Special InTAX: February 2024 Issue 1 | Volume 1
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
Bureau of Internal Revenue
The Bureau of Internal Revenue (BIR) issued the following:
Revenue Memorandum Circular (RMC) No. 19-2024, dated 12 September 2023, to clarify the tax treatment of interest expense paid or incurred on indebtedness in connection with the taxpayer's profession, trade or business and other related matters.
RMC No. 19-2024 provides the below tabular list of difference on accounting treatment and current tax treatment of interest expense that shall be observed to further guide the taxpayers.
Particulars |
Accounting Treatment |
Current Tax Treatment |
Interest expense on borrowing arrangements |
Interest is recognized as an expense using effective interest method. Interest incurred directly attributable to the acquisition of a qualifying asset are capitalized as part of the cost of the asset. |
Interest can be claimed as a deduction, subject to certain limitations, provided all criteria are met. Interest incurred to acquire property used in trade, business or exercise of profession may be recognized as an expense in the year incurred or capitalized as part of the cost of the property. |
Interest paid in advance by the taxpayer reporting income on cash basis. |
Interest is recognized as an expense when incurred. |
Interest can be claimed as a deduction in the year the indebtedness is paid. If the indebtedness is payable in periodic amortizations, the amount of interest which corresponds to the amount of the principal amortized or paid during the year shall be allowed as deduction in such taxable year. |
Interest expense on indebtedness between related parties |
Interest expense is recorded when incurred. |
Interest expense is not deductible pursuant to Section 34(B)(2)(b) of the National Internal Revenue Code of 1997, as amended. |
The RMC also discussed the accounting treatment for qualifying asset and the conditions that need to be met to capitalize the borrowing cost.
For tax purposes, the issuance explains the requisites on when can interest expense can be claimed as deduction from gross income and when shall interest expense be allowed for capitalization. Further, the issuance provides clarity on the following cases:
- Claiming of periodic depreciation or amortization of capitalized interest expense (Q&A No. 3)
- Deductibility of interest expense when claimed as an outright expense (Q&A No. 4)
- Disclosures that need to be presented in the Notes to Financial Statements (Q&A No. 5)
- Tax treatment of prepaid interest or interest expense paid in advance (Q&A No. 6)
- Tax treatment of prepaid interest or interest expense paid or incurred on intercompany loans (Q&A No. 7)
- Tax treatment of cost other than interest, paid or incurred on borrowing funds (Q&A No. 8)
- Applicable withholding tax rates on interest expense paid or incurred on debt instruments not within the coverage of deposit substitutes (Q&A No. 9)
The Circular takes effect immediately.
RMC No. 18-2024, dated 8 January 2024, to announce the availability of BIR Form Nos. 1700 and 2000 in the Electronic Filing and Payment System (eFPS).
BIR Form No. |
Description |
Deadline of Payment |
1700 |
Annual Income Tax Return for Individuals Earning Purely Compensation Income (Including Non-Business/Non-Profession Related Income) |
On or before April 15 of each year covering income for the preceding taxable year. |
2000* |
Monthly Documentary Stamp Tax Declaration/Return |
Within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted, or transferred or when reloading a metering machine becomes necessary or upon remittance by revenue collection agents of collection from the sale of loose stamps. |
All taxpayers who are mandated to use the eFPS shall file the above-mentioned returns and pay the corresponding taxes due, using the eFPS facility, effective immediately.
Revenue Memorandum Order (RMO) No. 4-2024, dated 05 February 2024, to inform the creation of Alphanumeric Tax Code (ATC) Creditable Withholding Tax on Gross Remittances made by electronic marketplace (e-marketplace) operators and digital financial services providers to sellers/merchants. The following ATCs are hereby created:
Alphanumeric Tax Code (ATC) |
Description |
Tax Rate |
Legal Basis |
BIR Form No. |
|
On one-half (1/2) of the gross remittances by electronic marketplace (e-marketplace) operators and digital financial services providers to sellers/ merchants for the good or services sold/paid through their platform/ facility. |
1% |
RR No. 16-2023 |
1601-EQ/ 2307 |
WI760 WC760 |
Individual Corporate |
This RMO takes effect immediately.
Here are the links to the full text of the issuances: RMO No. 4-2024, RMC No. 18-2024, and RMC No. 19-2024.
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