Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 24-2008)
For sellers of services, 'gross income' means gross receipts less sales returns, allowances, discounts, and cost of services.
'Cost of services' means all direct costs and expenses necessarily incurred to provide the services required by customers and clients, including salaries and benefits of personnel directly rendering the service and costs of facilities directly utilized in providing the service such as depreciation or rental of equipment and cost of supplies.
'Direct costs and expenses' pertain only to costs exclusively and directly incurred in relation to the revenue realized by sellers of services, which are indispensable to earning the revenue such that without these costs, no revenue can be generated.
No, expenses and other costs outside the ambit of what is defined as 'direct costs and expenses' are not allowed for inclusion in the 'cost of services' for purposes of computing gross income subject to the 2% MCIT.
No, only salaries and employee benefits of personnel, consultants, and specialists directly rendering the service can be included as direct costs in the 'cost of services'.
No, general administrative expenses are not included as 'cost of services' since they are not direct costs necessarily incurred to provide the service.
Facility costs directly utilized in providing the service such as depreciation or rental of equipment used and the cost of supplies are considered part of the 'cost of services'.
Its purpose is to clarify the scope of the term 'direct costs and expenses' that should comprise the 'cost of services' for computing the gross income subject to the 2% Minimum Corporate Income Tax under the 1997 National Internal Revenue Code.
Yes, all internal revenue officers are enjoined to give this Circular as wide publicity as possible.