BIR Ruling

November 18, 1970 Philippine Electric Plant Owners Association Thru: Atty. Pilar Nable 116 10th St., Gilmore Quezon City Gentlemen : This refers to your letter dated October 7, 1970 requesting a ruling on "Tax Credit Law" as applied to infrastructure projects undertaken by private companies. In reply, I have the honor to inform you that pursuant to Republic Act No. 5279, the Certificate of Indebtedness paid to private persons, corporations, associations or partnerships undertaking such infrastructure projects may be used in payment of internal revenue taxes and customs duties. In other words, said Certificates may be applied as tax credit. For ready reference, the pertinent provisions of Republic Act No. 5279 are quoted hereunder: "SEC. 3. Private persons, corporations, associations or partnerships undertaking such public works projects shall be paid in the form of certificates of indebtedness which may be used by said private persons, corporations, associations or partnerships in payment of internal revenue taxes and customs duties, whether current or future. "SEC. 4. The certificates of indebtedness to be issued in accordance herewith when used in settlement for any tax liabilities of contractors shall be chargeable to funds appropriated by law and allotted from funds certified by the Commissioner of the Budget as available. "Certificates of indebtedness shall be issued within thirty days from the time the work has been completed or within ten days after the close of every quarter by the Secretary of Finance upon recommendation of the bureau or agency under whose jurisdiction the project falls to cover the proportional cost of the work completed for the preceding quarter at the option of the contractor. These certificates of indebtedness shall be availed of in payment of internal revenue taxes and customs duties which may be due: Provided , That a contractor or his assignees shall not be allowed in one single fiscal year to apply his certificates of indebtedness in an amount exceeding that programmed for release for the project from funds available during said period: Provided, further , That the shares of municipalities, cities and provinces from all internal revenue taxes shall not be diminished by reason of the payment of such taxes with certificate of indebtedness whose value shall be considered in the computation thereof; and such shares shall be fully remitted by the national government to the municipality, city or province concerned: Provided, finally , That the unredeemed portion of certificates of indebtedness issued under this Act shall earn interest at the prevailing rate until the obligation is fully settled. Unused certificates of indebtedness may be carried over for as many years as necessary, but in no case shall they be assigned, transferred., or otherwise encumbered more than once. The assignee may use said certificates of indebtedness in payment of its own tax liabilities Upon dissolution of any corporation, association, or partnership, unused certificates of indebtedness shall be forfeited in favor of the government. Very truly yours, CONRADO P. DIAZ Acting Commissioner of Internal Revenue