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:

  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:                                                     

  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.   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.