CASE DIGEST IN TAXATION LAW

REVIEW

CASES:
1. Soriano v. Secretary of Finance (815 SCRA 316)

2. Salva v. Magpile (844 SCRA 586)

3. Commissioner of Internal Revenue v. San Miguel Corporation

(815 SCRA 563)

4. Sitel Philippines Corporation v. Commissioner of Internal

Revenue (817 SCRA 193)

5. Commissioner of Internal Revenue v. St. Luke’s Medical Center,

Inc. (817 SCRA 347)

6. Commissioner of Internal Revenue v. Asalus Corporation (818

SCRA 543)

7. Metropolitan Bank and Trust Company v. Commissioner of

Internal Revenue (822 SCRA 496)

8. Marubeni Philippines Corporation v. Commissioner of Internal

Revenue (825 SCRA 401)

SUBMITTED BY: JOHN REIÑER G. MANADAO

SUBMITTED TO: JUDGE EDMAR CASTILLO

 1. Soriano v. Secretary of Finance (815 SCRA 316)

FACTS: On 19 May 2008, the Senate filed its Senate Committee Report No. 53 on Senate
Bill No. (S.B.) 2293. On 21 May 2008, former President Gloria M. Arroyo certified the
passage of the bill as urgent through a letter addressed to then Senate President
Manuel Villar. On the same day, the bill was passed on second reading IN the Senate
and, on 27 May 2008, on third reading. The following day, 28 May 2008, the Senate sent
S.B. 2293 to the House of Representatives for the latter's concurrence.

On 17 June 2008, R.A. 9504 entitled "An Act Amending Sections 22, 24, 34, 35, 51, and
79 of Republic Act No. 8424, as Amended, Otherwise Known as the National Internal
Revenue Code of 1997," was approved and signed into law by President Arroyo.

The following are the salient features of the new law:It increased the basic personal
exemption from P20,000 for a single individual, P25,000 for the head of the family, and
P32,000 for a married individual to P50,000 for each individual.It increased the
additional exemption for each dependent not exceeding four from P8,000 to P25,000.It
raised the Optional Standard Deduction (OSD) for individual taxpayers from 10% of
gross income to 40% of the gross receipts or gross sales.It introduced the OSD to
corporate taxpayers at no more than 40% of their gross income.It granted MWEs
exemption from payment of income tax on their minimum wage, holiday pay, overtime
pay, night shift differential pay and hazard pay.

Accordingly, R.A. 9504 was published in the Manila Bulletin and Malaya on 21 June
2008. On 6 July 2008, the end of the 15-day period, the law took effect.
Petitioners Jaime N. Soriano et al. primarily assail Section 3 of RR 10-2008 providing for
the prorated application of the personal and additional exemptions for taxable year
2008 to begin only effective 6 July 2008 for being contrary to Section 4 of Republic Act
No. 9504.[2]Petitioners argue that the prorated application of the personal and
additional exemptions under RR 10-2008 is not "the legislative intendment in this
jurisdiction."[3] They stress that Congress has always maintained a policy of "full taxable
year treatment"[4] as regards the application of tax exemption laws. They allege further
that R.A. 9504 did not provide for a prorated application of the new set of personal and
additional exemptions.[5]

Then Senator Manuel Roxas, as principal author of R.A. 9504, also argues for a full
taxable year treatment of the income tax benefits of the new law. He relies on what he
says is clear legislative intent In his "Explanatory Note of Senate Bill No. 103," he
stresses "the very spirit of enacting the subject tax exemption law.

Petitioner Trade Union Congress of the Philippine contends that the provisions of R.A.
9504 provide for the application of the tax exemption for the full calendar year 2008. It
also espouses the interpretation that R.A. 9504 provides for the unqualified tax
exemption of the income of MWEs regardless of the other benefits they receive.[14] In
conclusion, it says that RR 10-2008, which is only an implementing rule, amends the
original intent of R.A. 9504, which is the substantive law, and is thus null and void.

Petitioners Senator Francis Joseph Escudero, the Tax Management Association of the
Philippines, Inc., and Ernesto Ebro allege that R.A. 9504 unconditionally grants MWEs
exemption from income tax on their taxable income, as wel1 as increased personal and
additional exemptions for other individual taxpayers, for the whole year 2008. They
note that the assailed RR 10-2008 restricts the start of the exemptions to 6 July 2008
and provides that those MWEs who received "other benefits" in excess of P30,000 are
not exempt from income taxation. Petitioners believe this RR is a "patent nullity"[15]
and therefore void.

