ALLOWABLE DEDUCTIONS FROM GROSS INCOME

A. Allowable Itemized Deductions

1. Advertising and Promotions
2. Amortizations
3. Bad Debts
4. Charitable Contributions (Note: Donations should be made to BIR accredited donee
institutions, otherwise individual taxpayers can only claim 10% of the donation as deductible)
5. Commissions
6. Communication, Light and Water
7. Depletion
8. Depreciation
9. Director’s Fees
10. Fringe Benefits
11. Fuel and Oil Insurance
12. Interest (Note: The taxpayer’s allowable deduction for interest expense shall be reduced by an
amount equal to the 33% of the interest income subjected to final tax. Moreover, all interest
incurred or paid to related parties cannot be claimed as deductions to income)
13. Janitorial and Messengerial Services
14. Losses
15. Management and Consultancy Fee (Note: A portion of expenses must be withheld and paid to
BIR.)
16. Miscellaneous
17. Office Supplies
18. Other Services
19. Professional Fees (Note: A portion of expenses must be withheld and paid to BIR.)
20. Rental (Note: A portion of expenses must be withheld and paid to BIR.)
21. Repairs and Maintenance-Labor
22. Repairs and Maintenance-Materials/Supplies
23. Representation and Entertainment (Note: Limited to 0.5% of net sales for sellers of goods or
1% of net revenue for seller/provider of services.)
24. Research and Development
25. Royalties
26. Salaries and Allowances
27. Security Services
28. SSS, GSIS, Philhealth, HDMF and Other Contributions
29. Taxes and Licenses
30. Tolling Fees
31. Training and Seminars
32. Transportation and Travel
33. Others (Case to case)

B. Optional Standard Deduction

Based on the amendment of RA 8424 introduced in RA 9337 - OSD from 10% to 40%
1. Individual Taxpayer
Gross sales/receipts - P500,000.00
Less: sales returns, discounts and allowances - P60,000.00
Net Sales - P440,000.00
OSD rate - 40%
Allowable deduction (OSD) - P176,000.00
2. Corporate
Gross sales/receipts - P500,000.00
Less: sales returns, discounts and allowances - P60,000.00
Net Sales - P440,000.00
Less: cost of sale/service - P150,000.00
Gross profit - P290,000.00
OSD rate - 40%
Allowable deduction (OSD) - P116,000.00