Issuance of a Tax Credit Certificate on the Excess Available Tax Credit

March 17, 1987 BIR RULING NO. 074-87 166 (c) 000-00 074-87 Gentlemen : This refers to your letter dated November 28, 1987 requesting for the issuance of a tax credit certificate on the excess available tax credit for the year ending December 31, 1985 in the amount of P8,073,469.00. It appears that you are a domestic corporation organized and existing under the laws of the Philippines and duly registered with the Securities and Exchange Commission; that you registered with the Board of Investments (BOI) under the Export Incentives Act (Republic Act No. 6135) as a preferred non-pioneer enterprise for the production/export of wires and cables; that you are likewise registered under the Investments Incentives Act (Republic Act No. 5186) as a preferred pioneer enterprise for the production/manufacture of continuous cast copper rods; that upon investigation conducted by an examiner of this Office, it was found out that you purchased from Philippine Associated Smelting and Refining Corporation (PASAR) copper cathodes; that the tax "deemed paid" in your purchases of cathode copper from PASAR and the tax credit beginning December 31, 1984 inventories were not fully utilized by you as total available sales tax credit creditable from your sales tax, that the investigating examiner recommended the issuance of a tax credit certificate in your favor for the aforesaid amount of P8,073,469.00; and that you intend to apply the same in payment of your other internal revenue tax liabilities aside from the advance sales tax. aisadc In reply, please be informed that pursuant to Section 166(c) of the Tax Code as amended by PD No. 2031 and as implemented by Revenue Regulations No. 5-86, a taxpayer who has excess tax credits has three (3) options, namely: "Sec. 166. Credits Against Sales Tax . "xxx xxx xxx "(c) Excess tax credit . If at the end of taxable year, the total tax paid on the raw material, part, accessory or other article exceeds the amount of the sales tax due on the finished product, the manufacturer or producer may elect to: "1. Carry over such excess or a portion thereof to be credited against his sales tax liability in the succeeding quarter or quarters; or "2. File an application for the issuance of a tax credit certificate for such excess or a portion thereof which can be used in payment of any advance sales tax; or "3. Deduct such excess or portion thereof from gross income for income tax purposes, ...". It is clear from the foregoing that although you are entitled to a tax credit on the excess available tax credit for the year ending December 31, 1985, the tax credit certificate which may be issued to you, if you desire to avail of option No. 2, can be used only in payment of the advance sales tax but not against your other internal revenue tax liabilities. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner