BIR reminds candidates, parties of post-election tax obligations

The Bureau of Internal Revenue (BIR) on Friday reminded candidates and those participating in the national and local elections of their tax obligations as voters head to the polls on May 9. 

In a statement, the BIR said that within 30 days after the elections, “every candidate and treasurer of the political parties/party list groups, whether winning or losing, shall submit the Statement of Contributions and Expenditures (SOCE) to the Comelec and Revenue District Office (RDO) where the candidates/political parties/party list groups are registered.”

The taxman’s post-election tax compliance reminders are contained in its Revenue Memorandum Circular (RMC) No. 22-2022, issued on February 21, 2022.

“All 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,” it said.

The BIR also clarified the issue of the taxability of campaign contributions.

The bureau said that “[a]s 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/enrichment of the concerned candidate, but for the purpose of utilizing such contributions for his/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,” it said.

However, unutilized or excess campaign funds, as well as donations utilized before the campaign period, net of the candidate's or political party's or party list's campaign expenditures, "shall be considered as subject to Income Tax and, as such, must be included in their/his taxable income as stated in their/his Income Tax Return (ITR) pursuant to RR No. 7-2011," the BIR said.

Donor's tax is not imposed on cash or in-kind contributions made to any candidate, political party, or party list group that are duly reported to the Commission on Elections.

“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.

“Donations made by corporations in violation of Section 36(9) of the Corporation Code of the Philippines are subject to Donor's Tax and may not be deducted as political contributions on the part of the donor/corporation,” it added.

The taxman said that income payments made by political candidates and political parties or party-list groups on their purchase of goods and services as campaign expenditures, and 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 subject to 5% Creditable Withholding Tax (CWT).

The BIR said the following are considered among those covered by Expanded Withholding Tax: media services, printing jobs, talent/entertainment fees, rentals of both real and personal property/ies.

“Expenses incurred by the candidates which were given free of charge, such as use, rental or hire of land, water or aircraft, equipment, facilities, apparatus and paraphernalia used in the campaign shall be assessed by the candidate and declare the amount commensurate with the expenses for the use thereof, based on the prevailing rate in the locality and shall be included in the total campaign contributions received and expenses incurred by the candidate,” the taxman said.

“The 5% Creditable Withholding Tax (CWT) shall be filed and remitted not later than the last day of the month following the close of the quarter during which the withholding was made, using BIR Form No. 1601-EQ through Electronic Filing and Payment System (eFPS)/eBIRForms Package or Authorized Agent Banks or Revenue Collection Officers under the jurisdiction of the BIR office where the withholding agent is registered,” it said.

Moreover, expenses that were not subjected to the 5% CWT as required in the Circular are not considered utilized campaign funds, and the candidates, political parties/party-list groups are precluded from claiming such expenditures as deductions from his/her/its campaign contributions.

The BIR stated that the full amount corresponding to said expense must be reported as unutilized campaign funds subject to income tax.

Further, a payor or withholding agent, who may be an individual candidate, a political party/party list group, or any juridical entity, is required to file the Annual Information Return of Creditable Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax as well as the Statement of Contributions and Expenditures duly stamped "Received" by the Comelec on or before March 1 following the year of election, according to the taxman. —VBL, GMA News