NOLCO from 2020 and 2021 can be carried over for the next 5 years

(Revenue Regulations No. 25-2020 published on October 2, 2020)

This Tax Alert is issued to inform all concerned on the longer period for claiming net operating losses carry over (NOLCO) from taxable years 2020 and 2021.

Pursuant to Section 4 (bbbb) of Bayanihan II and as implemented under RR No. 25-2020, the net operating loss of a business or enterprise incurred for the taxable years 2020 and 2021 can be carried over as a deduction from gross income for the next five (5) consecutive taxable years following the year of such loss. Ordinarily, NOLCO can be carried over as deduction from gross income for the next three (3) consecutive years only.

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, respectively.

The NOLCO shall be separately shown in the taxpayer’s income tax return while the unused NOLCO shall be presented in the notes to financial statements in detail. The NOLCO for the taxable years 2020 and 2021 shall be presented in the notes to financial statements separately from the NOLCO for other taxable years. Failure to comply with the reporting requirement will disqualify the taxpayer from claiming the NOLCO.