GROUP 6 ALOJADO l MONTEMAYOR l PLOPINIO l VILLAJUAN

PART II -  INDIVIDUALS CORPORATIONS ESTATES & NOTES

DEDUCTIONS  TRUSTS
CITIZEN ALIEN DOMESTIC FOREIGN
RESIDENT NON-RESIDENT RESIDENT NON-RESIDENT RESIDENT NON-RESIDENT
Engaged in Not engaged
trade or in trade or
business business
Optional Standard Allowed in Allowed in Allowed in Not allowed Not allowed Allowed in Allowed in Not allowed Allowed
Deduction lieu of lieu of lieu of lieu of lieu of
Itemized; Itemized; Itemized; Itemized; Itemized;
except on except on except on except when except when
compensatio compensatio compensatio they availed they availed
n income & n income & n income & of the option of the option
those those those for 15% tax for 15% tax
claiming 8% claiming 8% claiming 8% on GI on GI
FT FT FT provided provided
certain certain
qualifications qualifications

Itemized Deductions:

a. Ordinary and Allowed; Allowed; Allowed; Allowed; Not allowed Allowed Allowed Not allowed Allowed
Necessary Trade, except for TP except for TP
Business or earning earning
Professional expenses compensatio compensatio
n income n income
arising from arising from
personal personal
services services
rendered rendered
under ER-EE under ER-EE
relationship relationship

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b. Interest Allowed Allowed Allowed Allowed Not allowed Allowed Allowed Not allowed Allowed Limit: TP’s
deduction is
limited shall
Limit: Interest Arbitrage be reduced
by 33% of
the interest
income
c. Taxes Allowed; Allowed; Allowed; Allowed only Not allowed Allowed; Allowed only Not allowed Allowed;
except for a) except for a) except for a) if and to the except for a) if and to the except for a)
income taxes income taxes income taxes extent that income taxes extent that income taxes
provided for provided for provided for they are provided for they are provided for
under this under this under this connected under this connected under this
Title; b) Title; b) Title; b) with income Title; b) with income Title; b)
Income taxes Income taxes Income taxes from sources Income taxes from sources Income taxes
imposed by imposed by imposed by within the imposed by within the imposed by
authority of authority of authority of Philippines; authority of Philippines; authority of
any foreign any foreign any foreign except for a) any foreign except for a) any foreign
country; c) country; c) country; c) income taxes country; c) income taxes country; c)
estate and estate and estate and provided for estate and provided for estate and
donor taxes; donor taxes; donor taxes; under this donor taxes; under this donor taxes;
and d) taxes and d) taxes and d) taxes Title; b) and d) taxes Title; b) and d) taxes
assessed assessed assessed Income taxes assessed Income taxes assessed
against local against local against local imposed by against local imposed by against local
benefits of a benefits of a benefits of a authority of benefits of a authority of benefits of a
kind tending kind tending kind tending any foreign kind tending any foreign kind tending
to increase to increase to increase country; c) to increase country; c) to increase
the value of the value of the value of estate and the value of estate and the value of
the property the property the property donor taxes; the property donor taxes; the property
and d) taxes and d) taxes
assessed assessed
against local against local
benefits of a benefits of a
kind tending kind tending
to increase to increase

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the value of the value of

the property the property
d. Losses
- In general Allowed as Allowed as Allowed as Allowed; Not allowed Allowed as Allowed; Not allowed Allowed as
deductions a) deductions a) deductions a) Limit: those deductions a) Limit: those deductions a)
if incurred in if incurred in if incurred in actually if incurred in actually if incurred in
trade, trade, trade, sustained trade, sustained trade,
profession or profession or profession or during the profession or during the profession or
business; b) business; b) business; b) year incurred business; b) year incurred business; b)
of property of property of property in business, of property in business, of property
concerned concerned concerned trade, or concerned trade, or concerned
with the with the with the exercise of a with the exercise of a with the
trade, trade, trade, profession trade, profession trade,
business or business or business or conducted business or conducted business or
profession, if profession, if profession, if within the profession, if within the profession, if
the loss the loss the loss Philippines, the loss Philippines, the loss
arises from arises from arises from when such arises from when such arises from
fires, storms, fires, storms, fires, storms, losses are fires, storms, losses are fires, storms,
shipwreck, or shipwreck, or shipwreck, or not shipwreck, or not shipwreck, or
other other other compensated other compensated other
casualties, or casualties, or casualties, or for by casualties, or for by casualties, or
from robbery, from robbery, from robbery, insurance or from robbery, insurance or from robbery,
theft, or theft, or theft, or other forms theft, or other forms theft, or
embezzleme embezzleme embezzleme of indemnity embezzleme of indemnity embezzleme
nt nt nt nt nt

