REVENUE REGULATIONS NO. 17-2005 issued on October 19, 2005 provides the policies, guidelines and procedures in the implementation of the tax subsidy granted by the Fiscal Incentives Review Board (FIRB) to the Bases Conversion and Development Authority (BCDA) for the Subic-Clark-Tarlac Expressway Project The said privileges shall be limited to the purchases of materials, equipment, supplies and services in connection with the Project, amount of tax subsidy, scope and period of tax subsidy as provided for in the FIRB Resolution and Certificate of Entitlement to Subsidy (CES) issued by the FIRB to BCDA, Tax Subsidy Availment Certificate (TSAC) and Value-Added Tax (VAT) Subsidy Checks (VSCs) issued to the primary contractors and consultant and the SubVAT Subsidy Checks (SVSCs) issued to the subcontractors, suppliers, sub-subcontractors and sub-suppliers. The tax subsidy to be granted by the FIRB to BCDA for VAT represents the output VAT liability of the primary contractors and consultant that the primary contractors and consultant can pass-on to BCDA. Since the existing VAT system works on the input-output system, the primary contractors and consultant can deduct from their output VAT liability the input VAT passed-on to them by their subcontractors and suppliers for the Project. The subcontractors and suppliers, in turn, can deduct from their output VAT liability the input VAT passed-on to them by their subsubcontractors and sub-suppliers. Because of the input-output system of the VAT, to ensure that the tax subsidy will cover the entire VAT passed-on by the (a) sub-subcontractors and sub-suppliers to the subcontractors and suppliers; (b) subcontractors and suppliers to the primary contractors and consultant; and (c) primary contractors and consultant to BCDA; and ensure that no part of the loan shall be utilized in payment for any VAT on the Project, the VAT mechanism for this Project shall apply to both Japanese and Filipino nationals or entities operating as contractors, subcontractors, suppliers, sub-subcontractors and sub-suppliers in the Project up to the fourth level only. Payments by BCDA to the primary contractors and consultant are exempt from the withholding VAT. Such exemption from withholding of VAT is also recorded in the Exchange of Notes between the Government of the Republic of the Philippines and the Government of Japan. Accordingly, BCDA shall not withhold any VAT from its payments to the primary contractors and consultant. The subcontractors, suppliers, sub-subcontractors and sub-suppliers have the right and option to use the VSCs and SVSCs as payment for their VAT liabilities under the Project and other projects, as well as for payment of their other internal revenue tax liabilities. The said Certificates shall be valid for a period of 5 years reckoned from the date of issuance of the VSCs by the primary contractors and consultant and thereafter shall be revalidated for another 5 years. The BCDA shall file an application with the FIRB for issuance of the CES for the Project. The BCDA shall be responsible for securing the TSAC and VSCs directly from the BIR and thereafter in providing the copy of the TSAC and VSCs to the primary contractors and consultant. Within 3 days from receipt of the CES issued by FIRB, the Department of Budget and Management (DBM) shall issue a Special Allotment Release Order (SARO) in favor of the Bureau of Treasury (BTr) to cover the payment of the aforesaid taxes payable to the BIR as well as furnish the Revenue District Office (RDO) having jurisdiction over the BCDA’s principal office and the BTr with a copy of the SARO. Upon receipt of the SARO, the RDO having jurisdiction over BCDA’s principal office shall furnish the Revenue Accounting Division (RAD) under the Collection Service with a copy of the said SARO. The RAD shall record the corresponding revenue collection upon receipt of the BTr’s Journal Entry Voucher (JEV). The BCDA, primary contractors, consultant, subcontractors, suppliers, subsubcontractors and sub-suppliers shall individually submit to the Commissioner of Internal Revenue through the RDO having jurisdiction over each of their principal offices, a Quarterly Summary List of Purchases and/or Billing Statement or its equivalent (in diskette form) in accordance with the provisions of Revenue Regulations No. 8-2002, as amended. In case of delay on the part of the government in the release of the SARO, TSAC, VSCs, SVSCs or TSDMs, the payment of the VAT due on primary contractors, consultant, subcontractors, suppliers, sub-subcontractors and sub-suppliers’ VAT declarations/returns shall be accepted without imposition of penalty for late payment, provided that the subcontractors, suppliers, sub-subcontractors and sub-suppliers shall submit their respective TSDMs, together with their duly filed VAT returns, with the RDO having jurisdiction of their principal offices, within 10 days following the release of the TSDM. Any input tax passed-on to and paid in cash by the primary contractors and consultant on their purchases of goods and services in connection with the Project prior to the effectivity of these regulations shall be paid and reimbursed by the BCDA in cash within 10 days upon receipt of a request for refund from the primary contractors or consultant. BCDA shall request from the BIR the issuance of a Tax Credit Certificate (TCC) equivalent to the amount of the said input tax, which shall be valid for a period of 5 years reckoned from the date of issuance of the tax credits by the BIR subject to revalidation. The request for issuance of TCC shall be filed with the BIR office having jurisdiction over BCDA, with the following attachments: a. VAT Sales Invoice/s or Official Receipt/s issued to the primary contractor or consultant upon its purchase of goods or services; b. Statement of account, or billing, issued to BCDA requesting for reimbursement; c. The agreements or contracts which became the bases for the purchase of goods or services by the primary contractor or consultant; and d. Official Receipt/s issued to the BCDA upon its cash payment to the primary contractors and consultant. Upon submission of complete documents the BIR shall issue the corresponding TCC within 30 days. The TCC shall be non-transferable. Any input tax passed-on but not yet paid in cash by the primary contractors and consultant on their purchases of goods and services prior to the effectivity and implementation of the Regulations shall be settled by the primary contractors and consultant utilizing their VSCs for payment of the VAT.