BIR reminds candidates of SOCE, tax obligation
Within 30 days after the May 9, 2022 national and local election, every candidate and treasurer of the political parties/party list groups, whether winning or losing, shall submit the Statement of Contributions and Expenditures (SOCE) to the Commission on Elections (Comelec) and Revenue District Office (RDO) where the candidates/political parties/party list groups are registered.
This is the “post-election” tax compliance reminders made by the Bureau of Internal Revenue (BIR) through the issuance of its Revenue Memorandum Circular (RMC) No. 22-2022 last Feb. 21.
With regard to taxability of campaign contributions, the Bureau states 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. Thus, to be considered as exempt from the Income Tax, these campaign contributions must have been utilized to cover a candidate’s expenditures for his/her electoral campaign during the campaign period.
However, unutilized/excess campaign funds, as well as donations utilized before the campaign period, net of the candidate’s or political party’s/party list’s campaign expenditures, 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) pursuant to RR No. 7-2011 (see full text of the RMC for details)
The contributions in cash or in kind to any candidates, political parties or party list groups, duly reported to Comelec, are exempt from the imposition of Donor’s Tax. Only those donations/contributions that have been utilized/spent during the campaign period as set by the Comelec are exempt from Donor’s Tax. Donations made by corporations in violation of Section 36(9) of the Corporation Code of the Philippines are subject to Donor’s Tax and may not be deducted as political contribution on the part of the Donor/corporation.
Income payments made by political candidates and political parties/party-list groups on their purchases of goods and services as campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates shall be subject to five percent (5%) Creditable Withholding Tax (CWT) pursuant to RR No. 11-2018. The following are considered among those covered by Expanded Withholding Tax, but not limited to payments for: (a) media services, (b) printing jobs, (c) talent/entertainment fees, (d) rentals of both real and personal property/ies. Likewise, BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) shall be issued upon demand.
Expenses incurred by the candidates which were given free of charge, such as use, rental or hire of land, water or aircraft, equipment, facilities, apparatus and paraphernalia used in the campaign shall be assessed by the candidate and declare the amount commensurate with the expenses for the use thereof, based on the prevailing rate in the locality and shall be included in the total campaign contributions received and expenses incurred by the candidate.
The five percent CWT shall be filed and remitted 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 through Electronic Filing and Payment System (eFPS)/eBIRForms Package or Authorized Agent Banks or Revenue Collection Officers under the jurisdiction of the BIR office where the withholding agent is registered. As withholding agents, they are also required to submit the Quarterly Alphalist of Payees (QAP) (available for download in the “downloadable” section in the BIR Website) through the eSubmission facility of the BIR.
The payor/withholding agent, who may be an individual candidate, a political party/party list group, or any juridical entity, is further required to file the Annual Information Return of Creditable Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax (BIR Form No. 1604-E) as well as the Statement of Contributions and Expenditures duly stamped “Received” by the Comelec on or before March 1 following the year of election.
Expenses that were not subjected to the five percent CWT as required in the Circular are not considered utilized campaign funds, and the candidates, political parties/party-list groups are precluded from claiming such expenditures as deductions from his/her/its campaign contributions. As such, the full amount corresponding to said expense shall be reported as unutilized campaign funds subject to Income Tax.
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 Revised Consolidated Schedule of Compromise Penalties for Violations of the NIRC of 1997, as amended (RMO No. 7-2015).
For complete tax compliance reminders for the May 9, 2022 national and local elections, pls. access the full text of RMC No. 22-2022 at https://www.bir.gov.ph/images/ bir_files/internal_ communications_2/RMCs/2022% 20RMCs/RMC%20No.%2022-2022.pdf (BIR)