The Office of the Solicitor General (OSG) filed a Consolidated Comment[16] and took the
position that the application of R.A. 9504 was intended to be prospective, and not
retroactive. This was supposedly the general rule under the rules of statutory
construction: law will only be applied retroactively if it clearly provides for retroactivity,
which is not provided in this instance. The OSG further argues that the legislative intent
of non-retroactivity was effectively confirmed by the "Conforme" of Senator Escudero,
Chairperson of the Senate Committee on Ways and Means, on the draft revenue
regulation that became RR 10-2008.

ISSUE: Whether the increased personal and additional exemptions provided by R.A.
9504 should be applied to the entire taxable year 2008 or prorated, considering that
R.A. 9504 took effect only on 6 July 2008. Second, whether an MWE is exempt for the
entire taxable year 2008 or from 6 July 2008 only. Third, whether Sections 1 and 3 of RR
10-2008 are consistent with the law in providing that an MWE who receives other
benefits in excess of the statutory limit of P30,000[19] is no longer entitled to the
exemption provided by R.A. 9504.

RULING: The policy of full taxable year treatment is established, not by the amendments
introduced by R.A. 9504, but by the provisions of the 1997 Tax Code, which adopted the
policy from as early as 1969.

Principles: This Court ruled in the affirmative, considering that the increased exemptions
were already available on or before 15 April 1992, the date for the filing of individual
income tax returns. Further, the law itself provided that the new set of personal and
additional exemptions would be immediately available upon its effectivity. While R.A.
7167 had not yet become effective during calendar year 1991, the Court found that it
was a piece of social legislation that was in part intended to alleviate the economic
plight of the lower-income taxpayers. For that purpose, the new law provided for
adjustments "to the poverty threshold level" prevailing at the time of the enactment of
the law.

In the present case, the increased exemptions were already available much earlier than
the required time of filing of the return on 15 April 2009. R.A. 9504 came into law on 6
July 2008, more than nine months before the deadline for the filing of the income tax
return for taxable year 2008. Hence, individual taxpayers were entitled to claim the
increased amounts for the entire year 2008. This was true despite the fact that incomes
were already earned or received prior to the law's effectivity on 6 July 2008.
 2. Salva v. Magpile (844 SCRA 586)

FACTS: Sometime in 1968, respondent Ildefonso P. Magpile (Magpile) acquired a 262-

square-meterparcel of land situated in Makati City, Metro Manila. His title thereto,
Transfer Certificate of Title (TCT)No. 215195,4 was registered on February 19, 1968 and
bears "2118 Apolinario, Makati, Rizal" as hispostal address.

He transferred to and resided in the subject property. On June 30, 1980, he filed withthe
Office of the Municipal Assessor of Makati a Sworn Statement of the True Current and
Fair MarketValue6 of the land covered by TCT No. 215195 as well as the improvements
made thereon. In the SwornStatement, he wrote "1772 Evangelista, Bangkal, Makati,
M.M." as his postal address.Magpile failed to pay the real property taxes due on the
subject property from 1998 up to 2006.As a result, the City Treasurer of Makati sent him
billing statements,7 notice of realty tax delinquency,8and warrants of levy9 at the
address "2118 Apolinario St., Bangkal, Makati City."

On May 24, 2006, thesubject property was sold at a public auction for P200,000.00 to
petitioner Katherine Rose Salva (Salva)as the highest bidder.10Almost two years after,
on March 5, 2008, Magpile, through his daughter, Ma. Socorro Magpile-Del Rosario as
attorney-in-fact,11 filed a petition12 to declare as null and void the auction sale and
tocancel the certificate of sale issued in favor of Salva.

