Early this year, Executive Order (EO) No. 68-A, Series of 2014, amending EO No. 68, Series of 2012 was issued to simplify the terms of the VAT tax credit certificate (TCC) monetization program, and thereby promote conducive business environment and raise the business credibility of the government. Pursuant to EO No. 68-A, the Department of Finance (DOF), the Department of Budget and Management (DBM), the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) issued Joint Circular No. 2-2014 providing for the mechanism for qualified VAT-registered persons to receive the cash equivalent of their outstanding VAT TCCs. Revenue Memorandum Circular No. 82-2014 circularizes the full text of the said joint circular.
The joint circular provides that VAT TCCs for which the BIR has issued the corresponding notice of payment schedule (NPS) and VAT drawback TCCs approved for monetization by the BOC, are qualified for monetization under the joint circular. Similarly, all other VAT TCCs outstanding as of Dec. 31, 2012 not covered for monetization and VAT TCCs issued after Dec. 31, 2012, are qualified for cash conversion, notwithstanding the existing administrative regulations, guidelines or conditions prohibiting or restricting the cash conversion of VAT TCCs.
Specifically, the joint circular provides the procedures in which holders of VAT TCCs with BIR-issued NPS may present the NPS to the BIR for payment on or before the maturity dates indicated thereon. Within 45 calendar days from presentation of the NPS, the BIR should directly pay the total face value of the NPS, net of any delinquent tax liability, to the account of the NPS holder pursuant to the Modified Disbursement Payment System (MDPS) of the government. For NPS presented on or before the 15th of the month, the 45-day period should commence on the first day of the following month, while the 45-day period for those presented after the 15th of the month should commence on the 16th of the following month.
On the other hand, holders of Import VAT TCCs and VAT drawback TCCs approved for monetization by the BOC pursuant to EO. No. 68, series of 2012, and DOF-BOC-DBM joint circular No. 3-2012 shall receive written notice from the said government agency that the corresponding cash equivalent of the TCCs may be claimed from the BOC subject to existing budgeting, accounting and auditing law, rules and regulation. The said holders have one year from receipt of such notice to claim payment from the BOC, which shall in turn directly pay the outstanding balance of the TCC, net of any delinquent tax liability, within 45 calendar days from presentation of the notice. For notices presented on or before the 15th of the month, the 45-day processing period should commence on the first day of the immediately following month, whereas notices presented after the 15th of the month, the 45-day processing period should commence on the 16th of the immediately following month.
Applications for cash conversion of other Import VAT TCCs and drawback VAT TCCs should be filed directly with the BOC, while applications for cash conversion of all other VAT TCCs should be filed directly with the BIR. Said applications should be deemed complete if accompanied by the following documents:
a. Letter of application
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b. Original TCC
c. Proof of authority of the representative, such as a secretary’s certificate on the board resolution designating the TCC holder’s authorized representative in the case of corporations or a special power of attorney in the case of partnerships and sole proprietorships
d. For Import VAT and VAT drawback TCCS, a certification from the BOC collection service that the applicant has no tax and/or duty liabilities or a statement of the outstanding account, as the case may be
The joint circular also provides the following criteria for evaluating the applications:
a. That the TCC was duly issued by the government.
b. That the certificates are not tampered.
c. That the requesting party is the rightful TCC owner.
d. That the TCC is not yet expired.
e. That the TCC has remaining creditable/outstanding balance.
Within 45 calendar days from the filing of the application, the BIR or BOC should pay the amount equivalent to the outstanding balance of the TCC, net of any delinquent tax liability. The 45-day processing period should commence on the first day of the immediately following month for applications filed on or before 15th of the month, while the 45-day processing period should commence on the 16th of the immediately following month for applications filed after the 15th of the month.
With the issuance of the implementing rules in the form of the joint circular, the holder of the VAT TCCs now has an option to either avail of the provisions of the said circular, i.e. to apply for monetization or cash conversion of the VAT TCCs or retain the right to credit his VAT TCC against tax and/or duty liabilities in accordance with existing rules on TCC utilization or the holder may apply for VAT TCC revalidation under Section 230 (B) of the National Internal Revenue Code (NIRC), subject to conditions of law and pertinent rules and regulations.
Lorevill S. Pinoon-Fontanilla is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.
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