Dayagbil, Escano, Sabdullah, Villablanca EH 406 TAX 1 December 16, 2017

Perino, Benuya, Go, Salvacion

CIR VS PHIL AMERICAN ACCIDENT INSURANCE

GR 141658 March 18, 2005

FACTS:

Respondents are domestic corporations licensed to transact insurance business in the

country. From August 1971 to September 1972, respondents paid the Bureau of Internal Revenue
under protest the 3% tax imposed on lending investors by Section 195-A of Commonwealth Act
No. 466 (CA 466), as amended by Republic Act No. 6110 (RA 6110) and other laws. CA 466 was
the National Internal Revenue Code (NIRC) applicable at the time.

Respondents paid the following amounts: P7,985.25 from Philippine American (PHILAM)
Accident Insurance Company; P7,047.80 from PHILAM Assurance Company; and P14,541.97
from PHILAM General Insurance Company.

These amounts represented 3% of each companys interest income from mortgage and other
loans. Respondents also paid the taxes required of insurance companies under CA 466.

ISSUE:

WHETHER RESPONDENT INSURANCE COMPANIES ARE SUBJECT TO THE 3%

PERCENTAGE TAX AS LENDING INVESTORS UNDER SECTIONS 182(A)(3)(DD) AND
195-A, RESPECTIVELY IN RELATION TO SECTION 194(U), ALL OF THE NIRC.

RULING:

The rule that tax exemptions should be construed strictly against the taxpayer presupposes
that the taxpayer is clearly subject to the tax being levied against him.

Unless a statute imposes a tax clearly, expressly and unambiguously, what applies is the
equally well-settled rule that the imposition of a tax cannot be presumed.

Where there is doubt, tax laws must be construed strictly against the government and in favor
of the taxpayer. This is because taxes are burdens on the taxpayer, and should not be unduly
imposed or presumed beyond what the statutes expressly and clearly import.
Section 182(A)(3)(dd) of CA 466 also provides:
Sec. 182. Fixed taxes. (A) On business xxx
xxx
(3) Other fixed taxes. The following fixed taxes shall be collected as follows, the amount stated
being for the whole year, when not otherwise specified;
xxx
(dd) Lending investors
1. In chartered cities and first class municipalities, five hundred pesos;
2. In second and third class municipalities, two hundred and fifty pesos;
3. In fourth and fifth class municipalities and municipal districts, one hundred and twenty-five
pesos; Provided, That lending investors who do business as such in more than one province shall
pay a tax of five hundred pesos.
Section 195-A of CA 466 provides:
Sec. 195-A. Percentage tax on dealers in securities; lending investors. Dealers in securities and
lending investors shall pay a tax equivalent to three per centum on their gross income.

Neither Section 182(A)(3)(dd) nor Section 195-A mentions insurance companies. Section
182(A)(3)(dd) provides for the taxation of lending investors in different localities. Section 195-A
refers to dealers in securities and lending investors. The burden is thus on petitioner to show that
insurance companies are lending investors for purposes of taxation.

In this case, petitioner does not dispute that respondents are in the insurance business.
Petitioner merely alleges that the definition of lending investors under CA 466 is broad enough to
encompass insurance companies. Petitioner insists that because of Section 194(u), the two
principal activities of the insurance business, namely, underwriting and investment, are separately
taxable.

Section 194(u) of CA 466 states:

(u) Lending investor includes all persons who make a practice of lending money for themselves or
others at interest.
xxx

As can be seen, Section 194(u) does not tax the practice of lending per se. It merely defines
what lending investors are. The question is whether the lending activities of insurance companies
make them lending investors for purposes of taxation.
Asia International Auctioneers vs CIR
GR 179115 Sept 26 2012
FACTS:

Asia International Auctioneers (AIA), a duly organized corporation operating within

the Subic Special Economic Zone, is engaged in the importation of used motor vehicles
and heavy equipment which it sells to the public through auction. When the BIR assessed
AIA for deficiency taxes, AIA filed a protest which was not acted upon by the BIR. AIA
filed a petition for review before the CTA. BIR filed a motion to dismiss for AIA’s failure to
timely appeal the protest, which was granted both by the CTA Division and En Banc.
While the case was pending before the SC, AIA availed of the Tax Amnesty
Program under RA 9840 to which it submitted a certificate of qualification issued by the
BIR. The CIR contends however that AIA is disqualified under Sec 8 (a) of the RA 9840
because it is “deemed” a withholding agent for the deficiency taxes. Also, the CIR argues
that AIA, being an accredited investor/taxpayer situated at the Subic Special Economic
Zone, should have availed of the tax amnesty granted under RA 9399 and not under RA
9480.

