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RMC No. 42-2021: Circularizes Republic Act No. 11534 titled, “An Act Reforming the Corporate Income Tax and Incentive System, Amending for the Purpose Sections 20, 22, 25, 27, 28, 29, 34, 40, 57, 109, 116, 204 and 290 of the National Internal Revenue Code of 1997, as Amended, and Creating Therein New Title XIII, and For Other Purposes”

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Summary

RMC No. 42-2021 circularizes RA No. 11534, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, signed March 26, 2021, together with the President’s Veto Message.

Key points

  1. Purpose. The Act lowered the Corporate Income Tax rate and rationalized the fiscal incentives granted to investors, among others.
  2. NIRC sections amended. The amended sections are 20(B), 20(C), 22, 25, 27, 28, 34, 40, 57, 109, 116, 204 and 290 of the NIRC of 1997. Section 29, on the improperly accumulated earnings tax, is repealed.
  3. New Title XIII. A new Title XIII on Tax Incentives is added, with six chapters from General Provisions through Transitory and Miscellaneous Provisions. The existing Titles XIII and XIV are re-sectioned, and several incentive laws are repealed under Section 17 and amended under Section 18 of the Act.
  4. Implementing rules. Within ninety (90) days from effectivity, the Secretary of Finance on the recommendation of the Commissioner of Internal Revenue issues the rules. For Title XIII, the Secretaries of Finance and of Trade and Industry issue them jointly after consulting the Commissioner, the Board of Investments and other Investment Promotion Agencies. Failure to issue rules does not prevent implementation.
  5. Vetoed items. The President vetoed items including the higher VAT exempt threshold on sale of real property, the 90-day period for processing general tax refunds, the definition of investment capital, and redundant incentives for domestic enterprises. Also vetoed were limits on the Fiscal Incentives Review Board’s power, the President’s power to exempt any investment promotion agency, and automatic approval of incentive applications.

Who is affected

  • Domestic and foreign corporations
  • Investors and enterprises receiving fiscal incentives

Deadlines and effectivity

  • RA No. 11534 signed March 26, 2021
  • Implementing rules within ninety (90) days from effectivity

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.

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