Reversion of Rates of Percentage Tax, Minimum Corporate Income Tax, and Regular Corporate Income Tax on Proprietary Educational Institutions and Not for Profit Hospitals

June 20, 2023 REVENUE MEMORANDUM CIRCULAR NO. 69-2023 SUBJECT : Reversion of Rates of Percentage Tax, Minimum Corporate Income Tax, and Regular Corporate Income Tax on Proprietary Educational Institutions and Not for Profit Hospitals, Pursuant to Republic Act No. 11 534, Otherwise Known as the "Corporate Recovery and Tax Incen tives for Enterprises Act" TO : All Internal Revenue Officials, Employees and Others Concerned This Circular is issued to inform the public and all concerned that pursuant to Sections 6, 7 and 13 of Republic Act No. 11534, otherwise known as the "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE), as implemented by Revenue Regulations (RR) Nos. 4-2021, 5-2021 and 8-2021, and as clarified by Revenue Memorandum Circular (RMC) Nos. 65-2021 and 67-2021, effective July 1, 2023 : HTcADC 1. The rate of percentage tax (PT) shall now revert to three percent (3%) of gross quarterly sales or receipts of the taxpayer. This rate applies to corporations, self-employed individuals and professionals whose gross sales or gross receipts are not exceeding the PhP3.0 million threshold, except for cooperatives and self-employed individuals and professionals availing of the eight percent (8%) income tax rate; 2. The rate of minimum corporate income tax (MCIT) for domestic and resident foreign corporations, including offshore banking units and regional operating headquarters, shall now revert to two percent (2%) based on the gross income of such corporations; and 3. The rate of regular corporate income tax (RCIT) for proprietary educational institutions and hospitals which are nonprofit shall now revert to ten percent (10%) of their taxable income. Based on the foregoing, the relevant taxes for taxable year 2023 shall be computed as follows: A. Calendar Year Period MCIT/RCIT/PT Tax Due Gross income/Taxable income/quarterly sales or receipts from January 1, 2023 to June 30, 2023 1% PhPXXX Gross income/Taxable income/quarterly sales or receipts from July 1, 2023 to December 31, 2023 2%/10%/3% PhPXXX Total Tax Due PhPXXX B. Fiscal Year CAIHTE Period MCIT/RCIT/PT Tax Due Gross income/Taxable income/quarterly sales or receipts from X month to June 30, 2023 1% PhPXXX Gross income/Taxable income/quarterly sales or receipts from July 1, 2023 to X month 2%/10%/3% PhPXXX Total Tax Due PhPXXX ILLUSTRATIONS: 1. MCIT (Domestic Corporations/ROHQ/OBUs) A. Calendar Year ABC Corporation, a domestic trading corporation, has gross sales of PhP1,400,000,000.00, with cost of sales of PhP560,000,000.00 and allowable deductions of PhP799,000,000.00 for calendar year 2023. Its total assets of PhP480,000,000.00 includes the land and building in which the business operation is conducted, amounting to PHP100,000,000.00 and PhP125,000,000.00, respectively. Particulars (In PhP) Gross Sales 1,400,000,000.00 Less: Cost of Sales 560,000,000.00 Gross Income 840,000,000.00 Less: Allowable Deductions 799,000,000.00 Taxable Income 41,000,000.00 Tax Due (PhP41,000,000 x 25%) 10,250,000.00 Compare with MCIT: January 1-June 30, 2023 (PhP840,000,000.00/12) x 6 months x 1% 4,200,000.00 July 1-December 31, 2023 (PhP840,000,000/12) x 6 months x 2% 8,400,000.00 Total MCIT 12,600,000.00 Income Tax Payable (Higher between the regular income tax and MCIT) 12,600,000.00 B. Fiscal Year Assuming the same information above, except that ABC Corporation has adopted a fiscal year ending August 31, 2023, the computation of its income tax payable shall be as follows: aScITE Particulars (In PhP) Gross Sales 1,400,000,000.00 Less: Cost of Sales 560,000,000.00 Gross Income 840,000,000.00 Less: Allowable Deductions 799,000,000.00 Taxable Income 41,000,000.00 Tax Due (PhP41,000,000 x 25%) 10,250,000.00 Compare with MCIT: September 1, 2022-June 30, 2023 (PhP840,000,000.00/12) x 10 months x 1% 7,000,000.00 July 1-August 31, 2023 (PhP840,000,000/12) x 2 months x 2% 2,800,000.00 Total MCIT 9,800,000.00 Income Tax Payable (Higher between the regular income tax and MCIT) 10,250,000.00 2. Income Tax for Proprietary Educational Institutions/Hospitals Which are Non-Profit A. Calendar Year R&D Colleges, a proprietary educational institution, has gross income of PhP200,000,000.00, all of which are from related activities, with allowable deductions of PhP160,000,000.00 for the calendar year 2023. Particulars (In PhP) Gross Sales 200,000,000.00 Less: Allowable Deductions 160,000,000.00 Taxable Income 40,000,000.00 January 1-June 30, 2023 (PhP40,000,000.00/12) x 6 months x 1% 200,000.00 July 1-December 31, 2023 (Ph40,000,000/12) x 6 months x 10% 2,000,000.00 Income Tax Payable 2,200,000.00 B. Fiscal Year If R&D Colleges has adopted a fiscal year ending in September 30, 2023, the computation of its income tax shall be as follows: Particulars (In PhP) Gross Sales 200,000,000.00 Less: Allowable Deductions 160,000,000.00 Taxable Income 40,000,000.00 October 1-June 30, 2023 (PhP40,000,000.00/12) x 9 months x 1% 300,000.00 July 1-September 30, 2023 (Ph40,000,000/12) x 3 months x 10% 1,000,000.00 Income Tax Payable 1,300,000.00 All revenue officials concerned are enjoined to give this Circular as wide a publicity as possible. (SGD.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue