Votes & taxes

As the barangay and Sangguniang Kabataan elections (BSKE) draw near, the BIR reminded all candidates and other BSKE parties of their legal duty of tax compliance by issuing RMC 97-2023 in September 2023. In said RMC, the BIR released FAQs on obligations under existing tax rules.

Whilst BIR registration and payment of registration fee are not required in filing for a certificate of candidacy, candidates have the duty to register or update their registration in the event they engage in business, purchase campaign-related goods and/or services, receive donations and campaign contributions, and have income payments subject to withholding taxes. The BIR reiterated that such transactions are subject to five percent (five percent) creditable withholding tax pursuant to RR 11-2018, making it effectively necessary for candidates to register or update their registration with the BIR.

The BIR also highlighted the need for all candidates to maintain an adequate record of contributions, donations, and expenditures, which shall be submitted to the Commission on Elections (COMELEC) and RDO where the candidate is registered within 30 days after the election. Candidates shall also issue non-VAT BIR printed receipts for every contribution received, whether in cash or in kind. For contribution in kind, it shall be valued at fair market value.

Under existing tax rules, unutilized campaign funds, net of the candidate’s or political party’s/party list’s campaign expenditures, are considered as additional income subject to income tax. This is required to be reported in their Income Tax Return, without further deductions.

In addition, election participants who fail to file with the COMELEC their Statement of Contributions and Expenditures required under the Omnibus Election Code are not allowed to claim such expenditures as deductions from campaign contributions, making the entire amount of contribution/donation received subject to income tax.

Regarding the donors/contributors, RMC 31-2019 provides that campaign donations spent during the allowed campaign period set by the COMELEC are exempt from donor’s tax. Donations utilized outside of the campaign period are subject to the donor’s tax and not deductible as political contributions on the part of the donor.

Like any other taxpayer, election parties who fail to comply with the tax regulations set forth by the BIR will be subjected to penalties under existing tax laws and issuances.

The BIR has been consistent with their positions involving election participants. They promote compliance by issuing timely guidelines and reminders every election period. After all, election participants, particularly the candidates, aspire to create a better country. There’s no better way to kickstart their nation-building than by being good examples and complying with their tax obligations.

Marvin Rafael D. Serrano is an assistant manager from the Global Mobility Services under the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Marvin Rafael D. Serrano or Maria Ruby E. Rea-Vergara through [email protected], social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.