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    No. 22 Cir VS Marubeni

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    AJ Quim
    Marubeni Corporation, a Japanese corporation engaged in general import and export trading in the Philippines, was assessed for deficiency income taxes, branch profit taxes, and contractor's taxes for fiscal year 1985 by the Commissioner of Internal Revenue (CIR). However, Marubeni claimed it had availed of the tax amnesty under Executive Orders 41 and 64. The Court of Tax Appeals and Court of Appeals found that Marubeni had properly availed of the tax amnesty. The Supreme Court affirmed, finding that Marubeni was not disqualified from availing the tax amnesty and that the income from portions of Marubeni's contracts that were completed outside the Philippines were not subject to Philippine taxes.

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    No. 22 Cir VS Marubeni

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    AJ Quim
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    Marubeni Corporation, a Japanese corporation engaged in general import and export trading in the Philippines, was assessed for deficiency income taxes, branch profit taxes, and contractor's taxes for fiscal year 1985 by the Commissioner of Internal Revenue (CIR). However, Marubeni claimed it had availed of the tax amnesty under Executive Orders 41 and 64. The Court of Tax Appeals and Court of Appeals found that Marubeni had properly availed of the tax amnesty. The Supreme Court affirmed, finding that Marubeni was not disqualified from availing the tax amnesty and that the income from portions of Marubeni's contracts that were completed outside the Philippines were not subject to Philippine taxes.

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    tax

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    NO. 22 CIR VS MARUBENI

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    Marubeni Corporation, a Japanese corporation engaged in general import and export trading in the Philippines, was assessed for deficiency income taxes, branch profit taxes, and contractor's taxes for fiscal year 1985 by the Commissioner of Internal Revenue (CIR). However, Marubeni claimed it had availed of the tax amnesty under Executive Orders 41 and 64. The Court of Tax Appeals and Court of Appeals found that Marubeni had properly availed of the tax amnesty. The Supreme Court affirmed, finding that Marubeni was not disqualified from availing the tax amnesty and that the income from portions of Marubeni's contracts that were completed outside the Philippines were not subject to Philippine taxes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16 views2 pages

    No. 22 Cir VS Marubeni

    Uploaded by

    AJ Quim
    Marubeni Corporation, a Japanese corporation engaged in general import and export trading in the Philippines, was assessed for deficiency income taxes, branch profit taxes, and contractor's taxes for fiscal year 1985 by the Commissioner of Internal Revenue (CIR). However, Marubeni claimed it had availed of the tax amnesty under Executive Orders 41 and 64. The Court of Tax Appeals and Court of Appeals found that Marubeni had properly availed of the tax amnesty. The Supreme Court affirmed, finding that Marubeni was not disqualified from availing the tax amnesty and that the income from portions of Marubeni's contracts that were completed outside the Philippines were not subject to Philippine taxes.

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    © All Rights Reserved
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    of 2

    CIR v.

    Marubeni Corporation
    G.R. No. 137377
    December 18, 2011

    By: Ellaine M. Quimson

    PONENTE: Puno, J.

    FACTS:

    CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting
    the 1985 deficiency income, branch profit remittance and contractor’s taxes from Marubeni Corp
    after finding the latter to have properly availed of the tax amnesty under EO 41 & 64, as
    amended.

    Marubeni, a Japanese corporation, engaged in general import and export trading,


    financing and construction, is duly registered in the Philippines with Manila branch office.

    CIR examined the Manila branch’s books of accounts for fiscal year ending March 1985,
    and found that respondent had undeclared income from contracts with NDC and Philphos for
    construction of a wharf/port complex and ammonia storage complex respectively.

    On August 27, 1986, Marubeni received a letter from CIR assessing it for several
    deficiency taxes. CIR claims that the income respondent derived were income from Philippine
    sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for
    review with CTA: the first, questioned the deficiency income, branch profit remittance and
    contractor’s tax assessments and second questioned the deficiency commercial broker’s
    assessment.

    On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85, and
    that taxpayers who wished to avail this should on or before Oct 31, 1986. Marubeni filed its tax
    amnesty return on Oct 30, 1986.

    On Nov 17, 1986, EO 64 expanded EO 41’s scope to include estate and donor’s taxes
    under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of availment
    to Dec 15, 1986 and stated those who already availed amnesty under EO 41 should file an
    amended return to avail of the new benefits. Marubeni filed a supplemental tax amnesty return
    on Dec 15, 1986.
    CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the
    deficiency taxes. CA affirmed on appeal.

     
    ISSUE: Whether or not Marubeni Corporation is exempted from paying tax?
     
    RULING:
    Yes.

    EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed
    with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet been filed.
    Marubeni does not fall in the exception and is thus, not disqualified from availing of the amnesty
    under EO 41 for taxes on income and branch profit remittance.

    On situs of taxation 

    Marubeni contends that assuming it did not validly avail of the amnesty, it is still not
    liable for the deficiency tax because the income from the projects came from the “Offshore
    Portion” as opposed to “Onshore Portion”. It claims all materials and equipment in the contract
    under the “Offshore Portion” were manufactured and completed in Japan, not in the Philippines,
    and are therefore not subject to Philippine taxes.

    Marubeni won in the public bidding for projects with government corporations NDC and
    Philphos. In the contracts, the prices were broken down into a Japanese Yen Portion (I and II)
    and Philippine Pesos Portion and financed either by OECF or by supplier’s credit. The Japanese
    Yen Portion I corresponds to the Foreign Offshore Portion, while Japanese Yen Portion II and
    the Philippine Pesos Portion correspond to the Philippine Onshore Portion. Marubeni has already
    paid the Onshore Portion, a fact that CIR does not deny.

    CIR argues that since the two agreements are turn-key, they call for the supply of both
    materials and services to the client, they are contracts for a piece of work and are indivisible. The
    situs  of the two projects is in the Philippines, and the materials provided and services rendered
    were all done and completed within the territorial jurisdiction of the Philippines. Accordingly,
    respondent’s entire receipts from the contracts, including its receipts from the Offshore Portion,
    constitute income from Philippine sources. The total gross receipts covering both labor and
    materials should be subjected to contractor’s tax (a tax on the exercise of a privilege of selling
    services or labor rather than a sale on products).

    Marubeni, however, was able to sufficiently prove in trial that not all its work was
    performed in the Philippines because some of them were completed in Japan (and in fact
    subcontracted) in accordance with the provisions of the contracts. All services for the design,
    fabrication, engineering and manufacture of the materials and equipment under Japanese Yen
    Portion I were made and completed in Japan. These services were rendered outside Philippines’
    taxing jurisdiction and are therefore not subject to contractor’s tax.

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