DEDUCTIONS

FROM GROSS
INCOME
OLD NIRC AND
TRAIN
Updated July 2019
DEDUCTIONS DEFINED
Items or amounts which the law allows to
be deducted from gross income in order
to arrive at the taxable income.
BASIC PRINCIPLES
GOVERNING DEDUCTIONS
a. The taxpayer seeking a deduction must
point to some specific provisions of the
statute authorizing the deduction; and
b. He must be able to prove that he is
entitled to the deduction authorized or
allowed. (Atlas Consolidated Mining &
Dev. Corp. vs. Commissioner, GR No. L-
26911, January 21, 1981)
BASIC PRINCIPLES
GOVERNING DEDUCTIONS
c. Any amount paid or payable which is
otherwise deductible from, or taken into
account in computing gross income or for
which depreciation or amortization may be
allowed, shall be allowed as deduction
only if it is shown that the tax required to
be deducted and withheld therefrom has
been paid to the BIR. [Sec. 34(K), NIRC]
TAXPAYERS WHO CANNOT
AVAIL OF DEDUCTIONS
FROM GROSS INCOME
1. Citizens and resident aliens whose income is purely
compensation income (except for premium
payments on health and/or hospitalization
insurance);
2. Non-resident aliens not engaged in trade or
business in the Philippines (NRANETB); and
3. Non-resident foreign corporation (NFRC)
CLASSES OF DEDUCTIONS
1. Individuals
a. With gross compensation income from
employer-employee relationship only
(1)premium payments on health
and/or hospitalization insurance
(2) personal and additional personal
exemptions
CLASSES OF DEDUCTIONS
b. Gross income from business or practice of
profession
(1) Optional Standard Deduction (OSD)
(2) Itemized deductions (Ordinary ID: BITE DeDe
Loss CPR)
(3) Premium Payments on Health and/or
Hospitalization Insurance, provided family gross
income is not more than P250,000(No longer
applicable in TRAIN)
(4) Personal and additional personal exemptions
(No longer applicable in TRAIN)
CLASSES OF DEDUCTIONS
2. CORPORATIONS
Itemized Deductions
OSD
KINDS OF DEDUCTIONS
1. Optional standard deduction (OSD) [As
amended by R.A. 9504 which took
effect July 6, 2008]
(a) An individual, other than a nonresident
alien, may elect a standard deduction of
40% of his gross sales or gross receipts.
(prior to RA 9504, rate is 10% of gross
income)
KINDS OF DEDUCTIONS
b. In the case of a corporation, it may
elect s standard deduction of 40% of its
gross income as defined in Section 32 of
the Tax Code. (prior to RA 9504, no OSD
benefit for corporation)
( Gross income = Gross sales – COGS)
KINDS OF DEDUCTIONS
2. Personal and Additional Exemption (No
longer applicable in TRAIN)
(a) Basic Personal Exemption
Pursuant to amendments under RA No.
9504, there shall be allowed personal
exemptions amounting to P50,000 for
each individual taxpayer regardless of
whether he is single, head of the family or
married.
KINDS OF DEDUCTIONS
(b) Additional Exemptions for Taxpayers
with Dependents (No longer applicable in
TRAIN)
There shall also be allowed an additional
exemption of P25,000 for each
“dependent” not exceeding four.
KINDS OF DEDUCTIONS
A “dependent” means:
 A legitimate, illegitimate or legally adopted child
Chiefly dependent upon and living with the
taxpayer
Not married, not gainfully employed, not more
than 21 years of age
Except: If such dependent, regardless of age, is
incapable of self-support because of mental or
physical defect.
KINDS OF DEDUCTIONS
A “dependent” also includes:
a. foster child (temporary substitute
parental care by a duly licensed by
DSWD)
b. PWD ( within 4th degree of
consanguinity or affinity to the taxpayer,
regardless of age, not gainfully employed
and dependent upon the taxpayer)
IMPORTANT NOTES
1. In case of married individuals, the additional
exemption shall be claimed by only one of
the spouses.
2. The proper claimant of the exemption would
be generally be the husband, EXCEPT if the
husband is (1) unemployed (2) working
abroad like an OFW or seaman (3) husband
waived his right to the exemption
IMPORTANT NOTES
3. For legally separated spouses, the additional
exemption may be claimed only by the spouse
who has custody of the child

