Case Summary (G.R. No. 188550)
Parties and Background
Deutsche Bank AG Manila Branch (“petitioner”) withheld and remitted ₱67,688,553.51 as 15% branch profit remittance tax (BPRT) on net income repatriated to its head office in Germany for 2002 and prior years, pursuant to Section 28(A)(5) of the National Internal Revenue Code (NIRC) of 1997. Believing it overpaid, petitioner sought a refund of ₱22,562,851.17 and confirmation of a preferential 10% rate under the Philippines–Germany Tax Treaty from the BIR’s International Tax Affairs Division (ITAD). Alleging BIR inaction, petitioner filed a petition with the Court of Tax Appeals (CTA) on October 18, 2005.
Key Dates
• October 21, 2003: Payment of 15% BPRT (₱67,688,553.51)
• October 29, 2003: Remittance of net profits (EUR 5,174,847.38)
• October 4, 2005: Administrative refund claim and treaty‐rate confirmation request
• October 18, 2005: Petition for review before CTA
• May 29, 2009: CTA En Banc Decision
• July 1, 2009: CTA En Banc Resolution
• May 5, 2014: Supreme Court Decision
Applicable Law
• NIRC § 28(A)(5) – Fifteen-percent BPRT on branch profits
• Philippines–Germany Tax Treaty, Art. 10(6) – Cap BPRT at 10%
• RMO No. 1-2000, Sec. III(2) – Prior application for treaty relief at least 15 days before transaction
• NIRC § 229 – Two-year prescriptive period for refund claims
• 1987 Constitution, Art. II § 2 – Treaties as the law of the land
CTA Second Division Ruling
The CTA Second Division found petitioner paid the 15% BPRT and remitted branch profits net of tax. It denied the refund because petitioner failed to apply for treaty relief with ITAD at least 15 days before payment, in violation of RMO No. 1-2000. It invoked Mirant, holding that treaty benefits require prior ITAD ruling.
CTA En Banc Ruling
Affirming the Second Division, the CTA En Banc applied stare decisis, treating minute resolutions in Mirant as binding. It refused to relax the 15-day rule and denied petitioner’s refund claim solely for noncompliance with RMO No. 1-2000.
Issue Presented
Whether strict compliance with RMO No. 1-2000’s 15-day prior‐application rule can deny a taxpayer the substantive benefit of a tax treaty.
Supreme Court’s Analysis – Binding Effect of Minute Resolutions
The Court held that minute resolutions, unlike full decisions, do not constitute binding precedent beyond the same parties and identical subject matter. Mirant’s minute resolution is not binding here due to different parties, treaties, and taxable years, and because it lacked the formal requisites of a decision under Article VIII § 14(1) of the Constitution.
Supreme Court’s Analysis – Supremacy of Tax Treaty over RMO No. 1-2000
Under the 1987 Constitution, treaties are the law of the land (Art. 2 § 2) and bind the State under the principle of pacta sunt servanda. Tax treaties aim to eliminate double taxation and encourage investment. An administrative issuance cannot impose additional conditions that negate treaty relief. RMO No. 1-2000 did not expressly deprive entitled taxpayers of treaty benefits for late application; its 15-day rule is procedural and mu
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Facts
- Under Section 28(A)(5) of the 1997 NIRC, Deutsche Bank AG Manila Branch (petitioner) withheld and remitted ₱67,688,553.51 on 21 October 2003, representing the 15% Branch Profit Remittance Tax (BPRT) on net income remitted to its head office in Germany for 2002 and prior years.
- Believing it overpaid, petitioner filed on 4 October 2005 an administrative claim for refund or issuance of a tax credit certificate in the amount of ₱22,562,851.17.
- On the same date, petitioner requested from the BIR’s International Tax Affairs Division (ITAD) confirmation of entitlement to the 10% preferential rate under the RP-Germany Tax Treaty.
- Alleging BIR inaction on its claim, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) on 18 October 2005, reiterating its refund claim of ₱22,562,851.17.
CTA Second Division Ruling
- Confirmed petitioner paid ₱67,688,553.51 as 15% BPRT on RBU profits totaling ₱451,257,023.29 for 2002 and prior years.
- Noted that in 2003 petitioner remitted €5,174,847.38 (₱330,175,961.88 at ₱63.804/EUR), net of the 15% BPRT.
- Denied the refund claim on the ground that petitioner failed to file its tax treaty relief application with ITAD at least 15 days prior to payment, in violation of Section III(2) of RMO No. 1-2000.
- Relied on Mirant (Philippines) Operations Corp. v. CIR, holding that invocation of tr