AGPAOA, KARL REDJIE D.

BSAIS-3
CREATE LAW
RA 11534, “An act reforming the Corporate Income Tax and Incentives System,
amending for the Purpose Sections 20, 22, 25, 27, 28, 29, 34, 40, 57, 109, 116, 204,
and 290 of the National Internal Revenue Code of 1997, as Amended and Creating
Therein New Title XIII, and for Other Purposes,” or the “Corporate Recovery and Tax
Incentives for Enterprises (CREATE) Act” – Signed into law March 26, 2021
BEFORE AND AFTER CREATE Law
Value Added Tax

National Internal RA 11534 or CREATE Law

Revenue Code of 1997
VAT Exemption of The sale of the following CREATE increased the
sale of residential residential properties is threshold
property exempt from VAT:  Residential Lot: P2,500,000
Residential Lot: P1,500,000  Residential house and Lot:
Residential house and lot: 4,200,000
P2,500,000
VAT Exemption on VAT exemption applies to CREATE expanded the
sale of the sale, importation, coverage of the VAT
printing or publication exemption, it now
of: covers:
 Books  Books
 Newspapers  Newspapers
 Magazines  Magazines
 Review Bulletin  Journal
 Review Bulletin
 Any such educational
reading material covered
by the UNESCO agreement
on the importation of
educational, scientific and
VAT exemption shall only cultural materials
apply to the sale of physical The above exemptions
copies. Digital are subject to include the digital copies
VAT. PROVIDED, that the material
provided are not devoted
principally to the publication
of paid advertisements.
*which appears at regular *removes the “regular
intervals with fixed prices intervals with fixed
for subscription and sale prices for subscription
and which is not devoted and sale” rule*
principally to the publication
of paid advertisements. *
VAT exemption on Prescription drugs for the CREATE changed the
specific following illnesses are VAT effectivity date of the VAT
prescription drugs exempt: exemption:
and medicines Beginning Jan 1, 2020: Beginning Jan 1, 2021:
Diabetes  Cancer
High Cholesterol  Mental Illness
Hypertension  Tuberculosis
Beginning Jan 1,2023:  Kidney Diseases
Cancer
Mental Illness
Tuberculosis
Kidney Diseases
Expanded VAT No provision Sale or importation of
Exemption for the following beginning
COVID-19 Jan 1,2021 to Dec 31,
2023 are exempt from
VAT:
 Capital equipment, its
spare parts and raw
materials, necessary for
the production of personal
protective equipment
components such as
coveralls, gown, surgical
cap, surgical mask, N-95
mask, scrub suits, googles
and face shield, double or
surgical gloves, dedicated
shoes, and shoe covers for
COVID-19 prevention;
 All drugs, vaccines and
medical devices
specifically prescribed and
directly used for the
treatment of COVID-19
 Drugs for the treatment of
COVID-19 approved by the
food and drug
administration (FDA) for
use in clinical trials,
including raw materials
directly necessary for the
production of such drugs.
 On the Bi-cam version,
VAT and duty-free
exemption is granted for
COVID-19 vaccines until
2025

Other Percentage Tax

National Internal RA 11534 or CREATE Law

 Revenue Code of 1997
Sec. 116 Any person whose sale or CREATE temporarily reduced
receipts does not exceed the tax rate to 1% beginning
P3,000,000 for the taxable July 1, 2020 until June 30,
year and who is not a VAT- 2023
registered person shall pay  Before July 1, 2020 – 3%
a tax equivalent to three  July 1, 2020 – June 30,
percent (3%) of his gross 2023 – 1%
quarterly sales or receipts.  After June 30, 2023 – 3%

