Вы находитесь на странице: 1из 55

PRINCIPLES OF DEDUCTIONS

 Deductions from Gross Income- business expenses incurred by a taxpayer engaged in business or in
the practice of profession
 Business- habitual engagement in a commercial activity involving the regular sale of goods and services
to customers or clients.
- In taxation, it is generally used to include the exercise of a profession.

BUSINESS EXPENSE PERSONAL EXPENSE


costs of doing trade, business or practice of living and family expenses of individual taxpayers
profession such as employee salaries, office such as family, food, personal recreation and
utilities, supplies and rent, taxes, losses, bad debts, transporation, medication, home rentals and
depreciation on business properties, research and utilities, tuition fees of dependents anf other similar
development and the like expenses

Deductible Non-deductible

Expenses that are intended for both the business and personal use are allocated between the two.
BUSINESS EXPENSE CAPITAL EXPENDITURE
benefits only the current accounting period benefits future accounting period
costs of generating income or gains for the current period initially recorded as assets upon acquisition then later
deducted against future gross income when used in the
trade, business or profession
deductible against gross income in the current period advanced deduction is not warranted as it contradicts the
Lifeblood Doctrine
Salaries and wages expense, utilities expense, selling Items o property, plant and equipment, inventory,
expense, rent, local taxes and permits investments, prepayments, acquisition of intangible assets
such as patent or franchise, including costs of defending
the same in court, expenses to promote business goodwill,
rentals on capital lease or finance lease that transfers
ownership
 Property, plant & equipment-all types of properties used or reserved for use in the business of the
taxpayer such as:
1. Land- used currently or intended to be used in the business
2. Depreciable Properties- those that decrease in value through normal wear and tear by usage or through
obsolescence by the passage of time
a. Land improvements
b. Building
c. Building improvements
d. Machineries and equipment
e. Furniture and fixtures
f. Leasehold improvements
 Inventory- merchandise intended for sale, tools and supplies used by the taxpayer in his business
 Investments- assets purchased which are intended to earn from appreciation in value or for accrual of
income such as dividends and interest
 Acquisition of intangible properties- amortized over the period they are expected to be used
 Expenses to promote business goodwill- Expenses incurred to create or maintain some form of
goodwill for the taxpayer’s trade or business of for the industry of profession of which the taxpayer is
member are non-deductible and should be amortized over the period of years during which the benefits
of the expenditures are realized
 Rental payments on finance lease that transfers ownership- commonly know as “rent to own”
arrangements which constitutes acquisition cost of the leased property that should be initially capitalized
and depreciated throughout the useful life
RULES ON DEDUCTING CAPITAL
EXPENDITURES

1. Non-depreciable asset
The cost of assets that do not depreciate by usage or by passage of time is deducted against the
selling price when sold.
2. Depreciable properties
The depreciable/acquisition cost, net of expected salvage value, is allocated as deduction over the
useful life of the property.
DEPRECIATION METHODS
A. Straight line method
The depreciable cost is simply spread equally over the useful life. The annual
depreciation expense is computed as:
(acquisition cost – salvage value)
useful life in years

B. Sum-of-the-years-digit method

The depreciation charge is computed as a fraction of the remaining useful life over the total of the
annual remaining useful life of the asset.
C. Declining balance method
A declining rate not exceeding double of the straight line rate is applied to the book value of the
property. For every period, depreciation expense is computed by multiplying the depreciation rate to the
declining book value of the property. The salvage value is initially ignored in computing depreciation
expense but is considered in the terminal year of the property.

D. Other methods which may be prescribed by the Secretary of Finance upon recommendation of
the Commissioner

Disposal of properties before full depreciation


If the property is disposed before it gets fully depreciated, its book value is deducted against the selling price
of the sale.
If the property is destroyed, its book value is recognized as an ordinary loss.
3. Intangible assets
Amortizable intangible assets or those that lose their value over the time should be expensed over
their legal life or expected usage life, whichever is lower.
Intangible assets that do not lose their value shall not be amortized.
4. Inventory
For goods inventory and supplies, their costs is deducted when sold or used in the business using the
inventory method or the specific identification method with the aid of a Point-of-Sale (POS) machine.

