Philippines: Guidance on enhanced deductions regime

The Fiscal Incentives Review Board (FIRB) issued guidance setting out the terms and conditions for the grant of the enhanced deductions regime (EDR) under Section 294(C) of the National Internal Revenue Code of 1997, as amended by Republic Act No. 12066 (CREATE MORE Act).

The main points of the guidance include:

• Eligible registered business enterprises (RBEs) may qualify for enhanced deductions of qualified capital expenditures, labor expenses, research and development (R&D) expenses, training expenses, domestic input expenses, power expenses, reinvestment allowances, expenses related to exhibitions, trade missions, or trade fairs, and enhanced net operating loss carry-over (NOLCO), subject to prescribed conditions and limitations. (Section 5)
• Enhanced deductions are treated as additional allowable deductions from taxable income and are applied only after the determination of gross income and the deduction of ordinary and necessary operating expenses. The tax base of enhanced deductions is the actual amount of costs and expenses incurred during the tax year, without the benefit of other additional deductions. (Section 6)
• RBEs must maintain adequate supporting documents and comply with the reporting and disclosure requirements. (Sections 9 and 10A)
• RBEs must submit a notarized comprehensive summary report to the concerned Investment Promotion Agency (IPA), which will review the report and endorse its findings and supporting documents to the Bureau of Internal Revenue (BIR). (Section 10B)

Read an August 2026 report prepared by the KPMG member firm in the Philippines