Applicability of the 40% Optional Standard Deduction Allowed to Self-Employed and Professionals Under R.A. No. 7496

October 7, 1994 BIR RULING NO. 152-94 21 000-00 152-94 Reliance Business Agency, Inc. 1131 Aguilar Street, Manila Attention: Ms . Mary Tan Accountant Gentlemen : This refers to your letter dated May 30, 1994 requesting a ruling whether the 40% optional standard deduction allowed to self-employed and professionals engaged in the practice of their profession under R.A. No. 7496, otherwise known as the Simplified Net Income Taxation Scheme (SNITS), applies to the whole year of 1992 of whether two (2) rates should be applied, i.e., 10% under Section 29 of the Tax Code from January to July 28, 1992 and 40% from July 28 to December 31, 1992. cdti It is represented that R.A. No. 7496 took effect on July 28, 1992, pursuant to Section 9 of Revenue Regulations No. 2-93, implementing R.A. 7496, stating, among others, that it shall apply to income of the self-employed and professionals engaged in the practice of their profession covering the entire calendar year 1992; that with respect to deductions, it shall apply only to direct costs paid or incurred on or after July 28, 1992; that it is your opinion that in the case of itemized deductions, the cut-off date to claim direct cost is July 28, 1992 and that however, in the case of the 40% optional standard deduction, this would apply to the entire taxable year 1992. In reply, please be informed that Section 9 of Revenue Regulations No. 2-93, implementing R.A. No. 7496 (SNITS Law), provides that: "These regulations shall take effect fifteen (15) days after publication in a newspaper of general circulation and shall apply to income covering the entire calendar year 1992, and with respect to deductions, this Act shall apply only to direct costs paid or incurred on or after July 28, 1992". Such being the case, this Office is of the opinion as it hereby holds that the 40% optional standard deduction allowable to the self-employed and professional engaged in the practice of their profession provided under R.A. No. 7496 shall apply to their gross income after July 28, 1992, while the 10% optional standard deduction shall apply to their gross income before July 28, 1992. cdti Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue