Taxwise Or Otherwise
By Maria Jonas Yap
With the COVID-19 cases in the country continuing to decline and the restrictions relaxing, we are now slowly returning to our pre-pandemic lives.
And while there may still be a lot of uncertainty about the Philippines’ post-pandemic future, there are a few tax-related certainties we know so far.
TAXATION OF PROPRIETARY EDUCATIONAL INSTITUTIONS
Schools nationwide are now urged to allow limited face-to-face classes. For students who have missed out on classroom activities and interacting with school friends and teachers, the possibility of going back to school brings hope and confidence in reverting to the status quo.
Amidst the ongoing preparations for the anticipated face-to-face classes, there’s another reason private schools are especially delighted these days. In January, Republic Act No. 11635 amended Section 27(B) of the National Internal Revenue Code of 1997 to finally end the long-standing issue on the proper income tax treatment of proprietary educational institutions.
RA 11635 confirms that the strict interpretation of the original provisions of Section 27(B) of the Tax Code and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) amendments under Revenue Regulations No. 5-2021 do not align with the objective of lawmakers to grant consideration to the education sector given the many challenges it faced during the pandemic — suspended operations and decline in enrolment, among others. With the amendment, it is now clear that for-profit educational institutions are eligible for the 10% preferential income tax rate and the 1% temporarily reduced rate between July 1, 2020 and June 30, 2023. Nonprofit educational institutions remain exempt from income tax under the Constitution.
The education sector can now breathe a sigh of relief and focus its efforts on the upcoming reopening of classes.
UPDATED LIST OF TOP WITHHOLDING AGENTS
With the relaxed health restrictions, most business establishments are now allowed to operate at full capacity as long as they comply with the minimum health protocols set forth by the Department of Health. As more establishments open, taxpayers are expected to have increased dealings with current suppliers and perhaps even gain new suppliers. Taxpayers should be mindful of withholding tax obligations on their purchases.
On that note, the Bureau of Internal Revenue issued Revenue Memorandum Circular No. 27-2022 announcing the recently updated list of withholding agents for inclusion to the list of top withholding agents (TWAs). Under the Circular, newly-added TWAs are required to deduct and remit either the 1% or 2% creditable withholding tax (CWT) from income payments to their suppliers of goods and services, respectively, starting April 1, 2022. Failure to withhold and remit the CWT on income payments is grounds for the disallowance of expenses for income tax purposes.
NO SUSPENSION OF EXCISE TAXES ON FUEL PRODUCTS
For some of us, returning to pre-pandemic life involves the daily commute as we slowly transition back from working at home to physically reporting to the office. While teleconferencing is still encouraged, some may already find themselves conducting join face-to-face meetings.
Reporting to the office comes at a critical time, when prices of fuel products continue to rise. And while pump prices are mainly dictated by the global price of crude, the excise taxes imposed on fuel products also significantly contribute to the burden on commuters.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the current excise tax rates are P10 per liter for gasoline, P6 per liter for diesel, P5 per liter for kerosene, P4 per liter for aviation fuel, and P3 per liter for liquefied petroleum gas.
The considerable increases in fuel prices have understandably made basic commodities more expensive. As such, the clamor for the suspension of excise taxes on fuel products has been resounding.
Unfortunately, no temporary relief will be provided this time. The government has rejected calls to suspend the excise tax on fuel, with the Department of Finance citing the potential hit to government revenue. Instead, the President approved a proposal to provide P200 in monthly direct aid or unconditional cash transfers to the most vulnerable sectors.
But while immediate relief for the recent price hikes may not be in sight, and we are not safely out of the woods yet with this pandemic, it is still encouraging to know that we are making progress in rediscovering our old lives. The reopening of businesses, the bustle of city life, and even the traffic are encouraging signs that we are recovering from the two-year pandemic.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Maria Jonas Yap is a senior manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.