The CREATE MORE Act: A Foreign Investor's Guide to Republic Act No. 12066 and Its Impact on Your Philippine Tax Strategy

Republic Act No. 12066, the CREATE MORE Act, was approved on November 8, 2024, ceremonially signed on November 11, 2024, and took effect on November 28, 2024. It builds on the original CREATE Act (RA 11534) of 2021 and reworks the country's tax incentives regime to be more predictable for the investors who commit capital to it. Whether you are a Japanese manufacturer establishing your first Southeast Asian production facility, an American tech company setting up a regional hub, or a European brand evaluating the Philippines for regional operations, CREATE MORE decides which incentives your Philippine entity can actually claim — and on what terms.

This guide is written for foreign investors, in-house counsel, finance directors, and business development executives who are evaluating or already operating in the Philippines. It covers the incentive options, the incentive periods, the Strategic Investment Priority Plan (SIPP), VAT treatment, the BIR's implementing regulations, the registration steps, and the compliance obligations that follow — so you can structure your Philippine entity correctly from day one.

I. Background: Why CREATE MORE Was Necessary

The original CREATE Act lowered the regular corporate income tax rate from 30% to 25% and replaced a patchwork of incentive laws with a single framework. Its incentives regime, however, drew criticism from the private sector on three points.

First, sequencing and duration. Under CREATE, an Income Tax Holiday (ITH) of four to seven years had to be followed by the Special Corporate Income Tax (SCIT) or enhanced deductions for a further period — ten years for export enterprises and "critical" domestic market enterprises, but only five years for other domestic market enterprises. Investors in capital-intensive projects argued these windows were too short to recover setup costs.

Second, local taxes. The 5% SCIT was meant to be in lieu of all national and local taxes, but uncertainty over local fees and charges led to disputes between registered enterprises and local government units (LGUs).

Third, the enhanced deductions regime (EDR) kept the regular 25% rate on taxable income. For many investors, additional deductions at 25% did not compare favorably with the certainty of the SCIT.

CREATE MORE addresses each of these and adds new incentives that were not available under the original law.

II. The Two Core Incentive Options: SCIT and EDR

CREATE MORE offers two income tax regimes to Registered Business Enterprises (RBEs), and — unlike the original CREATE Act, which required the ITH to come first — lets an RBE elect a regime immediately at the start of commercial operations. Under Section 295 of the Tax Code, as amended:

Registered export enterprises may choose (1) an ITH followed by SCIT or EDR; (2) SCIT from the start of commercial operations; or (3) EDR from the start of commercial operations.
Registered domestic market enterprises may choose (1) an ITH followed by EDR; or (2) EDR from the start of commercial operations. The SCIT is available only to export enterprises.

The elected package is irrevocable for the entire period of entitlement, and the EDR can never be granted simultaneously with the SCIT.

Option 1: Special Corporate Income Tax (SCIT) at 5%

Under Section 294(B) of the Tax Code, as amended by CREATE MORE, an export enterprise may pay a Special Corporate Income Tax of 5% on gross income in lieu of all national and local taxes and local fees and charges. The express reference to local fees and charges is the fix for the disputes under the original law, and Section 294(F) confirms that the new RBE local tax (below) may not be imposed on RBEs under the SCIT.

The SCIT is typically worth modelling for:

Export enterprises with high gross revenue relative to taxable income — where the fixed 5% on gross income may be lower than the effective tax under the EDR
Enterprises exposed to LGU impositions — where a single, all-inclusive rate removes the risk of separate local tax assessments

Option 2: Enhanced Deductions Regime (EDR) with a 20% CIT Rate

CREATE MORE reduces the corporate income tax rate for RBEs under the EDR from 25% to a flat 20% on taxable income derived from registered projects or activities. The rate is written into Sections 27(A) and 28(A)(1) of the Tax Code, so it applies to both domestic corporations and resident foreign corporations — including Philippine branches of foreign companies — that are registered under the EDR. Income from non-registered activities stays at the regular rate. For context, the standard corporate income tax rate is 25%, and the minimum corporate income tax is 1% of gross income.

