Definition of Gross Income Earned
- Gross income earned refers specifically to gross sales or gross revenues derived from business activities within Special Economic Zones (ECOZONES).
- Calculation is net of sales discounts, sales returns, and allowances.
- Deducts costs of sales or direct costs before any deductions for administrative, marketing, selling, operating expenses, or incidental losses.
Allowable Direct Costs for ECOZONE Enterprises
- For ECOZONE Export Enterprises, Free Trade Enterprises, and Domestic Market Enterprises, the following direct costs are deductible:
- Direct salaries, wages, and labor expenses
- Production supervision salaries
- Raw materials used in manufacturing
- Decreases in Goods in Process and Finished Goods accounts
- Supplies and fuels used in production
- Depreciation on machinery, equipment, and portion of buildings used exclusively in production
- Rent and utility charges tied to buildings, equipment, and warehouses used in production
- Financing charges on fixed assets used in production, if not capitalized previously
Allowable Direct Costs for ECOZONE Developer/Operator, Facilities, Utilities, and Tourism Enterprises
- The following direct costs are deductible for service-oriented registered enterprises:
- Direct salaries, wages, and labor expenses
- Service supervision salaries
- Direct materials and supplies used
- Depreciation on machinery, equipment, and portion of buildings used exclusively in service rendition
- Rent and utility expenses for buildings and capital equipment used in service delivery
- Financing charges on fixed assets used in registered service business, if not capitalized previously
Suspension of Certain Revenue Regulations Provisions
- Suspension applies to Sections 3, 4, and 6 of Revenue Regulations No. 2-2005 as it concerns enterprises registered under Republic Act No. 7916.
- Suspension is effective pending issuance of new regulations covering these matters.
Effectivity Clause
- These regulations took effect on March 5, 2005.
- Signed and adopted on April 25, 2005, by the Acting Secretary of Finance and Commissioner of Internal Revenue.