Losses due to looters may be declared as income tax deductible—Henares

BIR Commissioner Kim Jacinto-Henares. INQUIRER FILE PHOTO

MANILA, Philippines—Business establishments allegedly looted by some survivors of typhoon Yolanda may declare losses as deductible from their income taxes.

At a press conference, Bureau of Internal Revenue (BIR) Commissioner Kim Henares said establishment owners must meet certain conditions to be able to avail of casualty loss.

“If you lose something out of theft—that is still considered as casualty loss. So, kung nawalan ka sa pagnanakaw, pareho yun sa nawalan ka dahil doon sa storm (Yolanda’).

“Kailangan hindi nabayaran sa ‘yo ng insurance company; kasi lahat ng negosyo usually may insurance against theft… so if nabayaran ka ng insurance company, hindi mo pwede i-deduct [as casualty loss,” Henares said.

Under the Tax Code, casualty loss is the one resulting from complete or partial destruction of property from an identifiable event of a sudden, unexpected or unusual nature. Casualties such as fire, storms, earthquake, shipwreck as well as robbery, theft and embezzlement are realities in a business environment and their effect is a big financial loss to one’s business.

The requirements that should be met are the following:

a. The loss must be that of a taxpayer.
b. It must be actually sustained and charged off within the taxable year.
c. It must be evidenced by a closed and completed transaction.
d. It must not be compensated for by insurance or other forms of indemnity.
e. In case of casualty loss, a sworn declaration of the loss must be filed within the prescribed period, that is, not less than 30 days or not more than 90 days from the date of the occurrence of casualty or robbery, theft or embezzlement.
f. The taxpayer must prove the elements of the loss he is claiming, such as the actual nature and occurrence of the event and amount of the loss.
g. The loss must be connected with the trade, business, or profession of the taxpayer.
h. The loss must not have been previously claimed as a deduction for estate tax purposes in the estate tax return.

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