Tax Alert No. 4 [Implementing Rules and Regulations of Title XIII of Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended by Republic Act No. 12066 or CREATE MORE Act]

05 Mar 2025

Pursuant to Section 32 of Republic Act (RA) No. 12066, entitled, “An Act Amending Sections 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, and 311, and Adding New Sections 135-A, 295-A, 296-A, and 297-A of the National Internal Revenue Code of 1997, as amended, and for Other Purposes”, the Secretary of Finance and the Secretary of Trade and Industry, after consultations with the Commissioner of Internal Revenue, Commissioner of Customs, the Board of Investments, and other Investment Promotion Agencies hereby promulgate this Implementing Rules and Regulations (IRR).

Please be informed that the IRR of CREATE MORE Act has been issued to provide policies and guidelines for the implementation of Republic Act (RA) No. 12066, or the CREATE MORE Act, amending Sections 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, and 311, and Adding New Sections 135-A, 295-A, 296-A, and 297-A of the National Internal Revenue Code of 1997 (“Tax Code”), as amended. We provide below the salient points:

Coverage of the IRR:
- All Investment Promotion Agencies (IPAs), unless specifically exempted, including the BOI, PEZA, BCDA, SBMA, and others.
- Newly registered projects and activities, including qualified expansion projects under the Strategic Investment Priority Plan (SIPP).
- Registered enterprises, projects, or activities with IPAs and enjoying incentives before RA No. 11534 (CREATE Act) and RA No. 12066.
- Government agencies and entities administering tax incentives.
- GOCCs, GIs, government commissaries, and SUCs granted tax subsidies under the Tax Expenditure Fund of the annual GAA.

Income Tax-Based Incentives:

1. Income Tax Holiday (ITH)	RBEs	Registered projects or activities are exempt from regular income tax. During the ITH period, income payments related to their registered project or activity are not subject to creditable withholding tax.
2. Special Corporate lncome Tax (SCIT)	REEs	A 5% tax on gross income earned, in lieu of all national and local taxes, and local fees and charges. However, private ecozone developers shall be subject to real property tax on land owned by them.
3. Enhanced Deductions Regime (EDR)	DMEs and High-value DMEs	Deductions in addition to the allowable ordinary and necessary deductions under Section 34 of the Tax Code.
	REEs	REEs may, at their option, avail of the EDR. ln no case, however, shall EDR be granted simultaneously with the SCIT.
	RBEs	Depreciation allowance: 10% for buildings, 20% for machinery and equipment. Labor expenses: Additional 50% deduction for direct local employment. Research & Development expenses: 100% additional deduction. Training expenses: 100% additional deduction for training Filipino employees, as approved by the IPA. Domestic input expenses: 50% additional deduction. Power expenses: 100% deduction. Reinvestment allowance: Up to 50% for manufacturing and tourism within five years. Exhibition expenses: 50% additional deduction for exhibitions, trade missions, or trade fairs. Enhanced NOLCO: Losses in the first 3 years can be carried over within the next 5 years.

Duty Incentives:

1. Custom duty exemption

REEs and DMEs

Exemption from customs duties applies to the importation of capital equipment, raw materials, spare parts, and accessories for their registered project or activity, including goods used for administrative purposes, subject to the following conditions: 1. The exemption is for items directly related to the registered project or activity, and 2. The items must not be domestically available in sufficient quantity, quality, or at reasonable prices.

The VAT exemption and VAT zero rating on local purchases shall only apply to goods and services directly attributable to the registered project or activity of an REE or a registered High-value DME, including incidental expenses thereto.

Registered Business Enterprise Local Tax (RBELT): The concerned LGU may impose an RBELT of up to 2% based on gross income during the lTH and EDR, replacing all local taxes, fees, and charges: RBELT is not applicable to RBEs under SCIT. RBEs certified by the BOI as pioneer or non-pioneer are exempt from local business tax for 6 or 4 years, respectively, from registration. IPAs with regulatory powers will continue to impose fees and charges within their areas.
Period of availment of incentives based on location and industry tiers:
- For REEs approved by an IPA

