AB Capital and Investment Corporation

May 10, 2007 BIR RULING [DA-295-07] DA-333-2003; Sec. 5 (a) & (c), RR 5-2000; Sec. 3 (4), DOF Department Order No. 19-03 AB Capital and Investment Corporation 8th Floor Phinma Plaza 39 Plaza Drive, Rockwell Center Makati City Attention: Jose S. Banta Vice-President/Controller Gentlemen : This refers to your letter dated November 24, 2006, requesting for a ruling regarding the special revalidation of your Tax Credit Certificate (TCC) issued on July 24, 2001. It is represented that in connection with Department Order No. 20-06 of the Department of Finance, AB Capital and Investment Corporation ("AB Capital" , for brevity) submitted TCC No. SN 023980, issued on July 24, 2001, with a remaining balance of Six Hundred Three Thousand Seventy-Three Pesos and Seventy-Eight Centavos, (P603.073.78) for special revalidation on November 21, 2006. Unfortunately, you were recently informed that the said TCC had already expired on July 24, 2006. Sometime during the 2nd quarter of 2003, AB Capital was instructed by the BIR to have its TCC No. SN 023980 revalidated. After carrying out several verification procedures, Mr. Danilo C. Uy, Chief of Staff, OCIR and then Chairman of the TCC Revalidation Committee, issued a Memorandum dated September 8, 2003 addressed to Ms. Ma. Gracia B. Javier confirming the revalidation of TCC No. 023980 and allowing the application for payment of AB Capital's internal revenue liabilities on the unutilized balance. It is further represented that AB Capital only availed of the partial utilization (40-50%) of the TCC in question starting from the October 2005 tax period up to the last time it was utilized for application for its percentage tax liability for the May 2006 tax period. For the aforementioned period, AB Capital paid a total of P3,528,922.38 of its tax liabilities in cash instead of applying its TCC as full payment: otherwise, the TCC should have been fully utilized for the tax period January 2006. You now request this Office to confirm your opinion that AB Capital's TCC, being revalidated in 2003, as per the above-mentioned Memorandum, is to expire only in 2008 and not on 2006, as was brought to your attention. In reply, please be informed that Section 5 (a) and (c) of Revenue Regulations (RR) No. 5-2000 provide that: "SEC. 5. PERIOD OF VALIDITY, CONVERSION AND REVALIDATION. a. Validity Period. Any Tax Credit Certificate issued in accordance with the pertinent provision of the Tax Code of 1997 which remains unutilized after five (5) years from date of issue shall, unless revalidated before the end of the fifth year, be considered invalid and 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. xxx xxx xxx c) Revalidation Period. In general, a TCC may be revalidated prior to the expiration of its validity period. Provided, however, that any TCC issued prior to January 1, 1998 in which the grantee's holding period therefore as of said date is less than five (5) years counted from date of issue, may be submitted for revalidation by the holder within six (6) months prior to the end of the fifth year, . . ." It is clear from the aforequoted provisions that TCCs issued under the pertinent provisions of the Tax Code may be used as payment of any internal revenue tax, except withholding tax, within five (5) years from date of issue. After which, the same may no longer be utilized, except if the TCC has been revalidated within six (6) months prior to the expiration of the five year period. It is also clearly stated that a revalidated TCC is valid for a period of five years from the date of issue. In the present case, however, AB Capital's TCC which was first issued on July 24, 2001, was submitted for revalidation with the BIR in 2003 pursuant to Department Order No. 19-03 of the DOF. In this regard, Section 3 (4) of the said Department Order provides that: "Section 3. General Procedures on the Special Revalidatio n. xxx xxx xxx 4. The Center shall accept applications for special revalidation in accordance with the following procedure: xxx xxx xxx The revalidated TCC shall indicate the date of original issuance, date of revalidation and the TCC maturity date. The maturity date of the TCC shall be the same as that of the original issuance and shall undergo regular revalidation as provided by law ." (emphasis supplied) AB Capital's submission of its TCC in 2003, pursuant to DOF Department Order No. 19-03, was simply for the Government to determine the outstanding amount of TCCs that are still floating in the market and to prevent the use of expired, stolen, fake, tampered, or recycled TCCs. In this regard, it is evident that the September 8, 2003 Memorandum issued by the Chairman of the TCC Revalidation Committee revalidating AB Capital's TCC did not have the effect of extending its maturity date, considering that DOF Department Order No. 19-03 expressly states that the maturity date of the TCCs submitted in accordance with said Order shall be the same as that of the original issuance and shall undergo regular revalidation. Since there is nothing in said Department Order that extends the 5-year period of taxpayers' TCCs submitted for special revalidation, the 5-year lifespan of AB Capital's TCC effectively ended on July 24, 2006, five years after its first issuance. cITaCS Accordingly, this Office holds that AB Capital's TCC is no longer eligible for revalidation in accordance with Section 5 (c) of Revenue Regulations 5-2000. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service