Under Section 294(C), CREATE MORE keeps the original enhanced deductions and changes or adds the following:

100% additional deduction on power expense (up from 50% under CREATE), limited to power used for the registered project or activity — significant for energy-intensive operations such as manufacturing and data centers
Reinvestment allowance for manufacturing and tourism — when a manufacturing or tourism RBE reinvests undistributed profit in SIPP-listed manufacturing or tourism projects, up to 50% of the amount reinvested may be deducted within five years of the reinvestment. Previously limited to manufacturing, this deduction is available until December 31, 2034
50% additional deduction on expenses relating to exhibitions, trade missions, and trade fairs — a new category, which includes IPA-approved expenses for promoting the export of goods or services to foreign markets
Enhanced Net Operating Loss Carry-Over (NOLCO) — net operating losses of the registered project in its first three years of commercial operation may be carried over for the five consecutive taxable years immediately following the last year of the ITH, rather than the five years following the year of loss. This gives new entrants a longer runway to use early losses

The New RBE Local Tax for ITH and EDR Enterprises

RBEs on the ITH or the EDR are not covered by the SCIT's "in lieu of local taxes" rule. Instead, Section 294(F) allows the LGU where the enterprise is located to impose, by ordinance, an RBE local tax of not more than 2% of gross income, which replaces all local taxes, fees, and charges under the Local Government Code. The RBE pays it directly to the city or municipal treasurer; where two or more LGUs cover the same enterprise, the law sets a sharing formula, and the LGUs may reduce or waive the rate. Factor this into any SCIT-versus-EDR comparison.

If You Already Hold CREATE Incentives

Under Section 31 of RA 12066, several changes apply prospectively to projects already granted incentives under the original CREATE Act: the SCIT's exemption from local taxes, fees, and charges; the new and increased enhanced deductions; the 20% EDR rate; the RBE local tax for ITH and EDR enterprises; and the revised conditions for duty and VAT benefits.

How to Choose: SCIT vs. EDR

The choice depends on the enterprise's financial profile. A general framework for export enterprises that have both options:

Consider SCIT if gross revenue is high relative to taxable income, or if you want one fixed rate covering national and local taxes
Consider EDR if you expect substantial deductible expenses attributable to the registered project (power, trade promotion, reinvestment), if you expect early-year losses that would benefit from the enhanced NOLCO, or if the 20% rate on taxable income plus the RBE local tax works out lower than 5% of gross income

Model both scenarios with your Philippine tax counsel before applying to the Investment Promotion Agency (IPA). Because the election is irrevocable, it is one of the most consequential decisions in the registration process.

III. Incentive Periods: Up to 27 Years

The length of your incentives depends on two things: whether your project is approved by an IPA or by the Fiscal Incentives Review Board (FIRB), and where your project sits on the SIPP's location and industry tiers.

IPA-approved projects (investment capital of PHP 15 billion and below): an ITH of 4 to 7 years followed by SCIT or EDR for 10 years, or SCIT or EDR alone for 14 to 17 years. Domestic market enterprises now receive 10 years of EDR after the ITH, up from 5 years under the original CREATE Act.
FIRB-approved projects (investment capital above PHP 15 billion, a threshold FIRB may raise): an ITH of 4 to 7 years followed by SCIT or EDR for 20 years, or SCIT or EDR alone for 24 to 27 years.

Within each band, the exact period turns on location and tier. Tier I projects in the National Capital Region receive the shortest period (4 years of ITH plus 10 or 20 years of SCIT/EDR). The longest (7 years of ITH plus 10 or 20 years of SCIT/EDR) goes to Tier III projects in metropolitan areas adjacent to the NCR and to Tier II and III projects in all other areas.

The law also allows additional time in specific cases:

Two additional years of income tax-based incentives for projects in areas recovering from armed conflict or a major disaster, as determined by the Office of the President
Three additional years for projects that completely relocate out of the NCR during their incentive period, counted from completion of the relocation
An extension of up to 5 years (IPA-approved) or up to 10 years (FIRB-approved) for a project that employs and maintains at least 10,000 direct local employees, subject to performance review — though no new ITH is granted on an extension

The incentive period starts from the actual start of commercial operations, which must begin within three years of registration unless the SIPP provides otherwise. For projects of exceptional scale — at least PHP 50 billion in investment capital or 10,000 direct local jobs within three years — Section 301 lets the President, on FIRB's recommendation, tailor the incentive package, with total income tax-based incentives capped at 40 years.

IV. The Strategic Investment Priority Plan (SIPP) Framework

Incentives are granted only to projects or activities listed in the Strategic Investment Priority Plan (SIPP). The SIPP is formulated by the Board of Investments (BOI) in consultation with FIRB, the IPAs, and the private sector, is approved by the President, and is valid for three years, subject to review every three years. IPAs may not accept applications for projects that are not listed in the SIPP; unlisted projects are automatically disapproved.

The SIPP classifies activities into three industry tiers:

Tier I — activities with high potential for job creation and essential to the economy, such as labor-intensive manufacturing, agriculture and agribusiness processing, and essential services.
Tier II — activities that build a competitive, resilient industrial base and supply chains, such as electronics and semiconductors, automotive and parts, renewable energy components, and logistics.
Tier III — as defined in the law: research and development with significant value-added; generation of new knowledge and intellectual property registered or licensed in the Philippines; commercialization of patents, industrial designs, copyrights, and utility models owned or co-owned by an RBE; highly technical manufacturing; and activities critical to the structural transformation of the economy, including cybersecurity, artificial intelligence, and data-center facilities.

Higher tiers and locations outside the NCR earn longer incentive periods (see Section III). The tier does not by itself change VAT treatment, which depends on whether the enterprise is an export or high-value domestic market enterprise (see Section V).

Incentives are administered by the IPAs — including the BOI, the Philippine Economic Zone Authority (PEZA), the Clark Development Corporation (CDC), the Subic Bay Metropolitan Authority (SBMA), the Bases Conversion and Development Authority (BCDA), the Cagayan Economic Zone Authority (CEZA), the Authority of the Freeport Area of Bataan (AFAB), and the Tourism Infrastructure and Enterprise Zone Authority (TIEZA), among others. Confirm with your counsel which IPA covers the location and sector of your project, as application procedures vary by IPA.

V. VAT and Duty Treatment: Export Enterprises and the "Directly Attributable" Standard

CREATE MORE clarifies VAT incentives that were loosely drafted in the original law. The VAT benefits are not available to every RBE: under Section 295(D), VAT exemption on importation and VAT zero-rating on local purchases apply only to goods and services directly attributable to the registered project of a registered export enterprise or a registered high-value domestic market enterprise.

Duty and VAT Exemption on Importations

Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories directly attributable to the registered project — now including goods used for administrative purposes — is available to RBEs, subject to prior IPA approval and to the goods not being produced locally in sufficient quantity or comparable quality at reasonable prices.
VAT exemption on importation applies to export enterprises whose export sales are at least 70% of total annual production for the preceding year, and to high-value domestic market enterprises.

VAT Zero-Rating on Local Purchases

Sales of goods and services by VAT-registered suppliers to a registered export enterprise, regardless of location, are subject to 0% VAT. Sales to bonded manufacturing warehouses of export-oriented enterprises are also zero-rated. Under the original CREATE Act, zero-rating was commonly limited to purchases used "directly and exclusively" in the registered activity; CREATE MORE applies a "directly attributable" standard instead, defined as goods and services that are incidental to and reasonably necessary for the registered project, expressly including:

Janitorial and security services
Financial and consultancy services
Marketing and promotion services
Services for administrative operations, such as human resources, legal, and accounting

Whether an item is directly attributable is determined by the relevant IPA. In practice, this means a qualifying export enterprise may now zero-rate outside professional fees — for example, legal or accounting services — that were often disputed under the original law.

High-Value Domestic Market Enterprises

A high-value domestic market enterprise is a registered domestic market enterprise with investment capital exceeding PHP 15 billion in an import-substituting sector, or with export sales of at least USD 100 million in the immediately preceding year. These enterprises may claim VAT exemption on importation and VAT zero-rating on local purchases from registration until their income tax incentives expire. FIRB may raise these thresholds.

Losing the VAT Benefits

An export enterprise that falls below the 70% export threshold in a year, or a high-value domestic market enterprise that no longer meets its investment or export requirement, is disqualified from the duty exemption, VAT exemption on importation, and VAT zero-rating in the immediately succeeding year. Local sales by any RBE — sales to domestic market enterprises or non-RBEs, even within an ecozone — are subject to 12% VAT unless otherwise exempt or zero-rated.