 However, the total amount of additional

exemption that may be claimed by both shall
not exceed 4.
IMPORTANT NOTES
 Non-resident aliens engaged in trade or business
(NRAETB) MAY be entitled to personal
exemptions (but not additional exemption)
subject to reciprocity such that :
i. The country from which he is a citizen has an
income tax law;
ii. The income tax law of his country allows personal
exemption to citizens of the Philippines not
residing therein but deriving income therefrom
and not to exceed the amount allowed in NIRC.
IMPORTANT NOTES
The personal exemption shall be equal to that
allowed by the income tax law of the country to
a citizen of the Philippines not residing therein,
or the amount provided in the NIRC, whichever
is LOWER.
eg.
Allowed personal exemption in Canada: P 60, 000
Allowed by NIRC: P 50, 000 per dependent
Deductible personal exemption is P 50, 000 (lower)
IMPORTANT NOTES
 Non-resident aliens not engaged in trade or
business (NRANETB) cannot claim any personal
or additional exemption. –Because their
income is subject to Final Tax.
KINDS OF DEDUCTIONS
(c) Individuals NOT entitled to personal and
additional exemptions:
i. Non-resident alien NOT engaged in trade or
business
ii. Alien individual employed by Regional or Area
Headquarters of Multinational Companies
iii. Alien Individual employed by Offshore Banking
Units
iv. Alien Individual employed by Petroleum Service
Contractor and Subcontractor
KINDS OF DEDUCTIONS
(d) Status-at-the-end-of-the-year-rule
i. If the taxpayer marries or should have additional
dependent(s) as defined above during the taxable
year, the taxpayer may claim the corresponding
personal or additional exemption, as the case
may be, in full for such year. 
ii. If the taxpayer dies during the taxable year, his
estate may still claim the personal and additional
exemptions for himself and his dependent(s) as if
he died at the close of such year. 
KINDS OF DEDUCTIONS
iii. If the spouse or any of the dependents dies
or if any of such dependents marries, becomes
twenty-one (21) years old or becomes gainfully
employed during the taxable year, the taxpayer
may still claim the same exemptions as if the
spouse or any of the dependents died, or as if
such dependents married, became twenty-one
(21) years old or became employed at the close
of such year.
GENERAL RULE
ITEMIZED
DEDUCTIONS
These are deductions that are related to Trade or business or the
Practice of a Profession.
These DO NOT apply to Taxpayers earning Compensation Income
ITEMIZED DEDUCTIONS
To be deductible:
(a) The expense must be ordinary and necessary,
(b) It must be paid or incurred within the taxable year, and
(c) It must be paid or incurred in carrying on a trade or business.
(d) The expense must be substantially proved by evidence or records the
deductions claimed under the law, otherwise, the same will be
disallowed. Esso Standard Eastern, Inc. v. Commissioner of Internal
Revenue, [G.R. Nos. L-28508-9, July 7, 1989]
ITEMIZED DEDUCTIONS
ORDINARY ITEMIZED
SPECIAL ITEMIZED DEDUCTION
DEDUCTIONS
 Ordinary Business Expenses  SPECIAL EXPENSES under the
NIRC and SPECIAL LAWS
 BITE DeDe Loss CPR
ORDINARY ITEMIZED
DEDUCTIONS

BITE DeDe Loss

CPR
ITEMIZED DEDUCTIONS
B- Bad Debts Loss
I- Interest C- Charitable
T- Taxes and other
E- Expenses contribution
De- Depreciation P- Pension Trust
De- Depletion R- Research and
Development
BAD DEBTS
 Debts due to the taxpayer actually ascertained to
be worthless and charged off during the year may
be claimed as deduction.
 “Actually ascertained to be worthless”
Worthlessness is not determined by an inflexible
formula or slide rule calculation but upon the exercise
of sound business judgment.
 The determination of worthlessness must depend
upon the particular facts and circumstances of the
case. It must be uncollectible even in the future.
BAD DEBTS (REQUISITES FOR DEDUCTIBILITY)

 [1] Existing indebtedness due to the taxpayer which

must be valid and legally demandable,
 [2] Connected with the taxpayer’s trade, business or
practice of profession,
 [3] Must not be sustained in a transaction entered
into between related parties,
 [4] Actually ascertained to be worthless and
uncollectible as of the end of the taxable year, and
 [5] Actually charged off in the books of accounts of
the taxpayer as of the end of the taxable year.
BAD DEBTS: TAX BENEFIT RULE

 NOTE: Tax Benefit Rule - Recovery of bad debts

previously allowed as deduction in the preceding yrs
shall be included as part of gross income in the yr. of
recovery to the extent of the income tax benefit of
such deduction
INTEREST EXPENSE