The case was raffled to Makati RTC, Branch 150 anddocketed as Civil Case No. 08-184.In
his petition; Magpile claimed that he did not receive any of the notices sent by the
CityTreasurer, who failed to comply with Section 258, Chapter VI, Title II, Book II of
Republic Act. (R.A.) No.7160, or the Local Government Code of 1991 (LGC). He asserted
that his former .postal address is nolonger existing since 1996. As proof, he attached the
Certification dated February 28, 2008 issued by theBarangay Captain of Pio del Pilar,
Makati, attesting that "the address or numbers of residences andestablishments located
in Apolinario Street this Barangay have been changed since 1996" and that "theformer
postal address of Mr. Ildefonso P. Magpile of 2118 Apolinario Street indicated last 1968
[has]been replaced last 1996 by the current numbers or address 1510 A & B Apolinario
Street."13Despite impleading the Officer-in-Charge of the Office of the City Treasurer of
Makati as public respondent, only Salva filed an Answer.14 She alleged, among others,
that public respondent enjoys the presumption of regularity, and assuming that
Magpile's allegations are true, he is estopped for his failure to call the attention of public
respondent about the continued use of 2118 Apolinario St.,Bangkal, Makati City as his
postal address. It was noted that years had elapsed from the alleged submission of the
Sworn Statement until the notice of realty tax delinquency was sent.

ISSUE: Whether the CA was alleging that they have the jurisdiction upon the disputed
case.

RULING: The SC in its decision pointed out that the CA correctly asserted its jurisdiction
in this case. Here, the dispute arose from the alleged non-compliance of the
respondents with the pertinent provisions of the LGC on tax delinquency sale. A plain
reading of Magpile's petition before the RTC would show that he did not assail the
legality or validity and reasonableness or correctness of the real property tax
assessment and collection. In fact, he categorically and repeatedly admits in his pleading
is that he failed to pay the real property tax from 1998 up to 2006. As the CA ruled, what
he is questioning is the alleged denial of due process in the levying of his property. 

3. Commissioner of Internal Revenue v. San Miguel Corporation (815 SCRA 563)

FACTS: When SMC's October 19, 1999 letter requested the registration and authority to
manufacture "San Mig Light," to be taxed at ₱12.15 per liter, the BIR granted the
request, thus confirming SMC can register, manufacture, and sell "San Mig Light" as a
new brand.

The CIR argues that "San Mig Light," launched in November 1999, is not a new brand but
merely a low-calorie variant of "San Miguel Pale Pilsen." Thus, the application of the
higher excise tax rate for variant products is appropriate (₱19.91 per liter instead of
₱9.15 per liter) and SMC should not be entitled to a refund or issuance of a tax credit
certificate. The CTA sided with SMC; hence, this petition by the CIR with the SC.

ISSUES:
[1] Is it not that estoppel does not apply to the government in case of collection of
taxes?
[2] Is SMC entitled to a refund of excess payment of excise taxes on "San Mig Light"?

RULING:
[1] While estoppel generally does not apply against government, especially when the
case involves the collection of taxes, an exception can be made when the application of
the rule will cause injustice against an innocent party.136 Respondent had already
acquired a vested right on the tax classification of its San Mig Light as a new brand. To
allow petitioner to change its position will result in deficiency assessments in substantial
amounts against respondent to the latter's prejudice.

The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the
mistakes or errors of its agents is conceded. However, this authority must be exercised
reasonably.

[2] Yes, SMC is entitled to tax refund or tax credit certification. The Tax Code includes
remedies for erroneous collection and overpayment of taxes. Under Sections 229 and
204(C) of the Tax Code, a taxpayer may seek recovery of erroneously paid taxes within
two (2) years from date of payment.

4. Sitel Philippines Corporation v. Commissioner of Internal Revenue (817 SCRA

193)

FACTS: Sitel, a corporation engaged in the business of providing call center services from
the Philippines to domestic and offshore businesses and registered with the Bureau of
Internal Revenue (BIR) as a VAT taxpayer, as well as with the Board of Investments on
pioneer status as a new information technology service firm in the field of call center.
For the period from January 1, 2004 to December 31, 2004, Sitel filed with the BIR its
Quarterly VAT Returns.
On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax credit
with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the
Department of Finance for its unutilized input VAT arising from domestic purchases of
goods and services attributed to zero-rated transactions and purchases/importations of
capital goods.

