RMC No. 62-2016: Clarifies the proper tax treatment of passed-on Gross Receipts Tax

Summary

RMC No. 62-2016 clarifies the tax treatment of passed-on Gross Receipts Tax (GRT).

Key points

1. Who is liable. Banks, non-bank financial intermediaries performing quasi-banking functions, financing companies and other financial intermediaries not performing quasi-banking functions doing business in the Philippines are directly liable for GRT.
2. Part of the tax base. GRT passed on to customers, clients or borrowers forms part of the GRT tax base as gross receipts based on actual or constructive receipt of income. It is gross income under Section 32(A) of the Tax Code and is taxed at 7% under Section 121(c). If the recipient is a non-bank financial intermediary not performing quasi-banking functions, the 5% GRT under Section 122 applies.
3. Classification. Passed-on GRT is treated as other fees and charges, consistent with BSP Circular No. 370 dated July 20, 2011.
4. Deductibility. Banks and non-bank financial intermediaries may deduct the GRT paid for Income Tax purposes under Section 34(C), subject to actual remittance as provided in Section 128 of the Tax Code. Passed-on GRT is also treated as income under Section 32.

Who is affected

• Banks
• Non-bank financial intermediaries performing quasi-banking functions
• Financing companies
• Other financial intermediaries not performing quasi-banking functions

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.