Senate OKs bill granting private schools 1% preferential tax relief

The Senate has approved on third and final reading the measure that seeks to clarify that all private schools –both non-profit and for profit—are entitled to the one percent preferential tax rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.

Senator Pia Cayetano, chairperson of the Senate Ways and Means Committee, welcomed the passage of Senate Bill No. 2407 as this would put to rest any questions and concerns regarding this provision in the CREATE law which was enacted last March.

Cayetano acknowledged that private school institutions are the government's “partners in delivering quality education for the youth, and in molding them to become changemakers and responsible leaders of the future.”

“This partnership is even more crucial today as our nation struggles with COVID-19, which has disrupted educational systems and the formal learning of our current generation of students,” Cayetano added.

Following the passage of CREATE on March 26, 2021, proprietary educational institutions groaned on the “ill-timed” regulation released by the Bureau of Internal Revenue (BIR) which specifically stated that only ‘non-profit’ proprietary educational institutions can avail of the said preferential tax rate under CREATE, as the agency based its policy on previous Supreme Court rulings.

This prompted lawmakers both from the Senate and the House of Representatives to appeal to the BIR to withhold the implementation of the specific tax provision to provide some leeway to private schools who are in a critical state since the start of the COVID-19 pandemic.

Sen. Sonny Angara, chairman of the Senate Finance Committee, filed Senate Bill No. 2272, to clarify the issue. Senators also asked the Department of Finance (DOF) to suspend implementation of BIR’s RR 5-2021 to avert its impending ill-effects on “for-profit” private schools.

The BIR then issued RR 14-2021, which suspended the inclusion of “for-profit” private schools in the regime of regular income tax.

Cayetano said that it is important to give the public a fair and full picture of the circumstances that led Angara to file the measure which was substituted by SBN 2407 under her committee report.

This measure, she said, will eventually help the Philippines keep track with its goal to ensure quality education, which is part of the government's commitments to the Sustainable Development Goals (SDGs), particularly SDG 4.

“This is the power of dialogue at work, involving all stakeholders,” Cayetano said.