NOLCO 5-Year Expiration in the Philippines: What Happens to Your 2020–2021 Pandemic Losses

If your business booked a loss in 2020 or 2021, you may still have a NOLCO balance sitting on your books. It doesn’t run on the usual three-year clock.

Under RA 11494 (Bayanihan 2), as implemented by RR 25-2020, pandemic-year losses get five years instead of three. Some of these balances are only expiring now, in 2025 and 2026.

The main issue though is that the BIR’s filing systems, the Offline eBIRForms Package and the eFPS, currently limit NOLCO input to the three immediately preceding taxable years. Even a business that knows about the five-year rule may be unable to properly reflect the deduction through the standard NOLCO fields.

BIR RMC 081-2026, issued July 22, 2026, is the BIR’s workaround for that gap. This is a pattern that comes up often. A business still carrying 2020 or 2021 losses forward runs into a gap that looks like a system error until you read the fine print.

NOLCO 5-Year Expiration: What Changed

Taxpayers first enter as much of the loss as the regular NOLCO schedule allows. The remainder, the portion the system can’t recognize under the standard three-year rule, gets reported separately under Special Allowable Itemized Deductions, with RA 11494 cited as legal basis and the applicable taxable year clearly indicated.

Why This Happened

The five-year window is closing on a fixed schedule. 2020 losses reach their final claim year in taxable year 2025, with returns filed in 2026. 2021 losses reach their final claim year in taxable year 2026, with returns filed in 2027.

The current versions of the BIR’s filing systems still limit NOLCO input to the three immediately preceding taxable years. Now that the window is actually closing, the gap became urgent instead of theoretical.

Worth noting: RMC 081-2026 was signed May 7, 2026, but only released July 22, 2026, months after the April 15 deadline for a standard calendar-year TY2025 return. For calendar-year taxpayers, that means the workaround wasn’t yet available when the return covering the last year for a 2020 NOLCO claim was actually due.

This is a systems fix, not a change to the underlying law. RA 11494 and RR 25-2020 haven’t moved. RMC 081-2026 exists so the deduction can be properly declared, without the system limitation getting in the way.

What This Means for Your Business

If you’re still carrying a 2020 or 2021 NOLCO balance, entering it in the wrong place doesn’t just create a filing headache. It can result in the deduction being improperly reflected in the return, which creates a reconciliation problem down the line.

If your remaining balance still fits inside the standard three-year schedule the forms already support, this circular may not change anything for you. It’s the businesses whose remaining balance exceeds what the system will natively accept who need to apply the workaround.

What to Do Before You File

Identify your remaining 2020 and 2021 NOLCO balances first, since the correct treatment depends on how much is left and which taxable year it applies to. Then apply the RMC 081-2026 workaround: enter what the standard schedule allows, and report the excess separately with RA 11494 cited as legal basis.

If your business files on a calendar year and already submitted your TY2025 return, this workaround is most relevant now if you’re amending that return. If you file on a fiscal year still within the extended window (see FAQ below), or you’re preparing a 2021 NOLCO claim for TY2026, the workaround applies directly to your upcoming filing.

Getting the Deduction You Already Earned

A pandemic-era NOLCO balance is a deduction your business qualified for years ago. The risk now isn’t whether it’s valid, it’s whether it gets reported correctly before the filing systems’ limitations turn a valid claim into a mismatched one.

We help clients confirm exactly where their remaining pandemic NOLCO balance sits, and make sure it’s reported the way RMC 081-2026 actually requires before the window closes. If you’re not certain how much of your 2020 or 2021 loss is still outstanding, or whether your current filing approach matches the workaround, our tax services can help you sort it out.

Frequently Asked Questions

Does this apply if my business uses a fiscal year instead of a calendar year?

Yes, within limits. RMC 081-2026 extends to businesses with a fiscal year ending between July 31, 2020 and June 30, 2022, treating those periods as taxable years 2020 and 2021 respectively, per RMC 138-2020. Fiscal years ending before July 31, 2020 or after June 30, 2022 don’t qualify for the extended period.

What if my total NOLCO claim, across both schedules, is wrong?

The circular requires the total NOLCO claimed, whether reflected in the regular NOLCO Schedule/Table or the Special Allowable Itemized Deductions Schedule, to not exceed the allowable NOLCO deduction for that taxable year. The circular instructs taxpayers to validate the return for errors before submitting it.

Which BIR forms does the workaround actually cover?

Only three: BIR Form 1701, 1702-RT, and 1702-MX. If you’re filing a different income tax return, this specific workaround procedure doesn’t apply to you.