CTA Case No. 5183

DECISION

This case involyes petitioner's claim for refund or tax credit in the amount of P4,989,567.65 representing alleged overpaid branch profit remittance tax for the years 1991 and branch in the Philippines authorized to engage in the banking Mn May 20, 1992, petitioner received a letter, dated May Department of the Fangke Sentral ng Pilipinas (BSP) authorizing the remittances of branch profits earned in 1991 to ifs Head Office in California, USA, ameunting to FP190,910,553.80, net of 15% branch profit remittance tax of F25,570,897.20. On December 24, 1992, petitioner filed the monthly remittance return of income taxes withheld (DIR Form 1743 W) corresponding te the branch af F25,570,097.20 which amount was ay profit remittance tax withheld by BSP.

sumetime 1993, petitioner applied for an authority to remit branch profits for 1992 to its Head Office. BSF granted the remittance of the amount of P$6,445,497.30, net of 15% br anch profit remittance tax of F12,632,454.70, per BSF letter dated May 14, 1993. The tax withheld amounting te F12,6$2,454.70 was reported to the BIR on July 9, 1993 under BIR Form 17434 W.

On October 21, 1994, petitioner filed with the Appellate Division of the Bureau of Internal Revenue a letter, dated October 20,.1994, claiming for the refund or issuance of a tax credit certificate of the alleged overpaid branch profit remittance tax for the years 1991 and 1992 in the sum of P4,959,567.65, computed as follows:

iS$l:

RBU

a) Profit rernittance bax paid P164,106,234.00 15% = P24615.935.10

DECISION -

C.T.A. CASE RG. 5183 b) Profit remittance

Plh4

145 tess branch profit remittance

FODU

al Profit remittance tax paid FP 6.36641400 2 15% = tax paid F6.366414.002 153 = 115 Excess branch profit remittance tax paid

Total 1991 Overpaid Branch Profit

1992 .

RBU

a) Profit remittance tax paid P $4,273, 117.00 4 15% = should te:

ba Protit remittance fax paid 4it5 P 954,962.10 830,401.83 P 124,560.27 10,992, 145.69

DECISION -

C.T.4. CASE NG. 5183 try ha 4 f

T

oy on conte no i wha —_ pate ae beets _ ap) =

Cae)

bnty pate or be ‘ “Ls bm ot on] renee or & er) ne om) on “Ts

~ % {F749 294 OF

A pate f i Fy 3, tid 2.69) P 41,467.15 hi Prefit remittance tax paid Po 27654100 2 153 3

Lis

Eacess branch profit remittance

Total 1992 Overpaid Branch Profit

Remittance Tax Poo1654234.23 GRAND TOTAL P 4,989,567.66 tin December 26, lyy4, petitioner filed the instant petition in order to suspend the running of the two-year prescriptive period tor judicially claiming a refund or tax credit.

Petitioner anchors its claim for rerund or tax credit on the bases of the Supreme Court decisions in “Commissioner ot Internal Revenue vs. Burroughs Limited and the Court of Tax Appeals.” GR. No. 66653, June 19, 1986; and “Bank of America NT & 34 ve. Honorable Court of Appeals and The Cormmmissioner c oy Internal Reyenne” GR No. 1osug2, July 21, lyya. The High Lourt ruled in both cases that the branch profit remittance fax

DECISION -

C_LA_ CASE HO _ 5183

- 5 - shall b© (Otnput&d t)ased on the profit "actu.ally remitted" abroad and tK·t (,11 thE:' pr(·fits to bf remitted abroad. Rt:-spondE.-nt. hov"ever contended tllat the 15% branch profit remittance tZG<: is impvsed and collected at source. Therefore, the basis shc·uh:i be tlle amount actually applied for by the branch V·lith r.:P a2:. the profit tv be remitted abroad follogNing the guiclelines set in Revenue Memorandum Circular No. ·3-(32, :Mardl 17, 19·Ñ·2, and follovving the case of Compania General de Tabacos de Filipinas - Phil. Brandl vs. Commissi()ner of Internal Revenue, CL!:.. Ca.::.& No. ,YJZ 7, October 14, 19<:;&. The only issue to be determined in tlle present case is \1·.;het11er or not the 1 y; branch profit remitta.nce t:lx h3hould be <.,.)mputecl (!tl the pr()fits actually remitted abroad i.)r on t11e r t• .-. r·l· t¨ ;< r = 11. ,::> -1 f .·, r· r·.:. .11 1. H-=ltl··-Ò l) .... t) • .::. ':·j-·'1) ·-·'·- t._.

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.

The lav,r in force is Section 25(a)(5) \A tlle Tax (:()de, whkh r· -. ·r1· ·1 - · }) . l._J...

{._ l::."J.

