Month: September 2020

The CTA En Banc affirmed the decision of the CTA Division declaring the assessment void, cancelled and withdrawn.

Under the rules, a Memorandum of Assignment (MOA) may be construed as equivalent to new letter of authority where the authority of a newly designated revenue officer emanates from, provided that it contains all the necessary elements to establish a contract of agency between the CIR or his duly authorized representative and the new revenue officer.

The Revenue Regional Director (RRD) is authorized to issue an LOA. The position equivalent to a RRD for the Large Taxpayers Division, who is authorized to issue the LOA, is the Assistant Commissioner or Head Revenue Executive Assistants (HREA)

• In the instant case, only the OIC-Chief signed the MOA. He is neither the CIR, RRD nor HREA. Thus the MOA is void and the resulting assessment is also void.
• Jurisprudence has ruled that PAGCOR’s licensees and contractees, such as the taxpayer in this case,  are exempt from income tax on their gaming revenues.
• Therefore, the assessment was declared void, cancelled and withdrawn (CIR v. Travellers International Hotel Group, Inc., CTA EB No. 2047, CTA Case No. 9168, July 17, 2020).

The CTA En Banc affirmed the CTA Division’s decision denying the claim of refund of income tax paid by the ADB employees.

Pursuant to the 1965 ADB Charter Agreement, salaries of ADB employees are not subject to tax. However, when the Philippine government ratified the Agreement, it provided for a reservation that it retains the right to tax salaries and emoluments paid by the bank to the Filipino citizens. The BIR issued RMC No. 31-2013 which implements the foregoing rule, which took effect on May 2, 2013.

• The rules should operate prospectively. Since the tax payments being sought to be refunded pertain to taxable year 2013 and BIR’s RMC took effect on May 2, 2013, the income earned are subject to income tax.
• Thus, the taxpayer’s claim for refund was denied (Canzon et. al., v. CIR, CTA EB No 2040, CTA Case No. 9384, July 16, 2020).

The BIR partially granted the taxpayer’s refund of erroneously paid tax from P3.9M to P3.4M arising from overpaid percentage taxes.

The following are the requirements in order to prove a claim for refund of taxes erroneously paid or illegally collected.

• The taxpayer should file a written claim for refund with the BIR within 2 years from the date of payment of tax or penalty;
• If denied or not acted upon within the 2-year period, the petition for refund should be filed with the CTA within 30 days from receipt of the denial AND within said 2-year period from the date of payment of tax or penalty regardless of any supervening clause
• The claim for refund must be a categorical demand for reimbursement; and
• There must be proof of payment of erroneously or illegally collected taxes.

In this case, the taxpayer was able to prove the foregoing requirements.The taxpayer is a non-bank financial intermediary subject to 5% percentage tax on its gross receipts (Gross receipt tax or GRT). Under the rules, GRT shall only apply to income actually or constructively received during a taxable period, and the claim of refund is based on error of computation in computation of gross receipts.

• The Court confirmed that the tax base for GRT purposes should be the income actually or constructively received. Considering that the income subjected to GRT was on accrual basis, the taxpayer erroneously computed its GRT (Aeon Credit Service (Philippines), Inc.  v. CIR, CTA Case No. 9770, July 15, 2020).