Gavin Howe
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, also known as Republic Act No. 11534, is a Philippine law that was enacted in response to the COVID-19 pandemic. The act aims to provide fiscal relief to domestic and foreign corporations conducting business in the Philippines by lowering corporate income tax rates, offering tax relief measures, and rationalizing fiscal incentives. The act was initially known as the TRABAHO bill (Tax Reform for Attracting Better and Higher-quality Opportunities) and then as CITIRA (Corporate Income Tax and Incentives Reform Act) before it was passed into law as CREATE. The law reduces the regular corporate income tax rate from 30% to 25% for domestic and resident foreign corporations, with additional tax relief measures and incentives for targeted investors.
| Characteristics | Values |
|---|---|
| Full Form | Corporate Recovery and Tax Incentives for Enterprises |
| Country | Philippines |
| Purpose | To provide fiscal relief to domestic and foreign corporations doing business in the Philippines |
| Tax Reform | Lower income tax rates and higher fiscal incentives |
| Corporate Income Tax (CIT) Rates | Reduced from 30% to 25% for domestic corporations and resident foreign corporations |
| Minimum Corporate Income Tax (MCIT) Rate | Reduced from 2% to 1% of gross income |
| Effective Dates | Retroactive to July 1, 2020 for CIT rates; effective January 1, 2021, for MCIT rate reduction |
| Value-Added Tax (VAT) Exemptions | Sale or distribution, importation, printing, or publication of educational materials covered by the UNESCO agreement, including digital and electronic formats |
| Improperly Accumulated Earnings (IAE) Tax | Repealed; previously a 10% tax on IAE |
| Amendments | CREATE MORE (Republic Act 12066) signed into law in November 2025, enhancing the competitiveness of the Philippines' incentive regime |
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What You'll Learn
The Philippines' Republic Act No. 11534
The Philippines Republic Act No. 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, was created by the Philippine Congress and signed into law by President Rodrigo Duterte on March 26, 2021, in response to the COVID-19 pandemic. The act provides fiscal relief to domestic and foreign corporations doing business in the Philippines by reducing corporate income tax (CIT) rates and offering various tax incentives.
The CIT rates for domestic corporations and resident foreign corporations (RFCs) under the CREATE Act were reduced from 30% to 25% retroactively to July 1, 2020. This reduction aimed to enhance the competitiveness of the Philippines' incentive regime and attract more investments to the country.
The CREATE Act also introduced several tax incentives, including:
- Value-Added Tax (VAT) exemptions on the sale or distribution, importation, printing, or publication of educational materials covered by the UNESCO agreement, including digital and electronic formats.
- Allowing businesses with an Income Tax Holiday (ITH) prior to the effectivity of the CREATE Law to continue availing of the incentive for the remaining period.
- Businesses granted the ITH but have not yet utilized it can use it for the period specified in their registration terms and conditions.
- Businesses granted an ITH prior to the law and entitled to a 5% tax on Gross Income Earned (GIE) can continue availing of this incentive for 10 years.
- Businesses already availing of the 5% tax on GIE before the law can continue enjoying this incentive for 10 years.
In November 2025, Republic Act 12066 (CREATE MORE) was signed into law, amending and enhancing the CREATE Act. CREATE MORE expands the VAT zero-rating incentive and reduces the corporate income tax rate for businesses availing of the Enhanced Deductions (ED) incentive from 25% to 20%. It also addresses the imposition of Local Business Tax (LBT) on businesses availing of the ITH and ED incentives.
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Fiscal relief for corporations
The Republic Act (RA) No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, was enacted by the Philippine Congress as a fiscal relief measure for domestic and foreign corporations doing business in the Philippines in response to the COVID-19 pandemic. The law reduces the Regular Corporate Income Tax (RCIT) rates, effective July 1, 2020, as follows: the income tax rate for non-resident foreign corporations was lowered from 30% to 25%, and the Minimum Corporate Income Tax (MCIT) rate was reduced from 2% to 1% of gross income (revenue less cost of sales) effective from July 1, 2020, to June 30, 2023. The act also repeals the 10% tax on improperly accumulated earnings (IAE), which are profits that corporations accumulate instead of distributing to shareholders to avoid income tax.
