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Private schools ask court to void BIR bid to impose 25% tax

Private schools ask court to void BIR bid to impose 25% tax

PRIVATE SCHOOLS filed a petition with the tax court Monday to halt the implementation of the Bureau of Internal Revenue’s (BIR) Revenue Regulation 5-2021, which bars for profit educational institutions from availing of a 1% tax rate. 

The Philippine Association of Colleges and Universities, the Coordinating Council for Private Educational Associations and 27 Proprietary Educational Institutions, claimed that the BIR mistakenly applied the taxation rule for “non-profits” which only refers to hospitals in the National Internal Revenue Code, as amended by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law. 

The BIR regulation “went beyond the language of Sec. 27 (B) of the Tax Code as amended by the CREATE Law, as the term “non-profit” (covers) only qualified hospitals,” the petitioners’ lawyer Joseph N. Estrada said in a Viber message. 

Mr. Estrada added that “(t)he issuance violates Sec. 4, Article XIV of the 1987 Philippine Constitution, which completely exempts non-stock non-profit schools, and allows preferential treatment, like the lower 10% rate, to Proprietary Educational Institutions.” 

The CREATE law allows eligible companies to avail of reduced corporate income tax rates as a form of economic relief. It reduced the rate for proprietary educational institutions to 1% from 10% for the three years to July 2023. 

However, the BIR issued Revenue Regulation 5-2021 on April 9, claiming that the CREATE law is applicable only to “non-profit” organizations, and that the applicable rate for private schools is 25%. 

On June 3, Senator Juan Edgardo M. Angara filed Senate Bill 2272 to amend Section 27 (B) of the National Internal Revenue Code to remove any ambiguity about its application to private schools. On Tuesday, seven senators signed on as co-sponsors. 

In a letter from Mr. Angara to the Senate Bills and Index Service on Tuesday, he said Senators Ralph G. Recto, Juan Miguel F. Zubiri, Emmanuel Joel J. Villanueva, Maria Lourdes Nancy S. Binay-Angeles, Sherwin T. Gatchalian, Mary Grace Natividad S. Poe-Llamanzares, and Richard J. Gordon Sr. “would like to be made co-authors of (the bill).” 

“At times like these when so many Filipinos are having a hard time due to the pandemic, it is not timely to impose high taxes, particularly to private schools that are currently having a very hard time with the crisis they are facing,” Mr. Angara said in Filipino in a statement Tuesday. 

Mr. Angara added: “The intention of CREATE was to provide tax relief to industries affected by the pandemic and not to place an additional burden on them just like what this BIR issuance has ended up doing to the private educational institutions.” — Bianca Angelica D. Añago

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