Exporters, domestic firms to have distinct incentives in CREATE bill

Firms in domestic industries and those engaged in exporting will be given different fiscal incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill to ensure that businesses would thrive despite the rationalization of perks amid the COVID-19 pandemic, Senator Pia Cayetano said on Tuesday.

"Exporters and domestic industries are now treated differently under CREATE. The basis for this is because they have a different market, and therefore, their needs and their ability to be profitable are different," Cayetano, chairperson of the Senate Ways and Means Committee, said as the period of amendments for the bill resumed.

Senate President Pro Tempore Ralph Recto previously proposed three models in reforming the incentives aspect of the bill, one of which included distinguishing between domestic and export enterprises.

Exporters will have the option to continue availing of the special corporate income tax rate of five percent of gross income earned (GIE) for 10 years, or avail of enhanced deductions, Cayetano said while stressing that it is a "major give" on the part of the Department of Finance.

On the other hand, domestic enterprises may avail of the enhanced deductions for 10 years.

"Worth noting is this 10-year period, which is quite lengthy," she said.

Both exporters and domestic industries will enjoy a four to seven-year income tax holiday under the CREATE bill, according to Cayetano.

She stressed that this period was longer compared to what was originally proposed in the measure.

"The total incentive duration for both exporters and domestic industries is 17 years. That is coming from the four to seven years of income tax holiday, and then the 10 years for the availment of the special corporate income tax rate or the enhanced deduction," Cayetano said.

Meanwhile, existing registered businesses who were granted income tax holidays will be given ample time to enjoy it for the period it was granted before transitioning to the provisions under CREATE.

"Puwede nilang tapusin 'yung period nila. And for those who have been enjoying the 5% gross income earned tax, regardless of the number of years that they have been enjoying the incentives, all will have 10 years to transition to CREATE," she said.

"They can re-apply and they will be able to get the incentives that I mentioned for export or domestic businesses," she added.

Aside from rationalization of fiscal perks, the CREATE bill also seeks to reduce the corporate income tax rate in the country from the current 30%.

Cayetano accepted Recto's proposal to impose progressive tax rates on domestic corporations in a bid to make it equitable for micro, small, and medium enterprises.

Senate Majority Leader Juan Miguel Zubiri was optimistic that the CREATE bill, a priority measure, would be approved on second and third reading on Wednesday.

The House of Representatives approved its counterpart bill last year. — DVM, GMA News