Verification of Taxes Paid on Raw Materials for Purposes of Claim for Tax Credit by Manufacturer-Exporters

July 9, 1984 REVENUE MEMORANDUM ORDER NO. 18-84 SUBJECT : Verification of Taxes Paid on Raw Materials for Purposes of Claim for Tax Credit by Manufacturer-Exporters TO : All Internal Revenue Officers and Others Concerned The pertinent provisions of Section 202 of the Tax Code read as follows: "Sec. 202. . . . "Any percentage or specific tax paid under this Title or Title IV respectively, on domestically manufactured or on imported raw materials used in the manufacture of finished products exported shall be allowed to be credited against other tax liabilities of the manufacturer-exporter: Provided, however , That the amount of the tax on the raw material, part, accessory or other article shall be indicated as a separate item in the sales invoice." Under the foregoing provisions, a manufacturer of finished products exported is entitled to the credit of the percentage or specific tax on locally manufactured or imported raw materials used in the said manufacture, provided that the amount of tax is billed as separate item in the invoice issued by the supplier of the raw materials. casia However, in connection with the investigation of the foregoing claims for tax credit, which are being filed with and acted upon by the Appellate Division, Legal Office, it is necessary, among other existing requirements, that investigating examiners should verify the tax payments made by the suppliers of the raw materials. In the case of the percentage tax, the tax paid may either be the manufacturer's sales tax or the advance sales tax depending on whether the raw material is locally manufactured or imported. aisa dc In cases where suppliers of raw materials are located in a place which is not within the jurisdiction of the revenue district office investigating the claim for tax credit, said revenue district office shall prepare the list of suppliers, the kind and value of raw material supplied, as well as the number and date of the corresponding sales invoices and shall also indicate the kind of tax and amount thereof passed on to the manufacturer-exporter, which was separately billed. Thereafter, said revenue district office shall send these data to the revenue district office having jurisdiction over the supplier for verification of the payment of the percentage or specific taxes paid on the raw materials. The report on the result of said verification should be sent to the Appellate Division. Upon receipt of the report on the investigation of the claim for tax credit, the Appellate Division shall immediately process the same, even if the reports on the result of the verification as regards the tax payments on the raw materials have not been received from the revenue district offices concerned. However, if the report on the said verification shows that the taxes on the raw materials have not been actually paid, the Legal Office shall take the necessary action against the suppliers concerned not only for the collection of the taxes due (Atlas Fertilizer Corp. vs. Commissioner, G. R. No. L-27813, August 15, 1975, 66 SCRA 165) but also for the criminal prosecution of the parties concerned, if the same is warranted by the evidence. cdt The provisions of any Revenue Memorandum Order and other pertinent issuance inconsistent herewith are hereby revoked. This Order shall take effect immediately. RUBEN B. ANCHETA Acting Commissioner