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By: Euney Marie J. Mata-Perez on February 20,2020

The Senate Ways and Means Committee released Committee Report 50 dated Feb. 17, 2020, endorsing Senate Bill (SB) 1357, in substitution of SBs 535, 595 and 702, taking into consideration House Bill (HB) 4157, the proposed Corporate Income Tax and Incentives Rationalization Act (Citira), amending our National Internal Revenue Code (Tax Code). This version of SB 1357 is still to be submitted for sponsorship and for second reading by Sen. Pia Cayetano, the chairman of the Senate Ways and Means Committee, and could still be further be amended on the floor.

Key corporate income tax (CIT) proposals

SB 1357 retains the decrease of the CIT rate over a period of 10 years, from 30 percent to 20 percent in 2029. However, no conditions are imposed on the CIT reduction for the first five years. It provides that beginning 2025, the scheduled decrease may be suspended by President Rodrigo Duterte upon the recommendation of Finance secretary if the projected deficit target as a percent of gross domestic product exceeds the programmed deficit.

Apparently, SB 1357 has not adopted the proposals of business groups, such as the joint foreign chambers, for an immediate reduction of the CIT to 25 percent, before a staggered reduction to 20 percent. Such an immediate reduction is viewed to send a very good message to investors.

Unlike HB 4157, we note that SB 1357 did not propose amendments to the optional standard deduction provisions under Section 34 (L) of the Tax Code, thereby retaining the present 40-percent deduction from gross income for corporations and 40-percent deduction from gross sales or revenues for individuals. It also did not also embody proposals to amend Section 50 of the Tax Code, which is proposed by HB 4157 on the Bureau of Internal Revenue commissioner’s power to allocate, impute and distribute income among related parties. Further, it also did not propose amendments to the penalty provisions of the Tax Code (Sections 255 to 282).


Like HB 4157, SB 1357 proposes an income tax holiday (ITH). However, in addition, SB 1357 proposes a special corporate income tax (CIT) of 8 percent that shall increase to 10 percent by 2022. Such special CIT shall be in lieu of all taxes and could be availed of after the expiration of the ITH period. After ITH period expiration, HB 4157, on the other hand, proposes a reduced CIT of 18 percent, which shall be further reduced to 13 percent by 2029, but such reduced CIT is not in lieu of all taxes.

SB 1357 proposes a value-added tax (VAT) exemption and zero-rating on all local purchases. HB 4157, on the other hand, applies the VAT exemption and zero-rating only on enterprises whose export sales are at least 90 percent.

Both HB 4157 and SB 1357 provide for enhanced or special deductions such as additional deductions for direct labor, depreciation, research and development, and training expenses.

SB 1357 provides that in no case shall the enhanced deductions be granted simultaneously with the special CIT rate. Under HB 4157, the enhanced deductions can be offset against the reduced CIT.

Interestingly, SB 1357 provides for an additional deduction of 50 percent of power expense incurred in the taxable year. This is probably a result of the proposals of the business groups that claim that the Philippines’ high power costs is one of the factors hampering direct foreign investments.

Period of availment

The ITH under HB 4157 is only three years, which may be extended to five years. SB 1357, however, allows a longer period of four years plus a four-year special CIT period or a total of eight years, of which the total period may in total be extended for another four years, but not exceeding 12 years in total.

SB 1357 categorizes registered enterprises into basic, enhanced and advanced for purpose of availment of incentives. The determination of the category shall be based on location, activity and other relevant factors. Less developed areas shall be prioritized. Certain activities, like agriculture, fishing, forestry and agribusiness, shall likewise be prioritized.

While in the overall, the present SB 1357 proposes similar revisions as HB 4157, we can see that SB 1357 also proposes several different amendments. Thus, we expect that there will there will be much work at the bicameral committee that would be constituted after the Senate shall have approved its version. Until that time, we will not be certain as to which particular amendments will pass.

As what some business groups have pointed, the delay in the passage of Citira gives rise to a continuing uncertainty for the business and investment community. It is thus best that these amendments be passed within the soonest possible time.

Contact Information

Our office address:

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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco