A key provision is the further reduction in corporate income tax (CIT) rate to 20 percent from 25 percent for Registered Business Enterprises (RBEs) under the Enhanced Deductions Regime (EDR) on their taxable income derived from registered projects or activities during the taxable year.
DOF Secretary and Fiscal Incentives Review Board (FIRB) chairperson Ralph Recto has been pushing for this proposal. I see at least four ways that this law will make the Philippines even more globally competitive in attracting and keeping investments.
One, our 20 percent CIT will put us at par with Vietnam (reduced from 22 percent until 2015), Thailand (from 23 percent until 2012), Taiwan (increased from 17 percent until 2017) and Cambodia (flat 20 percent for decades). It will be lower than Indonesia’s 22 percent, Malaysia and South Korea’s 24 percent and China’s 25 percent, but higher than Singapore’s 17 percent and Hong Kong’s 16.5 percent. Tax competition in East Asia is real and not fictional.
Two, our 20 percent CIT under EDR will put us nearer the global minimum tax (GMT) rate of 15 percent under Pillar Two of the Organization for Economic Co-operation and Development (OECD). Thus, businesses from rich OECD member-countries can easily align with Philippines’ CIT and still enjoy deductions on research and development, seminars and related expenses.
Three, RBEs have the option to choose between the Special CIT (SCIT) of five percent or EDR right from the start of their commercial operations, and these incentives have been extended from maximum of 10 years to 17 or 27 years.
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