CREATE Act Philippines: Tax Incentives, Application, and Compliance

The CREATE Act tax incentives in the Philippines give registered enterprises a package built around three main tools: an Income Tax Holiday of four to seven years, followed by either a 5 percent Special Corporate Income Tax on gross income or an Enhanced Deductions Regime with a reduced 20 percent corporate rate. Value-added tax zero-rating and customs duty exemptions sit on top. Republic Act No. 11534 (CREATE) set up the framework in 2021, and Republic Act No. 12066 (CREATE MORE), signed in November 2024, expanded the flexibility and reach of the benefits.1Department of Finance. Recto: CREATE MORE Law Is a Win-Win for Both Businesses and the Filipino People

For context, the standard corporate income tax rate is 25 percent, or 20 percent for small domestic corporations with net taxable income at or below ₱5 million and total assets under ₱100 million (excluding land).2Senate of the Philippines. Republic Act No. 11534 – Corporate Recovery and Tax Incentives for Enterprises Act The incentives below apply on top of, or in place of, those rates for enterprises registered with an Investment Promotion Agency.

The Three Core Income Tax Incentives

Income Tax Holiday

The Income Tax Holiday (ITH) fully exempts income from a registered project from regular corporate income tax. It runs four to seven years, with the exact length turning on the project’s tier under the Strategic Investment Priority Plan and its physical location.3Fiscal Incentives Review Board. Available Incentives

One of the biggest changes under CREATE MORE: you no longer have to take the ITH first. A registered enterprise can now go straight into the Special Corporate Income Tax or the Enhanced Deductions Regime from its first year of commercial operations if that suits the business better.1Department of Finance. Recto: CREATE MORE Law Is a Win-Win for Both Businesses and the Filipino People

Special Corporate Income Tax

After the ITH ends, or in place of it, registered export enterprises can elect a 5 percent Special Corporate Income Tax (SCIT) on gross income. This flat rate takes the place of all national and local taxes, which keeps compliance simple.4Bureau of Internal Revenue. RMC No. 89-2021 – Republic Act No. 11534 Domestic market enterprises can qualify for the SCIT too, but only if they have at least ₱500 million in investment capital or are engaged in activities the SIPP classifies as critical.

Enhanced Deductions Regime

The Enhanced Deductions Regime (EDR) is the alternative to SCIT after the ITH. Under CREATE MORE, businesses using EDR pay a reduced 20 percent corporate income tax on registered-project income instead of 25 percent, and they get additional deductions stacked on top of ordinary business deductions:3Fiscal Incentives Review Board. Available Incentives

  • 10 percent additional depreciation for buildings; 20 percent for machinery and equipment
  • 50 percent additional deduction on labor expenses
  • 100 percent additional deduction on training expenses
  • 100 percent additional deduction on research and development
  • 50 percent additional deduction on domestic input expenses
  • 100 percent additional deduction on power expenses
  • 50 percent additional deduction on exhibitions and trade fairs

SCIT and EDR cannot be claimed at the same time. You pick one.5Department of Finance. CREATE MORE Act Implementing Rules and Regulations Combined, the ITH plus SCIT or EDR can run for 14 to 17 years depending on tier and location. A Tier III export enterprise in a provincial area, for example, could claim 7 years of ITH followed by 10 years of SCIT or EDR.

How Long Your ITH Lasts by Tier and Location

Every incentive window scales with two things: your SIPP tier and where you set up. Here is what the CREATE MORE implementing rules provide for ITH duration:5Department of Finance. CREATE MORE Act Implementing Rules and Regulations

  • National Capital Region: 4 years (Tier I), 5 years (Tier II), 6 years (Tier III)
  • Metropolitan areas or areas adjacent to NCR: 5 years (Tier I), 6 years (Tier II), 7 years (Tier III)
  • All other areas: 6 years (Tier I), 7 years (Tier II), 7 years (Tier III)

The tiers themselves organize qualifying activities by policy priority:6Board of Investments. 2025 Strategic Investment Priority Plan

  • Tier I covers modern basic needs, sustainability-driven industries, and export activities.
  • Tier II covers defense, food security, gaps in the industrial value chain, and green manufacturing.
  • Tier III covers science, technology, and innovation-driven activities, with recent SIPP drafts pointing to artificial intelligence, data science, quantum technology, and hydrogen energy.

