REO TAXATION: LIST OF CHANGES BY THE CREATE LAW
HANDOUTS UPDATES
H04 – FINAL INCOME TAXATION
 CORRECTION OF THE FINAL TAX ON PCSO OR LOTTO WINNINGS
 CORRECTION OF THE FINAL TAX ON FOREX DEPOSITS FOR RESIDENT FOREIGN CORPORATIONS
 DEEMED PAID TAX CREDIT UNDER THE TAX SPARING RULE
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H05 – CAPITAL GAINS TAXATION
 CORRECTION OF THE TWO-TIERED CAPITAL GAINS TAX ON FOREIGN CORPORATIONS
 5%-10% CGT TO 15% CGT

MERGER & CONSOLIDATION
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 EXPANSION OF THE DEFINITION OF TAX FREE-EXCHANGES
 ACQUISITION OF CONTROL OR TRANSFER TO A CONTROLLED CORPORATION
 RECAPITALIZATION
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 REINCORPORATION
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 ACQUISITION OF SUBSTANTIAL ASSETS
H06 – REGULAR INCOME TAX – GROSS INCOME
 Exemption criteria on dividend from non-resident foreign corporation (NRFC)
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 The domestic corporate recipient directly owns at least 20% in value of the outstanding
shares of the NRFC.
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 The shareholdings in the NRFC must have been held uninterruptedly for a minimum of 2
years at the time of dividend distribution or throughout the entire existence of the NRFC
if it is operational for less than 2 years.
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 The foreign-sourced dividend received or remitted must be reinvested within the next
taxable year in business operations of the domestic corporation such as working capital
requirements, capital expenditures, dividend payments, investment in domestic
subsidiaries or iInfrastructure projects.
 CAVEAT:
Foreign-sourced dividends that are not utilized within the following taxable year shall be considered
taxable income in the year received subject to surcharges, interest and penalties, as applicable.
(Insert under Dividends in Page 3 of 7)
H07.1 – REGULAR INCOME TAX – ITEMIZED DEDUCTIONS
REO TAXATION: LIST OF CHANGES BY THE CREATE LAW
 CHANGE IN THE ARBITRAGE LIMIT ON INTEREST EXPENSE
 FROM 33% TO 20% OR 0% (Page 1 of 11)
 DONATION OF COVID19 SUPPLIES AND EQUIPMENTS (Page 5 of 11 under contribution)
 ADDITION OF SPECIAL DEDUCTION FOR TRAINING EXPENSES (Page 8 of 11)
 APPRENTICESHIP AGREEMENT
 NOT TO EXCEED 10% OF DIRECT LABOR WAGES
 EXPANDED NOLCO CARRY-OVER (Page 9 of 11)
 2020 and 2021 (5 years)
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 DEP-ED, TESDA, CHED CERTIFICATION
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H09 – CORPORATE INCOME TAX
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 For taxpayers on a fiscal year basis, NOLCO for fiscal year ending on or before June 30,
2021 and June 30, 2022 will be carried over 5 years.
 MSMEs – 20%
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TWO CLASSIFICATIONS FOR DOMESTIC CORPORATIONS
 LARGE CORPORATIONS – 25%
MSME CRITERIA:
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 EFFECTIVE JULY 1, 2020
 ASSET TEST – Total assets, excluding land on which their office, plant and equipment are
situated, does not exceed P100,000,000
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 INCOME TEST – Taxable income does not exceed P5,000,000
 REPEAL OF THE 15% GROSS INCOME TAX FOR DOMESTIC CORPORATIONS
 TAX RATE FOR PROPRIETARY SCHOOLS/NON-PROFIT HOSPITALS
REO TAXATION: LIST OF CHANGES BY THE CREATE LAW
 1% BETWEEN JULY 1, 2020 TO JUNE 30, 2023
 INCLUSION OF HDMF AMONG EXEMPT CORPORATIONS
 OBUs ARE NOW REGULAR CORPORATIONS
 ROHQs ARE REGULAR CORPORATIONS STARTING JANUARY 1, 2022
 ADJUSTMENT OF THE MCIT
 1% EFFECTIVE JULY 1, 2020 TO JUNE 30, 2023
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 REPEAL OF THE IMPROPERLY ACCUMULATED EARNINGS TAX (IAET)