Request for Payment of Excise Tax Liabilities to the Municipality by Offsetting or Application of Tax Credit Certificate

August 24, 1994 BIR RULING NO. 128-94 151 000-00 128-94 The Honorable Mayor Municipality of Placer Surigao del Monte S i r : This is in reply to your letter dated March 10, 1994 relative to Resolution No. 94-030 of the Sangguniang Bayan of Placer, Surigao del Norte, requesting that the payments of the excise tax liabilities of Manila Mining Corporation for 1993, whether by way of offsetting, or application of tax credit certificate, be credited to your municipality for purposes of computing its 40% share of gross collection from mining tax, among others, pursuant to Section 290 of the Local Government Code of 1991. Under Section 290 of the Local Government Code of 1991 stating "Sec. 290. Amount of Share of Local Government Units . Local Government units shall, in addition to the internal revenue allotment, have a share of forty percent (40%) of the gross collection derived by the national government from the preceding fiscal year from mining taxes , royalties, forestry and fishery charges, and such other taxes, fees or charges, including related surcharges, interests, or fines, and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction." (emphasis supplied) the Municipality of Placer is entitled to a share of 40% of the gross collection derived by the National Government from the preceding fiscal year from mining tax on mineral products. While mining tax has been abolished and deleted from the Tax Code pursuant to Executive Order No. 273 effective January 1, 1988, it was replaced by excise tax under Section 151 of the Tax Code; hence, the excise tax payment of Manila Mining Corporation corresponding to its operations in Placer, Surigao del Norte, forms part of the mining tax from which you are entitled to a 40% share. The application of tax credit certificate to the taxpayer's excise tax liability satisfies the requirement for the allocation of 40% thereof to your municipality pursuant to the aforequoted provision of the Local Government Code. However, since "equitable recoupment" or offsetting of a tax liability against a pending claim for refund/tax credit of erroneously paid an overpaid tax and vice versa is not allowed in our jurisdiction (CIR vs. UST and the CTA, G.R. Nos. L-11274 and L-11280), a unilateral offsetting by the taxpayer of its excise tax liability against its pending claim for tax credit has no force and effect and is not binding upon this Office. Hence, the tax liability offsetted by the taxpayer remains collectible from it and, therefore, it is still premature on the part of the Municipality of Placer, Surigao del Norte to claim for its 40% share from excise tax collection considered paid by way of automatic offsetting. Accordingly, it is requested that you coordinate with the Revenue Accounting Division to determine how much of the excise tax liability of the Manila Mining Corporation for 1993 has been paid by way of application of its tax credit certificate; and how much has not been considered paid, the same having been paid by way of automatic offsetting. This will serve as an authority for the Revenue Accounting Division to certify the amount corresponding to the Municipality's 40% share from the excise tax collection attributable to Manila Mining Corporation's operations in the Municipality of Placer. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue