Request for Authority to Apply Tax Credit Certificate Issued by the Board of Investments (BOI) Against Final Income Tax Liability on Interest Income Paid to Sakamoto Yakuhin Kogyo Co., Ltd. for Japan (Sakamoto, Japan), the Majority Stockholder and Foreign Lender

October 25, 1995 BIR RULING NO. 172-95 106 000-00 172-95 Sakamoto Orient Chemicals Corporation Unit 50 Plaza Royale 120 Alfaro St. Salcedo Village, Makati Metro Manila Attention: Mr . Cesar F . Cabanas Accounting Manager Gentlemen : This refers to your letter dated May 5, 1995 requesting reconsideration of BIR Ruling No. UN-146-94 dated April 12, 1994, denying your request for authority to apply your Tax Credit Certificate No. 001315 issued by the Board of investments (BOI) against your final income tax liability on interest income paid to Sakamoto Yakuhin Kogyo Co., Ltd. for Japan (Sakamoto, Japan), your majority stockholder and foreign lender. cdtech It appears that your company is BOI-registered enjoying exemption from income tax until November 1995. You have contended that VAT Ruling No. 123-90 which ruled on the non-transferability of TCC's does not apply to your case because the situation is different; that first, the TCC mentioned in said ruling was issued under PD 2031, and implemented by Ministry Order No. 19-79 which specifically prohibits transferability of TCC's, while a TCC issued under PD 1789 is transferable; and that secondly, the TCC mentioned in said VAT ruling bears a note that the same is to be applied in payment of your value-added tax liability only, while a TCC issued by BOI does not have such limitation. As an alternative request, you would like your TCC to be converted into a cash refund. In reply, please be informed that contrary to your understanding, the reason for denying your request for the application of the TCC No. 001315, issued by the BOI is that it was not applied against your direct tax liability, but against the final withholding tax liability of another entity which is Sakamoto Japan. What you have withheld from your remittances to your foreign lender is the final withholding tax that is payable by the latter from the interest earnings of your loans. BOI-issued TCC's are subject to certain restrictions, among others, that it can be transferred only once, and that the transfer shall be made only to the supplier of raw materials to the grantee; thus, your argument in support of your request for reconsideration is without legal basis. We cannot also give due course to your request to convert your TCC into cash refund because the subject TCC was issued by the Board of Investments, not by this Office. Moreover, this Office is authorized only to issue refunds/tax credit certificates in cases of erroneous or overpaid taxes and unused input tax credit as contemplated under Sections 204 and 106, respectively of the Tax Code, as amended. cdll Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue