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CREATE Law Prioritises New Digital Tech Investments in the Philippines

In a move that could hasten the country’s digital transformation, the Philippine government has created the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law which gives generous fiscal incentives for investments in new digital technologies.

The move has been recently confirmed by the Department of Trade and Industry (DTI) Undersecretary Rafaelita Aldaba speaking at a forum of the European Chamber of Commerce of the Philippines (ECCP). She disclosed that the CREATE Law is aligned with the agency’s industrial policy by promoting investments that will push for a fourth industrial revolution.

The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) provides support measures for innovative projects that companies could access as they implement their industrial transformation plans.

– Rafaelita Aldaba, DTI Undersecretary

 Moreover, Aldaba pointed out that new tech investments are given top priority by the government. Under the CREATE Law, Tier 3 activities are given:

  • the longest period for Income Tax Holiday (ITH)
  • Special Corporate Income Tax (SCIT) of 5 per cent for export enterprises
  • and enhanced deductions.

Further, she explained what categorises Tier 3 investments. These include:

  • Industries adopting advanced digital production technologies of the fourth industrial revolution
  • Industries producing equipment, parts, and services that embed new technologies
  • Industries engaging in research and development (R&D) activities and commercialisation of R&D that leads to accelerate innovation and “increase the added value on products and services.”

These include investments in robotics, industrial biotechnology, additive manufacturing, photonics, advanced materials, nanotechnologies, advanced manufacturing, Artificial Intelligence (AI), mobility, blockchain, cybersecurity, satellite technology, big data, Internet of Things (IoT), augmented and virtual reality, micro and nanoelectronics, and cognitive technology.

The benefits in looking into emerging technology run a-plenty. For example, export enterprises that will invest in Tier 3 investments within Metro Manila are qualified for six years of ITH and seven years for investments outside Metro Manila, and another 10 years of enhanced deductions and SCIT.

But it’s not just the exporters, local businesses can also make the most of the CREATE Law For domestic market activities, the government provides six years of ITH for investments in the National Capital Region (NCR) and seven years for investments outside NCR, and five more years for enhanced deductions and SCIT.

Aldaba stressed the importance of new technology in today’s world. To do that requires a paradigm shift. She cited AI, for instance, as not here to destroy jobs or replace humans but to create new jobs and change what work looks like, augment human intelligence and skills and make our workplaces safer.

While she revealed that the reality is that micro-industries have the least technology utilisation scores, the paradigm shift should happen even for the smallest of businesses. Small and medium enterprises (SMEs) should utilise new technologies to better their operation.

The Philippines is increasingly moving towards greater digital transformation. This recent move attests to that. And time and again, the Southeast Asian nation has relied on technology to move its economy forward. As reported on OpenGov Asia, Manila sought the partnership of the biggest names in technology today to facilitate a successful, clean and honest national election this coming 9 May.

Though there are still a lot of things to do for the country to adopt digital technology, the CREATE Law should provide a timely spark to set off positive change for every Filipino.

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