Understanding the CREATE MORE Law in the Philippines

Companies belonging to the Philippines’ information technology (IT) and business process outsourcing (BPO) industries are some of the enterprises that can expect better tax incentives and streamlined processes with the passage of the CREATE MORE Act. 

Here’s what to expect from this new law. 

In this article: 

Looking for a specific piece of information? Click any of the items below to jump straight to the section you’re interested in. 

• A comprehensive law for doing business in the Philippines 

• Check your eligibility: Does CREATE MORE apply to your entity? 

• What is a registered business enterprise and what constitutes it? 

• Choosing an incentive package 

• Fiscal incentives and their coverage 

• How can BPO companies benefit from CREATE MORE? 

A comprehensive law for doing business in PH

Republic Act (RA) 12066, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (shortened as CREATE MORE), is an act that seeks to improve the tax incentives system in the Philippines and simplify business processes for investors. It was signed into law on 11 November 2024 to amend certain provisions of the CREATE Act (RA 11534).  

CREATE MORE law expands the fundamental principles concerning tax, duty, and VAT exemptions; tax incentives; company income tax rate; and the policies involved to be eligible for these benefits. 

With its more comprehensive and clearer take on the country’s incentives system, the Fiscal Incentives Review Board (FIRB) stated that CREATE MORE can: 

• enhance the ease of doing business in the Philippines,  

• expound value-based tax rules,  

• provide more attractive tax incentives,  

• strengthen governance and accountability, and  

• make clearer transitory rules for pre-CREATE registered business enterprises (RBEs). 

“CREATE MORE will open the floodgates of more high-impact investments both from our international investors and domestic enterprises,” said finance secretary and FIRB chairperson Ralph Recto via the Department of Finance’s press release.  

Aside from attracting new investments and increasing business revenues, the new law is also expected to help create more jobs, increase income, and reduce poverty. 

Related: Key Features of the Ease of Doing Business Law in PH [Infographic] 

Check your eligibility: Does CREATE MORE apply to your entity?

As outlined under the Implementing Rules and Regulations (IRR) of the CREATE MORE Act, your entity must be a registered business enterprise (RBE) to enjoy the law’s fiscal and non-fiscal incentives.

On top of this, your firm must also either have:

• Newly registered projects or activities, including qualified expansion projects or activities, under the Philippines’ Strategic Investment Priority Plan (SIPP).

  You may check the list of qualifying investment activities here.

  Be sure to familiarize yourself with the qualifying investment activities. As stated in CREATE MORE’s IRR, the tax incentives you can receive are “only to the extent” of your registered project or activity under the SIPP. 
  
  The government will also be releasing the 2025-2028 SIPP this year, so make sure to review any changes upon its release. Through this, you can be updated on the key economic activities that qualify for fiscal incentives under CREATE MORE. We’ll provide further updates in this article once the new SIPP is available. 

• Existing registered projects or activities under the concerned Investment Promotion Agencies (IPAs) and incentives before the passage of both CREATE Act and CREATE MORE Act.  
   
  If your entity falls under this criterion, you have until 31 December 2034 to maximize your national and local benefits, including VAT and duty incentives. 

What is a registered business enterprise (RBE) and what constitutes it?

As mentioned above, your entity must be a registered business enterprise (RBE) that has eligible projects or activities to qualify for the appropriate incentives under the CREATE MORE Act.  

But what exactly does it mean to be an RBE? 

The law classifies any of the entity below to be an RBE provided they meet two special conditions; that is, 1) they must be organized and existing under Philippine laws and 2) registered with an Investment Promotion Agency*: 

• Individual 

• Partnership 

• Corporation 

• Philippine branch of a foreign corporation 

 Service enterprises, meanwhile, are excluded as RBEs, specifically those engaged in: 

• Customs brokerage 

• Trucking or forwarding services 

• Janitorial services 

• Security services 

• Insurance 

• Banking and other financial services 

• Consumers' cooperatives 

• Credit unions 

• Consultancy services 

• Retail enterprises 

• Restaurants 

• Or other similar services as determined by the FIRB 

If your entity qualifies as an RBE, the next thing to do is to determine what type of RBE it is: a registered export enterprise or a domestic market enterprise.

