The Bureau of Internal Revenue has revoked Clark Development Corp.’s preferential tax treatment, saying it must pay the same income tax rate as other government-owned and controlled corporations with the exception of those with specified taxation in their charters.
According to CDC’s 2022 annual audit report, its income tax expense amounted to P124.29 million in 2022, up from P76.05 million in 2021, based on a preferential tax rate of 5%.
BIR Revenue Memorandum Circular No. 63-2023, signed by Commissioner Romeo Lumagui on May 30, revokes two BIR rulings that date back decades.
These rulings treated CDC as a business enterprise in accordance with the Philippine Corporation Law. As CDC operates within the Clark Special Economic Zone, it paid only a 5% tax based on gross income, in lieu of local and national internal revenue taxes.
While CDC is a private corporation, the fact remains that it is a GOCC that carries out regulatory functions, Lumagui said.
“As such, it does not stand on equal footing with business enterprises operating within CSEZ, thereby precluding it from claiming the same privileges available to them,” he said.
CDC is owned by the government through the Bases Conversion and Development Authority. It was established to manage CSEZ.
Lumagui said “despite being structured as a stock corporation, it is evident that CDC is a GOCC that operates and performs as a regulatory agency. Thus, unless there is a law that expressly states otherwise, CDC must be treated on par with other GOCCs regardless of its formation or the nature of its operations.”
Even if CDC is considered as a business enterprise, the BIR said the passage of the CREATE Law, as amended, limited the grant of fiscal incentives to business enterprises registered with investment promotion agencies.