CIR vs.

GOODYEAR
G.R. No. 216130 August 3, 2016

FACTS:
Goodyear Philippines, Inc. increased its ACS from P400M to P1.7B with 4M common shares and 13.3
preferred shares. All preferred shares were solely and exclusively subscribed by Goodyear Tire and
Rubber Company (GTRC), a foreign corporation unregistered in the Philippines.

In 2008, the BOD of GP authorized the redemption of GTRC’s 3.7M preferred shares. GP filed an
application for relief before the International Tax Affairs Division of the BIR to confirm that the
redemption was not subject to Philippine income tax pursuant to the RP-US Tax Treaty. Notwithstanding
the same, GP still withheld 15% FWT on the redeemed shares.

GP later filed an administrative claim for refund or issuance of TCC, representing the 15% FWT.
Thereafter, it filed a judicial claim via petition for review before the CTA.

The CTA Division granted the petition and ordered the BIR to refund or issue a TCC in the amount of
P14.6M to GP for having been erroneously withheld and remitted as FWT. The CTA En Banc affirmed the
ruling.

ISSUE:
Whether or not the gain derived by GTRC was not subject to 15% FWT on dividends.

HELD:
YES. The imposition of 15% FWT on intercorporate dividends received by a non-resident foreign
corporation is found in Section 28 (B) (5) (b) of theTax Code. It must be noted, however, that GTRC is a
non-resident foreign corporation, specifically a resident of the US. Thus, pursuant to the cardinal
principle that treaties have the force and effect of law in this jurisdiction, the RP-US Tax Treaty
complementarily governs the tax implications of respondent's transactions with GTRC.

Under the RP-US Tax Treaty, the term "dividends" should be understood according to the taxation law of
the State in which the corporation making the distribution is a resident, which, in this case, pertains to
respondent, a resident of the Philippines. Accordingly, attention should be drawn to the statutory
definition of what constitutes "dividends," pursuant to Section 73 (A) 42 of the Tax Code which provides
that "[t)he term 'dividends' x x x means any distribution made by a corporation to its shareholders out of
its earnings or profits and payable to its shareholders, whether in money or in other property."

In light of the foregoing, the Court therefore holds that the redemption price representing the amount
of P97,732,314.00 received by GTRC could not be treated as accumulated dividends in arrears that could
be subjected to 15% FWT. Verily, respondent's AFS covering the years 2003 to 2009 show that it did not
have unrestricted retained earnings, and in fact, operated from a position of deficit. Thus, absent the
availability of unrestricted retained earnings, the board of directors of respondent had no power to
issue dividends.
 AEGIS PEOPLESUPPORT vs. CIR
CTA EB 1231 May 17, 2016

FACTS:
Aegis is registered with the BOI as a new and pioneer IT Export Service firm as a contact center. As such,
it was issued a Certificate of Income Tax Holiday Entitlement. It was also registered with the PEZA. It
derives its service fees from services rendered to US-based clients of its mother company
PeopleSupport, Inc. (PSI-US).

In 2008, Aegis filed its annual ITR. Its non-operating and other income was subjected to 35% regular
corporate income tax. In 2011, Aegis filed an administrative claim for refund on the tax erroneously
and/or excessively paid on their realized forex gains, which they derived from a hedging contract with
Citibank.

The CTA Division denied the claim ruling that for petitioner to enjoy the ITH incentive, its income must
be effectively related to the conduct of its registered trade or business. It held that Aegis failed to
establish that the forex gains is attributable to its registered activity and that entering into a hedging
contract is not within the ambit of petitioner's registered activities with the BOI and PEZA, thus, the
forex gains arising from such hedging contract cannot be exempted from payment of income tax.

ISSUE:
Whether or not Aegis’ forex gains is covered by the ITH entitlement.

HELD:
NO. The CTA En Banc ruled that while it be may be true that the US Dollars earned by the taxpayer as a
contact center were used to purchase Pesos, through its hedging contract with Citibank, in order to pay
for its ordinary and necessary expenses of its customer support business, the fact remains that the
subject forex gains were derived from the foreign exchange contract it entered into with Citibank and
not from its registered activity as a contact center or any activity necessarily related or attributable to it.
The taxpayer’s hedging contract, which involve the sale of specified amounts of dollar to Citibank on
predetermined dates and at pre-determined exchange rates, is certainly not within the ambit of the
taxpayer’s registered activity with PEZA and/or BOI. And since the taxpayer’s hedging activity is outside
of its registered trade or business, i.e. as a contact center, the income tax holiday on its registered
activity cannot be possibly stretched to cover its forex gains.
 MARUBENI PHILIPPINES CORPORATION vs. CIR
CTA 7223 April 21, 2016

FACTS:
This is a remanded case involving the refund or the issuance of tax credit certificate in the amount of
P134,662.95, representing unutilized excess input taxes attributable to zero-rated sales for the four
taxable quarters of 2003, in favor of petitioner Marubeni Philippines Corporation, pursuant to the
Decision dated December 15, 2009 and Decision June 19, 2013, issued by the First Division of this Court
and the Court En Banc, respectively.

The CTA Division is its December 2009 Decision alleged that the recipients of the services rendered
should be entities doing business outside the Philippines, which is one of the requisites in order for the
supply of services to be VAT zero-rated. petitioner alleged that no such proof that the recipient of its
services is not doing business outside, but within, the Philippines. Accordingly, the service agreements
constituting petitioner as its agent in the Philippines would establish Marubeni-Tokyo's disinterest in
having a progressive pursuit of commercial dealings in the Philippines.

