Publications


Tax Digest
Volume 9,
Series 53
Tax Compliance for National and Local Election

The Bureau of Internal Revenue (BIR) reiterated the tax compliance of all candidates, political parties, including party list groups participating this coming National and Local Election on May 9, 2016. This circular cited several legal basis like revenue regulations, Commission on Election (COMELEC) resolutions, Corporation Code of the Philippines, and the National Internal Revenue Code of 1997. Certain issues which need clarifications are surfacing as the 2016 election day is fast approaching. Issues, such as the taxability of excess contributions to a candidate are discussed in this RMC. Moreover, the circular discusses topics that needed to be complied thereon.

BIR Registration
All participants in the National and Local Election are required to register with the BIR pursuant to Revenue Regulation (RR) No. 8-2009, as amended by RR No. 10-2009 including the issuance of official receipts and withholding taxes. For the Head Office of the political parties, the registration shall be made with the Revenue District Office (RDO) having jurisdiction with the area.

For individual candidates, it shall be their duty to update their registration with the BIR. Their registration or update shall be either with the RDO where they’ll be running an office for, or if not applicable, with the RDO where their principal residence is.

Registration as candidates shall automatically end after thirty (30) days from the date of the election, except for political parties which will remain.

Registration of Books
All participants are required to register and keep adequate books and other accounting records like Cash Receipts Journal, Cash Disbursement Book or their equivalent.

Issuance of BIR Registered Official Receipts (ORs)
The ORS are for the contributions received by the participant in the election, there should at least be a duplicate to be issued.

Contributions in kind shall be valued at their cash equivalents or fair market value.

Because of the fast approaching election day, the BIR waived the requirement for Authority to Print (ATP) for Non-VAT ORs provided that the ORs are BIR-printed non-VAT ORs. Unused ORs should be surrendered within ten (10) days after the election.

Preservation of Accounting Records
Records of the contribution and expenditures of the participant should be preserve for five (5) years, pursuant to Section 2, Rule 9 of COMELEC Resolution No. 9991, after holding the election to which they pertain and for their production for inspection as authorized by the Commissioner of Internal Revenue (CIR).

Tax Treatment of Campaign Contribution
Political contributions are subject to condition set forth under the RR No. 7-2011. As a general rule, campaign contributions are not subject to income tax because of its nature – it does not enrich the candidate for personal purpose. However, if part of the contributions was not utilized, the same will be subjected to income tax and be included in the candidate’s taxable income as disclosed in his/her Income Tax Return (ITR).

Furthermore, if the candidate failed to file with the COMELEC the appropriate Statement of Expenditure as required under the Omnibus Election Code, the entire amount of contribution shall be subject to income tax without the benefit of the expenditure incurred relative to the campaign.

The circular also emphasized that only those contributions utilized during the campaign period are exempt from donor’s tax otherwise, it shall be subjected to donor’s tax.

Donations made by Corporations are prohibited under Section 36(9) Corporation Code of the Philippines, and are subject to donor’s tax without the benefit of deduction on the part of the corporation.

Tax Treatment of Campaign Expenditures
All participants in the election purchasing all kinds of goods and services relative to their campaign and during the campaign period, and those income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates shall be subjected to creditable withholding tax (CWT) of five percent (5%).

The same procedures as that of a regular taxpayer will apply in terms of filing and paying of withholding taxes for manual or eFPS taxpayers, as the case maybe.

The payors/withholding agents are also required to file with the BIR Office where it is registered, on or before March 1, 2017 the BIR Form No. 1604E as well as the Statement of Contributions and Expenditures duly stamped “RECEIVED” by the COMELEC. For payors who are not engaged in business or practice of profession and have designated as withholding agents for limited time only during the election period, the due date to file the said documents is on or before the 30th day after the day of elections.

Finally, expenses that were not subjected to 5% CWT are considered as non-deductible expenses.

Revenue Memorandum Circular No. 30-2016, March 14, 2016
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