In a bold move to attract foreign investment, Philippine President Ferdinand Marcos Jr. has signed a new law reducing corporate income tax rates and enhancing fiscal incentives for businesses. This law aims to boost the struggling economy by making the Philippines more competitive in the region.
Key Features of the New Law
- Corporate income tax cut from 25% to 20% for registered business enterprises (RBEs).
- Enhanced deductions, including a 100% additional deduction for power expenses.
- Extension of tax perks for strategic investments from 17 years to 27 years.
- Allows up to 50% of an RBE’s workforce to work from home.
Investment Landscape
Despite the Philippines being one of Asia’s fastest-growing economies, it has struggled to draw foreign direct investment (FDI). In 2023, the FDI amounted to around US$6.2 billion, far behind Singapore’s US$159.67 billion.
Issues such as foreign ownership restrictions, high power costs, and inadequate infrastructure have been significant barriers. President Marcos expressed confidence that the recent legislative changes would help improve this situation, stating, “We have taken a decisive step towards our vision of a globally competitive and investment-led Philippine economy.”
Financial Implications
The new law is projected to result in a tax revenue loss of approximately 5.9 billion pesos (about S$134 million) over the next few years. This considerable revenue loss reflects the government’s commitment to incentivising growth within strategic industries that will be pivotal for the nation’s future.
Finance Secretary Ralph Recto highlighted that the legislation is designed to significantly cut costs for the manufacturing sector, addressing one of the crucial pain points for businesses operating in the Philippines.