Does a CREATE MORE Registered Business Enterprise Still Get Withheld BIR Form 2307?

A CREATE MORE Registered Business Enterprise (RBE) enjoying an Income Tax Holiday (ITH) or the Enhanced Deductions Regime does not become a blanket exemption from expanded withholding tax (EWT) for everyone who pays it. Expanded withholding tax is a collection mechanism on the payee’s eventual income tax liability, and that liability belongs to the RBE, not the payor — so a payor generally keeps withholding on EWT-covered payments the same way it would for any other supplier. The one narrower exception, per the law’s implementing rules, is income payments tied directly to the RBE’s registered project or activity during its ITH-availing period, which the rules exempt from CWT without a separate BIR ruling.

Why withholding and income tax incentives are two separate questions #

Expanded withholding tax exists to collect tax in advance on the payee’s income, not the payor’s — so a payee’s own tax incentive doesn’t automatically change what a payor must withhold, unless a rule says so specifically. Republic Act No. 12066 (CREATE MORE), which amended the CREATE Act’s incentive regime, gives qualifying RBEs a reduced 20% corporate income tax rate under the Enhanced Deductions Regime (EDR), or continued ITH, depending on the enterprise’s registration terms with its Investment Promotion Agency. The BIR implemented the reduced EDR rate through Revenue Regulations No. 7-2025 (issued February 27, 2025), covering Sections 27, 28, and 34 of the Tax Code as amended — but that income-tax-rate mechanic is a separate question from whether a customer paying the RBE must still withhold.

The withholding side: RR No. 5-2025 and the ITH-period carve-out #

On the withholding side, the BIR issued a separate regulation — RR No. 5-2025, also dated February 27, 2025 — amending Sections 2.57.2(H) and (X) of RR No. 2-98 to revise certain withholding tax rates and the income-payment bases affected by CREATE MORE, rather than exempting RBEs from EWT outright. Separately, CREATE MORE’s implementing rules address what happens specifically during an RBE’s ITH-availing period. As reported by tax and regulatory counsel reviewing the IRR:

“No creditable withholding tax shall be imposed on income payments to RBEs in relation to their registered project or activity without the need for a BIR ruling during the ITH availing period.”

— CREATE MORE implementing rules, as summarized by tax counsel reviewing the IRR

This is a narrow exception, not a general rule: it applies only (1) during the ITH-availing period specifically (an EDR-only RBE outside ITH doesn’t get it), and (2) only to income payments connected to the registered project or activity — income the RBE earns from an unregistered line of business stays fully subject to ordinary EWT. Because the relevant implementing and incentive-availment rules were still being finalized as of late 2026, a payor relying on this carve-out for a specific filing should confirm the current provision directly with the RBE’s Investment Promotion Agency or the Fiscal Incentives Review Board rather than assuming the summary above is the final word.

What a payor should actually do #

1. Confirm whether the payee is a CREATE MORE RBE and, if so, whether it is currently within its ITH-availing period or already on the EDR/reduced-rate track — these have different withholding consequences.
2. If ITH applies, ask the RBE to confirm (via its Certificate of Registration and Investment Promotion Agency confirmation) that the specific payment relates to its registered project or activity, not an unregistered sideline.
3. If the ITH, registered-activity carve-out applies, withhold no EWT on that payment — document the basis for not withholding in the payor’s own files.
4. In every other case — EDR-track RBEs, ITH-track RBEs being paid for unregistered activities, or any payment type RR No. 5-2025 doesn’t specifically adjust — withhold and issue BIR Form 2307 exactly as for any other payee, using the applicable rate from the Expanded Withholding Tax Rates Consolidated Reference Table.

For the broader set of CREATE MORE changes beyond withholding — the reduced income tax rate itself and the enhanced deductions available to RBEs — see CREATE MORE Act Incentives: Enhanced Deductions and Tax Breaks for RBEs. For how CREATE MORE separately expanded VAT zero-rating for a registered export enterprise’s local suppliers, see CREATE MORE and VAT Zero-Rating on Indirect Exports.

Worked example: a consultant billing a CREATE MORE export enterprise #

An IT consulting firm bills ₱500,000 for a system-integration project for a CREATE MORE-registered export enterprise. The export enterprise is on the EDR track (not ITH), so the ITH-period carve-out above does not apply to it at all — its reduced 20% income tax rate has no bearing on the payor’s withholding duty. The consulting firm withholds the ordinary professional/technical-consultant EWT rate on the ₱500,000 fee and issues BIR Form 2307 exactly as it would for any other corporate client; the export enterprise later credits that withheld amount against its own (reduced-rate) income tax due. Had the same enterprise instead been within an ITH-availing period and the project been part of its registered activity, the consulting firm’s fee could fall under the narrower exception above — but that depends on registration specifics the payor must verify, not something it can assume from the EDR/ITH label alone.

Summary #

Don’t assume a CREATE MORE RBE’s income tax incentive extends to the withholding tax its customers owe — in most cases it doesn’t, because EWT collects against the payee’s liability, and the payor’s duty to withhold is a separate question from how lightly the payee is ultimately taxed. The one real exception sits narrowly inside the ITH-availing period, tied to the RBE’s registered project or activity, and even then a payor should document the basis rather than assume it applies.