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Transferability of Tax Credit and Duty Drawback Certificates

Legal Basis:

a.	Tax credit certificates issued under E.O. 226, the Omnibus Investment Code of 1987, are transferable as provided for under Article 21 of the said Code.
b.	Tax credit certificates issued under Section 112 of the National Internal Revenue Code are transferable in accordance with Revenue Regulation 5-2000 dated July 19, 2000.
c.	Duty drawback certificates issued under Section 106 of the Tariff and Customs Code are negotiable.

Guidelines :

1.)

Tax Credit Certificates Issued Under the Omnibus Investment Code of 1987:

Memorandum of Agreement Between BOI and DOF

The guidelines governing the transferability of these TCCs are contained in the Memorandum of Agreement dated October 13, 2000 executed by the Board of Investments (BOI) and the Department of Finance (DOF) pursuant to Article 21 of E.O. 226.

Main Features of the MOA:

Clear definition of the conditions for transfer
Limitation in qualified transferee and in amount of TCC
Required liquidation of approved transfers
Adoption of the Implementing Rules and Regulations

Basic Conditions for Allowing Transfer:

1.	The TCC being transferred is valid.
2.	Both the transferor and the transferee are BOI-registered companies.
3.	The transferee is a supplier of the transferor of raw materials, supplies and consumables iif the TCC is based on raw materials; or
4.	The transferee is a supplier of the transferor of capital equipment, parts and components if the TCC is based on domestic capital equipment.
5.	If the transferee is the parent company, a sister company or an affiliate of the transferor, the conditions stated in 3 and 4 will be waived provided the transfer is deemed a form of assistance to either party deemed in distress. This is however subject to approval by the Executive Committee of the Center.
6.	In case the transferor has permanently closed or stopped its BOI-registered activity for valid reasons as certified by BOI, it may be allowed to transfer its outstanding and valid tax credit certificates only if the transferee is a BOI-registered parent, sister or affiliate company. In the absence of such related companies, the transfer to any BOI-registered companies may be allowed if the transferor had operated its BOI-registered activity for at least five (5) years prior to its closure.
7.	Second transfer from the first transferee of the same transferred tax credit certificates maybe allowed only as a strategy to assist a distressed industry sector upon endorsement by BOI and approval by the Executive Committee.
8.	All approved transfers of tax credit certificates shall be subject to liquidation.

Tax credits issued under the National Internal Revenue Code

REVENUE REGULATION NO. 5-2000

RR 5-2000 issued on July 19, 2000 prescribes the regulations governing the manner of issuance of tax credit certificates and the conditions for their use, revalidation and transfer.

CONDITIONS FOR TRANSFER

1.	The transfer must be with prior approval of the Commissioner or his duly authorized representative who shall verify whether the TCC sought to be transferred is still valid.
2.	The transfer is limited to one transfer only.
3.	The transferee shall use the TCC assigned strictly in payment of his direct internal revenue tax liability and in no case shall the same be available for conversion to cash.

Duty Drawback Certificates under the Tariff and Customs Code

Duty drawback certificates are negotiable and transferable without any conditions, except that certificates issued based on fuel oil consumption can only be transferred to oil companies who supplied the fuel oil.

PROCEDURES FOR TRANSFER

Documents to be submitted:

TCCs issued under the Investment Incentive Code:

a.)

Letter request signed by the highest executive officer of the transferor;

b.)

Original tax credit certificate and one photocopy;

c.)

Notarized Deed of Assignment signed by responsible officers of the transferor and the transferee. This document must state the consideration for the transfer.

d.)

Secretary's certification on the Board Resolutions of both parties on the authorized signatories to the Deed of Assignment;

e.)

Specific documents to support the consideration for the transfer as stated in the Deed of Assignment, such as:

Commercial documents like sales contract, invoices, pro-forma invoices, covering the trade transaction declared as basis for the transfer;
Audited financial statements of the transferor for the last two (2) years, with breakdown of manufacturing cost indicating the cost of the particular materials subject of the transfer, if the transfer is based on supply of materials;
Secretary's Certification on the present ownership profiles of the companies for transfers to related companies;
Other documents/information as prescribed in the foregoing guidelines

f.)

Copy of the BOI Registration Certificates of both parties;

g.)

Clearances from BIR and BOC;

h.)

Liquidation Report on previously approved transfer(s).

i.)

Letter request signed by the highest executive officer of the transferor;

j.)

Original tax credit certificate and one photocopy;

k.)

Notarized Deed of Assignment signed by responsible officers of the transferor and the transferee. This document must state the consideration for the transfer.

l.)

Secretary's certification on the Board Resolutions of both parties on the authorized signatories to the Deed of Assignment;

m.)

Specific documents to support the consideration for the transfer as stated in the Deed of Assignment, such as:

Commercial documents like sales contract, invoices, pro-forma invoices, covering the trade transaction declared as basis for the transfer;
Audited financial statements of the transferor for the last two (2) years, with breakdown of manufacturing cost indicating the cost of the particular materials subject of the transfer, if the transfer is based on supply of materials;
Secretary's Certification on the present ownership profiles of the companies for transfers to related companies;
Other documents/information as prescribed in the foregoing guidelines.

n.)

Copy of the BOI Registration Certificates of both parties;

o.)

Clearances from BIR and BOC;

p.)

Liquidation Report on previously approved transfer(s).

TCCs issued under the Internal Revenue Code

a.)	Letter request signed by the highest executive officer
b.)	Original tax credit certificate
c.)	Deed of assignment
d.)	Board resolutions authorizing the signatories in the deed of assignment

Duty drawback certificates under the Tariff and Customs Code

a.)	Letter request signed by the highest executive officer
b.)	Original certificate
c.)	Deed of assignment
d.)	Board resolutions on the signatories in the deed of assignment