MANILA, Philippines - Taxpayers seeking income tax deductions for losses they incurred because of tropical storm Ondoy and typhoon Pepeng should show proof of the damage on their businesses, the Bureau of Internal Revenue (BIR) said yesterday.
The BIR said some businesses seeking tax deductions have not been submitting the necessary documents.
According to the BIR’s Revenue Memorandum Order 31-2009, taxpayers whose enterprises have been affected by the two typhoons need to submit a Sworn Declaration of Loss and other documents to substantiate their proof of loss.
The agency said applicants seeking tax deductions need to file the documents within 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 policies of the concerned parties.
Aside from a sworn declaration, the BIR said applicants should also submit photographs of the affected properties taken before and after the typhoon to show the extent of the damage.
There should also be documentary evidence for determining the cost or valuation of the damaged properties such as cancelled checks, vouchers and receipts.
Other evidence of costs include insurance policy for the properties concerned and a police report in case of looting.
As discussed in the BIR memorandum, the requisites for deductibility for income tax purposes focus on properties actually used in the business enterprise and properly recorded in the accounting records and financial statements.
The BIR said the amount of loss compensated by insurance coverage should not be claimed as a deductible loss.
The agency issued the additional guidelines after announcing last week that taxpayers may claim income tax deductions for losses brought about by the two typhoons.
Because of the damage left by the two typhoons on businesses, the BIR said it is likely to miss its 2009 collection target of P798.5 billion.