BIR, BOC allow conversion to cash of tax credit certificates

MANILA, Philippines - The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) have issued joint circulars allowing the conversion to cash of tax credit certificates (TCC) earlier issued by the government.

The move is part of the government’s move to stop the issuance of TCCs for value added tax (VAT) and to monetize this instead.

The Department of Finance (DOF) announced that two circulars, one each for the BIR and BOC, were signed by their respective heads and together with the Secretaries of the Department of Finance and Department of Budget and Management, implementing the special provisions on VAT TCC monetization under the General Appropriations Act of 2012.

Under the joint circular the holders of VAT TCCs need to have their certificates verified and validated first by the concerned issuing government agency before they can get their notice of payment schedule (NPS).

An NPS is a document detailing the taxpayer’s information, refundable amount and TCC maturity date.

Concerned agencies may either be the BIR, BOC, or the One-Stop-Shop Center of the DOF (DOF-OSS).

With the NPS, the holders may opt to sell the outstanding amount at a discount to government financial institutions (GFIs). Holders also have the option to hold the NPS until its maturity and be paid the full cash value of the TCC in accordance with the specified schedule.

“Where a taxpayer opts to monetize his TCC before its maturity date, he shall surrender the NPS to the government financial institutions (GFIs). The GFIs shall give the equivalent refundable amount less the applicable discount,” the circulars stated.

Finance Assistant Secretary Ma. Teresa Habitan said the DOF has tapped the Land Bank of the Philippines and Development Bank of the Philippines for the program.

“It is now up to them to draft the formula on determining the discount,” she said.

The Finance executive said private banks may also participate in the government’s TCC monetization program since process of monetizing outstanding TCCs will run until 2016.

DOF data showed there is some P9.9 billion worth of outstanding TCCs dating back to 2001.

Of the amount, the OSS has issued P5.4 billion worth of TCCs while the BIR has issued P3.7 billion. Customs, for its part, has issued P875.6 million worth of TCCs.

According to the joint circulars, TCCs issued from 2003 and prior years will be monetized in full by the BIR this year, while BOC will monetize in 2012 those issued from 2004 to 2007.

 Both bureaus will monetize the TCCs issued in 2008, followed by certificates issued in 2009 by 2014; those issued in 2010 will be monetized by 2015; and those issued in 2011 and 2012 will be monetized by 2016.

 “Any holder of a covered TCC who opts not to enrol in the program shall retain the right to credit the TCCs against tax liabilities in accordance with existing rules on TCC utilization,” the circulars said.

However, Habitan said the government would continue to issue TCCs even as it embarks on the monetization program.

 “TCCs are provided for in the law. Now it is up to the taxpayer whether he wants to have a TCC or a cash refund,” Habitan said.

The new program hopes to prevent a repeat of the controversial TCC scam which occurred in the mid-1990s and defrauded the government some P2.5 billion in revenues.

A TCC serves as proof of a company’s claim for tax credits, which are granted either to exporting firms that are entitled to duty-free privileges or to those that have tax refunds. Holders may use these certificates in paying taxes. Fraud is committed when companies acquire the certificates illegally.