The cost of money incurred within a taxable

year on indebtedness in connection with the
taxpayer’s profession, trade or business.
INTEREST EXPENSE (REQUISITES FOR DEDUCTIBILITY)

1. There must be an indebtedness stipulated in

writing
2. The indebtedness must be that of the
taxpayer
3.The indebtedness must be that of the
taxpayer in connection with the trade, business
or profession
3. The interest must have been paid and
incurred during the taxable year (meaning due
and demandable)
NONDEDUCTIBLE INTEREST
EXPENSE
The following income are NOT allowed as deduction from
business/professional income:
1. If the Individual is on the CASH basis of Accounting, and the
Interest is paid in advance, through discount or otherwise
2. Interest payment on indebtedness NOT business related
3. Interest payment in favor of a RELATIVE (related debtor and
creditor)
4. Interest to purchase or carry tax-exempt transactions
5. Interest paid on indebtedness to finance petroleum
operations; and
6. Interest on unclaimed salary is not deductible from gross
RELATED DEBTOR AND
CREDITOR
Members of the family, which includes WIFE, BROTHERS,
1.
SISTERS, ANCESTORS, and other lineal
descendants/ascendants
2. An individual and corporation where more than 50% of the
outstanding shares of the Corporation is owned by the
Individual
3. Two corporations where the same individual owns more than
50 % of the outstanding stock of each Corporation
4. Between grantor and fiduciary of any trust
5. Between fiduciary of a trust and the fiduciary of another
trust if the same person is a grantor with respect to each
trust; or
6. Between fiduciary of a trust and the beneficiary
INTEREST EXPENSE –
DEDUCTIBLE
DEDUCTIBLE IN FULL
1. The business has no interest
income subject to 20 % FTx; or
2. The interest expense is paid in
favor of the government.
NB: Interest on delinquent taxes is
deductible because taxes are
considered legal debt when due
(Fines and penalties are NOT
deductible)
PARTIAL DEDUCTION
 If the taxpayer has interest income
SUBJECT TO final tax,
AND
 At the same time, incurred an interest
expense during the taxable year
THUS, the interest expense shall be
reduced BY 33% of the Interest Income
Subject to Final Tax. (Regardless of the
date when the Investment was made)
INTEREST EXPENSE DEDUCTIBLE SUBJECT TO LIMIT
(DOWNWARD ADJUSTMENT)

e.g.
Interest expense P100, 000 ; Interest income
subject to FTx P30, 000

Interest Expense P100,000

Less: Tax differential (30, 000 * .33) 9, 900
Deductible Interest Expense P90, 100
PREPAID INTEREST BY A
CASH BASIS INDIVIDUAL
TAXPAYER
1. Interest payment by a cash individual taxpayer shall
be deductible in the year that the principal is fully
paid.
Eg. On December 31, 2015, Mr. A acquired a loan of
P 100, 000 for business purposes. He received P 90,
000 as proceed of loan, net of interest. The principal
is to be paid in 2016.
The interest expense is deductible in 2016, upon the
full payment of the principal.
PREPAID INTEREST BY A
CASH BASIS INDIVIDUAL
TAXPAYER
2. Proportionate to principal amortization
If indebtedness is payable in PERIODIC amortization,
the amount of the interest which corresponds to the
amount of the principal amortized or paid during the
year

