Lower Your Tax Bill the Legal Way—Without the Headache
As a Filipino entrepreneur, you work hard to grow your business. But did you know that you might be paying more taxes than you should?
Many business owners in the Philippines miss out on legitimate tax deductions that could help them save thousands of pesos each year. Knowing what expenses are deductible—and keeping proper records—is the key to minimizing your tax bill while staying BIR-compliant.
In this blog, we’ll break down the top tax deductions you should know, how they work, and how to claim them properly.
🧾 What Are Tax Deductions?
A tax deduction is a business-related expense that the Bureau of Internal Revenue (BIR) allows you to subtract from your gross income—reducing the amount of income that gets taxed.
📌 Example:
If you earned ₱1,000,000 in revenue and had ₱300,000 in deductible expenses, you’ll only be taxed on the remaining ₱700,000 (called your net taxable income).
✅ Top Tax-Deductible Expenses in the Philippines
Here are some of the most common deductions Filipino entrepreneurs and self-employed individuals can legally claim:
1. 📦 Cost of Goods Sold (COGS)
For product-based businesses, you can deduct the direct costs of producing or buying your goods—like raw materials, shipping fees, or packaging.
2. 🏢 Rent Expense
If you’re renting an office, warehouse, or co-working space, the rent payments are fully deductible—as long as you have an official receipt from the lessor.
3. ⚡ Utilities
Electricity, water, internet, and even mobile plans used for business operations are deductible.
4. 🖥️ Office Supplies & Equipment
Pens, paper, computers, printers, and other supplies used in daily operations can be deducted.
5. 🚗 Transportation & Travel
Gas, toll fees, parking, and even domestic travel (flights, accommodations) used for business purposes may be deducted—just keep your receipts and document the purpose of the trip.
6. 👨💻 Salaries and Wages
If you have employees, their salaries, government contributions (SSS, PhilHealth, Pag-IBIG), and 13th month pay are deductible.
7. 💼 Professional Fees
Fees paid to accountants, consultants, legal services, virtual assistants, or marketing freelancers are deductible—as long as the provider issues an official receipt.
8. 📚 Training and Education
Workshops, seminars, or online courses related to your business can be deducted as a business expense.
9. 🏦 Bank Charges & Loan Interest
Service fees, transfer charges, and interest from business loans or credit lines can be included as deductions.
10. 🧾 Depreciation
If you purchase equipment, furniture, or vehicles, you can deduct their value over time through depreciation.
🚨 BIR Requirements to Claim Deductions
To legally claim deductions, you must:
Be BIR-registered (with COR and books of accounts)
Request and keep official receipts or sales invoices
Record all expenses in your books
Keep supporting documents (contracts, payment proofs)
Choose between Itemized Deduction or Optional Standard Deduction (OSD)
📌 Itemized Deduction vs. OSD
Itemized Deduction:
You list down every allowable expense
Requires complete documentation
Can result in higher deductions if you have many expenses
Optional Standard Deduction (OSD):
Flat 40% of gross income as deduction (no need to submit receipts)
Simple and hassle-free
Best for freelancers or service-based businesses with minimal costs
🔍 Which One Should You Choose?
Choose Itemized Deduction if:
You have high operating expenses
You maintain complete receipts and records
You want to maximize savings
Choose OSD if:
Your expenses are minimal
You don’t have time or resources to track every receipt
You want a simpler filing process
🛠️ Pro Tips for Filipino Entrepreneurs
Always ask for official receipts (ORs) from suppliers and vendors
Maintain your books of accounts and update them monthly
Keep both physical and digital copies of your receipts
Work with a bookkeeper or accountant to avoid errors during filing
Don’t wait until tax season—track expenses throughout the year
✨ Final Thoughts
Tax deductions are not loopholes—they’re your right as a business owner. The more organized you are, the more you can legally save. With the right knowledge and discipline, you can minimize your tax burden and reinvest those savings into growing your business.
💬 Need Help with Bookkeeping or Tax Filing?
We help Filipino entrepreneurs and SMEs maximize their tax deductions and stay 100% BIR-compliant—from books to filing.
Navigating the business landscape in the Philippines can be both rewarding and intricate. Whether you’re embarking on a new venture or scaling up, ensuring that your corporate endeavors are in line with local regulations is paramount.
At CBOS Business Solutions Inc., we pride ourselves on simplifying these processes for our clients. As a seasoned professional services company, we offer comprehensive assistance with SEC Registration, Visa processing, and a myriad of other essential business requirements. Our team of experts is dedicated to ensuring that your business is compliant, well-established, and ready to thrive in the Philippine market.
Why venture into the complexities of business registration and compliance alone? Allow our team to guide you every step of the way. After all, your success is our commitment.
Get in touch today and let us be your partner in achieving your business goals in the Philippines.
Email Address: gerald.bernardo@cbos.com.ph
Mobile No.: +639270032851
You can also click this link to schedule a meeting.
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