The Philippine Economic Zone Authority (PEZA) (a government agency attached to the Department of Trade and Industry)—with the support of the Bureau of Internal Revenue (BIR)—identified several additional deductions for use in computing the 5% gross income tax in response to the coronavirus (COVID-19) pandemic.
The PEZA guidelines provide that the following may be considered as direct costs for purposes of computing for the 5% gross income tax:
The BIR expressed its position that expenses relating to COVID-19 testing are not directly related to the rendition of PEZA-registered services because the registered activities could still be conducted without such costs. Therefore, unless it can be proven that such COVID-19 tests are directly related to the registered service, the BIR position is that these costs must be classified as operating expenses and not direct costs.
Read a February 2021 report prepared by the KPMG member firm in the Philippines
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