BIR suspends tax hike on private schools

 BIR suspends tax hike on private schools
PHILSTAR

By Beatrice M. Laforga, Reporter

THE Bureau of Internal Revenue (BIR) suspended a regulation that would have increased the corporate income tax for nonprofit private schools, as the bill correcting the tax treatment is still pending in Congress.

BIR Commissioner Caesar R. Dulay signed Revenue Regulations (RR) 14-2021 on Wednesday suspending certain provisions of RR 5-2021 that excluded nonprofit private schools from availing of the preferential tax and effectively increased the rate to the 25% regular corporate income tax.

“To ease the burden of taxation among proprietary educational institutions, especially during this time of COVID-19 pandemic, and taking into account the pending bills in Congress… to finally clarify the income taxation of schools, the implementation of the following provisions of RR 5-2021 dated 8 April 2021 are hereby suspended pending passage of such appropriate legislation,” the signed document obtained by BusinessWorld read.

The new regulation was dated July 26 but only issued on Wednesday. It was signed by Finance Secretary Carlos G. Dominguez III on July 27.

With RR 5-2021 suspended, non-profit private schools will now continue to enjoy the preferential tax rate of 1%, which has been lowered under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) for three years until June 30, 2021, from 10% previously.

Coordinating Council of Private Educational Associations (COCOPEA) earlier flagged the previous RR for its “erroneous” interpretation on the tax imposed on private schools, warning the higher tax rate could force some schools to permanently close amid the pandemic.

“On behalf of the COCOPEA, we thank the Department of Finance and the BIR for heeding the call of the Senate and the pleas of the private education sector to suspend the enforcement of BIR RR 5-2021 pending the passage of appropriate legislation clarifying the taxability of proprietary educational institutions,” Anthony Jose M. Tamayo, chairman of COCOPEA, said in a Viber message on Wednesday.

“This will certainly help many of our struggling schools continue in their delivery of education amidst the COVID-19 pandemic,” he added.

Congress will be tackling a measure amending the Tax Code in order to clarify the definition of proprietary educational institutions by including the phrase “which are nonprofit.” It also aims to clarify the tax treatment of proprietary educational institutions that are nonprofit.

Bills were filed at the House of Representatives and Senate last month to amend certain provisions under the National Internal Revenue Code and clear up the tax treatment of private schools.

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