Republic Act (RA) No. 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was created by the Philippine Congress in response to the COVID-19 pandemic as a fiscal relief to domestic and foreign corporations doing business in the Philippines. It seeks to amend several provisions in the old Tax Code, with a central focus on lowering corporate income tax rates and rationalizing fiscal incentives to better attract local and foreign investments in the Philippines.
President Rodrigo Duterte signed CREATE into law on March 26, 2021, with a number of vetoed provisions. It was published in the Business Mirror on March 27 and took effect on April 11, 2021.
Before the COVID-19 pandemic, CREATE Act was initially known as TRABAHO bill (or Tax Reform for Attracting Better and Higher-quality Opportunities). When the bill failed to pass Congress, it was renamed to CITIRA (or Corporate Income Tax and Incentives Reform Act ), which also failed to pass Congress because it was deemed as a non-priority and non-urgent bill during the outbreak of COVID-19. The addition of COVID-19 related provisions propelled the passage of the bill into law.
The corporate income tax (CIT) rates for domestic corporations and resident foreign corporations (RFCs) under the CREATE Act will be reduced from the current 30% to 25% , retroactive to July 1, 2020. The CIT will be reduced further by 1% annually in the next six years. And shall eventually reach 20% by 2027 onwards.
Summary of CIT rates and their effectivity under CREATE Act