Section 17Sec./Art. 17

Net Operating Loss Carry-Over (NOLCO) of Participating FIs.-

(a) Any loss that is incurred by an FI as a result of the transfer of an NPA within the two (2)-year period from the effectivity of this Act, shall be treated as ordinary loss:Provided,That the accrued interest and penalties shall not be included as loss on said loss carry-over from operations, subject to the provisions of the National Internal Revenue Code of 1997 on NOLCO.

Such loss incurred by the FI from the transfer of NPAs within the two (2)-year period from the effectivity of this Act may be carried over for a period of five (5) consecutive taxable years immediately following the year of such loss:Provided,further,That for purposes of corporate gain or loss, the carry-over shall be subject to pertinent laws:Provided, finally,That the tax savings derived by FIs from the NOLCO shall not be made available for dividend declaration but shall be retained as a form of capital build-up. The Department of Finance (DOF), upon the recommendation of the BIR, shall issue the rules and regulations to effectively implement the provisions of this section.

(b) The regulatory authority concerned shall promulgate the necessary rules and regulations governing the treatment of any loss of the FIs in the books of accounts as a result of the transfer of the NPAs.

(c) In the case of GFIs and GOCCs enumerated in Section 3(e) hereof, the DOF, in consultation with the Commission on Audit (COA), shall promulgate the necessary rules and regulations governing the treatment of any loss in their books of accounts as a result of the transfer of their NPAs.