Article 21 of E.O.

226 defines a tax credit as follows:

ARTICLE 21. “Tax credit” shall mean any of the credits against taxes and/or duties equal to those
actually paid or would have been paid to evidence which a tax credit certificate shall be issued by the
Secretary of Finance or his representative, or the Board, if so delegated by the Secretary of Finance. The
tax credit certificates including those issued by the Board pursuant to laws repealed by this Code but
without in any way diminishing the scope of negotiability under their laws of issue are transferable under
such conditions as may be determined by the Board after consultation with the Department of Finance.
The tax credit certificate shall be used to pay taxes, duties, charges and fees due to the National
Government; Provided, That the tax credits issued under this Code shall not form part of the gross income
of the grantee/transferee for income tax purposes under Section 29 of the National Internal Revenue Code
and are therefore not taxable: Provided, further, That such tax credits shall be valid only for a period of
ten (10) years from date of issuance.

NIRC

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
Taxes. -

The Commissioner may -

xxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good condition
by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered
unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for
credit or refund within two (2) years after the payment of the tax or penalty: Provided, however,
That a return filed showing an overpayment shall be considered as a written claim for credit or
refund.

A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is
directly liable. Any request for conversion into refund of unutilized tax credits may be allowed,
subject to the provisions of Section 230 of this Code: Provided, That the original copy of the Tax
Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer
for verification and cancellation: Provided, further, That in no case shall a tax refund be given
resulting from availment of incentives granted pursuant to special laws for which no actual
payment was made.
Revenue Regulation 2-98

SECTION 2.58.3. Claim for Tax Credit or Refund. —

(A) The amount of creditable tax withheld shall be allowed as a tax credit against the income tax liability
of the payee in the quarter of the taxable year in which income was earned or received.

(B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on
income payments shall be given due course only when it is shown that the income payment has been
declared as part of the gross income and the fact of withholding is established by a copy of the
withholding tax statement duly issued by the payor to the payee showing the amount paid and the
amount of tax withheld therefrom.

Proof of remittance is the responsibility of the withholding agent.