5. Prepaid expenses
Prepayments are deducted in the future period as they expire or as they are used in the business or
profession of the taxpayer. The advanced deduction of prepayments, if material in amount, will cause
significant distortion in net income; hence, not allowed.
Immaterial capital expenditures
The acquisition of items of property, plant and equipment, inventories or prepayments of
expenses which are relatively immaterial in amount may be deducted outright as expense.
Moreover, the inventory method may likewise be impractical to use for such items.
SPECIAL CONSIDERATIONS WITH DEDUCTIONS
1. Property repairs and improvements
Repairs that significantly increase the value or prolong the useful life of properties are capital
expenditures. These are capitalized to the adjusted tax basis of the property and are included in the
subsequent annual provision for depreciation.
Repairs that merely restore the value of functionality of the property shall be deducted as outright
expense.
If the fair value of the property increases due to repairs, improvements or additions, the actual cost of
these should be capitalized not the exceed the appreciation in fair value.
If the fair value of the property is not determinable, the excess of the actual repair cost over the tax
basis of the property is presumed a capitalizable increase in fair value.
Improvements and additions to normally increase the value or useful life of properties; hence,
capitalized and depreciated.
2. Asset acquisition-related costs
All costs directly related to the acquisition of an item of property, plant and equipment are capitalized
as part of the cost of the property subject to depreciation (exluding VAT for a VAT taxpayer).
Expenses incurred which are directly related to the acquisition of goods are capitalized to the cost of
goods and are expensed through cost of goods sold when sold.
Cost of financing the asset acquisition (i.e. interest expense) may, at the option of the taxpayer, be
expensed outright or capitalized and depreciated.
3. Security issue costs
Expenses of issuing entity or debt securities are not deductible expense against gross income. They
are deducted against the proceeds of such securities.
4. Manufacturing expenses
Plant or factory expenses such as cost of raw materials and supplies used, labor, and other overheads
are capitalized as part of the cost of goods being processed and are expensed through cost of sales when
sold.
The cost of goods sold of a manufacturing firm is computed as:
5. Effects of accounting methods
The methods adopted by the taxpayer in accounting for expense have a significant bearing on the
deductible expense.
Deductions shall be composed of the following:
CASH BASIS ACCRUAL BASIS
Cash expenses (paid) xx Accrued expenses (paid or unpaid) xx
Amortization of prepayments xx Amortization of prepayments xx
Depreciation of properties xx Depreciation of properties xx
Cash basis deductions xx Accrual basis deductions xx
GENERAL PRINCIPLES OF DEDUCTIONS FROM
GROSS INCOME
1. Expenses must be legitimate, ordinary, actual and necessary (LOAN)
Characteristics of a legitimate business expense:
a. Incurred in and for the current taxable period
b. Not a capital expenditure
c. Pertains to the business or profession of the taxpayer
d. Not contrary to law, public policy or morals
e. Adequately substantiated with receipts or other documents.

A deductible expense must be both ordinary and necessary


An expense is necessary if reasonable and essential to the development, management, operation, or conduct
of the trade, business or exercise of profession of the taxpayer.
It is ordinary when it is a payment which is normal in relation to the business of the taxpayer and the
surrounding circumstances and if it normally incurred by other taxpayers under the same line of business.
An expense is actual if it is paid or resulted to an incurrence of an obligation to the taxpayer. In case of a loss, it
must be sustained or realized by the taxpayer in a closed and complete transaction which is when no further
transaction emanates from its occurrence or when no right of recourse for indemnification or reimbursement
from other party exits.

Examples of non-deductible expense under this rule:


1. Decrease in value of properties or investments
2. Estimated future losses
3. Loss on properties covered with insurance or indemnity contracts
2. Matching Principle
It is a well-established rule in income taxation that only business expenses that are incurred for the generation of
items of gross income subject to regular tax are deductible. This is a pervasive criterion observed by the NIRC,
including revenue regulation and BIR rulings.
Business expenses incurred to generate items of gross income that are either exempt or excluded from
taxation, subject to final tax or capital gains tax or to a special tax regime must not be matched or deducted against
gross income subject to regular tax.