Projects in provincial areas or regions recovering from conflict or disasters get the longest incentive periods; NCR projects get the shortest.

VAT and Customs Duty Relief

Export-oriented enterprises that export at least 70 percent of their total annual production qualify for 0 percent VAT on local purchases of goods and services directly attributable to the registered activity. CREATE MORE explicitly widens “directly attributable” to include support services like janitorial, security, financial consulting, marketing, HR, and legal work.5Department of Finance. CREATE MORE Act Implementing Rules and Regulations

In 2025, the Supreme Court ruled that VAT zero-rating under the CREATE Act is not limited to export enterprises. All registered business enterprises, including domestic market enterprises, are entitled to zero-rated VAT for goods and services directly and exclusively used in the registered project.7Supreme Court of the Philippines. SC Press Release: Domestic Market Enterprises Entitled to Zero-Rated VAT under CREATE Act

On the import side, capital equipment, raw materials, spare parts, and accessories directly attributable to the registered activity are exempt from customs duties. CREATE MORE lowered the threshold from “directly and exclusively used” to “directly attributable,” which brings more items in. The amended law also lets enterprises import goods before their Certificate of Registration is issued, provided they post a performance bond or bank guarantee equal to the duties and taxes that would otherwise apply.

How to Apply

What You Need to Prepare

Start with a project brief covering scope, investment capital, projected employment, and implementation timeline. Expect to submit five-year financial projections, proof of legal status (SEC certificate for corporations, DTI for sole proprietorships), a clear disclosure of foreign ownership and equity structure, and documentation of your funding source and the physical location of the facility.

Where to File

Applications go through the Fiscal Incentives Registration and Monitoring System (FIRMS), the online portal run by the Fiscal Incentives Review Board.8Fiscal Incentives Review Board. Fiscal Incentives Registration and Monitoring System If FIRMS is unavailable, you can file manually in two notarized copies, or through whatever alternative the relevant Investment Promotion Agency accepts.5Department of Finance. CREATE MORE Act Implementing Rules and Regulations

The reviewing body depends on project size. Applications with investment capital above ₱15 billion go to the FIRB itself. Projects at ₱15 billion or below are handled by the relevant Investment Promotion Agency, such as the Board of Investments or the Philippine Economic Zone Authority. The FIRB has authority to raise that threshold in the future.5Department of Finance. CREATE MORE Act Implementing Rules and Regulations

Timeline for a Decision

Once your documents are complete, the FIRB or IPA has 20 working days to issue a decision. A single extension of up to 20 more working days is allowed, capping the process at 40 working days from complete submission. If documents are missing, the IPA will notify you within three working days, and you have seven working days to supply them. Miss that window and the application is treated as withdrawn, though you can refile.9Fiscal Incentives Review Board. Frequently Asked Questions Approved applicants receive a Certificate of Registration.

Keeping Your Incentives: Annual Compliance

Certificate of Entitlement to Tax Incentives

The Certificate of Entitlement to Tax Incentives (CETI) is not a one-time document. You need a new CETI every taxable year, and you must have it before filing your annual income tax return. Skip it and you forfeit the ITH for that year.10Board of Investments. Certificate of Entitlement to Tax Incentives under EO 226 and Other Special Laws Processing takes about five days and costs ₱1,500 in filing fees.

Two Annual Reports

You also file two reports each year:11Fiscal Incentives Review Board. How to Fill Out the ATIR and ABR Annexes

  • The Annual Tax Incentives Report (ATIR) details every incentive claimed for the year, including income tax breaks, VAT exemptions, and duty exemptions. Due within 30 calendar days after filing your income tax return.
  • The Annual Benefits Report (ABR) covers economic contributions: investment amounts, employment, dividends paid, and taxes collected. Due within 60 calendar days after filing your income tax return.

Both reports are required even in years when you did not actually use your incentives, including loss years and years before commercial operations began.

Penalties

Late or missed reports trigger escalating fines:

  • First violation: ₱100,000
  • Second violation: ₱500,000
  • Third violation: cancellation of registration by the FIRB

Separately, the FIRB can cancel registration and demand a refund of incentives already enjoyed if it finds material misrepresentation in the application. If an enterprise misses the economic targets it committed to at registration, the FIRB may recommend cancellation to the President, but only after a hearing and a genuine opportunity to catch up. Non-compliance caused by circumstances outside the enterprise’s control does not trigger penalties.