BIR Guidelines and Policies for the Reporting of Casualty Losses

On October 16, 2009, BIR passed a Revenue Memorandum Order No. 31-2009 prescribing the rules and guidelines that shall govern the declaration of Casualty Losses incurred by taxpayers, and the reporting of such losses filed at the concerned Revenue Districts.

REQUIREMENTS FOR THE FILING OF CLAIMS OF CASUALTY LOSSES

1. Sworn Declaration of Loss to be filed within forty-five (45) days after the date of the event.
2. Proof of elements of the loss(es) claimed, such as, but not limited to, the following:

• Photographs of the property(ies) (Before and After the disaster)
• Documentary evidence for determining the cost or valuation of the damaged property(ies), such as but not limited to: cancelled checks,vouchers, receipts, and other documentary evidences
• Insurance policy, in the event that there is an insurance coverage for the property(ies)
• Police report, in case of roberry/theft during the typhoon and/ or as consequence of looting.

REQUISITES OF DEDUCTIBILITY

1. Taxpayer must be engaged in business and casualty loss incurred are actually used in the business enterprise. Personal properties shall therefore not allowed.
2. Properties reported as casualty loss shall be booked or accounted for in the accounting records of the taxpayer indicating the acquisition costs, immediately preceding the occurrence of the loss.
3. The recovery of casualty losses through insurance claims be governed by RR 12-17. Insurance proceeds that exceed the net book value of the damage assets, such excess shall be subjected to the Regular Income Tax, but not to the Value-Added Tax.
4. Accounting for casualty losses must also be observed:

• The deduction of capital losses must be properly recorded in accounting reports, with the adjustment of applicable accounts. The accounting entry to record actual loss of property is as follows:

Particulars	Debit	Credit
Casualty losses	XXX
Accumulated depreciation	XXX
Property/Asset Account		XXX
To record casualty loss…

• The restoration of the damaged property, or acquisition of new property to replace it, must be properly recorded as either: (a) Repairs and maintenance; or (b) a Capital asset.

ADDITIONAL NOTES

The RMO 31-2009 refers to the casualty losses incurred during the typhoon Ondoy and Peping on 2009. However, I believe that such rule is still applicable to the future claims of casualty losses.