deductions from gross income

8/10/2019 Deductions From Gross Income

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TYPES OF EXPENSES ORDINARY &NECESSARY/REASON

ABLE

PAID DURING THETAXABLE YEAR

DIRECTLYATTRIBUTABLE TO

TRADE/BUSINESS/PROFESSION

(dev,mgt,op and

conduct)

SUPPORTED BYSUFFICIENTEVIDENCE (

SUBSTANTIATIONRULE)

NOT AGAINSTLAMOCPOP

Expenses in general X X X X Xcompensation payments X X X X X

Travelling expnenses (transpo, lodging and meals, laundry and otherincidentals)

X X

Rentals and/or other payments X X

Entertainment, amusement and recreation expenses X X X X

Bribes(gift or emolument used corruptly to influence public official oraction), Kickbacks (consideration,usually a bribe given to someone ina position for the grant of a privilege/power, etc) and other similarpayments

X

Senior citizens(SCs are aged 60 yrs or above and may apply to thosewith "dual citizenships" provided citizenship is proved and a residentfor at least 6 months) discounts and compensation

a. 20% discount to SC x x

b. 15% special deductions on salaries of SCs


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ABLE




(dev,mgt,op and

conduct)


SUBSTANTIATIONRULE)

NOT AGAINSTLAMOCPOP

sales discounts on Persons with disability (PWD - individual sufferingfrom restriction or different abilities as a result of mental, physical orsensory impairment to perform an activity in a manner or within therange considered normal for a human being, both physical andmental and limits physiological, psychological, anatomical functions)

x x

sales discounts on Persons with disability as special deductioninterests (compensation for the use or forbearance or detention ofmoney, regardless od the name it is called or denominated)

x

1. optional treatment of interest (capitalized (forms part of dpnor as deduction(see above)) 2. non deductible interest (for interest paid in advance ortaxpayer under cash basis(but allowed when the interest was actually

paid))taxes (does not include surcharges, penalties and fines) x

1. tax credit/deduction from foreign taxes paid (available only

for - resident citizens, domestic corp, gpp, beneficiaries of estates ortrusts)expenses not deductible from gross income a. Personal, living and family expenses

b. amounts paid out for new building or for permanentimprovements - capitalized instead of treated as expense


3/8


ABLE




(dev,mgt,op and

conduct)


SUBSTANTIATIONRULE)

NOT AGAINSTLAMOCPOP

c. any amount expended in restoring property or making good thatwhich has been exhausted.

d. premiums on life insurance policy covering the life of any officialor employee or of any person financially interested in any trade orbusiness carried on by the tax payer - individual or coporate, WHENTHE TAXPAYER IS DIRECTLY, INDIRECTLY a beneficiary under suchpolicyContributions to Govt or any of its political subdivisions, foreigninstitutions or internation organizations based on treaty, accredited

NGOs)

Losses

Bad Debts


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ABLE




(dev,mgt,op and

conduct)


SUBSTANTIATIONRULE)

NOT AGAINSTLAMOCPOP

Depreciation

Depletion


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OTHERS

includes fringe benefits (grossedup and FBT has beenpaid)INCURRED WHILE AWAY FROM HOME(LOCATION OF PLACE OF BUSINESS AND NOT FAMILYRESIDENCE) OTHERWISE CHARGED ASTRANSPORTATION EXPENSETAXPAYER HAS NOT TAKEN TITLE OR EQUITY OTHERTHAN LESSEE, USER OR POSSESSOR

MUST NOT HAVE BEEN PAID DIRECTLY TO THE OFFICIALAS A BRIBE, KICKBACK ETCWITHHOLDING TAXES HAVE BEEN PAIDNOT EXCEED THE CEILING OF 1/2 % OF NET SALES OR1% OF NET REVENUE OR APPORTIONMENT FORMULA(PROP OF ns/nr x actual exp)NOT allowed as deduction for direct or indirectpayment to govt official of NGS, GOCCs, foreign govt,corps, gpp or similar entities, exception if ordinary,necessary and reasonable (cir vs sullivan)

actually and exclusively used, consumed or enjoyed bySCsselling price and sales disc is indicated separately inOR/SIonly actual amount granted and not exceeding 20% of

SPemployment continue for at least 6 months,annual taxable income does not exceed the povertylevel


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OTHERS

20% discount relative to sale of goods and serviceswhich is deducted from gross income after CGS.actually and exclusively used, consumed or enjoyed byPWD

there must be indebtedness of the taxpayernot made between related parties/taxpayers

there must be legal liability to pay interestinterest is stipulated in writingDEDUCTION must be reduced by 33% of interestincome (net of Final Tax)INTEREST on unpaid business related taxes is notsubject to limitation on deduction

taxes previously deducted and refunded shall beincluded as part of gross incomeexception:1. income tax2. foreign income tax claimed as tax credit3. estate and donors taxes4. taxes assess against local benefits(tending toincrease value of property)NI(per foreign country)/total net incomexPH income

tax OR NI from all foreign countries/total NI x PH tax


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OTHERS

NI of NGO must not inure to the benefir of any privateindividual, utlized not later than the 15 day of the 3rd

month following the close of its taxable year, adminexpenses must conform to rules and regs of sec offinance, upon recom of commissioner - but not toexceed 30% , upon dissolution assets are transferred toanother NGO


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OTHERS

deductions from gross income

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