October 16, 2009

REVENUE MEMORANDUM ORDER NO. 031-09

TO : All Internal Revenue Officers and Others Concerned

SUBJECT : Policies and Guidelines for the Reporting of Casualty Losses

I. Objectives
The past three weeks have witnessed the passage of two (2) weather
systems — Typhoons Ondoy and Pepeng — through the Philippines' area of
responsibility. In this regard, it is anticipated that a significant number of
taxpayers shall claim deductions for casualty losses sustained as a result of
the destruction wrought by these two weather systems throughout Luzon. ITDHSE

As such, this Order is being issued to prescribe the policies and

guidelines that shall govern the declaration of casualty losses incurred by
taxpayers, and the reporting of such losses filed at the concerned Revenue
District Offices (RDOs).
II. Policies and Guidelines
A. Requirements for the Filing of Claims of Casualty Loss
1. Sworn Declaration of Loss (Annex A of this Order), to be filed within
forty-five (45) days after the date of the event, stating the
following:
• Nature of the event that gave rise to such loss(es), and the time
of its occurrence;
• Description and location of the damaged property(ies);
• 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.
• Amount of insurance or other compensation received or
receivable.
1.1. The Sworn Declaration of loss must be supported by the
following documents:
• The Financial Statement for the year immediately
preceding the event; and,
• Copies of the Insurance Policy(ies), if any, for the
concerned property(ies).
2. Proof of the elements of the loss(es) claimed, such as, but not
limited to, the following:
• Photographs of the property(ies):
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 o Photographs taken showing the property(ies) before the
typhoon; and,
o Photographs taken after the typhoon, showing the extent
of the damage sustained.
• 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 evidence of
costs. cAHDES

• Insurance policy, in the event that there is an insurance

coverage for the property(ies).
• Police report, in cases of robbery/theft during the typhoon
and/or as a consequence of looting.
Failure to report a theft or robbery to the police can be held
against the taxpayer. However, a mere report of an alleged
theft or robbery to the police authorities is not considered
as conclusive proof of the loss arising therefrom.
All documents and other evidence submitted to prove such loss(es)
shall be subject to verification by the concerned Bureau office,
and should be kept by the taxpayer as part of his tax records,
and be made available to the duly-authorized Revenue Officer(s),
upon audit of his Income Tax return and the declaration of loss.
B. Requisites for Deductibility
2. * A taxpayer engaged in trade or business may be entitled to claim,
as business deductions, casualty losses incurred for properties
actually used in the business enterprise that were damaged and
reported as losses in the appropriate declaration filed with the
BIR. The loss of assets not used in the course of business and/or
are personal in nature shall therefore not be allowed.
3. Properties that shall be reported as casualty losses must have been
properly reported as part of the taxpayer's assets in the
taxpayer's accounting records and financial statements in the
year immediately preceding the occurrence of the loss, with the
costs of acquisition clearly established and recorded. Otherwise,
the claim for deduction shall not be allowed.
4. The recovery of casualty losses through insurance claims shall be
governed by the guidelines set forth in Revenue Regulations (RR)
No. 12-77. Moreover, the amount of loss that shall be
compensated by insurance coverage should not be claimed as a
deductible loss.
4.1. If the insurance proceeds exceed the net book value of the
damages assets, such excess shall be subject to the regular
Income Tax, but not to the Value-Added Tax, since the
indemnification is not an actual sale of goods by the insured
company to the insurance company. CacEIS

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 5. In addition to the policies prescribed in RR No. 12-77 relative to the
substantiation of casualty losses arising from typhoons and other
natural disasters, the following guidelines shall be observed:
5.1. The deduction of assets as capital losses must be properly
recorded in accounting reports, with the adjustment of the
applicable accounts. The accounting entry to record this
action is illustrated as follows:
Debit: Casualty Loss Pxx,xxx,xxx.xx
Accumulated
xx,xxx,xxx.xx
Depreciation
Credit: Property/Asset Account Pxx,xxx,xxx.xx
In the event of a total loss/destruction of property(ies) used in
the business enterprise, the net book value (costs less
accumulated depreciation) immediately preceding the
natural disaster should be used as the basis in claiming
casualty losses, and shall be reduced by the amount of
insurance proceeds received.
5.2. The restoration of the damaged property, or the acquisition
of new property to replace it, must be properly recorded
and recognized as either: a) a repairs expense; or, b) a
capitalized asset.
The appropriate treatment of this property shall be governed by
the financial accounting and tax accounting rules, and must
take into account the nature of the transaction, the value of
the amounts involved, and other factors.
C. Monitoring and Reporting of Claims for Casualty Losses
1. All revenue personnel are enjoined to exert every effort to assist
taxpayers who wish to file claims for casualty losses.
2. All RDOs should ensure that samples of the format to be used in the
preparation of the Sworn Declaration of Loss are readily available
upon request of the taxpayer. The RDOs must initiate a campaign
to inform the taxpaying public within their respective jurisdictions
of the policies and guidelines for the filing of claims for casualty
losses. cTDECH

3. All RDOs shall submit to the Deputy Commissioner (Operations

Group), through the concerned Regional Director, copy furnished
the Office of the Senior Deputy Commissioner, a Report on
Casualty Losses for the month of October 2009, using the format
prescribed in Annex B of this Order, not later than November 10,
2009.
A Final Report on Casualty Losses must be submitted, following the
aforesaid channels, not later than December 10, 2009. A
Consolidated Report shall then be submitted by the Deputy
Commissioner (Operations Group) to the Commissioner, not later
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 than December 31, 2009.
This Order shall take effect immediately.

(SGD.) SIXTO S. ESQUIVIAS IV

Commissioner of Internal Revenue

ANNEX A
Declaration of Loss Arising from Casualty
Name of Taxpayer: ____________________________________________________

Business Address: ____________________________________________________

T.I.N.: ____________________________________________________

RDO No.: ____________________________________________________

A. Nature of Loss
1. Event causing the loss ____________________________________

2. Date of occurrence of event ____________________________________

B. Valuation of Loss
Business Property — Total Destruction

Declared Cost Accumulated Amount of

Description
Location of Property Depreciation Insurance Name of
of
Property (Per Financial (If Any) Recovery Insurance
Statement) (Per Financial Declared Company
Statement)
1. __________ _________ ____________ ____________ __________ __________
2. __________ _________ ____________ ____________ __________ __________
3. __________ _________ ____________ ____________ __________ __________
4. __________ _________ ____________ ____________ __________ __________
5. __________ _________ ____________ ____________ __________ __________
Business Property — Partial Damage

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 Declared Cost Accumulated Replacement
Description
Location of Property Depreciation Cost to Amount of
of
Property (Per Financial (If Any) Restore the Insurance
Statement) (Per Financial Property Recovery
Statement) Back to its Declared
Normal
Operating
Condition
1. __________ _________ ____________ ____________ __________ __________
2. __________ _________ ____________ ____________ __________ __________
3. __________ _________ ____________ ____________ __________ __________
4. __________ _________ ____________ ____________ __________ __________
5. __________ _________ ____________ ____________ __________ __________
NB: To support the information provided in this Form, the following documents must be
submitted:
1) Financial Statement for the year immediately preceding the event that caused
the loss; and,
2) Copies of the Insurance Plan(s) for the concerned property(ies).
I am executing this Sworn Declaration to attest to the truth of the foregoing
facts and for whatever legal intents and purposes it may serve.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 2009 at _________________________, Philippines.
______________________________
Taxpayer
(Signature Over Printed Name)
SUBSCRIBED AND SWORN to before me, this _____ day of _____________,
2009 at _______________, affiant exhibiting to me his Tax Identification No.
__________ issued at _____________________.
_____________________________

NOTARY PUBLIC
Doc. No. _______
Page No. _______

Book No. ______

Series of 2009.

ANNEX B
Report on Claims for Casualty Losses
Revenue District No. ____, ___________

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 Declared
Name of Description Amount of
Cost
Taxpayer TIN of Property of Property Accumulated Insurance Amount of
(Per
Depreciation Recovery Deductible
Financial
Statement) (If Any) Declared Casualty Loss
_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
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_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
_________ _____ __________ __________ ___________ __________ ___________
Submitted by:

_______________________________
(Signature Over Printed Name)
Revenue District Officer

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