RR No. 3-2022: Implements the provisions of RA No. 11635, titled “An Act Amending Section 27 (B) of the National Internal Revenue Code of 1997, as Amended, and for Other Purposes” on the income taxation of proprietary educational institutions and hospitals which are non-profit

Summary

RR No. 3-2022 implements RA No. 11635, which amends Section 27(B) of the NIRC, on the income taxation of proprietary educational institutions and non-profit hospitals.

Key points

1. Institutions covered. The preferential ten percent (10%) Corporate Income Tax rate covers proprietary educational institutions, hospitals which are non-profit, and non-stock, non-profit educational institutions whose net income or assets inure to the benefit of any member or specific person.
2. Temporary one percent rate. From July 1, 2020 until June 30, 2023, the rate of one percent (1%) under Section 27(B) applies. After June 30, 2023, the rate reverts to 10%.
3. Loss of preferential rate. The twenty-five percent (25%) regular Corporate Income Tax under Section 27(A) applies to the entire taxable income of these institutions if gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of their total gross income from all sources.
4. Other non-stock, non-profit schools. A non-stock, non-profit educational institution outside the covered group pays the 25% regular rate on the portion of its revenues or assets not used actually, directly and exclusively for educational purposes.

Who is affected

• Proprietary educational institutions
• Non-profit hospitals
• Non-stock, non-profit educational institutions

Deadlines and effectivity

• July 1, 2020 until June 30, 2023: 1% rate
• After June 30, 2023: rate reverts to 10%

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.