RMO No. 31-2009: Prescribes the policies and guidelines for the declaration and reporting of casualty losses by taxpayers

Summary

RMO No. 31-2009 prescribes the policies and guidelines for declaring and reporting casualty losses of taxpayers hit by Typhoons Ondoy and Pepeng.

Key points

1. Sworn Declaration of Loss. The declaration is filed within forty-five (45) days after the date of the event. It states the nature and time of the event, the description and location of the damaged property, the items needed to compute the loss (cost or other basis, depreciation allowed, value before and after, cost of repair), and any insurance or other compensation received or receivable.
2. Supporting documents and proof. The declaration is supported by the financial statement for the year before the event and any insurance policy. Proof of the loss includes before and after photographs, cost or valuation records such as cancelled checks, vouchers and receipts, and a police report for robbery or theft.
3. Theft and verification. Failure to report a theft or robbery to the police can be held against the taxpayer, but a police report alone is not conclusive proof of loss. All evidence is subject to BIR verification and must be kept as tax records for audit.
4. Business deduction conditions. A taxpayer in trade or business may claim casualty losses on properties actually used in the business and reported in the declaration. The properties must have been reported as assets in the accounting records and financial statements of the year before the loss, with acquisition costs clearly established and recorded. Otherwise the deduction is not allowed.
5. Insurance. Insurance recovery follows Revenue Regulations No. 12-77, and the loss covered by insurance cannot be claimed as a deductible loss. Insurance proceeds above the net book value of the damaged assets are subject to regular income tax but not to VAT.
6. Total loss and restoration. For a total loss, the basis is the net book value (cost less accumulated depreciation) just before the disaster, reduced by insurance proceeds received. Restoration or replacement is recorded as either a repairs expense or a capitalized asset under financial and tax accounting rules.

Who is affected

• Taxpayers who suffered casualty losses from Typhoons Ondoy and Pepeng
• Taxpayers in trade or business claiming casualty losses

Deadlines and effectivity

• Issued October 23, 2009
• Sworn Declaration of Loss within forty-five (45) days after the date of the event

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.