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Creating more investments for the Philippines


In recent years, the Philippines has been undergoing an extensive overhaul of its tax system. One such law is the CREATE Act, which was passed in 2021. Under CREATE (the Corporate Recovery and Tax Incentives for Enterprises Act), the corporate income tax was lowered, and the existing incentives regime was rationalized. Since the law was passed, the Philippines has approved P1.1 trillion worth of investment capital.

However, one of the bills currently pending before Congress seeks to amend CREATE to further improve its provisions. Dubbed CREATE MORE, the proposed bill seeks to, among others, restore the authority of administering incentives to the Investment Promotion Agencies (IPAs), instead of the Fiscal Incentives Review Board (FIRB).

The main reason for reverting the authority to grant incentives to IPAs is the removal of an additional bureaucratic layer in the granting or denial of incentives. How the system works at present is that business enterprises must seek the approval of either the IPA or the FIRB, depending on the amount of investment capital. Pursuant to an FIRB advisory released Feb. 19, the threshold for the FIRB’s jurisdiction starts at P15 billion. Incentives application for businesses with an investment capital of less than P15 billion is subject to the approval of the relevant IPA.

The problem with this current system is that it delays the start of commercial operations of business enterprises covered by that threshold. They have to go either to the IPA or the FIRB first when they could just go straight to the IPA instead. This step does not add any additional value to the investment approval process since the FIRB will just approve what was recommended by the IPAs.

Another feature proposed by the CREATE MORE bill is creating a clear distinction in the jurisdiction of each relevant government agency. Ideally, those within ecozones are governed by the Philippine Economic Zone Authority (PEZA) while those outside ecozones are governed by the Board of Investments (BoI). However, this is not strictly implemented. For example, the BoI has the authority to register projects even if those projects are located in a PEZA-registered building. A proposal by PEZA is to delineate the actual limits of each, such that there would be no confusion as to the authority of the BoI and PEZA.

As regards the incentives themselves, there are also other provisions that warrant looking into.

Presently, after the Income Tax Holiday period, a registered business enterprise (RBE) can avail themselves of the Enhanced Deductions incentive, but it will be subject to the regular 25% corporate income tax. CREATE MORE seeks to improve this incentive by offering RBEs a 20% corporate income tax rate to those granted an Enhanced Deductions incentive. This additional benefit will undoubtedly make tax rates more competitive with the global market, as a step toward the OECD-proposed minimum global tax rate of 15%.

There is also a need to further authorize IPAs, specifically PEZA, with the authority to downgrade incentives. Prior to CREATE, PEZA allowed the downgrading of incentives (e.g., from an Income Tax Holiday or ITH incentive to a Special Corporate Income Tax or SCIT incentive) in cases where they did not meet certain conditions. However, there is no similar provision for this under the CREATE Act. This means that failing to meet a few conditions already warrants the cancellation of incentives of that RBE.

Adding a provision that allows the PEZA some flexibility in the granting of incentives would make the Philippines more competitive. The cancellation of incentives for failure to meet a few conditions is a harsh punishment that can affect the economic performance of RBEs. It may be better to rely on the expertise and specialized knowledge of the PEZA on the appropriate act for such matters. This expertise and specialized knowledge is reflected in its contributions to foreign direct investments in the country. For 2023 alone, PEZA was lauded for drawing in P175.7 billion in approved investments, which increased by 25% compared to P140.7 billion in 2022.

Recently, the Asian Consulting Group (ACG) entered into a Memorandum of Understanding with PEZA to reflect their joint vision of encouraging inflow investments and reinvestments into the Philippines. Through its International Tax and Investment Roadshow, ACG will be promoting the Philippines as an investment destination and guiding potential investors on the ins-and-outs of doing business in the Philippines. It started in Singapore, Malaysia, and Japan early this month and will continue in South Korea, then in the United States in April 2024, followed by Europe in May 2024, and Australia and Canada in June 2024. (For more information, visit

Another proposal under the CREATE MORE bill exempting RBEs from the need to obtain business permits from LGUs. To recall, the purpose of the establishment of ecozones is to minimize government intervention in the operation of businesses located therein. However, at present, RBEs are still required to obtain local government permits, such as mayor’s permits or business permits. RBEs should be exempt from these requirements and, in lieu thereof, be liable to pay a 2% local tax to be collected by the relevant IPAs and remitted to the LGU concerned.

Finally, CREATE MORE provides a clarification on the grant of non-income tax incentives (i.e., duty exemptions, VAT exemptions on importation, and VAT zero-rating on local purchases). These non-income tax incentives should continue to be granted notwithstanding the lapse of the income tax incentives (i.e., ITH or SCIT). The rationale for the grant of these non-income tax incentives stems from the nature of an ecozone as a “separate customs territory.”

Overall, these changes seek to further enhance the administration of tax incentives in the Philippines. Unnecessary bureaucratic layers and procedures will only drive away potential investors and will make the Philippines a less competitive investment destination on the global scale. At the moment, the most pressing issue for foreign investors and locators is the processing and approval of the VAT refund. While the TRAIN Law (the Tax Reform for Acceleration and Inclusion Law) mandates an enhanced VAT refund system, it is still quite a challenge given the possible liability and risk on the part of Bureau of Internal Revenue and the pending implementation of electronic invoicing to automate the processing of the refund.

ACG stands as a testament to the country’s unwavering commitment to foster a conducive environment for investment and economic development. ACG will continue to collaborate with the policymakers and the business community, particularly foreign chambers, to make sure we further improve the ease of doing business in the country.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.

Raymond “Mon” A. Abrea is an MPA/mason fellow at Harvard Kennedy School. He is a member of the MAP Tax Committee and the MAP Ease of Doing Business Committee, co-chair of the Paying Taxes on Ease of Doing Business Task Force, and is the chief tax advisor of ACG.

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