I'm Giancarlo Enrico S. Pozon, a Wushu instructor, investor and Barrister... That's right, Barrister; I graduated from law school and took the Bar Exams, now I'm waiting for the results. I created this blog to make Philippine Law easy to understand for the average person. It's all about free legal advice. There are many law blogs. But the problem is that many of them are written for lawyers and law students. They use words that can't be understood by ordinary people.
Many lawyers, judges and law students consider themselves as superior to most human beings because of their knowledge of the law. It bothers me since the law is supposed to serve society. Since the law is meant to serve society as a whole, it is important that is must be understood by everybody.
This does not mean that we should all become lawyers. It means that although law is a highly specialized profession, the first duty of everybody in this profession is to make the law understandable to all; that's why all these articles are free legal advice.
Like I said, this blog is about law -but it's for the ordinary people, not the lawyers. It's for the ordinary folk so they will know what is good and bad for them, and that making them aware of the law will help us all improve society as a whole. This is free legal advice for everybody!
The NIRC provides two methods of deduction the taxpayer may use, depending on his capability and convenience: the Optional Standard Deduction and Itemized Deduction.
1.) Optional Standard Deduction
For individuals, estates and trusts, 40% of gross sales or gross receipts may be deducted as expenses. For corporations and partnerships, 40% of the gross income may be deducted as expenses. This option is available to resident citizens, nonresident citizens, resident aliens, estates, trusts, partnerships, domestic corporations and resident foreign corporations. It cannot be availed of by nonresident aliens, whether doing business in the Philippines or not, and nonresident foreign corporations. This options does NOT require the presentation of supporting documents to claim the 40% deduction!
2.) Itemized Deduction
Expense deductions must be supported by the necessary documents and evidence to claim such a deduction. Therefore, the taxpayer has the burden of proof to prove that his expenses are correct. This option is not available to nonresident foreign corporations and nonresident aliens not doing business in the Philippines.
So choose whichever suits your concerns!
Here's a suggestion. Before you pay your taxes (and before the tax man arrives to assess you) do an accounting. Depending on the results of your inventory, you can then choose which option to use to deduct your expenses with. Each option has its advantages.
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