Two days before the campaign for local posts begin, candidates should heed the reminder of the taxman of their obligation to register with the Bureau of Internal Revenue (BIR), issue official receipts and withhold taxes, or else face penalties and possible criminal charges.
Recently, the Virac Revenue District Office No. 69 disclosed to the Tribune that of the 294 candidates for the May 2019 local elections, only 147 paid their corresponding taxes on time and 95 paid beyond the due date.
Fifty-two (52) have unpaid withholding tax as of March 10, 2022, said Assistant Revenue District Officer Modesto Avila Jr.
They could be liable upon conviction to a penalty equal to the total amount of tax not withheld, or not accounted for and remitted pursuant to Sec. 251 of the National Internal Revenue Code of 1997.
The NIRC also imposes a penalty equivalent to 25% of the amount due plus interest of 12% per annum from the date prescribed for payment until the amount is fully paid.
“In the event that a taxpayer refuses to pay the suggested compromise penalty as settlement of the criminal liability, the violation shall be referred to the appropriate office for criminal action,” ARDO Avila stated.
The Virac office of the BIR declined to release the list of the 52 candidates who did not comply with Revenue Memorandum Circular No. 31-2019 dated March 7, 2019 on the tax compliance requirements of candidates, political parties, party list groups and campaign contributors.
Last month, BIR chief Caesar Dulay issued a similar circular reminding candidates in the May 9, 2022 national and local elections, parties and campaign financiers to register or update their registration with the local RDO.
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.
“They shall also register non-VAT official receipts to be issued for every contribution received, whether in cash or kind valued at fair market value,” the circular said.
Campaign contributions are not included in the taxable income of the candidate to whom they were given as they are to be used for the campaign.
“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,” it added.
Thus, all unspent or excess campaign funds as well as donations are subject to income tax and must be included in their/his taxable income as stated in their/his income tax return (ITR),” it stressed.
Income payments for their purchases of goods and services as campaign expenditures will be subject to 5-percent creditable withholding tax (CWT), which 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.
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, with the records to be preserved for at least five years after the elections.