3. Related Party Rule


Gains realized between related parties are taxable but losses are non-deductible.
Who are related parties?
A. Members of the family – includes brothers and sisters (whether half-blood or full-blood), spouse, lineal
ascendants and descendants
B. Except in cases of distribution in liquidation, the direct or indirect controlling individual of a corporation
C. Except in cases of distribution in liquidation, corporations under direct or indirect common control
(ownership of more than ½ of the voting stocks of a corporation) by or for the same individual
D. Grantor and fiduciary of any trust
E. Fiduciaries of trusts with the same grantor
F. Fiduciary of a trust and the beneficiary of such trust
4. Withholding Rule
The business or professional practice must withhold (pre-deduct) any required final taxes or creditable withholding
taxes upon his income payments and remit the same to the government.
Non-withholding shall render the expense non-deductible.

Expenses subject to withholding tax:


A. Compensation expense- BIR Form 1601-C
B. Fringe benefits expense- BIR Form 1601-F
C. Passive expenses- BIR Form 1601-F
D. Expenses subject to the expanded withholding taxes- BIR Form 1604-E
(refer to Appendix 3)

The business or professional practice must release to the recipient of the income payments copies of evidence
of the withholding:
A. BIR Form 2306 (Certificate of final tax withheld at source) or
B. BIR Form 2307 (Certificate of creditable tax withheld at source)
NON DEDUCTIBLE EXPENSE
1. Personal, living or family expenses
2. Amount paid out for new buildings or for permanent, or betterments made to increase
the value of any property or estate
3. Any amount expended in restoring property or in making good the exhaustion thereof
4. Premiums paid on any life insurance policy covering the life of any officer or
employee, or any person financially interested in any trade or business carried on by
the taxpayer, individually or corporate, when the taxpayer is directly or indirectly a
beneficiary under such policy.
TAX REPORTING CLASSIFICATION OF
DEDUCTIONS

1. Cost of sales or cost of services- it is deducted outright against sales, revenues, receipts or fees of
individual taxpayers in the measurement of gross income from operations.
2. Regular allowable itemized deductions- pertains to all necessary and ordinary expenses paid
or incurred during the taxable year including directly attributable costs in carrying on the
development, management, operation and/or conduct of the trade, business or exercise of
profession.
Expenses which are not directly related to the acquisition of goods or provision of services are
included in the regular allowable itemized deductions. These include administrative and selling
expenses.
3. Special allowable itemized deductions- are additional deductions provided under the NIRC or
special laws. It can be categorized into two types:
A. Actual compliance expense- actual payments or transfers of funds
B. Deduction incentives- not actual expense but are merely allowed by law to encourage
taxpayer to support government programs
4. Net Operating Loss Carry-Over (NOLCO)- it pertains to the excess of deductions over gross
income during a taxable year which is allowed by the law to be deducted against the net income of
the following three years.
MODE OF CLAIMING DEDUCTIONS FROM
GROSS INCOME
1. Itemized deductions
The taxpayer lists every item of business expense he claims as deduction. Deductions are strictly construed
against the taxpayer.
The taxpayer has to point to the provision of the law authorizing the deduction, substantiates his claim by
supporting the deduction with official receipts, payment vouchers, cancelled checks or other adequate records
and documentations, and complies with any withholding tax requirements on expenses. Deductions claimed
must also comply with any applicable deduction ceilings set by law.
2. Optional standard deductions
The optional standard deductions is in lieu of the itemized deductions, regular or special, including NOLCO.
The deduction is merely presumed as a fixed percentage of gross income for corporations and gross sales or
gross receipts for individuals.
SPECIAL ALLOWABLE ITEMIZED
DEDUCTIONS
o These are other items of deductions which may or may not partake the nature
of an expense but is allowed by the NIRC or by special laws as deductions

o Include deduction incentives to taxpayers in assisting and complying with


certain legal requirements.
1. Income distribution from a taxable estate or trust
2. Transfer to reserve fund and payments to policies and annuity contracts of
insurance companies
3. Dividend distribution of a Real Estate Investment Trust (REIT) under RA
9856
4. Transfer to reserve funds and taxable cooperatives
5. Discounts to senior citizens under RA 9257
6. Discounts to persons with disability under RA 9442

SPECIAL ALLOWABLE DEDUCTIONS:


SPECIAL EXPENSES UNDER THE NIRC AND
SPECIAL LAWS
1. Additional compensation expense for senior citizen employee under RA 9257
2. Additional compensation expense for persons with disability under RA 7277, as amended by RA 9442
3. Cost of facilities improvements for persons with disability in accordance with RA 7277 , as amended
by RA 9442
4. Additional training expense under the RA 8502, jewelry industry Development Act of 1998
5. Additional contribution expense under the Adopt-a-School program under RA 8525
6. Additional deductions for compliance to Rooming-in and Breast-feeding practices under RA 7600, as amended
by RA 10028
7. Additional free legal assistance expense under RA 9999
8.
Deduction Incentives under Special Laws
Additional productivity incentive bonus expense under Ra 6971
Income distribution made by taxable estate or trusts

 Income distribution made by the administrator of a taxable estate or trust in


favor of the heirs of by a trustee of a taxable trust in favor of the beneficiary of
the trust is a special deduction against the gross income of the estate or trust
the income distribution shall be included by the recipient heir or beneficiary in
his gross income

SPECIAL EXPENSES UNDER THE NIRC


AND SPECIAL LAWS
 A REIT is a publicly listed corporation established principally for the purpose of owning
income –generating real state assets. A REIT is legally mandated to distribute income as
dividends to shareholders.
 Under RA 9856, the dividend distributions of REITs are treated s special deductions against
gross income.
 For a purpose of computing the taxable income of REITs, dividends distributed by them
from their distributable income after the close of the taxable year and on or before the last
day of the fifth month following the close of the taxable year shall be considered as paid on
the last day of such taxable year.

Dividend distribution of a Real Estate Investment Trust (REIT)


 Under RA 9250, cooperatives are required to maintain reserves for their
protection and stability. Cooperatives are exempt from income tax but are
subject to tax on their income from unrelated activities. The amount
transferred by the cooperative to the reserve fund out of the surplus from
unrelated activities is an item of deduction in the computation of the taxable
net income of the cooperative.

Transfer to reserve fund of cooperatives


 Under the Insurance Code, non-life insurance companies are required to maintain
a reserve equivalent to 40% of their gross premium, less returns and cancellations for
risks expiring within one year. For marine cargo risks, the reserve is equivalent to the
amount of premium on insurance during the last two month of the calendar year.
 The net additions, if any, required by law to be made within a year to reserve
the funds and the sums, other than dividends, paid within one year on policy and
annuity contracts may be deducted from the gross income of insurance companies.
 Under current regulations, the transfer to the reserve fund shall be deductible in
one year it was actually paid and not in the year it was determined. Also in in
consonance to the tax benefit rule, the release of the reserve is treated as an income
in the year of release.

Net transfer to Reserve Fund and Payments to Policies


and Annuity contracts of Insurance Companies
Conditions for deductibility of sales discounts to senior citizens

1. Only that portion of that sales exclusively used, consumed or enjoyed by the senior citizen shall be eligible for
the deductible sales discount.
2. the gross selling price and the sales discount must be separately indicate in the official receipt or sales
invoice issued by the establishment for the sale pf goods or services to the senior citizen.
3. Only the actual amount of the discount granted or sales discount not exceeding 20% of the gross selling price
can be deducted from gross income, net of VAT, if applicable.
4. The discount can only be allowed as deduction from gross income for the same taxable year that the discount is
granted.
5. The business establishment giving sales discount to qualified senior citizen is required to keep a separate amount
and accurate records of sales, which shall include the name, TIN. ID, gross sales/receipt, discounts granted, date
of the transaction and invoice number for every sale transaction to senior citizen.
 Senior Citizen or Elderly
“Senior Citizen or Elderly” refer to any resident Filipino citizen aged 60 years old and above.

 Under RA 9257, a senior citizen or elderly is entitled to a 20% discount on certain establishment
such as hotels and similar lodging establishments, restaurants, re creational 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 and burial service providers.

 The discounts granted to senior citizens by covered establishments and service providers ae
allowed special deductions against gross income.

The Expanded Senior Citizen Act of 2003 (RA 9257)


 Additional Claimable Compensation Expense for Senior Citizen
Employees

 Under RA 9257, private establishments employing senior citizens shall be


entitled to additional deduction from gross income equivalent to 15% of the total
amount paid as salaries and wages to senior citizens.

