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#AskTheTaxWhiz: Do candidates pay taxes for campaign expenses?

As it's the campaign season again, campaign funders are coming out of the woodwork once more. Are their political contributions taxable?

As clarified by Revenue Memorandum Circular (RMC) No. 30-2016, only contributions spent and utilized during the campaign period are exempt from tax. Any political contributions or donations spent before or after the campaign period set by the Commission on Elections are subject to both donor's tax and income tax.

RMC 30-2016 also notes that any unspent political contributions form part of the taxable income and are subject to income tax.

The Bureau of Internal Revenue (BIR) commissioner earlier reminded political candidates about their tax obligations.

Further, corporations are prohibited from making political contributions under Section 36 of the Corporation Code. Should a corporation violate this, their contributions – no matter if they are spent within the campaign period or not – will be subject to donor's tax.

Currently, donor's tax has been lowered by the Tax Reform for Acceleration and Inclusion law to 6%.

What other tax obligations are specific to political candidates? What about campaign expenditures?

Income payments made by political parties and candidates of local and national elections are subject to a 5% creditable withholding tax.

According to Revenue Regulations No. 8-2009, all individuals, juridical persons, and political parties are required to deduct and withhold taxes from their campaign expenditures.

This means that if a political candidate pays for your services (say, to print campaign posters or tarpaulins), he or she is required to withhold 5% of the payment. The candidate is then responsible for remitting that amount to the BIR.

RMC 30-2016 further clarifies that the creditable withholding tax applies no matter the source (political contributions, personal funds, or otherwise).

As potential representatives of Filipinos, these candidates must be held to a higher standard and be more responsible taxpayers. Should taxpayers fail to file returns, they are heavily penalized.

Taxpayers can learn more about how to avoid these penalties by attending tax seminars, consultations, or tax coaching sessions. For more questions and inquiries, you can reach us at consult@acg.ph or via (02) 622-7720. – Rappler.com

Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2017 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founding president of the Asian Consulting Group (ACG) as well as the Center for Strategic Reforms of the Philippines (CSR Philippines). Assisting him in his column is JM Miñano, communications associate of ACG. He graduated with a bachelor's degree in Communication Arts from the University of the Philippines Los Baños.

For inquiries, you may email consult@acg.ph or visit www.acg.ph for tax-related concerns.