BIR Ruling

July 1, 1969 The Honorable Chairman Committee on Ways & Means House of Representatives Manila Attention: Technical Staff S i r : This refers to House No. 18914 providing for tax credit when the personal exemption of an individual exceeds his taxable net income, which credit shall be applicable for the next ensuing two years following the calendar year for which he filed his income tax return. cdll Before rendering comment, this Office wishes to clarify the intention of the bill, that is whether the excess shall be applied as tax credit or as a carry-over deduction for the ensuing two years. This Office surmises that the intention is to carry-over the excess as a deduction for, if as tax credit, there could not be any basis therefore, no tax having been actually paid. This Office believes that the proposition under either of the prospective raised in our point for clarification is not founded on sound consideration. The amount of personal exemptions to which an individual is entitled, more or less, approximates the individual's living expenses. Where, therefore, the taxable net income of an individual exceeds his personal exemptions, it is but proper that he should pay tax on the excess. Besides, the proposition hardly finds application for hardly, will a taxpayers income increase to such an extent that the excess will exceed his personal exemptions in that year and that of the preceding year, the group of taxpayers to which the bill is directed being apparently salaries people. For the foregoing considerations, this Office does not recommend the passage of the bill. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue