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

Key points

1. Five-year carry-over. Unless disqualified from the deduction, a business with a net operating loss for taxable years 2020 and 2021 may deduct it from gross income for the next five (5) consecutive taxable years immediately following the loss year.
2. After RA No. 11494 expires. The loss may still be carried over after the expiration of RA No. 11494, if claimed within those five (5) consecutive taxable years.
3. Presentation. The NOLCO is shown separately in the Income Tax Return and its Reconciliation Section. The unused NOLCO appears in the Notes to the Financial Statements, with the year the loss was incurred and any amounts already claimed. The 2020 and 2021 NOLCO is presented separately from NOLCO for other years.
4. Failure to comply. Failure to follow the presentation requirement disqualifies the taxpayer from claiming the NOLCO.

Who is affected

• Businesses and enterprises with a net operating loss for taxable years 2020 and 2021

Deadlines and effectivity

• Carry-over for five (5) consecutive taxable years following the loss year