CREATE MORE Act One Year In: What Actually Changed for SMEs

The Gap Most Growing PH Businesses Don’t Notice Until It Costs Them

If you registered your business with PEZA, BOI, or another investment promotion agency sometime in the last two years, you’ve probably had this experience: someone forwards you a law firm alert about a new tax incentive, you skim it, and you’re still not sure what it means for your filing next quarter. That’s the gap this piece is trying to close.

It’s been over a year since the CREATE MORE Act took effect, and a full year since its detailed rules landed. Enough has happened since then (official implementing rules, several rounds of BIR regulations, one meaningful VAT correction) that it’s worth looking at what actually reached a small business’s books, rather than what the law promised on paper. That’s what this piece walks through: the real timeline, the wins that showed up in practice, and the parts that still mostly benefit larger investors.

The quick recap, for anyone starting cold

CREATE MORE, officially Republic Act No. 12066, was signed into law in November 2024 and took effect later that month. It amends the 2021 CREATE Act, which had already overhauled how the Philippines taxes and gives incentives to businesses.

The reason it exists: the Philippines was losing ground to Vietnam, Indonesia, and Malaysia in the competition for foreign investment, partly because the original law’s incentive rules were seen as too rigid and its VAT treatment too unpredictable. CREATE MORE was the government’s attempt to fix that: lower the tax rate on a key incentive track, expand VAT relief, let businesses hold onto their incentives longer, and generally make the system less confusing for the people actually trying to comply with it.

A few terms this article uses, explained once so you don’t have to hold them in your head:
Registered business: a company registered with an investment promotion agency like PEZA or BOI to receive tax incentives. The formal term is “Registered Business Enterprise,” or RBE, which you’ll see used in most official documents and law firm write-ups.
The two main incentive tracks: a registered business generally picks one of two paths: a flat 5% tax on gross income instead of regular corporate income tax (officially called the Special Corporate Income Tax, or SCIT), or a lower corporate income tax rate plus extra deductions on specific expenses (officially called the Enhanced Deductions Regime, or EDR).
Tax holiday: a period, usually the first several years, where a registered business pays no income tax at all before moving onto one of the two tracks above. Officially called the Income Tax Holiday, or ITH.
Domestic seller: a registered business that mainly sells within the Philippines rather than exporting. Officially called a Domestic Market Enterprise, or DME.
The government’s investment priority list: the official list of industries and activities eligible for incentive registration. Officially called the Strategic Investment Priority Plan, or SIPP.

What actually rolled out, month by month

CREATE MORE wasn’t a single event. It was a law that then needed months of clarifying regulations before businesses knew exactly how to apply it, and that drip-feed of implementation is the real story of the past year.

If you’re a registered business and you felt like the rules kept shifting under you throughout 2025, that’s not a perception problem. That’s genuinely what happened.

What changed for small businesses that are registered

Strip away the terminology, and here’s what a small business on this incentive track actually gained.

• Corporate income tax, before and after. Before CREATE MORE, businesses on the deductions track paid the regular 25% corporate income tax on income from their registered project, on top of their extra deductions. Now, that track comes with its own lower rate, 20%, a direct five-point cut, no extra hoops, as long as the income is tied to the registered project.
• Power deduction, before and after. Before, the deductions track let you claim an extra 50% deduction on power expenses tied to the registered activity. Now it’s 100%. For anything power-intensive (manufacturing, cold storage, data-adjacent operations), this is one of the more tangible savings in the whole law.
• Local tax predictability. If your local government chooses to impose a local tax on your registered operations, CREATE MORE now caps it at 2% of gross income, and that cap replaces other local taxes and fees during your tax holiday or deductions-track period. One caveat: this cap doesn’t apply if you’re on the flat 5% track instead. It’s specific to businesses using the tax holiday or the deductions track.
• Remote work legitimacy. For tech, service, and IT-adjacent registered businesses operating in economic or freeport zones, CREATE MORE formally allowed remote work arrangements for up to 50% of the workforce without risking their tax incentives, no more operating in the grey area regulators spent years going back and forth on.
• E-invoicing setup relief. To ease the shift to mandatory electronic invoicing, the smallest taxpayers can claim an additional 100% deduction on the total cost of setting up a BIR-compliant electronic invoicing system, while medium and large taxpayers get a 50% deduction.
• Incentive duration, before and after. Before, the flat-rate and deductions tracks topped out around 10 years for most projects. Now, depending on the type of business, that stretches to a 14 to 17 year range (longer for larger export projects), with further extensions possible for labor-intensive projects. Separately, older registered businesses still on the previous 5% gross income tax arrangement had their cutoff date pushed from April 2031 to December 31, 2034, three extra years on a fairly favorable deal.
• VAT zero-rating, before and after. Before, local purchases only qualified for VAT-free treatment if they were “directly and exclusively used” for the registered activity, a standard that led to frequent disputes with the tax bureau. CREATE MORE loosened this to “directly attributable,” a meaningfully easier bar to document and defend during an audit.

Each of these is a real improvement. None of them required a small business to do anything heroic to access them, which is more than can be said for the next item.

The VAT fix that quietly mattered most

If you’re a business that mainly sells within the Philippines, this is the section to read twice, because it’s the one most small businesses actually felt in their cash flow, even if they never read a single regulation.

The government’s first attempt at this rule tried to apply a straightforward principle: domestic sales by registered businesses should carry the regular 12% VAT, regardless of which incentive track they’re on. Fair enough in theory. But the mechanics it chose made the buyer responsible for remitting that VAT, transaction by transaction, using a specific BIR payment form. For a domestic seller doing volume business, this meant no VAT ever actually flowed through their own books, so the VAT they’d already paid on their own purchases just piled up unused, with no way to recover it, since their sales weren’t zero-rated either. For buyers, it meant filing a separate government form for every single invoice, sometimes several times a day.

By March 2026, the tax bureau walked this back. The fix: ordinary domestic sales now go back to seller-remitted VAT, the same way any regular VAT-registered business operates, which lets the seller offset the VAT they collect against the VAT they’ve already paid, like normal. Buyers, meanwhile, got a real administrative break: bulk shipments covered by multiple invoices can now be settled with one consolidated payment instead of filing separately for each invoice, and the deadline to update point-of-sale and accounting systems to reflect the new labeling was pushed to December 31, 2026.

If your finance team spent a chunk of 2025 fighting unrecoverable VAT or filing duplicate paperwork, this correction is the reason that headache eased up this year. It’s a good reminder that a lot of the real-world impact of tax law doesn’t come from the headline Act. It comes from the regulation that quietly corrects it a year later.

What didn’t change (or got harder)

In the interest of an honest retrospective, not everything moved in the small business’s favor.

• The incentive choice is still locked in once made. Whether a registered business picks the flat 5% track or the deductions track, that choice holds for the full length of the incentive period. There’s no switching later if circumstances change. For a startup without a seasoned finance team, that’s a high-stakes decision made early, often before the business has enough history to know which track actually wins out.
• Compliance and reporting requirements grew, not shrank. Between the detailed implementing rules, the corporate tax regulation, and two rounds of VAT rules in a single year, registered businesses, including small ones, had to track more forms, more deadlines, and more classification exercises (like the buyer now having to determine whether a seller is a domestic seller or an exporter) than they did under the previous law.
• The transition year created real confusion. Two VAT regulations in twelve months, each changing who remits and how, meant plenty of businesses either over-paid, under-paid, or simply weren’t sure which rule applied to a given sale while the correction was pending.
• Incentive value still concentrates at the top. The government’s current investment priority list leans toward capital-intensive, high-value projects: clean energy, digital infrastructure, advanced manufacturing, and frontier technology like AI and quantum computing. The most generous incentive tiers are built around investment amounts exceeding ₱15 billion, or export sales of at least USD 100 million. A typical small business is not competing for that tier. The best realistic outcome for most small registered businesses is the lower 20% tax rate and expanded deductions, genuinely useful, but a fraction of what a large-scale project can access under the same law.

For small businesses that aren’t registered at all

If you’re not registered with an investment promotion agency, CREATE MORE still touches you indirectly, mostly through your customers. If you supply goods or services to a registered business, the March 2026 VAT correction determines whether you or your customer is responsible for remitting VAT on that sale, and getting this wrong on an invoice is now a documented compliance issue rather than a minor grey area.

It’s also a reasonable moment to revisit whether registering makes sense for you. With the lower 20% tax rate, the full power deduction, capped local taxes, and clearer VAT rules now in place, and with a year of real-world implementation behind them rather than untested promises, the math for a scaling small business considering registration is more concrete than it was when CREATE MORE first passed. It’s not a fit for everyone, and the point above about the choice being locked in means it’s not a decision to rush.

Where CloudCFO fits in

This is a lot to track for a finance team that’s also closing books, running payroll, and managing cash flow. Two VAT corrections in one law’s first eighteen months, a new investment priority list, and a corporate tax rule change are not a one-time reading assignment. They’re an ongoing monitoring job.

That’s the part of the work CloudCFO takes off your plate:

• Ongoing Monitoring: We track new regulations and priority-list changes as they land, and translate them into what they actually mean for your registration status.
• Track Feasibility Check: Before you lock in a choice between the flat-rate track and the deductions track, we help you run the actual numbers, factoring in your power costs, local tax exposure, and expense profile to see which one genuinely keeps more cash in your business.
• Compliance Maintenance: We help you stay fully compliant with your existing registration so you never risk losing your incentives over a missed filing or an invoice formatting error.

For more on how we support registered businesses with tax compliance and incentive planning, visit our Tax and Compliance Services page.

Want a second set of eyes on your registration status, or want to figure out whether registering under the current rules makes sense for your business? That’s a conversation worth having now rather than after the next regulation lands.
Get in Touch with Our Team

Quick answers

Is my business eligible for CREATE MORE incentives?
Eligibility runs through the government’s current investment priority list. If your activity isn’t on it, no agency can approve your registration for incentives, full stop. If it is listed, you’d register with PEZA, BOI, or another agency and choose your incentive track based on whether you mainly export or sell domestically. This is worth a proper feasibility check before you apply, since the choice is locked in once made.

What’s the actual difference between the original CREATE Act and CREATE MORE?
CREATE MORE amends the original law rather than replacing it. The headline changes for most registered businesses: a new 20% tax rate on the deductions track (versus the regular 25%), a full 100% power expense deduction (up from 50%), longer incentive periods, an easier standard for VAT-free local purchases, and clearer transition rules for older registered businesses.

Do the VAT changes affect businesses that aren’t registered for incentives?
Yes, indirectly. If you sell to a registered business, the March 2026 correction determines whether you or your customer is responsible for remitting VAT on that sale, getting this wrong on an invoice is a documented compliance issue, not a minor clerical error.

Is CREATE MORE actually better for small businesses, or mainly for large investors?
Both, but unevenly. The tax cut, power deduction, and VAT clarity are real, accessible wins for any registered business regardless of size. The largest incentive tiers, though, are built around investment thresholds most small businesses will never hit, so the law’s biggest upside is concentrated at the top of the market.