TRAIN LAW
The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of
the comprehensive tax reform proposed by President Rodrigo Duterte’s
administration.
The TRAIN law program aims to create a more just, simple and effective system of
tax collection, as per the constitution, where the rich will have a bigger contribution
and the poor will benefit more from the government’s programs and services.
TRAIN law seeks to raise P130 billion in revenue in order to facilitate the funding of
the government’s Build, Build, Build infrastructure program and socio-economic
programs.
The vision of TRAIN law is to achieve the following:
 Poverty rate reduced from 26% to 17% (or some 10 million Filipinos uplifted
from poverty).
 Law-abiding country.
 Peace within the country and with our neighbors.
 Achieve high middle-income status, where per capital gross national income
(GNI) increased from USD 3,000 to USD 4,200 by 2022 in today’s money.
 Eradicate extreme poverty.
 Inclusive economic and political institutions where everyone has equal
opportunities.
 Achieve high income status where per capital GNI increases from
 USD 3,000 to USD 12,000 by 2040 in today’s money.
TRAIN has finally been signed into law by President Duterte on December 19, 2017
as Republic Act No. 10963. It addresses several weaknesses of the current tax
system such as lowering and simplifying personal income taxes, simplifying estate
and donor’s taxes, expanding
the value-added tax (VAT) base, adjusting oil and automobile excise tax, and
introducing excise tax on sugar-sweetened beverages.
TRAIN has lowered the income tax rates in the personal income tax schedule of
individual taxpayers and introduced a new tax rate equivalent to 8% allowing
individual taxpayers to have significant tax savings and higher take-home pays. It
also made the taxation for estate and donor’s
taxes simpler and lower through the implementation of a 6% flat tax rate on net
estate and net donations. Certain allowable deductions from gross estate have also
been increased. A considerable increase in VAT threshold is also one of the
substantial amendments in TRAIN. From the P1,919,500 to P3,000,00 VAT threshold,
a substantial number of taxpayers has now availed VAT exemption. Amendments
increasing excise taxes particularly on petroleum, mineral products and automobiles
were made and a tax on sugar-sweetened beverages has been implemented.
BEFORE AND AFTER TRAIN Law
Value Added Tax

National Internal Revenue Code of RA 10963 or TRAIN Law

1997
Zero-Rated Sale
Sec. 106 (A)(2) VAT zero-rating on  Sale of gold to BSP is reclassified
sale of goods classified as: from export sales to exempt
transactions.
a) The term export sales means:
 The goods, supplies, equipment and
 Sale of gold to the BSP;
fuel shall be used for international
 Sale of goods, supplies, equipment shipping or air transport operations.
and fuel to persons engaged in  For Item 3, 4, 5 - shall be subject to
international shipping or 12% VAT upon the successful
international air transport establishment and implementation of
operations. an enhanced VAT refund system that
grants refunds of creditable input tax
 Sale of raw materials or packaging within 90 days from filing of the VAT
materials to a nonresident buyer refund application with the BIR and
for delivery to a resident local all pending VAT refund claims as of
export-oriented enterprise to be 31 December 2017 shall be fully paid
used in manufacturing, in cash by 31 December 2019.
processing, packing or repacking in
the Philippines of the said Removed:
buyer’s goods and paid for in Foreign currency denominated sales
acceptable foreign currency and
accounted for in accordance with Note: This Item has been VETOED by
the rules and regulations of the President Rodrigo R. Duterte.
(BSP)
 Sale of raw materials or packaging Note: The following are supposed to be
materials to export-oriented included in the zero-rated sale but was
enterprise whose export sales vetoed by the President: Sale and
exceed seventy percent (70%) of delivery of goods to:
total annual production Registered enterprise within a
separate customs territory as provide
 Those considered export sales under laws; and
 under Executive Order No. 226, Registered enterprise within tourism
otherwise known as the Omnibus enterprise zones as declared by the
Investment Code of 1987, and Tourism Infrastructure and Enterprise
other special laws; Zone Authority (TIEZA) subject to the
provisions under Republic Act No. 9593
or The Tourism Act of 2009.
Foreign currency denominated sales
VAT on Importation of Goods
Sec. 107 (A) There shall be levied, The VAT on the Importation of Goods
assessed and collected on every increased at Twelve percent (12%).
importation of goods a value-added tax
equivalent to 10% based on the total
value used by the Bureau of Custom in
determining tariff and customs duties,
plus customs duties, excise taxes.
Rate and Base of Tax
Sec. 108 (A) Provision defines sale or Sale of electricity by generation
exchange of services. companies, transmission by any
entity, and distribution companies,
including electric cooperatives is
included in the definition of sale or
exchange of services.
Transaction Subject to Zero Percent (0%) Rate
Sec. 108 (B) Zero-rated sales of For Item 1 - Those services shall be
services include: exclusive for international shipping or
air transport operations
1. Services rendered to persons
engaged in international shipping For Items 2 and 3 - Subjected to
or international air transport 12% VAT upon successful
operations, including leases of establishment and implementation of
property for use thereof an enhanced VAT refund system that
grants refunds of creditable input tax
2. Processing, manufacturing or
within 90 days from filing of the VAT
repacking goods for other persons
refund application with the BIR and
doing business outside the
all pending VAT refund claims as of 31
Philippines which goods are
December 2017 shall be fully paid in
subsequently exported, where the
cash by 31 December 2019.
services are paid for in acceptable
foreign currency and accounted
for in accordance with the rules Note: This Item has been VETOED by
and regulations of the BSP President Rodrigo R. Duterte.

Services performed by subcontractors

and/or contractors in processing, Note: The following are supposed to
converting, or manufacturing goods for be included in the zero-rated sale but
an enterprise whose export sales was vetoed by the President: Services
exceed seventy percent (70%) of total rendered to:
annual production (i) Registered enterprise within a
 separate customs territory as provide
under laws; and
Registered enterprise within tourism
enterprise zones as declared by the
Tourism Infrastructure and Enterprise
Zone Authority (TIEZA) subject to the
provisions under Republic Act No. 9593
or The Tourism Act of 2009.
Exempt Transactions
Sec. 109 (1) Following transactions For Item 1 - Importation
shall be exempt from the value-added of professional instruments
tax: and implements, toolsof
trade, occupation or employment,
1. Importation of professional
wearing apparel, etc. belonging to
instruments implements, wearing
persons coming to settle in the
apparel, etc. belonging to persons
Philippines or Filipinos or their families
coming to settle in the
and descendants who are now
Philippines, for their own use and
residents or citizens of other
not for sale, accompanying such
countries, referred as overseas
persons or arriving within 90
Filipinos, for their own use and not for
days before or after their arrival;
sale, accompanying such persons, or
2. Sale of real properties not arriving within a reasonable time.
primarily held for sale to For Item 2 - Beginning January 1,
customers or held for lease in the 2021, the VAT exemption shall only
ordinary course of trade or apply to sale of real properties not
business, or real property utilized primarily held for sale to customers or
for low-cost and socialized held for lease in the ordinary course
housing, residential lot valued at of trade or business, sale of real
P1,500,000 and below, house and property utilized for socialized
lot, and other residential housing, sale of house and lot, and
dwellings valued at P2,500,000. other residential dwellings with selling
price of not more than Two million
3. Lease of a residential unit with a pesos P2,000,000.
monthly rental not exceeding Ten
thousand pesos P10,000 For Item 3 - Lease of a residential
4. Importation of fuel, goods, and unit with a monthly rental not
supplies by persons engaged in exceeding Fifteen thousand pesos
international shipping of air P15,000
transport operations; and For Item 4 - Exemption of the
Sale or lease of goods or properties or importation of fuel, goods and
the performance of services, the gross supplies shall only apply if such are
annual sales and/or receipts do not used for international shipping or air
exceed the amount of One million five transport operations.
hundred thousand pesos P1,500,000. For Item 5 - Sale or lease of goods or
properties or the performance of
services the, gross annual sales
 and/or receipts do not exceed the
amount of Three million pesos
P3,000,000.
Additional Provision:
• Exemption for sale or lease of
goods and services to senior
citizens and persons with disability.
• Exemption for transfer of property
made by the parties involved
during merger or consolidation
such as follows:
1. Property in exchange for stock
in a corporation
2. Stock of a corporation in
exchange of stock of another
corporation
3. Securities of a corporation in
exchange for stock or securities
of a corporation.
Reference: Section 40 (C)(2) of NIRC
• Exemption for association dues,
membership fees, and other
assessments and charges
collected by homeowners’
associations and condominium
corporation.
• Exemption for sale of gold to BSP.
Exemption for sale of drugs and
medicines prescribed for diabetes, high
cholesterol, and hypertension beginning
January 1, 2019
The input tax on domestic purchase or importation of goods or
properties by a VAT- registered person
Sec. 110 (A) (2)(b) The input tax on Additional Provision:
goods purchased or imported in a
The amortization of the input VAT shall
calendar month for use in trade or
only be allowed until December 31,
business for which deduction for
2021 after which taxpayers with
depreciation is allowed, shall be
unutilized input VAT on capital goods
spread evenly over the month of
purchased or imported shall be allowed
