BIR Issues Revenue Regulation Extending Claiming of Net Operating Loss Carry-Over to Five (5) Years

With the implementation of the Bayanihan to Recover as One Act, taxpayers will enjoy various exemptions under the law, including relief for businesses incurring losses due to the Pandemic. One such relief, is the issuance of the Bureau of Internal Revenue (BIR) Revenue Regulations (RR) No. 25-2020 which prescribes the rules and regulations extending the period of claiming of Net Operating Loss Carry-Over (NOLCO).


The Regulation covers the deduction from Gross Income of the Net Operating Loss incurred by businesses or enterprises for taxable years 2020 and 2021. Net Operating Loss is the excess of allowable deduction over gross income of the business in a taxable year. This means that expenses or costs incurred is more than the revenue or gross income generated by the business.


Unless otherwise disqualified from claiming the deduction, the said net operating loss shall be carried over for the next five (5) consecutive taxable years instead of the normal three (3) year period. For corporate taxpayers who are on fiscal year accounting period, taxable year 2020 and 2021 shall include all those corporations with fiscal years ending on or before June 30, 2021, and June 30, 2022


The NOLCO shall be separately shown in the taxpayer’s Income Tax Return (also shown in the Reconciliation Section of the Tax Return) while the unused NOLCO shall be presented in the Notes to Financial Statements showing, in detail the taxable year in which the net operating loss was sustained or incurred, and any amount claimed as NOLCO deduction within five (5) consecutive years immediately following the year of such loss. Failure to comply with this requirement will disqualify the taxpayer from claiming the NOLCO.

If you have any inquiries on how this regulation will impact your business, don’t hesitate to reach out to us.