Are candidates, political parties, party-list groups, and campaign contributors required to register with the Bureau of Internal Revenue (BIR)? For independent or individual candidates, will they be registered as political candidates? What are the tax compliance requirements and other information they need to avoid penalties?
All candidates, political parties, party-list groups, and campaign contributors have the duty to register or update their registration with the revenue district office (RDO) having jurisdiction over their residence address or principal office following the guidelines stated in Revenue Memorandum Circular (RMC) No. 38-2018.
Individual candidates shall be registered as professionals in order to be issued an authority to print receipts or invoices.
Here’s the summary of tax compliance requirements based on RMC 31-2019:
- All candidates, political parties, and party-list groups shall pay an annual registration fee of P500.
- A certificate of registration is no longer required to be issued for individual candidates who are not engaged in business.
- All political parties and party-list groups shall register and keep adequate books and other accounting records such as a cash receipts journal (basis for Statement of Contributions for submission to the Commission on Elections), a cash disbursements book (basis for Statement of Expenditures for submission to the Comelec), or their equivalent.
- All political parties, party-list groups, and candidates shall be responsible for the preservation of records of contributions and expenditures, together with all pertinent documents, for a period of three years from the close of the taxable year during which the election was held.
- Every candidate and treasurer of the political party or party-list group shall submit the Statement of Contributions and Expenditures (SOCE) to the Comelec and the RDO where the candidate, political party, or party-list group is registered within 30 days after the election.
Are candidates, political parties, and party-list groups required to issue receipts for campaign contributions received? Are they also required to withhold taxes from income payment to their suppliers, influencers, endorsers, and other campaign expenditures? What will happen when they fail to withhold tax?
All candidates, political parties, and party-list groups shall register and issue non-VAT official receipts for every contribution received, whether in cash or in kind, valued at fair market value.
They are also required to:
- Remit the 5% creditable withholding tax (CWT) for the first two months of the quarter on or before the 10th day of the following month in which withholding was made using BIR Form No. 0619E.
- File and pay the quarterly withholding tax return not later than the last day of the month following the close of the quarter during which the withholding was made, using BIR Form No. 1601-EQ together with the submission of the Quarterly Alphalist of Payees through the eSubmission facility of the BIR.
- File the Annual Information Return of Creditable Taxes Withheld (Expanded/Income Payments Exempt from Withholding Tax) or BIR Form No. 16014E as well as the SOCE duly stamped “Received” by the Comelec on or before March 1 following the year of election.
Expenses that were not subjected to the 5% CWT are not considered utilized campaign funds and are not allowed to be claimed as deductions from campaign contributions. As such, the full amount shall be reported as unutilized campaign funds subject to income tax.
Are campaign contributions exempted from 6% donor’s tax? Can a local company contribute to a candidate or political group? Are campaign funds received by candidates, political parties, and party-list groups subject to income tax? What will happen to those who fail to submit their SOCE?
Campaign contributions are exempt from donor’s tax. However, the Omnibus Election Code limits it to donations spent during the campaign period as set by the Comelec. This means donations utilized before or after the campaign period are subject to donor’s tax and not deductible as political contributions on the part of the donor, and are subject to income tax.
Local companies can make donations to candidates. Under the New Corporation Code, only foreign corporations are prohibited from giving donations in aid of any political candidate or party for the purpose of partisan political activity.
Unutilized or excess campaign funds are subject to income tax, and as such, must be included in taxable income as stated in the income tax return. No further deduction, either itemized or optional, shall be made against the taxable income.
Any candidate or political group, whether winner or loser, who fails to submit the SOCE to the Comelec as required under the Omnibus Election Code will be automatically prevented from claiming expenditures as deductions from the campaign contributions, making the entire amount directly subject to income tax.
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Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at firstname.lastname@example.org and download the TaxWhizPH app for free if you have tax questions.