BIR amends rules on income tax deductions

The Bureau of Internal Revenue (BIR) has amended rules on certain income tax deductions, banning taxpayers from deducting items from their returns if these separate payments are not made on time.

“Any income payment shall be allowed as a deduction from the payor’s gross income only if it is shown that the income tax required to be withheld has been paid to the BIR,” a statement released Monday said.

These deductions cover taxes withheld by businessmen from payments to suppliers. These also include taxes withheld from employee salaries.

The new rule, outlined in Revenue Regulation (RR) No. 11-2013, was issued last July 12 and amends the requirements for “deductability” of certain income payments.

The BIR said the current rule allows certain exceptions where a deduction will also be allowed even if no withholding tax was made on time.

These exceptions are allowed for deductions made during audits or investigations of taxpayers.

The new RR removes such exceptions, not being expressly provided for by the Tax Code, and maintains the rule that any income payment shall be allowed as a deduction only if it has shown that the income tax required to be withheld has been paid to the BIR.

The new RR is the latest in a series of reforms that aim to plug holes in the country’s revenue base.

Earlier this year, in an effort to further curb tax evasion and smuggling, the BIR issued a directive mandating that all businesses transact only with BIR-accredited printing companies for the paper receipts that are issued to customers.

The controversial rule stated that all businesses replace older receipts with new ones made by accredited printers starting this month.