Guidelines in the Allowance of Tax Credit under the second paragraph of Section 202 of the National Internal Revenue Code on Export Sales in relation to sub-paragraph (d) of the first paragraph of the same section

December 7, 1981 REVENUE REGULATIONS NO. 21-81 SUBJECT : Guidelines in the Allowance of Tax Credit under the Second Paragraph of Section 202 of the National Internal Revenue Code on Export Sales in Relation to Sub-paragraph (d) of the First Paragraph of the Same Section TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of Section 326 in relation to Section 4, both of the National Internal Revenue Code of 1977, as amended, these regulations governing the application for tax credits on finished products exported under Section 202(d) of the Code, are hereby promulgated. SECTION 1 . Scope . These regulations shall govern the application of tax credits for taxes paid under Title IV & V on domestically manufactured or on imported raw materials used in the manufacture of finished products exported directly by the manufacturer-exporter under the provisions of Section 202 of the Tax Code. These regulations shall not apply to export producers registered under any incentive law administered by other government agencies or instrumentalities, except where the application covers tax credit for percentage taxes paid under Sections 198 and 203 of the Tax Code, on raw materials used in the manufacture of the finished products. acd SECTION 2 . Definition of terms . In applying the provisions of these regulations, the following words and phrases shall have the following meaning: (a) Raw materials used in the manufacture of finished products are those raw materials, parts or accessories which form part of the finished product exported. (b) Other tax liabilities refer only to internal revenue tax liabilities directly due from the manufacturer-exporter. (c) Manufacturer-exporter refers to any person, natural or juridical, engaged in the manufacture of products which are directly exported by such person. (d) Export sales refers to the Philippine port FOB value, determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by the manufacturer-exporter. SECTION 3 . Availment of tax credit . 1. A manufacturer-exporter may avail of the tax credit under the provisions of Section 202 of the Tax Code, subject to the following conditions: ctai (a) That the tax credit shall be for percentage or specific taxes actually paid on imported and domestically manufactured raw materials forming part of the product exported; (b) That the amount of percentage or specific tax paid on or locally purchased raw material, part, accessory or other article used in the manufacture and forming part of the exported product is indicated as a separate item in the sales invoice; (c) That the applicant is not registered with any government agency granting tax incentives or a similar tax credit on the export product, except as provided for in the last paragraph of Section 1 hereof. 2. A manufacturer-exporter entitled to such tax credit may either: (a) Apply the tax credit available on his export sales during the quarter against his sales tax liability on domestic sales for the same quarter; or (b) Apply for the issuance of a tax credit certificate. The initial application made during a taxable year shall be considered as the option taken and the same cannot be changed during the said period. SECTION 4 . Tax credit procedures . 1. Where the manufacturer-exporter applies the tax credit against his sales tax liabilities, the same shall be applied only against the net quarterly sales tax liability (gross sales tax liability minus tax credit on domestic sales). Any excess tax credit may be carried over to the succeeding quarter or quarters. If at the end of the taxable year, there is still a balance of tax credit, and the taxpayer shifts to the other option, an application for the issuance of a tax credit certificate should be filed for the said balance in accordance with paragraph 2 hereunder. 2. Where the manufacturer-exporter applies for the issuance of a tax credit certificate, he must comply with the following requirements: (a) The applicant shall be under oath in the prescribed BIR Form No. ________ (Annex "A") and filed with the Investment Incentives Division, Bureau of Internal Revenue within one (1) year from the close of the applicant's taxable year. (b) There shall be attached to the application the prescribed Tables I, II, III, IV and certification. (Annexes B, C, D, E, F & G); (c) The application shall include the required supporting documents specified in the list (Annex H) and such other documents as may be required for verification and evaluation. (d) The application may cover export sales for one or more quarters, but should not extend beyond one taxable year. The Investment Incentives Division, Bureau of Internal Revenue, shall process all applications. If found in order, it shall recommend to the Commissioner of Internal Revenue for the issuance of a tax credit certificate. cdt The approved tax credit certificate shall be distributed as follows: (1) Original to the applicant-taxpayer (2) Duplicate to the Sector Operations Office (3) Triplicate to the Investment Incentives Division (4) Quadruplicate to the Receivable Accounts Division Nothing in the preceding paragraphs of this Section shall prejudice the right of the taxpayer to claim tax credit on taxes erroneously and illegally collected within two years from the payment of the tax as provided for by paragraph 3 of Section 295 of the National Internal Revenue Code, as amended. SECTION 5 . Registry of tax credit certificate . The Investment Incentives Division shall keep a Registry of Tax Credit Certificates, which shall contain the name and address of the taxpayer-grantee, the Tax Credit Certificate number, its date of issuance and the amount of tax credit. SECTION 6 . Use of tax credit certificates . Tax credit certificates shall be used only by the grantee named therein and only for payment of his other tax liabilities, as defined herein. The use of a Tax Credit Certificate shall in no case result in a refund, whether directly or indirectly. A manufacturer-exporter shall not be allowed to offset tax credits on finished products exported against his sales tax liability where an application for the issuance of a Tax Credit Certificate has been filed or where such tax credits are already covered by a Tax Credit Certificate(s). acd SECTION 7 . Transitory provisions . These regulations shall apply to export sales made beginning July 1, 1978 where the manufacturer-exporter has not yet claimed a tax credit either directly against his sales tax liability on domestic sales or through an application for a tax credit certificate. Said manufacturer-exporter should file his application with the Investment Incentives Division, Bureau of Internal Revenue, within six months from the date of effectivity of these regulations. SECTION 8 . Repealing provisions . All regulations, rulings, circulars, orders, or portions thereof contrary to or inconsistent with the provisions of these regulations are hereby modified and/or repealed accordingly. SECTION 9 . Effectivity . These regulations shall take effect upon approval. Approved this 14th day of December, 1981. (SGD.) ALFREDO PIO DE RODA, JR. Acting Minister of Finance Recommended by: (SGD.) RUBEN B. ANCHETA Acting Commissioner ANNEX B Table I Format for Calculating Tax Credit Availment ANNEX C Table II Table of Taxes ANNEX D Table III Table of Export Data ANNEX F Table V Application of Tax Credit ANNEX G Certification ANNEX H List of Required Supporting Documents ANNEX I Details of Tax Credit Computation ANNEX J Tax Credit Certificate