TAXATION BATCH 5: FRINGE BENEFITS TAX

interpreted to constitute an exception to the general law in the absence of

FRINGE BENEFITS TAX special circumstances warranting a contrary conclusion. R.A. No. 7716, a
general law, did not provide for the express repeal of PAGCOR’s Charter,
G.R. No. 177387. November 9, 2016.* which is a special law; hence, the general repealing clause under Section 20
of R.A. No. 7716 must pertain only to franchises of electric, gas, and water
COMMISSIONER OF INTERNAL REVENUE, utilities, while the term other franchises in Section 102 of the NIRC should
petitioner, vs. SECRETARY OF JUSTICE, and PHILIPPINE refer only to transport, communications and utilities, exclusive of
AMUSEMENT AND GAMING CORPORATION, respondents. PAGCOR’s casino operations.

Judicial Interpretation; While a judicial interpretation becomes a part Philippine Amusement and Gaming Corporation; Republic Act (RA)
of the law as of the date that the law was originally passed, the reversal of No. 7716 indicates that Congress has not intended to repeal Philippine
the interpretation cannot be given retroactive effect to the prejudice of Amusement and Gaming Corporation’s (PAGCOR’s) privilege to enjoy the
parties who may have relied on the first interpretation.—The Secretary of five percent (5%) franchise tax in lieu of all other taxes.—R.A. No. 7716
Justice should not be taken to task for initially entertaining the petitions indicates that Congress has not intended to repeal PAGCOR’s privilege to
considering that the prevailing interpretation of the law on jurisdiction at the enjoy the 5% franchise tax in lieu of all other taxes. A contrary construction
time of their filing was that he had jurisdiction. Neither should PAGCOR to would be unwarranted and myopic nitpicking.
blame in bringing its appeal to the DOJ on January 5, 2004 and August 4,
2004 because the prevailing rule then was the interpretation in Development Same; Value-Added Tax; Republic Act (RA) No. 7716 does not
Bank of the Philippines v. Court of Appeals, 180 SCRA 609 (1989). The specifically exclude Philippine Amusement and Gaming Corporation’s
emergence of the later ruling was beyond PAGCOR’s control. Accordingly, (PAGCOR’s) exemption under Presidential Decree (PD) No. 1869 from the
the lapse of the period within which to appeal the disputed assessments to the grant of exemptions from value-added tax (VAT).—Unlike the case of PAL,
CTA could not be taken against PAGCOR. While a judicial interpretation however, R.A. No. 7716 does not specifically exclude PAGCOR’s
becomes a part of the law as of the date that the law was originally passed, exemption under P.D. No. 1869 from the grant of exemptions from VAT;
the reversal of the interpretation cannot be given retroactive effect to the hence, the petitioner’s contention that R.A. No. 7716 expressly amended
prejudice of parties who may have relied on the first interpretation. PAGCOR’s franchise has no leg to stand on.

Jurisdiction; On previous occasions, the Court has overruled the Same; Same; Philippine Amusement and Gaming Corporation’s
defense of jurisdiction in the interest of public welfare and for the (PAGCOR’s) exemption from value-added tax (VAT), whether under
advancement of public policy whenever an extraordinary situation existed.— Republic Act (RA) No. 7716 or its amendments, has been settled.—
To dismiss the petitions in order to have PAGCOR bring a similar petition in PAGCOR’s exemption from VAT, whether under R.A. No. 7716 or its
the CTA would not serve the interest of justice. On previous occasions, the amendments, has been settled in Philippine Amusement and Gaming
Court has overruled the defense of jurisdiction in the interest of public Corporation (PAGCOR) v. The Bureau of Internal Revenue, 645 SCRA 338
welfare and for the advancement of public policy whenever, as in this case, (2011), whereby the Court, citing Commissioner of Internal Revenue v.
an extraordinary situation existed. Acesite (Philippines) Hotel Corporation, 516 SCRA 93 (2007).

Statutory Construction; A basic rule in statutory construction is that a Same; Same; The payments made by Philippine Amusement and
special law cannot be repealed or modified by a subsequently enacted Gaming Corporation (PAGCOR) to its catering service contractor are
general law in the absence of any express provision in the latter law to that subject to zero-rated (0%) value-added tax (VAT) in accordance with Section
effect.—A basic rule in statutory construction is that a special law cannot be 13(2) of Presidential Decree (PD) No. 1869 in relation to Section 3 of
repealed or modified by a subsequently enacted general law in the absence of Republic Act (RA) No. 7716.—The payments made by PAGCOR to its
any express provision in the latter law to that effect. A special law must be
1
 TAXATION BATCH 5: FRINGE BENEFITS TAX

catering service contractor are subject to zero-rated (0%) VAT in accordance Office of the Government Corporate Counsel for respondent.
with Section 13(2) of P.D. No. 1869 in relation to Section 3 of R.A. No.
7716.
BERSAMIN, J.:
Same; Taxation; To avoid the imposition of the fringe benefit tax on the
benefit received by the employee, and, consequently, to avoid the withholding Petitioner Commissioner of Internal Revenue (CIR) commenced this special
of the payment thereof by the employer, Philippine Amusement and Gaming civil action for certiorari to annul the December 22, 2006 resolution1 and the
Corporation (PAGCOR) must sufficiently establish that the fringe benefit is March 12, 2007 resolution,2 both issued by the Secretary of Justice in OSJ
required by the nature of, or is necessary to the trade, business or profession Case No. 2004-1, alleging that respondent Secretary of Justice acted without
of the employer, or when the fringe benefit is for the convenience or or in excess of his jurisdiction, or in grave abuse of discretion amounting to
advantage of the employer.—The car plan extended by PAGCOR to its lack or excess of jurisdiction.
qualified officers is evidently considered a fringe benefit as defined under
Section 33 of the NIRC. To avoid the imposition of the FBT on the benefit The dispositive portion of the assailed December 22, 2006 resolution states:
received by the employee, and, consequently, to avoid the withholding of the
payment thereof by the employer, PAGCOR must sufficiently establish that WHEREFORE, premises considered, PAGCOR is declared exempt from
the fringe benefit is required by the nature of, or is necessary to the trade, payment [oil all taxes, save for the franchise tax as provided for under
business or profession of the employer, or when the fringe benefit is for the Section 13 of PD 1869, as amended, the presidential issuance not having
convenience or advantage of the employer. been expressly repealed by RA 7716.3
Same; Philippine Amusement and Gaming Corporation’s (PAGCOR’s)
while the March 12, 2007 resolution denied the CIR’s motion for
payment to the Commission on Audit (COA) for its audit services is exempted
reconsideration of the December 22, 2006 resolution.
from withholding tax pursuant to Sec. 2.57.5(A) of Revenue Regulation (RR)
2-98.—PAGCOR’s payment to the COA for its audit services is exempted
from withholding tax pursuant to Sec. 2.57.5(A) of Revenue Regulation (RR) Antecedents
2-98.
Respondent Philippine Amusement and Gaming Corporation (PAGCOR) has
Same; It is settled that all presumptions are in favor of the correctness operated under a legislative franchise granted by Presidential Decree No.
of tax assessments. The good faith of the tax assessors and the validity of 1869 (P.O. No. 1869), its Charter,4 whose Section 13(2) provides that:
their actions are thus presumed.—It is settled that all presumptions are in
favor of the correctness of tax assessments. The good faith of the tax (2) Income and other Taxes - (a) Franchise Holder:
assessors and the validity of their actions are thus presumed. They will be
presumed to have taken into consideration all the facts to which their No tax of any kind or form, income or otherwise, as well as fees, charges
attention was called. Hence, it is incumbent upon the taxpayer to credibly or levies of whatever nature, whether National or Local, shall he
show that the assessment was erroneous in order to relieve himself from the assessed and collected under this Franchise from the Corporation; nor
liability it imposes. shall any form of tax or charge attach in any way to the earnings of the
Corporation, except a Franchise Tax of five percent (S(X1) of the gross
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari. revenue or earnings derived by the Corporation from its operation
under this Franchise. Such tax shall be due and payable quarterly to the
The facts are stated in the opinion of the Court. National Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or
The Solicitor General for petitioner.
2
 TAXATION BATCH 5: FRINGE BENEFITS TAX

