REVENUE REGULATIONS AMENDING SECTIONS 16 AND 23 OF REVENUE REGULATIONS NO. 5-87

SECTION 1.       Scope . — Pursuant to the
provisions of Section 245 in relation to Section 4, both of the National
Internal Revenue Code, as amended, these Regulations are hereby
promulgated amending Sections 16 and 23 of Revenue Regulations No. 5-87.

SECTION 2.       Section 16 of Revenue Regulations 5-87 is hereby amended to read as follows:

“Sec. 16.       Refunds or tax credits of input tax. —

a.            Zero-rated sales of goods and services. — Only a
VAT-registered person may be granted a tax credit or refund of
value-added taxes paid corresponding to the zero-rated sales of goods or
services, to the extent that such taxes have not been applied against
output taxes, upon showing of proof of compliance with the conditions
stated in Section 8 of these Regulations.

“For export sales, the application should be filed with the
Bureau of Internal Revenue within two years from the date of
exportation.  For other zero-rated sales, the application should be
filed within two years after the close of the quarter when the
transaction took place.

“b.          Capital Goods. — Only a VAT-registered person may
be granted a tax credit or refund of input taxes paid on capital goods,
to the extent that such input taxes have not been applied against output
taxes.  If the applicant is an on-going concern, the application for
refund can be made only after the expiration of two successive quarters
following the end of the taxable quarter in which the input tax was paid
by the VAT-registered person. In this case, if the VAT-registered
person bought capital goods in the second quarter, he has to wait for
the lapse of the third and fourth quarters before he can file his
application for refund.

“If the purchaser of the capital goods is a newly registered
person, he can apply for refund of input taxes on capital goods only
after the expiration of 180 days from the date of registration or actual
commencement of business operation, whichever comes later.  In any
case, the application shall be made within two years from the date of
payment of the tax.

For example, “Y” Manufacturing Company was registered for VAT
purposes on February 1, 1988. It imported capital equipment which
arrived on February 28, 1988.  The machinery was installed and it
started business operation beginning May 1, 1988. In this case, the 180
days shall be counted from May 1, 1988.

“Refund of input taxes on capital goods shall be allowed only to
the extent that such capital goods are used in VAT taxable business.  If
it is also used in exempt operations, the input tax refundable shall
only be the ratable portion corresponding to the taxable operations.

“Refund or issuance of Tax Credit Certificates for input taxes on
capital goods purchased from BOI-registered pioneer enterprises,
partially subject to VAT on sale of their registered products, shall be
allowed only to the extent of the input taxes paid by the buyer on the
VAT-taxable portion. However, with respect to input taxes deemed paid on
the exempt portion of the purchase, these shall be allowed only as
credit against output tax due and can neither be refunded nor become the
basis for the issuance of a Tax Credit Certificate.

(c)          Claims for tax credits/refunds. — Application For Tax Credit/Refund of Value-Added Tax Paid (BIR Form No. 2552)
shall be filed with the Revenue District Office of the city or
municipality where the principal place of business of the applicant is
located or directly with the Commissioner, Attention: VAT Division.

A photo copy of the purchase invoice or receipt evidencing the
value added tax paid shall be submitted together with the application. 
The original copy of the said invoice/receipt, however, shall be
presented for cancellation prior to the issuance of the Tax Credit
Certificate or refund.  In addition, the following documents shall be
attached whenever applicable:

“1.     Export Sales

” i)           photo copy of export document showing the
amount of export, and the date and destination of the goods exported.
With respect to foreign currency denominated sale, the photo copy of the
invoice or receipt evidencing the sale of the goods, as well as the
name of person to whom the goods were delivered.

“ii)           statement from the Central Bank or any of its
accredited agent banks that the proceeds of the sale in acceptable
foreign currency has been inwardly remitted and accounted for in
accordance with applicable banking regulations.

“2.     Zero-rated sale of services.

” i)           authenticated copy of the contract showing the
person from whom the services were rendered, the amount of the
consideration and description of the services and document evidencing
actual payments.

“ii)           statement from the Central Bank of any of its
accredited agent bank that the consideration in acceptable foreign
currency has been inwardly remitted and accounted for in accordance with
applicable banking regulations.

