BIR Ruling [DA-279-00]

July 6, 2000 BIR RULING [DA-279-00] 204 (c), 230; 192-99; DA-279-2000 Benguet Corporation One Corporate Plaza 845 Arnaiz Avenue 1223 Makati City Attention: Mr . Salvador P . Pabalan SVP - Finance and Treasurer Gentlemen : This refers to your letter dated March 30, 2000 requesting, in effect, for a ruling on the assignability of BIR-issued Tax Credit Certificates in favor of third parties. prcd It is represented that Benguet Corporate (Benguet) is a domestic corporation primarily engaged in the mining business including the exploration, development and operation of mining properties for purposes of commercial production, as well as the marketing of mineral products produced thereby; that it exports one hundred (100%) percent of its major product gold; that as such, Benguet is subject to zero percent (0%) value-added tax (VAT); that Benguet had accumulated input VAT credits in the course of its business operations; that inasmuch as Benguet's input VAT credits had constantly exceeded its output VAT liability, its VAT returns accordingly reflected excess input VAT credits; that Benguet thus applied for TCCs therefore, which applications were subsequently granted by the BIR, and in some case, upon judicial orders; that since Benguet, along with other mining companies, had been suffering serious financial reverses for several years now, it had no opportunity to utilize these TCCs; that Benguet previously attempted to convert these TCCs in cash refunds but such attempts proved unavailing; that in the meantime, however, Benguet continues to pay for input VAT passed on to it by its suppliers of goods and services, naturally leading to the accumulation of more tax credits that Benguet would again be unable to utilize; that Benguet thus finds itself in the midst of aimlessly accumulating tax credits in vain while its financial condition inexorably suffers serious degradation; and that the following are the TCCs which Benguet intends to transfer: TCC Number Date Amount SN015066 (Revalidated) November 25, 1998 P14,216,232.94 SN000716 August 25, 1998 13,449,368.29 SN018934 October 29, 1998 16,080,847.10 SN018994 February 24, 1999 17,258,658.75 SN021781 September 16, 1999 30,148,940.85 In reply, please be informed that insofar as BIR-issued TCCs are concerned, there is no provision under the Tax Code of 1997 expressly prohibiting the transfer or assignment of duly-issued BIR TCCs. Under the 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 all 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 its wishes. These powers are necessarily an attribute of the taxpayer's ownership of said certificate. The free enjoyment and disposition of said certificate can 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 of TCCs issued under the Tax Code. On the contrary, the law specifically allows the conversion of unutilized tax credits into cash refund within five (5) years from date of 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 the TCC to another yields the same result, without any revenue loss or prejudice to the government. prcd 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. Such being the case, BIR-issued TCC Nos. SN015066, SN000716, SN018934, SN018994 and SN021781 can be transferred or assigned by Benguet in favor of third parties provided that (1) said TCCs have not expired and remain valid in the hands of Benguet; (2) such transfer of said TCCs shall be limited to one transfer only; and (3) the TCC transferee/s can utilize the aforestated TCCs only in payment of its internal revenue tax liabilities and cannot be the subject of a cash refund. (BIR Ruling No. 192-99 dated December 6, 1999) This ruling is being issued on the basis of the foregoing facts. 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, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group