MANILA – The Bureau of Internal Revenue (BIR) has suspended the implementation of its regulation which could have increased the income tax for non-profit educational institutions pending legislation concerning the tax treatment of proprietary private schools.
The development was confirmed to GMA News Online by Finance secretary Carlos Dominguez III.
Based on Revenue Regulations (RR) No. 14-2021, signed by Dominguez and recommended for approval by Internal Revenue Commissioner Caesar Dulay, the BIR suspended certain provisions of Revenue Regulations No. 5-2021 dated April 8.
It was aimed to “ease the burden of taxation among proprietary educational institutions, especially
during this time of COVID-19 pandemic…,” the RR 14-2021 read.
The latest BIR issuance also took into consideration the pending bills in Congress seeking to amend Section 27 (B) of the National Internal Revenue Code of 1997, as amended.
The revenue regulation suspended section two (C) of RR 5-2021, particularly, the definition of proprietary educational institution, “insofar as it includes therein the phrase, ‘which are non-profit’.”
It also suspended Section 2 (E) of the regulation in question, particularly, on the definition of “nonprofit.”
The latest BIR issuance, likewise, suspended Section 3 (B) of RR 5-2021, which provides illustrations on the tax treatment of non-profit proprietary educational institutions.
The Coordinating Council of Private Educational Associations (COCOPEA) earlier sought to rectify the “onerous” BIR RR 5-2021, which it claimed excludes private educational institutions from availing of a preferential income tax rate and the concessionary tax rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.
The group also warned that the measures will affect stakeholders – students, parents, faculty, and other school workers, alumni, and small enterprises dependent on school operations.
According to COCOPEA, the measure could bring about “destructive consequences” such as the closure of more schools.
With the suspension of certain provisions of RR 5-2021, non-profit educational institutions will continue to enjoy the preferential tax rate of one percent, pursuant to CREATE law for three years, before it will revert to 10 percent.
The new revenue regulation dated July 26 “shall take effect immediately.”(GMA News)
