The Department of Finance (DOF) has suspended the Bureau of Internal Revenue’s (BIR) ruling barring for-profit educational institutions from availing of a reduced income tax rate.
Based on Revenue Regulations No. 14-2021 signed by Finance Secretary Carlos G. Dominguez III, the BIR has suspended the implementation of “certain provisions” of Revenue Regulations No. 5-2021 dated last April 8.
The document, dated July 26, 2021 but was signed by Dominguez on July 27, 2021, stated that the deferral was aimed at easing the burden of taxation among proprietary educational institutions, especially during the time of COVID-19 pandemic.
The DOF also noted the pending bills in Congress clarifying the provisions under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law regarding taxation on for-profit educational institutions.
“The following provisions of Revenue Regulations (RR) No. 5-2021 dated 8 April 2021 are hereby suspended pending passage of such appropriate legislation,” the newly-signed RR read.
Also suspended was “(i) Section 2 (C), on the definition of Proprietary Educational Institutions, insofar as in includes therein the phrase, ‘which are non-profit’,” the document said.
Moreover, “Section 2 (3), on the definition of Non-Profit, insofar as it applies to ‘Proprietary Educational Institutions’,” was also suspended.
Lastly, the DOF barred the implementation of “Section 3 (B), which provides illustration on the tax treatment of Proprietary Educational Institutions that are non-profit.”
“All other revenue issuances inconsistent herewith are hereby modified or amended according,” Dominguez said. “This Regulations shall take effect immediately.”
Earlier, the Coordinating Council for Private Educational Associations (COCOPEA), a group of private schools, appealed to rectify RR 5-2021.
COCOPEA said the BIR regulations will cause “irreparable damage” to private education institutions as the bureau will more than double their existing tax rate.
“The erroneous provision of RR 5-2021 will add a heavy additional burden to the many stakeholders of the private education sector, at a time when we are already fighting for our survival,” the group said.
“Our sector has not yet recovered from the debilitating effects of the K-12 Law, and is in the midst of struggling with the steep drop in enrollment caused by the pandemic. RR 5-2021 will be the straw that breaks the camel’s back,” it added.###