House passes bill granting tax relief to private schools

FILE PHOTO: Albay Rep. Joey Salceda

MANILA, Philippines — The House of Representatives on Monday approved on final reading a bill that would clarify that the 10-percent preferential income tax rate applies to all proprietary educational institutions, including for-profit schools.

With 203 affirmative votes, zero negative, and no abstention, the lower chamber approved House Bill No. 9913, which seeks to amend the National Internal Revenue Code (NIRC) to define the tax rates of proprietary schools to allow them to avail of the preferential tax rate of 10 percent, which is reduced to 1 percent until June 2023 under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

After 2023, the 1-percent preferential tax rate under CREATE will again be set at 10 percent.

The bill was meant to intervene in the implementation of the recent regulation of the Bureau of Internal Revenue (BIR) increasing the tax rate of proprietary private educational institutions to 25 percent from 10 percent.

The BIR has already suspended the order hiking the said tax rate on private schools following backlash from several lawmakers, who said the increase violates the spirit of CREATE.

Albay Rep. Joey Salceda, one of the principal authors of the measure, pointed out that the reduced 1-percent preferential rate under CREATE until 2023 would allow these schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire at least 12,996 teachers at the start of the next school year.

The bill, he added, will also “absolve the private schools of the legal liability to pay back taxes during the period when the law was unclear as to their treatment.”

“But the aim is also to ensure that the BIR is also absolved from any refund liabilities. It’s a good compromise and was the premise of the agreement between me and the BIR,” Salceda added.