Eg. Page 469 of your book

OPTIONAL TREATMENT OF
INTEREST EXPENSE
At the option of the taxpayer, interest incurred
to acquire property used in trade or business
may be allowed as a deduction(outright
deduction) or treated as capital
expenditure( capitalized as part of the cost of
equipment).
TAXES
GR: taxes are allowed as deduction when paid
or incurred within the taxable year in
connection with the taxpayer’s profession,
trade or business.
TAXES (REQUISITES FOR
DEDUCTIBILITY)
 must be in connection with taxpayer’s
business;
 tax must be imposed by law on, and payable
by taxpayer; and
 paid or incurred during the taxable year.
NON DEDUCTIBLE TAXES
1. Philippine Income tax
2. Estate tax and donor’s taxes
3. Foreign income tax, if claimed as a tax credit
4. Percentage tax on stock transaction
5. Value added tax
6. Taxes not related to business, trade, or profession
7. Other items related to tax such as surcharges,
Special assessment, and compromise
GENERAL BUSINESS EXPENSES
These expenses are directly attributable to the
development, management, operation and or
conduct of the trade, business or exercise of
profession.
GENERAL BUSINESS EXPENSES
a. Salaries, wages, management expenses,
commissions and labor
b. Supplies, repairs and maintenance, and other
incidental expenses
c. Operating expenses of transportation equipment
and used in the trade, profession or business
d. Rental for the use of business property
e. Advertising and other selling expenses
And the like ..
EXPENSES ( REQUISITES FOR
DEDUCTIBILITY)
a. Ordinary and necessary for the conduct of business or
exercise of profession
b. Substantiated with official receipts or any other
adequate records
c. Reasonable amount
d. Withheld with tax and paid to the BIR, if required such
as salary expense or income payment
e. Not contrary to law, morals, public policy, or public
order
f. Incurred or paid and deducted within the taxable year
SALARIES AND WAGES
Salary expense are allowed as deductions from
gross business income only if the corresponding
withholding tax has been deducted and
remitted to the BIR.
COMPENSATION FOR
INJURIES AND PENSIONS
Compensation for injuries and pensions are
deductible expenses.
Even the amount of the salary of an employee
paid for a limited period of time after his death
to his widow or heirs, in recognition for the
services, rendered may be deducted
AS LONG AS IT IS BUSINESS RELATED,
DEDUCTIBLE.
MATERIALS AND SUPPLIES
Beginning inventory xx
Add: Net Purchases xx
Total available for use xx
Less: Ending Inventory xx
Deductible Supplies Expense xx
TRAVELING EXPENSE
These are expenses incurred within and outside
the country while away from home in the
pursuit of trade, business or profession
RENT EXPENSE
Rentals paid for the property used in business,
whether the property is real or personal are
deductible as business expense

**Deductible when incurred (even if not paid) in

relation to trade, business and profession and
the corresponding creditable withholding tax
has been made.
LEASEHOLD IMPROVEMENT
When a lessee constructed an improvement
on the leased property, the cost of such
improvement shall be depreciated over the life
of the improvement, or the term of the lease
contract, whichever is shorter.
Eg. Lease term 10 years
Life of the LI 15 years
The LI will be depreciated over 10 years (shorter)
REPRESENTATION EXPENSE
These are Entertainment, Amusement, and Recreation
(EAR) expenses incurred and paid during the taxable year
that are directly connected to the development of,
management and operation of the trade, business or
profession of the taxpayer

SUBJECT TO CEILING
A. ½ % of NET SALES (sales- actual returns) = taxpayer=
sale of goods
B. 1 % of NET RECEIPTS (Gross receipts- returns)= Sale of
services
REPRESENTATION EXPENSE
 If both servicing and trading, then
Step 1. prorate, i.e. Net sales/ Total revenue and Net
receipts/ Total Revenue
Step 2. Compare with the Statutory limit ( ½% for
Net sales, 1% for Net receipts)
Step 3. Choose whichever is lower.
DEPRECIATION
Periodic reduction of the value of tangible permanent
assets due to passage of time, wear and tear and
obsolescence.
For intangible assets, such as patents, copyrights, it is
called Amortization
METHODS OF
DEPRECIATION
The following are methods of depreciation;
1. Straight-line method
2. Declining method
3. Sum of the years digit
4. Any other methods (DD, 150% Declining)

NOTE: if the problem is silent, use Straight line method

METHODS OF
DEPRECIATION
DEPRECIATION AND OTHER RELATED EXPENSES OF
VEHICLES
Only one vehicle for land transport is allowed for the
use of an official or employee (1 car per employee or
official), and the value should not exceed P 2, 400,
000.

Estimated Useful Life= 5 years

METHODS OF
DEPRECIATION
Depreciation of Properties used in Petroleum
1. EUL
a. Used DIRECLY in relation to production= 10 years or
shorter as may be permitted by BIR Com
b. NOT used directly in production = 5 years
DEPLETION
Exhaustion of natural resources like mines, oil and gas
wells due to production.
The purpose is to recover the invested capital in the
property
DEPLETION
Cost of property XX
Less: Salvage Value (scrap value) XX
Depletion base XX
Divide by; Estimated tons TO BE extracted XX
Depletion per ton XX
Multiplied by: Number of TON EXTRACTED during XX
the year
Depletion expense during the year XX
LOSSES
LOSSES – refer to such losses which do not come
under the category of bad debts, inventory losses,
depreciation, etc., and which arise in taxpayer's
profession, trade or business.
LOSSES
 Kinds of Loss:
1. Casualty Loss or Ordinary
Requisites of deductibility:
 a. Must be sustained during the taxable period
 b. Must not be compensated by insurance or other forms of
indemnity
 c. Must arise from theft, robbery, embezzlement and other
casual and unusual sudden occurrences.
 d. Taxpayer must notify CIR of such loss within 45 days from
date of discovery of the casualty.
LOSSES
2. Abandonment Loss
  Peculiar to petroleum operations
  If petroleum operators ceases its operation, all the unamortized loss
of the property being used in the petroleum operation shall be treated
as abandonment loss.

