BIR commended for correcting error

June 21, 2021 Ryan Ponce Pacpaco 652 views

DEPUTY Speaker and Cagayan de Oro City Rep. Rufus Rodriguez has commended the Bureau of Internal Revenue (BIR) for correcting itself on the imposition of a 25-percent tax on proprietary educational institutions.

“We thank Commissioner Caesar Dulay for recognizing the error early and for rectifying it in Revenue Memorandum Circular (RMC) No. 76-2021 issued Friday last week,” Rodriguez said.

Rodriguez said Congress did not intend to impose a higher tax on schools under the corporate tax reform law it recently passed.

“The prompt correction by Commissioner Dulay will prevent the closure of more colleges and universities and other educational institutions, which are already suffering from lower enrollment and financial difficulties due to the Covid-19 pandemic,” Rodriguez said.

It would also stave off an increase in tuition and other school fees arising from a higher tax, he added.

Rodriguez has filed Houae Bill (HB) No. 9577 to clarify school taxation under the newly enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, which President Duterte signed last March 26.

“This bill seeks to make it clear that the preferential tax rate of 10 percent (reduced to one percent from July 1, 2020 to June 30, 2023), applies to proprietary educational institutions, as well as non-profit hospitals, by amending the first sentence of Section 27 (B) of the NIRC,” he said.

RMC No. 76-2021 amends RMC 5-2021, issued last April 8, which implements the CREATE Law.

In his new issuance, Dulay corrected the tax rates that were “inadvertently written” in the “illustrative examples” he made in his April circular on how to compute income tax of affected corporations.

He said in the case of a proprietary educational institution with net taxable income of P10 million, the “correct amount” of tax should be P100,000 or one percent, instead of P1 million.

Dulay’s new circular states that the one-percent tax rate for schools “shall be imposed only for the period July 1, 2020 until June 30, 2023,” after which the rate “shall revert to 10 percent” beginning July 1, 2023.