COCOPEA says new BIR circular did not ‘rectify’ 150% tax hike policy vs private schools

Published June 22, 2021, 7:12 PM

by Merlina Hernando-Malipot

The new tax hike policy Bureau of Internal Revenue (BIR) continues to threaten the private educational system, the Coordinating Council of Private Educational Associations (COCOPEA) on Tuesday, June 22, said.


In a statement, COCOPEA said that the Revenue Memorandum Circular (RMC) 76-2021 released by the BIR dated June 11, 2021, “merely clarifies the illustrative example computations” in the controversial Revenue Regulations No. 5-2021.

COCOPEA added that the new BIR circular “does not rectify the onerous 150% tax hike policy” which threatens the survival of private schools.

“Aside from correction of mathematical computations in the examples, there is no change whatsoever in the BIR’s current tax policy, which imposes a 25 percent tax on proprietary educational institutions, in contravention of the CREATE Law,” COCOPEA said.

COCOPEA noted that the RR 5-2021 “remains prejudicial to proprietary educational institutions” as the definition of proprietary educational institutions being non-profit remained unchanged pursuant to BIR’s interpretation.

Additionally, COCOPEA noted that there was nothing in the RMC 76 that “clarifies or changes the position” of the BIR in its letter dated June 2, 2021, which claims that proprietary educational institutions have never been intended by the Constitution, the National Internal Revenue Code and any other law to be entitled to a preferential income tax rate, including the concessionary tax rate under the CREATE Act.

(Photo from COCOPEA/FB)

COCOPEA maintained that unless there is an official clarification from the BIR that removes the “non-profit” qualification in RR 5 – 2021 for proprietary educational institutions to enjoy the preferential tax rate of 10% under Section 27 (B) of the Tax Code which is further lowered to 1% under the CREATE Act, “we do not see any change at all in the existing tax policy that we are appealing to be corrected.”

The Council added that with the issuance of RMC 76-2021, it shows that the BIR “can issue a clarificatory or corrective memorandum anytime.”

This, COCOPEA said, gives the private schools hope that the next clarification would be a substantial one that disposes the contentious issues on RR 5-2021, particularly the “non-profit” qualification which mistakenly bars stock for-profit schools from the lowered tax rate under the CREATE Act, as intended by CREATE’s authors.

COCOPEA said that it continues to exhaust all administrative, legislative and judicial remedies to correct and stop the implementation of RR 5-2021 on behalf of their member institutions affected.

More importantly, COCOPEA expressed hope that this will be rectified soon for its stakeholders – students, parents, faculty and other school workers, alumni and small enterprises dependent on school operations – so they can be spared from the “destructive consequences of RR 5-2021 including the closure of more schools.”