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Dean Elvena Requirements For Deductible Items and Items Not Deductible
Dean Elvena Requirements For Deductible Items and Items Not Deductible
Deductions
Itemized Deduction
Substantiation Rule
**if the expense is subject to withholding tax the withholding taxes should be
withheld and remitted to the BIR
**Reasonableness test- no hard and fast rule- representation expense- must not
exceed 1% of service receipts when taxpayer is engaged in service enterprise
or 1/2 % of net sales with respect to taxpayers engaged in manufacturing or retail
enterprieses
* all events test- expense is accrued and deducted for tax purposes when
1. the obligation to pay is already fixed
2. the amount can be determined with reasonable accuracy
3. already knowable or the taxpayer can reasonably be expected to have known at the
closing of its books for the taxable year
Interest Expense
1. there must be an indebtedness
2. there should be an interest expense paid or incurred upon such indebtedness
3. the indbtedness must be that of the taxpayer
4. must be connected with the taxpayer's trade, business or exercise of profession
5. the interest expense must have been paid or incurred during the taxable year
6. the interest must have been stipulated in writinf
7. the interest must be legally due
8. the interest payment arrangement must not be between related taxpayers
9. the interest must not be incurred to finance petroleum operations
10. in case of interest incurred to acquire property used in trade, business or
exercise of profession, the same was not treated as a capital expenditure
TAXES
1. the obligation to pay the tax must be connected with taxpayer's trade urisness,
or ecercise of profession
2. the tax must have been paid or incurred during the taxable year
3. tax must not be in the nature of the ff
a. income tax
b. estate and donor's tax
Depreciation Expense
1. the amount of depreciation must be reasonable
2. must have been charged off during the taxable year
3. it must be attributed to a property used in business
4. must be supported by receipts,. records, or other pertinent papers
Losses
-casualty loss - loss arising from TRECUSO theft
roberry
embzzlement
and other casual or unusual sudden occurence
- IF THE TAXPAYER SUFFERED LOSS WITHIN TAXABLE YEAR
- SEND NOTICE TO THE CIR WITHIN 45 FROM THE OCCURENCE OF THE LOSS
CHARITIBLE CONTRIBUTIONS
1. full deductions - to the govt or political subd for priority subjects
- contribution to an accredited NGO
- donations to foreign institutions pursuant to international agreement
2. with limitations
corporate taxpayer- 5% of the taxable income before the recognition of the
charitable contribution
individual taxpayer- 10% of the taxable income before the recognition of the
charitable contribution
- contributions or gifts actually paid or made within the taxable year to, or for
the use of the Govt of the Ph, or any of its agencies or political subd. therof
exclusively for public purpose
- contributions or gifts to accredited, non-profit, domestic corp or assoc
organized and operated exclusively for RECCYS(religious, educational, charitable,
civic, youth and sports development, and scientific) purposes, not more than 30% of
the contribution shall be used for admin purposes
c. contributions for the rehabilitation of veterans, or to social welfare
institutions
d. contributions to NGO'S
*proceeds of life insurance policies paid to the heirs or beneficiaries upom the
death of the shall be excluded from the gross income