June 21, 2024

President Rodrigo Duterte signed into law the bill that reinforces the 10 percent preferential income tax rate to proprietary private educational institutions, including for-profit schools, overturning an earlier Bureau of Internal Revenue order that raises private schools’ corporate income tax rate to 25 percent.
Republic Act 11635 or the “An Act Amending Section (B) of the National Internal Revenue Code (NIRC) of 1997, as amended, and for other purposes,” clarifies a disputed portion on revenue regulation under the Corporate Recovery and Tax Incentives for Enterprises (Create) Act.
Under the Create Act, “proprietary educational institutions and hospitals which are nonprofit” must pay 10 percent of their taxable income, which has been brought down to one percent until June 2023.
Congress sought to clarify the said provision in what they believed was an erroneous interpretation of the law after the BIR released Revenue Regulation 5-2021 that orders the raise on income tax for private schools run by stock corporations to 25 percent.
Higher and Technical Education Committee chair and Baguio City Rep. Mark Go, one of the principal authors of the law, said the BIR’s ordered increase in the taxation on private schools was “a serious and urgent concern, especially considering the severe impact of the pandemic on the current financial position of private schools all over the country.”
“Even prior to the Create Law, or under the NIRC, the phrase ‘proprietary educational institutions and hospitals which are nonprofit’ has always been construed as that the word nonprofit pertains only to hospitals. This same phrase was merely reiterated in the Create Law, and should have been interpreted in the same manner,” Go said.
He stressed the importance of private schools as an invaluable partner in the country’s recovery amid the pandemic.
“Now more than ever do we need the help of private schools as we continue to fight the Covid-19 crisis: by helping uplift the country’s state of education, alleviating the burden on our public schools, and producing productive and talented graduates to help in nation-building,” Go said. – Press release