If, as a withholding taxpayer, you do not meet the withholding tax requirements, these expenses will be treated as non-deductible for the purposes of calculating your taxable income. Remember – the income tax rate is 30%! Indirectly, not applying the correct withholding tax could cost a company 30% of these expenses in additional income tax. The courts of three instances supported the position of the tax administration, arguing that, since the Russian Tax Code treats lease payments as a taxable purchase in Russia at source, while the contract does not contain specific rules for the taxation of such payments, the income in question should be treated as other income not expressly mentioned in the contract. Since the contract does not provide for other income to be exempt from withholding tax, the courts agreed that the lessor`s income should be taxed at 20% in Russia in the situation in question. If the tenant pays a rent advance and a deposit, the tenant must register them as an asset at the time of payment. These are reported as rental expenses/costs during the period in which they are applied to the rental. On the part of the landlord, the prepayment/prepaid rent and deposit are recorded as a liability during the subscription period and reported as the proceeds of the lease in the period in which they are applied to the lease. However, the staggered filing of tax returns authorized for withholding taxpayers/taxpayers registered in the Executive Committee`s EFPS mechanism does not apply to NGAs under RR 1-2013. As we all know, accounting standards and tax regulations differ in many cases, and PFRS 16 is no exception. The purpose of this article is to provide taxpayers with a useful reference for knowing and dealing with the differences between accounting and tax rules for leases.

The difference between rental income and expenses must be disclosed in the notes on the accounts for the reconciliation of net profit by accounting book to the taxable income tax return. The tax liability lies primarily with the payer as a withholding tax taxpayer. In case of non-withholding tax or in case of under-deduction, the deficiency tax will be collected by the payer / taxpayer at source. For quarterly tax payments, Form 1601EQ must be filed every January, April, July and October. The deadline is the last day of the month after the end of the quarter. For the 1. Quarter that ends in March, the deadline is April 30. The Philippine Financial Reporting Standard (PFRS) 16 is the new accounting standard for leasing assets or contracts that include a lease agreement. It entered into force on 1 January. It replaces Philippine Accounting Standard (PAS) 17, which means that companies reporting under the RSTP must apply this new standard to their leasing operations from the effective date.

The Company (as a withholding tax agent) is required to provide the Supplier with Form BIR 2307 (or, in some cases, Form 2306) as proof of withholding tax. The supplier can then use this form as proof of payment. The amount of taxes withheld should then be deducted from the taxpayer`s income tax at the end of the year. However, the courts have also concluded that double taxation in this case is eliminated by offsetting the withholding tax by the tax obligations of the owner in Belarus. TAX RULESRR No. 19-86 defines a lease as an agreement between a landlord and a tenant that allows the tenant to own and use a particular property against payment of rents over a certain period of time (which may be final or indefinite). The equivalent of a short-term lease or a lease for low-value assets for tax purposes is an operating lease. In addition to the purchase of goods and services, there are other forms of withholding tax. For example, renting buildings requires a 5% withholding tax on gross rent payments.

For a complete list of withholding taxes under Philippine law, see the list of source deductions from bir. TAXATION OF THE LESSORTHE TAXATION OF THE LESSOR IN THE OPERATING LEASE IS SIMILAR TO THAT OF THE LESSEE, but with opposite effects. ACCOUNTING TREATMENT FOR LESSEES AND LESSORS Such contracts are recognised in a manner similar to the current accounts for operating leases, which means that payments made by the lessee are recognised as expenses or expenses and income by the lessor on a direct or other systematic basis more representative of the service model. Simply put, rental expenses or income are usually reported uniformly over the term of the lease. In the case of short-term leases, however, the tenant has the possibility to recognize the rights of use (ROUA) and a corresponding rental liability instead of the linear basis. The discussion on the accounting and tax treatment of ROUA liabilities and leases is discussed in Part 2 of this article. We recommend assessing the impact that potential changes in the classification of lease payments could have on existing cross-border leases, including planned changes to tax treaties with jurisdictions that are most commonly used in cross-border leases. The following table lists monthly rental income/expenses for accounting and tax purposes. In the event that the tenant pays prepayment/prepayment rents, if the tenant adopts the accrual accounting basis in accordance with tax regulations, the tenant must treat the prepayment/prepayment rents at the time of payment as an asset subject to an EWT of 5% at the time of payment. These are to be claimed as a deductible at the time of their application to the rental contract.

In addition to the rent actually paid or payable to the landlord, the tenant must also declare any expenses/costs that the tenant must pay under the terms of the contract or on behalf of the landlord as additional rental costs/costs, which are also subject to 5% EWT. An example is the property tax on the leased property, if paid by the tenant, should be claimed by the tenant as a rental fee and not as a tax expenditure. Many businesses in the Philippines struggle to navigate through rates, timing, and reporting withholding taxes. The tax compliance system has become even more complex with the introduction of new withholding tax regulations resulting from the TRAIN Act. If you are a withholding tax agent, you are generally required to deduct 1% of the value of payments for the purchase of goods and 2% for the purchase of services from all local suppliers. A withholding tax officer is also required to withhold taxes from non-resident aliens who trade or do business in the Philippines. The deposit, if received from the lessor, whether the lessor uses the accrual or cash method of accounting, must be treated as a liability at the time of receipt and will be recorded as income subject to VAT at the time of application of the lease. If, on the other hand, the tenant accepts cash accounting, the prepayments/prepayments are deductible items at the time of payment, provided that the prepayments/instalments do not last more than 12 months. Otherwise, the prepayment rents/prepayment rents corresponding to the period after 12 months will be recognised as assets and claimed as deductible items at the time of their lease application […].