·sECTION. 25- ll:tes of tax on foifl'ig.n co.rpoiafj,-,.o_ - {a) Tff.X ,.,n Iesident ft'>.reign Ct'>.rpo.rafjons. ( 1) In general - x x x.

&XX

XXX

X XX_

(5) Tax vn branch piofiL8 remittances.. - Any profit re-mitted by a bra.nc11 to its head office ·;hall bt:.- subject to a tmr of 15: (except . those r-s>gi·3tÓ?red with thl?

ExpN·t

Processing

Zono:>

Authority)· x x x. • (Emphasis ours.)

The Supreme Court adopted our view in the case of Bank of America HT & 2A vs. The Commissioner of Internal Revenue, CTA fase No. 3799, Octeber 24, 1956 in its recent decision in the case of Bank of America NT & SA, et. al. vs. The Court of Appeals, et. al., G.R. No. 103092, and Bank of America NT & SA, ¥5. The Hon. Court of Appeals, et. al., GR. No.

103106, July 21, 1994, thusly:

“SZ E In all the situations 3 X= where the mechanism of withholding of taxes af source operates to ensure collection of the tax, and which respondent claims the tase on which the tax is computed is the amount to be paid or remitted, the law applicable expressly, specifically and unequivocally mandates that the fax is on the total amount thereof which shall be collected and paid as provided in sections 54 and 54 of the Tax Code.

Thus:

Dividends received by an individual who is 4 citizen or resident of the Philippines from a domestic corporation, shall be subject to a final tax at ameunt thereof, which shall be collected and paid nrovided in Sections 54 and 54 ef this Code.

(Emphasis supplied; Sec.

21, Tax Code)

DECISION-

LLA. CASE NO. 518) - 7 - 'Interest from Philippine Currency bani::. d©posits and yield from depo:;lt sub:;titutes Æ.hlhether received bv , citizens or the Philippines 2x \)y resklent aliÇn indi,.tidua1s, shall be subje;::t to ;;:t. final tax as follov%:

(J.)

1 :):i of the inte-rest 0r sav·ings rlepo':;it;;, ;:l.nd (b) 20% of tJw interest on time deposits and yield from deposits su.l)stitutes. (""Tllicll •" \-. ·:j 11 1' ·' - '11  ·'t;::. ··i atld n ·:> 1. (1 ..:·114:.....

_JF 1. • .a .. ..r t:;'t ... _ ..•. \..

r sJo. ...

.-j ,-. r, +· ')TT< j?:>f"l t't} <;'·'V'tl• ·"lf"l•-·

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;:!Jld r;.4 of tlliS Code: X X X (l.lnderlining supplied; Sec. 2 1, Tax Code applicable.)'

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·on the other llancl..

there is ab::;olutel'.§ nothinQ' in

Section

' ,_.

24(b)(2)(ii), supra. which indicates t11at the 15% tax on branch prc·fit remittance if: on tne t.ot21 amount ot prNit to be remitted abroad v..rhich shall be vAlected and paid in ac:cordanc:e V·litll the t::1.x V.fitltlwlding device pr'Jvided in Sedions y::. and ¨A of the Tax Code. The st3.tute employs 'Any profit remittd abroad by a branch to its head office - shall be subject to a tax of fifteen per Aent ( 1 :s;) - without more. Nowhere is there said of 'base on the total amount ;Jduallv ;:1ppli.ed for by the branch with t11e Central Eia.nk of the Philippines as

DECISION-

C.T.A. CASE NO. 518J - a - ·· ·· r· · t t ') tö ··· 1· Pfi · tt ·' " al' 1· ·' . ., ·j • · ·'11. ·'11 [.'1 1.) 1..

.lv .":f v 11 z.I;.::'U • ) Vo.'y , •;•ii '·-· ·=·t·l-$tll t·)p ,· f111.::.c··tu<l '='!"1,-·l č1':"t!.d a<-· ďlf·,-·lĐT1. rlPr"l ._1 1 1_.

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·- ·-· ·._ in Sedi(:.t1e 5.3 and 54 of this Code.· Where the lm.v does not qualify tha.t tll.s­ tax iû; imposed and collected at source ba2;ed on profit to \)e remitted abroad. tltat. qu;Jlifi(:ation should not tH7 re;:.v.i into U1÷ la.ĎH.

It is a basic rulõ of -:;ta.tu.torv construction that there is no ' ::;afer nor better canon of interpret.J.tion than that vlhen tlle language of tlw la-vv is dear ;:Jnd unarnbiguous, it should \)e ;:.pplied as Volntten.

And to our rnind.

the tE>rm ·any profit rernitted abroad' can (:.nly rne::u1 sud1 prcJfit as is 'f\)rwarded .. sent, or transmitt...ed al)[oad' a.s the v.rord 'remitt.ed ' is commonly and popularly accepted and underst(locl. To O:;ay t11erefore that the tax on branch prrAit.

remittanc<:> is imposed a.nd <::ollect.ed at source and neces:;arilv the , t--YT l· a·-·P .-.\- .-,,1'1 biC-> tl·p ·at· · -·ut· t "(·t''allTr ....:.1 .• >. {.lo:..::· |· .::·11'-· '-\ ·1 ..

1,. c. Ilv 1 c.x-- .uc.

,1 applied for the bnu1ch úüo/ith the Central Bculk as profit to be remitted abr•.)ad is t/.) ignore th& unmista.ta.ble meaninq of

Ll

'-' r:.1·=11• +"• T,',!()t• \lø; 0 r-· '-· !1 \ ( - . -.

In the 15.;1; ro::>rnitta:tKe tax, the lm·ll specifies its ovm t3.X base to be on the ·proflt remitted abroad.· There 1s absolut.E>lv notllinq enlJlvocal or uncertain , ._.

'1 ;:"l.bout. the language of the pn::.Nision. The t3.X is imposed on the amount sent abr•.)ad.. aw:l the laù .. v (then in fonČe) calls for notlling further.

The taxpayer is a single entity, and it should be understandable i( such as in tl1is case, it is the local branch of the corporation, using its ovln lo(:al funds, vv-hi<::h rernits the tax to the Philippine Government.

XXX

X X X.

DECISION-

C.LA. CASE HO. )183 - 9 - The ::;t)licitor General suggests that the anah)gy '311ould e1rt.end t(J the on:iinary application of the áNithholding· t-J.x svstetn and so with the rule on ·-'

I

r::r)nstructive rernittance concept as v.,re11.

It

is difflcu.lt tc! accept Uw proposition. In the operation of the ´Nitl11lolding tax system, the payee is the t;::,xpa.;ler. the person on whom the tax is imposed, V·lhile the payor. a :;epa.rate entity, acts no more than a.n ;:.112ent of the Eovernment for tlle collection of the ·-· '-' tax in order to ensure its payment. Obviously_. the amount tlwrebv u.sed to settle the tax liabilitv is ' ' •:lec:>med sourcc:>d from the proceeds constitutive of tlw t:r:I b.::1se Smce t.lle payee .. twt the payor, is the real tazp:::1.yer, the rule on (:onstruc:tive remittance {.- r· 1·,:::.,-'.::.l·r-.r;·· .... . âr·1 l·1.::. ,:::.·3 ·.:-1·1u r?tt < ·· · r·l·:"Jll· ãä..-1 l.f t·1nt 1.11,.-l>=>A..-l \· . .J ._,. ._ . . _. r·· -· ·-··-· -··-· .._ . . _._:

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v æ· ·. ·ç·., .. , !Uc\dČ cl.,;.arly ma.nife:;t.

It

is hardly the c:as!:!, h•.)V!e".rer. in t.lle imposithm of the 15% remittance tax V·.2llere there is but one t:.tZ:..TJaver using its ovm .&.!-'

I

-' domestic funds in the paynwnt of tlle tax. Tel say that there is u:;.nstru.ctive remittance o?VE>n of such funds -vvonlcl be stretchmg tar t1)0 much t.lla.t imagmary rule.

Sound logic does not defy but must concede to f:::td::;_·· It is tlwrMort:' th)VvT C:\ settled rule tlla.t t.lle l µ<1: bran..::ll profit. remitt:J.tlGE- tax is ba:::ed on tlie "profit rernitt.ed a.broad ··.  Tliè sarn' dt.)(.trine VvTa.s folh:..·vved in tlle tlh)re recent ..:a.se of Fit"i'.:ling therefore n .. ) en•.)r in t11e t:.<:..rnpu.t.3.t.k·n of petitioner's d:J.im for refund or tax (:re.Jit in tlw sum

·A

representing excess branc1l remit.t:m..:.³ t.:txes p.3.W f•)f t>rancll profits earn;2.•.:l in 1991 a.tKl 1992. thE- ;: .. :uuċ is 1lE-reby avian:led in its favor.

DECISION -

C.1.4. CASE NG. 5183

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ordered to refund or issue in favor of petitioner a tax credit certificate in the amount of P4,9$9,567.60, representing overpaid branch profit remittance tax for the years 1991 and 1992. No pronouncement as to costs of suit.

30 ORDERED.

, “op RAMON 0. DE VEY / ;

/ Associate Judge

1 CONCUR:

/ ERNESTO D. ACOSTA

Presiding Judge

CERTIFICATION

] hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordanes with Section 14, Article ¥III of the Constitution.

Yee QA

ERNESTO D. ACOSTA

Fresiding Judge

Court of Tax Appeals