NextGen Day

President Rodrigo Duterte has signed a measure lowering the preferential tax rate for proprietary educational institutions from 10% to 1%.

On December 10, 2021, Duterte signed Republic Act (RA) 11635, which amends Section 27 (B) of the National Internal Revenue Code of 1997.

“Hospitals that are nonprofit and proprietary educational institutions shall pay a tax of ten percent on their taxable income, except those covered by Subsection (D) hereof: Provided, that the tax rate herein imposed shall be one percent beginning July 1, 2020, and ending June 30, 2023,” the law stated.

Any private school maintained and administered by private individuals or groups with a permit to operate issued by the Department of Education (DepEd), the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, based on existing laws and regulations, is referred to as a proprietary education institution.

The bill’s author, Albay Rep. Joey Salceda, leader of the House Ways and Means Committee, previously stated that the new law is likely to help private schools hire more teachers and retain existing employees through tax relief.

“It will make it easier for private schools to retain their teachers.” Due to the pandemic, they had to fire instructors already. He stated, “I believe the entire committee feels that we should grant them relief.”

He pointed out that, until 2023, using the reduced 1% preferential rate under RA 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, would save schools an equivalent of 3.43 percent in compensation costs, allowing them to rehire at least 12,996 teachers at the start of the next school year.

On September 27, 2021, the Senate enacted RA 11635 as Senate Bill 2407, and on September 29, 2021, the House adopted it as an amendment to House Bill 9913.

In the meanwhile, Duterte enacted the following laws:

1) RA 11599 – An Act Separating the Sito of Ladol from Barangay Poblacion in the Municipality of Alabel, Province of Sarangani, and establishing Barangay Ladol as a district and independent barangay; 2) RA 11636 – An Act Establishing the Bohol First Congressional District Library in the Municipality of Balilihan, Province of Bohol; 3) RA 11637 – An Act Granting Good

These laws were also signed on December 10, 2021, but they were only made public on Thursday.

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