January 6th, 2022
President Duterte has signed Republic Act No. 11635, or the Proprietary Educational Institutions Tax Act, which clarifies that tax regime for private schools and allows them to avail of the tax discount under the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act, which sets their tax rate to 1% until June 2023. House Ways and Means Chair Joey Sarte Salceda is the principal author of both the CREATE Law and RA 11635.
The measure will apply the preferential tax rate of 10% on taxable income prospectively and allow proprietary schools to avail of the 1% tax rate under Republic Act No. 11534.
“It’s a 90% tax discount under CREATE Law. That’s the biggest tax cut this country has given to any sector in recent history.”
“I thank President Duterte for his assent to this initiative of the House Ways and Means Committee. The President has been supportive of this reform, as has the Department of Finance and the Bureau of Internal Revenue. I thank Secretary Dominguez and Commissioner Dulay for working with the Committee on this measure,” Salceda said.
“The committee’s relationship with the tax authorities is very strong and close. The next step, obviously, is to get the regulations out very quickly. This is a simple and straightforward measure,” Salceda said.
Salceda also said that the measure will help private schools hire more teachers.
“Applying the CREATE until 2023 would allow these schools to save an equivalent of 3.43 percent of compensation expenses, which could help them rehire at least 12,996 teachers at the start of the next school year,” he said.
“This reform thus gives a direct financial assistance to private schools teachers, whom unfortunately we were not able to extend direct financial assistance to during the COVID-19 pandemic,” Salceda said.
“I also hope that private schools that did not shed employment will instead translate the reduced tax rate into lower tuition fees for students whose families are also struggling,” Salceda added.
Salceda said that his Committee will request the BIR to expedite revenue regulations and ensure that “the measure also expunges any liability private schools may have had when the tax treatment was not yet clear, but within the coverage of this reform.”
“The law settles uncertainty in the tax regime for private schools. It ends the confusion, and hopefully allows private schools to move forward and provide better services to students and better terms to their hired teachers.” (end)
