COVID-19 pandemic tax cuts expire, original rates back —BIR

The tax relief measures implemented to help businesses cope with the economic impact of the COVID-19 have expired and rates returned to pre-pandemic levels in July, the Bureau of Internal Revenue (BIR) has said.

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, passed into law in March 2021, provided tax cuts for businesses as they struggled during the peak of the pandemic lockdowns in 2020.

Among the tax relief measures is the granting of a 1% percentage tax for non-value added tax (VAT) taxpayers until June 30, 2023.

In an advisory, the BIR said that starting July 1, 2023 those subject to percentage tax under Section 116 of the National Internal Revenue Code (NIRC), as amended, will have to pay the original 3% rate of their gross quarterly sales or receipts.

Under Section 116 of the NIRC, “Any person whose sales or receipts are exempt under Section 109(CC) of this Code from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to 3% of his gross quarterly sales or receipts.”

Non-VAT taxpayers are mandated to file the percentage tax return or BIR Form No. 2551Q and pay the corresponding tax dues within 25 days after the end of each taxable quarter.

Likewise, the CREATE law reduced the minimum corporate income tax (MCIT) to 1% until June 30, 2023.

“Moreover, from July 1, 2023 onwards, the minimum corporate income tax will return to its previous rate of 2%, calculated based on the gross income at the end of the taxable year,” the BIR said.

The MCIT rate applies to domestic corporations or resident foreign corporations when the MCIT exceeds the regular corporate income tax of the company, according to the taxman.

The MCIT is imposed beginning the fourth taxable year immediately following the year in which said corporation begins its business operations, the BIR said.

Meanwhile, the tax for non-profit and proprietary educational institutions and hospitals will also revert to its original 10% rate from 1%, beginning July.

“In addition, non-stock/non-profit schools and hospitals will once again be subject to a preferential tax rate of 10% on their taxable income,” the BIR said.

“However, as previously provided, if the gross income from ‘unrelated trade, business, or other activity’ exceeds 50% of the total gross income generated by the educational institution or hospital from all sources, the tax applicable to domestic corporations will be levied on their entire taxable income,” it said. —NB, GMA Integrated News