Deduction Incentives under Special Laws:


Conditions for deductibility of additional compensation:

1. Employment shall to continue for at least 6 months


2. The annual taxable income of the senior citizen does not exceed the poverty level as determined the NEDA.

 The poverty line or poverty threshold pertains to the amount of income sufficient to meet basic food and
non-food needs such as clothing, housing, transportation, and health among others. The senior citizen shall
submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level.

 The 15% additional deduction s definitely not an actual expense but is allowed by law merely as an
incentive for employers who considers senior citizens for employment. The regular salaries will be presented as
part of regular allowable itemized deductions. The 15% additional deduction shall be presented as special
allowable itemized deductions.

 Senior citizens who are above the poverty level may avail of incentives under the Minimum Wage Law if
they qualify as minimum wage earners.
DISCOUNTS TO DISABLED PERSONS (RA 7277)

 A person with disability pertains to an individual suffering from restriction or different


abilities, as a result of mental, physical, or sensory impairment to perform an activity in a
manner or within the range considered normal for human beings.

 Disability pertains to physical or mental impairment that substantially limits one or more
psychological, physiological or anatomical functions of an individual or activities of such
individuals.
Discounts to persons with disability

 Similar to senior citizens, persons with disability is entitled to 20% discount from certain establishment such as
hotels and similar lodging establishments, restaurants, re creational centers, and other places of culture, leisure
and amusements, drugstore on the purchase of medicine, medical and dental services in private facilities, and
domestic air, sea and land transport.

 The discounts to persons with disability shall be allowed as special deduction under the same terms and
conditions with those for senior citizens.
 Under the Adopt-a-School Program, private entities are allowed to assist a public
school in particular aspect of educational program within an agreed period of time.
 The adopting private entity which may be an individual in business or practice of
profession, a partnership or a corporation, shall team up with the DepEd, CHED or
TESDA toward providing much needed assistance and services to public schools.
 The assistance may be an aid, contribution, or donation in cash or in kind but not
limited to infrastructure, physical facilities, real estate property, training and skills
development, learning support, reading materials, computer and science laboratories,
health and nutrition packages, and assistive learning devices for students with special
needs.

ADOPT-A-SCHOOL ACT OF 1998


(RA8525)
Qualifications of participating schools:
 Any government schools in all levels may participate in the program. Priorities shall be given to schools
located in the poorest provinces, low income municipalities, and other local government units
experiencing severe classroom shortages, insufficient budget, or having numerous poor but high
performance learners.
Qualifications of Adopting Private Entity:
1. It must have a credible track record
2. It must have been in existence for at least one year
3. It must not have prosecuted and guilty in engaging in illegal activities such a s money laundering and
other similar circumstances.

Tax Deduction Incentive:


 Contributions to the government in priority activities are deductible in full while those made in non-priority
activities are deductible subject to limit.

 Aside from the usual regular deductible contribution expense, an adopting entity shall be allowed an
additional deduction from gross income equivalent to 50% of the contribution of the adopting entity for
the Adopt-a School Program.
Conditions for deductibility:

a) The deduction shall be availed of in the taxable year in which the expense is paid or incurred.
b) The expense is substantiated with sufficient evidence, such a official receipts or delivery receipt and other
adequate records.
a. the amount or expenses being claimed as deductions.
b. Direct connection or relation of the expenses to the adopting private entity's participation in the Adopt-
a-School Program.
c. Proof of acknowledgement of receipt of the contributed or donated property by the recipient public
school.
c) The application together with the approved MOA endorsed by the National Secretariat, shall be filed with
RDO having jurisdiction over the place of business of the Adopting private entity, copy furnished RDO
having jurisdiction of the property, if the contribution is in the form of property.
Memorandum Agreement
 An adopting private entity shall enter into a Memorandum of Agreement(MOA) with the head of the public
school. The MOA shall specify the detail of the adoption which must be for a minimum of 2 years pre-
terminable only when the adopting private entity is dissolve prior to the end of such period or when terminated
for failure to possess the qualifications of such.