- Net operating loss Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed;
carry over except for except for except for except for except for except for except for
any net loss any net loss any net loss any net loss any net loss any net loss any net loss
*Merger incurred in a incurred in a incurred in a incurred in a incurred in a incurred in a incurred in a
taxable year taxable year taxable year taxable year taxable year taxable year taxable year
during which during which during which during which during which during which during which
the taxpayer the taxpayer the taxpayer the taxpayer the taxpayer the taxpayer the taxpayer
was exempt was exempt was exempt was exempt was exempt was exempt was exempt
from income from income
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from income from income from income from income tax; provided tax; provided from income
tax tax tax tax that there that there tax
has been no has been no
substantial substantial
change in the change in the
ownership of ownership of
the business the business
or enterprise or enterprise
in that: in that:

a. Not less a. Not less

than 75% in than 75% in
nominal nominal
value of value of
outstanding outstanding
issued issued
shares if the shares if the
business is in business is in
the name of the name of
a a
corporation, corporation,
is held by or is held by or
on behalf of on behalf of
the same the same
persons; or persons; or

b. Not less b. Not less

than 75% of than 75% of
the paid up the paid up
capital of the capital of the
corporation, if corporation, if
the business the business
in in the in in the
name of a name of a
corporation, corporation,
is held by or is held by or

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on behalf of on behalf of
the same the same
persons. persons.
- capital loss Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed;
Limit: only to Limit: only to Limit: only to Limit: only to Limit: only to Limit: only to Limit: only to
the extent the extent the extent the extent the extent the extent the extent
provided in provided in provided in provided in provided in provided in provided in
Section 39 Section 39 Section 39 Section 39 Section 39 Section 39 Section 39
(gains from (gains from (gains from (gains from (gains from (gains from (gains from
such sales or such sales or such sales or such sales or such sales or such sales or such sales or
exchanges) exchanges) exchanges) exchanges) exchanges) exchanges) exchanges)

- losses from wash Not allowed; Not allowed Not allowed Not allowed Not allowed Not allowed Not allowed Not allowed Not allowed Allowed if the
sale claim is
made by a
dealer in
stock or
securities
and with
respect to a
transaction in
the ordinary
course of
business of
such dealer
- Wagering loss Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed;
Limit: extent Limit: extent Limit: extent Limit: extent Limit: extent Limit: extent Limit: extent
of gains from of gains from of gains from of gains from of gains from of gains from of gains from
such such such such such such such
transaction transaction transaction transaction transaction transaction transaction

- Abandonment loss Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed;
Limit: allowed Limit: allowed Limit: allowed Limit: allowed Limit: allowed Limit: allowed Limit: allowed
only in only in only in only in only in only in only in
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petroleum petroleum petroleum petroleum petroleum petroleum petroleum

operation are operation are operation are operation are operation are operation are operation are
undertaken/ undertaken/ undertaken/ undertaken/ undertaken/ undertaken/ undertaken/
producing producing producing producing producing producing producing
well well well well well well well

e. Bad Debt Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed;
except those except those except those except those except those except those except those
not not not not not not not
connected connected connected connected connected connected connected
with with with with with with with
profession, profession, profession, profession, profession, profession, profession,
trade or trade or trade or trade or trade or trade or trade or
business and business and business and business and business and business and business and
those those those those those those those
sustained in sustained in sustained in sustained in sustained in sustained in sustained in
a transaction a transaction a transaction a transaction a transaction a transaction a transaction
entered into entered into entered into entered into entered into entered into entered into
between between between between between between between
parties parties parties parties parties parties parties

