Those who are running for office must register with the Bureau of Internal Revenue (BIR), issue official receipts, and pay taxes as part of their responsibilities under tax law.
The BIR reiterated this under Revenue Memorandum Circular (RMC) No. 22-2022, issued on February 21, in relation to Revenue Regulation (RR) No. 8-2009 and RMC No. 31-2019.
In the recently issued RMC, Commissioner Caesar Dulay stated that unregistered taxpayers and tax evaders will face penalties under the Revised Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code (NIRC) of 1997, as amended.
“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 No. 8-2009,” the circular stated.
Dulay said they need to comply with the memorandum circular pursuant to RR No. 8-2009, as amended by RR No. 7-2011, and other related revenue issuances.
Political parties, party-list groups, and candidates must register with the Revenue District Office (RDO) that has jurisdiction over their headquarters or major office, or where the candidate is running for office.
The requirements listed by RMC No. 22-2022 are accomplished BIR Form No. I 901, any identification issued by an authorized government body showing the name, address, and birthdate of the applicant, and the Certificate of Candidacy (COC) from the Commission on Elections (COMELEC).
All candidates and political parties/party-list groups shall pay an Annual Registration Fee (ARF) of P500 and be issued a Certificate of Registration (COR). Individual candidates who are not in business no longer need to get a COR.
Aside from the registration fee, the accounting books must also be registered and kept along with other records. All candidates, political parties, and party-list groups must also register for Non-VAT Official Receipts (ORs), which will be issued for any contribution received, whether in cash or in kind, and valued at fair market value.
The original copies of such ORs shall be issued to the contributor or donor, while the duplicate shall be retained by the issuing candidate/political party /party list.
“As a general rule, campaign contributions are not included in the taxable income of the candidate to whom they are 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,” Dulay explained.
“Thus, to be considered 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,” he added.
The unutilized campaign funds, as well as donations utilized before the campaign period, net of the candidate’s or political party’s/party list’s campaign expenditures, shall be considered subject to income tax. It must be included in taxable income as stated in the Income Tax Return (ITR) pursuant to RR No. 7-2011, the bureau chief noted.
Dulay explained further that exemption from the donor’s tax will only be applied if the donations or contributions have been utilized during the campaign period as set by the COMELEC.
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 a political contribution on the part of the donor or corporation.
The BIR chief also reminded the public that income payments made for the purchase of goods and services as campaign expenditures are subject to a 5% creditable withholding tax (CWT).
Included in the expanded withholding tax are media services, printing jobs, talent and entertainment fees, and rentals of both real and personal properties.
The 5% (CWT) withholding must be filed and remitted no later than the last day of the month following the end of the quarter in which the withholding was made.
According to Dulay, “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 declared in an 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.”
“Expenses that were not subjected to the 5% CWT as herein required 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. As such, the full amount corresponding to said expense shall be reported as unutilized campaign funds subject to income tax,” he added.
The Statement of Contributions and Expenditures must be submitted to the COMELEC and RDO where the candidates, political parties, or party-list groups are registered within 30 days after the election.
Earlier this month, the RDO Puerto Princesa branch reminded the local candidates in Palawan and Puerto Princesa of their obligations. RDO Jose Luna mentioned that virtual seminars were started in December 2021 to orient and remind the candidates about BIR compliance procedures.
The local bureau believes that it will also help the performance of the collection for the year 2022, despite the ongoing pandemic and the effect of typhoon Odette.