BIR to automatically encash tax credits unutilized for a year

The Bureau of Internal Revenue (BIR) will automatically convert unused tax credit certificates (TCCs) into cash after a year to allow the government to better capture actual tax collections.

Published on Friday, the BIR’s Revenue Regulations (RR) No. 14-2020 signed by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay amended the 20-year-old rules on cash conversion of unutilized TCCs.

“Any TCC which remains underutilized for more than one year at any given interval of time during its validity shall be converted into cash with prior written notice by the BIR, subject to the availa­bility of funds,” the new rules read.

Under the previous guidelines, or RR 5-2000, the BIR allowed the conversion of these TCCs into cash only when the taxpayer no longer has any use for the tax credits.

The BIR issues TCCs to those who have overpaid their dues or had erroneous payments. This way, taxpayers need not to go through the trouble of filing refund claims.

By filing a tax debit memo (TDM), the taxpayer can make use of these TCCs to settle other tax liabilities, for as long as these tax credits are still valid within a certain period.

The BIR said expired TCCs, or those issued prior to the new guidelines, would automatically be canceled, while those uncashed or unclaimed within five years from date of issuance would be forfeited in favor of the government.

The country’s biggest tax-collection agency noted, “while TCCs, through the TDMs, are used in payment of internal revenue taxes, it is not generally recognized as actual tax collections because it does not represent the real or true yield of the taxes prescribed and sought to be generated by the Tax Code.”

“The attainment of targe­ted collections from any tax initiative, whether through legislative or administrative, should be measured by the amount of cash actually collected by the BIR,” it added.