RMC No. 81-2025: Echoes of the Past

They say history repeats itself — and in taxation, that’s often true.

- MARIA JONAS YAP

Over the years, taxes have consistently undergone a familiar cycle of reform, resistance and frustration. While the specifics evolve, the underlying narrative remains unchanged: the government seeks revenue, taxpayers push back, and the tug-o-war continues. Today, tax issues are, in many ways, modern echoes of the past.

A recent example is the Bureau of Internal Revenue (BIR)’s issuance of Revenue Memorandum Circular (RMC) No. 81-2025, which reiterates the criteria and guidelines for deductibility of business expenses, particularly emphasizing that only expenses considered “ordinary” and “necessary” and directly attributable to the taxpayer's business operations are deductible for income tax purposes.

Under the law, taxpayers may deduct expenses that are both ordinary and necessary for their business. Ordinary expenses refer to those that are usual and customary in the taxpayer's line of business. These need not be habitual or recurring; they simply must be common within the context of the taxpayer’s business. Necessary expenses are those that are helpful, integral and directly connected to the business operations, contributing to income or profit generation.