EFFECT
OF
CREATE LAW
IN
INCOME
TAXATION
ABDUL BARRI INDOL GATO, CPA
MINDANAO STATE UNIVERSITY
MARAWI CITY
09452146094
POST-CREATE LAW
PRE-CREATE LAW
CREATE #1
Addition of OPCs to the coverage
CREATE #2
Effective July 1, 2020 the tax rate for DCs shall be based on the ff criteria:
TOTAL ASSETS*
TAXABLE INCOME
TAX RATE
100M and below
5M and below
20%
All other DCs
No provision
Tax on DCs shall be 30% RCIT
25%
* Does not include the land on which business entity’s office / PPE are situated
Effective July 1, 2020: the tax rate for RFCs shall be 25% on taxable income
Effective July 1, 2020: the tax rate for NRFCs shall be 25% on GROSS income
CREATE #3
This provision has been repealed / revoked
Provision on 15% Gross Income Tax
CREATE #4
Interest arbitrage shall be 20%
Interest arbitrage shall be 33%
CREATE #5
Effective July 1, 2020 until June 30, 2023:
the MCIT rate shall be 1% both to DCs and RFCs
Thereafter, it shall revert to 2% MCIT rate
MCIT rate is at 2%
CREATE #6
Foreign-sourced dividends received by DCs shall be exempt subject to ff conditions:
Foreign-sourced dividends received by DCs are 100% taxable
DC holds directly at least 20% of outstanding shares of the FC and
held the shareholdings for at least 2 yrs from dividend distribution
⑥ Funds are reinvested in the business operations of the DC
⑥ Funds are reinvested within the next taxable year from the time
dividends were received
⑥ Reinvestment shall be limited to funding the:
- working capital requirements
- capital expenditures
- dividend payments
- investment in domestic subsidiaries
- infrastructure projects
⑥
CREATE #7
Effective January 1, 2022: ROHQs shall be subject to RCIT
ROHQs shall be subject to 10% tax on taxable income
CREATE #8
The tax on interest income (foreign currency) by RFCs shall now be 15%
The tax on interest income (foreign currency) by RFCs shall be 7.5%
CREATE #9
The CGT on sale of shares of stock (not listed) shall now be 15%
The CGT on sale of shares of stock (not listed) shall be
CREATE #10
This provision has been removed
Interest Income of OBUs from foreign currency loans
granted to residents shall be subject to 10% FINAL Tax
CREATE #11
This provision has been repealed / revoked
Provision on IAET
First 100k: 5%
Excess of 100k: 10%
POST-CREATE LAW
PRE-CREATE LAW
CREATE #12
Effective July 1, 2020 until June 30, 2023:
Proprietary educational institutions & Non-profit hospitals
shall now pay 1% tax on their taxable income
Thereafter, it shall revert to 10%
Proprietary educational institutions and Non-profit hospitals
shall pay 10% tax on their taxable income
CREATE #13
The following GOCCs shall be exempt from income tax:
⑥ GSIS (Government Ser vice Insurance System)
⑥ SSS (Social Security System)
⑥ HMDF (Home Development Mutual Fund)
⑥ PHIC (Philippine Health Insurance Corporation)
⑥ LWDs (Local Water Districts)
The following GOCCs shall be exempt from income tax:
⑥ GSIS (Government Ser vice Insurance System)
⑥ SSS (Social Security System)
⑥ PHIC (Philippine Health Insurance Corporation)
⑥ LWDs (Local Water Districts)
All other GOCCs: 30% RCIT
All other GOCCs: 20% or 25% RCIT
CREATE #14
Additional deduction of 1/2 of value of labor training expenses incurred
for skills development of enterprise-based trainees enrolled in:
- public senior high schools
- public higher education institutions
- public technical and vocational institutions
Provided that they are:
covered by an Apprentice Agreement under the Labor Code
with proper certification from DepEd, TESDA or CHED
deduction must not exceed 10% of direct labor wage
No provision