Accumulated Tax Credit Certificates Cannot be Used in the Payment of Loan Obligations

June 9, 1987 BIR RULING NO. 160-87 246 094-87 160-87 Gentlemen : This refers to your letter dated April 9, 1987 stating that one of your borrower-firms, Solid Development Corporation which has been verbally represented as a Board of Investments registered export producer, has been accumulating tax credit certificates (TCC) much faster than it is using the same, that it has in fact accumulated more than P10 million worth of tax credit certificates through export sales and has proposed to pay its loans to the Development Bank of the Philippines (DBP) with tax credit certificates; that you are willing to accept the same in payment of Solid Development Corporation's obligations with DBP which you intend to apply in payment of your gross receipts tax to the Bureau of Internal Revenue. You now request information from this Office as to whether that arrangement is feasible. In reply, please be informed in the negative. Pursuant to Article 22 of the Omnibus Investments Code, the tax credit certificates issued to a registered export producer shall be used for the payment of taxes, duties, charges and fees due to the National Government incurred in its operations. Such being the case, Solid Development Corporation can only utilize its accumulated tax credit certificates in payment of taxes, duties, charges and fees due from it but it cannot use the same in payment of its loan obligations to DBP. adc It may be stated in this connection that tax credit certificates issued for taxes and duties paid on domestic capital equipment purchased, withholding tax on interest, raw materials used in the manufactured export products may be transferred only to another registered enterprise while tax credit certificates on net local content and on net value earned may be transferred only to domestic producers of the raw material and/or component who are suppliers of the registered enterprise. (Rule IX, Rules and Regulations implementing PD 1789 and BP 391) DBP is neither a registered enterprise nor a domestic raw material supplier of Solid Development Corporation. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner