Tuesday, April 15, 2008 Tax notes: ‘Cost of services’ for MCIT purposes
THE Bureau of Internal Revenue (BIR) recently issued Revenue Memorandum Circular (RMC) 24-2008 clarifying the scope of the term “direct costs and expenses” that should comprise the “cost of services” for purposes of computing the gross income subject to the two percent Minimum Corporate Income Tax (MCIT) of taxpayers engaged in the sale of services.
“Direct costs and expenses” shall only pertain to those costs exclusively and directly incurred in relation to the revenue realized by the sellers of services.
These refer to costs which are considered indispensable to the earning of the revenue such that without such costs, no revenue can be generated.
Hence, expenses and other costs that do not meet this requirement are not allowable for inclusion in “cost of services” in computing the gross income subject to the two percent MCIT. (Source: Punongbayan & Araullo)
