THE HOUSE of Representatives approved on second reading Tuesday a bill that explicitly qualifies private schools for tax relief, which would clear up their tax treatment after the industry disputed the interpretation of the tax relief law put forward by the Bureau of Internal Revenue (BIR).
House Bill 9913 amends Section 27 (B) of the National Internal Revenue Code (NIRC) of 1997 to apply the 10% preferential tax rate to all proprietary educational institutions and nonprofit hospitals for a limited period to allow them to recover from the economic crisis, which has hurt enrollment.
Private schools will be charged a reduced tax rate of 1% between July 1, 2020 and June 30, 2023, as authorized by Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law. Once the provision expires, the tax rate will revert to 10%.
The proposed law was passed by the House Committee on Ways and Means Monday.
The Bureau of Internal Revenue (BIR) has withdrawn provisions in Revenue Regulations (RR) No. 5-2021 requiring private educational institutions to be “nonprofit,” effectively increasing the tax rate for private schools to the 25% regular corporate income tax.
Negros Occidental Rep. Francisco B. Benitez said in his sponsorship speech that BIR RR No 5-2021 “contravenes the intent of the CREATE law to provide tax relief to enterprises amidst the pandemic.”
He added that the “higher tax burden will lead to sharp deductions in investment in school facilities, equipment, curriculum development, teachers’ salary, and scholarships.”
Albay Rep. Jose Ma. Clemente S. Salceda, chairman of the House Ways and Means committee, said in a Viber message Monday that he expected “some amendments” to the measure. However, no amendments were made during its period of deliberation.
The counterpart measure, Senate Bill 2272, is still pending in committee at the Senate. — Russell Louis C. Ku