Philippines Lowers Corporate Income Tax Rates

MANILA (Reuters) – Philippine President Ferdinand Marcos Jr. signed into law on Monday a bill that lowers corporate income tax rates and provides additional fiscal incentives to promote foreign investment in the country.

Despite being one of Asia's fastest-growing economies, the Philippines has struggled to attract foreign direct investment due to foreign ownership restrictions, high electricity costs, and inadequate infrastructure.

According to United Nations data, the Philippines received $6.2 billion in foreign direct investments last year, significantly less than Singapore's $159.7 billion, Indonesia's $21.6 billion, and Vietnam's $18.5 billion.

The new legislation, known as the Corporate Recovery and Tax Incentives for Enterprises to Maximise Opportunities for Reinvigorating the Economy, reduces the income tax rate for registered business enterprises (RBEs) from 25% to 20%.

Building on a 2021 law, it allows RBEs registered with investment promotion agencies to take advantage of enhanced deductions. This includes a 100% additional deduction for power expenses to alleviate the burden of high electricity costs in the Philippines.

The measure also extends tax benefits for strategic investments from 17 years to 27 years and clarifies the sales tax exemptions available to companies. Additionally, it formalizes the allowance for up to 50% of RBEs' employees to work from home while still receiving their incentives.

In a statement, Marcos described the bill as a product of hard work and emphasized its potential to aid in the Philippines' economic transformation.

However, the Philippines is expected to incur a loss of 5.9 billion pesos ($100.89 million) in tax revenue due to the new law between 2025 and 2028, according to analysis from the president's communications office.

> ($1 = 58.4800 Philippine pesos)