Wednesday, December 21, 2011

Typhoon Sendong : Report Business Losses within 45 days

December 17, Sunday the intensity of Typhoon Sendong brought the city of Cagayan de Oro, and Iligan to its knees.

Businesses affected by the recent typhoon Sendong should be reported to the Bureau of Internal revenue within 45 days after the event.

The BIR has previously issued Revenue Memorandum Order (RMO) No. 31-2009, dated October 16, 2009,  which laid down the policies and guidelines for the reporting and claiming of casualty losses, in general. This was issued in aftermath of Typhoon Ondoy and Pepeng. (For annexes attached to this RMO click this links for Annex A and Annex B you will be ask to open or save to download file to your PC)

The destruction wrought by Typhoon Sendong is undeniably even greater than the previous typhoons. Businesses who incurred losses should report this to the BIR within the said time frame.

Who are allowed to claim for this casualty losses or business losses?
Only Taxpayers engaged in trade or business are entitled to claim deductions for casualty losses. Furthermore, the LOSSES should be incurred for properties ACTUALLY USED IN BUSINESS and were reported as losses in the appropriate declaration filed with the BIR.
For filing claims of casualty losses, 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.

Sworn Declaration of Loss shall state the following

1. Nature of the event that gave rise to such loss(es) and the time of its occurrence; 

2. Description and location of the damaged property(ies);

3. Items needed to compute the loss(es), such as a) cost or other basis of the property(ies); b) depreciation allowed, if any c) value of the property (ies) before and after the event; d) cost of repair and  e) lastly the amount of insurance or other compensation received or receivable. 

Supporting Documents

The Sworn Declaration of Loss should be supported with Financial Statement for the year immediately preceding the event; copies of Insurance Policy(ies), if any,  for the properties used in business. 

Other Proofs for Losses being claimed

Photographs of properties before the typhoon and after, showing the extent of damage to the said properties. 

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, if properties used in business are covered by it.

Police Report, in cases of robbery / theft during the typhoon and or as the consequence of looting.

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

Deduction of assets as capital losses must be properly recorded in the accounting reports, with the adjustment of the applicable accounts. 

The restoration of the damaged property, or the acquisition of new property to replace the damaged property, must be recorded and recognized as either repairs expense or capitalized asset.

Affected taxpayers should comply with the requirements prescribed under Revenue Memorandum Order (RMO) No. 31-2009   guidelines  to avoid  the inability to claim such losses as deductions for income tax purposes. 

BIR may eventually undertake audit of the affected years later on, within 1 or 2 years most probably and at that time, it will be too late to comply with the requirements.

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