Case Digest (G.R. No. 206789) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Marubeni Corporation v. Commissioner of Internal Revenue, petitioner Marubeni Corporation, a foreign corporation organized under Japanese laws and licensed to operate in the Philippines through its Intramuros branch, invested in Atlantic Gulf & Pacific Co. of Manila (AG&P). For the first and third quarters of 1981, AG&P declared cash dividends of ₱849,720.00 each to Marubeni’s head office in Tokyo, withheld 10% final dividend tax (₱169,944.00 total) and, on the remaining net amount, 15% branch profit remittance tax (₱229,424.40 total), remitting a net ₱1,300,071.60. On January 29, 1981, petitioner sought a BIR ruling whether these dividends were “branch profits” subject to the 15% tax. BIR ruled they were not effectively connected and hence not taxable under Section 24(b)(2) of the NIRC of 1977. Thereupon, on September 24, 1981, Marubeni claimed refund or tax credit of the ₱229,424.40 erroneously withheld. The Commissioner denied the claim on June 14, 1982, invoking the Phili Case Digest (G.R. No. 206789) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Corporate Structure
- Petitioner Marubeni Corporation: a foreign corporation organized under Japanese laws, licensed to do business in the Philippines through a branch office in Manila.
- Atlantic Gulf and Pacific Co. of Manila (AG&P): a domestic corporation in which Marubeni holds equity shares and from which it received dividends.
- Dividend Declarations and Withholdings
- AG&P declared cash dividends of ₱849,720 for the first quarter (March 31, 1981) and the third quarter (September 30, 1981), withholding the 10% final dividend tax (₱84,972 each).
- On the net dividend (₱764,748 each), AG&P withheld the 15% branch profit remittance tax (₱114,712.20 each), remitting net amounts of ₱650,035.80 per quarter to Marubeni’s head office in Tokyo.
- Tax Payments and Documentation
- AG&P paid both the 10% dividend tax and the 15% branch profit remittance tax for the first quarter on April 20, 1981 (Central Bank Receipt No. 6757880) and for the third quarter on August 4, 1981 (No. 7905930).
- Total branch profit remittance tax paid amounted to ₱229,424.40 for both quarters.
- Administrative Ruling and Refund Claim
- On January 29, 1981, petitioner sought a BIR ruling on whether the dividends were “effectively connected” with its Philippine business; the BIR ruled they were not, and thus subject to branch profit tax if remitted.
- Petitioner filed a claim on September 24, 1981 for refund or tax credit of ₱229,424.40, representing the branch profit remittance taxes allegedly erroneously paid.
- Denial and Court Proceedings
- The Commissioner of Internal Revenue denied the claim on June 14, 1982, asserting dividends paid to a non-resident are taxed at 25% under Article 10(2)(b) of the Philippines–Japan Tax Treaty.
- The Court of Tax Appeals affirmed that denial on February 12, 1986, ruling the dividends were income of Marubeni Japan, a non-resident, and taxable at 25%.
- Petitioner appealed to the Supreme Court, challenging (a) its tax classification, (b) the aggregation of taxes to reach 25%, (c) treaty interpretation, and (d) the timeliness of appeal under R.A. 1125.
Issues:
- Whether the dividends are “effectively connected” with Marubeni’s Philippine business for branch profit tax under Section 24(b)(2) of the Tax Code.
- Whether Marubeni Japan is a resident or non-resident foreign corporation under Philippine law for dividend taxation.
- Whether the correct tax rate is 15% under Section 24(b)(1)(iii) or 25% under Article 10(2)(b) of the Philippines–Japan Tax Treaty.
- Whether petitioner has overpaid taxes and is entitled to a refund, and the correct computation of any overpayment.
- Whether the petition for review was timely filed under the appeal period prescribed by R.A. 1125.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)