Supplement to Revenue Memorandum Circular No. 63-2012 on Invoicing and Recording of Income Payments for Media Advertising Placements

December 28, 2012 REVENUE MEMORANDUM CIRCULAR NO. 091-12 SUBJECT : Supplement to Revenue Memorandum Circular No. 63-2012 on Invoicing and Recording of Income Payments for Media Advertising Placements TO : All Revenue Officials, Employees and Others Concerned This Circular is being issued to supplement the guidelines laid down in Revenue Memorandum Circular No. 63-2012 dated October 29, 2012 to cover invoicing and recording of income payments for media advertising placements under a split payment scheme or arrangement. Under a split payment arrangement, the advertiser may engage or contract directly with a media entity/supplier and an advertising agency for media advertising placements. As such, the income payments directly made by the advertiser to the media supplier and to the advertising agency is limited to the cost of the service provided by each entity ( i.e., billing of the media supplier for the total cost of production and media placement and billing of advertising agency for commission/service fee). The following are the accounting entries to guide concerned taxpayers in their invoicing and recording of income payments and receipts in relation to media advertising placements. Assuming that the total cost of the advertiser for the total media advertisement is P100,000 comprised of P85,000 media entity/supplier billing and P15,000 advertising agency commissioner/service fee, inclusive of VAT: A. Accounting entries in the Books of Account of the Advertiser: Receipt of billing from media entity/supplier Debit Credit Advertising Expense P85,000 Deferred Input VAT 10,200 Accounts Payable - Media Entity/Supplier P95,200 Payment to Media Entity/Supplier Debit Credit Accounts Payable - Media Entity/Supplier P95,000 Creditable IT Withheld P1,700 Cash 93,500 Receipt of Billing from Advertising Agency Debit Credit Service Expense P15,000 Deferred Input VAT 1,800 Accounts Payable - Advertising Agency P16,800 Payment to Advertising Agency Debit Credit Accounts Payable - Advertising Agency P16,800 Creditable IT Withheld P300 Cash 16,500 B. Accounting Entries in the Books of Account of the Media Entity/Supplier Billing to Client/Advertiser for the Media Placement Debit Credit Accounts Receivable - Advertiser P95,200 Income/Fees - Media Placement P85,000 Deferred VAT Payable 10,200 Receipt of Income Payment from Advertiser Debit Credit Cash P93,500 Creditable Withholding Tax 1,700 Accounts Receivable -Advertiser P95,200 C. Accounting entries in the books of account of the Advertising Agency Billing to Client/Advertiser for the Commission/Service Fee Debit Credit Accounts Receivable - Advertiser P16,800 Commission Income/Service Fees P15,000 Deferred VAT Payable 1,800 Receipt of Income Payment from Advertiser Debit Credit Cash P16,500 Creditable IT Withheld 300 Accounts Receivable - Advertiser P16,800 All revenue officers and employees are hereby enjoined to give this Circular as wide a publicity as possible. (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue <ftp://ftp.bir.gov.ph/webadmin1/pdf/67586RMC%20No%2091-2012.pdf> last visited January 7, 2012 .