Requirements on the Processing of Applications for Cash Conversion of Tax Credit Certificates

The Bureau just recently issued the Revenue Memorandum Circular no. 77-2014, clarifying certain requirements on the processing of applications for cash conversion of tax credit certificates.

It is clarified in the circular the all applications for cash conversion of TCCs which have been filed with the concerned revenue Office that issued the said TCC before the expiration of the validity period, as indicated on the face of the TCC, shall no longer be required to be revalidated for purposes of continuance of the processing of applications for TCC cash conversion.

The provisions of Section 5 b) of Revenue Regulations No. 5-200 dated July 19, 200 is clear that: "Any request for conversion into cash refund of unutilized tax credits may be allowed during the validity period of any TCC.xxx" (underscoring ours).

On the other hand, the provisions of Section 5 c) and d) of the same regulations governing revalidation only apply to any TCC whose validity period is about to expire and the same needs to be revalidated by reason that the holder of the TCC has to apply the unutilized portion thereof on its/his/her tax liabilities, subject to the prescribed exception where the TCC has already been previously revalidated.

Accordingly, the processing of all applications for TCC cash conversion filed before the expiration of the validity period of the TCC with the TCC-issuing Office and remained pending with and withheld by the concerned processing revenue Office as of the date of expiration thereof by reason of the above issue shall proceed accordingly, whether for verification, approval or for payment, without the need for revalidation of the covered TCC.

Refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMC%20No%2077-2014.pdf of the full tex of the said circular.

Revenue Regulations No. 5-2000 was issued in August 15, 2000 governing the manner of the issuance of Tax Credit Certificates (TCCs) and the conditions for their use, revalidation and transfer. It is stated in the regulations that a TCC may be used in the by the grantee or his assigneee in the payment of his direct internal revenue tax liability but in no case shall the TCC be use in the payment of the following:

1. Payment or remittance for any kind of withholding tax;

2. Payment arising from the availment of tax amnesty declared under a legislative enactment;

3. Payment of deposits on withdrawal of exciseable articles;

4. Payment of taxes not administered or collected by the Bureau of Internal Revenue; and

5. Payment of compromise penalty

Besides, in no case shall a tax refund or TCC be given resulting from availment of incentives granted pursuant to special laws for which no actual tax payment was made.  

BIRissued TCCs may be transferred in favor of an assignee subject only to the following conditions: 

1) the transfer of a valid TCC must be with prior approval of the Commissioner or his duly authorized representative; 

2) the transfer should be limited to one transfer only; and 

3) the transferee shall use the TCC assigned to him strictly in payment of his direct internal revenue tax liability and in no case shall the same be available for conversion to cash in his hands. 

Any TCC issued which remains unutilized after five (5) years from the date of issue shall, unless revalidated before the end of the fifth year, be considered invalid. This means that the TCC shall not be allowed for use in payment of any of the taxpayer's internal revenue tax liability nor allowed to be transferred and the unutilized amount thereof shall revert to the General Fund of the National Government. The revalidated TCC shall be valid for a period of five years from the date of issue. Any request for conversion into cash refund of unutilized tax credits may be allowed during the validity period of the TCC, subject to conditions specified in the Revenue Regulations. Any TCC issued prior to January 1, 1998, may be submitted for revalidation by the holder within six (6) months prior to the end of the fifth (5th) year. No revalidated TCC shall be issued unless the Commissioner's duly authorized representative has certified that the applicant taxpayer has no outstanding tax liability. If the holder has any outstanding tax liability, said liability should be applied first against the TCC sought to be revalidated through the issuance of a Tax Debit Memo.