On March 26, 2021, Republic Act. No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was signed to amend the Tax Code and serve as a Coronavirus disease (COVID-19) relief measure.

Albeit temporary, one of the key changes was the reduction of percentage tax for Non-VAT taxpayers from 3% to 1%.

Percentage tax is a business tax imposed on persons, entities, or transactions specified under Sections 116 to 127 of the Tax Code, as amended, and as required under special laws. Section 116 is hereby further amended by CREATE to read as follows:

“Any person whose sales or receipts are exempt under Section 109 (BB) of this Code from the payment of value added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided, That cooperatives, shall be exempt from the three percent (3%) gross receipts tax herein imposed.

PROVIDED, FURTHER, THAT EFFECTIVE JULY 1, 2020 UNTIL JUNE 30, 2023, THE BATE SHALL BE ONE PERCENT (1%).”

Notably, the effectivity of the CREATE percentage tax rate of 1% shall retroact from July 1, 2020. Hence, it will affect returns already submitted such as:

1. BIR Form No. 2551M - Monthly Percentage Tax Return

2. BIR Form No. 2551Q - Quarterly Percentage Tax Return

   
   

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