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    CREATE LAW - Short Intro

    Uploaded by

    Benjie Davila
    The CREATE Law provides the largest fiscal stimulus package passed by the Philippine government to help corporations, especially micro, small and medium enterprises, deal with the economic impact of the COVID-19 pandemic. It lowers corporate income tax rates to 25% and provides further reductions over time. For smaller corporations meeting certain criteria, the tax rate is reduced to 20%. The law also lowers other business taxes like the minimum corporate income tax and the percentage tax for non-VAT payers. It provides tax exemptions on foreign dividends and repeals improperly accumulated earnings tax and special tax rates for regional operating headquarters.

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    CREATE LAW - Short Intro

    Uploaded by

    Benjie Davila
    49 views3 pages
    The CREATE Law provides the largest fiscal stimulus package passed by the Philippine government to help corporations, especially micro, small and medium enterprises, deal with the economic impact of the COVID-19 pandemic. It lowers corporate income tax rates to 25% and provides further reductions over time. For smaller corporations meeting certain criteria, the tax rate is reduced to 20%. The law also lowers other business taxes like the minimum corporate income tax and the percentage tax for non-VAT payers. It provides tax exemptions on foreign dividends and repeals improperly accumulated earnings tax and special tax rates for regional operating headquarters.

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    CREATE LAW - short intro

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    The CREATE Law provides the largest fiscal stimulus package passed by the Philippine government to help corporations, especially micro, small and medium enterprises, deal with the economic impact of the COVID-19 pandemic. It lowers corporate income tax rates to 25% and provides further reductions over time. For smaller corporations meeting certain criteria, the tax rate is reduced to 20%. The law also lowers other business taxes like the minimum corporate income tax and the percentage tax for non-VAT payers. It provides tax exemptions on foreign dividends and repeals improperly accumulated earnings tax and special tax rates for regional operating headquarters.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views3 pages

    CREATE LAW - Short Intro

    Uploaded by

    Benjie Davila
    The CREATE Law provides the largest fiscal stimulus package passed by the Philippine government to help corporations, especially micro, small and medium enterprises, deal with the economic impact of the COVID-19 pandemic. It lowers corporate income tax rates to 25% and provides further reductions over time. For smaller corporations meeting certain criteria, the tax rate is reduced to 20%. The law also lowers other business taxes like the minimum corporate income tax and the percentage tax for non-VAT payers. It provides tax exemptions on foreign dividends and repeals improperly accumulated earnings tax and special tax rates for regional operating headquarters.

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    CREATE LAW

    The CREATE Law, so far, is the largest fiscal stimulus granted by the Philippine
    government to corporations. It was passed into law, to respond to the COVID 19
    pandemic and it intends to alleviate the burden that the latter has caused to
    corporations operating in the country, particularly, Micro, Small, and Medium
    enterprises or MSMEs.

    a. Corporate income tax (CIT) rate is now 25 percent of a corporation’s net


    income. This provision is retroactive from July 1, 2020. Further, a reduction of
    1% every year starting 2023 until 2027 was approved to bring the CIT down to
    20%.

    For corporations with a net taxable income not exceeding P5 million and with
    total assets not exceeding P100 million, the CIT rate is 20%. It must be noted,
    however, that in computing the total assets, the value of the land where the
    office, plant, and equipment are situated during the taxable year is to be excluded.

    Foreign corporations, will be subjected to an income tax equivalent to 25 percent


    of the taxable income derived in the preceding taxable year from all their sources
    within the Philippines;

    b. Reduction of CIT for proprietary, non-profit educational institutions and


    hospitals to 1% from July 1, 2020 until June 30, 2023;
    c. The Minimum Corporate Income Tax (MCIT) of 2 percent of the gross income
    as of the end of the taxable year imposed on the entitled taxable corporation
    beginning on the fourth taxable year immediately following the year in which such
    corporation commenced its business operations has been decreased to 1% from
    July 1, 2020 until June 30, 2023 for both domestic and resident foreign
    corporations;
    d. Reduction of percentage tax for non-VAT taxpayers from 3% tax rate to 1%
    tax rate, effective from July 1, 2020 to June 30, 2023;
    e. Tax exemption of foreign-sourced dividends of domestic corporations subject
    to certain conditions;
    f. Repeal of 10% special income tax rate on regional operating headquarters
    (ROHQ) starting January 1, 2022; and
    g. Repeal of improperly accumulated earnings tax (IAET);

    The following are the changes made in CREATE Law from TRAIN Law:
    Changes enacted in the TRAIN LAW CREATE LAW
    CREATE Law

    a. Corporate tax cuts

    a.1. Domestic MSME 30% CIT 20% CIT


    corporations with a taxable
    income of P5M and below,
    and with total assets of not
    more than P100M

    a.2. Domestic corporations 30% CIT 25% CIT


    which earn a taxable
    income above P5M

    a.3. Foreign corporations 30% CIT 25% CIT


    subject to the regular rate

    a.4. Percentage tax (PT) 3% PT 1%PT


    for non-VAT taxpayers
    (applicable from July 1,
    2020 to June 30, 2023)

    a.5. Minimum corporate 2% MCIT 1% MCIT


    income tax (applicable
    from July 1, 2020 to June
    30, 2023)

    a.6. Non-profit and 10% CIT 1% CIT


    proprietary educational
    institutions and hospitals
    (applicable from July 1,
    2020 to June 30, 2023)

    b. Foreign-sourced 30% Exempt, subject to;


    dividends received by
    a. reinvestment of
    domestic corporations earnings in the
    are now tax-exempt Philippines;
    b. a 20% or more
    ownership; and
    c. a 2 years or more
    holding period.

    c. Repeal of improperly 10% Repealed


    accumulated earnings
    tax (IAET)

    d. Repeal of 10% special 10% Regular CIT effective


    income tax for regional January 1, 2022
    operating headquarters

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