Prescribing the Modified Procedures on the Issuance and Use of the Revised Tax Credit Certificate (BIR Form No. 2320) and Tax Debit Memo Form No. 2321)

June 10, 1991 REVENUE MEMORANDUM ORDER NO. 20-91 SUBJECT : Prescribing the Modified Procedures on the Issuance and Use of the Revised Tax Credit Certificate (BIR Form No. 2320) and Tax Debit Memo Form No. 2321) TO : All Internal Revenue Officers and Others Concerned I. Objectives: This Order is issued: A. To prescribe new guidelines and procedures in the processing of Tax Credit Certificate (TCC) and Tax Debit Memo (TDM); B. To provide standard forms in the issuance and utilization of tax credits; C. To effectively monitor and control all approved TCCs and TDMs. II. Definition of Terms: A. Tax Credit-an amount due in favor of a taxpayer resulting from an overpayment of a tax liability, erroneous payment of a tax due, or grant of tax incentives under existing laws. B. Tax Credit Certificate (BIR Form No. 2320, revised April, 1988 and marked as Annex A)-is an accountable form issued to a taxpayer in acknowledgment of an approved tax credit. This replaces the Tax Credit Memo (TCM). C. Tax Debit Memo (BIR Form No. 2321, revised April, 1988 and marked as Annex B)-is an accountable form issued to a taxpayer notifying him that his tax liability has been charged against his tax credit. This serves as the taxpayer's evidence of payment. III. Guidelines: A. Tax credit shall be issued for the following: 1. At the option of the taxpayer, excess quarterly income taxes paid by corporation resulting from the final adjustment return. 2. Overpayment of income taxes withheld at source to the extent that the amount of such overpayment was not deducted and withheld. 3. Input taxes as follows: 3.1 Those attributable to the following, to the extent that such input taxes have not been applied to output taxes: a. Export sales by a VAT-registered exporter; b. Zero-rated or effectively zero-rated sales made by any person other than a VAT-registered exporter; and c. Capital goods imported or locally- purchased by a VAT-registered person. 3.2 Unused input taxes resulting from cancellation of VAT registration due to retirement from or cessation of business, or due to changes in or cessation of status under Section 100(c) of the Tax Code. 4. Excise taxes paid on: 4.1 Petroleum products sold to tax-exempt entities and international carriers; 4.2 Goods locally produced or manufactured and actually exported without returning to the Philippines; 4.3 Petroleum products which resulted in overpayment due to Energy Regulatory Board (ERB) resolutions. 5. Taxes erroneously or illegally received or penalties imposed without authority. B. The TCC shall be used in the payment of internal revenue liabilities of a taxpayer except for the following: 1. Payment or remittance for any kind of withholding tax, by taxpayers. 2. Payment to a tax reduced by way of compromise authorized under Section 204 of the Tax Code. 3. Payment of deficiency taxes arising from confidential information. C. TDM shall be issued by the Accounts Receivable/ Billing Division (AR/BD) whenever a TCC (whether issued by the BIR, by the Board of Investment (BOI), or by the Bureau of Customs (BOC) is used for payment of any current or outstanding tax obligation with the Bureau except those enumerated in III B above. D. The offices authorized to requisition from the Accountable Forms Division and to issue TCCs and TDMs are as follows: 1. TCC a. Appellate Division for erroneous or excess payment of direct and indirect taxes where question of law is involved. b. Tax Credit/Refund Division-for erroneous or excess payment of direct taxes where only question of fact is involved. c. International Tax Affairs Division-for transactions arising from tax treaty provisions. d. Field Operations Division-for excess or erroneous payments of excise taxes where only question of fact is involved and deliveries of tax-paid excisable articles to tax-exempt entities and international carriers. e. Value-Added Tax Division-for erroneous or excess payment of VAT and other indirect taxes where question of fact is involved. 2. TDM a. Accounts Receivable/Billing Division only. IV. Procedures: A. The offices mentioned in D.1a-e above shall follow the succeeding steps in the issuance of TCC: 1. Receive the letter-request/claim for tax credit with required supporting documents from the taxpayer. 2. Ascertain the completeness of the supporting documents and date-stamp the letter-request and supporting documents. 3. Record the receipt of letter-request/claim and other pertinent information in the Logbook for TCC Claims (Annex C) maintained exclusively for tax credit. 4. Evaluate the request/claim based on the report of investigation and other required supporting documents. 5. Prepare indorsement/verification slips for the following offices: a. Accounts Receivable/Billing Division-for verification of any tax liability. b. Revenue Accounting Division-for verification if taxes to be credited were actually remitted to the Bureau. c. Withholding Tax Division-for verification of taxes withheld (in cases where claims involve withholding taxes). 