Philippines is a largely educated population and the best English speaking country, as we claim it! Do you subscribe to this the way we do?
Do not get us wrong and we do not intend to argue on that point. We subscribe to that anyway because as a matter of policy, primary and secondary education is mandatory and English is taught all throughout until college. Nevertheless, this article would tend to share the different broad classifications of educational institutions in the Philippines preparatory towards better appreciation of the applicable tax rules.
For tax tax purposes, educational institutions are distinguished from one another based on the nature of its structure or the charter that creates the same. Here are the broad classifications:
Proprietary educational institution
Proprietary educational institution is one registered with the Securities and Exchange Commission (SEC) as a private stock corporation to engage in maintaining and administering a school – pre-school, kindergarten, primary, secondary, tertiary or college, pst-graduate studies, technical and vocational education. It is a profitable venture of a private school governed by a Board of Directors, owned by stockholders, and which issued dividends based on the results of its operations. It operates like any other domestic stock corporation in the Philippines except that it has to strictly adhere to the rules and regulations applicable to educational institutions based on the permit to operate duly issued by Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education Skills Development Authority (TESDA).
Non-stock, non-profit educational institution
Non-stock non-profit educational institution is one registered with the Securities and Exchange Commission (SEC) as a non-stock corporation to engage in maintaining and administering a school – pre-school, kindergarten, primary, secondary, tertiary or college, pst-graduate studies, technical and vocational education based on the permit to operate duly issued by DepEd, CHED, TESDA. This is not operated for profit so the governing body is Board of Trustees, the owners are members, and that no dividends are issued. In short, no income shall inure to the benefit of its members, directors and officers, though, they could be provided reasonable per diems and salaries for acting as employees.
Government educational institution
Finally, government educational institution is one created by the legislative body – the Congress of the Philippines pursuant to a particular law for the purpose. The specific law or legislation itself would provide for its structure, management, operations, funding, and other matters. State colleges and universities falls under this and hereunder are some examples.
In short, the above two educational institutions are private corporations formed by private individuals. To determine its classification is to simply look at how the school or educational institution is constituted. Private and non-stock, non profit educational institutions are required to be issued permit to operate from the Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations. Registering such private educational institutions and non-stock, non-profit educational institutions with the Securities and Exchange Commission would require an endorsement with DepEd, CHED, and/or TESDA, whichever is applicable.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at email@example.com.)
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