Scribd Logo
Upload

Welcome to Scribd!

  • 23 views

    Deutsche Bank vs. Cir G.R. No. 188550 August 19, 2013 Ticker: Tax Treaty Doctrine: Undue Delegation Facts

    Uploaded by

    Khenna Dela Cruz
    The Supreme Court ruled that Deutsche Bank is entitled to a refund for overpayment of branch profit remittance tax. While the tax code sets a 15% rate, the Philippines-Germany Tax Treaty allows a preferential 10% rate. The BIR issued rules requiring taxpayers to apply for treaty benefits 15 days before transactions, but the Court found this did not override treaty obligations. As Deutsche Bank qualified for the 10% rate under the treaty, its failure to first apply with the BIR did not deprive it of the lower rate. The Court ordered the refund for overpayment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Deutsche Bank vs. Cir G.R. No. 188550 August 19, 2013 Ticker: Tax Treaty Doctrine: Undue Delegation Facts

    Uploaded by

    Khenna Dela Cruz
    23 views2 pages
    The Supreme Court ruled that Deutsche Bank is entitled to a refund for overpayment of branch profit remittance tax. While the tax code sets a 15% rate, the Philippines-Germany Tax Treaty allows a preferential 10% rate. The BIR issued rules requiring taxpayers to apply for treaty benefits 15 days before transactions, but the Court found this did not override treaty obligations. As Deutsche Bank qualified for the 10% rate under the treaty, its failure to first apply with the BIR did not deprive it of the lower rate. The Court ordered the refund for overpayment.

    Original Title

    20200825CONSTIDEUTSCHEV0.01

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The Supreme Court ruled that Deutsche Bank is entitled to a refund for overpayment of branch profit remittance tax. While the tax code sets a 15% rate, the Philippines-Germany Tax Treaty allows a preferential 10% rate. The BIR issued rules requiring taxpayers to apply for treaty benefits 15 days before transactions, but the Court found this did not override treaty obligations. As Deutsche Bank qualified for the 10% rate under the treaty, its failure to first apply with the BIR did not deprive it of the lower rate. The Court ordered the refund for overpayment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    Deutsche Bank vs. Cir G.R. No. 188550 August 19, 2013 Ticker: Tax Treaty Doctrine: Undue Delegation Facts

    Uploaded by

    Khenna Dela Cruz
    The Supreme Court ruled that Deutsche Bank is entitled to a refund for overpayment of branch profit remittance tax. While the tax code sets a 15% rate, the Philippines-Germany Tax Treaty allows a preferential 10% rate. The BIR issued rules requiring taxpayers to apply for treaty benefits 15 days before transactions, but the Court found this did not override treaty obligations. As Deutsche Bank qualified for the 10% rate under the treaty, its failure to first apply with the BIR did not deprive it of the lower rate. The Court ordered the refund for overpayment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    DEUTSCHE BANK VS.

    CIR
    G.R. No. 188550
    August 19, 2013
    Ticker: Tax Treaty

    Doctrine: Undue Delegation

     FACTS
    In accordance with Section 28(A)(5)[4] of the National Internal Revenue Code (NIRC) of
    1997, petitioner withheld and remitted to respondent on 21 October 2003 the amount of PHP
    67,688,553.51, which represented the fifteen percent (15%) branch profit remittance tax
    (BPRT) on its regular banking unit (RBU) net income remitted to Deutsche Bank Germany
    (DB Germany) for 2002 and prior taxable years.[5]

    Believing that it made an overpayment of the BPRT, petitioner filed with the BIR Large
    Taxpayers Assessment and Investigation Division on 4 October 2005 an administrative claim
    for refund or issuance of its tax credit certificate in the total amount of PHP 22,562,851.17.
    On the same date, petitioner requested from the International Tax Affairs Division (ITAD) a
    confirmation of its entitlement to the preferential tax rate of 10% under the RP-Germany Tax
    Treaty.[6]

    Alleging the inaction of the BIR on its administrative claim, petitioner filed a Petition for
    Review[7] with the CTA on 18 October 2005. Petitioner reiterated its claim for the refund or
    issuance of its tax credit certificate for the amount of PHP 22,562,851.17 representing the
    alleged excess BPRT paid on branch profits remittance to DB Germany.

    ISSUE
    This Court is now confronted with the issue of whether the failure to strictly comply with
    RMO No. 1-2000 will deprive persons or corporations of the benefit of a tax treaty.

    RULING :The Petition is meritorious.


    Under Section 28(A)(5) of the NIRC, any profit remitted to its head office shall be subject to
    a tax of 15% based on the total profits applied for or earmarked for remittance without any
    deduction of the tax component. However, petitioner invokes paragraph 6, Article 10 of the
    RP-Germany Tax Treaty, which provides that where a resident of the Federal Republic of
    Germany has a branch in the Republic of the Philippines, this branch may be subjected to the
    branch profits remittance tax
    withheld at source in accordance with Philippine law but shall not exceed 10% of the gross
    amount of the profits remitted by that branch to the head office.

    By virtue of the RP-Germany Tax Treaty, we are bound to extend to a branch in the
    Philippines, remitting to its head office in Germany, the benefit of a preferential rate
    equivalent to 10% BPRT.

    On the other hand, the BIR issued RMO No. 1-2000, which requires that any availment of
    the tax treaty relief must be preceded by an application with ITAD at least 15 days before the
    transaction. The Order was issued to streamline the processing of the application of tax treaty
    relief in order to improve efficiency and service to the taxpayers. Further, it also aims to
    prevent the consequences of an erroneous interpretation and/or application of the treaty
    provisions (i.e., filing a claim for a tax refund/credit for the overpayment of taxes or for
    deficiency tax liabilities for underpayment).[13]

    The crux of the controversy lies in the implementation of RMO No. 1-2000.

    Petitioner argues that, considering that it has met all the conditions under Article 10 of the
    RP-Germany Tax Treaty, the CTA erred in denying its claim solely on the basis of RMO No.
    1-2000. The filing of a tax treaty relief application is not a condition precedent to the
    availment of a preferential tax rate. Further, petitioner posits that, contrary to the ruling of
    the CTA, Mirant is not a binding judicial precedent to deny a claim for refund solely on the
    basis of noncompliance with RMO No. 1-2000.

    Respondent counters that the requirement of prior application under RMO No. 1-2000 is
    mandatory in character. RMO No. 1-2000 was issued pursuant to the unquestioned authority
    of the Secretary of Finance to promulgate rules and regulations for the effective
    implementation of the NIRC. Thus, courts cannot ignore administrative issuances which
    partakes the nature of a statute and have in their favor a presumption of legality.

    The CTA ruled that prior application for a tax treaty relief is mandatory, and noncompliance
    with this prerequisite is fatal to the taxpayer's availment of the preferential tax rate.

    You might also like