Supporting evidence
 An adopting entity must maintain sufficient evidence of the amount of assistance incurred, establish the
connection of the expense to the adopting entity’s participation in the program, and maintain proof of
acknowledgement receipt by the public school recipient of the donation.
 Apply for Certificate of Tax Incentive and Tax Incentive and Tax Exemption
 The adopting entity shall apply for a “certificate of tax incentive and tax exemptions” and submit the
following documents to the Secretariat.
a) Duly authorized approved MOA
b) Duly notarized deed of donation
c) Official receipt and other documents showing the actual value of the contribution or donation
d) Certificate of Title and Tax Declaration, if the donation is in the form of property
e) Other adequate records showing direct connection or correlation of the expense being claimed as deduction
to the adopting entity’s participation in the program
1. Cash assistance, contribution or donation shall be based on the actual amount appearing in the
official receipt issued by the done.
2. Assistance other than money
a. Personal property – acquisition cost of assistance or contribution
b. Consumable goods – acquisition cost or value at date of donation whichever is lower
c. Services – the value of services rendered by the donor and the service provider and the public
school as fixed in the MOA or the actual expense incurred by the donor, whichever is lower
d. Real property – fair value (higher of zonal value or assessed value) at the time of contribution
or the depreciated cost of the property whichever is lower

VALUATION OF DEDUCTIONS (RR10-


2003)
 Note:
1. For corporations, contribution to the government is non-priority activities are subject to a limit of
5% of the net income before the contribution.
2. The basis of the additional incentive is the actual donation as valued under RR10-2003 not the
amount of the regular allowable itemized contribution expense.
 Private entitles that employ disabled persons who meet the required skills or qualifications, either as
regular employee, apprentice or learner, shall be entitled to an additional deduction from their gross
income, equivalent to 25% of the total amount paid as salaries and wages to disabled persons.

 Requisite for Deductibility:


a) The entity present proof as certified by the Department of Labor and Employment that disabled persons are
ender their employ
b) The disabled employee is accredited with the Department of Labor and Employment and the Department of
Health as to his disability, skills and qualifications.
 The actual salaries shall be presented as part of regular expense while the 25% additional salaries expense
shall be presented as special itemized allowable deductions.

ADDITIONAL CLAIMABLE COMPENSATION


EXPENSE FOR PERSONS WITH DISABILITY
 Under RA 7277, private entities that improve or modify their physical facilities in
order to provide reasonable accommodation for disabled persons shall also be
entitled to additional deduction from their income, equivalent to 50% of the direct
costs of the improvements or modifications.

COST OF FACILITIES IMPROVEMENT


FOR DISABLED PERSONS
 Under RA 8502 and its implementing rules and regulations, a qualified jewelry enterprise duly registered
and accredited with the Board of Investments (BOI) is entitled to an a additional deduction from taxable
income of 50% of the expenses incurred in training schemes approved by Technical Education and Skills
Development Authority (TESDA). The same shall be deductible during the year the expenses were incurred.

 Conditions for Deductibility:


a) A qualified jewelry enterprise must submit to the BIR a certified true copy of its Certificate of Accreditation issued
by the BOI.
b) The training scheme must be approved and certified by TESDA.

ADDITIONAL TRAINING EXPENSE UNDER


THE JEWELRY INDUSTRY DEVELOPMENT ACT
OF 1998
 The purpose of RA 10028 is to encourage, protect and support the practice of
breast-feeding which is believed to provide distinct benefits to the mother and
the infant aside from saving the country’s valuable foreign exchange that may
otherwise be used for milk importation.

EXPANDED BREASTFEEDING
PROMOTIONAL ACT OF 2009 (RA 10028)
 Requirements to all Establishments:
 Location station
• All health and non-health facilities, establishments and institutions whether operating for profit or non-profit
which employ in any workplace nursing employees are required to establish a lactation station. Exemptions
may be granted when the establishment of the lactation station is not necessary due to the circumstance of
the workplace taking into consideration among others the number of employees, physical size of
establishments, and the average number of women who visit.
• Due substantiation shall be made by the employer to support the application for exemption. Private sectors
may secure exemption from the Department of Labor and Employment (DOLE). Public sector may apply for
exemption from the Chairperson of the Civil Service Commission. The certificate of exemption is valid for 2
years.
 Lactation period
• Nursing employees shall be granted break intervals of not less than 40 minutes for
every 8-hour working period, in addition to the regular time-off for meals to
breastfeed or express milk. The interval shall include the time it takes the
employee to get to and from the workplace and the lactation station =. The
required additional breaks are compensable hours.

