Profits tax-what you need to know about commissions, rebates and discounts

Taxpayers paying commissions, rebates or discounts must be clearly and separately listed in the accounts, providing the payment amount and various information about the payee. However, there are exceptions. In the following circumstances, taxpayers can disclose information without having to follow the regulations of the Inland Revenue Department:

• In general business, the commission, rebate or discount allowed under the principle that the payer and the beneficiary are the principals, and the commission, rebate or discount will be reflected in the accounts of all parties.

• Individuals are commissions, rebates or discounts paid by employees or other persons of the principals of the payer and the payee. Such commissions, rebates or discounts have been reported in BIR Form 56A (Salary and pension tax returns filed by employers), thereby disclosing the name and address of the payee.

If the taxpayer actually needs to provide information on the payment of commissions, rebates or discounts, but fails or refuses to provide them, the Inland Revenue Department will not approve the deduction of such commissions, rebates or discounts.

The above information is for reference only. If in doubt, we welcome your tax inquiries