1. Registered export enterprises (REEs) are any RBE engaged in:

• Manufacturing, assembling, or processing activities 

• Services such as information technology (IT) and business process outsourcing (BPO)  

The law also expounds that the above activities and/or services must result in “the direct exportation and/or sale of its manufactured, assembled, or processed product or IT/BPO services to another REE that will form part of the final export product or export service of the latter, of at least 70% of its total production or output.” 

2. Domestic market enterprises (DMEs), on the other hand, are any RBE other than a registered export enterprise.

If your DME has an investment capital of more than 15 billion pesos and engages in import-substituting sectors; or if it has at least $100 million in export sales from the preceding year, then your entity can be classified as a high-value DME. Being a high-value DME comes with its own benefits. We’ll discuss more of this later. 

*An Investment Promotion Agency (IPA) is a government body responsible for promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of different economic zones and freeports. Out of all recognized IPAs, the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA) are the ones in-charge of promoting investments on a national level.

Choosing an incentive package

Depending on your RBE classification (that is, whether you’re an REE or DME), you can choose which incentive package to utilize over a certain period at the start of your commercial operations. 

a. If you’re a registered export enterprise (REE) under the SIPP, you have three options:

1. Income Tax Holiday (ITH) followed by either Special Corporate Income Tax (SCIT) or Enhanced Deductions Regime (EDR) 

If you prefer to skip ITH to enjoy other incentives longer, you can either select: 

2. SCIT that may be granted immediately at the start of your commercial operations

3. EDR that may be granted immediately at the start of your commercial operations 

b. If you’re a registered domestic market enterprise (DME), you can choose between:

1. ITH followed by EDR 

2. EDR that may be granted immediately at the start of your commercial operations

Note: Your chosen incentive package will be irrevocable for the entire duration, so make sure to choose with caution. 

Take the time to consider your entity’s current circumstances and plans. Of the incentives listed above, which do you think can benefit your operations in the long term?

For instance, do you think it will be better to avail your business of ITH, or will it be more beneficial to skip it altogether so you can maximize either SCIT or EDR longer? 

We also highly advise consulting this with a professional who is knowledgeable on both law and taxation.  

The succeeding section will provide more details on ITH, SCIT, EDR, other fiscal incentives, and the authorities in charge of granting those incentives. 

Fiscal incentives and their coverage

Before we discuss the fiscal incentives that may be available to your RBE, let’s first touch on the government bodies responsible for granting those incentives: the Investment Promotion Agencies (IPAs) and the Fiscal Incentives Review Board (FIRB).

Why is this necessary?

It's because one of the determining factors of how long you can enjoy an incentive depends on which of the two government bodies approve your project and/or activity. 

1. Concerned IPA

• Exclusive jurisdiction to register all projects or activities regardless of the amount of investment capital.
• Authority to approve or disapprove the grant of tax incentives for projects or activities with 15 billion pesos and below investment capital. 

2. FIRB

• Upon the recommendation of the concerned IPA, the FIRB will approve or disapprove the grant of tax incentives to registered projects of activities with more than 15 billion pesos investment capital. 

Now let's proceed to the fiscal incentives available under the CREATE MORE Act.

1. Income Tax Holiday (ITH)

Available for: REEs and DMEs 

ITH exempts your registered project or activity from regular income tax for a certain period.  

The availment period of ITH is highly dependent on the location and sectoral tiering of your registered project or activity, as outlined in the table below. 

Here’s what each tier covers based on the list of priority activities under the current SIPP. 

2. Special Corporate Income Tax (SCIT)

Available for: REEs only 

The SCIT is a tax rate equivalent to 5% based on the gross income you earned, in lieu of all national and local taxes, local fees, and charges.

Gross income earned, as defined by the law, pertains to 1) the total sales or revenues from the registered activity, 2) excluding sales discounts, returns, allowances, and direct costs, 3) but before deducting any administrative expenses or incidental losses during a taxable period. 

The law also specified certain activities or projects that may be computed as direct costs. You can check the full list here. 

