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  • Deutsche Bank Ag Manila Branch v. Commissioner of Internal Revenue

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    Soraya UNOS
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    This case involved Deutsche Bank AG Manila Branch seeking a refund of PHP 22 million in branch profit remittance tax paid for 2002 and prior years, claiming they were entitled to a preferential 10% tax rate under the RP-Germany Tax Treaty. The Court of Tax Appeals denied the refund claim, ruling the bank needed to first invoke the tax treaty provisions. The Supreme Court ruled that failure to strictly comply with an administrative issuance requiring prior application for tax treaty relief should not deprive taxpayers of the benefits they are entitled to under a tax treaty. Compliance with tax treaties takes precedence over administrative procedures. While noncompliance has implications, entitlement to treaty benefits cannot be denied entirely for such failure.

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    DEUTSCHE BANK AG MANILA BRANCH V. COMMISSIONER OF INTERNAL REVENUE

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    This case involved Deutsche Bank AG Manila Branch seeking a refund of PHP 22 million in branch profit remittance tax paid for 2002 and prior years, claiming they were entitled to a preferential 10% tax rate under the RP-Germany Tax Treaty. The Court of Tax Appeals denied the refund claim, ruling the bank needed to first invoke the tax treaty provisions. The Supreme Court ruled that failure to strictly comply with an administrative issuance requiring prior application for tax treaty relief should not deprive taxpayers of the benefits they are entitled to under a tax treaty. Compliance with tax treaties takes precedence over administrative procedures. While noncompliance has implications, entitlement to treaty benefits cannot be denied entirely for such failure.

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    © All Rights Reserved
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    3 views2 pages

    Deutsche Bank Ag Manila Branch v. Commissioner of Internal Revenue

    Uploaded by

    Soraya UNOS
    This case involved Deutsche Bank AG Manila Branch seeking a refund of PHP 22 million in branch profit remittance tax paid for 2002 and prior years, claiming they were entitled to a preferential 10% tax rate under the RP-Germany Tax Treaty. The Court of Tax Appeals denied the refund claim, ruling the bank needed to first invoke the tax treaty provisions. The Supreme Court ruled that failure to strictly comply with an administrative issuance requiring prior application for tax treaty relief should not deprive taxpayers of the benefits they are entitled to under a tax treaty. Compliance with tax treaties takes precedence over administrative procedures. While noncompliance has implications, entitlement to treaty benefits cannot be denied entirely for such failure.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    UNOS, Soraya E.

    I – Arellano
    Constitutional Law 1
    DEUTSCHE BANK AG MANILA BRANCH V. COMMISSIONER OF INTERNAL
    REVENUE
    GR NO. 188550; August 19, 2013
    Ponente: Sereno

    Facts:

    Petitioner Deutsche Bank AG Manila Branch withheld and remitted to the respondent the
    amount of PHP 67 million which represented the 15% branch profit remittance tax (BPRT) of its
    regular banking unit net income remitted to Deutsche Bank Germany for 2002 and prior taxable
    years.

    Believing that there was an overpayment of the BPRT, petitioner filed with the BIR an
    administrative claim for refund or issuance of its tax credit certificate in the amount of PHP 22
    million. Petitioner also requested from the International Tax Affairs Division (ITAD) a
    confirmation of its entitlement to the 10% preferential tax rate under the RP-Germany Tax
    Treaty.

    As the BIR failed to act on petitioner’s administrative claim, petitioner filed a petition for
    review before the Court of Tax Appeals (CTA) reiterating its claim for refund. The CTA denied
    petitioner’s claim for refund on the ground that before the benefits of the tax treaty may be
    extended to a foreign corporation wishing to avail itself thereof, the latter should first invoke the
    provisions of the tax treaty and prove that they indeed apply to the corporation. This ruling was
    affirmed by the CTA en banc.

    Issue:
    Whether the failure to strictly comply with RMO No. 1-2000 will deprive persons or
    corporations of the benefit of a tax treaty

    Ruling:
    Bearing in mind the rationale of tax treaties, the period of application for the availment of
    tax treaty relief as required by RMO No. 1-2000 should not operate to divest entitlement to the
    relief as it would constitute a violation of the duty required by good faith in complying with a tax
    treaty. The denial of the availment of tax relief for the failure of a taxpayer to apply within the
    prescribed period under the administrative issuance would impair the value of the tax treaty. At
    most, the application for a tax treaty relief from the BIR should merely operate to confirm the
    entitlement of the taxpayer to the relief.

    The obligation to comply with a tax treaty must take precedence over the objective of
    RMO No. 1-2000. Logically, noncompliance with tax treaties has negative implications on
    UNOS, Soraya E.
    I – Arellano
    Constitutional Law 1
    international relations, and unduly discourages foreign investors. While the consequences sought
    to be prevented by RMO No. 1-2000 involve an administrative procedure, these may be
    remedied through other system management processes, e.g., the imposition of a fine or penalty.
    But the Court cannot totally deprive those who are entitled to the benefit of a treaty for failure to
    strictly comply with an administrative issuance requiring prior application for tax treaty relief.

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