REVENUE MEMORANDUM CIRCULAR NO. 42-2021 issued on March 31, 2021 circularizes Republic Act (RA) No. 11534 signed by Rodrigo R. Duterte on March 26, 2021, titled “An Act Reforming the Corporate Income Tax and Incentive System, Amending for the Purpose Sections 20, 22, 25, 27, 28, 29, 34, 40, 57, 109, 116, 204 and 290 of the National Internal Revenue Code of 1997, as Amended, and Creating Therein New Title XIII, and For Other Purposes”, and the Veto Message of President Duterte.
     The Act, which shall be known as the Corporate Recovery and Tax Incentives for
Enterprises or CREATE Act, lowered the Corporate Income Tax rate and rationalized the fiscal  incentives granted to investors, among others.
     The following Sections of the National Internal Revenue Code (NIRC) were amended under the CREATE Act:
       a. Section 20(B) – Submission of Tax-Related Information to the Department of Finance
       b. Section 20(C) – Report to Oversight Committee
       c. Section 22 – Definition of Corporation
       d. Section 25 – Tax on Nonresident Alien Individual
     e. Section 27 – Rates of Income Tax on Domestic Corporations: (A) In General, (B) Proprietary Educational Institutions and Hospitals, (C) Government-owned or -Controlled Corporations, Agencies or Instrumentalities, (D)(4) IntercorporateDividends, and (E) Minimum Corporate Income Tax on Domestic Corporations
        f. Section 28 – Rates of Income Tax an Foreign Corporations: (1) In General, (2)
Minimum Corporate Income Tax of Resident Foreign Corporations, (4) Tax on Branch Profits Remittances, (5) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies, (6) Tax on Certain Incomes Received by a Resident Foreign Corporation
       g. Section 34 – Deductions from Gross Income: (A) Expenses and (B) Interest
    h. Section 40 – Determination of Amount and Recognition of Gain or Loss: (C) Exchange of Property
          i. Section 57 – Withholding of Tax at Source
          j. Section 109 – Exempt Transactions
          k. Section 116 – Tax on Persons Exempt from Value-Added Tax (VAT)
       l. Section 204 – Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes
          m. Section 290 – Congressional Oversight Committee
      Section 29 of the NIRC of 1997, as amended, on the imposition of improperly accumulated earnings tax, was repealed under the CREATE Act.
       Aside from amending the aforecited Sections of the NIRC, a new “Title XIII – Tax Incentives” was introduced in the said Code, and the existing Titles XIII and XIV were resectioned accordingly. The Chapters under Title XIII are as follows:
      • Chapter I – General Provisions on Tax Incentives
      • Chapter II – Tax and Duty Incentives
      • Chapter III – The Fiscal Incentives Review Board
      • Chapter IV – Qualified Projects or Activities for Tax Incentives
      • Chapter V – Tax Incentives Management and Transparency
      • Chapter VI – Transitory and Miscellaneous Provisions
        Several laws related to the grant of fiscal incentives were also repealed under Section 17 and amended under Section 18 of the Act.
       Within ninety (90) days from the effectivity of the Act, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations for its effective implementation: Provided, That for the provisions under Title XIII, the Secretary of Finance and the Secretary of Trade and Industry shall jointly promulgate the necessary rules and regulations thereof within the same period, after due consultations with the Commissioner of Internal Revenue, the Board of Investments, and other Investment Promotion Agencies, for its effective implementation. Failure to promulgate the rules and regulations shall not prevent the implementation of this Act upon its effectivity. The following line items in the CREATE Act were vetoed by President Duterte:
        a. Increasing the VAT exempt threshold on sale of real property (under Section 12 of the Act – Item (P) of the amended Section 109 of NIRC)
          b. 90-day period for the processing of general tax refunds (under Section 14 of the Act)
         c. Definition of investment capital (under Section 16 of the Act – Item (g) of the new Section 293 of the NIRC)
         d. Redundant incentives for domestic enterprises (under Section 16 of the Act – portions of the new Sections 294, 295 and 296 of the NIRC)
          e. Allowing existing registered activities to apply for new incentives for the same activity (under Section 16 of the Act – specific provisions under new Section 296 of the NIRC)
          f. Limitations on the power of the Fiscal Incentives Review Board (under Section 16 of the Act – new Section 297 of the NIRC)
      g. Specific industries mentioned under activity tiers (under Section 16 of the Act –specific paragraphs under the new Section 296(B) of the NIRC)
         h. Provision granting the President the power to exempt any investment promotion agency from the reform (under Section 16 of the Act – specific provisions under the new Section 301 of the NIRC)
          i. Automatic approval of applications for incentives (under the new Section 297(B) of the NIRC)