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

PRIVATE SCHOOLS and notproIft hospitals may have to pay the 25%are taxed if their gross income from unrelated business activities exceeds 50% of total income, the Bureau of Internal Revenue (BIR) said.

BIR Revenue Regulation No. 3-2022 establishes the implementing rules and regulations for Republic Act No. 11635 which amended the State Tax Code to clarify the private school income tax rate and non-profit hospitals. The settlement was signed on April 7 and published in a newspaper on Monday.

Under BIR rules, not proIft Hospitals and private schools will be charged a preferential corporate tax rate of 10% after June 30, 2023.

Are also covered by the non-stock, non-pro rulesIft educational institutions whose net income or assetsIfa member or speciIfit’s nobody.

These institutions are currently taxed at a corporate income tax rate of 1% from July 1, 2020 to June 30, 2023 due to the Business Recovery and Business Tax Incentive Act (CREATE).

However, BIR rules stated that the 25% corporation tax would be imposed on all taxable income of private schools and non-profit hospitals if their gross income from a trade, business or other unrelated activity exceeds 50% of total gross income from all sources.

The BIR said unrelated trade and business means any activity that “is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function.”

For others non stock and non proIfIn educational institutions, a regular corporate income tax of 25% will be imposed on its income or assets that are not used exclusively for educational purposes.

BIR rules said “no proIft” means that all net income or assets of the institution and all its activities are conducted so as not to generate proIfts.

However, he clarified that non-profit institutions will not be prohibited from providing transportation allowances to attend meetings and other compensation to the institution’s board of directors, officers and employees.

“(This) will not necessarily be considered a private contribution that would nullify the status of non-profit institutions,” the BIR said, adding that they will be subject to appropriate repayment or liquidation.

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

The Coordinating Council of Private Educational Associations, which represents more than 2,500 private education institutions with more than 300,000 school staff, has previously said the new law would help “save” the education sector from ” excessive taxes and collapse” as the pandemic continues.

In September 2021, private school enrollment was 1.4 million, down 57% from the previous year, and just 66% from the 4.3 million seen in 2019, according to fast count data. of the Department of Education’s Apprenticeship Enrollment Survey. — Tobias Jared Tomas

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