The Bureau of Internal Revenue (BIR) has issued a new order consolidating the provisions granting tax exemptions and incentives under the Adopt-a-School Act, the new Enterprise-Based Education and Training (EBET) Framework Act, and the Tax Code. These tax perks aim to encourage companies to help upgrade and modernize educational institutions in the Philippines amid the growing skills-job gap.
Issued March 31, 2025, Revenue Regulations (RR) 013-2025 consolidates the provisions to simplify and streamline the procedures and requirements for companies availing themselves of the tax exemptions and benefits under the Adopt-a-School Act of 1998 or Republic Act (RA) No. 8525, EBET Framework Act or RA 12063, and the Tax Code.
Under the Tax Code, registered export and domestic enterprises are allowed to deduct 50% additional deduction on the labor expense incurred in the taxable year and 100% additional deduction on training expense incurred in the taxable year.
The Code clarifies that the 50% additional deduction on the labor expense shall not include salaries, wages, benefits, and other personnel costs incurred for managerial, administrative, indirect labor, and support services.
Moreover, the 100% additional deduction shall only apply to trainings, as approved by the Strategic Investment Priority Plan, given to the Filipino employees engaged directly in the registered business enterprise’s production of goods and services.
Meanwhile, under the Adopt-a-School Program, incentives are granted to a private entity that agrees to adopt and provide assistance to a public school. These perks include deduction from the gross income of the amount of contribution/donation that were actually, directly and exclusively incurred for the program, plus an additional amount equivalent to 50% of such contribution/deduction.
This is provided that the deduction is availed of in the taxable year that the expenses were incurred and that it can be substantiated with sufficient evidence such as official invoice and other adequate records.
Under the same program, another incentive for the adopting private entity is exemption from donor’s tax. For foreign donation, the value-added tax (VAT) and excise tax on the importation of goods shall be assumed by the Department of Education, Commission on Higher Education, or Technical Education and Skills Development Authority (TESDA).
In the case of local donation considered as a “transaction deemed sale” of goods or properties originally intended for sale by the adopting private entity, the local donation shall be subject to VAT on the transfer of said goods or properties.
“The said donor or Adopting Private Entity, however, is entitled to claim the available input tax subject to the rules on allocation among taxable sales, zero-rated sales and exempt sales,” points out RR 013-2025.
If the local donation is not considered as a “transaction deemed sale,” then the transfer of the goods or properties to the public school shall be exempt from VAT.
On the other hand, Section 4 of RR 013-2025 tackles the incentives granted to technical-vocational institutions (TVIs) implementing a registered EBET Framework under RA 12063. Here enterprises implementing a registered EBET program shall be entitled to the following tax exemptions and incentives:
• They shall be allowed to avail of an additional deduction from taxable income equivalent to 50% of actual training expenses from the effectivity of RA 12063 up to December 31, 2027, with the additional deduction increasing to 75% of the actual training expenses starting January 1, 2028. Such deduction shall not exceed 5% of their total direct labor expenses, or P25 million a year, whichever is lower. For this, the enterprise will have to secure the proper certification from TESDA.
• Donations, contributions, bequests, subsidies, or financial aid actually paid or made to a TVI implementing theoretical instructions for the EBET programs within the taxable year shall be exempt from payment of donor’s tax and shall be deductible from the gross income of the donor, subject to the provisions of the Tax Code. For this, TVIs are not required to obtain accreditation but they should secure the proper certification from the TESDA.
“Donations, contributions, bequests, subsidies, or financial aid made under this section, which are certified by the TESDA to be actually, directly and exclusively for the conduct of a registered EBET Program, shall be exempt from taxes and duties,” said the RR.
Last March, TESDA deputy director general Nelly Nita Dillera said they are hoping the increase in the incentives offered for participants to the EBET program under the EBET Framework Act will encourage more firms to join. She noted that only more than 200 out of a million enterprises in the Philippines have joined the program as of 2023 data.
She continued that the EBET program is envisioned to help overcome challenges such as the widening skills-job gap in the Philippines, which will be addressed through greater collaboration between industry, academe and government and fostering inclusivity by improving access of the workforce to quality training programs.
The newly issued RR shall take effect 15 days following publication in the Official Gazette or the BIR website.
