Ano bang bago dito (CREATE BILL)? -Part 1 – Reduced Corporate Income Tax Rates

I know it is still too early to discuss given that the House and Senate might need to reconcile the two versions (Read: How do laws become laws)  however it is not bad to give you an idea of what is in store for us. So here is our short (but extensive) series on CREATE BILL which will tackle the big changes and salient features of the CREATE BILL as per Senate Bill (SB) 1357.

Part 1 – Lowered Corporate Income Tax Rates (Sec. 6 amending Sec. 27 (A) of the National Internal Revenue Code (NIRC) of 1997)

Our country has the most expensive/largest corporate income tax rate compared with its South East Asian neighbor with 30% income tax on taxable income which is above and beyond the average corporate income tax rate in the region of 20-25% while Singapore boasts the cheapest tax rate with 17%.

Now the Senate version of the CREATE BILL wishes to address this concern by amending the Corporate Tax Rate as follows:

1. Domestic Corporations (DCs)

These are corporations duly incorporated under Philippine Laws. These corporations are currently taxed at 30%. But when the CREATE Bill is enacted the corporate income tax rate will be reduced to 25% beginning JULY 2020 (yes ,it will have a retroactive effect). 

In addition, Corporations who are qualified to be  considered as Micro – Small Medium Enterprises (MSME) or those entities with assets whose values are not more than Php 100 million (excluding the land where the particular business entity’s office, plant and equipment are situated) AND at the same time not having  a taxable income more than Php 5M will have a reduced corporate income tax rate of 20%.

2. Foreign Corporations

These are corporations duly incorporated under Foreign Laws. While for foreign corporations the tax corporate income tax rate will be reduced  to 25%.

To summarize:

Type of Corporation	Current	Proposed (SB 1357)
Domestic Corporation	30%	Assets not over  Php 100M AND Taxable Income not over Php 5M – 20% Taxable income over Php 5M (regardless of value of assets) – 25%
Foreign Corporations	30%	25%

We will be coming out with a  podcast/youtube video discussing this article in the coming weeks.

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Download the complete SB 1357 as approved per 3rd Reading here: