All eyes on JMC No. 1: The definitive RBELT mandate

Here’s a review of the laws designed to invigorate economic growth.

HISTORY OF LAWS
The Investment Incentives Act (RA No. 5186) in the 1960s introduced Income Tax Holidays (ITH) for Board of Investments (BoI)-registered companies. This was later expanded to include businesses registered in economic zones and investment agencies. A 5% Gross Income Earned (GIE) tax was later applied to Philippine Economic Zone Authority (PEZA)-registered enterprises in the ’90s.

The 2021 Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act then created the Fiscal Incentives Review Board (FIRB) to centralize incentives monitoring. The GIE regime was also rebranded as the Special Corporate Income Tax (SCIT) rate.

The 2024 CREATE Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act then allowed registered entities enjoying Income Tax Holidays (ITH) to remain exempt from income tax, subject to local government unit (LGU)-imposed local business taxes, fees, and charges.

To address this, the Registered Business Enterprise (RBE) Local Tax, or RBELT, was introduced. Enterprises enjoying the ITH — or under the Enhanced Deductions (ED) regime — could opt to pay this tax instead of other local taxes, fees, and charges otherwise imposed. It can only be enacted through an LGU ordinance and should not exceed 2% of the RBE’s gross income.

RBELT INTRODUCED
Disputes over RBELT applications have been common. Such conflict has resulted in filing administrative cases or judicial actions in already congested courts. In a December 2025 briefing, the Supreme Court reported a 19% disposition rate, with the Court of Tax Appeals at 20% and first- and second-level courts at 48%. Thus, case resolution may take considerable time, which could put off investors.

Joint Memorandum Circular (JMC) No. 01 was then issued on March 23, by the departments of the Interior and Local Government (DILG), Finance (DoF) and Trade and Industry (DTI) to provide guidelines for LGUs and stakeholders.

EXEMPTIONS
The Circular differentiates the exemptions afforded to RBEs, as follows:

• PreCREATE RBEs (Section 5.1, JMC No. 1 Series of 2026)

• RBEs availing of ITH only

• Exempt from local business taxes for:

• 6 years from date of registration — pioneer projects (EO No. 226)

• 4 years from date of registration — nonpioneer projects (EO No. 226)

If an LGU imposes RBELT, the RBE must annually choose between the local business tax exemption or the RBELT, which is the default option unless expressed otherwise. This is irrevocable for the entire taxable year.

• RBEs availing of ITH and/or 5% GIE

– Exempt from local business taxes during the remaining ITH period

– Exempt from all local taxes, fees, and charges while availing of the 5% GIE tax until Dec. 31, 2034

• RBEs availing of 5% GIE only

• Exempt from all local taxes, fees, and charges until Dec. 31, 2034

• CREATE/CREATE MORE RBEs (Section 5.2, JMC 1 Series of 2026)

• RBEs availing of ITH or EDR and certified as pioneer or non-pioneer (EO No. 226) 

• Uses the same treatment as pre-CREATE RBEs, availing of ITH only. After the exemption period, they may be subject to RBELT unless the LGU grants an explicit exemption, or is expressly exempt under law

• RBEs availing of 5% Special Corporate Income Tax (SCIT)

• Exempt from all local taxes, fees, charges and RBELT during the entire granted incentive period

RATE AND COVERAGE
The Circular provides that a city or municipality may, via ordinance, impose an RBELT of up to 2% of the RBE’s gross income on its registered project or activity during its ITH and EDR periods. If operating in areas covered by multiple LGUs, the 2% rate remains the same. However, this does not apply to RBEs within the Philippine Veterans Investment Development Corp. (PHIVIDEC) Industrial Authority areas (PD 538). IPAs with regulatory powers shall also continue to regulate and supervise their RBEs.

ALLOCATION OF GIE/SCIT
For those availing of 5% GIE/SCIT, the current allocation rules among the National Government, LGUs and IPAs under special laws are to be observed. For RBEs operating with no allocation rules, the split is as follows:

• 3% to the National Government; and

• 2% to the corresponding city or municipality

If covered under multiple LGUs, the distribution of the 2% RBELT is as follows:

• 50% equally among LGUs

• 50% based on population

The following rules are also noted:

• Municipalities share 50% with the province;

• Cities keep 100% of their share; and

• LGUs may reduce or waive their share if multiple LGUs are involved

POINTS OF CONSIDERATION
While the Circular is a welcome development, key points must be considered.

• DEPENDENCE ON LGU ORDINANCES

RBELT is not self-executing. It must be based on a Sanggunian ordinance. Nevertheless, some LGUs forgo this, relying on rules not expressly implementing RBELT. This results in illegal collection and refund issues. Thus, RBES must always ask for the approved RBELT ordinance before paying or recognizing any assessment.

• MONITORING IMPLEMENTATION

With over 426 operating ecozones under PEZA alone, monitoring implementation is challenging. Thus, training informing LGUs on RBELT guidelines may be organized. Clarificatory joint circulars may also be issued as necessary

• TIMING AND RECOGNITION OF TRANSACTIONS

Timing issues in applying RBELT may arise as RBE incentives are time-bound. Incorrect recording may produce discrepancies, penalties, or tax rate reclassification. RBEs should align accounting cut-off policies with the exact start and end dates of availment as approved by the IPA/FIRB. This includes mapping recognized revenue to specific incentive periods and tagging income as “ITH‑covered,” “EDR‑covered”, or “post‑incentive.”

•  EASE OF USE AND ADMINISTRATIVE BURDEN FOR RBES

Last, RBEs may face practical challenges via unclear election procedures and differing LGU requirements. This may discourage registration altogether, undermining the policy objectives of CREATE and CREATE MORE. To address this, publishing of updated Citizens’ Charters will provide clarity for RBEs.

Currently, it is too early to gauge the Circular’s effectivity. Nevertheless, it shows sincere commitment to staying globally competitive.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Marla Angelie B. So is an associate from the Tax Advisory & Compliance practice area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd. pagrantthornton@ph.gt.com