From the blog

Dst On Loan Agreement

In this case, the taxpayer was subject to an TSD review because of its short-term obligations and multi-party advances. The short-term bonds were purchased from various local banks. The taxpayer challenged the assessment on the basis that the TSD had already been deducted from the proceeds of these loans. 1. In the case of a constructive document of documents by the person, documents, instruments, loan contracts and documents, assumptions, assignments, sales and promotions of the commitment, law or property affixed to it, wherever the document is drawn up, signed, issued, accepted or transferred, where the commitment or right comes from Philippine sources or if the property is located in the Philippines. , while this act is being carried out or is being made; However, for some tax notices, the final balance or the increase in credits payable, which should not be the case to shortly reduce the process, and in the absence of details. In the example above, the DST calculation is based on the final balance of the P500,000 loan or is a P2.500 DST (P500,000 divided by P200). As a general rule, any party to the taxable transaction may be held responsible. In some contracts (for example.

B the absolute sale contract of real estate or the sale of shares, loan contracts or other similar contracts), the parties may agree to assume the DST in force in the agreement. However, it is binding only on the parties and not on the Bureau of Internal Revenue (BIR or Tax Authority). When taxing, BIR will ensure that the DST has been paid for such transactions, so it will be good to have a provision on proof of payment of DST for such contracts for the safety of the contracting parties. Associated and reimbursable costs: Costs are affected when a single company pays the group`s costs on behalf of all related companies. For example, spending on software or information technology, with the parent company generally acting with the service provider and allocating costs to the group. In return, related companies pay their share of the costs to the parent company. Since this is a reimbursement of costs and is not income from the parent company, source tax is not necessary. However, the group should ensure that these expenditures are supported by a cost allocation agreement, so that there is a basis for companies that claim the legitimate amount of costs.

However, if one of the service companies is set up for the group, the costs charged to each business are now subject to income tax and VAT (VAT), which is considered income. As a result, the ancillary costs of the related parties may be subject to withholding tax depending on the type of service. Example: During the year, Company A received a business loan five times at peer intervals, and the balance of this loan is P500,000.00. Company A is responsible for P25,000 (P5M divided by P200) in each of the five credit transactions. Subject to the provisions of Section 199, Point (d) of the tax code as amended, there is no additional evidence of the time provided in sections 179, 195 and 198 of the same code regarding the aforementioned extensions.