Allowing Sales Tax Credits on Raw Materials Purchase Against Quarterly Sales Taxes

October 10, 1984

EXECUTIVE ORDER NO. 990

ALLOWING SALES TAX CREDITS ON RAW MATERIALS PURCHASE AGAINST QUARTERLY SALES TAXES WITHOUT TAKING INTO ACCOUNT RAW MATERIAL, WORK-IN-PROCESS AND FINISHED GOODS INVENTORIES

WHEREAS, the current economic crisis amounts to a grave emergency which affects the stability of the nation and requires immediate action;

WHEREAS, the issuance of this Decree is an essential and necessary component of the national economic recovery program formulated to meet and overcome the emergency;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me under Section 290-B of the National Internal Revenue Code, do hereby direct and order that:

SECTION 1. Credits Against Sales Tax Due. — Any specific or percentage tax paid under Titles IV and V of the National Internal Revenue Code on domestically manufactured, processed or produced, or imported raw material, part, accessory or other article locally purchased or imported by the manufacturer for conversion into or intended to form part of the finished products shall be credited against the sale tax due on the finished product enumerated in Sections 194, 195, 196, 197, 199 (a) and 201 of the same Code: Provided, however, that in case the total tax paid on the raw material, part, accessory or other article exceeds the amount of the sales tax due on the finished product, the excess shall be credited against the sales tax liability of the manufacturer for the succeeding taxable quarter or quarters; and, Provided, further, that the amount of tax on the raw material, part, accessory or other article shall be indicated as a separate item in the sales invoice; and, Provided, furthermore, that any tax credit corresponding to the raw materials which were subsequently sold, transferred, disposed of, or, for any other reason, can no longer be used in the manufacture of the finished product, shall either be deducted from any unused tax credit or paid as a part of the tax due in the quarter following the disposal.

SECTION 2. Transitory Provisions. — All accumulated tax credits accruing on inventories of raw materials, work-in-process and finished goods as of the end of the taxable quarter which commenced after December 31, 1984 shall be applied in four equal installments against the quarterly sales tax for the four quarters immediately following the effectivity of this Executive Order.

SECTION 3. Uniformity of Methods of Recording Sales Tax Credits and Sales Tax Liability. — The Minister of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate rules and regulations prescribing uniform system of accounting and method of recording sales tax liability of manufacturers and sales tax credits representing specific and sales taxes shifted and separately billed in sales invoices by dealers, importers, manufactures or producers. cd

SECTION 4. Effectivity. — This Order shall take effect on sales for taxable quarters beginning after December 31, 1984.

DONE in the City of Manila, this 10th day of October, in the year of Our Lord, Nineteen Hundred and Eighty-Four.

Published in the Official Gazette, Vol. 80 No. 42 page 5436 on October 15, 1984.