RR No. 14-2001: Implements certain provisions of the Tax Code relative to the allowance of Net Operating Loss Carry-Over (NOLCO) as a deduction from gross income

Key points

1. Carry-over period. Only net operating losses accumulated by a qualified taxpayer beginning January 1, 1998 may be carried over. The deduction runs to the next three (3) immediately succeeding taxable years after the loss year.
2. Mines. For mines other than oil and gas wells, a net operating loss incurred in any of the first ten (10) years of operation, realized without Omnibus Investments Code of 1997 incentives, may be carried over for the next five (5) years.
3. Who may deduct. Individuals, including estates and trusts, engaged in trade or business or profession, and domestic and resident foreign corporations may deduct NOLCO.
4. Who may not deduct. Excluded are Offshore Banking Units and Foreign Currency Deposit Units authorized by the Bangko Sentral ng Pilipinas, and BOI-registered enterprises for their activity enjoying the Income Tax Holiday. Also excluded are PEZA-registered enterprises for their registered activity, enterprises registered under the Bases Conversion and Development Act of 1992, and foreign corporations in international shipping or air carriage business in the Philippines. Any person enjoying income tax exemption under the Code or a special law is excluded for the exemption period.
5. Related rules. An individual claiming the 10% optional standard deduction cannot claim NOLCO at the same time. The three-year period keeps running in that case, and also for corporations that paid under the Minimum Corporate Income Tax computation. NOLCO is used on a first-in, first-out basis.

Who is affected

• Individuals, estates and trusts in trade, business or profession
• Domestic and resident foreign corporations
• Mines other than oil and gas wells

Deadlines and effectivity

• Losses accumulated beginning January 1, 1998
• Carry-over: next three (3) immediately succeeding taxable years
• Mines: next five (5) years for losses in first ten (10) years of operation