Question & AnswerQ&A (BIR MEMORANDUM CIRCULAR NO. 4-2003)
The circular clarifies the items that should constitute gross receipts and corresponding costs in determining the gross income on services for the computation of the 2% Minimum Corporate Income Tax (MCIT) pursuant to Sections 27(E) and 28(A)(2) of the National Internal Revenue Code of 1997.
Gross receipts for these entities mean actual or constructive receipts from interests, commissions, and discounts from lending activities and all other items treated as gross income under Section 32 of the NIRC of 1997 that are not subject to final withholding income tax.
Their costs of services include salaries, wages and other employee benefits of personnel engaged in lending/investment, obtaining funds through deposits, trading foreign exchange and other financial instruments; interest expense (except interest charged or paid to head office on assigned capital funds); PDIC premium payments; and BSP supervision fees.
Gross receipts include actual or constructive receipts representing net retained premiums, gross premiums or collections from planholders, membership fees for HMOs, miscellaneous income, investment income not subject to final tax, released reserve, and for pre-need companies, gross withdrawals from trust funds mandated by the SEC, plus all other items treated as gross income under Section 32 of the Tax Code.
Costs include salaries, wages and employee benefits of personnel directly engaged, commissions on direct writings/agents, claims, losses, maturities and benefits net of reinsurance recoveries, net additions required by law to reserve funds, and contributions to trust funds for pre-need companies.
Their gross receipts are actual or constructive receipts representing interests, discounts, and other items treated as gross income under Section 32 of the NIRC 1997 not subject to final withholding income tax.
Costs include salaries and wages of personnel directly engaged in brokerage activities, PSE terminal fees, communication charges related to trading/sales, research fees such as Bloomberg and Reuters data, commissions paid to non-employee agents, and settlement/processing costs of trades ('exchange dues').
Gross receipts mean actual or constructive receipts representing the contract price, including the amount charged for materials supplied with the services.
Costs include cost of materials used, salaries and benefits of site laborers and supervisors, insurance for workers, fees and costs paid to subcontractors, performance bond costs, depreciation and maintenance of directly used equipment, moving costs to and from contract site, design and technical assistance costs, and supplies and tools directly used.
Costs include salaries, wages and employee benefits of personnel directly engaged in operation, toll and parking fees, franchise fees, depreciation and maintenance of transportation equipment and parking properties, fuel and lubricants for vehicles, meals for passengers, safety paraphernalia for passengers, and annual transportation equipment registration fees.