RMC No. 138-2020 — Clarifies Revenue Regulations No. 25-2020 on the availment of NOLCO for taxpayers adopting fiscal year Digest | Full Text

REPUBLIC OF THE PHILIPPINES ffiAUo FffiALRhvi:Nrrts, ; I] + DEPARIMENT OF FINANCE TdD f,tt, BUREAU OF INTERNAL REYENUE ;b, \-/ it Quezon City RECORDS MGT. DEC ? 2 2020 8' REVENUE MEMORANDUM CIRCULAR NO. /9 E O 2D SUBJECT: Clariffing Revenue Regulations No. 25-2020 on the Availment of NOLCO for Taxpayers Adopting Fiscal Year TO All Internal Revenue Officials, Employees and Others Concerned Revenue Regulati ,ns No. 25-2020 was issued on Sept. 30,2020 to implement Section 4 (bbbb) of Republic Ac, (RA) No. 11494 or the "Bayanihan to Recover as One Act" relative to the Net Operating Loss Carry-Over (NOLCO) incurred by businesses for taxable years 2020 and202l. The said Reglrlations, in conformity with the law, stated that, "unless otherwise disqualified from claiming the deduction, the business or enterprise which incurred net operating loss for to'lble yearc 2020 and 2021 shall be allowed 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 ruch loss.". The terms taxable year and fiscal year are defined in Sec. 3 of the Regulations as lqlllows: " 3.5 Taxable Ye'w - means the calendar year, or the fiscal year ending during such calendar ycar, upon the basis of which the net income is cotuputed under Title II of :he Tax Code of 1997, as amended. Taxable year includes, in the case of a return made for a fractional part of a year, the period for which such return is mo(^t,'. 3.6 Fiscal Year- mlxns an accounting period of twelve (12) months ending on the last day of any inonth other than December. Taxable year 2020 and 2021 shall include all ttose corporations with fiscal years ending on or before June 30,2021, and rune 30, 2022, respectively." Under existing re\i;nss issuances, a fiscal year (FY) will fall on a particular taxable year depending on the nurnber of months it has on the two (2) years involved. Thus, a FY ending on March 31, 2021i will fall on taxable year 2019 since it has nine (9) months in 2019 and only three (3) months in2020. In the case of FY ending on June 30,2021, the beginning trf which is July l, 2020., it is considered as taxable year 2020 since it has more days in 2020 (184 days) than in 2021 (181 days). Based on the above, the following FY ending on the stated months are counted as:

Taxable year 2020 Taxable year }AZL Those companies with fiscal years endin g before July 3 I, 2020 and fiscal years ending after Jvne 30,2022 which incurred net operating loss are only allowed to carry-over the loss as a deduction from its gross income for the next three (3) consecutive taxable years under Sec. 34 (DX3) of the Tax Code, as amended. They cannot avail of the extended period to carry-over the loss for another tryo (2) yeffs. All internal revenue officials and employees are hereby enjoined to give this Circular as wide a publicity as possible. This Circular shall take effect immediately. J /g.r-+l^H IittARR. DULAYP Commissioner of Internal Re'venue ' 039841 K-1 ffiu