SPECIAL ALLOWABLE

ITEMIZED DEDUCTIONS
AND NET OPERATING
LOSS CARRY OVER
Special allowable itemized deductions

- Other items of deductions which may or may not

partake the nature of an expense, but are allowed by
the NIRC or by special laws as deductions.

- Special deductions include deduction incentives to

taxpayers in assisting and in complying with certain
legal requirements.
A. Special expenses under the NIRC and special laws

1. Income distribution from a taxable estate or trust

2. Transfer to reserve fund and payments to policies
and annuity contracts of insurance companies
3. Dividend distribution of a Real Estate Investment
Trust (REIT) under RA 9856
4. Transfer to reserves funds of taxable cooperatives
5. Discounts to senior citizens under RA 9257
6. Discounts to persons with disability under RA 9442
B. Deduction incentives under special laws

1. Additional compensation expense for senior citizen

employees under RA 9257 – 15% of the total amount
paid as salaries to SC

2. Additional compensation expense for persons with

disability under RA 7277, as amended by RA 9442 –
25% of the total amount paid as salaries to disabled
person

3. Cost of facilities improvements for persons with

disability in accordance with RA 7277, as amended by
RA 9442 – 50% of the direct costs of the improvements
or modification
B. Deduction incentives under special laws

4. Additional training expense under the RA 8502 – Jewelry Industry

Development Act of 1998 – 50% of the expenses incurred in training
schemes approved by TESDA

5. Additional contribution expense under the Adopt-a-School program

under RA 8525 – 50% of the contribution of the adopting entity

6. Additional deductions for compliance to rooming-in and breast-feeding

practices under RA 7600, as amended by RA 10028 – 200% actual
amount incurred

7. Additional free legal assistance expense under RA 9999 – 10% of gross

income derived from the actual performance of the legal profession
whichever is lower

8. Additional productivity incentive bonus expense under RA 6971 – 50% of

the total productivity bonuses
NET OPERATING LOSS CARRY OVER (NOLCO)

- Pertains to the amount of net operating loss that is

allowed by the law to be carried over as deduction against
available net income in the following three years up to
the extent of the available net income before NOLCO
deduction in those periods.

Requisites for deductibility

a. The TP must not be exempt from income tax during the
taxable year when the NOLCO was incurred.
b. There has been no substantial change (75%) of the
ownership of the business.