registration under the interim IRR must submit an Affidavit of Intent on or before 31 December 2024.
• Applications with Affidavit of Intent filed beyond the said period shall not be considered. Such applications must be evaluated by the concerned IPAs within 20 working days from receipt of complete submission from the RBE, and all applications for transfer of registration must be acted upon by the concerned IPA within 30 days from the effectivity of the IRR of CREATE MORE.
• The RBE shall surrender its Certificate of Registration (COR) or Certificate of Registration and Tax Exemption for cancellation upon approval of the transfer, and a new COR under CREATE or CREATE MORE shall be issued, as the case may be.

Entitlement to Incentives

The following incentives under CREATE or CREATE MORE may be granted upon transferee projects or activities, provided that the applicant shall elect the applicable income tax-based incentive regime at the time of its application for transfer:

a. Income Tax Holiday (ITH);

b. 5% Special Corporate Income Tax (SCIT) rate based on gross income earned, in lieu of all national and local taxes and local fees and charges;

c. Enhanced Deductions Regime (EDR);

d. Duty exemption or importation of capital equipment, raw materials, spare parts, or accessories directly attributable to the registered project or activity, including goods used for administrative purposes;

e. VAT exemption on importation and VAT zero-rating on local purchases of goods and services directly attributable to the registered project or activity, including expenses incidental thereto; and/or

f. RBE local tax.

The reckoning period of the income tax-based incentive for operating RBEs issued with new CORs shall be 1 January 2025. However, the reckoning period for incentives of pre-operating RBEs issued with new COR under the interim IRR shall be pursuant to the terms and conditions provided under such COR.

Period of Availment of Incentives

The period of availment of incentives under CREATE and CREATE MORE based on the combination of both location and industry tiers (as determined in the SIPP) are also provided in Section 5, Rule 3 of the interim IRR.

Performance Commitments

Performance commitments that may be imposed on the transferee projects or activities are also enumerated in Section 6, Rule 3 of the interim IRR. When any of the imposed performance commitments are not met, justifications shall be submitted to the concerned IPA. The entitlement to tax incentives may be cancelled, suspended or withdrawn upon due notice.

Transitory Provisions

The provisions of Section 311 of the Tax Code applicable to pre-CREATE RBEs, and the provisions of Section 31 of CREATE MORE applicable to CREATE RBEs shall take effect upon effectivity of CREATE MORE on 28 November 2024, notwithstanding the absence of the IRR.

RBEs granted income tax-based incentives and enjoying VAT zero-rating on local purchases and VAT exemption on importation prior to CREATE, regardless of market orientation, may continue to enjoy such VAT incentives until 31 December 2034.

The concerned IPA may issue the VAT Zero-Rating Certificate for covered transactions under CREATE MORE, upon determination of the compliance with the export requirement, as may be applicable, pending the effectivity of the IRR of CREATE MORE.

(RGM&Co. Note: The interim IRR was published in the Philippine Star on 17 December 2024, which will take effect immediately upon publication.)

Here is the link to the full text of the issuance: Interim IRR of Republic Act (RA) No. 12066.