Philippines CREATE MORE Act (RA 12066): tax-incentive overhaul for FDI

Mechanism

RA 12066 amends the National Internal Revenue Code of 1997 and the 2021 CREATE Act (RA 11534) to overhaul the Philippines' fiscal-incentive architecture for Registered Business Enterprises (RBEs). Key levers:

1. Tax rates and incentive horizon

• CIT cut for RBEs under the Enhanced Deductions Regime (EDR):

20%, down from 25% under the standard rate. Alternative track remains the 5% Special Corporate Income Tax (SCIT) on gross income.

• Maximum incentive period extended from 17 to 27 years (income

tax holiday + SCIT/EDR window combined). Labor-intensive projects may receive additional 5-10 year extensions on top.

2. Power-cost deduction (manufacturing-targeted)

• 100% additional deduction on power expenses (raised from 50%

under the original CREATE Act). Materially lowers effective energy-cost burden for export-manufacturing RBEs — Philippines industrial power tariffs are among the highest in ASEAN, so the doubled deduction is a real competitiveness lever.

3. VAT and customs treatment

• VAT zero-rating for local purchases of export-oriented

enterprises (clarified and broadened).

• VAT-exemption on importations by export-oriented RBEs to

resolve cash-flow bottlenecks from the prior input-VAT/refund regime.

4. Governance and approval

• IPA approval threshold raised from PHP 1bn to PHP 15bn —

Investment Promotion Agencies (PEZA, BOI, etc.) now have direct approval authority up to PHP 15bn project size, with only the largest projects escalating to the Fiscal Incentives Review Board (FIRB). Streamlines approval timelines.

• Work-from-home institutionalised for ecozone / freeport

RBEs (resolves the long-running PEZA WFH dispute that surfaced during COVID-19 and lingered post-pandemic).

Context: ASEAN FDI competition + post-CREATE recalibration

The Philippines' original 2021 CREATE Act was widely criticised for making the country's incentive regime less competitive than ASEAN peers (Vietnam, Indonesia, Thailand, Malaysia) by introducing a 17-year cap on incentive availment and tightening eligibility. CREATE MORE is the explicit policy correction: it benchmarks against the regional incentive arms race driven by US-China decoupling-era FDI flows.

Direct peers in the IPTM register:

• Vietnam Decree 182/2024/ND-CP (Investment Support Fund,

31 Dec 2024): direct cash subsidy for semiconductor/AI R&D up to 50% of capex.

• Thailand EV 3.5 package (1 Jan 2024): targeted EV/battery

incentives.

• Malaysia National Semiconductor Strategy (28 May 2024):

RM 25bn fiscal envelope for chip ATMP/IC design.

• Indonesia (multiple): Permendag downstreaming + investment

support measures.

CREATE MORE is broader-spectrum than these (general FDI/RBE regime, not sector-specific subsidy), but operates on the same ASEAN incentive-competition logic. First Philippines action in the IPTM register.

Downstream implications

• PEZA / BOI competitiveness: the IPA threshold lift to PHP

15bn and the 27-year incentive horizon shift the Philippines back toward parity with Vietnam's and Thailand's flagship regimes for export-manufacturing FDI.

• Manufacturing reshoring candidates: with the 100% power

deduction, Philippines becomes more competitive for energy-intensive manufacturing (semiconductor ATMP, EMS, metal fabrication) — historically blocked by high PHL grid costs.

• Semiconductor ATMP: existing Philippine semiconductor

workforce (Texas Instruments, Analog Devices, Amkor in Carmona/Calamba/Sucat) makes PHL a natural ASEAN ATMP expansion candidate alongside Malaysia. CREATE MORE's sweeteners for export-RBEs may unlock new TSMC/Intel/Amkor capex commitments.

• EPHE exposure: iShares MSCI Philippines ETF — banking

(BDO, BPI, Metrobank) and conglomerates (Ayala, SM, JG Summit) carry indirect upside via property/industrial-park leasing to expanded RBE footprint.

• Fiscal cost: DOF estimates the package as broadly

revenue-neutral over the medium term, betting that incremental FDI and broadened VAT base offset the CIT cut and expanded deductions. Audit trail will become visible in BIR collection data over 2025-2027.

Open questions

• Will the IPA threshold lift to PHP 15bn meaningfully accelerate

approval times, or will FIRB still bottleneck the largest deals?

• Does the 100% power deduction unlock specific semiconductor /

data-center capex commitments, or does it primarily benefit existing RBEs?

• How does CREATE MORE interact with the OECD/G20 Global Minimum

Tax (Pillar Two) — does the 20% EDR rate keep PHL compliant while preserving competitiveness vs Vietnam's direct-subsidy workaround (Decree 182)?

• Will future BIR/DOF implementing regulations narrow the

expanded VAT zero-rating in practice (the 2021 CREATE Act's IRR is widely cited as having clawed back statutory benefits)?