Tax Credit Memo to Recognize Revenue Collections Paid in Advance by Entities Subject to Pay Taxes Pursuant to Executive Order No. 739 as Implemented Under COA Circular No. 84-231

December 11, 1987 REVENUE MEMORANDUM ORDER NO. 45-87 SUBJECT : Tax Credit Memo to Recognize Revenue Collections Paid in Advance by Entities Subject to Pay Taxes Pursuant to Executive Order No. 739 as Implemented Under COA Circular No. 84-231 TO : All Internal Revenue Officers and Others Concerned Executive Order No. 739 provides the establishment of a Debt Clearing Office under the administrative supervision of the National Treasurer of the Philippines which is to effect the settlement of obligations subsisting between and among national government offices and instrumentalities, government-owned and controlled corporations, local government units, and private individuals and corporations. cdt To implement this Order, COA Circular No. 84-231 was issued to define the procedure under which receivable and payable accounts can be offsetted among the parties which have debits and credits among themselves. There are cases where the Bureau of Internal Revenue is made a party to the offsetting of debits and credits. This is when one of the parties is liable to pay taxes to the Bureau of Internal Revenue. An example of this case is as follows: Corporation A has a receivable account from Government Agency B in the sum of P100,000.00. Government Agency B, however, failed to receive on time its Advice of Allotment (AA) and Cash Disbursement Ceiling (CDC) from the Office of Budget Management (OBM) and is therefore unable to pay Corporation A. Since Corporation A is liable to pay taxes to the BIR, Corporation A, Government Agency B, the Bureau of Treasury agree that BIR be credited with P100,000.00 as revenue collection paid in advance by Corporation A, and for the BIR to issue Tax Credit Memo in favor of Corporation A. This tax Credit Memo can be used by Corporation A as payment of its existing or future tax liability. Corresponding journal entries are made in the books of the parties involved. To give effect of Executive Order No. 731 and COA Circular No. 84-231, the procedure to be followed in the Bureau in handling this type of a transaction shall be as follows: 1. Revenue Accounting Division shall receive at least two (2) copies of the Journal Voucher from the Bureau of Treasury together with its request to issue Tax Credit Memo wherein it is shown that the Bureau of Internal Revenue has been credited with an amount, as shown in the Journal Voucher, as revenue collections received from an entity described thereon to have paid taxes in advance. 2. After Revenue Accounting Division recognizes the revenue in its books, copy of the Journal Voucher and the request to issue Tax Credit Memo issued by the Bureau of Treasury shall be forwarded to the Collection Office. 3. On the basis of the Journal Voucher and the request to issue Tax Credit Memo, the Collection Office shall issue its Tax Credit Memo in favor of the entity entitled to it. Original copy of the Tax Credit Memo shall be released to the entity entitled to it, while a copy of the Tax Credit Memo and Journal Voucher shall be returned or forwarded to Revenue Accounting Division for its information or guidance. 4. Collection Office shall maintain in its permanent file copies of the Tax Credit Memo, Journal Voucher and other records for future reference. 5. The revenue recognized under this procedure shall form part of the monthly or annual report of revenue collections of the Bureau. 6. In case the taxpayer to whom tax credit memo was issued wants to utilize the same for payment of its existing delinquent account or for its current taxes, said taxpayer shall file its request with the Receivable Accounts Division for the application of its Tax Credit Memo for payment of its delinquent or current taxes, and corresponding Tax Debit Memo shall be issued to it in accordance with the procedure now adopted under Revenue Memorandum Order No. 21-65. This Order shall take effect immediately. (SGD.) BIENVENIDO A. TAN, JR. Commissioner