Under subparagraphs 1(ii) and 2(ii), the statement shall show
the amount in foreign currency of the export proceeds or consideration
and the date of inward remittance, conversion rate into Philippine
currency and the total peso value thereof.

“3.     Effectively zero-rated sale of goods and services.

” i)           photo copy of approved application for zero rate if filing for the first time.

“ii)           sales invoice or receipt showing name of the
person or entity to whom the sale of goods or services were delivered,
date of delivery, amount of consideration, and description of goods or
services delivered.

“iii)          evidence of actual receipt of goods or services.

“4.     Purchase of capital goods.

” i)           original copy of invoice or receipt showing
the date of purchase, purchase price, amount of value-added tax paid and
description of the capital equipment locally purchased.

“ii)           with respect to capital equipment imported,
the photo copy of import entry document for internal revenue tax
purposes and the confirmation receipt issued by the Bureau of Customs
for the payment of the value-added tax.

“5.     In applicable cases, where the applicant’s zero-rated
transactions are regulated by certain government agencies, a statement
therefrom showing the amount and description of sale of goods and
services, name of persons or entities (except in case of exports) to
whom the goods or services were sold, and date of transaction shall also
be submitted.

In all cases, the amount of refund or tax credit that may be
granted shall be limited to the amount of the value-added tax (VAT) paid
directly and entirely attributable to the zero-rated transaction during
the period covered by the application for credit or refund.

Where the applicant is engaged in zero-rated and other taxable
and exempt sales of goods or services, and the VAT paid (inputs) on
purchases of goods and services cannot be directly attributed to any of
the aforementioned transactions, the following formula shall be used to
determine the creditable or refundable input tax for zero-rated sale:

Amount of Zero-rated Sale	X	Total Amount of Input Taxes
Total Sales

         =       Amount Creditable/Refundable            

        For example:

Zero-rated sales……………..   P100,000
Taxable sales………………..      200,000
Exempt sales………………..      100,000
Input tax………………………       10,000

P100 ,000

————    X    P10 ,000   =   P2,500  refundable or creditable VAT

400,000                    

(d)          Cancellation of registration. — A person whose
registration has been cancelled due to retirement from or cessation of
business, or due to changes or cessation of status in accordance with
Section 5 of these Regulations may, within two years from the date of
such cancellation, apply for the issuance of a tax Credit Certificate,
for any input tax credit unused as of the date of cancellation.  The
application which shall be filed with the Revenue District Officer where
his principal place of business is situated should be accompanied by an
acknowledged copy of the final VAT return.”

SECTION 3.       Section 23 (b) is hereby amended to read as follows:

“(b)    Where to file the return. (1) Returns involving cash
payment. — Returns with an amount due to be paid in cash shall be filed
with any duly accredited bank in the city or municipality where his
principal place of business is located. If there are no accredited banks
within the city or municipality where a taxpayer has his principal
place of business, he may file his return with the collection agent or
the duly authorized treasurer of the municipality or with the Revenue
District Officer.  He may, however, file his return with any duly
accredited bank within the jurisdictional area of the Revenue District
Office where his principal place of business is located.

“(2)    No Cash payment returns. — All returns where no cash
payment is involved shall be filed with the Revenue District Officer,
Collection Agent or authorized Municipal Treasurer where a filer has his
principal place of business.

“(3)    Returns to be paid in tax credit certificate. — If the
value-added tax payable on the return shall be paid wholly in tax
credit certificate (BIR Form No. 2320) the return shall be filed with
the Revenue District Officer of the city or municipality where the
principal place of business of the VAT taxpayer is located.  The Revenue
District Officer shall issue a Tax Debit Memo (BIR Form No. 2321)
showing the serial number of the Tax Credit Certificate (TCC) and the
amount for which the TCC was applied.

“If the value-added tax payable is to be paid partly in Tax
Credit Certificate and partly in cash, the Revenue District Officer
shall issue the corresponding Tax Debit Memo covering the amount paid by
TCC. The duplicate copy of the TDM shall be attached to the original of
the VAT return to be filed with the proper accredited bank or
Collection Agent or duly authorized Municipal Treasurer as the case may
be.”

SECTION 4.       Effectivity . — These Regulations shall take effect upon its approval.

Adopted: 7 April 1988

(SGD.) VICENTE R. JAYME
Secretary of Finance