Some non-profit hospitals, schools may have to pay 25% income tax, says BIR

Private schools and nonProStayHospitals may have to pay 25% regular corporate in ৷Tax comes when their total income Exceeded 50% of total revenue from unrelated business activities, the Bureau of Internal Revenue (BIR) said.

BIR sets out effective rules and regulations for Revenue Regulation No. 3-2022 Republic Act No. 11635, which amended the National Internal Revenue Code to clarify income tax rates for private schools and non-profit hospitals. The regulation was signed on April 6 and published in a newspaper on Monday.

Under the BIR rules, aprStayt 10% preferential corporate income tax rate will be levied on hospitals and private schools after June 30, 2023.

Also covered by the rules is nonstop, nonproStayt Educational institutions whose net income or wealth gainStayta member or specialStayC person.

Due to the Corporate Recovery and Tax Incentives for Enterprise (CREATE) Act, these companies are currently subject to a 1% corporate income tax rate from July 1, 2020 to June 30, 2023.

However, the BIR rules state that 25% corporate income tax will be levied on the full taxable income of private schools and non-profit hospitals if the total income from their unrelated trade, business or other activities exceeds 50% of the total income of all. Formula

The BIR states that unrelated trade and business means any activity that is not “significantly related to the primary purpose of such educational institution or hospital or the practice or performance of work.”

For other nonstock and nonproStayIn educational institutions, a 25% regular corporate income tax will be levied on its revenue or assets which are not used for educational purposes only.

The rules of the BIR state, “AproStayt “means all the net income or assets of the organization and all its activities are managed in order not to create proStayts

However, it made it clear that non-profit organizations would not be barred from paying transportation allowances and other compensation to attend meetings of the Board of Trustees, officers and employees.

“(It) will not be unnecessarily treated as a personal insurance that denies the organization its status as a non-profit,” the BIR said, adding that these would be subject to fair compensation or termination.

BIR said it would review such costs on a case-by-case basis.

The Coordinating Council of Private Educational Associations, which represents more than 2,500 private educational institutions, including more than 300,000 school staff, has previously said the new law will help the education sector “avoid additional taxes and collapse” as the epidemic continues.

As of September 2021, enrollment in private schools was 1.4 million, down 57% from a year earlier and only 66% of the 4.3 million seen in 2019, according to the Department of Education’s Learning Enrollment Survey Quick Count data. – Tobias Jared Thomas