Empowering education through tax: Highlights of RR 13-2025

Education stands as one of the pillars of our nation, shaping individuals to become vital contributors to society – artists, educators, designers, lawyers, accountants and more. It is therefore essential that the state devote critical attention to the education system’s development for the benefit of future generations.

To reinforce this commitment, the Philippine government enacted Republic Act 8525, or the Adopt-a-School Act of 1998, encouraging private entities to support public education through contributions, in exchange for tax incentives and exemptions. Over time, the Bureau of Internal Revenue (BIR) released several implementing rules, the latest of which is Revenue Regulations (RR) 13-2025. This consolidates the provisions of RA 8525, RA 12063 (Enterprise-Based Education and Training or EBET Framework Act), and prior regulations to streamline procedures for availing of tax privileges.

RR 13-2025 grants incentives to qualified taxpayers, such as registered export and domestic enterprises, private entities and Technical-Vocational Institutions (TVIs), as determined upon application.

Registered export and domestic enterprises

In addition to the 50 percent additional deduction on labor expenses excluding salaries, wages, benefits and other personnel costs incurred for administrative, indirect labor and support services, these entities are entitled to a 100 percent additional deduction on qualified training expenses. This additional deduction must be supported by a certification from DepEd, CHED or TESDA, along with a sworn declaration issued by the applicant’s authorized officer as to the amount of expenses being deducted.

Adopting private entities

This refers to individuals engaged in business or practice of profession or other private business organizations which enter into an agreement e.g., Memorandum of Agreement or Deed of Donation, with public schools for provision of assistance which could be in the form of infrastructure, teaching and skills development, learning support, computer and science laboratories, or food and nutrition.

Adopting private entities may deduct the actual, direct and exclusive contribution costs from gross income within the same taxable year, provided that no private stockholder or individual is benefited in an amount of more than 10 percent in the case of an individual, and five percent in the case of a corporation, of the taxpayer’s taxable income derived from trade, business or profession. These entities are also exempt from donor’s tax on contributions made locally or internationally. In cases of local donations considered as “transaction deemed sale” of goods originally intended for sale, VAT applies and the Adopting Private Entity may claim input VAT, subject to applicable rules on the allocation among taxable, zero-rated and exempt sales. The donee-public school, as the end user, cannot claim input VAT. If the local donation does not qualify as a “transaction deemed sale,” the transfer to the public school remains exempt from VAT.

For foreign donations, VAT and excise tax on imports will be assumed by DepEd, CHED or TESDA, unless the items are VAT-exempt under Section 109 of the Tax Code, as amended. Availing oneself of these exemptions requires the submission of duly notarized Memorandum of Agreement and Deed of Donation (certified true copy), a sworn declaration linking the expenses to the program, and a list of undertaken projects detailing how the donations were utilized.

TVIs under RA 12063

TVIs implementing a registered EBET framework under RA No. 12063 are entitled to various tax exemptions and incentives. They may claim an additional deduction from taxable income equivalent to 50 percent of actual training expenses incurred from the law’s effectivity on Nov. 22, 2024. This rate will increase to 75 percent of actual training expenses starting Jan. 1, 2028 but is capped at five percent of the TVI’s total direct labor expenses or P25 million annually, whichever is lower. To avail oneself of this incentive, TVIs must secure TESDA certification and submit a sworn declaration issued by a TVI officer confirming the expenses being claimed and the institution’s eligibility.

Additionally, donations, contributions or financial aid given to TVIs within the taxable year are exempt from donor’s tax and deductible from the donor’s gross income, subject to relevant Tax Code provisions. Accreditation is not required; however, TVI must secure TESDA certification. Directly and exclusively for the conduct of a registered EBET program, it shall also be exempt from taxes and duties. For eligibility, the donors must attach the original or certified true copy of the notarized Deed of Donation and Acceptance and TESDA certification to their donor’s tax return and income tax return for the applicable period.

These incentives are exclusive and cannot be used in conjunction with those offered by other general or special laws. All pending applications with the BIR prior to the effectivity of this RR are deemed approved, provided the applicant has all the requisites to qualify for the incentives. The RR authorizes the BIR to conduct a post-audit of tax-exempt entities and incentive grantees to verify compliance and determine any tax liabilities.

RA 8525, as reinforced by RR 13-2025, emphasizes the government’s continued commitment to strengthening the education sector. By incentivizing private participation, the government aims to foster an inclusive, empowered and well-educated citizenry – laying the foundation for a stronger and more resilient nation, and a bolder Philippine economy.

Lily Nadia Copada is an associate from the Tax Compliance Group under the Tax Group of R.G. Manabat & Co. (KPMG in the Philippines), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Lily Nadia B. Copada or Maria Myla S. Maralit through [email protected], social media or visit www.home.kpmg/ph.