On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for
review before the CTA. CTA Division rendered a Decision partially granting Sitel's claim
for VAT refund or tax credit but denied Sitel's claim for unutilized input VAT attributable
to its zero-rated sales for the four quarters of 2004. CTA Division found that Sitel failed
to prove that the recipients of its services are doing business outside the Philippines.
Aggrieved, Sitel filed a motion for partial reconsideration. CTA Division denied Sitel's
Motion for Reconsideration.

Sitel filed a Petition for Review with the CTA En Banc claiming that it is entitled to the
amount denied by the CTA Division. CTA En Banc reversed and set aside the ruling of the
CTA Division and denied Sitel's entire refund claim on the ground of prematurity. Sitel
moved for reconsideration, but the same was denied by the Court En Banc for lack of
merit. Hence, the instant petition raising the following issues:

ISSUE: Whether or not petitioner is entitled to a refund or tax credit of its unutilized
input vat arising from purchases of goods and services attributable to zero-rated sales
and purchases/importations of capital goods for the 1st, to 4th quarters of taxable year
2004.

RULING: SC ruled: "In order that a foreign corporation may be regarded as doing
business within a State, there must be continuity of conduct and intention to establish a
continuous business, such as the appointment of a local agent, and not one of a
temporary character."

A taxpayer claiming a tax credit or refund has the burden of proof to establish the
factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly
against the taxpayer.

In the same vein, Sitel fell short of proving that the recipients of its call services were
foreign corporations doing business outside the Philippines.
Thus, the Court finds no reason to reverse the ruling of the CTA Division denying the
refund of P7,170,276.02, allegedly representing Sitel's input VAT attributable to zero-
rated sales.

5. Commissioner of Internal Revenue v. St. Luke’s Medical Center, Inc. (817 SCRA
347)

FACTS: On December 14, 2007, respondent St. Luke’s Medical Center, Inc. (SLMC)
received from the Bureau of Internal Revenue Audit Results/Assessment Notice
regarding a deficit income tax. On January 14, 2008, SLMC filed with petitioner
Commissioner of Internal Revenue (CIR) an administrative protest assailing the
assessments. SLMC claimed that as a non-stock, non-profit charitable and social welfare
organization under the provision of 1997 NIRC, it is exempted from paying income tax.
On 25 April 2008, SMLC received CIR's Final Decision on the Disputed Assessment
increasing the deficiency for the taxable year 2005 and 2006. SLMC filed a Petition for
Review with the CTA Division which ruled in favor of SLMC. CIR moved for
reconsideration but CTA Division denied the motion. CIR filed a Petition for Review
before the CTA En Banc which denied the said motion. Hence this instant petition.

ISSUE: WON SMLC is liable for income tax under Sec 27 (B) of the 1997 NIRC?

RULING: SLMC is liable for income tax under Section 27(B) of the 1997 NIRC insofar as
its revenues from paying patients are concerned. This section imposes a 10%
preferential tax rate on the income (1) proprietary non-profit educational institutions
and (2) proprietary non-profit hospitals. The only qualifications for hospitals are that
they must be proprietary and non-profit.

6. Commissioner of Internal Revenue v. Asalus Corporation (818 SCRA 543)

FACTS: On December 16, 2010, respondent Asalus Corporation (Asalus) received a

Notice of Informal Conference from Revenue District Office No. 47 of the Bureau of
Internal Revenue (BIR). It was in connection with the investigation conducted by
Revenue Officer Fidel M. Bañares II on the Value-Added Tax transactions of Asalus for
the taxable year 2007. Asalus filed its Letter-Reply, dated December 29, 2010,
questioning the basis of Bañares' computation for its VAT liability.

On January 10, 2011, petitioner Commissioner of Internal Revenue issued the

Preliminary Assessment Notice finding Asalus liable for deficiency VAT for 2007 in the
aggregate amount of P413,378,058.11.

On August 26, 2011, Asalus received the Formal Assessment Notice stating that it was
liable for deficiency VAT for 2007 in the total amount of P95,681,988.64, inclusive of
surcharge and interest. Consequently, it filed its protest against the FAN, dated
September 6, 2011.

On October 16, 2012, Asalus received the Final Decision on Disputed Assessment
showing VAT deficiency for 2007 in the aggregate amount of P106,761,025.17, inclusive
of surcharge and interest and P25,000.00 as compromise penalty. As a result, it filed a
petition for review before the CTA Division. In its April 2, 2014 Decision, the CTA Division
ruled that the VAT assessment issued on August 26, 2011 had prescribed and
consequently deemed invalid.

