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
