Senator Win Gatchalian hailed the signing of a law that would grant tax relief to private schools, a move that the lawmaker said would help them stay afloat amid the devastating effects of the COVID-19 pandemic.
Republic Act No. 11635, which President Rodrigo Duterte signed into law on December 10, 2021, further amends Section 27 (B) of the National Internal Revenue Code of 1997, as amended, to reduce the preferential tax rate of 10% to 1% imposed on proprietary educational institutions.
While the law provides that proprietary educational institutions shall pay a 10% tax on their taxable income, the 1% tax rate shall be imposed between July 1, 2020 until June 30, 2023.
The law defines proprietary educational institutions as any private school maintained and administered by private individuals or groups and with an issued permit to operate from the Department of Education (DepEd), the Commission on Higher Education (CHED), and the Technical Education and Skills Development Authority (TESDA).
According to Gatchalian, the signing of the law clarifies and reinforces the intention of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) to provide relief to private schools. It can be recalled, however, that the Bureau of Internal Revenue (BIR) came up with Revenue Regulation No. 5 which said that an educational institution can avail of the lower tax rate if it is proprietary and non-profit. For schools that do not meet the category, a 25% rate would be imposed, an equivalent of a 150% increase.
The heavier burden could result in more schools suspending operations or closing down, more job losses, and more learners losing access to quality education. Data from the Department of Education (DepEd) showed that because of the pandemic, enrollment in private schools declined by 929,000; about 643,000 students transferred to the public education system; while 452 private schools suspended their operations or closed down.
“Dahil sa matinding pinsalang dulot ng pandemya sa ating mga pribadong paaralan, higit nilang kinakailangan ang lahat ng uri ng suporta mula sa ating pamahalaan. Kaya naman napapanahon ang batas na magbabawas sa kanilang buwis hanggang sa taong 2023 upang tulungan silang makabangon at maipagpatuloy ang paghahatid ng dekalidad na edukasyon,” said Gatchalian, chairman of the Senate Committee on Basic Education, Arts and Culture.
Gatchalian, one of the co-authors and co-sponsors of the law, also thanked Senator Sonny Angara, the law’s principal author, and Senator Pia Cayetano who sponsored the law.