ISSUE: WHETHER OR NOT the CTA erred in the decision and that the petition be granted
in favor of the petitioner.

RULING: The statement given by the CTA were correct in a way, and it was given due
respect for they found it partly correct but, after a review of the records and applicable
laws and jurisprudence, the Court finds that the CTA erred in concluding that the
assessment against Asalus had prescribed. Internal revenue taxes shall be assessed
within three years after the last day prescribed by law for the filing of the return, or
where the return is filed beyond the period, from the day the return was actually filed.
Section 222 of the NIRC, however, provides for exceptions to the general rule. It states
that in the case of a false or fraudulent return with intent to evade tax or of failure to
file a return, the assessment may be made within ten years from the discovery of the
falsity, fraud or omission.

In the oft-cited Aznar v. CTA, the Court compared a false return to a fraudulent return in
relation to the applicable prescriptive periods for assessments, to wit:

Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not
file false and fraudulent returns with intent to evade tax, while respondent
Commissioner of Internal Revenue insists contrariwise, with respondent Court of Tax
Appeals concluding that the very "substantial under declarations of income for six
consecutive years eloquently demonstrate the falsity or fraudulence of the income tax
returns with an intent to evade the payment of tax."
WHEREFORE, petition is GRANTED. The July 30, 2015 Decision and the November 6,
2015 Resolution of the Court of Tax Appeals En Banc are REVERSED and SET ASIDE. The
case is ordered REMANDED to the Court of Tax Appeals for the determination of the
Value Added Tax liabilities of the Asalus Corporation.

7. Metropolitan Bank and Trust Company v. Commissioner of Internal Revenue

(822 SCRA 496)

FACTS: On June 5, 1997, Solidbank Corporation (Solidbank) entered into an agreement

with Luzon Hydro Corporation (LHC), whereby the former extended to the latter a
foreign currency denominated loan in the principal amount of US$123,780,000.00
(Agreement). Pursuant to the Agreement, LHC is bound to shoulder all the
corresponding internal revenue taxes required by law to be deducted or withheld on the
said loan, as well as the filing of tax returns and remittance of the taxes withheld to the
Bureau of Internal Revenue (BIR). On September 1, 2000, Metrobank acquired
Solidbank, and consequently, assumed the latter's rights and obligations under the
aforesaid Agreement.

On March 2, 2001 and October 31, 2001, LHC paid Metro bank the total amounts of
US$1,538,122.17 and US$1,333,268.31, respectively. Pursuant to the Agreement, LHC
withheld, and eventually paid to the BIR, the ten percent (10%) final tax on the interest
portions of the aforesaid payments, on the same months that the respective payments
were made to petitioner. In sum, LHC remitted a total ofUS$106,178.69, or its Philippine
Peso equivalent of ₱5,296,773.05, as evidenced by LHC's Schedules of Final Tax and
Monthly Remittance Returns for the said months.

According to Metrobank, it mistakenly remitted the aforesaid amounts to the BIR as well
when they were inadvertently included in its own Monthly Remittance Returns of Final
Income Taxes Withheld for the months of March 2001 and October 2001. Thus, on
December 27, 2002, it filed a letter to the BIR requesting for the refund thereof.
Thereafter and in view of respondent the Commissioner of Internal Revenue's (CIR)
inaction, Metrobank filed its judicial claim for refund via a petition for review filed
before the CTA on September 10, 2003.
In defense, the CIR averred that: Metro bank must prove that there was double
payment of the tax sought to be refunded.

The CTA Division also denied Metrobank's claim for refund relative to the October 2001
tax payment for insufficiency of evidence.

The CTA En Banc affirmed the CTA Division's ruling. It held that since Metrobank's March
2001 final tax is in the nature of a final withholding tax, the two (2)-year prescriptive
period was correctly reckoned by the CTA Division from the time the same was paid on
April 25, 2001. As such, Metro bank's claim for refund had already prescribed as it only
filed its judicial claim on September 10, 2003.

ISSUE: Whether or not the CTA En Banc correctly held that Metrobank's claim for refund
relative to its March 2001 final tax had already prescribed.

