Republic Act No. 11635: Proprietary educational institutions are subject to 10% preferential income tax rate (1% from July 1, 2020 to June 30, 2023)

Republic Act No. 11635: Proprietary educational institutions are subject to 10% preferential income tax rate (1% from July 1, 2020 to June 30, 2023)

(Signed on December 10, 2021)

This Tax Alert is issued to inform all concerned on the amendment in National Internal Revenue Code relative to the income tax rate applicable to proprietary educational institutions.

Qualified proprietary educational institutions are subject to a tax of 10% on their taxable income, provided, that from July 1, 2020 until June 30, 2023, the tax rate imposed shall be 1%.

Proprietary educational institutions refer to any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education (DepEd) or 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.

Proprietary educational institutions whose gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross income derived by such educational institutions from all sources, shall be subject to regular income tax rate.