collected by any municipal, provincial or national government authority. On December 18, 2002, PAGCOR filed a letter-protest with the BIR against
(bold emphasis supplied) Assessment Notice No. 33-1996/1997 /1998 and Assessment Notice No. 33-
99.8
Notwithstanding the aforesaid 5% franchise tax imposed, the Bureau of
Internal Revenue (BIR) issued several assessments against PAGCOR for On March 31, 2003, PAGCOR filed a letter-protest against Assessment
alleged deficiency value-added tax (VAT), final withholding tax on fringe Notice No. 33-2000, in which it reiterated the asse1iions made in its
benefits, and expanded withholding tax, as follows: December 18, 2002 letter-protest.9

TOTAL In reply to both letters-protest, the BIR requested PAGCOR to submit

AMOUNT additional documents to enable the conduct of the reinvestigation.10
DUE
DATE PERIOD (inclusive of The CIR did not act on PAGCOR’s letter-protest against Assessment Notice
ASSESSMENT No. 33-1996/1997 /1998 and Assessment Notice No. 33-99 within the 180-
ISSUED COVERED interest,
surcharge and day period from the latter's submission of additional documents.11 Hence,
compromise PAGCOR filed an appeal with the Secretary of Justice on January 5, 2004
penalty) relative to Assessment Notice No. 33-1996/1997 /1998 and Assessment
Notice No. 33-99.12
No. 33-
1996/1997/1998 November
1996/1997/1998 ₱4,078,476,977.26 Meanwhile, in response to PAGCOR’s letter-protest dated March 31, 2003,
(for deficiency 14, 2002 BIR Regional Director Teodorica Arcega issued a letter dated December 15,
VAT)5 2003 reiterating the assessment for deficiency VAT for taxable year
2000,13 stating thusly:
No. 33-99 (for
deficiency
VAT, final In a memorandum to the Regional Director dated December 15, 2003 the
withholding tax Chief Legal Division, this Region, confirmed the taxability of PAGCOR
November under Section 108(A) of the 1997 Tax Code, as amended, effective Jan. 1,
on fringe 1999 ₱6,678,346,966.49
25, 2002 1996 (VAT Review Committee Ruling No. 041-2001 ).
benefits, and
expanded
withholding In view of the confirmation of the Legal Division we hereby reiterate the
tax)6 assessments forwarded to your office under Final Assessment No. 33-2000
dated March 18, 2003 amounting to ₱2,097,426,943.00.
No. 33-2000
(for deficiency However, the BIR only recomputed the deficiency final withholding tax on
VAT and final March 18, fringe benefits and expanded withholding tax, and reduced the assessments to
2000 ₱2,953,321,685.92
withholding tax 2003 ₱l2,212, 199.85 and ₱6,959,525. l0, respectively.14
on fringe
benefits)7 PAGCOR elevated its protest against Assessment Notice No. 33-2000 to the
TOTAL ₱13,710,145,629.67 CIR, but the 180-day period prescribed by law also lapsed without any action
on the part of the CIR.15 Consequently, on August 4, 2004, PAGCOR

3
 TAXATION BATCH 5: FRINGE BENEFITS TAX

brought another appeal to the Secretary of Justice covering Assessment III

Notice No. 33-2000.16
RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN
The Secretary of Justice consolidated PAGCOR's two appeals. EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS
DISCRETION IN ABSOLVING PAGCOR OF ITS DUTY AND
After the parties traded pleadings, the Secretary of Justice summoned them to RESPONSIBILITY AS WITHHOLDING AGENT TO WITHHOLD AND
a preliminary conference to discuss, inter alia, any possible settlement or REMIT FRINGE BENEFITS TAX, FINAL WITHHOLDING TAX AND
compromise.17 When no amicable settlement was reached, the consolidated EXPANDED WITHHOLDING TAX.21
appeals were considered submitted for resolution.18
Otherwise put, the issues to be resolved are: (1) whether or not the Secretary
On December 22, 2006, Secretary of Justice Raul M. Gonzales rendered the of Justice has jurisdiction to review the disputed assessments; (2) whether or
first assailed resolution declaring PAGCOR exempt from the payment of all not PAGCOR is liable for the payment of VAT; and (3) whether or not P
taxes except the 5% franchise tax provided in its Charter.19 AGCOR is liable for the payment of withholding taxes.

