Tax implications of integration of airport terminal fee in airline tickets

The BIR issued the following clarifications on the procedure for invoicing and tax treatment of the integration of the Domestic Passenger Service Charge (DPSC) into the sale of airline tickets.

On the collection of DPSC from passengers

The airline company, which shall be responsible for collecting the DPSC, shall include the DPSC in the official receipt it shall issue to its passengers. The VAT-able and VAT exempt components of DPSC shall be separately reflected in the official receipts. This means that the share of the airport authority in the DPSC shall be shown in the airline company’s official receipts as part of receipts subject to VAT, while the Aviation Security Fee should be reflected as VAT exempt. The VAT component shall be included in the total VAT.

On the payment of DPSC by airline companies to the airport authority

The DPSC collected by the airline company shall be paid to the airport authority which, in turn, shall issue an official receipt to the airline company. The official receipt shall indicate the full amount of the DPSC. The DPSC shall not form part of the gross receipts of the airport authority for purposes of computing creditable withholding taxes.

On the payment of service fees by airport authority to the airline company

The airport authority shall pay service fees to airline companies for collecting the DPSC. This shall be governed by the rules on government money payments, i.e., subject to withholding VAT at the rate of 5% and expanded withholding tax of 2% of gross payments. The entries to record payment/receipts/remittance of the DPSC in the books of an airline company and the airport authority are illustrated in the circular.

Revenue Memorandum Circular No. 34-2012, August 1, 2012

Tax Brief – August 2012

Punongbayan and Araullo