G.R. No. 180740 - Commissioner of Internal Revenue vs. San Miguel Corp.

Petitioner First Lepanto Taisho Insurance Corporation (now FLT Prime Insurance Corporation) is a non-life insurance company classified as a Large Taxpayer under Revenue Regulations (RR) No. 6-85, as amended by RR No. 12-94.
Respondent is the Commissioner of Internal Revenue (CIR).

Petitioner filed its 1997 corporate income tax return; on October 30, 1998, the CIR issued a Letter of Authority to audit petitioner’s 1997 and prior unverified years.
On December 29, 1999, the CIR issued deficiency assessments for 1997 income tax, withholding tax on compensation, expanded withholding tax, final withholding tax, value-added tax, and documentary stamp tax. Petitioner protested on February 24, 2000.

On February 15, 2008, petitioner moved to partially withdraw its petition for review of certain assessments in view of availed tax amnesty; the CTA Second Division granted the motion on March 31, 2008.
On May 21, 2009, the CTA Second Division partially granted the remaining petition, ordering payment of a reduced liability of ₱1,994,390.86, broken down as:

Petitioner elevated the case to the CTA En Banc. On March 1, 2011, the En Banc affirmed the Second Division’s decision in full.
Petitioner argued that:

Directors’ bonuses (₱500,000) were not subject to withholding tax on compensation because directors are not employees and bonuses were already subjected to expanded withholding tax.
Transportation, subsistence, lodging, and representation expenses were reimbursements and thus exempt from withholding.
Commissions (₱905,428.36), direct loss expense, occupancy cost, and service/contractor and purchase expenses were improperly assessed.
Final withholding tax on dividends and computerization payments to a foreign entity lacked proof of remittance.

Petitioner filed a petition for review on certiorari under Rule 45, assailing the CTA En Banc’s March 1, 2011 Decision and May 27, 2011 Resolution.
The Supreme Court resolved to deny the petition and affirm the CTA En Banc decisions.

Whether directors’ bonuses are subject to withholding tax on compensation.
Whether expenses for transportation, subsistence and lodging, representation, commissions, direct loss, occupancy cost, and service/contractors and purchases are properly subject to expanded withholding tax.
Whether payments of dividends and computerization expenses to foreign entities are properly subject to final withholding tax.
Whether delinquency interest under Section 249(c)(3) of the 1997 NIRC was correctly imposed.