GREP RESSS

EIGHTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES
Second Regular Session
HOUSE OF REPRESENTATIVES
Introduced by Representative Rufus B. Rodriguez
House Bill No. 9577,

EXPLANATORY NOTE

‘Section 27 (B) of the National Internal Revenue Code of the Philippines, as amended
Provides:

(B) Proprietary Educational Institutions and Hospitals. —

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: Provided, That beginning July 1, 2020
until June 30, 2023, the tax rate herein imposed shall be one percent (1%):
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. For purposes of this Subsection, 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.
‘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.

Unfortunately, confusion arose from the above provision of law as to whether an
educational institution should both be proprietary and nonprofit in order to qualify for the
preferential tax rate. Jurisprudence and the Bureau of Internal Revenue itself has added to
the confusion with their rulings and regulations.

It would be impossible for an educational institution to be both propriety and non profit
at the same time.

To address the situation, Sec 27 (B) of the NIRC should be amended to clarify that the
preferential tax rate shall apply to proprietary educational institutions and to nonprofit
hospitals.

In view of the foregoing, immediate approval of this measure is earnestly requested.

RUFYS B. jUEZ


EIGHTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES )
Second Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

No. 9577

AN ACT
AMENDING SECTION 27 (B) OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, AND FOR OTHER PURPOSES

House

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
Assembled:

SECTION I. Section 27 (B) of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

(B) [Proprietary Educational Institutions and Hospitals. - Proprietary educational
institutions and hospitals which are nonprofit] HOSPITALS WHICH ARE
NONPROFIT AND ALL PROPRIETARY EDUCATIONAL INSTITUTIONS shall
pay a tax of ten percent (10%) on their taxable income except those covered by
Subsection (D) hereof: Provided, That beginning July 1, 2020 until June 30,
2023, the tax rate herein imposed shall be one percent (1%): 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. For purposes of this
‘Subsection, 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. ‘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.

Sec. 2. Implementing Rules and Regulations. — The Department of Finance shall promulgate
the necessary rules and regulations for the effective implementation of the provisions of this
Act.

Sec. 3. Separability Clause. — If any portion or provision of this Act is subsequently declared
invalid or unconstitutional, other provisions hereof which are not affected thereby shall remain
in full force and effect.

Sec. 4. Repealing Clause. Alll laws, decrees, orders, rules and regulations and other issuances
or parts thereof, which are inconsistent with this Act, are hereby repealed or modified
accordingly

Sec. 5. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the Official
Gazette or in at least two (2) national newspapers of general circulation.
‘Approved,