 Illustration:
 There is a 10M worth equipment. The operator already utilized 2M of
the equipment. 8M can still be utilized if the operation is continued.
However, the operator decided to abandon the business.
 The 8M is unamortized. This value can be treated as abandonment loss.
LOSSES
3. Wagering Loss
 Same as gambling loss
  General rule: Wagering loss cannot be deducted.
  Exception: Gambling loss is deductible only to the extent of
gambling winnings.
 If there are no gambling winnings, gambling losses cannot be
deducted.
LOSSES
4. Capital Loss
 Loss that arises from dealings of capital assets.
 Capital assets: defined as assets not classified as ordinary assets.

 The following are ordinary assets:

 a. Stocks in trade
 b. Inventoriable properties
 c. Properties held for sale
 d. Real property used in business
 e. Depreciable properties
LOSSES
Any gain arising from capital assets are treated differently from gains
arising from transactions dealing with ordinary assets. Rules on
ordinary and capital losses are also different.
 If the loss arises from capital assets, it shall be treated as capital loss.
 For example: loss in the sale of shares of stocks.
 Shares of stocks are capital asset. Loss of such stocks are considered
as capital loss.
  Securities are investments. If securities have become worthless and
the taxpayer is not engaged in buying and selling securities, the value
of the securities that has become worthless are capital loss. (24b)
CATEGORY AND TYPES
OF LOSSES
1. ORDINARY LOSSES
 Incurred in trade or business, or practice of
profession
 Net operating loss carry-over (NOLCO)
Refers to the excess of allowable deductions over gross
income of the business for any taxable year, which had not
been previously offset as deduction from gross income.

