Background: Incentive Frameworks Defined
The Enterprise-Based Education and Training (EBET) Act (RA 12063) and the Adopt-A-School Act (RA 8525) offer enhanced tax incentives to private entities that collaborate with educational or technical-vocational institutions. These incentives include additional deductions for training expenses. (bir-cdn.bir.gov.ph)
Recent Clarifications (RMC No. 023-2026)
On 30 March 2026, the Bureau of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 023-2026 to clarify RR No. 13-2025 about the procedures and definitions for availing incentives under EBET and Adopt-A-School. (bir-cdn.bir.gov.ph)
Key Clarifications Include:
- “Technical-Vocational Institutions” (TVIs) refers specifically to enterprises registered with the Technical Education and Skills Development Authority (TESDA) that implement EBET frameworks. Academic institutions outside TESDA registration are excluded. (bir-cdn.bir.gov.ph)
- Additional deduction rate: Until 31 December 2027, allowable deduction = 150% of actual training expense (100% base + 50% extra). Starting 1 January 2028, the additional deduction rate increases to 75% of actual expense, subject to caps. (bir-cdn.bir.gov.ph)
- Limits: Additional deduction cannot exceed 5% of total direct labor expenses or ₱25 million/year, whichever is lower. (bir-cdn.bir.gov.ph)
Actionable Planning Tips
- Companies should ensure that training programs partner with TESDA-registered TVIs, and proper documentation is obtained.
- From now until the end of 2027, examine whether current training expenses would hit the limits under 5% of direct labor costs, so budgeting for 2028 can anticipate adjustments.
- Plan workforce training schedules to maximize deductions while staying within caps.
- Ensure internal payroll systems track “direct labor expenses” cleanly to support claims.
Example Comparison
Company A spends ₱50 million on direct labor annually and ₱5 million on eligible training through TESDA TVIs. Under the 150% rate, they get a deduction of ₱7.5 million (₱5 million × 1.5), which is 10% of direct labor expenses—but since 5% limit is lower, they can only claim up to ₱2.5 million. Excellent planning needed.