On March 12, 2007, Secretary Gonzales issued the second assailed resolution Ruling
denying the CIR's motion for reconsideration.20
The petition for certiorari is partly granted.
Hence, this special civil action for certiorari.
1.
Issues
The Secretary of Justice has no jurisdiction to
The grounds for the petition for certiorari are as follows: review the disputed assessments

I The petitioner contends that it is the Court of Tax Appeals (CTA), not the
Secretary of Justice, that has the exclusive appellate jurisdiction in this case,
RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN pursuant to Section 7(1) of Republic Act No. 1125 (R.A. No. 1125), which
EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS grants the CTA the exclusive appellate jurisdiction to review, among others,
DISCRETION IN ASSUMING JURISDICTION OVER THE PETITION the decisions of the Commissioner of Internal Revenue "in cases involving
ON DISPUTED TAX ASSESSMENTS FILED BY RESPONDENT disputed assessments, refunds of internal revenue taxes, fees or other
PAGCOR. charges, penalties imposed in relation thereto, or other matters arising under
the National Internal Revenue Code (NIRC) or other law or part of law
II administered by the Bureau of Internal Revenue."

RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN PAGCOR counters, however, that it is the Secretary of Justice who should
EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS adjudicate the dispute by virtue of Chapter 14 of the Revised Administrative
DISCRETION IN HOLDING THAT R.A. NO. 7716 (VAT LAW) DID Code of 1987, which provides:
NOT REPEAL P.D. NO. 1869 (CHARTER OF PAGCOR); HENCE,
PAGCOR HAS NOT BECOME LIABLE FOR THE PAYMENT OF THE CHAPTER 14. CONTROVERSIES AMONG GOVERNMENT OFFICES
10% VAT IN LIEU OF THE 5% FRANCHISE TAX. AND CORPORATIONS.

4
 TAXATION BATCH 5: FRINGE BENEFITS TAX

SEC. 66. How settled. - All disputes/claims and controversies, solely Later on, the Court reversed itself in Philippine National Oil Company v.
between or among the departments, bureaus, offices, agencies and Court of Appeals,23 and held as follows:
instrumentalities of the National Government, including government-owned
and controlled corporations, such as those arising from the interpretation and Following the rule on statutory construction involving a general and a special
application of statues, contracts or agreements shall be administratively law previously discussed, then P.O. No. 242 should not affect R.A. No. 1125.
settled or adjudicated in the manner provided for in this Chapter. This R.A. No. 1125, specifically Section 7 thereof on the jurisdiction of the CTA,
Chapter shall, however, not apply to disputes involving the Congress, the constitutes an exception to P.O. No. 242. Disputes, claims and controversies,
Supreme Court, the Constitutional Commission and local governments. falling under Section 7 of R.A. No. 1125, even though solely among
government offices, agencies, and instrumentalities, including government-
SEC. 67. Disputes Involving Questions of Law. - All cases involving only owned and controlled corporations, remain in the exclusive appellate
questions of law shall be submitted to and settled or adjudicated by the jurisdiction of the CTA. Such a construction resolves the alleged
Secretary of Justice as Attorney-General of the National Government and as inconsistency or conflict between the two statutes, x x x.
ex-officio legal adviser of all government-owned or controlled corporations.
His ruling or decision thereon shall be conclusive and binding on all the Despite the shift in the construction of P.D. No. 242 in relation to R.A. No.
parties concerned. 1125, the Secretary of Justice still resolved PAGCOR's petitions on the
merits, stating that:
SEC. 68. Disputes Involving Questions of Fact and Law. – Cases involving
mixed questions of law and of fact or only factual issues shall be submitted While this ruling (DBP) has been superseded by the ruling in Philippine
to and settled or adjudicated by: National Oil Company vs. CA, in view of the prospective application of the
PNOC ruling, we (the DOJ) are of the view that this Office can continue to
(1) The Solicitor General, if the dispute, claim or controversy involves only assume jurisdiction over this case which was filed and has been pending with
departments, bureaus, offices and other agencies of the National Government this Office since January 5, 2004 and rule on the merits of the case.24
as well as government-owned or controlled corporations or entities of whom
he is the principal law officer or general counsel; and We disagree with the action of the Secretary of Justice.

(2) The Secretary of Justice, in all other cases not falling under paragraph (1). PAGCOR filed its appeals in the DOI on January 5, 2004 and August 4,
2004.25 Philippine National Oil Company v. Court of Appeals was
Although acknowledging the validity of the petitioner's contention, the promulgated on April 26, 2006. The Secretary of Justice resolved the
Secretary of Justice still resolved the disputed assessments on the basis that petitions on December 22, 2006. Under the circumstances, the Secretary of
the prevailing doctrine at the time of the filing of the petitions in the Justice had ample opportunity to abide by the prevailing rule and should have
Department of Justice (DOJ) on January 5, 2004 was that enunciated referred the case to the CTA because judicial decisions applying or
in Development Bank of the Philippines v. Court of Appeals,22 whereby the interpreting the law formed part of the legal system of the country,26 and are
Court ruled that: for that reason to be held in obedience by all, including the Secretary of
Justice and his Department. Upon becoming aware of the new proper
x x x (T)here is an "irreconcilable repugnancy x x between Section 7(2) of construction of P.D. No. 242 in relation to R.A. No. 1125 pronounced
R.A. NO. 1125 and P.D. No. 242," and hence, that the latter enactment (P.O. in Philippine National Oil Company v. Court of Appeals, therefore, the
No. 242), being the latest expression of the legislative will, should prevail Secretary of Justice should have desisted from dealing with the petitions, and
over the earlier. referred them to the CTA, instead of insisting on exercising jurisdiction
thereon. Therein lay the grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Secretary of Justice, for he thereby
5
 TAXATION BATCH 5: FRINGE BENEFITS TAX

