Special InTAX: June 2021 Issue 1 | Volume 4

 

Department of Finance

 

The Department of Finance (DOF) and the Department of Trade and Industry (DTI) Secretary issued the Implementing Rules and Regulations (IRR) of Title XIII of Republic Act (RA) No. 8424, otherwise known as the “National Internal Revenue of 1997,” as amended by RA No. 11534 or the “Corporate Recovery and Tax Incentives For Enterprises (CREATE) Law” on 23 June 2021.

The salient provisions of the IRR are as follows:

Tax and Duty Incentives

• Registered Business Enterprises (RBEs) may be entitled to the following incentives provided under Title XIII of the Tax Code, as amended by the CREATE Law:

1.  Income Tax Holiday (ITH)

2. Special Corporate Income Tax (SCIT)

3. Enhanced Deductions (ED)

4. Customs and duty exemption on importation of capital equipment, raw materials, spare parts or accessories

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

6. Other incentives on importation of COVID-19 vaccines

7.  Other incentives on importation of petroleum products

Period of Availment of Incentives (based on location and industry priorities)

FOR EXPORTERS' ACTIVITIES
Location / Industry Tiers	Tier I	Tier II	Tier III
NCR	4 yrs. ITH + 10 yrs. ED/SCIT	5 yrs. ITH + 10 yrs. ED/SCIT	6 yrs. ITH + 10 yrs. ED/SCIT
Metropolitan areas or areas contiguous and adjacent to NCR	5 yrs. ITH + 10 yrs. ED/SCIT	6 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT
All other areas	6 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT

 

FOR DOMESTIC MARKET ACTIVITIES
Location / Industry Tiers	Tier I	Tier II	Tier III
NCR	4 yrs. ITH + 10 yrs. ED/SCIT	5 yrs. ITH + 10 yrs. ED/SCIT	6 yrs. ITH + 10 yrs. ED/SCIT
Metropolitan areas or areas contiguous and adjacent to NCR	5 yrs. ITH + 10 yrs. ED/SCIT	6 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT
All other areas	6 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT	7 yrs. ITH + 10 yrs. ED/SCIT

 

Transitory and Miscellaneous Provisions

• Existing registered projects or activities prior to the effectivity of the CREATE Law may qualify to register and avail of the incentives granted in the said  Law for the prescribed period, subject to the criteria and conditions set forth in the Strategic Investment Priority Plan (“SIPP”). In such case, the RBE shall surrender its certificate of registration or certificate of tax incentives.

• Existing RBEs with valid Certificate of Authority to Import (“CAI”) or Admission Entry whose capital equipment, raw materials, spare parts or accessories were ordered, as reflected in the date of the purchase order or on the date of the opening of the corresponding letters of credit; or loaded, as reflected in the bill of lading date; or are still in transit during the effectivity of Executive Order No. 85, Series of 2019 shall qualify for duty exemption until the expiration of the CAI or Admission Entry or the transitory period under Section 311 of the Tax Code.

Investments prior to the effectivity of the CREATE Law

• Projects or activities granted only an ITH prior to the effectivity of the CREATE Law – shall be allowed to continue with the availment thereof for the remaining period of the ITH as specified in the terms and conditions of their registration.

• Projects or activities granted an ITH but has not yet availed of the incentive – may use the ITH for the period specified in the terms and conditions of their registration.

• Projects or activities granted an ITH and are entitled to the five percent (5%) tax on gross income earned – shall be allowed to use the ITH period for the period specified in the terms and conditions of their registration and thereafter, avail of the five percent (5%) tax on gross income earned incentive, subject to the 10-year limit for both incentives.

• RBEs currently availing of the five percent (5%) tax on gross income earned – shall be allowed to continue availing the said tax incentive at the rate of five percent (5%) for ten (10) years.

• VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity of the export enterprises during the period of registration of the said registered project or activity with the concerned IPA.

• Pursuant to Revenue Regulations No. 9-2021, the following transactions shall be subject to twelve percent (12%) VAT:

1.    Sale of raw materials or packaging materials to a non-resident buyer for the purpose of delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

2.    Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production;

3.    Export sales under EO No. 226, otherwise known as the “Omnibus Investment Code of 1987”, and other special laws;

4.    Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP; and

5.    Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production.

• The excess input taxes attributable to zero-rated sales by VAT-registered RBEs may be refunded or applied for a tax credit, subject to the guidelines provided under RR No. 13-2018, as amended.

• After the expiration of the transitory period under Section 311 of the Tax Code (as amended by the CREATE Law), all applicable taxes shall apply.

The IRR shall take effect immediately upon publication in a newspaper of general circulation.

As of this writing, the IRR has not yet been published in a newspaper of general circulation.

Attached is a full text of the IRR for your reference.

 

Bureau of Internal Revenue

 

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 80-2021, dated 25 June 2021, to supplement RMC No. 52-2021 which suspended the running of the statute of limitations on assessment and collection of taxes pursuant to Section 223 of the Tax Code, as amended, due to the declaration of Enhanced Community Quarantine (ECQ) in Metro Manila, Bulacan, Cavite, Laguna and Rizal (NCR plus), and other applicable jurisdictions.

The RMC reiterated that the term “quarantine” includes both ECQ and modified ECQ (MECQ) since both levels restrict certain activities due to limited mobility. For this reason, the running of the statute of limitations in assessment and collection shall be suspended in areas placed under ECQ and MECQ. With such suspension, the concerned offices of the BIR shall be provided with additional days for them to issue Assessment Notices, Warrants of Distraint and/or Levy, as well as Warrants of Garnishment, equivalent to the number of days the specific area was placed under ECQ and MECQ plus sixty (60) days from the lifting of the said quarantine.

For ease of determining the extended due date, the BIR provided a matrix below showing the extended due date computation for NCR Plus under Case 1 (which was based on IATF Resolution Nos. 107-A, 108-A, 109-A and 113-A) and other computations for shorter ECQ and MECQ periods under Cases 2 and 3.

	Old Prescriptive Due Date	New Prescriptive Due Date per RMC No. 136-2020	Due to Declaration of ECQ and MECQ	Number of Declared ECQ and MECQ Days
Case 1	15 April 2021	30 August 2021	15 December 2021	47 days + 60 days
Case 2	15 April 2021	30 August 2021	19 November 2021	21 days + 60 days
Case 3	15 August 2021	30 December 2021	28 March 2022	28 days + 60 days

 

Attached is a full text of the issuance for your reference.

Republic Act No. 11534 2021 CREATE IRR for TITLEXIII

Revenue Memorandum Circular No. 2021-80 Clarifying Suspension of Statute of Limitations