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Chapter13-B A. Special Allowable Deductions

This document discusses special allowable itemized deductions and net operating loss carry-overs under Philippine tax law. It provides details on additional deductions that can be made beyond usual itemized deductions, including income distributions from estates or trusts, transfers to insurance company reserves, dividends from real estate investment trusts, transfers to cooperative reserves, and discounts for senior citizens and persons with disabilities. It also describes how net operating losses can be carried over for deduction over the next three years if losses exceed profits in a given year.

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319 views1 page

Chapter13-B A. Special Allowable Deductions

This document discusses special allowable itemized deductions and net operating loss carry-overs under Philippine tax law. It provides details on additional deductions that can be made beyond usual itemized deductions, including income distributions from estates or trusts, transfers to insurance company reserves, dividends from real estate investment trusts, transfers to cooperative reserves, and discounts for senior citizens and persons with disabilities. It also describes how net operating losses can be carried over for deduction over the next three years if losses exceed profits in a given year.

Uploaded by

Anne Nicolas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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CHAPTER 13-B

SPECIAL ALLOWABLE ITEMIZED DEDUCTIONS & NET OPERATING LOSS CARRY-OVER


(NOLCO)

 Special Allowable Itemized Deduction – In addition to the usual permissible


itemized deduction, as provided for under current regular and special legislation,
deductions from gross income can be made in calculating taxable income.
 Net Operating Loss Carry-Over (NOLCO) – Exceeding of allowable allowance over
taxable profits. It can be carried on as a deduction from the gross income for the
next three consecutive years immediately following the year of such loss.

SPECIAL ALLOWABLE DEDUCTIONS


A. SPECIAL EXPENSES UNDER THE NIRC AND SPECIAL LAW
 INCOME DISTRIBUTION MADE BY TAXABLE ESTATES OR TRUSTS- Estates
and trusts that may make use of deductions may exclude from their gross
income any amount of income charged, attributed or transferred to the
beneficiary, however that income is taxable to the beneficiary.
 TRANSFER TO RESERVE FUND AND PAYMENTS TO POLICIES AND ANNUITY
CONTRACTS OF INSURANCE COMPANIES- Under the insurance code, non-life
insurance is required to maintain a balance of 40% of the total premium,
lower return and risk termination within one year.
 DIVIDEND DISTRIBUTION OF a REAL ESTATE INVESTMENT TRUST (REIT)
UNDER R.A 9856- Investors expect a higher return on investment as the REIT
is required by law to distribute, on an annual basis, at least 90% of its
Distributable Income as dividends to its shareholders. A REIT may declare
dividends in cash, in property or in shares.
 TRANSFER TO RESERVE FUND OF COOPERATIVES- Cooperatives are
excluded from income tax but are liable to tax on their income activities the
money transferred by the cooperative to the contingency fund from the net
surplus of unrelated activities is a deduction in the calculation of the taxable
net income of the cooperative.
 DISCOUNTS TO SENIOR CITIZEN UNDER R.A 9257- Elderly Filipinos aged 60
and over are entitled to a 20% discount for senior citizens and are exempt
from value-added tax (VAT) on the products and services in force for their
exclusive use. These privileges apply to cash and credit card payments.
 DISCOUNTS TO PERSONS WITH DISABILITY R.A UNDER 9442- Reiterating
the provisions of the legislation, the Regulations note that eligible PWDs are
entitled to demand at least 20% discount on their purchases from identified
suppliers on such stated transactions.

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