Sunday 2nd March, 2008


BIR will not accept online receipts

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I had found the chaplet to be a fascinating device as a child, not unlike the abacus, or the prayer beads of my family. Now I know these were digital systems, the same used by Microsoft to revolutionise access to all information.

So let’s clear up some doubts about tertiary education claims, and count up the money that’s coming back to us via tax deductions. This is important information for completing your Tax Declaration Form 1—the TD1.

In addition to tertiary education, you can claim for individual annuities as we saw last week, or as a first-time homeowner, or for alimony/maintenance, which we will cover next week.

The current tertiary education claim does not apply to local institutions, where tuition is now free.

From January 1999 to 2006, the maximum claim per taxpayer was $18,000 per year. Since 2006, the claim has been restricted to foreign schools. Effective 2007, the claim was raised to $60,000 per household—an effective increase from $36,000 per two-parent household.

The evidence required includes a statement issued by the institution certifying full-time enrolment for a minimum of one academic year. To get the TD1 approved you must provide evidence of payments for the current academic year. When filing the tax return, evidence of payments is necessary.

Air fare claims are limited to one return airfare per year, evidenced by an actual ticket stub. Rental receipts for housing are also accepted.

If you took an education loan to pay for the education, the interest charges can also be claimed.

My experience with the BIR is that whereas an academic year tends to span two calendar years, commonly commencing in September of one year and ending in May of the following year, the BIR required evidence per calendar year respective to the claim.

This can create a difficulty if all the fees for the academic year are paid in August of year 2007, for example, and it exceeds the total claim amount for 2007. You are frustrated in that you cannot submit a claim for 2008 since you didn’t pay anything in calendar year 2008.

The solution is to pay fees per semester, so you can utilise your claim amount each year. This is relevant since undergraduate degree programmes cost about US$30,000 per year, or $170,000.

Another frustration occurs if you pay academic fees online. Every online fee payment generates an online receipt within seconds of the payment. I am told BIR is not accepting the online receipts.

The developed world is overtly digital!

It is quite a headache to get foreign institutions to issue receipts of payments from the bursar’s office after a period of time has elapsed, especially if the student is no longer at the school, having graduated and left the institution.

In summary then, for income year 2008, if you utilise the maximum individual annuity or pension claim of 25,000, and your maximum tertiary education claim of 60,000, you will pay no tax on $85,000 of income.

Should we add your personal exemption of $60,000, then you can earn $145,000 tax free—you save $21,250 from the tax man!

But we still use the abacus to teach our children, and hold fast to the chaplet, but we’re lagging behind in the digital interface. I wish BIR would accept the digital receipts; after all, they are generated from a secure site.