The Revenue Regulations No. 16-2008, as amended was issued by the bureau to determine the Optional Standard Deduction (OSD) allowed to Individuals and Corporations in computing their Taxable Income.
Persons covered are as follows:
1. Individuals: Residents Citizen; Non-resident Citizen; Resident Alien; Taxable Estates and Trusts
2. Corporations: Domestic Corporation and Resident Foreign Corporation
The OSD allowed to individual taxpayers shall be a maximum of forty percent (40%) of gross sales or gross receipts during the taxable year. if the individual is on the accrual basis of accounting for his income and deductions, the OSD shall be based on the gross sales during the taxable year. In the other hand, if the individual employs the cash basis of accounting for his income and deductions, the OSD shall be based on his gross receipts during the taxable year.
If Individual If Corporation
Gross Sales P100,000 P100,000
Less: Cost of Goods Sold 80,000
Basis of the OSD 100,000 20,000
X OSD Rate (maximum) .40 .40
OSD Amount P 40,000 P 8,000
Gross Sales P100,000 P100,000
Less: Cost of sales - 80,000
Gross Sales 100,000 20,000
Less: OSD (maximum) 40,000 8,000
Net Income 60,000 12,000
Less: Personal Exemption 50,000 -
Additional Exemption 25,000 -
Taxable Income P(15,000) P 12,000
Gross Sales P100,000 P100,000
Less: Cost of sales - 80,000
Gross Sales 100,000 20,000
Less: OSD (maximum) 40,000 8,000
Net Income 60,000 12,000
Less: Personal Exemption 50,000 -
Additional Exemption 25,000 -
Taxable Income P(15,000) P 12,000
Thanks http://www.blogger.com/profile/04798766688958154762
ReplyDeleteAre individuals earning both compensation and business income qualified for OSD?
ReplyDeleteYes. You will be filing BIR Forms 1701Q and 1701 as Single Proprietor. Once you opted to use OSD during the First Quarter, you will do the same to the other quarters and Annual Income Tax (1701). Thank you
Deletehi, please refer this link: http://philippinetaxtalk.blogspot.com/2015/04/individual-taxpayers-who-are-not.html Just copy paste to you internet browser. thank you
ReplyDeleteThis is great stuff. Very simple yet informative.
ReplyDeleteOne question though, if I may ask. Let's say an individual was employed during the first half of the year then decided to do freelance service as individual/sole propriertor during the next half of the year, is he qualified for OSD for the 2nd half of the year?
thanks a lot
Thanks sir. Yes he is qualifies for OSD upon registration. Once he opt to used the OSD in that quarter, he is required to use in the succeeding quarters and Annual Income Tax. If he is also employed and at the same time a sole proprietor, he is classified as a Mix Income Earner (Compensation and Business).
DeleteGoodmorning sir, I would like to clarify...
ReplyDeleteIf am a sole proprietor and am opt to use OSD in filing income tax, am I mandatory to file with audited financial statement when my income exceed to 600k?
Sir, can I ask for a sample computation on how to get the tax due for a sole proprietor (common carrier), retiree,and opt to use OSD with only 12,000 per quarter as his sales/income? Why is it there is no deduction per quarter for married/with dependents?
ReplyDeleteHi! I'm working remotely for a company outside the Philippines. I'll be filing my tax as 'self employed'. Can I used OSD in my tax computations?
ReplyDeleteThanks for this post! For legal tax help, visit the best attorney in Manila, NDV Law.
ReplyDeleteWhen im using EBIR portal, in 1701 annual when checked OSD, the part PERSONAL EXEMPTION is not fillable. in which Im supposed to file based on your sample, What's the problem with the portal? or should I need to file a downloaded form instead? FROM CONCERN CITIZEN_TERESE
ReplyDeletedo we need to show receipts to bir when osd is chosen?
ReplyDelete