EO 291 s. 2000 is Not Retroactive

January 12, 2002 BIR RULING NO. 002-02 000-00 Development Bank of the Philippines Senator Gil Puyat Avenue corner Makati Avenue Makati City Attention: Remedios L. Macalincag President and Chief Executive Officer Gentlemen : This refers to your letter to Her Excellency Gloria Macapagal-Arroyo, dated August 10, 2001, reiterating your request for the issuance of an appropriate directive clarifying the retroactivity of the non-taxability of monetized leave credits of government officials and employees under Executive Order No. 291 dated September 27, 2000. In reply, please be informed that it is the position of this Office that Executive Order No. 291 dated September 27, 2000 shall not be given retroactive application. In the case of Commissioner of Internal Revenue vs. Republic Cement Corporation, et al. , G.R. No. 35668, August 10, 1983, the Supreme Court, citing the case of Cebu Portland Cement Co. vs. Collector of Internal Revenue G.R. No. L-20563, October 29, 1968, ruled: "Indeed, like other statutes, tax laws operate prospectively, whether they enact, amend or repeal, unless, as aforesaid, the purpose of the Legislature to give retrospective effect is expressly declared or may clearly be implied from the language used. . . . . . . It was enough for the Court to say in effect that even assuming Republic Act 1299 had re-classified cement as a mineral product, the reclassification could not be given retrospective application (so as to justify the refund of sales taxes paid before Republic Act 1299 was adopted) because laws operate prospectively only, unless the legislative intent to the contrary is manifest, which was not so in the case of Republic Act 1266. [The situation would have been different if the Court instead had ruled in favor of refund, in which case it would have been absolutely necessary (1) to make an unconditional ruling that Republic Act 1299 re-classified cement as a mineral product (not subject to sales tax), and (2) to declare the law retroactive, as a basis for granting refund of sales taxes paid before Republic Act 1299.]" Section 2 of Executive Order 291 does not provide that it be given retroactive application, to wit: "SEC. 2. Abrogation of BIR Ruling on Monetized Leave Credits . Hence, pursuant to Section 17, Article VII of the Constitution, I hereby abrogate all previous rulings, including Section 2.78.1 (A) (7), p. 27 of Revenue Regulation No. 2-98 dated April 17, 1998 issued by the Bureau of Internal Revenue which subjected the monetization of leave credits to income tax, which I have noted to be inconsistent with the provision of Republic Act (R.A.) No. 8424, the "Tax Reform Act of 1997" as well as the intention on the grant of such benefits." Accordingly, we regret to inform you that your request is denied. TDcCIS Very truly yours, (SGD.) RENE G. BAEZ Commissioner of Internal Revenue