BIR warns of penalties vs unregistered, tax-evading candidates, political parties

DULAY
DULAY

The taxman has reminded candidates, political parties, as well as campaign financiers of their obligations ahead of the national elections on May 9, warning to slap penalties against unregistered taxpayers and tax evaders.

Internal Revenue Commissioner Caesar Dulay issued the revenue memorandum circular (RMC) on February 21, similar to his predecessors at the Bureau of Internal Revenue (BIR) who issued such reminders during election campaign season.

“All candidates, political parties/party-list groups, and campaign contributors are required to register with the BIR, issue official receipts, and withhold taxes [under existing laws and regulations]. The registration of political parties or party-list groups shall be made with the revenue district office having jurisdiction over their head office or principal office,” Dulay said.

RMC No. 22-2022 listed down the documentary requirements, including pertinent BIR forms, as well as copies of certificates of candidacy (COCs) from the Commission on Elections (Comelec).

On top of paying a P500 annual registration fee and obtaining a certificate of registration from the BIR, candidates and parties must keep and register their accounting books and other records.

Dulay said that “as 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.”

As such, all unspent or excess campaign funds as well as donations “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),” Dulay said.

As for donor’s tax, Dulay said the exemption will only apply to “donations/contributions that have been utilized/spent during the campaign period as set by Comelec.”

Dulay reminded candidates and political parties that income payments for their purchases of goods and services as campaign expenditures will be subject to 5-percent creditable withholding tax (CWT).

The CWT will also apply to payments for media services, printing jobs, talent/entertainment fees, as well as lease of real and personal properties.

The same expanded withholding tax must be paid for income payments made by individuals for goods and services intended as campaign contributions.

The 5-percent CWT will apply to payments regardless of the source of funds, whether through donations or contributions or from personal funds.

All taxpayers must file the pertinent BIR CWT returns plus the statement of contributions and expenditures stamped “received” by Comelec on or before March 1, 2023.

Also, all candidates and parties must preserve their records of contributions and expenditures for at least five years after the elections and must be ready to produce these documents if they were to be inspected by the BIR commissioner.

After the elections, all candidates and political parties must submit to Comelec and their BIR revenue district office their respective statements of contributions and expenditures within 30 days after the May 9 polls.

Dulay warned that “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 Tax Code. (©Philippine Daily Inquirer 2022)

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