By Maric De Castro
December 22, 2022 | 9:03 pm
Table of Contents
Christmas is the most magnificent time of the year and the busiest! Before merrymaking,
prepare your business activities for a stress-free holiday season.
You should pay attention to a few things while preparing for Christmas and the work holidays
ahead.
1. Holiday-related business expenses are tax-deductible
It is common for businesses to hold Christmas parties for their employees. Sending gifts to
clients, employees, and suppliers is also customary during the holiday season but subject to
the gift policy and guidelines of the Company.
These expenses can rank high on the budget for this season. But did you know these are also
tax-deductible expenses?
Tax may be far from your head now as the festivities kick in. But do not let it spoil your
fun by not keeping a record of the information needed for tax deductions.
To ensure tax deductibility, official receipts, sales invoices, and other documents must
support corporate giveaways and Christmas party expenses.
Take the case of your Christmas party, details of all party costs, who attended, and the
venue. As you gather information, request official receipts for services or sales invoices
for goods received consisting of every item for the party.
The same goes for gifts given to employees, clients, and suppliers. Record the cost of each
present and get receipts to prove that it is a company expense.
2. If possible, extend your cash balance ‘til year-end
Pay using a credit card or with credit terms extending beyond the year-end date. Doing so
optimizes the cash that will appear on your balance sheet.
Extending payment terms gives less headache to your accountants doing bank reconciliation
too! That’s the best gift for them, right? They can also enjoy the holidays with less stress
on cash balancing and reporting.
Extend payables after the New Year, so your cash balance is healthy at the
year-end
reporting. The collection of receivables can also be higher after the holiday break,
covering the payables due next month.
3. Schedule all your cash flows
Banks are not open on Christmas and other holidays like Rizal Day on the 30th. Many of your
employees will be on a break too!
Schedule all your cash flows- manual cheques and automated wire transfers - to effectively
and efficiently support operations for the remaining weeks until year-end.
Ensure that cash tracking is up-to-date. Seasonal cash flow patterns have to be taken into
consideration also ahead of time to ensure that you will have enough cash during the holiday
season.
Put off expenses that can wait so as not to drastically affect the cash flow, such as
delaying repairs or maintenance work until after the holiday.
Postpone big purchases like new office furniture. Delay big-ticket items and other expenses
after the New Year if not critical to the business operations.
4. Ensure to replenish all your petty cash and even revolving funds
Petty cash and even revolving funds are sources of allowable business deductions to help you
save on income tax before the tax deadline.
Allot some time to record all your expenses and submit the supporting documents to your
Finance department or accountant to recognize the costs and update the year-end petty cash
and revolving fund balance.
But don’t forget to put aside a contingency amount so your petty cash will be enough to
cover any unexpected expenses for the remainder of the year.
5. Don't forget to withhold tax on your business expenses
Witholding tax
on your business expenditures, especially for those businesses under Taxpayer Account
Management Program (TAMP). A deduction will only be allowed if the tax withheld was
paid.
Expenses where taxes were not withheld, are not considered tax deductible.
Taxpayers use Revenue Regulations
No. 2-1998
as the basis to determine if the expense is
subject to withholding tax. Taxes on expenditures not adequately paid will have penalties.
To avoid this headache, you may consult with
tax experts
to comply with the rules accurately.
To Wrap Up
Christmas is a time to enjoy and should be stress-free. Prepare well, so your business has
the finances to operate during the holidays.
Remember as well that business expenses need supporting documents to be tax deductible.
Having the proper documents lessen the headache of your accountants during the holiday and
the coming tax season.
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