Income Tax-Based Incentives

Location and Industry Tier

Tier I

Tier II

Tier III

NCR

4 years ITH + 10 years SCIT/EDR; or

14 years SCIT/EDR

5 years ITH + 10 years SCIT/EDR; or

15 years SCIT/EDR

6 years ITH + 10 years SCIT/EDR; or

16 years SCIT/EDR

Metropolitan Areas or Areas Contiguous and Adjacent to NCR

5 years ITH + 10 years SCIT/EDR; or

15 years SCIT/EDR

6 years ITH + 10 years SCIT/EDR; or

16 years SCIT/EDR

7 years ITH + 10 years SCIT/EDR; or

17 years SCIT/EDR

All Other Areas

6 years ITH + 10 years SCIT/EDR; or

16 years SCIT/EDR

7 years ITH + 10 years SCIT/EDR; or

17 years SCIT/EDR

7 years ITH + 10 years SCIT/EDR; or

17 years SCIT/EDR

For DMEs approved by an IPA

Income-Tax Based Incentives

Location and Industry Tier

Tier I

Tier II

Tier III

NCR

4 years ITH + 10 years EDR; or

14 years EDR

5 years ITH + 10 years EDR; or

15 years EDR

6 years ITH + 10 years EDR; or

16 years EDR

Metropolitan Areas or Areas Contiguous and Adjacent to NCR

5 years ITH + 10 years EDR; or

15 years EDR

6 years ITH + 10 years EDR; or

16 years EDR

7 years ITH + 10 years EDR; or

17 years EDR

All Other Areas

6 years ITH + 10 years EDR; or

16 years EDR

7 years ITH + 10 years EDR; or

17 years EDR

7 years ITH + 10 years EDR; or

17 years EDR

For REEs approved by the FIRB

Income Tax-Based Incentives

Location and Industry Tier

Tier I

Tier II

Tier III

NCR

4 years ITH + 20 years SCIT/EDR; or

24 years SCIT/EDR

5 years ITH + 20 years SCIT/EDR; or

25 years SCIT/EDR

6 years ITH + 20 years SCIT/EDR; or

26 years SCIT/EDR

Metropolitan Areas or Areas Contiguous and Adjacent to NCR

5 years ITH + 20 years SCIT/EDR; or

25 years SCIT/EDR

6 years ITH + 20 years SCIT/EDR; or

26 years SCIT/EDR

7 years ITH + 20 years SCIT/EDR; or

27 years SCIT/EDR

All Other Areas

6 years ITH + 20 years SCIT/EDR; or

26 years SCIT/EDR

7 years ITH + 20 years SCIT/EDR; or

27 years SCIT/EDR

7 years ITH + 20 years SCIT/EDR; or

27 years SCIT/EDR

For DMEs approved by the FIRB

Income Tax-Based Incentives

Location and Industry Tier

Tier I

Tier II

Tier III

NCR

4 years ITH + 20 years EDR; or

24 years EDR

5 years ITH + 20 years EDR; or

25 years EDR

6 years ITH + 20 years EDR; or

26 years EDR

Metropolitan Areas or Areas Contiguous and Adjacent to NCR

5 years ITH + 20 years EDR; or

25 years EDR

6 years ITH + 20 years EDR; or

26 years EDR

7 years ITH + 20 years EDR; or

27 years EDR

All Other Areas

6 years ITH + 20 years EDR; or

26 years EDR

7 years ITH + 20 years EDR; or

27 years EDR

7 years ITH + 20 years EDR; or

27 years EDR

Income tax-based incentives shall commence from the actual start of commercial operations.
Application and issuance of a VAT zero-rating certificate: REEs and high-value DMEs must apply annually for a VAT zero-rating certificate with their IPA to benefit from VAT zero-rating incentives on local purchases. Failure to achieve 70% export sales for REEs or meet export sales/investment capital for high-value DMEs in the previous year leads to disqualification from duty and VAT exemptions on imports and VAT zero-rating on local purchases for the following year. Non-compliance results in the IPA notifying the BIR of the certificate's cancellation, but previously availed non-income tax-based incentives remain unaffected.
Authority of the FIRB and IPAs to approve or disapprove tax incentive grants:

FIRB

IPAs

Registered projects or activities with investment capital of more than fifteen billion pesos (P15,000,000,000).

The FIRB may also raise this threshold in consultation with the IPAs.

Registered projects or activities with investment capital of fifteen billion pesos (P15,000,000,000) and below, subject to compliance with Title Xlll of the Tax Code and the minimum standards prescribed by this lRR.

The President may grant incentives for national economic development or upon the recommendation of the FIRB. Options include ITH not exceeding ten (10) years followed by 5% SCIT or EDR, or 5% SCIT or EDR, immediately at the start of commercial operations with a cap of 40 years for income tax incentives. Conditions for the grant shall be as follows: 1. Project must have a sustainable development plan with innovation; 2. Requires at least a Php50 billion investment capital or at least 10,000 local jobs within 3 years of COR issuance. FIRB to review thresholds every 3 years.
Pre-CREATE RBEs can maintain their tax incentives, which include exemptions from national and local taxes for SCIT projects, the option for enhanced deductions, a 20% income tax rate for RBEs availing EDR, up to 2% RBE local tax for those availing ITH or EDR, and conditions for availing the duty and VAT exemption on imports and VAT zero-rating on local purchases.
This IRR shall take effect immediately upon publication in a newspaper of general circulation. The IRR was signed on 17 February 2025 and published in the Philippine Star on 20 February 2025.

You may access the full version of this Regulation through the BIR website.

For any inquiry or request for assistance, please feel free to contact anyone from our Tax Services group. You may also reach us through this link