A must have account title in every client’ chart of accounts

I came across with RR 10-2002 and I consider it for us to be complied.

To clearly separate “representation” expenses subject to ceiling and those which are not, we should provide the following accounting title in our client’s chart of accounts:

1. Entertainment, amusement and recreation (subject 0.5%- goods) and 1% – services)
– These pertained to expenses in entertaining, amusing guest (i.e. customers, prospective clients).
Name of guests and his company, if any, should be disclosed on the receipt/invoice.

2. Internal business meetings – not subject to ceiling
– These pertained to expenses of employees, officers, partners, directors, stockholders. This expenses should be corroborated with a minutes of meeting (or at least, signed list of attendees). Must not be included in the “Representation and Entertainment” line item in the ITR- should be a separate line item.

3. Meals – not subject to ceiling but should be reasonable. Could be lump sump with internal business meetings in number two.

4. Fixed representation allowance – not subject to ceiling but might be subject to withholding tax on compensation. Since subject to withholding tax on compensation, OR /Invoices might not be needed. We can reclassify this to 13th month and Bonus which ceiling is Php 82,000

Otherwise, if we lodged everything to “Representation” as we used to, everything would be subjected to limits.

Disclaimer: New and subsequent BIR rulings, issuances and/or laws may render the whole or part of the article obsolete or inaccurate. For more information, please inquire or consult with the BIR.

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