Mining Tax Credit Certificates Against Excise Tax Liability

November 15, 1993 BIR RULING NO. 519-93 MINING TAX CREDIT CERTIFICATES AGAINST EXCISE TAX LIABILITY 151-00 00-00 519-93 1st Indorsement Returned to the Head Revenue Executive Assistant, Financial Service and Acting Chief, Revenue Accounting Division, his query relative to the issue whether mining tax payments made by the mining companies by way of application of their tax credit certificates form part of the mining tax collection of this Bureau that could be certified to the Department of the Budget and Management for purposes of determining and allocating the 40% share of the local government units as mandated by Section 290 of the Local Government Code (R.A. 7160). cdta Section 290 of the Local Government Code provides that, in addition to the local government allotment, they shall receive a share of forty percent (40%) of the gross collection from mining taxes, among others. Prior to the issuance of Executive Order No. 273, effective January 1, 1988, there used to be a separate title for mining taxes (Title VII of the Old Tax Code) indicating several sources or nature of mining taxes, e.g., occupation fee, rentals and royalties on mineral lands under lease, etc. Under Executive Order No. 273, the function of collecting occupation fee rentals on mineral lands under then Section 215 and 216(a) of the Tax Code was transferred to the local government units. (Refer to Sections 21 and 22, E.O. 273) Thus, only Section 216(b) of the Old Tax Code was retained and positioned in Section 151 of the present Code under the general heading for excise tax. But notwithstanding the loss of its nomenclature as a mining tax, it is settled and accepted that for purposes of determining the share of the local government units from mining taxes, the source and kind of mining tax collection is the one presently found in Section 151 of the Tax Code. The sole issue that is presently submitted for resolution is whether the application of the mining companies' tax credit certificates against their excise tax liability under Section 151 of the Tax Code is certifiable as part of the mining tax collection for purposes of determining, allocating and releasing the 40% share of the local government units pursuant to Section 290 of the Local Government Code. It is our opinion that in all cases where the law allows a tax obligation to be discharged by the application of tax credit certificate validly issued by this Office, a corresponding credit should be made to the account of the particular internal revenue tax upon which the tax credit certificate is applied. This is a reasonable rule at least for purposes of implementing Section 290 of the Local Government Code mandating the allocation of 40% of the mining tax collection to the local government unit where the mining activity is undertaken. Since local government units are intended to be compensated for the loss or depletion of its mineral resources, it would be absurd to contemplate a situation where a mining company in one municipality which pays all of its mining tax liabilities in cash, and another mining company in another municipality which pays all of its tax liabilities with tax credit certificates, then allowing the municipality in the first case to receive all of its 40% share from mining tax collection while denying the same share to the other. Such an interpretation indicates a poor grasp of legislative intent. Based on the foregoing, for purposes of uniform and reasonable implementation of the provisions of Section 290 of the Local Government Code, the issuance by the Revenue Accounting Division of a certification of the aggregate mining tax collection, inclusive of tax credit certificate applications, standing to the credit of the local government unit where the mining operation is undertaken, is hereby authorized. LLphil LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue