BOI to enterprises: refer to 2020 Investment Priorities Plan if qualified for CREATE incentives

Until a new Strategic Investment Priorities Plan (SIPP) can be issued, companies should refer to the 2020 Investment Priorities Plan (IPP) to see if their projects or activities qualify to be registered for incentives under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

Ely Jean DC Portoza, director of the BOI’s Legal and Compliance Service, in a recent webinar said that under Fiscal Incentives Review Board (FIRB) Resolution No. 05-21, the 2020 IPP shall serve as the transitional tax incentives program while the BOI is still formulating the new SIPP under CREATE, or Republic Act No. 11534.

The FIRB is the inter-agency government body authorized to grant tax incentives to registered business enterprises (RBEs).

The CREATE Act aims to, among others, develop a more responsive and globally competitive tax incentives regime that is performance-based, targeted, time-bound, and transparent.

CREATE introduced a new Title XIII in the National Internal Revenue Code, where Section 300 provides that BOI, in coordination with the FIRB, investment promotion agencies (IPAs), other government agencies administering tax incentives, and the private sector, shall formulate the SIPP.

Since SIPP remains under development, the FIRB through Resolution 05-2021 adopted in April this year the 2020 IPP as the temporary SIPP. The 2020 IPP was approved by the President in November 2020 through Memorandum Order (MO) No. 50 (“Approving the 2020 Investment Priorities Plan”). The MO took effect the following month.

Under the FIRB resolution, projects or activities that will qualify for incentives under the transitional SIPP, or 2020 IPP, will be registered under Tier 1 but may also be upgraded if qualified under the newly formulated SIPP, said Portoza in a presentation during a webinar organized on September 21 by the Philippine Exporters Confederation, Inc. (PHILEXPORT).

Further, Portoza said that under the same resolution, the grant of incentives for projects or activities with investment capital of more than P1 billion must be submitted to the FIRB for review and approval.

The executive said the following preferred activities may be registered for incentives under the IPP:

• All qualified activities relating to the fight against the COVID-19 pandemic

• Investments in activities, subject to the determination by the Board, supportive of programs to generate employment opportunities outside of congested urban areas

• All qualified manufacturing activities including agro-processing

• Agriculture, fishery and forestry

• Strategic services

• Healthcare and disaster risk reduction management services

• Mass housing

• Infrastructure and logistics Including PPPs

• Innovation drivers

• Inclusive business models

• Environment- or climate change-related products

• Energy

Likewise covered by the IPP are the following export activities:

• Production and manufacture of export products

• Services export

• Activities in support of exporters

Specifically for export products, the 2020 IPP covers the production and manufacture of non-traditional export products.

Moreover, applications for incentives for both export products and services export must meet the requirement that at least 50% of the RBE’s output is exported if the business enterprise is Filipino owned. For foreign-owned RBEs, the export requirement is at least 70%.

But Portoza stressed that this is just in the interim, as CREATE actually provides for a 70% export requirement regardless of whether the enterprise is Filipino or foreign owned, and this will be the future policy to be followed going forward.

In addition to preferred activities and export activities, the 2020 IPP also covers activities under special laws “where inclusion in the IPP is mandated for the purpose of incentives.” These special laws include the following:

• Industrial tree plantation

• Mining (limited to capital equipment incentive)

• Publication or printing of books/textbooks

• Refining, storage, marketing & distribution of petroleum products

• Rehabilitation, self-development and self-reliance of persons with disability

• Renewable energy

• Tourism

• Energy efficiency and conservation

On where businesses can submit their application for registration for incentives, Portoza said it should be filed with the IPA concerned, such as the BOI, FIRB or Philippine Economic Zone Authority.

“If it’s outside the zones, you go to the BOI and submit your application. The BOI or IPA concerned will evaluate the application for registration vis-à-vis the governing IPP for this year until the SIPP is issued. Once it qualifies under the IPP or SIPP, the BOI will make a decision. If it’s P1 billion and below, then the Board approves or disapproves it and informs the business enterprise or the applicant,” stated Portoza.

If the investment is more than P1 billion, the process takes a slightly longer route. The BOI Board will make a decision on the compliance of the registration and recommend to the FIRB what incentives may be given.

The FIRB Secretariat will then review and evaluate the IPA’s recommendation, and prepares and submits its report to the FIRB technical committee. The technical committee, in turn, may adopt or reject the Secretariat’s recommendation, and present its recommendation to the FIRB Board.

“Once the FIRB Board has made a decision, the same will be transmitted to the IPA concerned, and the IPA concerned will accordingly inform the business enterprise of the decision of the IPA concerned on the registration, and the decision of the FIRB on the tax incentives,” Portoza said.

She added that the processes are generally governed by the periods under the Ease of Doing Business Law.

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