 Access to Breastfeed information


• Employers shall ensure the staff and employees shall be made aware of the
Breastfeeding Act and its Implementing regulations.
 Rooming-in policy:
• The law requires newborn infants and mother to be roomed-in immediately after birth for a certain length of time.
In case the mother and baby separated and direct breastfeeding is not possible, there should be facilities for milk
expression and milk storage.
 Milk Storage Facility
• All health institutions adopting rooming-in and breastfeeding shall provide milk storage facility. A milk storage
facility is a private, clean. Sanitary, and well-ventilated area or space for the purpose of collecting and storing
milk among mothers separated from their babies due to medical reasons. This is different from a milk bank and a
lactation station. There must be dedicated and trained person who will supervise and assist the mothers who will
use the facility and the facility should comply with the Executive Order 51.

REQUIREMENTS TO HEALTH INSTITUTIONS:


 Milk Banks

• Milk banks can be used as temporary solutions when the mother and baby are separated, it may be a
source of breast milk for infants that are victims during an emergency and/or disaster.
• Medical centers and Regional hospitals among others re encouraged to set-up milk banks which should be
operated on a non-profit basis but a minimal processing fee may be charged to cover for the screening,
processing and administrative costs.
• Inability to pay the fees shall not be reason for a non-availment of the milk for patient in need. These milk
must have their own permanent, dedicated staff or personnel who are trained in human mil banking and
lactation management.
 Tax deduction incentives:
 The expenses incurred by a private health institution in complying with the rooming-in and breast-
feeding practices, shall be deductible expenses for income tax purposes up to twice the actual amount
incurred.

 Conditions for deductibility:


1. The deduction shall apply for the taxable period when the expenses were incurred
2. Al health or non-health facilities, establishments and institutions shall comply with the IRR of RA 10028within 6 months of its
approval.
3. The facility, establishment or institution secure a “Working Mother-Baby-Friendly Certificate” from the Department of Health to be
filed with the BIR.
FREE LEGAL ASSISTANCE (RA 9999)
 Lawyers or professional partnerships providing pro-bono legal services are given deduction incentives
for their free legal services.

 Requirement for Availment:


 Lawyers or professional partnerships rendering actual free legal services hall secure a certification from the Public Attorney’s
Office (PAO), the Department of Justice (DOJ) or association accredited by the Supreme Court indicating that the said legal
services to be provided are within the services defined by the Supreme Court, and the legal agencies cannot provide the legal
services to be provided by the legal counsel.
 The association and organization duly accredited by the Supreme Court shall issue the necessary certification for the number of
hours actually provided by the lawyer or partnership.
 Tax Deduction Incentive

 The practicing lawyer or professional partnership shall be entitled to an allowable deduction from gross income
equivalent to the amount that could gave 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.
 For the purpose of this incentive, 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.
 Under the Productivity Incentive Act of 1990(RA 6971), a business enterprise which adopts a
productivity incentive program is entitled to a special additional deduction equivalent to 50% of the
total productivity bonuses given to employees under the program.
 In addition, business enterprises providing manpower training and special studies to rank-and-file
employees as accredited by the Technical Education and Skills Development Authority are also
entitled to 50% additional deduction of the total grant for local trainings and special studies.
 However, the deduction incentive will not be allowed on bonuses accruing during the pendency of
strike or lockout arising from any violation of the productivity incentive program.

ADDITIONAL PRODUCTIVITY
INCENTIVE BONUS EXPENSE
Net Operating Loss Carry Over

 Net operating loss (NOL) pertains to the excess of allowable deductions over the gross income from business or
exercise of a profession during a taxable year.
 Net operating loss carry-over (NOLCO) pertains to the amount of net operating loss that is allowed by the law to
be carried over as deduction against available net income in the following three years.

NOLCO is computed as:


Gross income subject to regular tax Pxxx
Less:
Total deductions, excluding NOLCO from prior years
and deduction incentives under special laws xxxx
Net operating loss carry over Pxxxx

 It must be noted that the deduction incentives under special laws are not actual costs; hence, they are excluded in
the amount of the net operating loss carry-over. Moreover, deduction incentives are legally allowed only as
deduction in the period incurred or paid. Hence’ carry-over of these deduction incentives is not warranted. The
NOLCO of the current year to avoid breaching the three year prescriptive period rule.

Вам также может понравиться