Home Top Stories BIR releases draft IRR for CREATE Law
BIR releases draft IRR for CREATE Law
THE Bureau of Internal Revenue (BIR) released the draft guidelines for the implementation of the law that will immediately slash corporate income tax to 25% from 30%.
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was signed by President Rodrigo R. Duterte on March 26 as Republic Act No. 11534.
The proposed implementing rules and regulation (IRR) lays out the tax rates that will be implemented during the transition period of the CREATE law.
Based on the draft guidelines, regular corporate income tax rates will be retroactively reduced by 42 basis points (bps) starting July 2020. This means that the applicable rate for July 31 will be at 29.58% (from 30%) and will be brought down each month by another 42 bps until it reaches 25% by June 30, 2021.
Other domestic corporations with net taxable income lower than P5 million and total assets less than P100 million exclusive of land will see a reduction of 0.84 bp every month. This means applicable rates starting the accounting period July 31, 2020 will be reduced to 29.16%, until it reaches 20% by the accounting period June 30, 2021.
“For taxpayers who have already filed their income tax returns for taxable year 2020 (calendar year 2020; fiscal year ending from July 31, 2020 to fiscal year ending February 28, 2021) they may amend their income returns using the transitory rates per above matrix, and any resulting excess/overpayment can be claimed for refund or carried over to the next taxable year, at taxpayers’ option,” the proposed IRR stated.
CREATE aims to bring down corporate income tax to 25% starting July 2020 and will continue to slash it by a percentage point (100 bps) each year from 2023 to 2027 until it reaches 20%.
In the first two years of implementation, the law is expected to result in P251 billion in foregone tax revenues or P1 trillion worth of tax relief for a decade. Savings incurred by firms from the measure is expected to bring in job creation in the next five years. — Luz Wendy T. Noble