Revenue Memorandum Circular No. 81-2026

Pursuant to Section 4 of Revenue Regulations (RR) No. 25-2020, a business or enterprise that incurred a Net Operating Loss for taxable years 2020 and 2021 shall be allowed to carry over the same a deduction from its gross income for the next (5) consecutive taxable years immediately following the year of such loss, unless otherwise disqualified from claiming the deduction.

However, the current version of the Offline eBIRForms Package and Electronic Filing and Payment System (eFPS) limits the input of Net Operating Loss Carry-Over (NOLCO) to three (3) immediately preceding taxable years, which prevents the proper reflection of NOLCO incurred in 2020 and 2021 in later taxable-year filings (e.g., taxable year 2025)

Relative thereto, this Circular is hereby issued to prescribe interim workaround procedures to allow the accurate deduction of such NOLCO in BIR Form Nos. 1701, 1702-RT and 1702-MX, without affecting the validity of the electronically filed return.

Workaround Procedure in the Offline eBIRForms Package and eFPS

Due to the current system’s validation allowing NOLCO input to the three (3) immediately preceding taxable years, taxpayers filing electronically via the Offline eBIRForms Package and eFPS and claiming NOLCO incurred in taxable years 2020 ans/or 2021, may follow the temporary data-entry procedure provided in the attached Annex.

1. Reflect the NOLCO amounts within the NOLCO Schedule/Table to the extent allowed by the system.
2. For the NOLCO amounts incurred in taxable years 2020 and 2021 or year(s) that cannot be accommodated in the NOLCO Schedule/Table:
   • 2.1 Proceed to the Special Allowable Itemized Deduction Schedule.
   • 2.2 Indicate in the description field the specific NOLCO years being claimed (e.g., “NOLCO-TY 2020” or “NOLCO – TY Two Thousand Twenty”) and use “RA 11494” as the Legal Basis.
   • 2.3 Enter the corresponding amount of NOLCO applied for the current taxable year.
3. Ensure that the total NOLCO claimed, whether reflected in the NOLCO Schedule/Table or under the Special Allowable Itemized Deductions Schedule, does not exceed the allowable NOLCO deduction for the taxable year.
4. Click “Validate” to confirm that no validation errors occur.
5. Once validation is successful, click “Submit” to file the return.

The foregoing workaround procedures shall apply only to taxapyers claiming NOLCO incurred in taxable years 2020 and 2021, as allowed under RR No. 25-2020, including those adopting a fiscal year ending on July 31, 2020 to June 30, 2022, which are treated as NOLCO for taxable years 2020-2021, respectively, pursuant to Revenue Memorandum Circular No. 138-2020. Those businesses or companies with fiscal years ending before July 31, 2020 and after June 30, 2022, that incurred a net operating loss, cannot avail of the extended period to carry over the loss for an additional two (2) years.