Accounting Guidelines on the Transfer of Funds from the General Fund of the NG to the Trust Fund of the BIR and the BOC

October 11, 2021

COA CIRCULAR NO. 2021-010

 

1.0 RATIONALE

Sections 31 and 33 of RA No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN), amending Sections 106 and 108 of RA No. 8424 or the Tax Reform Act of 1997, provide that an amount equivalent to five percent (5%) of the total VAT collections of the BIR and the BOC from the immediately preceding year shall be automatically appropriated annually and be treated as a special account in the General Fund or as trust receipts for the purpose of funding claims for VAT refund, and that any unused fund, at the end of the year, shall revert to the General Fund.

Pursuant thereto, the Department of Finance (DOF), Department of Budget and Management (DBM), Bureau of the Treasury (BTr), BIR, BOC and this Commission issued Joint Circular (JC) No. 001-2018 providing that the amount equivalent to five percent (5%) of the total VAT collections of the BIR and the BOC from the immediately preceding year shall be treated as trust receipts to cover the payment of VAT refund claims subject to the guidelines prescribed therein.

This Circular is issued to provide:

1.1 Accounting guidelines on the transfer of funds from the General Fund of the NG to the Trust Fund of the BIR and the BOC, and the utilization thereof; and

1.2 Illustrative accounting entries to recognize the fund transfers, utilization, and other related transactions.

This Circular is further issued pursuant to Section 2 (2), Article IX-D of the 1987 Constitution and Section 33 of Presidential Decree No. 1445 or the Government Auditing Code of the Philippines, which vest upon the Commission on Audit (COA) the exclusive authority to promulgate accounting and auditing rules, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties.

2.0 COVERAGE

This Circular covers VAT collection transactions of the BIR and the BOC remitted to the BTr, and the subsequent refunds of the excess VAT collections.

3.0 ACCOUNTING GUIDELINES/PROCEDURES

3.1 The BIR and the BOC shall recognize the amount appropriated for VAT refund under Trust Receipts/Fund books with account code 07308602 based on the initial estimated amount which is equivalent to 5% of the total VAT collections of the preceding year.

3.2 The BIR and the BOC shall compute the final adjusted amount after the reconciliation of the VAT collections remitted to the NG as income of the General Fund and recognized in their books of accounts, with the amounts reflected in the BTr's books, and shall recognize any adjustments thereto.

3.3 The BIR and the BOC shall notify the BTr not later than the 15th of January of the current year, the initial amount to be transferred from the General Fund to the Trust Fund of the BIR and the BOC, and the final adjusted amount not later than the last day of February of the current year.

3.4 For current year's VAT refund, the BIR and the BOC shall recognize the initial estimated amount to be transferred from the General Fund to Trust Fund based on the historical data/experience, as necessary, and the final adjusted amount based on reconciled data.

3.5 The BTr shall recognize the transfer to the trust accounts of the BIR and the BOC based on the letter request/notification received from these agencies, and must be supported by copies of journal entry voucher (JEV) recognizing the initial estimate and the adjustment mentioned in Items 3.1 and 3.2.

3.6 The BTr shall furnish the BIR and the BOC with copies of JEV for the transfers, and shall issue certificates that the corresponding amounts are available in the BIR and the BOC's respective trust accounts.

3.7 The BIR and the BOC shall request from the DBM the release of Notice of Cash Allocation (NCA), duly supported with copies of JEV and certificates from the BTr.

3.8 The BIR and the BOC shall recognize the receipt of the NCA from the DBM, the disbursements or refunds of VAT, the reversion of unused NCA and any related adjustments, in the Trust Receipts/Fund books.

3.9 The BIR and the BOC shall submit Fund Utilization Report to the BTr for monitoring of used and unused NCA.

3.10 The BTr shall recognize the charges to the trust deposit accounts based on negotiated Modified Disbursement System (MDS)-Trust checks.

3.11 At year end, the BIR and the BOC shall prepare a JEV to recognize the lapsed or unutilized portion of the total NCA, copy furnished the BTr.

3.12 At year end, the BTr shall recognize the adjustment of the trust accounts of the BIR and the BOC and the corresponding payable equivalent to the amount of reverted unused NCA based on the copies of JEV furnished by the BIR and the BOC, pursuant to Section 4.2.1 of DOF-DBM-BTr-BIR-BOC-COA JC No. 001-2018.

4.0 ILLUSTRATIVE ACCOUNTING ENTRIES

The illustrative accounting entries for the recognition of the collection and refunds of VAT are presented as Annex A for BIR and BTr, and Annex B for BOC and BTr, attached hereto.

5.0 REPEALING CLAUSE

All circulars, memoranda and other issuances or any parts thereof which are inconsistent with the provisions of this Circular, are hereby amended, modified or repealed accordingly.

6.0 SAVING CLAUSE

Cases not covered in this Circular shall be referred to this Commission, through the Government Accountancy Sector, for resolution.

7.0 EFFECTIVE DATE

This Circular shall take effect immediately.

(SGD.) MICHAEL G. AGUINALDOChairperson

(SGD.) ROLAND C. PONDOCCommissioner

ANNEX A

Illustrative Entries

ANNEX B

Illustrative Entries