acted arbitrarily and capriciously in ignoring the pronouncement 01 (dated October 8, 2001), R.A. No. 771631 has expressly repealed,
in Philippine National Oil Company v. Court of Appeals. Indeed, the doctrine amended, or withdrawn the 5% franchise tax provision in PAGCOR's
of stare decisis required him to adhere to the ruling of the Court, which by Charter; hence, PAGCOR was liable for the 10% VAT.32
tradition and conformably with our system of judicial administration speaks
the last word on what the law is, and stands as the final arbiter of any The relevant provisions of R.A. No. 7716 on which the insistence has been
justiciable controversy. In other words, there is only one Supreme Court from anchored are the following:
whose decisions all other courts and everyone else should take their
bearings.27 SEC. 3. Section 102 of the National Internal Revenue Code, as amended, is
hereby further amended to read as follows:
Nonetheless, the Secretary of Justice should not be taken to task for initially
entertaining the petitions considering that the prevailing interpretation of the "SEC. l 02. Value-added tax on sale of services and use or lease of
law on jurisdiction at the time of their filing was that he had jurisdiction. properties. - (a) Rate and base of tax. - There shall be levied, assessed and
Neither should PAGCOR to blame in bringing its appeal to the DOJ on collected, a value-added tax equivalent to 10% of gross receipts derived from
January 5, 2004 and August 4, 2004 because the prevailing rule then was the the sale or exchange of services, including the use or lease of properties.
interpretation in Development Bank of the Philippines v. Court of
Appeals. The emergence of the later ruling was beyond PAGCOR's control. "The phrase 'sale or exchange of services' means the performance of all kinds
Accordingly, the lapse of the period within which to appeal the disputed of service in the Philippines for others for a fee, remuneration or
assessments to the CTA could not be taken against P AGCOR. While a consideration, including x x x service of franchise grantees of telephone and
judicial interpretation becomes a part of the law as of the date that the law telegraph, radio and television broadcasting and all other franchise grantees
was originally passed, the reversal of the interpretation cannot be given except those under Section 117 of this Code; x x x"
retroactive effect to the prejudice of parties who may have relied on the first
interpretation.28 SEC. 12. Section 117 of the National Internal revenue Code, as amended, is
hereby further amended further to read as follows:
The Court now undertakes to settle the controversy because of the urgent
need to promptly decide it. We cannot lose sight of the fact that PAGCOR is "SEC.117. Tax on Franchises. - Any provision of general or special law to
among the most prolific income-generating institutions that contribute
the contrary notwithstanding, there shall be levied, assessed and collected in
immensely to the country's developing economy. Any controversy involving respect to all franchises on electric, gas and water utilities a tax of two
PAGCOR should be resolved expeditiously considering the underlying percent (2%) on the gross receipts derived from the business covered by the
public interest in the matter at hand. To dismiss the petitions in order to have law granting the franchise. x x x"
PAGCOR bring a similar petition in the CTA would not serve the interest of
justice.29 On previous occasions, the Court has overruled the defense of
SEC. 20. Repealing Clauses. - The provisions of any special law relative to
jurisdiction in the interest of public welfare and for the advancement of
the rate of franchise taxes are hereby expressly repealed.x x x
public policy whenever, as in this case, an extraordinary situation existed.30
The CIR argues that PAGCOR' s gambling operations are embraced under
2.
the phrase sale or exchange of services, including the use or lease of
properties; that such operations are not among those expressly exempted
PAGCOR is exempt from payment of VAT from the 10% VAT under Section 3 of R.A. No. 7716; and that the legislative
purpose to withdraw PAGCOR's 5% franchise tax was manifested by the
The CIR insists that under VAT Ruling No. 04-96 (dated May 14, 1996), language used in Section 20 of R.A. No.7716.
VAT Ruling No. 030-99 (dated March 18, 1999), and VAT Ruling No. 067-
6
 TAXATION BATCH 5: FRINGE BENEFITS TAX

The CIR' s arguments lack merit. Section 4 of R.A. No. 7716 enumerates the transactions exempt from
VAT, viz.:
Firstly, a basic rule in statutory construction is that a special law cannot be
repealed or modified by a subsequently enacted general law in the absence of SEC. 4. Section 103 of the National Internal Revenue Code, as amended, is
any express provision in the latter law to that effect. A special law must be hereby further amended to read as follows:
interpreted to constitute an exception to the general law in the absence of
special circumstances warranting a contrary conclusion.33 R.A. No. 7716, a "SEC.103. Exempt transactions. - The following shall he exempt from the
general law, did not provide for the express repeal of PAGCOR's Charter, value-added tax:
which is a special law; hence, the general repealing clause under Section 20
of R.A. No. 7716 must pertain only to franchises of electric, gas, and water xxxx
utilities, while the term other franchises in Section 102 of the NIRC should
refer only to transport, communications and utilities, exclusive of PAGCOR's "(q) Transactions which are exempt under special laws, except those
casino operations. granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1590, and
nonelectric cooperatives under republic Act No. 6938, or international
Secondly, R.A. No. 7716 indicates that Congress has not intended to repeal agreements to which the Philippines is a signatory;
PAGCOR's privilege to enjoy the 5% franchise tax in lieu of all other taxes.
A contrary construction would be unwarranted and myopic nitpicking. In this x x x x" (bold emphasis supplied.)
regard, we should follow the following apt reminder uttered in Fort
Bonifacio Development Corporation v. Commissioner of Internal Revenue:34 Anent the effect of R.A. No. 7716 on franchises, the Court has observed
in Tolentino v. The Secretary of Finance36 that:
A law must not be read in truncated parts: its provisions must be read in
relation to the whole law. It is the cardinal rule in statutory construction that Among the provisions of the NIRC amended is §103, which originally read:
a statute’s clauses and phrases must not be taken as detached and isolated
expressions but the whole and every part thereof must be considered in fixing
§103. Exempt transactions.-The following shall be exempt from the value-
the meaning of any of its parts in order to produce a harmonious whole.
added tax:
Every part of the statute must be interpreted with reference to the
context, i.e., that every part of the statute must be considered together with
other parts of the statute and kept subservient to the general intent of the ....
whole enactment.
(q) Transactions which are exempt under special laws or international
In constructing a statute courts have to take the thought conveyed by the agreements to which the Philippines is a signatory.
statute as a whole: construe the constituent parts together; ascertain the
legislative intent from the whole act; consider each and every provision Among the transactions exempted from the VAT were those of PAL because
thereof in the light of the general purpose of the statute; and endeavor to it was exempted under its franchise (P.D. No. 1590) from the payment of all
make every part effective, harmonious and sensible. "other taxes ... now or in the near future," in consideration of the payment by
it either of the corporate income tax or a franchise tax of 2%.
Although Section 3 of R.A. No. 7716 imposes 10% VAT on the sale or
exchange of services, including the use or lease of properties, the provision As a result of its amendment by Republic Act No. 7716, §103 of the NIRC
also considers transactions that are subject to 0% VAT.35 On the other hand, now provides:

7
 TAXATION BATCH 5: FRINGE BENEFITS TAX

§103. Exempt transactions.-The following shall be exempt from the value- [R.A. No. 9337], SEC. 6. Section 108 of the same Code (R.A. No. 8424), as
added tax: amended, is hereby further amended to read as follows:

…….. SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of
Properties.
(q) Transactions which are exempt under special laws, except those granted
under Presidential Decree Nos. 66, 529, 972, 1491, 1590 ..... (A) Rate and Base of Tax. There shall be levied, assessed and collected, a
value-added tax equivalent to ten percent (10%) of gross receipts derived
The effect of the amendment is to remove the exemption granted to PAL, as from the sale or exchange of services, including the use or lease of
far as the VAT is concerned. properties: x x x

xxxx xxxx

x x x Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. (B) Transactions Subject to Zero Percent (0%) Rate. The following services
1590) by specifically excepting from the grant of exemptions from the VAT performed in the Philippines by VAT-registered persons shall be subject to
PAL's exemption under P.D. No. 1590. This is within the power of Congress zero percent (0%) rate;
to do under Art. XII, § 11 of the Constitution, which provides that the grant
of a franchise for the operation of a public utility is subject to amendment, xxxx
alteration or repeal by Congress when the common good so requires.37
(3) Services rendered to persons or entities whose exemption under
Unlike the case of PAL, however, R.A. No. 7716 does not specifically special laws or international agreements to which the Philippines is a
exclude PAGCOR's exemption under P.D. No. 1869 from the grant of signatory effectively subjects the supply of such services to zero percent
exemptions from VAT; hence, the petitioner's contention that R.A. No. 7716 (0%) rate;
expressly amended PAGCOR's franchise has no leg to stand on.
xxxx
Moreover, PAGCOR's exemption from VAT, whether under R.A. No. 7716
or its amendments, has been settled in Philippine Amusement and Gaming As pointed out by petitioner, although R.A. No. 9337 introduced
Corporation (PAGCOR) v. The Bureau of Internal Revenue,38 whereby the amendments to Section 108 of R.A. No. 8424 by imposing VAT on other
Court, citing Commissioner of Internal Revenue v. Acesite (Philippines) services not previously covered, it did not amend the portion of Section 108
Hotel Corporation,39 has declared: (B) (3) that subjects to zero percent rate services performed by VAT-
registered persons to persons or entities whose exemption under special laws
Petitioner is exempt from the payment of VAT, because PAGCORs or international agreements to which the Philippines is a signatory effectively
charter, P.D. No. 1869, is a special law that grants petitioner exemption subjects the supply of such services to 0% rate.
from taxes.
Petitioner's exemption from VAT under Section 108 (B) (3) of R.A. No.
Moreover, the exemption of PAGCOR from VAT is supported by Section 6 8424 has been thoroughly and extensively discussed in Commissioner of
of R.A. No. 9337, which retained Section 108 (B) (3) of R.A. No. 8424, thus: Internal Revenue v. Acesite (Philippines) Hotel Corporation. x x x The Court
ruled that PAGCOR and Acesite were both exempt from paying VAT, thus:

8
 TAXATION BATCH 5: FRINGE BENEFITS TAX

xxxx A close scrutiny of the above provisos clearly gives PAGCOR a blanket
exemption to taxes with no distinction on whether the taxes arc direct or
PAGCOR is exempt from payment of indirect taxes indirect. We arc one with the CA ruling that PAGCOR is also exempt from
indirect taxes, like VAT, as follows:
It is undisputed that P.D. 1869, the charter creating P AGCOR, grants the
latter an exemption from the payment of taxes. Section 13 of P.O. 1869 Under the above provision [Section 13 (2) (b) of P.O. 1869], the term
pertinently provides: "Corporation" or operator refers to PAGCOR. Although the law does not
specifically mention PAGCOR's exemption from indirect taxes, PAGCOR is
Sec. 13. Exemptions. undoubtedly exempt from such taxes because the law exempts from
taxes persons or entities contracting with PAGCOR in casino
xxxx operations. Although, differently worded, the provision clearly exempts
PAGCOR from indirect taxes. In fact, it goes one step further by granting
(2) Income and other taxes. - (a) Franchise Holder: No tax of any kind or tax exempt status to persons dealing with PAGCOR in casino
form, income or otherwise, as well as fees, charges or levies of whatever operations. The unmistakable conclusion is that PAGCOR is not liable for
nature, whether National or Local, shall be assessed and collected under this the ₱30, 152,892.02 VAT and neither is Acesitc as the latter is effectively
Franchise from the Corporation; nor shall any form of tax or charge attach in subject to zero percent rate under Sec. 108 B (3 ), R.A. 8424. (Emphasis
any way to the earnings of the Corporation, except a Franchise Tax of five supplied.)
(5%) percent of the gross revenue or earnings derived by the Corporation
from its operation under this Franchise. Such tax shall be due and payable Indeed, by extending the exemption to entitles or individuals dealing with
quarterly to the National Government and shall be in lieu of all kinds of PAGCOR, the legislature clearly granted exemption also from indirect taxes.
taxes, levies, fees or assessments of any kind, nature or description, levied, It must be noted that the indirect tax of VAT, as in the instant case, can be
established or collected by any municipal, provincial, or national government shifted or passed to the buyer, transferee, or lessee of the goods, properties,
authority. or services subject to VAT. Thus, by extending the tax exemption to
entities or individuals dealing with P AGCOR in casino operations, it is
(b) Others: The exemptions herein granted for earnings derived from the exempting P AGCOR from being liable to indirect taxes.
operations conducted under the franchise specifically from the payment of
any tax, income or otherwise, as well as any form of charges, fees or levies, The manner of charging VAT docs not make PAGCOR liable to said
shall inure to the benefit of and extend to corporation(s), association(s), tax.
agency(ies), or individual(s) with whom the Corporation or operator has any
contractual relationship in connection with the operations of the casino(s) It is true that VAT can either be incorporated in the value of the goods,
authorized to be conducted under this Franchise and to those receiving properties, or services sold or leased, in which case it is computed as 1/11 of
compensation or other remuneration from the Corporation or operator as a such value, or charged as an additional 10% to the value. Verily, the seller or
result of essential facilities furnished and/or technical services rendered to lessor has the option to follow either way in charging its clients and
the Corporation or operator. customer. In the instant case, Acesite followed the latter method, that is,
charging an additional 10% of the gross sales and rentals. Be that as it may,
Petitioner contends that the above tax exemption refers only to PAGCOR's the use of either method, and in particular, the first method, does not
direct tax liability and not to indirect taxes, like the VAT. denigrate the fact that PAGCOR is exempt from an indirect tax, like VAT.

We disagree. VAT exemption extends to Aeesite

9
 TAXATION BATCH 5: FRINGE BENEFITS TAX

Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Clearly, the assessments for deficiency VAT issued against PAGCOR should
Acesite, the latter is not liable for the payment of it as it is exempt in this be cancelled for lack of legal basis.
particular transaction by operation of law to pay the indirect tax. Such
exemption falls within the fo1mer Section 102 (b) (3) of the 1977 Tax Code, The Court also deems it warranted to cancel the assessments for deficiency
as amended (now Sec. 108 [b] [3] of R.A. 8424), which provides: withholding VAT pertaining to the payments made by PAGCOR to its
catering service contractor.
Section 102. Value-added tax on sale of services.- (a) Rate and base of tax -
There shall be levied, assessed and collected, a value-added tax equivalent to In two separate letters dated December 12, 200341 and December 15,
10% of gross receipts derived by any person engaged in the sale of services x 2003,42 the BIR conceded that the unmonetized meal allowances of
x x; Provided, that the following services performed in the Philippines by PAGCOR's employees were not subject to fringe benefits tax (FBT).
VAT registered persons shall be subject to 0%. However, the BIR held PAGCOR liable for expanded withholding VAT for
the payments made to its catering service contractor who provided the meals
xxxx for its employees. Accordingly, the BIR assessed PAGCOR with deficiency
withholding VAT for taxable year 1999 in the amount of ₱4,077 ,667.40,
(3) Services rendered to persons or entities whose exemption under inclusive of interest and compromise penalty; and for taxable year 2000 in
special laws or international agreements to which the Philippines is a the amount of ₱l2,212, 199.85, exclusive of interest and penalties.
signatory effectively subjects the supply of such services to zero (0%) rate
(emphasis supplied). The payments made by PAGCOR to its catering service contractor are
subject to zero-rated (0%) VAT in accordance with Section 13(2) of P.D. No.
The rationale for the exemption from indirect taxes provided for in P.O. 1869 1869 in relation to Section 3 of R.A. No. 7716, viz.:
and the extension of such exemption to entities or individuals dealing with
PAGCOR in casino operations are best elucidated from the 1987 case SEC. 13. Exemptions.-
of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where
the absolute tax exemption of the World Health Organization (WHO) upon (1) x x x
an international agreement was upheld. We held in said case that the
exemption of contractee WHO should be implemented to mean that the entity (2) (a) x x x
or person exempt is the contractor itself who constructed the building owned
by contractee WHO, and such does not violate the rule that tax exemptions (b) Others: The exemption herein granted for earnings derived from the
are personal because the manifest intention of the agreement is to exempt the
operations conducted under the franchise, specifically from the payment of
contractor so that no contractor's tax may be shifted to the contractee
any tax, income or otherwise, as well as any form of charges, fees, or levies,
WHO. Thus, the proviso in P.D. 1869, extending the exemption to entities
shall inure to the benefit and extend to corporation(s), association(s),
or individuals dealing with PAGCOR in casino operations, is clearly to agency(ies), or individual(s) with whom the Corporation or operator has any
proscribe any indirect tax, like VAT, that may be shifted to PAGCOR. contractual relationship in connection with the operations of casino(s)
authorized to be conducted under this Franchise and to those receiving
Although the basis of the exemption of PAGCOR and Acesite from VAT in compensation or other remuneration from the Corporation or operator as a
the case of The Commissioner of Internal Revenue v. Acesite result of essential facilities furnished and/or technical services rendered to
(Philippines)Hotel Corporation was Section 102 (b) of the 1977 Tax Code, the Corporation or operator.
as amended, which section was retained as Section 108 (B) (3) in R.A. No.
8424, it is still applicable to this case, since the provision relied upon has
been retained in R.A. No. 9337.40 xxxx
10
 TAXATION BATCH 5: FRINGE BENEFITS TAX

SEC. 3. Section 102 of the National Internal Revenue Code, as amended, is ₱12,212,199.85,
hereby further amended to read as follows: Final Withholding Tax on Fringe
2000 exclusive of penalty and
Benefits
interest
"SEC.102. Value-added tax on sale of service and use or lease of
properties. - x x x The amount of the assessment for deficiency expanded withholding tax under
Assessment No. 33-99 remained at ₱3,790,916,809.16.
"(b) Transaction subject to zero-rate. - The following services performed in
the Philippines by Vat-registered persons shall be subject to 0%: We now resolve the validity of the foregoing assessments.1âwphi1

"x x xx a. Final Withholding Tax on

Fringe Benefits
"(3) Services rendered to persons or entities whose exemptions under special
laws or international agreements to which the Philippines is a signatory The recomputed assessment for deficiency final withholding taxes related to
effectively subjects the supply of such services to zero rate. the car plan granted to PAGCOR's employees and for its payment of
membership dues and fees.
As such, the catering service contractor, who is presumably a VAT-
registered person, shall impose a zero rate (0%) output tax on its sale or lease Under Section 33 of the NIRC, FBT is imposed as:
of goods, services or properties to PAGCOR. Consequently, no withholding
tax is due on such transaction. A final tax of thirty-four percent (34%) effective January 1, 1998; thirty-
three percent (33%) effective January 1, 1999; and thirty-two percent (32%)
effective January 1, 2000 and thereafter, is hereby imposed on the grossed-up
3. monetary value of fringe benefit furnished or granted to the employee
(except rank and file employees as defined herein) by the employer, whether
PAGCOR is liable for the payment of withholding taxes an individual or a corporation (unless the fringe benefit is required by the
nature of, or necessary to the trade, business or profession of the employer,
Through the letters dated December 12, 200343 and December 15, 2003,44 the or when the fringe benefit is for the convenience or advantage of the
BIRrecomputed the assessments for deficiency final withholding taxes on employer). The tax herein imposed is payable by the employer which tax
fringe benefits under Assessment No. 33-99 and Assessment No. 33-2000, shall be paid in the same manner as provided for under Section 57 (A) of this
respectively, as follows: Code.

FBT is treated as a final income tax on the employee that shall be withheld
Period and paid by the employer on a calendar quarterly basis.45 As such, PAGCOR
Recomputed Amount
Covered is a mere withholding agent inasmuch as the FBT is imposed on PAGCOR's
Assessment No. 33-99 employees who receive the fringe benefit. PAGCOR's liability as a
withholding agent is not covered by the tax exemptions under its Charter.
Final Withholding Tax on Fringe ₱13,337,414.58, inclusive
1999
Benefits of penalty and interest The car plan extended by PAGCOR to its qualified officers is evidently
considered a fringe benefit46 as defined under Section 33 of the NIRC. To
Assessment No. 33-2000 avoid the imposition of the FBT on the benefit received by the employee,
11
 TAXATION BATCH 5: FRINGE BENEFITS TAX

