RR No. 25-2020 — Prescribes the Rules and Regulations to implement Section 4 (bbbb) of RA No. 11494 (Bayanihan to Recover as One Act) relative to Net Operating Loss Carry-Over (NOLCO) under Section 34 (D)(3) of the NIRC, as amended (Published in Malaya Business Insight on October 2, 2020) Digest | Full Text

I REPUBLIC OF THE PHILIPPINES u"*flti NUE SeptemberSEP 3 0 2020 &5* REVENUE REGULATToNS No. A-O1O SUBJECT: Rules and Regulations lmplementing Section 4 (bbbb) of Republic Act No. 11494, otherwise known as the "Bayanihan to Recover as One Act" Relative to Net Operating Loss Garry-Over (NOLCO) Under Section 34 (DX3) of the N|RC, As Amended To: All lnternal Revenue Officers and Others Concerned SECTION 1. Scope. - Pursuant to the provisions of Section 244 of the National lnternal Revenue Code (NIRC), as amended, these Regulations are hereby promulgated to implement section 4 (bbbb) of Repubtic Att (R.A ) No. 1149i, othenrise known as "Bayanihan to Recover as One Act',, to wit: ryE x xxx "SEC. 4. COVID-I9 Response and Recovery lnteruentions. xxx xxx xxx xxx m c) Cx LtL- si-TZitEIEl -I3tJ (bbbb) Notwithstanding the provision of existing laws to the contrary, the ,$TH} U' net operating loss of the busrness or enterprise for taxabte years 2020 f,3 and 2021 shall be canied over as a deduction from gross income for the IHi 6-I) ;=*RO ?'i next five (5) consecutive taxable years immediately foilowing the year of such /oss; Provided, That this subsection U' -t1a-,l1 (tal the expiration of this Act;" shall remain in effect even after ftt 6Z '42 5-l- =t SECTION 2, Coverage. These Regulations shall cover the deduction from gross income of the Net operating Loss carry-over (NoLCo) incurred by businesses or enterprises for taxable years z}za and 2021 pursuant to section 4 (bbbb) of Republic Act (R.A.) No. 11494. SECTION 3. Definition of Terms. - For purposes of these Regulations, the words and phrases herein provided shall mean as foilows: 3.1 Gross lncome means the pertinent items of income referred to in - Section 32(A) of the Tax Code of 1997, as amended, which are required to be dectared in lhe taxpayer's lncome Tax Return for purposes of computing its taxable income as defined in Section 31 of the same Code. Exempt income and all other items of income subject to final tax shall not form part of the gross income. 3.2 Allowable Deductions means the items of deduction enumerated - under Section 3a(A)'to(J) of the Tax Code of 1997, as amended, including the special deductions allowed to insurance companies under Section 37 of the sarie Code but excluding NOLCO and any item of incentive deduction allowable under any special law that does not actually involve cash ouilay. trffme 3.3 Net Operating Loss- means the excess of alt a'!t rt ilV I I of the business in a taxabte year. , ItFt,,C r, /t L, #*q$$$UFJ SIP 30 ffi;*l *E*E$q

3.4 - Taxable lncome means the excess amount of the pertinent items of gross income over the allowable deductions authorized under the Tax Code of 1997, as amended, or under any special law. 3.5 - Taxable Year means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the netincome is computed under Title ll of the 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 made. 3.6 FiscalYear- means an accounting period of twelve (12) months ending on the last day of any month other than December. Taxable year 2020 and 2021 shal! include all those corporations with fiscal years ending on or before June 30,2021, and June 30, 2022, respectively. SECTION 4. Five (5) Year Period of Entitlement to Deduct Net Operating - Loss lncurred for Taxable Years 2O2O and 2021. Unless otherwise disqualified from claiming the deduction, the business or enterprise which incurred net operating loss for taxable years 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 such loss. The net operating loss for said taxable years may be carried over as a deduction even after the expiration of RA No. 11494 provided the same are claimed within the next five (5) consecutive taxable years immediately following the year of such loss. SECTION 5. Presentation of NOLCO in Tax Return and Unused NOLCO in - the lncome Statement. 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 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. The NOLCO for taxable years 2020 and 2021 shall be presented in the Notes to the Finaneial Statements separately from the NOLCO for other taxable years. Failure to comply with this requirement will disqualify the taxpayer from claiming the NOLCO. SECTION 6. Repealing Glause. All revenue rules and regulations and other revenue issuances or parts thereof, which are inconsistent with these Regulations are hereby repealed or modified accordingly. SECTION 7. Effectivity. - These Regulations shall take effect immediately. The Office of the National Administrative Registrar (ONAR) of the U.P. Law Center shall be provided with three (3) certified copies of this Revenue Regulations. Recommending Approval : CARLOS G. DOMING Secretary of Finance CAESAR R. DULAY ID$tP 2 S ifi20 F o36so Comm issioner of I nternal"Reven ue 4 I UUHETIJ OF IN?ERHAL REVENUE IIJJUJA\ RECORDS MGT. DIVISIOil