RMC No. 34-2012: Clarifies the tax implications of integrating the Domestic Passenger Service Charge at the point of sale of airline tickets

Key points

1. Collection and receipt. The airline company collects the DPSC from passengers and includes it in the official receipt it issues to the passenger. The VATable and VAT exempt components of the DPSC are shown separately in that receipt.
2. Treatment in the receipt. The airport authority’s share of the DPSC is shown as part of receipts subject to VAT, and the Aviation Security Fee is shown as VAT exempt. The VAT component of the DPSC is included in the total VAT.
3. Payment to the airport authority. The airline pays the DPSC to the airport authority, which issues an official receipt for the full amount. The DPSC is not part of the airport authority’s gross receipts for computing creditable withholding taxes.
4. Service fees. Payment of service fees by the airport authority to the airline follows the rules on government money payment. It is subject to withholding VAT at the rate of 5% and expanded withholding tax of 2% of gross payments, and the airline issues a VAT Official Receipt.
5. Consolidated entries. The entries for DPSC and for service fees may be consolidated if the airline’s actual remittance of the DPSC is net of the service fees.

Who is affected

• Domestic airline companies
• Airport authority