The CREATE Act provides tax relief measures and rationalises fiscal incentives. It offers a range of incentives to targeted investors, including qualified export enterprises, which are now entitled to an Income Tax Holiday (ITH) of 4 to 7 years, followed by 10 years of either 5% Special Corporate Income Tax (SCIT) or Enhanced Deductions. The act also addresses Value-Added Tax (VAT) exemptions, including those for the sale or distribution, importation, printing, or publication of educational materials covered by the UNESCO agreement in digital and electronic formats.
The Corporate Income Tax (CIT) rates for domestic corporations and resident foreign corporations (RFCs) under the CREATE Act were reduced from 30% to 25%, retroactive to July 1, 2020. This reduction is expected to benefit both domestic and foreign corporations operating in the Philippines by lowering their tax burden and providing them with fiscal relief to aid in their recovery from the pandemic's economic impact.
The CREATE Act is the second package of the Comprehensive Tax Reform Program, which aims to reduce corporate income tax rates and provide tax relief measures to support businesses, particularly corporations, in recovering from the pandemic. The act also addresses the rationalisation of fiscal incentives, ensuring a more balanced approach to granting incentives to targeted investors. This amendment brings much-needed relief to registered business enterprises (RBEs) and their suppliers by simplifying the determination of eligible expenses and reducing administrative burdens.
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Reduced corporate income tax rates
The Republic Act (RA) No. 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, was passed by the Philippine Congress in response to the COVID-19 pandemic. The act aims to provide fiscal relief to domestic and foreign corporations doing business in the Philippines. One of the key components of the CREATE Act is the reduction of corporate income tax rates.
Before the CREATE Act, the corporate income tax (CIT) rate in the Philippines was 30%. The CREATE Act reduced this rate to 25% for domestic corporations and resident foreign corporations, effective July 1, 2020. The act also reduced the Minimum Corporate Income Tax (MCIT) rate from 2% to 1% of gross income for the period from July 1, 2020, to June 30, 2023. These reduced tax rates provide much-needed relief to businesses affected by the pandemic.
In addition to the reduced CIT rate, the CREATE Act also introduced other tax relief measures. One notable change is the repeal of the 10% tax on improperly accumulated earnings (IAE). Previously, corporations could avoid distributing profits to shareholders and instead accumulate them, resulting in a 10% tax on IAE. The CREATE Act repealed this tax, providing further relief to corporations.
The CREATE Act also introduced incentives for targeted investors, such as qualified export enterprises. These enterprises are now entitled to an Income Tax Holiday (ITH) of 4 to 7 years, followed by 10 years of either a 5% Special Corporate Income Tax (SCIT) or Enhanced Deductions. These incentives aim to enhance the competitiveness of the Philippines' incentive regime and attract more investments.
While the CREATE Act brought significant changes, there were further amendments made through the CREATE MORE law. This law sought to address some of the issues that arose during the implementation of the CREATE Act. One of the key amendments was the expansion of the VAT zero-rating incentive. Under the CREATE Act, only expenses "directly and exclusively used" in the registered activity were eligible for VAT zero-rating. CREATE MORE expanded this by using the term "directly attributable," which includes goods and services incidental to the registered project or activity. This amendment reduced administrative burdens and provided clarity to businesses.
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Tax relief measures
The Republic Act (RA) No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, was enacted by the Philippine Congress as a fiscal relief measure for businesses affected by the COVID-19 pandemic. The law offers tax relief measures and reduces corporate income tax rates for both domestic and foreign corporations.