acquisition and the 59 succeeding
to apply the same as scheduled until
months if the aggregate acquisition
fully utilized.
cost for such goods, excluding the
VAT component thereof, exceeds
P1,000,000.
Refunds or Tax Credits of Input Tax
Section 112 (C) The Commissioner The Commissioner shall grant a
shall grant a refund or issue the tax refund for creditable input taxes
credit certificate for creditable input within ninety (90) days from the date
taxes within one hundred twenty of submission of the official receipts
(120) days from the date of or invoices and other documents in
submission of complete documents in support of the application filed. The
support of the application filed. Commissioner should find that the
grant of refund is not proper, the
Commissioner must state in writing
In case of full or partial denial of the the legal and factual basis for the
claim for tax refund or tax credit, or the denial.
failure on the part of the Commissioner
to act on the application within the
period prescribed above, the taxpayer In case of full or partial denial of the
affected may, within thirty (30) days claim for tax refund, the taxpayer
from the receipt of the decision denying affected may, within 30 days from the
the claim or after the expiration of the receipt of the decision denying the
one hundred twenty day-period, appeal claim, appeal the decision with the
the decision or the unacted claim with Court of Tax Appeals. The failure on the
the Court of Tax Appeals. part of any official or agent or
employee of the BIR to act on the
application within the 90-day period
shall be punishable under Sec. 269 of
this Code.
Return and Payment of VAT
Sec. 114 (A) Every person liable to Additional Provision:
pay the value-added tax imposed
Beginning January 1, 2023, the filing
shall file a quarterly return of the
and payment shall be done within
amount of his gross sales or receipts
twenty-five (25) days following the
within twenty-five (25) days following
close of each taxable quarter.
the close of each taxable quarter
prescribed for each taxpayer. The
VAT-registered persons shall pay the
value-added tax on a monthly basis.
Withholding of VAT
Sec. 114 (C) Government shall, before Beginning January 1, 2021, the VAT
making payment on account of each withholding system shall shift from final
purchase of goods and services which to a creditable system. The payment for
are subject to the value-added tax lease or use of property rights to non-
deduct and withhold a final value-added resident owners shall be subject to
tax at the rate of five percent (5%) of twelve percent (12%) withholding tax at
the gross payment. Payment for lease the time of payment. The payments for
or use of properties or property rights purchases of goods and services arising
to nonresident owners shall be subject from projects funded by Official
to ten percent (10%) withholding tax at Development Assistance (ODA) shall
the time of payment. not be subject to the final withholding
tax system.
Other Percentage Taxes

National Internal Revenue Code of RA 10963 or TRAIN Law

1997
Tax on persons Exempt from VAT
Sec. 116 Any person whose sales or This provision is retained.
receipts are exempt from the payment
of VAT and who is not a VAT-registered Note: This Item has been VETOED by
person shall pay a tax equivalent to President Rodrigo
three percent (3%) of his gross
quarterly sales or receipts.
Tax on sale, barter or exchange of shares of stock listed and traded
through the local stocks exchange or through initial public offering
Sec. 127 (A) There shall be levied, The tax rate-imposed increase at the
assessed and collected on every sale, rate of six-tenths of one percent (6/10
barter, exchange, or other disposition of 1%).
of shares of stock listed and traded
through the local stock exchange
other than the sale by a dealer in
securities, a tax at the rate of one-
half of one percent (1/2 of 1%) of the
gross selling price or gross value in
money of the
shares of stock sold.
Returns and payment of percentage taxes
Sec. 128 The Commissioner may Repealed
prescribe the time for filing the return
and time of payment, including a
scheme of tax
prepayment of other percentage taxes.
Excise Tax on Certain Goods

