Definition of Terms (Ordinary Allowable Itemized Deduction)

Advertising and Promotions – this is used to tell prospective consumers about goods and services
and how to get hold of them. Disseminating information about a product, product range, brand, or
business is part of a promotion—one of the four essential components of the marketing mix.

Amortizations - an accounting method used over a specific time period to gradually reduce the
book value of a loan or intangible asset.

Bad Debts - the receivable that a customer refuses to pay and is conceivable anytime consumers are
given credit. They develop when a business provides a consumer with too much credit and cannot
pay it back, which leads to a payment that is either missed, decreased, or delayed.

Charitable Contributions – these are donations made to non-profit organizations. Donations may
take the form of cash, non-monetary goods, in-kind services, or volunteer time. According to IRS
laws, the donation may be tax deductible, and small firms might gain from making charitable
contributions.

Commissions – this is a payment made to a salesman in exchange for their assistance in starting or
finishing a deal. A fixed charge or a percentage of the sales revenue, gross margin, or profit may be
used to calculate the commission.

Communication, Light, and Water – also known as utility costs, such as those for electricity, Wi-Fi,
water, and other forms of communication, are deductible.

Depletion – this is a method of accrual accounting that is used to distribute the costs associated
with the extraction of natural resources from the earth, including lumber, minerals, and oil.
Depletion is a non-cash expense, similar to depreciation and amortization, that gradually reduces an
asset's cost value through regular charges to income.

Depreciation – an assessment of a company asset's "useful life" to establish the number of years
during which the cost of the item may be written off from taxable income, such as machinery or a
factory.

Director's Fees - refers to the monetary compensation (such as a per diem) that a corporation's
board of directors members receive. A corporation is governed by its Board of Directors. The
withholding tax rate for the director's fee is depending on the gross amount.
Fringe Benefits - defined as any items, services, or other perks provided or awarded by a company
to a specific employee, excluding rank-and-file workers, in cash or in kind, including but not limited
to housing, an expense account, a vehicle of any kind, and others.

Fuel and Oil – an indirect expense; providing and transporting all the fuel supplied to the Project.
Insurance - the sum of money that a company pays to secure an insurance contract, this is recorded
as an expense for a specific accounting period.

Interest - the payment made for the privilege to borrow money is called interest. Interest is the
payment a lender or financial organization gives in exchange for lending money.

Janitorial and Messengerial Services - The cleaning and maintenance of facilities is a part of
janitorial services, treated as an expense related to the removal of trash and garbage, recycling,
cleaning, and sanitizing the building. Meanwhile, messages, documents, and goods can be delivered
inside a building or between buildings via messenger services, on the other hand. This could entail
carrying out duties including delivering mail and packages to certain offices, gathering outgoing
mail, and conducting errands within the building.

Losses - an excess of expenses over revenues, whether for a single business transaction or the total
of all transactions for an accounting period, generates a loss.

Management and Consultancy Fee - refers to the cost incurred by a business or investment
organization when managing clients' assets. On the other hand, a consultancy fee is a cost that a
consultant or consulting firm charges clients for receiving professional advice or services.

Miscellaneous - refers to any expense or item that cannot be classified or assigned to a certain
category.

Office Supplies - materials and equipment that are frequently used in a workplace or office setting
to help with everyday tasks and productivity.

Professional Fees - a professional service provider, such as a consultant, attorney, or accountant,

Rental - refers to the act of paying to use or occupy something temporarily for a sum. This can apply
to renting or leasing real estate (like a house or an apartment), vehicles (like a car or truck), tools or
machinery, or other commodities or services.
Repairs and Maintenance (Labor or Labor & Materials) - services that are offered to maintain or
restore an asset's functionality are referred to as repairs and maintenance. The cost of the labor
force hired to complete repairs and maintenance tasks is referred to as labor. In the context of
repairs and maintenance, the terms "labor and materials" relating to the price of both the labor
force and the materials used.

Repairs and Maintenance (Materials/Supplies) - these are items that are utilized to facilitate
general operations and maintenance, such as office supplies, electrical parts and supplies, and
janitorial supplies.