f. Depreciation Allowed; Allowed; Allowed; Allowed only Not allowed Allowed; Allowed only Not allowed Allowed
when the when the
property is property is
located in the located in the
Philippines Philippines
g. Charitable and other Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed; Full
contributions provided no provided no provided no provided no provided no provided no provided no deductions:
part of the part of the part of the part of the part of the part of the part of the 1. Donations
Full deduction: net income of net income of net income of net income of net income of net income of net income of to the
which inures which inures which inures which inures which inures which inures which inures government
Partial deduction: to the benefit to the benefit to the benefit to the benefit to the benefit to the benefit to the benefit 2. Donations
of any private of any private of any private of any private of any private of any private of any private to certain
stockholder stockholder stockholder stockholder stockholder stockholder stockholder foreign
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GROUP 6 ALOJADO l MONTEMAYOR l PLOPINIO l VILLAJUAN

or individual or individual or individual or individual or individual or individual or individual institutions or

in an amount in an amount in an amount in an amount in an amount in an amount in an amount international
not in excess not in excess not in excess not in excess not in excess not in excess not in excess organizations
of ten of ten of ten of ten of ten of ten of ten 3. Donations
percent percent percent percent percent percent percent to accredited
(10%) in the (10%) in the (10%) in the (10%) in the (10%) in the (10%) in the (10%) in the NGOs
case of an case of an case of an case of an case of an case of an case of an
individual, individual, individual, individual, individual, individual, individual,
and five and five and five and five and five and five and five
percent (%) percent (%) percent (%) percent (%) percent (%) percent (%) percent (%)
in the case of in the case of in the case of in the case of in the case of in the case of in the case of
a a a a a a a
corporation, corporation, corporation, corporation, corporation, corporation, corporation,
of the of the of the of the of the of the of the
taxpayer's taxpayer's taxpayer's taxpayer's taxpayer's taxpayer's taxpayer's
taxable taxable taxable taxable taxable taxable taxable
income income income income income income income
derived from derived from derived from derived from derived from derived from derived from
trade, trade, trade, trade, trade, trade, trade,
business or business or business or business or business or business or business or
profession as profession as profession as profession as profession as profession as profession as
computed computed computed computed computed computed computed
without the without the without the without the without the without the without the
benefit of this benefit of this benefit of this benefit of this benefit of this benefit of this benefit of this
deduction deduction deduction deduction deduction deduction deduction

h. Research and Allowed; Allowed; Allowed; Allowed; Not allowed Allowed; Allowed; Not allowed Allowed; Deductions
development provided in provided in provided in provided in provided in provided in provided in shall not be
connection connection connection connection connection connection connection allowed as to
with his with his with his with his with his with his with his the ff:
trade, trade, trade, trade, trade, trade, trade, (a) Any
business or business or business or business or business or business or business or expenditure
profession as profession as profession as profession as profession as profession as profession as for the
ordinary and ordinary and ordinary and ordinary and ordinary and ordinary and ordinary and acquisition or
necessary necessary necessary necessary necessary necessary necessary improvement

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expenses expenses expenses expenses expenses expenses expenses of land, or for

which are not which are not which are not which are not which are not which are not which are not the
chargeable to chargeable to chargeable to chargeable to chargeable to chargeable to chargeable to improvement
capital capital capital capital capital capital capital of property to
account. account. account. account. account. account. account. be used in
connection
with research
and
development
of a
character
which is
subject to
depreciation
and
depletion;
and

(b) Any
expenditure
paid or
incurred for
the purpose
of
ascertaining
the
existence,
location,
extent, or
quality of any
deposit of ore
or other
mineral,
including oil
or gas.

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Instructions for Part II: Indicate if the listed items are allowed as deduction from the gross income of the taxpayer for purposes of determining its taxable income subject to regular or
ordinary income tax. Include the limitations, if any.
(see examples printed on the matrix)