MARUBENI CORP. V.

CIR
G.R. No. 76573, March 7, 1990

FACTS:
AG&P of Manila has been paying cash dividends and withheld 10% final dividend tax thereon to
Marubeni Corporation of Japan. AG&P, as withholding agent, directly remitted cash dividends to
Marubeni’s head office in Tokyo, not only of the 10% final dividend tax but also of the withheld
15% profit remittance tax based on the remittable amount after deducting the final withholding tax
of 10%.

Marubeni is claiming for refund or tax credit, alleging that the dividends remitted were not subject
to the 15% profit remittance tax as they are not income arising from sources within the Philippines.
CIR denied the claim on the ground that since Marubeni is a non-resident foreign corporation, it
is nevertheless subject to 25% tax pursuant to Art. 10(2) of the Philippines-Japan Tax Treaty.

Marubeni now claims that it is a resident foreign corporation because of its principal-agent
relationship with its Philippine Branch and, therefore, subject only to 10% intercorporate final tax
on dividends.

ISSUE:
W/N Marubeni is a resident or a non-resident foreign corporation. -YES

HELD: YES.
The general rule is that a foreign corporation is the same juridical entity as its branch office, so
that it is understood that the branch becomes its agent in the Philippines. However, when the
foreign corporation transacts business in the Philippines independently of its branch, the principal-
agent relationship is set aside. The transaction becomes one of the foreign corporation, not of the
branch. Consequently, the taxpayer is the foreign corporation, not the branch or the resident
foreign corporation. Corollarily, if the business transaction is conducted through the branch office,
the latter becomes the taxpayer, and not the foreign corporation.

In other words, Marubeni cannot now avail itself of the lower tax rate of 10% by pushing its
principal-agent relationship with the Philippine branch (and hence claim the increments as
ordinary consequences of its trade or business in the Philippines) when it has made this
independent investment attributable only to the head office. Marubeni Japan and Marubeni
Philippines are separate and distinct income taxpayers.