BIR Ruling [DA-252-00]

May 26, 2000 BIR RULING [DA-252-00] 204, 230; 192-99; DA-252-2000 Glorious Sun Fashion Garment Mfg. Co. (Phil.) Inc. 2nd Floor, Reliance House 205 EDSA Cor. Rochester St., Greenhills Mandaluyong, Metro Manila 1550 Attention: Mr . Nemesio G . Co President Gentlemen : This refers to your letter dated March 27, 2000 stating that Glorious Sun Fashion Garment Mfg. Co. (Phils.), Inc. is one of the biggest denim pants manufacturer-exporter in the country; that your other line of business is amusement center management and operations of four amusement companies, namely: Paco Amusement Co. (Phils.) Inc., KC Wonderland Corporation, Visaya Amusement Corporation and Great Worlds of Fun Corporation; and that the garment manufacturing company has thus far accumulated a fairly huge value in tax credits. Based on the foregoing, you now request that the said tax credits be assigned and applied for the future payment of taxes by the four amusement companies which you also own. In reply, please be advised that insofar as BIR-issued TCCs are concerned, there is no provision under the Tax Code of 1997 expressly prohibiting the transfer or the assignment of duly issued BIR TCCs. Under the Tax Code, a Tax Credit Certificate may be validly issued for amounts representing erroneously paid taxes; excess quarterly individual or corporate income taxes paid; illegally collected taxes; VAT on Zero-rated or Effectively Zero-rated Sales; input taxes paid on capital goods imported or locally purchased; and for unused input taxes due to retirement from or cessation of business or cessation of status of a VAT-registered person. In all instances, a BIR-issued TCC presupposes the existence of a previously paid tax arising out of the normal application of the provisions of the Tax Code. In contrast to a BOI-issued Tax Credit Certificate which is in the nature of a tax incentive granted by special laws to the grantee, such TCC is transferable only under certain conditions (Article 21, Omnibus Investments Code, as implemented by Rule VII of the Rules and Regulations of E.O. 226). Verily, taxpayers with TCCs issued by the BIR in their name hold the same in the concept of an owner. In BIR Ruling No. 098-95 dated June 27, 1995, this Office had an occasion to state that " (I)n the event of the issuance of tax credit certificate, the taxpayer as the owner thereof, has the exclusive right to enjoy and dispose of the certificate according to his wishes. These powers are necessarily an attribute of the taxpayer's ownership of said certificate. The free enjoyment and disposition of said certificate could only be subject to the limitations imposed by law . (Articles 427 and 428, New Civil Code of the Philippines)". As previously stated, there are no express, much less implied, limitations imposed by law on the transfer or assignment of TCCs issued under the Tax Code. On the contrary, the law specifically allows the conversion of the unutilized tax credits into cash refund within five (5) years from the date of the issue (Sections 204 and 230, NIRC). If the taxpayer can ultimately dispose the cash proceeds of his TCCs in any manner he chooses, we see no cogent reason why the source of such proceeds should be treated differently. At any rate, the conversion into cash refund or the transfer of TCC to another yields the same result, without any revenue loss or prejudice to the government. In view of the foregoing, this Office is of the opinion, and so holds, that a TCC validly issued pursuant to the Tax Code of 1997 can be transferred or assigned by the owner provided, of course, that the TCC sought to be transferred must not have expired and remains valid in the hands of the original holder pursuant to the provisions of Section 230 of the Code. Finding that copies of the TCCs sought to be transferred by you, i.e. TCC Nos. SN 021873; SN 021816; SN 018987; and SN 006240 are valid and with creditable balances, this Office interposes no objection to their assignment and/or transfer. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) ROMEO S. PANGANIBAN Deputy Commissioner Operations Group (Officer-in-Charge)