Philippine CREATE Act Incentives: How Low the Corporate Tax Goes, Using ITH and SCIT, and How to Apply

What CREATE Is: Two Big Moves at Once

The CREATE Act — the Corporate Recovery and Tax Incentives for Enterprises Act (Republic Act No. 11534) — took effect in 2021. It did two things that touch every business:

• Cut corporate income tax (CIT). It brought the former 30% CIT rate down, easing the general tax burden.
• Restructured incentives. It unified scattered, uneven benefits into a time-bound, conditional, performance-monitored framework (ITH + SCIT/EDR), with stronger accountability and transparency.

In short, CREATE makes "normal" taxpayers pay less and makes "incentivized" enterprises' rules clearer — but also more bounded. Together they form the tax foundation a foreign investor should understand first. For the wider picture see our overview of the Philippine investment climate.

How Low the CIT Goes: The 25% and 20% Tiers

CREATE's most direct perk cut CIT from 30% into two tiers:

• 25% (standard tier). Applies to general enterprises (including larger domestic corporations and foreign corporations operating in the Philippines, by category).
• 20% (small-business tier). For qualifying small and medium domestic corporations — usually requiring both "taxable net income within a set amount" and "total assets (excluding land) within a set amount" to access the lower 20%.

Reminder: qualifying for 20% turns on both net income and assets, and these thresholds and definitions follow current BIR rules; foreign branches and the like have their own rules. This is a framework, not a determination of your case's rate — compute against the latest regulations and your company's actual figures. To compare entity-level tax differences, see partnership vs corporation entity choice.

The Incentive Menu: ITH First, Then SCIT or Enhanced Deductions

For a Registered Business Enterprise (RBE) engaged in a qualified activity, CREATE offers a phased set of incentives:

• Income Tax Holiday (ITH). An opening period exempt from corporate income tax, with a length set by location and industry tier (commonly around 4 to 7 years). For the years and conditions see our full ITH guide.
• After the ITH, one of two follow-on regimes:
  • Special Corporate Income Tax (SCIT) — levied at 5% of gross income in lieu of most national and local taxes (mainly for export enterprises).
  • Enhanced Deductions Regime (EDR) — not an exemption, but allowing uplifted deductions on certain costs (labor, R&D, training, power, etc.) to lower the taxable base.

The whole incentive is a time-bound package (an ITH phase + an SCIT/EDR phase), with total length set by location tier and industry tier — the less-developed the area and the higher-value the encouraged activity, the longer the period tends to be. For the PEZA-vs-BOI difference see PEZA/BOI incentives.

How to Get It: Register With an IPA, Do a Qualified Activity

CREATE's incentives are not automatic — you must qualify and register:

1. Register with an Investment Promotion Agency (IPA). Such as the BOI (Board of Investments) or PEZA (Philippine Economic Zone Authority) and other zone/freeport authorities. Which IPA depends on your industry, whether you sit in an economic zone, your export ratio, and more. For how PEZA zones work see our PEZA economic zones guide.
2. The activity must be on the encouraged list. Your business must be a qualified activity under the Strategic Investment Priority Plan (SIPP) to be eligible; different tiers carry different strength and length of incentives.
3. Meet RBE obligations and performance monitoring. Enjoying incentives means meeting investment, employment or export commitments and reporting as required — benefits are tied to compliance.

In a line: first check whether your industry is in the SIPP, then register with the right IPA, before ITH/SCIT/EDR come into play. Path design and IPA choice directly affect how much you get and for how long — plan early.

What About Existing Registrants: Sunset Provisions

Enterprises already enjoying incentives before CREATE worry most about "will my incentives suddenly vanish." CREATE built in transition arrangements (sunset provisions):

• Existing incentives can continue for a transition period. Enterprises registered and incentivized before CREATE may generally keep their existing incentives during a statutory transition, avoiding an abrupt cut-off.
• The transition length varies by situation. How long you can continue depends on the type of incentive you enjoyed and your registration — check case by case against the law.
• Fold into the new system afterward. After the transition, you move into CREATE's new incentive framework or pay under the regular regime.

If your company is a legacy PEZA/BOI registrant, verify which sunset track applies and how long remains, and plan your post-transition tax structure early — don't scramble when incentives expire.

Don't Ignore Updates: Where CREATE MORE Heads

Tax reform is not a one-off. After CREATE, the Philippines advanced CREATE MORE (legislation further refining CREATE), aimed at making the incentive system more attractive, clearer and smoother to administer — for example refining enhanced deductions, clarifying registrants' room to choose an incentive regime, and improving local-tax and VAT treatment.

The practical meaning for you:

• Rules keep evolving. Specific rates, incentive strength, eligible scope and operational detail adjust with later legislation and implementing rules.
• Don't decide on outdated guides. Many online explainers stop at CREATE's initial rollout and may not reflect the latest changes.
• Verify the current version before deciding. Especially for amounts, periods and thresholds, rely on current law and the latest BIR and IPA rules.

To judge which incentives you can get and which IPA to use for your industry and site, the Yixing tax-incentives team can map it against the latest rules.

Practical Takeaways and Disclaimer

To use CREATE well, remember a few things:

• First separate "normal taxpayer" from "incentivized." The former cares about the 25%/20% tiers; the latter about ITH+SCIT/EDR and registration.
• Incentives need registration, eligibility and monitoring. They aren't automatic on incorporation — you must be in the SIPP, register with the right IPA, and report on commitments.
• Do the full math, not just the tax-free years. The post-ITH SCIT (5% of gross income) or EDR (uplifted deductions) matters a lot for long-run burden — model both.
• Legacy firms check sunset; new firms check the latest version. Existing incentives verify the transition; new investment follows the latest CREATE/CREATE MORE rules.

This article is general information, not tax or legal advice; rates, incentive strength, periods, thresholds and eligible scope change with regulations and each case — rely on current law and the latest BIR and IPA rules, and consult a licensed Philippine tax and legal professional. To plan an optimal tax structure by your industry, site and export ratio, contact the Yixing tax-incentives team.