Tag: CREATE

Pia: Bill clarifies private schools’ tax rates under CREATE

Senator Pia S. Cayetano welcomed the passage of Senate Bill No. (SBN) 2407 on third and final reading on Monday (September 27), saying that the measure will clarify that all private schools – both ‘non-profit’ and ‘for profit’ – are entitled to the 1 percent preferential tax rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which was enacted last March.

The Senate Ways and Means Committee Chair and sponsor of SBN 2407, Cayetano acknowledged private school institutions as 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.

She noted that many private schools are in a critical state, citing data from the Coordinating Council of Private Educational Associations of the Philippines (COCOPEA) showing that enrollment among its member-schools has declined to 60 percent this school year, compared to 2020.

It may be recalled that in her sponsorship speech, Cayetano recounted the circumstances that led to the filing and approval of the tax relief measure:

•The passage of CREATE (RA 11534) on March 26, 2021, brought reprieve to proprietary educational institutions by lowering their 10% preferential tax rate to 1% for a period of 3 years, specifically from July 1, 2020 until June 30, 2023.

•On April 8, 2021,  the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. (RR) 5-2021, which specifically stated that only ‘non-profit’ proprietary educational institutions can avail of the preferential tax rate under CREATE – basing its policy on previous Supreme Court rulings.

•This then prompted the filing of SBN 2272 by Senator Sonny Angara, which sought to clarify the issue. In the hearing held by the ways and means panel on June 30, 2021, senators 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.

•In response, DOF, through a letter to the Senate dated July 21, 2021, gave its commitment to issue the appropriate revenue regulations suspending the relevant provisions of BIR’s RR 5-2021.

•As a result, the BIR 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 to the filing of Sen. Angara’s SBN 2272, which was substituted by SBN 2407 under her committee report.

She concluded by saying that SBN 2407 will 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,” said Cayetano, who also chairs the Senate Committee on the SDGs, Innovation, and Futures Thinking.#

Senate session hall
Senator Pia Cayetano: SBN 2407 will clarify that all private schools are entitled to the 1 % preferential tax rate under CREATE

Sponsorship of the bill clarifying the tax rate for all private schools

By Senator Pia S. Cayetano
Chairperson, Committee on Ways and Means

Mr. President, distinguished colleagues, today, I rise to sponsor and seek your support for the passage of Senate Bill No. 2407, under Committee Report No. 311, which amends Section 27(B) of the National Internal Revenue Code.

Not long ago, this chamber passed the CREATE Act, a measure that serves as our fulfillment to the overdue reforms in the country’s corporate income tax and fiscal incentives system.

In particular, CREATE provided reprieve to proprietary educational institutions in the country by lowering their 10% preferential tax rate to 1% for a period of 3 years, specifically from July 1, 2020 until June 30, 2023.

This was made in keeping with our desire to provide support for our education sector, which has been severely burdened by the disruptions caused by the pandemic. This sector continues to need as much assistance and resources as it can get in order to continue delivering quality education to Filipino learners.

Meanwhile, on 8 April 2021,  the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. 5-2021, which specifically stated that only non-profit proprietary educational institutions can avail of the preferential tax rate under CREATE, basing this on  Supreme Court decisions.

This then prompted the filing of Senate Bill No. 2272 by Senator Sonny Angara, which sought to clarify the issue. During our hearing held on June 30, 2021,  my fellow legislators and I asked the DOF to suspend the implementation of the BIR Revenue Regulation in order to avoid its impending ill effects on the “for profit” private schools.

In response, the DOF, through its letter to the Senate dated 21 July 2021, gave its commitment that in order to ease the burden of taxation among proprietary educational institutions, they shall issue the appropriate revenue regulations suspending the relevant provisions of BIR’s Revenue Regulation No. 5-2021.

As a result, the Bureau issued Revenue Regulation No. 14-2021, which suspended the inclusion of “for-profit” private schools in the regime of regular income tax.

So this Committee Report effectively clarifies that the preferential tax rate of 10% under the NIRC, which was lowered by the CREATE Act to 1% from July 1, 2020 until June 30, 2023, applies to all private schools – putting an end to the debates as to whether  “for-profit” private schools were covered or not.

Private schools are the government’s partners in education. This partnership is even more crucial today, as our nation deals with the COVID-19 pandemic, which has disrupted our educational systems and the formal learning of our current generation of students.

Thank you Mr. President. #