Magazine of Normative & Developmental Law

ABSTRACT: A taxpayer has the right to claim losses due from typhoons such as Ondoy, Pepeng and Santi.  However, the right to claim losses should be made within FORTY FIVE (45) days from the date of the event causing the loss.  This is based on Revenue Regulations No. 12-77, as amended.

The following is the text of BIR’s MEDIA RELEASE dated October 16, 2009:

Due to the recent calamity brought about by Typhoons Ondoy and Pepeng, the BIR has issued a memorandum to business taxpayers about the requirements for reporting their claims for losses for purposes of income tax deduction.

For losses brought about by the recent typhoons, Large Taxpayers (LTs) and Non-Large Taxpayers with business, a Sworn Declaration of Loss and other requirements deemed necessary to substantiate proof of loss(es) claimed shall be submitted within forty-five (45) days after the date of event causing the loss to their Revenue District Office (RDO) or LT Division/District Office where they are registered, as stated in Section 34(D) of the Tax Code and Revenue Regulations No. 12-77.

The Sworn Declaration of Loss shall state the following:nature of the event that gave rise to such loss(es) and the time of its occurrence; description and location of the damaged property(ies); items needed to compute the loss(es), such as (a) cost or other basis of the propert(ies); (b) depreciation allowed, if any (c) value of the property(ies) before and after the event; (d) cost of prepair and lastly the amount of insurance or other compensation received or receivable.

Proof of the extent of loss(es) claimed whether due to casualty, robbery, theft or embezzlement have different requirements.

For casualty losses the documentary requirements includes photographs showing the extent of damage; the condition or value of the property after it was repaired, restored or replaced.

For those pertaining to robbery, theft or embezzlement a police and/or an insurance report should be attached to the Sworn Statement.

The said documents and requirements shall be verified by the concerned BIR office before the business taxpayer can actually claim deduction from his income tax.

(Former) Commissioner Sixto S. Esquivas IV has advised all the Taxpayer Service Units and BIR Personnel to advice and counsel all business taxpayers regarding the requirements in filing their claims of losses due to the recent typhoons.

In another advisory, the BIR made emphasis on the need to fill-out the revised Sworn Declaration of Loss within the same time frame of 45 days.

REVENUE MEMORANDUM ORDER (RMO) No. 31-2009 gives the policies and guidelines governing the declaration of losses or destruction of business property resulting from an identifiable event of a sudden or unexpected, or unusual nature – otherwise known in taxation as “casualty losses.”

The RMO as issued stresses the need for business taxpayers to file with their respective BIR Offices a Sworn Declaration of Loss Arising from Casualty and other support documents deemed necessary to substantiate their proof of loss, within forty-five (45) days after the date of the event.

The Sworn Declaration must be supported by the taxpayer’s Financial Statement for the year immediately preceding the event and copies of the Insurance Policy(ies), if any, for the concerned properties.

Proof of the elements of the loss(es) claimed include, but not limited to, photographs of the properties taken before and after the typhoon with the latter showing the extent of the damage sustained, documentary evidence for determining the cost or valuation of the damaged properties such as but not limited to cancelled checks, vouchers, receipts, and other evidence of costs, insurance policy for the properties concerned, and police report in cases of robbery/theft during the typhoon and/or as a consequence of looting.

The requisites of deductibility for income tax purposes, as discussed in the RMO focus on properties actually used in the business enterprise and properly recorded in the accounting records and financial statements as part of the taxpayer’s assets.

The recovery of casualty losses through insurance claims is still governed by Revenue Regulations (RR) No. 12-77 and must be properly recorded and recognized in the taxpayer’s books of accounts. Moreover, the amount of loss compensated by insurance coverage should not be claimed as a deductible loss.

A revised format of the Sworn Declaration is included in the subject RMO and may be downloaded from the BIR Website at www.bir.gov.ph.

You may click this link to Download the PDF copy of RMO 31-2009.

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