6. Prepare five (5) copies of TCC for the signature of proper authorities. The distribution of the TCC is as follows: Original - Taxpayer Duplicate Revenue Accounting Division Triplicate Accounts Receivable/Billing Division Quadruplicate COA Resident Auditor Quintuplicate TCC-Issuing Officer/Attached to Docket 7. Record all required information in the Logbook for TCC Claims and require taxpayer to sign on the space provided in the logbook to acknowledge receipt of the TCC. Release the original TCC to the taxpayer. (In case TCC is sent by mail to the taxpayer, indicate "mailed" on the "Taxpayer's Signature" portion of the logbook). 8. Prepare Monthly Report of TCCs Issued (listed sequentially) (Annex D) in four (4) copies to be distributed as follows within five (5) days after the end of each month: Original Revenue Accounting Division (together with the duplicate copies of issued TCCs and the first four (4) copies of cancelled TCCs, if any). Duplicate Accounts Receivable/Billing Div. (together with the triplicate copies of TCCs issued). Triplicate COA Resident Auditor (together with the quadruplicate copies of TCCs issued). Quadruplicate TCC Issuing Office (to be filed with the quintuplicate copies of cancelled TCCs, if any). cdt 9. Prepare Monthly Report of Accountability (Gen. Form 16A) for TCCs issued, in five (5) copies to be distributed as follows: Original COA Resident Auditor Duplicate Rev. Accounting Division Triplicate- TCC - Issuing Office Quadruplicate Accountable Forms Division Quintuplicate TCC-Requisitioning Officer 10. Report lost TCC, if any, to the Accountable Forms Division for publication/dissemination thru Revenue Memorandum Circular. B. The Accounts Receivable/Billing Division shall follow the succeeding steps in the issuance of TDM: 1. Receive BOI's list of TCCs issued as per Memorandum of Agreement between the BIR and BOI. 2. Receive letter-request for the issuance of TDM together with the original TCC from the taxpayer. (In case BOI-TCC shall be applied, a corresponding TDM issued by BOI shall accompany the original TCC). 3. Date-stamp letter-request and record receipt of it and other pertinent information in the TDM Issuance Logbook (Annex E). 4. Verify the authenticity of the BIR-TCC presented by the taxpayer against the triplicate copy on file furnished by the TCC-Issuing Office or in case of BOI-TCC against the BOI's list of TCCs issued. 5. Prepare in five (5) copies the corresponding TDM, filling in all items thereon, to be distributed as follows: cd Original Taxpayer Duplicate Revenue Accounting Division (RAD) Triplicate TDM-Issuing Officer/Attached to Docket Quadruplicate COA Resident Auditor Quintuplicate TCC Issuing Office 6. Fill in and update the "Utilization of Tax Credit" portion at the back of the original and triplicate copies on file of the TCC and affix signature on the column(s) thereof. 7. Record all required information in the TDM Issuance Logbook and require taxpayer to sign on the space provided in the logbook. 8. Post the TDM number and amount on the TDM portion of the return/ATAP. 9. Release to the taxpayer the original TCC and TDM with the tax return/assessment notice/demand letter/ATIPO/ ATAP or any document which serves as the basis for the payment of the tax, if the amount of the tax credit has not been fully utilized. Otherwise, retain the TCC for cancellation. Note: Maintain separate file for each TCC not yet fully utilized. 10. Prepare Monthly Report of Collections thru TDMs (listed sequentially) (Annex F) in three (3) copies to be distributed as follows within ten (10) days after the end of the month: Original RAD (together with attached duplicate copies of TDMs issued and all copies except the triplicates of cancelled TDMs, if any). cd i Duplicate COA Resident Auditor (together with the quadruplicate copies of TDMs issued). Triplicate AR/BD (to be filed together with the triplicate copies of cancelled TDMs, if any). 11. Transmit monthly within 5 days after the end of each month, the quintuplicates of TDMs to the TCC-Issuing Office concerned. 12. Transmit monthly the cancelled original copies of fully utilized TCCs to the Records Division for safekeeping in accordance with the existing rules and regulations. 13. Prepare Monthly Report of Accountability (Gen. Form 16A) for TDMs issued, in five (5) copies to be distributed as follows: Original COA Resident Auditor Duplicate Revenue Accounting Division Triplicate RDO/AR/BD Quadruplicate Accountable Forms Division Quintuplicate TDM Requisitioning Officer 14. Report lost TDM, if any, to the Accountable Forms Division for publication/dissemination thru Revenue Memorandum Circular. C. The Revenue Accounting Division shall: 1. Record in the books of accounts only TCCs issued by the various authorized BIR TCC-Issuing Offices and all TDMs issued by the AR/BD based on the Monthly Reports of TCCs Issued and Monthly Report of Collections Thru TDMs received using the journal entries prescribed by COA. 2. Verify completeness of TCCs/TDMs received against the Monthly Reports of Accountability. Issue call-ups to concerned offices for missing TCCs/TDMs. D. The Accountable Forms Division shall: 1. Upon receipt of requisition, distribute sufficient TCC booklets to offices authorized to process and issue TCC and TDM booklets to AR/BD. 2. Receive report(s) of lost TCC/TDM booklets, if any and prepare/issue corresponding RMC for information of all concerned. V. Repealing Clause: This Order supersedes Revenue Memorandum Order No. 21-65 dated May 31, 1965 and all other existing issuances or portions thereof inconsistent with this Order. casia VI. Effectivity: This Order shall take effect immediately. (SGD.) JOSE U. ONG Commissioner of Internal Revenue