Law providing 1% preferential tax relief to private schools inked

THE Chief Executive has signed a law reducing the preferential tax rate of 10 percent to 1 percent imposed on proprietary educational institutions.

President Duterte signed Republic Act (RA) 11635 last month, amending Section 27 (B) of the National Internal Revenue Code of 1997.

“Hospitals which are nonprofit and proprietary educational institutions shall pay a tax of 10 percent on their taxable income, except those covered by Subsection [D] hereof: Provided, that beginning July 1, 2020 until June 30, 2023, the tax rate herein imposed shall be 1 percent,” the law read.

Proprietary education institutions refer to any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education, the Commission on Higher Education or the Technical Education and Skills Development Authority, as the case may be, based on existing laws and regulations.

Representative Joey Salceda of Albay, chair of the Lower House’s Ways and Means Committee who authored the bill, earlier said the new law is expected to aid private schools in hiring more teachers and keeping existing staff through tax relief.

“It will help private schools keep their teachers. They already had to fire [some] due to the pandemic. I think the whole committee agrees we should provide them relief,” Salceda explained.

He noted that applying the reduced 1-percent preferential rate under RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises, known as CREATE Act, until 2023 would allow schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire some 13,000 teachers at the start of the next school year.

RA 11635 was passed as Senate Bill 2407 on September 27, 2021, and adopted by Congress as an amendment to House Bill 9913 two days later.