The goal of every business is to maximize resources to gain profits while minimizing expenses. That said, tax expenses are one kind of expense that you need to monitor and even account for. The amount you may spend on taxes which may range from 5 to 32% depending on the income and nature of the business is still a BIG deal.
So, how can you manage your taxes? Well, you can do tax avoidance. Tax services in Manila attest that this is a legal means of lessening one’s taxes by declaring all tax deductibles, no matter how small. It is not the same as tax evasion, which involves the illegal manipulation of accounts and funds or not paying your taxes all together.
If you know just what to do, tax avoidance is a great way to help get you lower tax payments so you can retain more of your income. It sounds pretty basic, but you would be surprised how many business owners neglect their smallest expenditures. These are forgotten and don’t make it to the books of account. You will realize that summed up together, these small expenses can greatly reduce your tax expense. Here are the tax-deductible expenses that you can take advantage of in preparation for tax filing.
Amortization is an amount that lowers the book value of intangible assets, like trademarks, patents, copyrights, etc., or a loan over some time. The deduction of amortization expense from your book of accounts lowers your tax expense. Note that you can annually deduct a portion of the cost of an intangible asset so long as it is in the service of your business and until it has no more value.
2. Depreciation Costs
Depreciation is a non-cash expense that is computed as a percentage or a portion of any fixed asset, like property, plant, and equipment, that the company has used over a certain period. Thereby with continual use, the object decreases its current netbook value. According to tax and audit services in the Philippines, by factoring depreciation into your expenses, you lower your net taxable earnings and lessen your tax payables.
3. Fringe Benefits
Fringe benefits cover perks and bonuses that the company gives employees in addition to their base salary. Inclusive of this are holiday bonuses, which are separate from holiday pay, gift certificates, in-kind gifts, health insurance, subscriptions, retirement, tuition, and benefits for family members, among many others. Don’t forget to factor these in when filing your tax returns.
Utilities, like electricity, wifi, water, and other communication expenses are deductibles. Do not forget to include cellphone bills and wifi or internt plans in this account. Moreover, if you have a home office where you work remotely, you can also note the utility bills for this home office as long as there is proper documentation. Note that in this case, you can only include the portion of electricity and utilities used for the home office and not the entire home since the latter billing statements fall under personal expenditures.
5. Bad Debts
Bad debts are any receivables owed to you that customers cannot pay or have not paid. One example is when a customer cannot make or complete their payment to you because of bankruptcy. These cannot be recovered, and are considered a loss or expense on your part, so you can write it off as a deductible and, consequently, lower your taxes.
6. Office Supplies
Office supplies are tax deductibles that are inclusive of everyday tools, supplies, and equipment. This may include paper, pens, paper clips, ink, printers, employee laptops, staplers, rulers, and even staple wire! Every company expense, no matter how small, can be leveraged, so make sure to get everything on that list. Tax and accounting services in the Philippines remind entrepreneurs to keep appropriate receipts so you can support your tax deductions.
7. Management and Cleaning Services
Management and cleaning services also cost you something. If you pay for these services, don’t forget to file them as deductible expense. As long as you keep the receipt, these can be claimed as deductible.
Donations and charity work made by the company or your person may be tax deductible as long as they are made to an institution accredited by the BIR. Again, proper documentation is necessary.
9. Marketing Expenses
The Philippines considers promotions, marketing, and advertising a tax-deductible expense. This includes poster printing, content creation, social media ad fees, and availing of graphic design and marketing services.
10. Consultancy fees
Whenever you hire professionals, like a finance person, a business adviser, a lawyer, or even an accountant, you can deduct what you pay them from your net taxable income, as long as you have an official receipt for proper filing.
Again, it’s imperative to keep documentation of these deductibles because they serve as the supporting evidence to the BIR. If you need assistance in maximizing these deductions, give our team a call. Our accounting services in Pasig is ready to assist you no matter where your business is situated.