Donations to Government and Schools

With IPA approval, tax- and duty-free capital equipment, raw materials, spare parts, or accessories may be donated within five years of importation to the national government or its agencies and political subdivisions, fully owned government corporations, TESDA, state universities and colleges, or DepEd- and CHED-accredited schools. The donation is exempt from import duties and taxes, including donor's tax.

VI. BIR Regulations Implementing CREATE MORE

The Bureau of Internal Revenue has issued implementing regulations for CREATE MORE since early 2025. Two are particularly relevant to foreign investors.

Revenue Regulations No. 7-2025

Issued on February 25, 2025, RR No. 7-2025 implements the amendments to Sections 27, 28, and 34 of the Tax Code. Its key points:

The 20% rate applies to domestic and resident foreign corporations registered under the EDR, effective November 28, 2024
The 20% rate covers only taxable income from registered projects or activities; income from non-registered projects or activities remains subject to the applicable income tax rates
Input tax paid on local purchases attributable to VAT-exempt sales is deductible from gross income
EDR enterprises that already filed their annual income tax return for calendar year 2024 (or a fiscal year ending on or before the regulation took effect) may carry forward the excess income tax payments resulting from the rate reduction to the succeeding taxable quarter or year

Revenue Regulations No. 10-2025

Dated February 25, 2025, RR No. 10-2025 amends Revenue Regulations No. 16-2005 to implement CREATE MORE's VAT provisions on zero-rating, VAT-exempt transactions, and VAT refunds. It covers zero-rating for local purchases by export-oriented enterprises whose export sales are at least 70% of total annual production in the preceding taxable year, limited to goods and services "directly attributable" to the export activity. Qualifying exporters obtain a certificate from the DTI's Export Marketing Bureau confirming they meet the threshold — separate from the VAT zero-rating certification IPAs issue to RBEs — and the BIR may verify in a post-audit that purchases are in fact directly attributable to the export activity.

VII. Flexible Work Arrangements and the Ban on Double Registration

Projects registered with an IPA that administers an economic zone or freeport must generally be conducted within the zone's boundaries, and activities conducted outside are not entitled to incentives. This used to be an obstacle to work-from-home and hybrid arrangements.

Section 309, as amended, now allows RBEs to run a telecommuting program under the Telecommuting Act (RA 11165), including work-from-home arrangements, covering up to 50% of their total workforce, subject to the IPA's rules — without losing their incentives. An RBE may also operate more than one registered project within the same zone under the same IPA.

The same section prohibits double registration: an RBE may not register to claim incentives under other special laws at the same time.

VIII. ROHQs and the Tax Treatment of Expatriate Executives

Foreign investors considering a Regional Operating Headquarters (ROHQ) should note that CREATE MORE does not change the income tax treatment of expatriate executives. The 15% preferential rate that once applied to alien employees of regional headquarters and ROHQs was removed by the TRAIN Law (RA 10963) starting 2018; under Revenue Regulations No. 8-2018, these employees are taxed at the regular graduated rates of up to 35%.

If you plan to deploy senior expatriate management, factor the graduated rates into compensation planning, and address tax equalization, visa, and alien registration requirements in the executive's employment agreement and onboarding from day one.

IX. One-Stop Action Centers and Faster Processing

CREATE MORE requires every IPA to establish a one-stop shop or One-Stop Action Center that facilitates the setting up of registered projects, including coordination with LGUs and other agencies under the Ease of Doing Business Act (RA 11032). Enterprises may keep using the one-stop shop even after their incentives expire. Two further changes help foreign investors:

Delegated permits — LGUs may, by memorandum of agreement, delegate to the IPA the acceptance, processing, and grant of business permits and licenses, and IPAs may file national-agency permit applications on the RBE's behalf. For what still has to be done at the local level, see our guide to local permits after SEC registration.
Processing deadlines — under Section 297-A, FIRB and the IPAs must decide on incentive applications within 20 working days from receipt of all required documents, extendable only once by up to 20 more working days.

IPAs also serve as the initial point of contact for foreign investment leads, helping investors identify the IPA or economic zone best suited to their project. Implementation varies by IPA, so confirm the current practice of the agency you intend to register with.

