Publishing Memorandum-Circular No. 44-66 of the Department of Finance Dated September 7, 1966

October 7, 1966 REVENUE MEMORANDUM CIRCULAR NO. 43-66 SUBJECT : Publishing Memorandum-Circular No. 44-66 of the Department of Finance Dated September 7, 1966 TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all internal revenue officers and others concerned there is quoted hereinbelow Memorandum-Circular No. 44-66 of the Department of Finance dated September 7, 1966: "MEMORANDUM-CIRCULAR NO. 44-66 "TO : The Commissioner of Customs, the Commissioner of Internal Revenue, the Treasurer of the Philippines and others concerned: "SUBJECT : Imposing additional conditions, aside from the instructions prescribed under Memorandum-Circular dated March 14, 1960 issued by this Department, governing the use by the original backpay claimant of backpay certificates of indebtedness pursuant to the provisions of Section 2 of R.A. No. 304, as a amended by R.A. No. 897, in payment of his customs duties and internal revenue taxes. "This Office has received reports that the "Standard Operating Procedure" prescribed under Memorandum-Circular dated March 14, 1960 issued by this Department, amending its General Circular (unnumbered) dated May 21, 1959, governing the use by the original backpay claimant of backpay certificates of indebtedness pursuant to Section 2 of R.A. No. 304, as amended by R.A. No. 897, in payment of his taxes, customs duties and other charges due on imported articles is not being strictly observed; and that such violation occurs especially when the importations involve the use of backpay acknowledgment certificates issued to veterans under R.A. No. 897 who allow their names to appear as the importers of shipments although they are not the actual and real importers, thereby facilitating the payment of customs duties and taxes due thereon with backpay certificates of indebtedness. "In order to put a stop to such irregularity, the following conditions, in addition to the standard operating procedure prescribed under the aforementioned Memorandum-Circular of this Department, are hereby imposed in the acceptance of backpay certificates of indebtedness issued under R.A. No. 897 in payment of taxes, customs duties and other charges on imports: "1. In the case where the articles involved are directly imported from abroad, the use of backpay certificates of indebtedness in payment of taxes, customs duties and other charges shall be allowed only when the applicant is the original backpay holder and the real importer as evidenced by the covering letters of credit, commercial and consular invoices, bill of lading, release certificate of the Central Bank or any of its authorized agent banks and other related documents. Such information shall be indicated at the back of the application for issuance of certificate of indebtedness (Backpay Form No. 3). prcd "2. In the case of a tax-exempt article acquired from personnel of U.S. Military Bases, the use of backpay certificates of indebtedness in payment of customs duties, compensating taxes and incidental fees shall be accepted only when the backpay holder is a direct buyer of the article, subject to tax, from the tax-exempt owner , and only after the backpay holder has sufficiently established through the presentation of his income tax returns, duly certified by the Commissioner of Internal Revenue, that he is in a financial position to purchase the articles acquired from the tax-exempt owner. This condition is being imposed so as to provide a countercheck against the possibility of the original backpay holder entering into a simulated contract of sale with the tax-exempt owner, although the backpayee is not the actual purchaser, in order to circumvent the backpay law which limits the privilege of using backpay in payment of taxes of the original backpay holder only. "3. The amount of backpay certificates of indebtedness issued under R.A. No. 897 that may be applied in payment of customs duties and taxes shall be only that amount that should have been paid to the original backpay holder if partial redemption had been authorized from the date of the approval of the said Act in 1963, and not the whole face amount of the backpay certificate as acknowledged. "The Commissioner of Customs shall render a monthly report to this Department on all backpay payments of customs duties and taxes due on imported shipments. Copies of backpay certificates of indebtedness issued by the Treasurer of the Philippines under R.A. No. 897 in favor of the Commissioner of Customs covering the payment of customs duties, taxes and other charges shall be submitted from time to time by the Treasurer of the Philippines to this Office. "This Order shall take effect immediately. "(SGD.) JUAN PONCE ENRILE "Acting Secretary of Finance" All internal revenue officers and others concerned are enjoined to be guided accordingly. aisadc (SGD.) MISAEL P. VERA Commissioner of Internal Revenue