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    Deutsche Bank AG Manila Branch v. CIR

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    Donna Dumaliang
    The Supreme Court held that Deutsche Bank is entitled to a tax refund of PHP 22,562,851.17 representing overpayment of branch profit remittance tax (BPRT) for 2002 and prior years. While Deutsche Bank did not comply with the 15-day period under Revenue Memorandum Order No. 1-2000 to apply for a tax treaty ruling, the Court found that treaties have the force of law and must take precedence. The Court also held that the minute resolution in Mirant v. CIR, which the CTA relied on, is not binding precedent. Deutsche Bank substantially complied with the requirements and is covered by the preferential 10% BPRT rate under the Philippines-Germany Tax Treaty.

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    Deutsche Bank AG Manila Branch v. CIR

    Uploaded by

    Donna Dumaliang
    777 views3 pages
    The Supreme Court held that Deutsche Bank is entitled to a tax refund of PHP 22,562,851.17 representing overpayment of branch profit remittance tax (BPRT) for 2002 and prior years. While Deutsche Bank did not comply with the 15-day period under Revenue Memorandum Order No. 1-2000 to apply for a tax treaty ruling, the Court found that treaties have the force of law and must take precedence. The Court also held that the minute resolution in Mirant v. CIR, which the CTA relied on, is not binding precedent. Deutsche Bank substantially complied with the requirements and is covered by the preferential 10% BPRT rate under the Philippines-Germany Tax Treaty.

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    The Supreme Court held that Deutsche Bank is entitled to a tax refund of PHP 22,562,851.17 representing overpayment of branch profit remittance tax (BPRT) for 2002 and prior years. While Deutsche Bank did not comply with the 15-day period under Revenue Memorandum Order No. 1-2000 to apply for a tax treaty ruling, the Court found that treaties have the force of law and must take precedence. The Court also held that the minute resolution in Mirant v. CIR, which the CTA relied on, is not binding precedent. Deutsche Bank substantially complied with the requirements and is covered by the preferential 10% BPRT rate under the Philippines-Germany Tax Treaty.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    777 views3 pages

    Deutsche Bank AG Manila Branch v. CIR

    Uploaded by

    Donna Dumaliang
    The Supreme Court held that Deutsche Bank is entitled to a tax refund of PHP 22,562,851.17 representing overpayment of branch profit remittance tax (BPRT) for 2002 and prior years. While Deutsche Bank did not comply with the 15-day period under Revenue Memorandum Order No. 1-2000 to apply for a tax treaty ruling, the Court found that treaties have the force of law and must take precedence. The Court also held that the minute resolution in Mirant v. CIR, which the CTA relied on, is not binding precedent. Deutsche Bank substantially complied with the requirements and is covered by the preferential 10% BPRT rate under the Philippines-Germany Tax Treaty.

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    of 3

    Deutsche Bank AG Manila Branch v.

    CIR
    August 19, 2013
    G.R. No. 18850
    Sereno, CJ.

    Summary: Deutsche Bank applied for a tax refund on the ground that it mistakenly paid the wrong branch profit
    remittance tax rate of 15%. It claimed that it is covered by the preferential tax rate of 10% under the RP-Germany
    Tax Treaty. The CTA held that petitioner is not entitled to the tax refund because it did not comply with the 15-day
    mandatory period of application with the ITAD which was held in Mirant v. CIR to be mandatory. The SC held that
    Deutsche Bank is entitled to the tax refund. We are bound to comply with the treaty because of pacta sunt
    servanda. More importantly, Mirant v. CIR does not create a binding precedent because it is just a minute
    resolution, not a decision of the SC. (Please see ratio for the distinctions between decisions and minute
    resolutions.)

    Facts:
     On October 21, 2003, petitioner withheld and remitted Php67,688,553.51 to the BIR which represented
    the 15% branch profit remittance tax (BPRT) mandated by Section 28(A)(5) of the NIRC.
     Believing that it made an overpayment, petitioner filed a claim for refund or issuance of a tax credit
    certificate on October 4, 2005 for the amount of Php22,562,851.17. It based its claim on the RP-Germany
    Tax Treaty which provided for a lower 10% preferential tax rate. On the same day, it requested a ruling
    from the International Tax Affairs Division (ITAD) of the BIR for the confirmation of its entitlement to the
    preferential treatment.
     On October 18, 2005, petitioner filed a petition for review with the CTA alleging inaction on the part of
    the BIR for its administrative claim.
     The CTA Second Division found that petitioner had indeed paid amounts representing 15% of the BPRT for
    2002 and previous years. The claim for refund was however denied on the ground that the ITAD ruling
    was not requested for and given prior to its availment of the preferential tax rate.
     The CTA 2nd Division held that petitioner violated the 15-day mandatory period required under RMO No.
    1-2000. The CTA 2nd Division also relied on Mirant v. CIR where the CTA en banc ruled that before the
    benefits of a tax treaty may be extended to a foreign corporation, it should first invoke the provisions of
    the tax treaty and prove that they indeed apply to the corporation.
    o Mirant v. CIR was affirmed by a minute resolution of the Supreme Court.
     The CTA en banc affirmed the ruling of the CTA 2nd Division. It also relied on the said case of Mirant v. CIR.

    Issue: Whether or not the failure to strictly comply with RMO No. 1-2000 will deprive persons or corporations of
    the benefit of a tax treaty. - NO

    Held: WHEREFORE, premises considered, the instant Petition is GRANTED. Accordingly, the Court of Tax Appeals En
    Banc Decision dated 29 May 2009 and Resolution dated 1 July 2009 are REVERSED and SET ASIDE. A new one is
    hereby entered ordering respondent Commissioner of Internal Revenue to refund or issue a tax credit certificate in
    favor of petitioner Deutsche Bank AG Manila Branch the amount of TWENTY TWO MILLION FIVE HUNDRED SIXTY
    TWO THOUSAND EIGHT HUNDRED FIFTY ONE PESOS AND SEVENTEEN CENTAVOS (PHP 22,562,851.17), Philippine
    currency, representing the erroneously paid BPRT for 2002 and prior taxable years.
    SO ORDERED.

    Ratio:
    CONTENTS OF THE RP-GERMANY TAX TREATY
     Paragraph 6, Article 10 of the RP-Germany Tax Treaty provides that where a resident of the Federal
    Republic of Germany has a branch in the Philippines, this branch may be subjected to the BPRT in
    accordance with Philippine law but shall not exceed 10% of the gross amount of the profits remitted to
    the head office.
    [DOCTRINE] A MINUTE RESOLUTION IS NOT A BINDING PRECEDENT
     The minute resolution in Mirant v. CIR is not a binding precedent.
     As held in Philippine Health Care Providers v. CIR, the effect of a minute resolution to the case is that it
    constitutes res judicata. When a minute resolution denies or dismisses a petition for failure to comply
    with formal and substantive requirements, the challenged decision, together with its findings of fact and
    legal conclusions are deemed sustained. However, if other parties or another subject matter is involved,
    the minute resolution is not a binding precedent.
     [DOCTRINE] There are substantial, not simply formal, distinctions between a minute resolution and a
    decision. The constitutional requirement under the first paragraph of Section 14, Article VIII of the
    Constitution that the facts and the law on which the judgment is based must be expressed clearly and
    distinctly applies only to decisions, not to minute resolutions.
    o A minute resolution is signed only by the clerk of court by authority of the justices, unlike a
    decision. It does not require the certification of the Chief Justice.
    o Moreover, unlike decisions, minute resolutions are not published in the Philippine Reports.
    o Finally, the proviso of Section 4(3) of Article VIII speaks of a decision.
    Indeed, as a rule, this Court lays down doctrines or principles of law which constitute binding
    precedent in a decision duly signed by the members of the Court and certified by the Chief
    Justice.
    TAX TREATY V. RMO NO. 1-2000
     Pacta sunt servanda demands the performance in good faith of treaty obligation on the part of the states
    that enter into the agreement. Treaties have the force and effect of law in this jurisdiction.
     Tax treaties are entered into to eliminate international juridical double taxation which is defined as the
    imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject
    matter and for identical periods. The rationale for doing away with double taxation is to promote the free
    flow of goods and services.
     Laws and issuances must ensure that the reliefs granted under tax treaties are accorded to the parties
    entitled to it. The BIR must not impose additional requirements which would negate the application of
    such treaties. More importantly, the RP-Germany Tax Treaty does not provide for any prerequisite for the
    availment of the benefits under it.
     There is nothing in RMO No. 1-2000 which would indicate a deprivation to a tax treaty relief for failure to
    comply with the 15-day period. The CTA’s outright denial of a tax treaty relief for failure to comply with
    the period is not in harmony with the objectives of the treaty.
     The denial of the availment of tax relief for failure to comply with the period would impair the value of
    the tax treaty.
     The obligation to comply with a tax treaty must take precedence over the objective of RMO No. 1-2000.
    PRIOR APPLICATION V. CLAIM FOR REFUND
     RMO No. 1-2000 was implemented to obviate any erroneous interpretation or application of the
    provisions of the tax treaty. However, noncompliance with the period for prior application should not
    operate to automatically divest entitled to the tax treaty relief.
     Petitioner should not be faulted for not complying with RMO No. 1-2000 prior to the transaction. It could
    not have applied for a tax treaty relief within the period prescribed, or 15 days prior to the payment of its
    BPRT, precisely because it erroneously paid the BPRT not on the basis of the preferential tax rate under
    the tax treaty, but on the regular rate as prescribed by the NIRC. Hence, prior application requirement
    becomes illogical. (verbatim yan ah)
     The fact that petitioner invoked the provisions of the tax treaty should be deemed substantial compliance
    with the RMO.
     The outright denial of the on the sole ground of noncompliance with the RMO would defeat the purpose
    of Section 229 of the NIRC which provides reliefs for refunds.
    PETITIONER IS ENTITLED TO A REFUND
     There was substantial compliance with the RMO.
     The CTA Second Division also found that petitioner indeed paid 15% remittance tax even if it was only
    required to pay 10% because it enjoys the benefits of the tax treaty.
     Petitioner is therefore entitled to a refund.

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