The CREATE Act boosts a conglomerate’s net profits.
DMCI Holdings Inc., a diversified engineering conglomerate, reported a record high core net income in the first nine months of the year, benefiting from the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law’s lower income tax.
DMCI Holdings said in a report that core net income nearly tripled from PHP4.50 billion to PHP12.31 billion from January to September, excluding a nonrecurring gain this year due to deferred tax remeasurement as a result of the CREATE Act and a nonrecurring loss in 2020 due to Davao project sales cancellations.
“In its unaudited interim condensed consolidated financial statements as of and for the nine-month period ended September 30, 2021, the Group reflected changes in current and deferred income taxes, including the retroactive effect of the change in tax rates arising from the CREATE Act, reducing provisions for current and deferred income tax by PHP993 million,” it said.
On March 26, 2021, President Rodrigo Duterte signed the CREATE Act into law in order to attract more investments while maintaining budgetary discipline and stability in the Philippines.
The CREATE Act, or Republic Act (RA) 11534, modifies the business income tax and incentive systems.
The Group would have been subject to a lower regular corporate income tax rate of 25% under the CREATE Act, which would have taken effect on July 1, 2020.
The DMCI Group said that its nine-month consolidated net income more than quadrupled from PHP3.9 billion to PHP13.5 billion, while consolidated sales soared to an all-time high of PHP80 billion, up 82 percent from PHP44 billion the previous year.
DMCI Power increased its net income contribution by 6%, from PHP403 million to PHP428 million, thanks to greater energy sales and average selling prices.
“The recent downgrading of Metro Manila to Alert Level 2 is expected to boost business activity and commercial usage, resulting in higher spot electricity costs and average effective water tariff,” the report added.
Tapering coronavirus disease 2019 (Covid-19) cases and extensive vaccination, according to the Group, are anticipated to boost domestic tourism, new investments, and international border reopening, which is good news for the off-grid, construction, and real estate industries.