Issue:
Whether or not Marubeni-Tokyo is doing business in the Philippines.

Ruling:
NO. According to Sec. 3 of the Foreign Investments Act,
(d) xxx That the phrase "doing business: shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or officer to represent its interests in
such corporation; nor appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.

Based on the above, petitioner contended that appointing a representative domiciled in the Philippines
to transact business in the representative's or distributor's own name and account is deemed as not
doing business in the Philippines .. Logically, therefore, the act of Marubeni Tokyo in constituting
petitioner as its agent, allegedly falls squarely with the aforecited provisions.

Even granting that petitioner is correct in this argument, petitioner still failed to establish that the
foreign currency remittances were actually representative of the amount of direct export sales and sales
commissions earned from export sales and services rendered to Marubeni-Tokyo and affiliates during CY
2003.
 RCD REALTY vs. CIR
CTA 8468 June 22, 2016

FACTS:
In an earlier case, the CIR was ordered by CTA to issue a tax credit certificate in favor of RCD Realty. Both
parties moved for partial reconsideration of the decision.

RCD claimed that the Court erred in disallowing the amount of P271,231.10 on the ground that the
Certificate of Withholding Tax did not bear its Taxpayer Identification Number (TIN) and that it complied
with the requirements to prove its entitlement to refund. It also contended that the failure of the payors
to indicate RCD’s TIN in the CWT is an omission that is not attributable to it because they did not have a
hand in the preparation thereof.

On the part of the CIR, respondent alleged that the absence of any entry in the "Creditable Tax
Withheld" column in petitioner's 2009 Annual Income Tax Return would mean that no part of the gross
income reported therein were ever subjected by petitioner to CWT; that it failed to comply with the
requirements under Revenue Regulations ("RR") No. 2-98, as amended by RR No. 2-2006.

On the other hand, petitioner counter-argues that it declared the amount of Php42,511,959.00 as gross
income for the taxable year 2009, as this amount was reflected in its Annual Income Tax Return and its
2009 Audited Financial Statements.

ISSUE:
Whether or not RCD is entitled to a refund or the issuance of Tax Credit Certificates.

HELD:
YES. The requirements for entitlement of a corporate taxpayer for a refund or the issuance of Tax Credit
Certificates ("TCC") involving excess withholding taxes are as follows:
1. That the claim for refund was filed within the two (2) year reglementary period pursuant to
Section 229 of the 1997 NIRC, as amended;
2. That it is shown on the ITR that the income payment received is being declared part of the
taxpayers’ gross income;
3. That 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 income tax withheld therefrom.

Applying the foregoing to the instant case, as long as CWT clearly shows the information regarding the
payor, the payee, the amount paid and the income tax withheld from that amount, there is sufficient
compliance with the requirement of the law. After a scrutiny of the documentary evidence that were
disallowed for not bearing petitioner's TIN, the Court finds that the same shall be allowed considering
that it contains the essential information.
 BLOOMBERRY RESORTS vs. BIR
G.R. No. 212530 August 10, 2016

FACTS:
In 2009, PAGCOR granted to Bloomberry Resorts a provisional license to establish and operate an
integrated resort and casino complex. Bloomberry and its parent company, Sureste Properties, own and
operate Solaire Resort & Casino. Thus, being one of the licensees, Bloomberry only pays PAGCOR license
fees, in lieu of all taxes, as contained in its provisional license and consistent with PAGCOR Charter or PD
1869, which provides the exemption from taxes of persons or entities contracting with PAGCOR in
casino operations.

However, when RA 9337 took effect, it amended Sec. 27(c) of the NIRC, which excluded PAGCOR from
the enumeration of GOCCs exempt from paying corporate income tax. PAGCOR questioned the
constitutionality of such amendment in another case, where the Court held that it was indeed
constitutional.

Consequently, in implementing the aforesaid amendments, the BIR issued RMC No. 33-2013 declaring
that PAGCOR and its contractees and licensees, in addition to the 5% franchise tax of its gross revenue is
now subject to corporate income tax. Thus, Bloomberry filed a petition for certiorari and prohibition
insisting on its exemption from the payment of all kinds of taxes except for the 5% franchise tax on its
gross gaming revenue.

ISSUE:
Whether or not Bloomberry is exempt from payment from all taxes except the 5% franchise tax.

HELD:
YES. Despite amendments to the NIRC of 1997, the said Charter remains in effect. Thus, income derived
by PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming
clubs and other similar recreation or amusement places, gaming pools and related operations is subject
only to 5% franchise tax, in lieu of all other taxes, including corporate income tax. The Court concluded
that the CIR committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
issued RMC No. 33-2013 subjecting both income from gaming operations and other related services to
corporate income tax and 5% franchise tax.

As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from
the operations conducted under the franchise specifically from the payment of any tax, income or
otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to
corporation(s), association(s), agency(ies), or individual(s) with whom the P AGCOR or operator has any
contractual relationship in connection with the operations of the casino(s) authorized to be conducted
fb under this Franchise, so it must be that all contractees and licensees of PAGCOR, upon payment of the
5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax
realized from the operation of casinos.