Huwebes, Pebrero 28, 2013

Tax Treatment of Deposits/Advances for Expenses Received by Taxpayers


The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) Nos. 89-2012 (dated December 28, 2012) and 16-2013 (dated February 15, 2013) providing for guidelines to be observed in the accounting and recording of deposits / advances for the payment of the pertinent expenses received by taxpayers.

Previous issuance, RMC No. 89-2012, clarifies the tax implications of deposits/advances, as well as accounting and liquidation of pertinent expenses specific to GPPs and/or their clients/customers.

The latest issuance, RMC 16-2013, spells out policies and guidelines on deposits/advances as part of gross receipts, claims for deduction of expenses, income payments which are subject to expanded withholding taxes, the issuance of official receipts (OR) and pro-forma accounting entries specific to taxpayers other than GPPs and their clients/customers.

The subject RMCs state that for every cash deposit or advances received by taxpayers from clients/customers, an OR covering the entire amount shall be issued and the same shall be booked as outright income and shall be subject to VAT or Percentage Tax, if applicable. The said income payment shall in turn be deductible as expense by the client/customer.

The RMCs stressed that receipts incurred, paid for an issued in the name of the taxpayer shall be recorded as its own expenses for income tax purposes and may be claimed as deductions from gross income provided that they are duly substantiated by official receipts/invoices.

All clients/customers, upon payment of deposits/advances, shall withhold, if applicable, the relevant expanded withholding tax (EWT), as prescribed in Revenue Regulations (RR) No. 2-98, as amended, and shall remit the same on or before the 10th day of the following month except those withheld on the month of December which shall be remitted on or before the 15th day of January. For the Electronic Fling and Payment System (eFPS) users, they shall follow the pertinent eFPS regulations.

The RMCs also provides pro-forma accounting entries and recording of deposits/advances of taxpayers and their clients/customers.

DOF News Correspondent
Source: http://www.dof.gov.ph/?p=5699

2 komento:

  1. Hello there. How would you interpret this memo? Do you agree that it means ALL receipts must be recorded as income?

    TumugonBurahin
  2. Not true, receipt of the proceeds of loan is receipt of money but absolutely not an income. You need to issue an official receipt for it because there is money coming into the company but loan proceeds is never an income which should be subject to Withholding Tax, VAT or percentage tax.

    TumugonBurahin