Representation and Entertainment - these are expenses that the company has incurred during
the course of business in relation to entertaining or meeting with guests at dining places, places of
amusement, sporting events, and other similar events or venues.

Research and Development - these are expenses that are directly related to a company's efforts to
improve, create, and enhance its products, services, technologies, or processes.

Royalties - this refers to the compensation that a company is required to pay to a third party for the
use of their patents and/or technology rights.

Salaries and Allowances - refers to the cost of employees' fixed compensation that is not
connected to the number of hours worked. Meanwhile, allowances are the amount of money
provided by an insurance company to an agent to cover business expenses

Security Services - these services are generally focused on safeguarding personnel and/or assets.
Security ensures a secure and hazard-free setting, allowing individuals to carry out their everyday
tasks and transactions without any apprehension.

SSS, GSIS, Philhealth, HDMF, and Other Contributions - the aforementioned are compulsory
deductions mandated by the government. According to Philippine labor laws, all employees are
mandated to become members of these deductions. By becoming a member of each, employees are
entitled to receive government-prescribed benefits. Nonetheless, in order to fully enjoy the benefits,
members are required to make regular and consistent contributions.

Taxes and Licenses - these are expenses incurred for taxes and licenses associated with the
business. Such expenses may include business licenses, copyrights, property taxes, and other
similar costs.
Tolling Fees - these are expenses incurred on toll roads, also known as expressways, charges
drivers to pay a fee in order to access and travel on them. These toll fees are typically collected to
help cover the costs associated with constructing and maintaining the road infrastructure.

Training and Seminars - these are expenses accrued for attending and organizing training
sessions, conferences, seminars, and workshops—related to training the staff engaged in project-
supported tasks.

Transportation and Travel - it refers to the expenses incurred while traveling for business-related
purposes such as attending meetings, conferences, or other work-related activities.

Definition of Terms (Tax Credits/Payments)

Creditable Tax Withheld per BIR Form No. 2307 for the 4th Quarter – it is a completed
certificate that is given to people who receive income that is subject to enhanced withholding tax.
One of the most popular BIR forms is utilized by companies of all sizes, including freelancers and
international enterprises.

Creditable Tax Withheld from Previous Quarter/s per BIR Form No. 2307 - it indicates that the
income of a person or business entity subject to Expanded Withholding Tax (EWT), which the
withholding agency pays, is presented using this form.

Excess MCIT Applied this Current Taxable Year (From Schedule 8 Item 4F) - the difference
between MCIT and NCIT can be carried forward as a deduction from regular income tax for three
(3) immediately consecutive taxable years and must be documented in the corporation's records as
"Deferred Charges-MCIT" under the Asset section

Foreign Tax Credits, if applicable – are calculated separately for each country. The total amount of
foreign tax credits cannot exceed the proportion of the tax against which the credit is being applied,
based on the ratio of the taxpayer's foreign-sourced income to their entire taxable income.

Income Tax Payment under MCIT from Previous Quarter/s – required payment of a corporation
of a 2% MCIT (Minimum Corporate Income Tax) based on their gross income. The MCIT has been
temporarily reduced to 1% from July 1, 2020, to June 30, 2023, due to the pandemic. After this
period, it will return to the original 2%. A corporation must pay this tax if its taxable income is zero
or negative, or if the MCIT is higher than the regular income tax. All corporations subject to the
ordinary corporate income tax, including non-profit, exempt, and special corporations, are subject
to this tax on their taxable income.

Income Tax Payment under Regular/Normal Rate from Previous Quarter/s - refers to the due
tax liability from previous quarters. If a taxpayer owes income tax for any prior quarters but has not
paid it, the unpaid balance is carried forward to the following quarter and added to that quarter's
tax liability.

Prior Year's Excess Credits Other Than MCIT - refers to the total amount of tax credits from a
prior tax year that exceeds the taxpayer's total tax liability for that year other than MCIT (Minimum
Corporate Income Tax).

Tax Paid in Return Previously Filed, if this is an Amended Return – a return that has not yet
been issued letters of authority from the BIR, an amended return may be filed to correct, add, or
include any omissions in the previously declared returns.