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Bir Ruling (Da-560-99) : Lexlib
Bir Ruling (Da-560-99) : Lexlib
Bir Ruling (Da-560-99) : Lexlib
Gentlemen :
"1. The "gross receipts" subject to the 2% franchise tax includes only
amounts actually or constructively received by EAPRC and excludes
accounts receivable and sales discounts given by EAPRC to its clients
for prompt payment of the billed or invoiced amount.
"2. For purposes of computing its taxable income subject to the corporate
income tax, EAPRC may either deduct the sales discounts it gives to
its clients either from its gross sales or deduct said sales discounts as
business expense."
1. Pursuant to Section 119 of the Tax Code of 1997, the 2% franchise tax
imposed on electric utilities is based on "gross receipts" derived from the business
Copyright 2019 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia First Release 2019 1
covered by the law granting the franchise. For this purpose, the term "gross receipts"
means the total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services performed or to be
performed for another person (BIR Ruling No. 029-98 dated March 19, 1998). In
other words, the "gross receipts" subject to franchise tax includes only amounts
actually or constructively received or collected by EAPRC from its clients.
"Constructive receipt" occurs when the money consideration or its equivalent is
placed at the control of the person who rendered the service or sold the goods without
restrictions by the payor. Amounts that have not been collected, although billed
during the quarter shall not form part of the gross receipts subject to franchise tax for
said quarter (BIR Ruling UN-198-7-6-94; PLDT Co. v. Collector of Internal Revenue,
98 Phil. 676).
Copyright 2019 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia First Release 2019 3