For SCIT, the availment period depends on the approving body and your entity’s location and sectoral tiering. 

If you choose to avail of ITH first, you’ll get: 

• 10 years of SCIT for IPA-approved projects 

• 20 years of SCIT for FIRB-approved projects 

Otherwise, see the timetable below if you skipped ITH and availed SCIT right at the start of your commercial operations.

See the table above for the list of qualified activities and projects under each tier. 

3. Enhanced Deductions Regime (EDR)

Available for: DMEs and high-value DMEs. REEs also have the option to avail themselves of this incentive, but they must note that the enhanced deduction incentive cannot be granted simultaneously with SCIT. 

The enhanced deductions regime gives you access to various types of deductions on top of deductions provided under the Tax Code.

One of EDR’s celebrated features is the lower corporate income tax (CIT) rate of 20%, down from 25% under the CREATE Act. Note that this new rate applies to your taxable income derived from registered projects or activities during the taxable year. 

Aside from the lower CIT rate, you may also be eligible for the following enhanced deductions: 

When it comes to the availment period, EDR follows the same scheme as SCIT.

If you avail ITH, you’ll get: 

• 10 years of EDR for IPA-approved projects 

• 20 years of EDR for FIRB-approved projects 

Otherwise, the timetable below applies: 

4. Duty exemption

Available for: REEs and DMEs 

If your entity imports capital equipment, raw materials, spare parts, and accessories for your registered project or activity, you can be eligible for customs duty exemption. 

However, the law also outlines some conditions for you to be eligible of this incentive: 

• Your imports must be directly attributable to the registered project or activity, including goods used for administrative purposes 

• Your imports should not be produced or manufactured in the Philippines in sufficient quantity or of comparable quality and at reasonable prices 

5. Value-added tax (VAT) zero-rating and exemption

Available for: REEs and high-value DMEs 

To be eligible for the 0% VAT on local purchases and VAT exemption on importation, you must meet the following conditions: 

• Your entity must be classified as a registered export enterprise or a high-value domestic market enterprise 
• Goods and services must be directly attributable to the registered project or activity, including incidental expenses 

If you believe your entity qualifies for fiscal incentives under the CREATE MORE Act, check out this step-by-step procedure to see how you can apply. 

How can BPO companies benefit from CREATE MORE?

Business process outsourcing (BPO) companies in the Philippines, as specified in the act, fall under the REE category. This means that as long as they have registered projects or activities, they can be eligible for most of the tax incentives provided by the CREATE MORE Law.

If that’s the case, how can BPO companies take advantage of the CREATE MORE law? 

BPO companies can get more cost-savings by utilizing 20% CITR

When used strategically, the lower corporate income tax rate of 20% can help BPO companies increase their cost savings. They can then use it to reinvest in different growth initiatives, such as technology upgrades, talent acquisition and retention, and process improvements. At the same time, it can also be useful for maintaining their service costs at manageable levels. This can be a strategic move to keep their prices competitive and attractive to foreign clients.

Institutionalization of remote work flexibility

Tax incentives aside, the CREATE MORE law also institutionalized remote work flexibility in accordance with the Telecommuting Act (R.A. 11165).

What do we mean by institutionalized remote work flexibility?

With this law, BPO companies can continue to enjoy their tax incentives if they meet the 50% workforce requirement (if they have PEZA registration). Meanwhile, those registered with the Bureau of Investments (BOI) can adopt 100% work from home arrangement. 

The direct effects of the CREATE MORE law to BPO companies are more prominent on their cost-savings initiatives and work flexibility, both of which can be used to keeping their operations modern and cost-effective.

Related: Understanding the Work-from-Home Policy in the Philippines 

Achieve more goals when you outsource to the Philippines 

CREATE MORE gives Philippine-based outsourcing companies their much-needed boost in providing competitively priced services to clients worldwide. With stable support from the government, we can expect the country’s BPO industry to continuously flourish.

Do you need to expand your organization’s accounting capacity? D&V Philippines is at your service. Contact us today to see if we’re the service provider you’re looking for or get a free copy of our guide, Outsourcing: How to Make it Work.