(Revenue Memorandum Circular No. 62- 2016, June 13, 2016)
This Tax Alert is issued to clarify the proper tax treatment of passed-on Gross Receipts Tax (GRT)
The BIR has previously ruled that banks and non-bank financial intermediaries performing quasi-banking functions may shift to their clients/borrowers the GRT due on transactions covered under Sections 121 and 122 of the NIRC.
The tax implications of passed-on GRT are as follows:
1. Passed-on GRT shall form part of the gross receipts of banks/NBFIs on which the GRT is imposed.
2. The passed-on GRT shall be classified as other fees as prescribed by the implementing rules issued by the BSP. Hence, for banks and NBFIs performing quasi-banking functions, the passed-on GRT shall be subject to the GRT rate of 7% under Sec. 121 of the Tax Code.
To illustrate:
GRT Base GRT Rate GRT due
Interest received 10,000 5% 500.00
Passed-on GRT 500 7% 35.00
Total amount collected from borrower 10,500 535.00
3. Customers/clients/borrowers can claim passed-on GRT (as other fees) as deductible expense for income tax purposes provided the appropriate tax has been withheld pursuant to RR 2-98 as amended by RR 12-2013.
4. While the passed-on GRT shall be considered as taxable income, the GRT paid/remitted can be a deductible expense for income tax purposes.
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