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BIR suspends implementation of higher tax on private schools
By TED CORDERO,GMA NewsThe 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 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.
The suspension of the RR 5-2021 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.
“[T]o finally clarify the income taxation of schools, the implementation of the following provisions of RR 5-2021 dated 8 April 2021 are hereby suspended pending passage of such appropriate legislation…,” the RR 14-2021 read.
The revenue regulation suspended Section 2 (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 “non-profit.”
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
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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 1%, pursuant to CREATE law for three years, before it will revert to 10%.
“All other revenue issuances inconsistent herewith are hereby modified or amended accordingly,” the RR 14-2021 read.
The new revenue regulation dated July 26 “shall take effect immediately.”
Senate President Pro Tempore Ralph Recto, Senators Sonny Angara and Joel Villanueva issued separate statements while they underscore the need for a permanent respite from Congress.
Angara thanked Finance Secretary Carlos Dominguez III and BIR Commissioner Caesar Dulay for “heeding” the clamor of the private educational institutions.
“This is what I call a taxation timeout. Now, the ball is on the court of Congress to permanently fix the confusion caused by the language of that law,” Angara said.
To recall, it was Angara who first filed the bill in the Senate to correct BIR’S “erroneous” interpretation of the tax imposed on proprietary educational institutions stipulated under Revenue Regulation No. 5-2021 issued on April 8, 2021. —with Hana Bordey/NB, GMA News