BIR reminds candidates, parties to comply with election, campaign tax rules

The Bureau of Internal Revenue (BIR) has issued a reminder for those running as candidates or participating in any other manner in the May 9, 2022 national and local elections of their tax obligations.

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— Ted Cordero (@Ted_Cordero) February 22, 2022

In its Revenue Memorandum Circular No. 22-2022, issued on February 21, 2022, the BIR reminded all candidates, political parties, and party-list groups as well as campaign contributors to register with the taxman, issue official receipts, and withhold taxes.

“It shall be the duty of every individual candidate and political parties/party-list groups, upon the filing of the certificate of candidacy, whether for local or national position to register, or to update their registration with the BIR for those who have previously registered as Withholding Agents pursuant to RR (Revenue Regulation) No. 8-2009,” the BIR said.

“The registration shall be made with the RDO (Regional District Office) having jurisdiction over the political subdivision where the candidate is seeking election, and, if this is not applicable, registration shall be made at the RDO having jurisdiction over their principal residence or registered head/principal office address, as the case may be,” it added.

The taxman said individual candidates shall be registered as “Professional - In General” and tagged as “Politician” under the special code in the BIR registration system.

Political parties and party-list groups, meanwhile, shall be tagged as ”Political Party” under the special code in the BIR registration system.

Likewise, individual campaign contributors shall be registered under Executive Order No. 98 as taxpayer with the RDO having jurisdiction over his place of residence using BIR For, No. 1904, the taxman said.

Non-individual campaign contributors, on the other hand, shall be registered with the RDO having jurisdiction over its principal place of business or head office using BIR Form No. 1903.

“The RDO shall maintain the list of all registered candidates and political parties/party-list groups for monitoring and updating of its registration record after election,” the BIR said.

Candidates and political parties are also required to pay an annual registration fee amounting to P500.

All participants in the elections are mandated to keep books and other accounting records such as Cash Receipts Journal as basis for Statement of Contributions for submission to the Commission on Elections (Comelec), Cash Disbursement Book as basis for Statement of Expenditures for submission to Comelec or their equivalent and register the same to the concerned RDO.

“All candidates and political parties/party-list groups shall also register Non-VAT Official Receipts to be issued for every contribution received, whether in cash or kind valued at Fair Market Value,” the BIR said.

Income tax exemption, unutilized campaign funds

The BIR said as a general rule, campaign contributions are not included in the taxable income of the candidate to whom they were given, the reason being that such contributions were given not for the personal expenditure or enrichment of the concerned candidate, but for the purpose of utilizing such contributions for his or her campaign.

“Thus, to be considered as exempt from the income tax, these campaign contributions must have been utilized to cover a candidate’s expenditures for his/her electoral campaign during the campaign period,” the taxman said.

The agency noted that unutilized or excess campaign funds as well as donations utilized before the campaign period shall be considered as subject to income tax and must be included in a candidate’s or political party’s taxable income.

Donor’s tax

The BIR also reminded election participants that contributions in cash or in kind duly reported to Comelec “are exempt from the imposition of Donor’s Tax.”

“It is hereby emphasized that only those donations/contributions that have been utilized/spent during the campaign period as set by the Comelec are exempt from donor’s tax,” it said.

The taxman took note that donations made by corporations are subject to donor’s tax and may not be deducted as political contributions on the part of the donor or corporation.

Income payments made by election participants on their purchase of goods and services as campaign expenditures as well as income payments made by individual or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates shall be subject to 5% creditable withholding tax, the BIR said.

Covered by withhold tax are payments for media services, printing jobs, talent/entertainment fees, rentals of both real and personal properties.

Post-election, penalties

The BIR said every candidate and treasurer of the political parties or party-list groups shall submit the Statement of Contributions and Expenditures to Comelec and RDO, where the candidate or political parties are registered, within 30 days after the election.

“The registration of individuals in their capacity as candidates shall automatically end 10 days after the deadline of the Quarterly Remittance Return of Creditable Income Taxes Withheld following the day of the election,” the taxman said.

Candidates, political parties, and party-list groups who failed to register and comply with the requirements of the BIR will be subjected to penalties under the Revised Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code of 1997, as amended, according to the BIR.—AOL, GMA News