We are an OPC, and we pay tax as a corporation. So the option I am writing about today was never available to our own company. Many of the people using Books run their business as individuals, and for them it is available. A rule you do not live under has no texture. I built something with no texture, looking only at the shape of its arithmetic.
The shape of the rule first. A person running their own business, or a professional, whose gross sales for the year do not exceed 3,000,000 pesos may elect to apply 8% to gross sales itself instead of computing income tax at the graduated rates. In a year where that is elected, the percentage tax that would otherwise be paid is not paid. The election is signified in the return for the first quarter of that year. Once it has been signified, it does not change for the rest of that year.
The 8% applies to gross sales. Expenses are not deducted. Against that, 250,000 pesos may be deducted. Those 250,000 pesos are where I tripped. What tripped me was not the amount but the fact that it is a once-a-year thing.
Our screen produces the tax for a quarter. Into that screen I put a computation that takes sales, subtracts 250,000 pesos, and applies 8%. Because it was the quarterly screen, I fed it the quarter's sales. And I subtracted the deduction every quarter as well. Taken across a year, that deducts 1,000,000 pesos.
It was found outside the screen. One of the people helping us test showed their third-quarter figure to their accountant. They were told on the spot that the deduction is once a year. The call reached me that evening.
We recounted for all four of them. Four people are on the 8% option, and the quarters where the deduction had been taken again after the first came to 7 in total. Each one is 8% of 250,000 pesos, which is 20,000 pesos. The shortfall came to 140,000 pesos in all. We reissued the figures to each of the four that same day. How a return gets corrected is for each person's accountant to decide, so we have not touched that.
Why I did not see it is plain enough. I built the quarterly screen first and the annual screen afterwards. Looking only at the quarterly screen, every quarter wears the same face. Nothing inside a quarter tells you that it is 1 of 4. A deduction that happens once a year can only live in the place that is looking at the year.
The mistake in the other direction was in the same place. Whether the 8% option had been elected was a setting on a screen. Being a setting, it could be switched at any time. Switching it recomputed the past quarters under the new setting, and what was displayed changed. One of the four switched it once in the middle of the third quarter, and the amounts for the first and the second changed without a word.
In the rule itself, this election belongs to the year. It is signified in the return for the year's first quarter and it does not change inside that year. I had held it as a preference that could be changed whenever. Something the rule fixes once a year, the software let anyone move on any day.
The repair split in 2. The 250,000-peso deduction came out of the quarterly computation and now sits once, on the annual side. The election is held with a year attached — the election for 2026, the election for 2027. Once the first quarter's return is marked as filed, that year's election can no longer be changed. Changing it means choosing which year you mean, and quarters already marked as filed are not recomputed.
There is also something we stopped doing. Whether the deduction is available depends on whether the person has only business income or also has compensation income. You cannot read that out of a ledger. So the software stopped guessing. We ask the person at the start and we hold their answer. On the screen we now write out, in words, which amount is being multiplied by which rate, and how many times in the year the deduction has been used.
In the quarter since, quarters with the deduction taken twice came to 0. Elections held without a year came to 0 as well. I have got this far without writing 1 line about which option comes out better. I am not writing it because it is not mine to write. I stop at the shape of the rule.
I estimated 2 days and it took 9. Taking the deduction out of the computation was 1 hour. The rest was re-holding the election with a year attached, opening every past quarter for all four of them, and sitting with each person while they looked at the amounts that had moved. I sent it to the engineer on the KAZENA side as well. That option does not exist for them, but a deduction usable only once a year does, they said, so putting it on the annual side carries over as it is.
One note. I am not a tax practitioner. This is a record of work around our own software, and it is not enough as an explanation of the rule. Decisions about electing and filing should be confirmed with a professional.