THE Philippine Economic Zone Authority (Peza) wants to highlight the tax incentives granted to company locators and ecozone development in the implementing rules and regulation (IRR) of the recently signed corporate tax reform measure.
The regulator of economic zone locators is preparing its inputs for the IRR of Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. Peza is set to meet with locator companies to discuss the potential impact and benefits of CREATE on their operations.
Peza Director General Charito Plaza told BusinessMirror she wants the investment promotion agency (IPA) to still have “the same globally competitive tax incentives and enhance with tax and non-tax subsidy for strategic big-ticket industries.”
Among the incentives of a Peza-registered enterprise are income tax holiday (ITH), tax- and duty-free raw materials importation, capital equipment, machineries and exemption in other related fees.
Plaza said Peza wants to give focus as well on the development of public and special economic zones in the private sector located in the countryside. This will allow the transformation of idle lands, which can attract different types of industry, she explained.
Peza regulates around 410 economic zones nationwide as of November 2020, majority or 290 of which are IT parks and centers.
While the regulator welcomed CREATE’s signing, a Peza official raised concern over a vetoed item which resulted in removal of tax incentive extension availment for foreign direct investors.
CREATE leaves registered business enterprises (RBEs) no choice but to accept the 10-year sunset period after the lapse of ITH, which follows the adoption of 25-percent corporate income tax (CIT) rate. Only new activities and projects will be granted fresh incentives, Peza noted.
Deputy Director General for Policy and Planning Tereso Panga, in a recent statement, said this can have repercussions for existing locators.
“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 ITH and SCIT (special corporate income tax) period (total of 14-17 years),” Panga said.
“[Or] worse, they 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,” he added.
Still, Plaza is “hopeful” the locator companies can adjust to the new measures under CREATE.
“We believe that effective governance will be pivotal in our resolve to retain, expand and attract investments into the ecozones under the CREATE regime and in due time, our existing locators will be able to adjust to CREATE and continue to secure their investments in the Philippines,” Plaza added.
President Duterte signed CREATE into law last month after the measure underwent different versions through the years.
The law cut CIT rate to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below, and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies pay 25-percent income tax.
Image credits: PIA CAR