Special InTAX: January 2022 Issue 1 | Volume 4

Office of the President

On 10 December 2021, Republic Act (RA) No. 11635 or An Act amending Section 27 (B) of the National Internal Revenue Code, as amended, and for other purposes was signed into law by the President.

Section 27 (B) of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:

Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D) hereof:

a)  Provided, that beginning 1 July 2020 until 30 June 2023, the tax rate herein imposed shall be one percent (1%)                                                                                                        

b)  Provided, further, that if the gross income from 'unrelated trade, business or other activity' exceeds fifty percent (50%) of the total gross income derived by such educational institutions or hospitals from all sources, the tax prescribed in Subsection (A) hereof shall be imposed on the entire taxable income.

Moreover, it also provides the following:

a)  the term 'unrelated trade, business or other activity' means any trade, business or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function.

b)  'Proprietary' means a private hospital or 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, in accordance with existing laws and regulations.

Attached is the full text of RA No. 11635 for your reference.

Republic Act No. 11635

(RGM&Co. Note: RA No. 11635 was posted in the Official Gazette on 06 January 2022 and shall take effect on 21 January 2022.)