RULING: In this relation, Section 229 of the same Code provides for the proper
procedure in order to claim for such refunds, to wit:

Section 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding

shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim for refund or credit
has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or
duress.

No such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may
arise after payment.
Metrobank insists that the filing of its administrative and judicial claims on December
27, 2002 and September 10, 2003, respectively, were well-within the two (2)-year
prescriptive period.

WHEREFORE, the petition is DENIED. The Decision of the Court of Tax Appeals En Banc
in C.T.A. EB No. 340 is hereby AFFIRMED.

8. Marubeni Philippines Corporation v. Commissioner of Internal Revenue (825

SCRA 401)

FACTS: Petitioner Marubeni s a foreign corporation duly organized under the existing
laws of Japan and duly licensed to engage in business under Philippine laws. Marubeni
of Japan has equity investments in Atlantic Gulf& Pacific Co. of Manila. AG&P declared
and directly remitted the cash dividends to Marubeni’s head office in Tokyo net of the
final dividend tax and withholding profit remittance tax.
Thereafter, Marubeni, through SGV, sought a ruling from the BIR on whether or not the
dividends it received from AG&P are effectively connected with its business in the
Philippines as to be considered branch profits subject to profit remittance tax. The
Acting Commissioner ruled that the dividends received by Marubeni are not income
from the business activity in which it is engaged. Thus, the dividend if remitted abroad
are not considered branch profits subject to profit remittance tax. Pursuant to such
ruling, petitioner filed a claim for refund for the profit tax remittance erroneously paid
on the dividends remitted by AG&P.

Respondent Commissioner denied the claim. It ruled that since Marubeni is a non-
resident corporation not engaged in trade or business in the Philippines it shall be
subject to tax on income earned from Philippine sources at the rate of 35% of its gross
income. On the other hand, Marubeni contends that, following the principal-agent
relationship theory, Marubeni Japan is a resident foreign corporation subject only to
final taxon dividends received from a domestic corporation.

ISSUE(S): (1) Whether or not the dividends Marubeni Corporation received from Atlantic
Gulf and Pacific Co. are effectively connected with its conduct or business in the
Philippines as to be considered branch profits subject to 15% profit remittance tax
imposed under Section 24(b)(2) of the National Internal Revenue Code.

(2) Whether Marubeni Corporation is a resident or non-resident foreign corporation.

(3) At what rate should Marubeni be taxed.

RULING:

(1) No. Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits
remitted abroad by a branch office to its head office which are effectively
connected with its trade or business in the Philippines are subject to the 15%
profit remittance tax. The dividends received by Marubeni Corporation from
Atlantic Gulf and Pacific Co. are not income arising from the business activity in
which Marubeni Corporation is engaged. Accordingly, said dividends if remitted
abroad are not considered branch profits for purposes of the 15% profit
remittance tax imposed by Section24(b)(2) of the Tax Code, as amended.

(2) No. The general rule is a foreign corporation is the same juridical entity as its
branch office in the Philippines. The rule is based on the premise that the
business of the foreign corporation is conducted through its branch office,
following the principal-agent relationship theory. It is understood that the
branch becomes its agent. However, when the foreign corporation transacts
business in the Philippines independently of its branch the principal-agent
relationship is set aside. The transaction becomes one of the foreign corporation,
not of the branch. Consequently, the taxpayer is the foreign corporation, not the
branch or the resident foreign corporation. Thus, the alleged overpaid taxes
were incurred for the remittance of dividend income to the head office in Japan
which is considered as a separate and distinct income taxpayer from the branch
in the Philippines.
(3) 15%. The applicable provision of the Tax Code is Section24(b)(1)(iii) in
conjunction with the Philippine-Japan Tax Treaty of1980. As a general rule, it is
taxed 35% of its gross income from all sources within the Philippines. However, a
discounted rate of 15%is given to Marubeni Corporation on dividends received
from Atlantic Gulf and Pacific Co. on the condition that Japan, its domicile state,
extends in favour of Marubeni Corporation a tax credit of not less than 20% of
the dividends received. This 15% tax rate imposed on the dividends received
under Section 24(b)(1)(iii) is easily within the maximum ceiling of 25% of the
gross amount of the dividends as decreed in Article 10(2)(b) of the Tax Treaty.