National Internal Revenue Code of RA 10963 or TRAIN Law

1997
Goods subject to Excise Taxes
Sec. 129 Excise taxes apply to goods Excise taxes also apply to the services
manufactured or produced in the performed in the Philippines.
Philippines for domestic sales or
consumption or for any other
disposition and to things imported.
Cigars and Cigarettes
Sec. 145 (B) Cigarettes Packed by Imposes excise tax on cigarettes
Hand shall be based on the following packed by hand and packed by
schedule: machines at the following schedule:
 Effective Jan. 1, 2013 P12/pack Effective Jan. 1, 2018 P32.50/pack
Jan. 1, 2014 15/pack
Jul. 1, 2018 35/pack
Jan. 1, 2015 18/pack
Jan. 1, 2020 37.50/pack
Jan. 1, 2016 21/pack
Jan 1, 2022 40/pack
Jan. 1, 2017 30/pack

Sec. 145 (C) Cigarettes Packed by

Machine shall be based on the The rates of tax imposed shall be
following schedule: increased by 4% every year effective
on January 1, 2024, through revenue
regulations issued by the Secretary of
Effective P11.50 and More than
Finance.
below P12.00 Jan.
1, 2013 12.00/pack 25.00/pack
Jan. 1, 2014 17.00/pack
27.00/pack
Jan. 1, 2015 21.00/pack
28.00/pack
Jan. 1, 2016 25.00/pack
29.00/pack
Jan. 1, 2017 30.00/pack 30.00/pack
Manufactured Oils and Other fuels
Sec. 148 Excise Tax Rate:
Manufactured Oils and Excise Manufactured Jan. 1 Jan.
tax rates Other Fuels 1 Jan. 1
Oils and Other 2018
2019 2020
Lubricating oils and greases P4.50
per Fuels
liter/kg
Lubricating oils/liter P 8.00 P9.00
P10.00
Processed gas 0.05 per liter And grease/kg

Waxes and petrolatum 3.50 per Processed gas/liter P 8.00

P9.00 P10.00
kg Waxes and petrolatum/kgP 8.00 P9.00
P10.00
Denatured alcohol/liter P 8.00 P9.00
Denatured alcohol 0.05 per liter P10.00
Regular gasoline /liter P 7.00 P9.00
 Naphtha, r e g u l a r g a s o l i n e P10.00
4.35 per liter
and other similar products Unleaded premium/liter P 7.00 P9.00
P10.00
of distillation
Aviation turbo/liter P 4.00 P4.00
P4.00
Kerosene/liter P 3.00
P4.00 P5.00
Diesel fuel oil/liter P 2.50
Unleaded premium 5.35 per P4.50 P6.00
liter gasoline
Liquefied Gas/kg P 1.00
P2.00 P3.00

Aviation turbo jet fuel 3.67 per liter Asphalt/kg P 8.00

P9.00 P10.00
Bunker fuel/liter P 2.50
P4.50 P6.00
Petroleum coke/metric ton P2.50 P4.50
P6.00

For the period covering 2018 to 2020,

the scheduled increase in the excise
tax on fuel as imposed in this Section
shall be suspended when the average
Dubai crude oil price based on Mean
of Platts Singapore (MOPS)for three
(3) months prior to the scheduled
increase of the month reaches or
exceeds Eighty dollars (USD 80) per
barrel.