X. How to Register and Claim CREATE MORE Incentives

To claim CREATE MORE incentives, a foreign investor generally must:

Establish a Philippine entity — for example, a subsidiary or a branch office — in line with the foreign ownership limits under the Foreign Investments Act (RA 7042) and the Foreign Investment Negative List.
Confirm your activity is listed in the current SIPP and identify its industry tier and location tier.
Register with the appropriate IPA — typically the BOI for projects outside economic zones, or PEZA or another zone authority for projects inside an ecozone or freeport.
Apply for incentives with the IPA or, for projects above PHP 15 billion, through FIRB. Applications must be accompanied by a cost-benefit analysis using FIRB's prescribed methodology.
Elect your incentive package (ITH, SCIT, or EDR) — remembering the election is irrevocable.

Timing of Registration

The SIPP is reviewed every three years, and an activity listed today may not appear in the next plan. If you plan to enter the market in the next two to three years, check how the current SIPP treats your activity and plan your registration timeline with that review cycle in mind.

Entity Structure and IPA Selection

The choice of entity — a Philippine subsidiary, a branch office, a representative office, or an ROHQ — interacts with CREATE MORE eligibility, and PEZA, BOI, and other zone authorities each have their own procedures, costs, and administrative requirements. Evaluate these trade-offs with your counsel before registering, since changing registration mid-stream can have tax consequences.

The Role of FIRB

The Fiscal Incentives Review Board (FIRB) sets performance metrics, reviews IPA administration of incentives, and approves or disapproves incentives for projects with investment capital above PHP 15 billion — including the 24-to-27-year incentive periods. FIRB can also cancel, suspend, or withdraw incentives for flagrant and material violations of their conditions; adverse FIRB decisions may be appealed to the Court of Tax Appeals within 30 days. If you are planning a large capital-intensive project, engage with FIRB's requirements early in the planning process.

XI. Compliance Obligations Under CREATE MORE

RBEs enjoying CREATE MORE incentives carry ongoing obligations, and failure to meet them can lead to fines, suspension, or cancellation of incentives:

Reportorial requirements: RBEs must meet the filing and reportorial requirements of their IPA and file tax returns through the BIR's electronic system. Under Section 308, failure to comply is penalized with a PHP 100,000 fine for the first violation, PHP 500,000 for the second, and cancellation of registration for the third.
Performance commitments: RBEs whose commitments include job generation must maintain employment levels to the extent practicable; if employment falls or targets are missed, they must submit justifications and a remediation plan to their IPA and FIRB.
Books and records: RBEs must keep books that clearly allocate income and expenses between registered and non-registered activities. This is critical for EDR enterprises, since the 20% rate applies only to registered-activity income.
Import controls: Tax- and duty-free imports may not be used in non-registered activities, or sold or transferred, without prior IPA approval; unauthorized disposal makes the RBE and the buyer solidarily liable for twice the duty exemption.
Withholding tax: RBEs remain subject to all applicable withholding tax obligations, including on compensation, professional fees, and certain supplier payments.
Transfer pricing: For related-party transactions — the norm for regional operations — Philippine transfer pricing rules under Revenue Regulations No. 2-2013 require arm's-length pricing. CREATE MORE incentives do not exempt RBEs from transfer pricing compliance; see our guide to transfer pricing compliance for foreign companies.

To simplify compliance, CREATE MORE also creates a separate service within the BIR dedicated to RBE tax filing and payment.

Conclusion

CREATE MORE gives foreign investors a more predictable incentives framework: a 20% rate under the EDR, larger deductions for power, trade promotion, and reinvestment, a 5% SCIT that clearly covers local taxes, fees, and charges, incentive periods of up to 27 years for large projects, a clearer "directly attributable" standard for VAT zero-rating, and room for work-from-home arrangements in ecozones.

The key decisions — when to register, which entity structure to use, which IPA to register with, and whether to elect the ITH, SCIT, or EDR — should be made with a full understanding of these options and trade-offs. The incentive election is irrevocable and will shape the finances of your Philippine operations for years.

If you are planning an investment in the Philippines, contact us to discuss how CREATE MORE applies to your project.

This article is for informational and educational purposes only and does not constitute legal advice. For specific legal guidance on your Philippine investment or tax planning, please consult a qualified Philippine attorney.