BIR: Campaign donations tax-exempt, but...

MANILA, Philippines - As the start of the official campaign period on Feb. 9 draws near, the Bureau of Internal Revenue (BIR) is reminding candidates that while campaign donations are tax exempt, amounts in excess are not.

“Campaign donations are exempted from taxes, provided that they are used for such purpose. Any excess would have to be reported to us later on,” BIR Commissioner Kim Henares told The STAR yesterday.

Under Revenue Regulations 7-2011, the BIR reminded election candidates to report to the bureau any “unutilized/excess campaign funds” as part of their income, and pay the corresponding levies for them.

“For instance, if they got a donation of P10 million, but only used P6 million, the balance of P4 million must be reported and paid the right amount of taxes,” Henares explained.

“This is, of course, provided they do not return the excess campaign funds after the election. If they did, then there’s no need to report them,” she added.

In a separate issuance, RR 08-2009, the BIR also said that income from purchase of goods and services using campaign contributions shall be subject to five percent withholding tax.

This means payments to campaign suppliers for goods such as tarpaulins and posters, and services like printing jobs and rentals, would be taxed.

“The obligation to withhold five percent is uniform in both payments for goods and services and, likewise, there is no distinction whether the source is through donations/contributions or from the personal funds of the payor, or elsewhere,” the regulation stated.

The Commission on Elections (Comelec) declared the official start of the election period last Sunday, 120 days before the presidential polls on May 10. A nationwide gun ban also took effect two days ago.

Under the law, the campaign period does not start until 90 days before the polls, or Feb. 9 for the May elections.

After the polls, Henares said candidates have until August to report to the bureau any unspent campaign funds and pay taxes on them.

The BIR chief said her agency is in constant coordination with the Comelec when it comes to campaign expenses. The election body, for its part, has reminded candidates not to spend beyond what is allowed in the law.

Under Republic Act No. 7166 or the Synchronized National and Local Elections Law, candidates belonging to a political party are allowed to spend only up to P3 per voter, while independent runners may shell out up to P5.

In the 2013 local elections, Henares came up with Revenue Memorandum Order No. 48-2013 containing provisions of BIR’s earlier issuances.

“They are the ones making the laws so they should know it,” she said, referring to many elected officials. “Remember, dura lex sed lex (the law may be harsh, but it is the law).”