Professional Documents
Culture Documents
- Deductions that may or may not partake as the nature of an expense but allowed by NIRC or Special Laws as deductions.
a. INCOME DISTRIBUTION MADE BY TAXABLE ESTATE OR TRUSTS
b. NET TRANSFER TO RESERVE FUND AND PAYMENT TO POLICIES AND ANNUITY CONTRACTS OF INSURANCE COMPANIES
c. DIVIDEND DISTRIBUTION OF A REAL ESTATE INVESTMENT TRUST(REIT)
d. TRANSFER TO RESERVE FUND OF COOPERATIVES
e. EXPANDED SENIOR CITIZEN’S ACT OF 2003
- Senior Citizen/Elderly – citizens aged 60 years old and above
- Entitled to 20% discount in hotels and lodging establishments, restaurants, recreational centers and other places of culture, leisure and
amusements, hospitals, drugstores, and services such as medical, dental, domestic air, sea and land transport, and funeral or burial
service providers
Conditions for deductibility of sales discounts to senior citizens
a. Only portion of the gross sales used, consumed or enjoyed by senior citizen must be allowed as a deduction.
b. The gross selling price and the sales discount must be separately indicated in the official receipt or sales invoice issued to senior citizen.
c. 20% of Gross selling price, NET of VAT, is the amount granted as a discount to senior citizen.
d. Discount is deducted in the same year the discount is granted.
e. Documentation requirement of every establishment granting discount: Name, TIN, ID, Gross Sales/receipts, date of transaction, invoice number and
date of transaction.
Note: if given is Gross receipts, it only means the total collections net of senior citizen discount so you need to gross up by 80%
f. DISCOUNTS TO DISABLED PERSONS – same as the terms and conditions of those for senior citizens
g. ADDITIONAL CLAIMABLE COMPENSATION EXPENSE FOR SENIOR CITIZENS EMPLOYEES – equivalent to 15% of the total amount paid as salaries and wages to
senior citizens. This is not an actual expense but an incentive for employers who consider senior citizens for employment.
Requisites for deductibility
i. Employment shall continue for at least 6 months.
ii. annual taxable income of senior citizen does not exceed the poverty level determined by NEDA
h. ADDITIONAL CLAIMABLE COMPENSATION EXPENSE FOR EXPENSE PERSONS WITH DISABILITY – additional deduction of 25% of the total amount paid as
salaries and wages to disabled persons.
Requisites for deductibility
i. Evidence certified by the DOLE that disabled persons are under their employment
ii. Disabled employee is accredited with DOLE and DoH as to his disability, skills and qualifications.
i. COST OF FACILITIES IMPROVEMENT FOR DISABLED PERSONS – additional deduction from taxable income equivalent to 50% of the direct costs of the
improvements or modifications
j. ADDITIONAL TRAINING EXPENSE UNDER THE JEWELRY INDUSTRY DEVELOPMENT ACT OF 1998 – additional deduction from taxable income equivalent to
50% of the expenses incurred in training schemes approved by TESDA in the year the expenses were incurred.
Conditions for Deductibility
i. It must be duly registered and accredited with BOI and a Certified True Copy of this must be submitted to BIR .
ii. Training scheme must be approved and certified by TESDA
k. ADOPT A SCHOOL ACT OF 1998- private entities are allowed to assist a public school in particular aspects of their educational program within an agreed
period of time. This is an additional deduction of 50% of the contribution made by the adopting entity. Take note that this is an additional deduction by
contributing to public schools aside from the deduction discuss in previous chapter which is under the Charitable and Other Contributions.
Qualifications of Participating Schools – any government school in all levels. Priorities shall be given to schools located in the poorest
provinces.
Qualifications of Adopting Private Entity – It must have a credible track record; it must have been in existence for at least one year; it must
not have been prosecuted and found guilty of engaging In illegal activities.
Valuation of deductions
i. Cash assistance – actual amount appearing in the Official Receipt
ii. Assistance other than money
1. Personal property – acquisition cost of assistance or contribution
2. Consumable Goods – acquisition cost or value at the date of donation whichever is lower
3. Services – amount of services in MOA or actual expense whichever is lower
4. Real Property – fair value(higher of zonal or assessed value) or depreciated cost of property whichever is lower
l. EXPANDED BREASTFEEDING PROMOTION ACT OF 2009 – expenses incurred by a private health institution in complying with the rooming in and
breastfeeding practices shall be deductible expenses for income tax purposes up to twice the actual amount incurred. Example: A company that employs
primarily women installed a lactation station for its nursing employees amounting to 150,000. This 150,000 is claimed as regular deduction and an additional
150,000 special deduction. Note that non taxable companies like government or provincial hospital cannot claim deduction since it is non taxable.
Conditions of deductibility
i. Deduction shall apply for the taxable period when expenses were incurred
ii. All health or non-health establishments and institutions shall comply with the IRR of RA 10028 within 6 months after its approval
iii. The institution shall secure a Working Mother Baby Friendly Certificate from DOH to be filed in BIR
m. FREE LEGAL ASSISSTANCE (RA 9999) – lawyers or professional partnerships providing pro-bono legal services are given deduction incentives for their free
legal services. They shall be entitled to an allowable deduction from gross income equivalent to the amount that could have been collected for the actual
performance of the actual free services rendered or up to 10% of gross income derived from the actual performance of the legal profession whichever is
lower.
Note that the free-legal services must be exclusive of the 60-hour mandatory free legal assistance rendered to indigent clients as mandatorily
required under the Rule on Mandatory Legal Aid Services for Practicing Lawyers.
n. ADDITIONAL PRODUCTIVITY INCENTIVE BONUS EXPENSE – a business enterprise which adopts a productivity incentive program is entitled to a special
deduction equivalent to 50% of the total productivity bonuses given to employees.
- Also companies providing manpower training and special studies to rank and file employees as accredited by TESDA are entitled to 50%
additional deduction of the total grant for local trainings and special studies.
- These deduction incentives will not be allowed on bonuses accruing during the pendency of a strike or lockout from any violation of the
productivity incentive program.