Tax Credits Issued to BOI-registered Firms on or after April 28, 1983 Not Included in Gross Income

September 29, 1986 BIR RULING NO. 195-86 24 000-00 195-86 Gentlemen : This refers to your letter dated August 29, 1986 stating that Indo Phil. Textile Mills, Inc. is registered with the Board of Investments (BOI) under Republic Act No. 5186 as producer of spurn yarn which are sold in domestic and export markets; that your registration with the BOI was approved on June 24, 1974; that as a BOI registered enterprise, you are entitled to several tax incentives one of which is tax credit, that to claim tax credit, you will have to file a Tax Credit Application showing the quantities of yarn exported after which BOI will issue the corresponding Tax Credit Certificate if the application is in order; and that you record in your books as income the Tax Credit Certificate issued by BOI. Based on the foregoing, you now request a ruling as to whether the Tax Credit Certificates issued by BOI are taxable income which should be reported in your income tax return. In reply, please be informed that pursuant to Article 22 of PD 1789 as amended by Batas Pambansa Blg. 391 (effective April 28, 1983), pertinent portion of which reads: ". . . The tax credit certificate shall be used to pay taxes, duties, charges and fees due to the national government: Provided, That the tax credits issued under this Code shall not form part of the gross income of the grantee/transferee for income tax purpose under Section 29 of the National Internal Revenue Code and are therefore not taxable . Provided, further , That such tax credits shall be valid only for a period of ten (10) years from date of issuance." (Emphasis supplied) the tax credits duly issued on or after April 28, 1983 to BOI registered firms like Indo Phil. Textile Mills, Inc. are not includible in the gross income of the grantee and are therefore not taxable for income tax purposes. Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner