When Insurance Expense is Allowed to be Deducted as a Direct Cost Actually Incurred in Handling Goods for Others

November 24, 1994 BIR RULING NO. 159-94 R.A. 7227 Sec. 12 (c) 000-00 159-94 Subic Bay Metropolitan Authority SBM Centre, Bldg. 229, Waterfront Road Subic Bay Freeport Zone Olongapo City Attention: Atty . Rodolfo M . Reyes Deputy Administrator For Administration Gentlemen : This refers to your letter dated August 20, 1994 requesting for a ruling on whether or not insurance expense on merchandise, inventory and goods stored for warehousing, incurred by an SBF registered enterprise, primarily engaged in transshipment, warehousing, storage and distribution should be included in the list of allowable deductions for purposes of determining the 'gross income earned'. It is represented that transshipment, warehousing, storage and distribution are among the activities you are trying to develop in Subic; that by the very nature of these industries, insurance for goods transshipped, stored and eventually distributed is one of the largest direct expenses that the said industries can incur; and that if this expense is not allowed to be deducted by these industries. Subic as a transshipment/warehousing/storage/distribution hub may not be economically attractive. cdpr In reply, please be informed that for purposes of determining the 'gross income earned' as contemplated under Section 12(c) of Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, an SBMA registered enterprise principally engaged in the business of warehousing, storage, transshipment and distribution of goods shall be allowed to deduct insurance expense as a direct cost actually incurred in handling goods for others. Very truly yours, RENE G. BAEZ Acting Commissioner