Deputy Speaker and Cagayan de Oro City Rep. Rufus Rodriguez on Friday, June 18 lauded the Bureau of Internal Revenue (BIR) for addressing the controversy over the imposition of a 25-percent tax on proprietary educational institutions.
BIR Commissioner Caesar Dulay clarified the issue when he issued Revenue Memorandum Circular (RMC) No. 76-2021 which had been the subject of protest from Congress and the affected universities and colleges.
RMC No. 76-2021 corrected RMC 5-2021 the provided the implementing rules of the newly-enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.
“We thank Commissioner Caesar Dulay for recognizing the error early and for rectifying it in Revenue Memorandum Circular (RMC) No. 76-2021 issued Friday last week,” said Rodriguez upon learning of the correction made by the BIR chief.
RMC No. 76-2021 referred to the implementation of CREATE which Rodriguez said was not intended to impose higher tax on schools.
An earlier version of the revenue memorandum circular, RMC 5-2021, reportedly provided for increased taxes on educational institution.
“The prompt correction by Commissioner Dulay will prevent the closure of more colleges and universities and other educational institutions, which are already suffering from lower enrollment and financial difficulties due to the Covid-19 pandemic,” he said.
"It would also stave off an increase in tuition and other school fees arising from a higher tax," he added.
CREATE, Rodriguez said, sought to clarify that the preferential tax rate of 10 percent applies to proprietary educational institutions and non-profit hospitals “by amending the first sentence of Section 27 (B) of the NIRC.
In his new issuance, Dulay corrected the tax rates that were “inadvertently written” in the “illustrative examples” he made in his April circular on how to compute income tax of affected corporations.
He said in the case of a proprietary educational institution with net taxable income of P10 million, the “correct amount” of tax should be P100,000 or one percent, instead of P1 million.
Dulay’s new circular states that the one-percent tax rate for schools “shall be imposed only for the period July 1, 2020 until June 30, 2023,” after which the rate “shall revert to 10 percent” beginning July 1, 2023.