One of the key tax relief measures in the CREATE Act is the reduction of corporate income tax (CIT) rates. The CIT rate for domestic corporations and resident foreign corporations (RFCs) has been lowered from 30% to 25%, effective retroactively from July 1, 2020. Additionally, the Minimum Corporate Income Tax (MCIT) rate has been reduced from 2% to 1% of gross income for the period from July 1, 2020, to June 30, 2023.
The CREATE Act also provides tax incentives to targeted investors, addressing the issue of the Philippines granting excessive tax incentives without proper review. Qualified export enterprises can benefit from an Income Tax Holiday (ITH) for 4 to 7 years, followed by 10 years of either a 5% Special Corporate Income Tax (SCIT) or Enhanced Deductions. Enterprises with an ITH prior to the CREATE Law can continue to avail of this incentive.
The law also includes Value-Added Tax (VAT) exemptions on educational materials, including digital and electronic formats, covered by the UNESCO agreement. Furthermore, the CREATE MORE amendment expands VAT zero-rating to include expenses “directly attributable" to the registered project or activity, such as janitorial, security, financial, and consultancy services.
The CREATE Act and its amendments aim to enhance the competitiveness of the Philippines' incentive regime and provide fiscal relief to corporations impacted by the pandemic. These tax relief measures are expected to aid businesses in their recovery and make the tax system more efficient and equitable.
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Rationalised fiscal incentives
The Republic Act (RA) No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, was passed by the Philippine Congress in response to the COVID-19 pandemic to provide fiscal relief to domestic and foreign corporations operating in the country. The CREATE Act, which took effect on April 11, 2021, amended various provisions of the National Internal Revenue Code (NIRC) of 1997 and introduced significant reforms to the country's corporate tax and incentives regime.
One of the key features of the CREATE Act is the rationalisation of fiscal incentives. The Act streamlines the existing incentives by setting clear qualification requirements, standardising rates, and periods of availment. This consolidation and harmonisation of incentives are overseen by the Fiscal Incentives Review Board (FIRB) for strategically important or larger projects. The FIRB's role is to ensure that incentives are granted to projects or activities with a total investment capital of up to PHP1 Billion (approximately USD20 Million). The Act also grants the Philippine President the power to exempt any Investment Promotion Agency (IPA) from the reform.
The CREATE Act also addresses the imposition of Local Business Tax (LBT) on registered business enterprises (RBEs) availing of the Income Tax Holiday (ITH) and Enhanced Deductions (ED) incentives. Under the previous regime, export enterprises in economic zones enjoyed an exemption from local business taxes due to the 5% gross income tax incentive. Under CREATE, registered export enterprises that opt for the 5% Special Corporate Income Tax (SCIT) on Gross Income Earned (GIE) settle their tax liabilities in lieu of national and local taxes. However, if these enterprises choose the ED route, they become subject to local business taxes unless specifically exempted.
The CREATE MORE Act, which amends the original CREATE Act, expands the coverage of the VAT zero-rating incentive for RBEs. While CREATE limited this incentive to expenses "directly and exclusively used" in the registered activity, CREATE MORE uses the term “directly attributable," which includes goods and services incidental to and reasonably necessary for the registered project or activity. This amendment provides clarity and reduces administrative burdens on RBEs and their suppliers.
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Frequently asked questions
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is a fiscal relief law passed in the Philippines in response to the COVID-19 pandemic. It aims to reduce corporate income tax rates and provide tax relief measures to help businesses recover from the pandemic's effects.
The CREATE Act reduces the Regular Corporate Income Tax (RCIT) rates for domestic and foreign corporations, effective July 1, 2020. It also provides tax incentives, such as the Income Tax Holiday (ITH) and Enhanced Deductions, and rationalizes the grant of fiscal incentives to targeted investors.
The CREATE Act has been well-received by businesses and enterprises in the Philippines, especially those registered with Investment Promotion Agencies (IPAs). However, there were some issues with the implementation of certain provisions, such as determining eligible expenses for VAT zero-rating. To address these issues, an amended version of the law called CREATE MORE was signed into law in November 2025, which expands the coverage of VAT zero-rating and makes other significant changes.
