Article 20p. 20

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

Philippines taxable under this Title bears to his

entire taxable income for the same taxable year.

(5) Adjustments on Payment of Incurred Taxes. - If

accrued taxes when paid differ from the amounts

claimed as credits by the taxpayer, or if any tax paid

is refunded in whole or in part, the taxpayer shall

notify the Commissioner; who shall re-determine

the amount of the tax for the year or years affected,

and

the

amount

of

tax

due

upon

such

re-determination,

if

any,

shall

be

paid

by

the

taxpayer

upon

notice

and

demand

by

the

Commissioner, or the amount of tax overpaid, if any,

shall be credited or refunded to the taxpayer. In the

case of such a tax incurred but not paid, the

Commissioner

as

a condition precedent to the

allowance of this credit may require the taxpayer to

give a bond with sureties satisfactory to and to be

approved by the Commissioner in such sum as he

may require, conditioned upon the payment by the

taxpayer of any amount of tax found due upon any

such redetermination. The bond herein prescribed

shall

contain

such

further

conditions

as

the

Commissioner may require.

(6) Year in Which Credit Taken. - The credits

provided for in Subsection (C)(3) of this Section may,

at the option of the taxpayer and irrespective of the

method of accounting employed in keeping his

books, be taken in the year which the taxes of the

foreign country were incurred, subject, however, to

the conditions prescribed in Subsection (C)(5) of this

Section. If the taxpayer elects to take such credits in

the year in which the taxes of the foreign country

accrued, the credits for all subsequent years shall be

taken upon the same basis and no portion of any

such taxes shall be allowed as a deduction in the

same or any succeeding year.

(7) Proof of Credits. - The credits provided in

Subsection (C)(3) hereof shall be allowed only if the

taxpayer

establishes

to

the

satisfaction

of

the

Commissioner the following:

(a) The total amount of income derived from

sources without the Philippines;

(b) The amount of income derived from each

country, the tax paid or incurred to which is

claimed as a credit under said paragraph, such

amount to be determined under rules and

regulations

prescribed

by

the

Secretary

of

Finance; and

(c)

All

other

information necessary for the

verification and computation of such credits.

(D) Losses. -

(1) In General. - Losses actually sustained during the

taxable year and not compensated for by insurance

or other forms of indemnity shall be allowed as

deductions:

(a) If incurred in trade, profession or business;

(b)

Of

property

connected

with the trade,

business or profession, if the loss arises from

fires, storms, shipwreck, or other casualties, or

from robbery, theft or embezzlement.

The

Secretary

of

Finance,

upon

recommendation

of

the

Commissioner,

is

hereby authorized to promulgate rules and

regulations prescribing, among other things,

the time and manner by which the taxpayer

shall submit a declaration of loss sustained

from

casualty

or

from

robbery,

theft

or

embezzlement

during

the

taxable

year:

Provided, however, That the time limit to be so

prescribed in the rules and regulations shall not

be less than thirty (30) days nor more than

ninety (90) days from the date of discovery of

the casualty or robbery, theft or embezzlement

giving rise to the loss.

(c) No loss shall be allowed as a deduction

under this Subsection if at the time of the filing

of the return, such loss has been claimed as a

deduction for estate tax purposes in the estate

tax return.

(2) Proof of Loss. - In the case of a nonresident alien

individual

or

foreign

corporation,

the

losses

deductible shall be those actually sustained during

the year incurred in business, trade or exercise of a

profession conducted within the Philippines, when

such losses are not compensated for by insurance or

other forms of indemnity. The secretary of Finance,

upon

recommendation

of the Commissioner, is

hereby

authorized

to

promulgate

rules

and

regulations prescribing, among other things, the

time

and

manner by which the taxpayer shall

submit a declaration of loss sustained from casualty

or from robbery, theft or embezzlement during the

taxable year: Provided, That the time to be so

prescribed in the rules and regulations shall not be

less than thirty (30) days nor more than ninety (90)

days from the date of discovery of the casualty or

robbery, theft or embezzlement giving rise to the

loss; and

(3)

Net

Operating

Loss Carry-Over. - The net

operating loss of the business or enterprise for any

taxable year immediately preceding the current

taxable year, which had not been previously offset as

deduction from gross income shall be carried over

as a deduction from gross income for the next three

(3) consecutive taxable years immediately following

the year of such loss: Provided, however, That any

net loss incurred in a taxable year during which the

taxpayer was exempt from income tax shall not be

allowed

as

a

deduction

under

this Subsection:

Provided,

further,

That

a

net

operating

loss

carry-over shall be allowed only if there has been no

substantial change in the ownership of the business

or enterprise in that -

(i) Not less than seventy-five percent (75%) in

nominal value of outstanding issued shares., if

the business is in the name of a corporation, is

held by or on behalf of the same persons; or

(ii) Not less than seventy-five percent (75%) of

the paid up capital of the corporation, if the

business is in the name of a corporation, is held

by or on behalf of the same persons.

For

purposes

of this subsection, the term ' net

operating loss ' shall mean the excess of allowable

deduction over gross income of the business in a

taxable year.

Provided, That for mines other than oil and gas wells,

a

net

operating

loss

without

the

benefit

of

incentives provided for under Executive Order No.

226, as amended, otherwise known as the Omnibus

Investments Code of 1987, incurred in any of the first

ten (10) years of operation may be carried over as a

deduction from taxable income for the next five (5)

years immediately following the year of such loss.

The entire amount of the loss shall be carried over to

the first of the five (5) taxable years following the

loss, and any portion of such loss which exceeds the

taxable income of such first year shall be deducted

in like manner form the taxable income of the next

remaining four (4) years.

(4) Capital Losses. -

(a) Limitations. - Loss from sales or Exchanges

of capital assets shall be allowed only to the

extent provided in Section 39.

(b)

Securities

Becoming

Worthless.

-

If

securities as defined in Section 22 (T) become

worthless

during

the taxable year and are

capital assets, the loss resulting therefrom shall,

for purposes of this Title, be considered as a loss

© Compiled by RGL

20 of 201