and, consequently, to avoid the withholding of the payment thereof by the The BIR assessed PAGCOR with deficiency expanded withholding tax for
employer, PAGCOR must sufficiently establish that the fringe benefit is the year 1999 under Assessment No. 33-99 amounting to ₱3,790,916,809.16,
required by the nature of, or is necessary to the trade, business or profession inclusive of surcharge and interest, which was computed as follows:49
of the employer, or when the fringe benefit is for the convenience or
advantage of the employer.
Taxable Basis per Investigation ₱ 2,441,948,878.00
PAGCOR asserted that the car plan was granted "not only because it was
necessary to the nature of the trade of PAGCOR but it was also granted for Expanded Withholding Tax due per 45,762,839.60
its convenience."47 The records are lacking in proof as to whether such investigation
benefit granted to PAGCOR's officers were, in fact, necessary for
PAGCOR's business or for its convenience and advantage. Accordingly, Less: Tax paid 43,490,484.05
PAGCOR should have withheld the FBT from the officers who have availed
themselves of the benefits of the car plan and remitted the same to the BIR.
Deficiency Expanded Withholding Tax ₱ 2,398,458,393. 95
As for the payment of the membership dues and fees, the Court finds that this Due
is not considered a fringe benefit that is subject to FBT and which holds
Add: 25% surcharge
PAGCOR liable for final withholding tax. According to PAGCOR, the
membership dues and fees are: 20% interest per annum from ___ 12-20- 1,392,433,415.21
02
57. x x x expenses borne by [respondent] to cover various memberships in Compromise Penalty
social, athletic clubs and similar organizations. x x x
TOTAL AMOUNT DUE &
58. Respondent's nature of business is casino operations and it derives ₱ 3, 790,891,809.16
COLLECTIBLE
business from its customers who play at the casinos. In furtherance of its ==================
business, PAGCOR usually attends its VIP customers, amenities such as
playing rights to golf clubs. The membership of PAGCOR to these golf clubs
Later, BIR issued a letter dated December 12, 2003 showing therein a
and other organizations are intended to benefit respondent's customers and
recomputation of the assessment, to wit:50
not its employees. Aside from this, the membership is under the name of
PAGCOR, and as such, cannot be considered as fringe benefits because it is
the customers and not the employees of PAGCOR who benefit from such Taxable Basis per Investigation ₱ 2,441,948,878.00
memberships.48 ================

Considering that the payments of membership dues and fees are not borne by EWT due per investigation 45,762,839.60
PAGCOR for its employees, they cannot be considered as fringe benefits
which are subject to FBT under Section 33 of the NIRC. Hence, PAGCOR is Less: Tax paid 43,490,484.05
not liable to withhold FBT from its employees.
Def. EWT ₱ 2,272,355.55
b. Expanded Withholding Tax
Add: Interest 1-26-00 to 12- ₱l,780,311.85

12
 TAXATION BATCH 5: FRINGE BENEFITS TAX

26-03 d) Taxes amounting to ₱6,679,807.53, the amount of which should not be

subjected to expanded withholding tax for obvious reasons;
Compromise 25,000.00 1,805,311.85
e) Security Deposit amounting to ₱3,450,000.00 which was written off after
the Regional Trial Court, Branch 226 of Quezon City through Presiding
Def. EWT ₱ 4,077,667.40 Judge, Leah S. Domingo-Regala, rendered a decision based on a compromise
agreement in Civil Case No. 097-31299 entitled 'Felina Rodriguez-Luna, et
al vs. Philippine Amusement and Gaming Corporation" (attached as Annex
PAGCOR submits that the BIR erroneously assessed it for thedeficiency
"52" and made an integral part hereof);51
expanded withholding taxes, explaining thusly:
PAGCOR' s submission is partly meritorious. The Court finds that PAGCOR
44. The computation made by the revenue officers for the year 1999 for
is not liable for deficiency expanded withholding tax on its payment for: (1)
expanded withholding taxes against respondent arc also not correct because it
audit services rendered by the Commission on Audit (COA), amounting to
included payments amounting to ₱682,120,262 which should not be
₱4,243,977.96,52 and (2) prizes and other promo items amounting to
subjected to withholding tax;
₱16,185,936.61.53
45. Of the said amount, ₱194,999,366 cover importations or various items for
PAGCOR's payment to the COA for its audit services is exempted from
the sole and exclusive use of the casinos x x x:
withholding tax pursuant to Sec. 2.57.5 (A) of Revenue Regulation (RR) 2-
98, which states:
xxxx
SEC. 2.57.5. Exemption from Withholding Tax –The withholding of
46. The breakdown of respondent's payments which were assessed expanded creditable withholding tax prescribed in these Regulations shall not apply to
withholding tax by the BIR but which should not have been made subject income payments made to the following:
thereto arc as follows:
(A) National government and its instrumentalities, including provincial, city
a) Taxable Compensation Income amounting to ₱7l,6ll,563.60, representing or municipal governments;
salaries of contractuals and casuals, clerical and messengerial and other
services, cost of COA services and unclaimed salaries and other benefits
On the other hand, the prizes and other promo items amounting to
recognized as income but subsequently claimed (attached as Annexes "10"
₱16,185,936.61 were already subjected to the 20% final withholding
to "18" and made integral parts hereof);
tax54 pursuant to Section 24(B)(l) of the NIRC.55 To impose another tax on
these items would amount to obnoxious or prohibited double taxation
b) Prizes and other promo items amounting to ₱16,185,936.61 which were because the taxpayer would be taxed twice by the same jurisdiction for the
already subjected to 20% final withholding tax. Pursuant to Revenue same purpose.56
Regulations 2-98, prizes and promo items shall be subject only to 20% final
tax (attached as Annexes "19" to "51" and made integral parts hereof);
Hence, except for the foregoing, the Court upholds the validity of the
assessment against PAGCOR for deficiency expanded withholding tax.
c) Reimbursements amounting to ₱18,246,090.35 which were paid directly
by agents/employees as over the counter purchases subsequently
We explain.
liquidated/reimbursed by PAGCOR pursuant to BIR rulings 129-92 and 345-
88;
13
 TAXATION BATCH 5: FRINGE BENEFITS TAX

