Tax Incentives Under the CREATE Act: A Sector-by-Sector Breakdown

The Philippines’ tax incentive landscape has evolved significantly since the original CREATE Act took effect in 2021 — and even more so with the passage of the CREATE MORE Act (Republic Act No. 12066) in late 2024. For businesses evaluating where and how to invest, understanding which sectors qualify for which incentives — and under what conditions — is essential to structuring a competitive, compliant operation in the Philippines.

The Legal Foundation

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act reduced the standard corporate income tax rate for large corporations from 30% to 25%, with an even bigger cut for MSMEs, from 30% down to 20%. Building on this, the CREATE MORE Act, signed into law in November 2024, gives Registered Business Enterprises (RBEs) a choice between two tax regimes: a 5% Special Corporate Income Tax (SCIT) on gross income earned, or an Enhanced Deductions Regime (EDR) with a reduced 20% corporate income tax rate plus additional deductions — including a 100% additional deduction on power expenses, up from 50% previously. PwC Tax SummariesSgv

“By introducing expanded tax incentives, streamlining VAT processes, and clearly defining eligibility criteria, the CREATE MORE Act aims to stimulate economic growth and position the Philippines as a prime destination for foreign direct investments.”

How Sectors Are Classified: The 2026 SIPP

Eligibility for these incentives depends heavily on the Strategic Investment Priority Plan (SIPP), which the Board of Investments drafts in consultation with government agencies and the private sector to identify which economic activities may qualify for fiscal incentives. The 2026 SIPP, approved under Memorandum Order No. 47, organizes priority industries into three tiers. Acclime

Tier 1: Essential and High-Impact Sectors

This tier covers sectors with strong potential for job creation and economic activity, including agriculture, food manufacturing, semiconductors, healthcare, housing, logistics, IT-business process management (IT-BPM), and energy. Acclime

Tier 2: Growth and Modernization Sectors

Industries positioned to support the country’s industrial upgrading and sustainability goals, generally receiving longer incentive periods than Tier 1 given their strategic complexity.

Tier 3: Advanced and High-Value Sectors

This tier covers advanced, transformative industries such as artificial intelligence, cybersecurity, data centers, research and development, and biotechnology. These sectors typically receive the most generous incentive packages, reflecting their long-term value to the economy.

Masterclass Objectives.

Incentive Periods by Enterprise Type

The length and structure of available incentives differ depending on whether a business is export-oriented or serves the domestic market:

• Export enterprises under the SIPP may avail of an income tax holiday of four to seven years followed by SCIT or EDR for 20 years, or SCIT/EDR alone for a maximum period of 24 to 27 years. Department of Finance
• Domestic Market Enterprises (DMEs) may avail of an ITH of four to seven years followed by EDR for 20 years, or EDR alone for a maximum of 24 to 27 years.
• High-Value Domestic Market Enterprises (HVDMEs) — a category introduced by CREATE MORE for domestic enterprises with investment capital exceeding PHP 15 billion that are import-substituting or have export sales of at least USD 100 million — can access VAT zero-rating and duty exemptions similar to export enterprises, though they are not eligible for the 5% SCIT, unlike registered export enterprises.
• Projects with investment capital exceeding PHP 15 billion approved by the Fiscal Incentives Review Board (FIRB) may qualify for incentive periods of up to 27 years.

Sector-Specific Highlights

Manufacturing and energy-intensive industries benefit most directly from the power expense deduction increase, which is particularly significant for energy-reliant sectors like manufacturing and heavy industries, given that high power costs have long been a deterrent to investment. Firb

Tourism enterprises receive targeted support as well: an additional 50% deduction for expenses related to trade fairs and tourism reinvestments is available through 2034.

IT-BPM and digital businesses remain a Tier 1 priority under the 2026 SIPP, and continue to benefit from CREATE MORE’s clarified VAT rules — a critical concern for an industry heavily reliant on local purchases and cross-border service delivery.

Compliance and Administration

Regardless of sector, all incentive applications flow through an Investment Promotion Agency (IPA) — such as PEZA or the BOI — with the Fiscal Incentives Review Board stepping in for projects exceeding an investment capital threshold of one billion pesos. The FIRB is required to decide on applications within 20 working days of receiving all requirements. Businesses should also note that the choice between the 5% SCIT and the EDR is irrevocable once elected at the time of application — making upfront financial modeling essential before committing to either path.

Key Takeaway for Investors

Sector classification under the SIPP is now the single most important variable in determining the value and duration of available incentives. Businesses should confirm their Tier classification early, model both the SCIT and EDR pathways before applying, and stay current on VAT rule updates that continue to be issued alongside the CREATE MORE implementing regulations.

This article is for general informational purposes only and does not constitute legal or tax advice. For guidance specific to your business, consult a qualified tax practitioner or legal counsel.