Question & AnswerQ&A (BIR REGULATIONS NO. 5-2000)
Tax credit refers to the amount due to a taxpayer resulting from an overpayment of a tax liability or erroneous payment of a tax due.
A TCC is a certification issued by the Commissioner or authorized representative, acknowledging a taxpayer's legal entitlement to a tax credit which can be used for payment or satisfaction of internal revenue tax liability, converted to cash refund, or otherwise disposed of according to the Regulations.
A Tax Debit Memo is a certification issued by the Commissioner or authorized representative acknowledging that a taxpayer has paid their tax liability using a TCC. It serves as an official receipt and the amount is deducted from the TCC's credit balance.
Sources include excess quarterly income taxes, overwithholding at source of income taxes, input taxes related to zero-rated sales or imported capital goods by VAT-registered taxpayers, unused input taxes from VAT registration cancellation, excise taxes on certain petroleum and exported goods, and taxes erroneously or illegally paid or penalties imposed without authority.
A TCC can be used to pay direct internal revenue tax liabilities such as income tax, documentary stamp tax, excise tax, value-added tax, percentage tax, and other internal revenue taxes, except for specific exclusions.
Payments for withholding taxes, taxes arising from tax amnesty, deposits on withdrawal of excisable articles, taxes not administered or collected by the BIR, and compromise penalties cannot be paid using a TCC.
Yes, TCCs can be transferred once with prior approval from the Commissioner or authorized representative, who verifies the validity. The transferee must use it strictly for payment of direct internal revenue tax liability and cannot convert it to cash or transfer it further.
The transferor must present the TCC for verification and get it marked 'Valid for Transfer.' After executing a Deed of Assignment and presenting it with the original TCC, the original TCC is cancelled and new TCCs issued for the transferee and any remaining balance. Issued TCCs for transferees are valid for 5 years, marked 'Not valid for further transfer' and 'Not valid for cash conversion.'
A TCC is valid for five years from the date of issue. If unutilized after this period and not revalidated, it becomes invalid and the unutilized amount reverts to the National Government's General Fund.
Revalidation requires filing an application with the Collection Service or authorized BIR office within six months before expiration. A new TCC reflecting the unutilized balance is issued, provided the applicant has no outstanding final and executory tax liabilities. Outstanding tax liabilities must first be settled through a Tax Debit Memo.
The refund check or treasury warrant that remains uncashed or unclaimed for five years from issuance, mailing, or delivery, whichever is later, is forfeited in favor of the government, and the amount reverts to the general fund.
The outstanding tax liability, defined as a final and executory assessment, will be applied first against the TCC sought to be revalidated through issuance of a Tax Debit Memo.
No, taxpayers erroneously registered as VAT persons are not covered by the input tax sources of tax credit as explained in paragraphs (c) and (d) of Section 2 of the regulations.
Revenue Regulations No. 7-98 and any other revenue issuances inconsistent with BIR Regulations No. 5-2000 are repealed, amended, or modified accordingly.