Other than the ₱4,243,977.96 payments made to COA, the remainder of the payments made.57 There is also nothing in the records to show that the
₱71,61 l,563.60 compensation income that PAGCOR paid for the services of amount of ₱6,679,807.53 really represented PAGCOR's tax payments,58 or
its contractual, casual, clerical and messengerial employees are clearly that the amount of ₱194,999,366.00 were, in fact, paid for PAGCOR's
subject to expanded withholding tax by virtue of Section 79 (A) of the NIRC importations of various items in furtherance of its business.
which reads:
Even the ₱3,450,000.00 security deposit that it claims to have been written-
Sec. 79 Income Tax Collected at Source.- off based on the compromise agreement in Civil Case No. 097-31299 was
not sufficiently proved to be tax exempt. The only document presented by
(A) Requirement of Withholding. - Every employer making payment of PAGCOR to support its contention was a copy of the trial court's decision in
wages shall deduct and withhold upon such wages a tax determined in the civil case. However, nowhere in the decision mentioned the security
accordance with the rules and regulations to be prescribed by the Secretary of deposit.
Finance, upon recommendation of the Commissioner: Provided, however,
That no withholding of a tax shall be required where the total compensation It is settled that all presumptions are in favor of the correctness of tax
income of an individual does not exceed the statutory minimum wage, or assessments.1âwphi1 The good faith of the tax assessors and the validity of
Five thousand pesos (₱5,000) per month, whichever is higher. their actions are thus presumed. They will be presumed to have taken into
consideration all the facts to which their attention was called.59 Hence, it is
In addition, Section 2.57.3(C) of RR 2-98 states that: incumbent upon the taxpayer to credibly show that the assessment was
erroneous in order to relieve himself from the liability it imposes. PAGCOR
SEC. 2.57.3 Persons Required to Deduct and Withhold. - The following failed in this regard. Hence, except for the assessment for deficiency
persons are hereby constituted as withholding agents for purposes of the expanded withholding taxes pertaining to the payments made to the COA for
creditable tax required to be withheld on income payments enumerated in its audit services and for the prizes and other promo items, the Court upholds
Section 2.57.2: the BIR's assessment for deficiency expanded withholding taxes.

xxxx WHEREFORE, the Court PARTIALLY GRANTS the petition

for certiorari; ANNULS and SETS ASIDE the Resolutions dated December
(c) All government offices including government-owned or controlled 22, 2006 and March 12, 2007 of the Secretary of Justice in OSJ Case No.
corporations, as well as provincial, city and municipal governments. 2004-1 FOR LACK OF JURISDICTION; DECLARES that Republic Act
No. 7716 did not repeal Section 13(2) of Presidential Decree 1869,
As for the rest of the assessment for deficiency expanded withholding tax and, ACCORDINGLY, the PHILIPPINE AMUSEMENT AND
arising from PAGCOR's (1) reimbursement for over-the-counter purchases GAMING CORPORATION is EXEMPT from value-added tax.
by its agents amounting to ₱18,246,090.34; (2) tax payments of
₱6,679,807.53; (3) security deposit totalling ₱3,450,000.00; and (4) The Court FURTHER RESOLVES to:
importations w01ih ₱194,999,366.00, the Court observes that PAGCOR did
not present sufficient and convincing proof to establish its non-liability. (1) CANCEL Assessment No. 33-1996/1997 /1998 dated November 14,
2002, which assessed PHILIPPINE AMUSEMENT AND GAMING
With regard to the reimbursement for over-the-counter purchases by its CORPORATION for deficiency value-added tax;
agents, PAGCOR merely relied on BIR Ruling Nos. 129-92 and 345-88 to
support its claim that it should not be liable to withhold taxes on these (2) CANCEL Assessment No. 33-99 dated November 25, 2002, insofar as it
payments without submitting any proof to show that there were really actual assessed PHILIPPINE AMUSEMENT AND GAMING
CORPORATION for deficiency -
14
 TAXATION BATCH 5: FRINGE BENEFITS TAX

(a) value-added tax; (2) its deficiency expanded withholding tax under Assessment No. 33-99,
except on compensation income paid to the Commission on Audit for its
(b) expanded withholding value-added tax on payments made audit services and on prizes and other promo items.
by PHILIPPINE AMUSEMENT AND GAMING
CORPORATION to its catering service contractor; Upon receipt of respondent PHILIPPINE AMUSEMENT AND GAMING
COH.PORA TIO N's payment for the foregoing tax deficiencies, the Bureau
(c) final withholding tax on fringe benefits relating to the of Internal Revenue is DIRECTED TO WITHHOLD 5% thereof and TO
membership fees and dues paid by PHILIPPINE AMUSEMENT REMIT the same to the Office of the Solicitor General pursuant to Section
AND GAMING CORPORATION for the benefit of its clients and 11(1) 60 of Republic Act No. 9417 (An Act to Strengthen the Office of the
customers; and Solicitor General, by Expanding and Streamlining its Bureaucracy,
Upgrading Employee Skills and Augmenting Benefits, and Appropriating
(d) expanded withholding tax on compensation income paid Funds Therefor and for Other Purposes).
by PHILIPPINE AMUSEMENT AND GAMING
CORPORATION to the Commission on Audit for its audit services, No pronouncement on costs of suit.
and expanded withholding tax on the prizes and other promo items,
which were already subjected to the 20% final withholding tax; SO ORDERED.

(3) CANCEL Assessment No. 33-2000 dated March 18, 2003, insofar as it REVENUE REGULATIONS NO. 3-98 issued June 4, 1998
assessed PHILIPPINE AMUSEMENT AND GAMING implements Section 33 of the National Internal Revenue
CORPORATION for deficiency –
Code (NIRC), as amended by RA No. 8424, relative to the
(a) value-added tax; special treatment of fringe benefits granted or paid by the
employer to employees, except rank and file employees,
(b)expanded withholding value-added tax on payments made beginning January 1, 1998. The definition of fringe benefits
by PHILIPPINE AMUSEMENT AND GAMING as well as the determination of the amount subject to the
CORPORATION to its catering service contractor; and fringe benefits tax are specified in the Regulations.

(c) final withholding tax on fringe benefits relating to the

membership fees and dues paid by PHILIPPINE AMUSEMENT
AND GAMING CORPORATION for the benefit of its clients and
customers; REVENUE REGULATIONS NO. 3-98 issued June 4, 1998
implements Section 33 of the National Internal Revenue
Respondent PHILIPPINE AMUSEMENT AND GAMING Code (NIRC), as amended by RA No. 8424, relative to the
CORPORATION is DIRECTED TO PAY to the Bureau of Internal
Revenue:
special treatment of fringe benefits granted or paid by the
employer to employees, except rank and file employees,
(l) its deficiency final withholding tax on fringe benefits arising from the car beginning January 1, 1998. The definition of fringe benefits
plan it granted to its qualified officers and employees under Assessment No. as well as the determination of the amount subject to the
33-99 and Assessment No. 33-2000; and fringe benefits tax are specified in the Regulations.
15