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The Philippine Tax Whiz discusses guidelines on the tax treatment of lease accounting by lessees under Philippine Financial Reporting Standard 16 per Revenue Memorandum Circular 11-2024
This is AI generated summarization, which may have errors. For context, always refer to the full article.
With a conditional sale, you’re not just reporting an expense; you’re recording an asset and a liability, then recognize interest or depreciation. For detailed comparison, the particulars of the tax treatment for income tax are listed in the table below:Aside from income tax, leases and conditional sales are subject to value-added-tax , expanded withholding tax and documentary stamp tax .
Meanwhile, EWT for leases is subject to 5% EWT, while conditional sale of personal property is considered as sale of goods, which has 1% EWT with interest expense of 15%. However, conditional sale for real properties will be pursuant to Revenue Regulation 02-98. As per Revenue Memorandum Circular 11-2024, the depreciation expense pertaining to the right-of-use asset shall not be treated as deductible expense for income tax purposes. Only the actual amount of rent paid or incurred, including other payments made to the lessor based on the lease agreement, shall be allowed as deductions in the computation of the net taxable income.
Bureau Of Internal Revenue Real Estate Industry Business
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