The Philippine Economic Zone Authority welcomed the signing of the Republic Act. No. 11534 or the “Corporate Recovery and Tax Incentives for Enterprises Act” Create.
In a statement on Wednesday, PEZA Director General Charito Plaza said most of the concerns and suggestions from the industry associations and PEZA-registered export industries that had been expressed and submitted to the House of Representatives and the Senate have been addressed by Create.
“We are happy with the final Create Act after all those years of struggle. We recognize the need to gradually change and reform the national tax or revenue system yet at the same time address the need to maintain and attract investors’ confidence in the Philippines, especially during this time of the pandemic,” said Plaza.
“Although Create may offer ‘win some, lose some’ opportunities for the different industries, we are glad that Create sustained our argument and has placed a high premium on export-oriented enterprises with their availment of superior fiscal incentives, particularly for new projects that will be applied with the IPAs (investment promotion agencies) like PEZA,” she added.
Plaza said the passage of the said law creates stability in the taxation regime and PEZA as the top export-oriented IPA can aggressively pursue marketing and promotion of the country’s economic zones to global investors.
The PEZA chief said that there’s a need to communicate to existing and new investors the impact of the Create Act to export-oriented industries while pushing momentum and efforts to attract investments through marketing and promotion activities.
Plaza said one of the items vetoed by the President that may have a big effect to the country’s existing foreign direct investors is the removal of the extension of availment of tax incentives by existing registered business enterprises (RBEs), given that the “extension of incentives for existing projects is unfair to ordinary taxpayers/unincentivized enterprises and further, only new activities and projects deserve fresh incentives.”
Plaza said that under the Create Act, RBEs have no choice but to make do with the 10-year sunset period (after the lapse of income tax holiday) and thereafter, graduate to the regular 25-percent corporate income tax rate.
PEZA Deputy Director General for Policy and Planning Tereso Panga said this scenario could be a make or break for the Philippines as the affected ecozone locators, for example, might decide to retain their facilities and invest in new projects to be entitled to a longer income tax holiday and special corporate income tax (total of 14 to 17 years).
She, however, said that under a worse case scenario, “investors might just pack up and transfer to a more willing host-country that can offer better incentives for their investments as their availment of more advantageous incentives for sunk projects with the IPAs prior to Create were cut short by the mandatory sunset period for RBEs.”
PEZA is currently preparing its inputs to the implementing rules and regulations (IRR) of the Create Act and will conduct dialogues with its locator companies to further discuss the impact or benefits of the law to PEZA and its registered enterprises.