April 10, 1980

REVENUE MEMORANDUM CIRCULAR NO. 13-80

1.

Subject

Treatment of Tax Refunds and Tax Credits When Received.

To

All Internal Revenue Officers and Others Concerned.

Refunds/Tax Credits under Section 295

of the Tax Code.

Taxes previously claimed and allowed as deductions, but

subsequently refunded or granted as tax credit pursuant to Section 295
of the Tax Code, should be declared as part of the gross income of the
taxpayer in the year of receipt of the refund or tax credit. However, the
following taxes, when refunded or credited, are not declarable for
income tax purposes inasmuch as they are not allowable as deductions:
a.

Income tax imposed in Title III of the Tax Code;

b.

Income, war-profit and excess profits taxes imposed by

authority of a foreign country; but this deduction shall be
allowed in the case of a taxpayer who does not signify in his
return his desire to have to any extent the benefits of paragraph
(3) of this subsection (relating to credit for taxes of foreign
countries);
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2.

c.

Estate and gift taxes;

d.

Taxes assessed against local benefits of a kind tending to

increase the value of the property assessed;

e.

Stock transaction tax;

f.

Energy tax; and

g.

Taxes which are not allowable as deductions under the law.

Special Tax Credits granted under R.A. 5186;

P.D. 535.

R.A. 6135

and

These tax credits and their tax consequences are as follows:

a.
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Sales, compensating and specific taxes are paid on supplies and

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raw materials imported by a registered export producer. Said

taxes are given as tax credit to be used in the payment of taxes,
duties, charges and fees due to the national government in
connection with its operations. (Sec. 7(a), R.A. No. 6135)
The tax credits granted should form part of the gross
income to the enterprise in the year of receipt of tax credit as
said taxes paid are considered allowable deductions for income
taxes purposes.
b.

In some cases, a registered BOI and tourism enterprise assumes

payment of taxes withheld and due from the foreign
lender-remittee on interest payments on foreign loans. In such
cases, the enterprise is given a tax credit for taxes withheld
subject to certain conditions. (Sec. 7(f), R.A. No. 5186; Sec.
8(c), P.D. No. 535)
Said taxes assumed by the registered enterprise represent
necessary and ordinary expenses incurred by the enterprise;
hence, deductible from its gross income. Therefore, the tax
credits granted necessarily constitute taxable income of the
enterprise.
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It is desired that this Circular be given as wide a publicity as possible.

EFREN I. PLANA
Acting Commissioner

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CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Taxation Encyclopedia 2013