Tax Alert No. 79 [Revenue Regulations (RR) No. 25-2020 dated 30 September 2020]

Rules and Regulations Implementing Section 4 (bbbb) of Republic Act No. 11494 (Bayanihan to Recover as One Act) relative to Net Operating Loss Carry-Over (NOLCO) under Section 34 (D)(3) of the National Internal Revenue Code (NIRC), as amended 

The Secretary of Finance, through the recommendation of the Commissioner of Internal Revenue, has issued RR No. 25-2020 to implement Section 4 (bbbb) of Republic Act No. 11494, allowing qualified businesses or enterprises which incurred net operating loss for taxable years 2020 and 2021 to carry over the same as a deduction from its gross income for the next five (5) consecutive taxable years immediately following the year of such loss.

Failure to comply with the following requirements will disqualify a taxpayer from claiming the NOLCO:

1. NOLCO shall be separately shown in the taxpayer's income tax return;
2. Unused NOLCO shall be presented in the Notes to the Financial Statements showing, in detail, the taxable year in which the net operating loss was sustained or incurred, and any amount thereof claimed as NOLCO deduction within five (5) consecutive years immediately following the year of such loss;
3. NOLCO for taxable years 2020 and 2021 shall be presented in the Notes to the Financial Statements separately from the NOLCO for other taxable years.

The regulation is effective immediately.

You may access the full version of RR No. 25-2020 through the BIR website.