ISSUE:

W/N AIA is deemed a withholding agent for the deficiency VAT and excise taxes

RULING:

No.
The CIR did not assess AIA as a withholding agent that failed to withhold or remit
the deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code.
Hence, the argument that AIA is “deemed” a withholding agent for these deficiency taxes
is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. In indirect
taxes, the incidence of taxation falls on one person but the burden thereof can be shifted
or passed on to another person, such as when the tax is imposed upon goods
before reaching the consumer who ultimately pays for it. On the other hand, in case of
withholding taxes, the incidence and burden of taxation fall on the same entity, the
statutory taxpayer. The burden of taxation is not shifted to the withholding agent who
merely collects, by withholding, the tax due from income payments to entities arising from
certain transactions27and remits the same to the government. Due to this difference, the
deficiency VAT and excise tax cannot be “deemed” as withholding taxes merely because
they constitute indirect taxes.
Issue 2: W/N the tax amnesty under RA 9399 is the only available program for business
enterprises operating within special economic zones or freeports
No. RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude
taxpayers within its coverage from availing of other tax amnesty programs available or
enacted in futuro like RA 9480. More so, RA 9480 does not exclude from its coverage
taxpayers operating within special economic zones. As long as it is within the bounds of
the law, a taxpayer has the liberty to choose which tax amnesty program it wants to avail.
 PAGCOR v. BIR (Peralta)
GR No. 172087 March 15, 2011

FACTS:
This resolves a motion for clarification on the Decision rendered in this case, which
held that PAGCOR as exclusion from the list of exempt GOCCs in the Tax Code is valid.
The decision at this point is already final and executory and there was already an entry
of judgment. PAGCOR alleges that RMC No. 33-2013 was issued by the BIR as a result
of the decision. The RMC states the tax treatment of PAGCORâs income. It subjected
income of Philippine Amusement and Gaming Corporation (Pagcor) from its operations
and licensing of gambling casinos, gaming clubs and other similar recreation or
amusement places, gaming pools and other related operations to corporate tax. Justice
Peralta resolves the motion on the ground of transcendental importance.

On the merits, he states the tax treatment as follows:

1. Income from gaming operations - subject only to franchise tax under PD 1869 (PD
1869 has an in-lieu-of provision: 5% franchise tax in lieu of all other taxes; but the
provision applies only to income from gaming operations)
2. Income from other related services â subject to corporate income tax (this is taxable
under the PD and with the withdrawal of the exemption in the Tax Code, this income
is taxable again.) It is not subject to franchise tax as this is expressly provided by the
PD

ISSUE:
Whether or Not PAGCOR is still tax exempt from corporate income tax and VAT
with the enactment of RA 9337?

RULING:

Taxation is the rule and exemption is the exception. Taxation is the rule and exemption
is the exception. The burden of proof rests upon the party claiming exemption to prove
that it is, in fact, covered by the exemption so claimed. As a rule, tax exemptions are
construed strongly against the claimant. Exemptions must be shown to exist clearly and
categorically, and supported by clear legal provision.

In this case, PAGCOR failed to prove that it is still exempt from the payment of corporate
income tax, considering that Sec 1 of RA no. 9337 amended Section 27 © of the National
Internal Revenue Code of 1997 by omitting PAGCOR from the exemption. The legistative
intent is to require PAGCOR to pay corporate income tax; hence, the omission or removal
of PAGCOR from exemption from the payment of corporate income tax. Thus, the
express mention of the GOCCs exempted from payment of coporate income tax excludes
all others. Not being excepted, PAGCOR must be regarded as coming within the purview
of the general rule that GOCCs shall pay corporate income tax.