Can be carried over as a deduction from gross income for

the next 3 consecutive years immediately following the
year of such loss.
CATEGORY AND TYPES
OF LOSSES
2. CAPITAL LOSSES (LOSSES ARE DEDUCTIBLE
ONLY TO THE EXTENT OF CAPITAL GAINS)
3. SPECIAL KINDS OF LOSSES
CHARITABLE AND OTHER
CONTRIBUTIONS
- It is non-operating expense, but the law allows some
contribution or gifts within the taxable year as
deduction from gross income
CONTRIBUTIONS
DEDUCTIBLE IN FULL
1. Donation to GOVERNMENT OF THE PHILIPPINES, or any
of its instrumentalities, exclusively to finance PRIORITY
PROJECTS as Identified by NEDA (HEYSHE)
a. Education
b. Health
c. Youth and sports development
d. Human settlements
e. Science and Culture
f. Economic development
CONTRIBUTIONS
DEDUCTIBLE IN FULL
2. Donations to international organizations in
pursuance of or in compliance with agreements or
treaties between the Philippine government and
foreign institutions
3. Donations to Accredited Non-Government
Organizations, provided
a. Not more than 30% of which should be used for
admin purposes
CONTRIBUTIONS SUBJECT
TO LIMIT
=These contributions are not deductible in full as
specified by the law or such deduction has not met the
requisites to be deducted in full.
A. Donations to Gov’t of the Philippines NOT IN
ACCORDANCE WITH PRIORITY PROJECTS
B. Donation to NON-ACCREDITED NGOs or DOMESTIC
CORPORATION ORGANIZED EXCLUSIVELY FOR:
a. Religious b. Charitable c. Scientific d. Youth and Sports
Development e. Cultural f. Educational g. Rehabilitation of
veterans h. Social welfare
CONTRIBUTIONS SUBJECT
TO LIMIT
These contributions are not deductible in full as specified
by the law or such deduction has not met the requisites to
be deducted in full.
Limitation:
a. Individuals: 10 % of the taxable income FROM TRADE,
BUS, OR PROF BEFORE actual contribution, OR actual
contribution, whichever is LOWER
b. Corporation: 5% of the taxable income FROM TRADE,
BUS, OR PROF BEFORE actual contribution, OR actual
contribution, whichever is LOWER
PENSION TRUST
PENSION TRUST CONTRIBUTIONS – a deduction
applicable only to the employer on account of its
contribution to a private pension plan for the benefit of
its employee. This deduction is purely business in
character.
PENSION TRUST
Defined Everything that
contribution plan the employer
shouldered is
deductible in full
Defined Benefit Current Service Deductible in full
plan Cost
Past service cost Amortized for 10
years
RESEARCH AND
DEVELOPMENT
Taxpayer has the option to consider R & D as:
a. Ordinary expense = deductible from GI in the year
the expense is incurred
b. Deferred expenses subject to amortization over a
period of not less than 60 months beginning the
month in which the taxpayer first realizes benefits
from such expenditures.
PREMIUM PAYMENTS FOR
HEALTH/HOSPITALIZATION INSURANCE (PPHHI)
(DELETED IN TRAIN)
It is an amount of premium on health and/or
hospitalization paid by an individual taxpayer (head of
family or married), for himself and members of his
family during the taxable year.
Who are allowed to deduct?
All individual taxpayer subject to progressive tax
EXCEPT NRAETB.
REQUISITES FOR
DEDUCTIBILITY
 Insurance must have actually been taken
 The amount of premium deductible does not exceed
P2,400 per family or P200 per month during the taxable
ear.
 That said family has a gross income of not more than
P250,000 for the taxable year.
 In case of married individual, only the spouse claiming
additional exemption shall be entitled to this ­deduction.
OPTIONAL STANDARD
DEDUCTION
OSD is in lieu of the itemized deductions including NOLCO.
Applicability: individual and corporate taxpayers only, except
non-resident alien.
 It must be specifically indicated in the return by checking the
box corresponding therein.
 If not indicated then it is presumed that the taxpayer is
 availing of the itemized deduction.
 Individuals - 40% of gross receipts/gross sales
 Corporation - 40% of gross income.
 No substantiation requirements [such as receipts]
OSD – INDIVIDUALS –
40% OS GS/GR
 Gross sales – Net sales in accounting
Net Sales Pxx
Add: Other taxable income from
Operations not subject to FWTx xx
Total Sales/Revenues/receipts/fee XX
Multiply by: 40%
OSD PXX
OSD – INDIVIDUALS –
40% OS GS/GR
Examples:
Primary Income Other operating
Income
Accounting firm Professional Fees Income from seminars
Interest from client
notes ..
Reimbursement of out-
of pocket expenses
Manufacturing Business Sales of goods Sale of scrap materials
NOTE: Gain on sale of used equipment is non-operating
income, Thus not subject to 40% OSD
OSD – CORPORATION –
40% GIincome subject to the regular income tax.
40% of all gross
No distinction between gross income subject to the
regular income tax.
Net Sales/Revenue/Receipts PXX
Less: Cost of Sales XX
Gross Income from Operations XX
Add: Other Taxable Income, not Sub to Ftx XX
Total Gross Income XX
Multiply by: 40%
OSD XX
OSD – CORPORATION –
40% GIof Option (Secretary of Finance 16-2008
 Irrevocability
as amended by Revenue Regulation 2-2010)
  When the taxpayer opted for a particular type of
allowable deduction, such option is irrevocable during
the taxable year when the choice has been made
  If the taxpayer did not signify any option in his
return, he is deemed to have chosen Itemized
Deduction.
OSD – CORPORATION –
40% GI
Can General
 Professional Partnership avail of OSD?
 Yes.

 If the GPP availed of OSD, can the partners also avail of

OSD?
 No.

 When the GPP has chosen OSD, the partners are actually the
ones who utilized such option. Therefore, they cannot again
utilize OSD as it would result to a double recognition of
expense.
TAXPAYERS NOT ALLOWED
TO USE OSD
 INDIVIDUALS
Those exempt under the tax code and other special
laws with no other taxable income (eg. BMBE)
Those with income subject to Special/Preferential Tax
rates
Those with income subject to income tax under
Sections 27(A) and 28A and also with income subject
to special or preferential tax rate
TAXPAYERS NOT ALLOWED
TO USE OSD
 CORPORATIONS
Those exempt under the tax code and other special
laws with no other taxable income (eg. Exempt
GOCC)
Those with income subject to Special/Preferential Tax
rates
Those with income subject to income tax under
Sections 27(A) and 28A and also with income subject
to special or preferential tax rate
 THA
NK
YOU!

Summarized notes from various

sources
jmc_July2019