The following items are exempt from

excise tax:
• Naphtha and pyrolysis gasoline,
when used as a raw material in the
production of petrochemical
products, or in the refining of
petroleum products, or as
replacement fuel for natural-gas-
fired-combined cycle power plant
in lieu of locally-extracted natural
 gas during the non- availability
thereof.
Production of petroleum products,
whether they are classified as
products of distillation and for use
solely for the production of
gasoline.
• Liquefied petroleum gas when used
as raw material in the production
of petrochemical products;
• Petroleum coke, when used as
feedstock to any power generating
facility.

Excise taxes paid on the purchased

base stock (bunker) used in the
manufacture or excisable articles and
forming part thereof shall be credited
against the excise tax due therefrom.

Note: This Item has been VETOED by

President Rodrigo R. Duterte.
Mandatory Marking of all petroleum products
No Existing Provision Sec. 148-A - The Secretary of Finance
shall require the use of an official fuel
marking or similar technology on
petroleum products that are refined,
manufactured, or imported into the
Philippines, and that are subject to the
payment of taxes and duties, such as
but not limited to, unleaded premium
gasoline, kerosene, and diesel fuel oil
after the taxes and duties thereon
have been paid.
Excise tax on automobile
Sec. 149 Excise Tax imposed Excise Tax schedule on automobiles,
on automobiles are as follows: amended:
Net Manufacturer’s Rate
price/ Importer’s selling price Amount
Up to P600,000 Excise Tax Rate
2% Not over P600,000
Over P600,000 P12,000 + 4%
20% of Over 600,000 to 1,000,000 10%
Over 1,000,000 to 4,000,000 20%
P1,100,000 value
Over 4,000,000
in excess of
50%
P600,000
Over P1,100,000 P112,000 +
40% of
P2,100,000 value
in excess of
Hybrid vehicles shall be subject to fifty
percent (50%) of the applicable excise
P1,100,000
tax rates on automobiles. The purely
Over P2,100,000 P512,000 +
electric vehicles and pick- ups shall
60% of be exempt from excise tax on
Value excess of automobiles.
P2,100,000 Jeeps are considered automobiles.
Pick-ups are considered as trucks.
Indexation of brackets by the Secretary Indexation of brackets by the Secretary
of Finance every two years is pegged on of Finance is removed.
a percentage of the change in the
exchange rate of the Philippine peso
against the United States dollar.

Non-essential Services
No Existing Provision Sec. 150 (A) A tax equivalent to five
percent (5%) based on the gross
receipts derived from the
performance of services on invasive
cosmetic procedures, surgeries, and
body enhancements directed solely
towards improving, altering, or
enhancing the patient’s appearance
and do not meaningfully promote the
proper function of the body or prevent
or treat illness or disease.

This tax shall not apply to procedures

necessary to ameliorate a deformity
arising from a congenital or
developmental defect or abnormality,
a personal injury resulting from an
accident or trauma, or disfiguring
disease, tumor, virus or infection; and
cases or treatments covered by the
National Health
Insurance Program.
Sweetened Beverages
No Existing Provision Sec. 150 (B) A tax of Six pesos
 (P6.00) per liter of volume capacity
shall be imposed on sweetened
beverages using purely caloric
sweeteners, and purely non-caloric
sweeteners, or a mix of caloric and
non-caloric sweeteners.

This tax rate shall not apply to

sweetened beverages using high
fructose corn syrup; and sweetened
beverages using purely coconut sap
sugar and purely steviol glycosides.
Mineral Products
Sec. 151 Excise Tax on Mineral Increased excise taxes on domestic or
Products imported coal and coke,
notwithstanding any incentives
• P10/metric ton - On coal and coke
granted in any law or special law, to
• 2% - Actual market value of the wit:
gross output of all nonmetallic
minerals and quarry resources
• Effective Jan. 1, 2018, P50/metric
• Metallic minerals are subject to the
ton
following taxes:
• Effective Jan. 1, 2019,
1 to 2% - copper and other
P100/metric ton
metallic minerals
• Effective Jan. 1, 2020,
2% - gold and chromite P150/metric ton
3% - Indigenous petroleum
Increased excise tax on nonmetallic
and metallic minerals to 4%.

Increased excise tax on indigenous

petroleum to 6%.