OSD (optional standard deduction)

OSD (optional standard deduction) — under the graduated regime, a flat 40% of gross receipts deducted in place of itemized expenses, with no substantiation required: the BIR assumes your costs rather than auditing them. The practical middle path: simpler than itemizing, usually more tax than the 8% option for lean service businesses (the 8%-vs-OSD crossover is lesson 2.7’s Do-it), and the right answer mainly when you’re past the VAT threshold (where the 8% option is unavailable) but your receipts are too thin to itemize.

First used in: 2.7 · The tax layer