October 17, 2019
THE Department of Finance (DoF) is firm on keeping the maximum five-year transition period for the rationalization of fiscal incentives under House Bill 4157, or the “Corporate Income Tax and Incentives Rationalization Act” (Citira).
In a recent interview, Finance Secretary Carlos Dominguez 3rd said his department would still push for those five years despite the Department of Trade and Industry’s proposal to extend this to between seven and 10 years that would act as a “soft landing” for high-performing and export-oriented companies.
“I told them that our position is five years,” Finance Undersecretary Antonette Tionko said.
Under Citira — the second package of the Duterte administration’s Comprehensive Tax Reform Program — firms enjoying the existing 5-percent tax on gross income earned would have a transition period in which they can continue to benefit from this incentive for two to five years.
Once these so-called sunset provisions expire, these firms may seek to apply for incentives under the new system.
Formerly called the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) measure, Citira also aims to reduce the corporate tax income (CIT) rate by 30 percent to 20 percent in 10 years. The House of Representatives approved the bill last month, and is now being discussed at the committee level in the Senate.
Under the proposal, the period of incentives to be granted will be tiered, depending on where the firms locate.
For example, the Finance department said the amount of time that deserving companies may enjoy the income tax holiday and then the special CIT rate would be up to five years if the enterprise locates in the National Capital Region; up to seven years if it locates in the provinces of Laguna, Bulacan, Cavite or Rizal; and up to 10 years if it locates elsewhere in the country.
Citira seeks to reform the country’s fiscal incentive system to ensure that it is performance-based, time-bound, targeted, and transparent, it added.
Under the proposed regime, incentives will be granted to firms whose activities yield a net benefit to the Philippines.
Chamber supports bill
Meanwhile, the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. on Wednesday expressed support for Citira, believing its passage “would put the country’s tax rate at par with those of our neighboring countries.”
In a statement, the group said the “reduction in corporate income tax rates will improve the competitiveness of Philippine companies, and allow them to use the tax savings to expand their business or start new ventures, thus increasing creation of new jobs.”
“This reduction of corporate income tax will also help attract more foreign direct investments,” it added.
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