Invoicing and recording of income payments for media advertising

The BIR issued the following clarifications on the procedure that should be observed by advertising agencies, media suppliers and advertisers in the invoicing and recording of income payments and gross receipts for media advertising placements.

1. On income payments by client/advertiser to media suppliers

Media suppliers should bill their clients/advertisers for the total amount of media placement. The clients/advertisers are required to withhold 2% on the entire cost of the media placement, and correspondingly, issue BIR Form 2307 (Certificate of Creditable Withholding Tax Withheld at Source) in the name of the media supplier. Upon receipt of income payment from the advertiser, the media supplier should issue VAT invoice/official receipt to its client/advertiser, and report the entire amount as its business income for income tax purposes.

2. On the commission/service fee of advertising agency

The advertising agency should bill the media supplier for its commission/service fee. Upon payment, the media supplier is required to withhold 2% on the commission/service fee, and issue BIR Form 2307 in the name of the advertising agency.

For receipt of commission/service fee, the advertising agency shall issue its VAT invoice/official receipt to the media supplier. The amount of VAT to be reported should be based on the commission/service fee of the advertising agency.

Illustrative accounting entries for recording income payments in the books of accounts of the advertisers, media entity and advertising agency are provided in the Circular.

(Revenue Memorandum Circular No. 63-2012, October 29, 2012)

Tax Brief – November 2012

Punongbayan and Araullo