What you need to know about Optional Standard Deduction?
REVENUE REGULATIONS NO. 10-2008, as amended by REVENUE REGULATIONS NO. 2-2010
COVERAGE
REVENUE REGULATIONS NO. 10-2008, as amended by REVENUE REGULATIONS NO. 2-2010
COVERAGE
INDIVIDUALS Resident Citizen Non-resident Citizen Resident Alien Taxable Estates / Trusts | CORPORATIONS Domestic Corporation Resident Foreign Corporation |
The OSD allowed to individuals shall be a maximum of forty percent (40%) of gross sales or gross receipts during the taxable year. | The OSD allowed shall be in an amount not exceeding forty percent (40%) of their gross income (net of returns, discounts and allowances). |
If Trading, the COST includes:
Invoice cost
Import duties
Freight
If Manufacturing, the COST includes:
Raw materials used
Direct Labor
Manufacturing OH
Freight
Other costs necessary
If Service-Oriented Enterprise, COST includes:
Salaries and employee benefits
Cost of facilities
Does not include interest expense
OTHER IMPLICATIONS:
A taxpayer who elected to avail of the OSD shall signify in the 1st quarterly income tax return such intention, otherwise it shall be considered as having availed of the itemized deductions allowed under Section 34 of the Tax Code. Once the election is signified, it shall be irrevocable for the taxable year which the return is made. This means that the taxpayer is precluded from amending said return in order to shift to the itemized deductions.
An individual taxpayer who is entitled to and claimed the OSD shall NOT be required to submit with his tax return such financial statements otherwise required under the Tax Code. The said individual shall keep such records pertaining to his gross sales/receipts. For corporations, the same are still required to submit its financial statements when it files its annual income tax return and to keep such records pertaining to its gross income as herein defined.
Invoice cost
Import duties
Freight
If Manufacturing, the COST includes:
Raw materials used
Direct Labor
Manufacturing OH
Freight
Other costs necessary
If Service-Oriented Enterprise, COST includes:
Salaries and employee benefits
Cost of facilities
Does not include interest expense
OTHER IMPLICATIONS:
A taxpayer who elected to avail of the OSD shall signify in the 1st quarterly income tax return such intention, otherwise it shall be considered as having availed of the itemized deductions allowed under Section 34 of the Tax Code. Once the election is signified, it shall be irrevocable for the taxable year which the return is made. This means that the taxpayer is precluded from amending said return in order to shift to the itemized deductions.
An individual taxpayer who is entitled to and claimed the OSD shall NOT be required to submit with his tax return such financial statements otherwise required under the Tax Code. The said individual shall keep such records pertaining to his gross sales/receipts. For corporations, the same are still required to submit its financial statements when it files its annual income tax return and to keep such records pertaining to its gross income as herein defined.