Tax Credits Received from the Board of Investments

August 28, 1989 BIR RULING NO. 188-89 28 000-00 188-89 Gentlemen : This refers to your letter dated April 14, 1989 requesting a ruling as to whether or not the Tax Credits (which your accountant treated as income subject to income tax) you received from the Board of Investments, particularly: (1) Tax Credit Certificate under B.P. 391 on Net Local Content; and (2) Tax Credit Certificate under B.P. 391 on Net Value Earned, are to be treated as income subject to income tax. aisadc In reply, please be informed that the Tax Credit Certificate on Net Local Content is one that arises from the excess of export sales less depreciation of capital equipment and the value of imported raw materials and supplies and indigenous commodities which the Board may exclude if they are not anyway available under clearly more favorable terms in the International Market as prescribed under Article 48(d) of the said decree, as amended by B.P. 391. On the other hand, the Tax Credit Certificate on Net Value earned is one that arises from the excess of the value of sales after deducting the cost of raw materials and components, supplies and utilities and depreciation of capital equipment as prescribed under Article 45(c) of the same decree, as amended. Under Article 22 of P.D. No. 1789, as amended by Section 5 of B.P. Blg. 391, both the Tax Credit Certificate on Net Local Content and the Tax Credit Certificate on Net Value Earned issued by the Chairman of the Board of Investments, or his representative shall not form part of the gross income of the grantee/transferee for income tax purposes under Section 28 (then 29) of the Tax Code. Accordingly, said Tax Credits are not to be treated as income subject to income tax. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner