NINETEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
HB. No, 2190

Introduced by Representative Ralph G. Recto

AN ACT
PROMOTING INVESTMENTS IN EXPORT AND DOMESTIC MARKET
ENTERPRISES, AMENDING FOR THE PURPOSE SECTION 296 OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

EXPLANATORY NOTE

This proposed measure seeks to extend the period of availment for tax
incentives which may be granted to export and domestic market enterprises ‘under
Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises
(CREATE) Act.

In March 2021, the CREATE Act was enacted to improve the equity and
efficiency of the corporate tax system by lowering the rate, widening the tax base,
and reducing tax distortions and leakages, and provides a tax incentives system that
is performance-based, time-bound, targeted, and transparent.

The CREATE Act grants an income tax holiday (ITH) for a period of 4 to 7 years,
depending on location and industry priorities, followed by special corporate income
tax (SCIT) or enhanced deductions (ED) for 10 years for export enterprises, and ED
for 5 years for domestic market enterprises in the Strategic Investment Priorities Plan
(SIPP).

However, the existing tax incentives system under the CREATE Act may not be
enough to attract foreign investments in the country. Total foreign investments


approved in the third quarter of 2022 reached P13.05 billion, 22.4% lower compared
with P16.82 billion in the same period in 2021.1 These investments were pledges from
four investment promotion agencies (IPAs), namely: Board of Investments (BOI),
Clark Development Corporation (CDC), Philippine Economic Zone Authority (PEZA),
and Subic Bay Metropolitan Authority (SBMA).? There were no foreign investment
approvals reported from the Authority of the Freeport Area of Bataan (AFAB), BOI-
Bangsamoro Autonomous Region in Muslim Mindanao (BOI-BARMM), Cagayan
Economic Zone Authority (CEZA), Poro Point Management Corporation (PPMC), and
Tourism Infrastructure Economic Zone Authority (TIEZA) for the third quarter of years
2021 and 2022.3

The country is currently facing economic and fiscal challenges. These
challenges include the COVID-19 pandemic, supply chain disruptions, energy crisis,
Russia-Ukraine conflict, rising commodity prices, soaring inflation, food crisis, and the
ballooning outstanding debt of the National Government, which now stands at P13.42
trillion* as of end-December 2022.

To counter these global and domestic challenges, the government must
prioritize programs that will help accelerate economic growth such as promoting
investments, not only in export-oriented enterprises but also in domestic market
enterprises. Thus, this bill extends the period of availment of ITH which may be
granted to export and domestic market enterprises from 4 to 7 years to 7 to 10 years.

In view of the foregoing, the approval of this bill is earnestly sought.

Siiao

1 https://psa.gov.ph/foreign-investments-press-releases/2022%2003
2 https://psa.gov.ph/foreign-investments-press-releases/2022%2003
> https://psa.gov.ph/foreign-investments-press-releases/2022%2003
“ https://www.treasury.gov.ph/wp-content/uploads/2023/02/NG-Debt_Dec22_web.pdf

2


aw

10

12
13
14
15
16
7
18
19

NINETEENTH CONGRESS OFTHE —)

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES

. CRB No. 7190

Introduced by Representative Ralph G. Recto

AN ACT
PROMOTING INVESTMENTS IN EXPORT AND DOMESTIC MARKET
ENTERPRISES, AMENDING FOR THE PURPOSE SECTION 296 OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
Section 1. Short Title. — This Act shall be known as the "Investments Promotion
Act".
Sec. 2. Section 296 of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:
“SEC. 296. Period of Availment. — The period of availment of incentive by
the registered business enterprise shall be as follows:
“(A) For export enterprise, income tax holiday of [fet-{4}-te] seven (7)
TO TEN (10) years, depending on location and industry priorities as specified in
this Section, and followed by special corporate income tax rate or enhanced
deductions for ten (10) years.
“ox
“(B) For domestic market enterprise under the Strategic Investment
Priority Plan, income tax holiday for [fewr-4}-te] seven (7) TO TEN (10) years
followed by enhanced deductions for five (5) years.
“Soo
“The industry of the registered project or activity shall be prioritized
according to national industrial strategy specified in the Strategic Investment
Priority Plan. The Strategic Investment Priority Plan shall define the coverage of
the tiers and provide the conditions for qualifying the activities:


w

eCarvaunes

eae
12

13

“(1) Tier I shall include activities that (i) have high potential for job
creation, INCLUDING MINING AND TOURISM; (ii) take place in sectors with
market failures resulting in underprovision of basic goods and services; (iii)
generate value creation through innovation, upgrading or moving up the value
chain; (iv) provide essential support for sectors that are critical to industrial
development; or (v) are emerging owing to potential comparative advantage.

(2) 0x

(3) 10K

“The period of availment of incentives based on the combination of both
location and industry priorities, as determined in the Strategic Investment Priority
Plan, shall be as follows:

For exporters:

Location/Industry Tiers Tier I Tier Il Tier II

National Capital Region
(4]7 ITH +|[5]8 ITH +/[6]9 ITH +
10 ED/SCIT__| 10 ED/SCIT__| 10 ED/SCIT

Metropolitan areas or
areas contiguous and
adjacent to the|[5]8 ITH +|[6]9 ITH +/[7]10 TH+
National Capital Region | 10 ED/SCIT | 10 ED/SCIT | 10 ED/SCIT

All other areas [6]9 ITH +/[#]10 ITH +] [7]10 TH +
10 ED/SCIT | 10 ED/SCIT__| 10 ED/SCIT
For domestic market activities:
Location/Industry Tiers Tier I Tier II Tier IIT

National Capital Region
[417 ITH +/[5]8 ITH +|[6]9 ITH +
SED SED SED

Metropolitan areas or
areas contiguous and
adjacent to the | [5]8 ITH +|[6]9 ITH +|[7]10ITH+
National Capital Region | 5 ED SED 5 ED



eCarvauwa

10
1
12
13
14
15

All other areas [6]9 ITH +|[7]10 ITH +|[7]10 ITH +
SED 5ED SED

»300¢"

Sec. 3. Implementing Rules and Regulations. — Within thirty (30) days from
the effectivity of this Act, the Secretary of Finance and the Secretary of Trade and
Industry, after due consultation with the Commissioner of Internal Revenue, the Board
of Investments, and other Investment Promotion Agencies, shall jointly promulgate
the necessary rules and regulations for its effective implementation.

Sec. 4. Separability Clause. - The provisions of the Act are hereby declared to
be separable. If any provision of this Act shall be held unconstitutional, the remainder
of the Act not otherwise affected thereby shall remain in full force and effect.

Sec. 5. Repealing Clause. - All laws, executive orders, rules and regulations, or
Parts thereof, inconsistent herewith are hereby repealed, amended or modified
accordingly.

Sec. 6. Effectivity Clause. - This Act shall take effect within fifteen (15) days
from its publication in at least two (2) national newspapers of general circulation or in
the Official Gazette.

Approved,