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CHAPTER 13 B - Special Allowable Itemized Deductions and NOLCO

1. The document discusses special expenses and deduction incentives under the NIRC and special laws, including income distributions from estates/trusts, REIT dividends, and discounts for seniors and persons with disabilities. 2. It provides instructions on how to compute net operating loss carryover (NOLCO) and lists requisites for NOLCO deductibility such as no exemption from tax and no substantial change in business ownership. 3. Rules for carrying over NOLCO are outlined, including claiming losses on a first-in-first-out basis for up to three years, and NOLCO expiration after three years if unused. NOLCO is not transferrable between different ownership groups.

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Deviane Calabria
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229 views2 pages

CHAPTER 13 B - Special Allowable Itemized Deductions and NOLCO

1. The document discusses special expenses and deduction incentives under the NIRC and special laws, including income distributions from estates/trusts, REIT dividends, and discounts for seniors and persons with disabilities. 2. It provides instructions on how to compute net operating loss carryover (NOLCO) and lists requisites for NOLCO deductibility such as no exemption from tax and no substantial change in business ownership. 3. Rules for carrying over NOLCO are outlined, including claiming losses on a first-in-first-out basis for up to three years, and NOLCO expiration after three years if unused. NOLCO is not transferrable between different ownership groups.

Uploaded by

Deviane Calabria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SPECIAL EXPENSES UNDER THE NIRC AND SPECIAL LAWS

1. Income distribution from a taxable estate or trust


2. Transfer to reserve fund and payments to policies and annuity contracts of insurance companies.
3. Dividend distribution of a Real Estate Investment Trust (REIT) under RA 9856
4. Transfer to reserves funds of taxable cooperatives.
5. Discounts to senior citizens under RA 9257
6. Discounts to persons with disability under RA 9442
7. Additional expenses on apprenticeship agreement.

DEDUCTION INCENTIVES UNDER THE NIRC AND SPECIAL LAWS


1. Additional compensation expense for senior citizen employees under RA 9257
2. Additional compensation expense for persons with disability under RA 7277, amended by RA 9442
3. Cost of facilities improvements for persons with disability in accordance with RA 7277, as amended by
RA 9442
4. Additional training expense under RA 8502 – Jewelry Industry Development Act of 1998
5. Additional labor training expense under the RA 11534 – CREATE law
6. Additional contribution expense under the Adopt-a-School program under RA 8525
7. Additional deductions for compliance to rooming-in and breast-feeding practices under RA 7600, as
amended by RA 10028
8. Additional free legal assistance expense under RA 9999
9. Additional productivity incentive bonus expense under RA 6971

HOW TO COMPUTE NOLCO


Gross income subject to regular tax P xxx,xxx
Less:
Total deductions excluding NOLCO from prior years and deduction
Incentives under special laws ( xxx,xxx)
Net operating loss carry-over (NOLCO) (P xxx,xxx)

REQUISITES FOR THE DEDUCTIBILITY OF NOLCO


1. The taxpayer must not be exempt from income tax during the taxable year when the NOLCO was
incurred.
2. There has been no substantial change in the ownership of the business or enterprise.

RULES IN CARRY-OVER OF NOLCO


1. NOLSO is claimable in a first-in-first-out (FIFO) fashion.
2. NOLCO can be claimed only up to the extent of the business net income in the next three years. Prior
year NOLCO cannot be deducted against a subsequent year net operating loss.
3. Any NOLCO which remains unused at the end of the three-year perspective period will expire.

IS NOLCO TRANSFERRABLE?
NOLCO is not allowed as deduction when there is a substantial change in the ownership of the business.
It is clear that the privilege for NOLCO deduction is reserved by the law only to the group of owners
when the loss was incurred while denying it to the new group of owners who subsequently acquired
substantial interest in the business. NOLCO is not a transferrable right, privilege, or interest.

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