Tax incentives await schools, firms in TESDA dual training program

13 January 2012

Tax incentives await schools, firms in TESDA dual training program

Business establishments that will open their doors to technical vocational education and training (TVET) students and trainees under the dual training system (DTS) of the Technical Education and Skills Development Authority (TESDA) will enjoy tax break and other incentives.

The tax incentives, which were detailed in a new circular released by the agency, aim to encourage greater private sector participation in the Dual Training System (DTS) that gives the trainees the hands-on experience in the workplace.

 “We would like the TVET students to gain actual workplace experience and at the same time help employers in the skills development of their prospective workers,” Secretary Joel Villanueva, TESDA Director General, said.

Under Republic Act 7686, the DTS brings together establishments and the educational institutions to share the responsibility of providing the students with the best possible job qualifications, the former essentially through practical training and the latter by securing an adequate level of specific, general and occupation-related theoretical instruction.
 
Sixty percent of the students' education and training will be spent in actual work exposure in the establishment and 40 percent of the time will be spent at the TVET institutions (TVIs).

Establishments that have been accredited by TESDA to participate in the DTS may avail the following tax incentives, according to the guidelines:

a) Fifty percent deduction from their taxable income of the actual system expenses paid to the Accredited Dual Training System Educational  Institution for the establishment's trainees;  Provided, That,  such  expenses shall not exceed five percent of their total direct labor expenses but in no case to exceed twenty five million pesos  (Php25,000,000. 00) a year.

b) Donation, contribution, bequest, subsidy, or financial aid actually paid or made for the operation of the system within the taxable year shall also be deductible for income tax purposes in an amount not in excess of three percent (3%) of the taxable business income of the establishment computed without the benefit of deduction.  Considering that the Dual Training System Educational Program is included in the list of National Priority Programs (NPP), then corporate contributions to the System shall be deductible in full from its taxable business income for the taxable period when actually made.

c) Exemption from Donor’s tax, provided, however, that not more than thirty percent (30%) of said gifts shall be used by the System for. administration purposes.

The guidelines also stated that “essential equipment, apparatus and materials imported by accredited dual training educational institutions shall be exempt from taxes (i.e. Value-Added Tax, ad valorem, or excise tax) and duties.”
 
“One of our main focus is the industries’ involvement in the DTS to help trainees immediately find employment after completing the program,” Villanueva said.

“Getting the industries into the loop in terms of helping train our students through actual work exposure will also guarantee that we will produce graduates that the companies need, thereby helping ease the job mismatch. And we are happy that we are gaining the industry's support to the DTS,” the TESDA chief added.

Villanueva cited that the Philippine Chamber of Commerce and Industry has highlighted in their resolution presented to President Aquino during the 38th Philippine Business Conference and Expo the need to strengthen dual education and training in the country.
 
The European Chamber of Commerce and other foreign chambers, he said, are likewise strongly supporting the dual training system. 

This year, TESDA will be aggressively promoting the dual training system nationwide.

"In partnership with the association of schools and the chambers of commerce and other industry associations, we hope we could increase the current number of institutions and establishments accredited by TESDA." Villanueva said.
 
As of December last year, about 500 institutions and establishments have been actively participating in the DTS. The biggest number of these are from the National Capital Region, Region IV-A, VII and XII.