Tax treatment of passed-on GRT
This Tax Alert is issued to inform all concerned that suspension of RMC 62-2016 is now lifted and will be in effect immediately.
Clarifications are issued on the proper tax treatment of passed-on Gross Receipts Tax (GRT) by banks and non-bank financial intermediaries (NBFIs).
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:
- Passed-on GRT shall form part of the gross receipts of banks/NBFIs on which the GRT is imposed.
- 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.
- 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.
- On the side of the banks/NBFIs, while the passed-on GRT shall be considered as taxable income, the GRT paid/remitted can be a deductible expense for income tax purposes.