Summary
RMC No. 138-2020 clarifies RR No. 25-2020 on the availment of the Net Operating Loss Carry-Over (NOLCO) for taxpayers adopting a fiscal year.
Key points
- Background. RR No. 25-2020 implements Section 4 (bbbb) of RA No. 11494 and lets businesses with net operating loss for taxable years 2020 and 2021 carry it over as a deduction for the next five (5) consecutive taxable years, unless otherwise disqualified.
- Which taxable year a fiscal year falls in. A fiscal year falls on the taxable year where it has more months or days. A FY ending March 31, 2020 falls on taxable year 2019 (nine months in 2019, three in 2020). A FY ending June 30, 2021 that began July 1, 2020 is taxable year 2020 (184 days in 2020, 181 in 2021).
- Limited carry-over. Companies with fiscal years ending before July 31, 2020 and fiscal years ending after June 30, 2022 that incurred net operating loss may carry it over only for the next three (3) consecutive taxable years under Sec. 34 (D)(3) of the Tax Code, as amended. They cannot use the extra two (2) years.
Who is affected
- Taxpayers adopting a fiscal year with net operating loss
Deadlines and effectivity
- Fiscal years ending before July 31, 2020 or after June 30, 2022: three (3) years carry-over only
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