REVENUE MEMORANDUM CIRCULAR NO. 34-2012 issued on August 1, 2012 standardizes the procedure for invoicing, recording and tax treatment of the integration of the Domestic Passenger Service Charge (DPSC) in airline tickets and the service fees received by domestic airline companies.
         The airline company shall collect the DPSC from passengers and shall include the DPSC in the official receipt to be issued by the airline company to the passenger. The VATable and VAT exempt components of DPSC shall be separately reflected in the official receipt.
        The share of the airport authority in the DPSC should be shown in the airline company’s official receipt as part of receipts subject to VAT while the Aviation Security Fee should be reflected as VAT exempt. Lastly, the VAT component of the DPSC should be included in the total VAT.
         The DPSC collected by the airline company shall be paid to the airport authority, which in turn, shall issue an official receipt to the airline company indicating the full amount of the DPSC. The DPSC shall not form part of the gross receipts of the airport authority for purposes of computing creditable withholding taxes.
          Payment of services fees by airport authority to airline company shall be governed by the rules on government money payment and be subject to withholding VAT at the rate of 5% and expanded withholding tax of 2% of gross payments. The airline company shall issue a VAT Official Receipt to acknowledge receipt of the service fees from the airport authority.
     Lastly the entries to record payment/receipt of DPSC and entries to take up the receipt/payment of service fees may be consolidated if the actual remittance of DPSC by the airline company to the airport authority is net of the service fees.