531 Phil. 382
SANDOVAL-GUTIERREZ, J.:
In reply, we hereby confirm that the law and regulations allow new corporations as well as existing corporations a leeway or adjustment period of four years counted from the year of commencement of business operations (reckoned at the time of registration by the corporation with the BIR) during which the MCIT (minimum corporate income tax) does not apply. If new corporations, as well as existing corporations such as those registered with the BIR in 1994 or earlier, are granted a 4-year grace period, we see no reason why TMBC, a corporation that has ceased business activities due to involuntary closure for more than a decade and is now only starting again to place its business back in order, may not be given the same opportunity. It should be stressed that although TMBC had been registered with the BIR before 1994, yet it did not have any business from 1987 to June 1999 due to its involuntary closure. This Office is therefore of an opinion, that for purposes of justice, equity and consistent with the intent of the law, TMBC's reopening last July 1999 is akin to the commencement of business operations of a new corporation, in consideration of which the law allows a 4-year period during which MCIT is not to be applied. Hence, MCIT may be imposed upon TMBC not earlier than 2002, i.e., the fourth taxable year beginning 1999 which is the year when TMBC reopened.Pursuant to the above Ruling, petitioner filed with the BIR a claim for refund of the sum of
Likewise, we find merit in your position that for having just come out of receivership proceedings, which not only resulted in substantial losses but actually brought about a complete cessation of all businesses, TMBC may be qualified to ask for suspension of the MCIT. The law provides that the Secretary of Finance, upon the recommendation of the Commissioner, may suspend the imposition of the MCIT on any corporation which suffers losses on account of prolonged labor dispute, or because of force majeure, or because of legitimate business reverses. [NIRC, Sec. 27(E)(3)] Revenue Regulations 9-98 defines the term "legitimate business reverses" to include substantial losses sustained due to fire, robbery, theft or embezzlement, or for other economic reasons as determined by the Secretary of Finance. Cessation of business activities as a result of being placed under involuntary receivership may be one such economic reason. But to be a basis for the recognition of the suspension of MCIT, such a situation should be properly defined and included in the regulations, which this Office intends to do. Pending such inclusion, the same cannot yet be invoked. Nevertheless, it is the position of this Office that the counting of the fourth taxable year, insofar as TMBC is concerned, begins in the year 1999 when TMBC reopened such that it will be only subject to MCIT beginning the year 2002.
Moreover, it must be emphasized that when herein petitioner was placed under receivership, there was merely an interruption of its business operations. However, its corporate existence was never affected. The general rule is that the appointment of the receiver does not terminate the charter or work a dissolution of the corporation, even though the receivership is a permanent one. In other words, the corporation continues to exist as a legal entity, clothed with its franchises (65 Am. Jur. 2d, pp. 973-974). Petitioner, for all intents and purposes, remained to be the same corporation, registered with the SEC and with the BIR. While it may continue to perform its corporate functions, all its properties and assets were under the control and custody of a receiver, and its dealings with the public is somehow limited, if not momentarily suspended. x x xOn June 11, 2003, petitioner filed with the Court of Appeals a petition for review. On May 11, 2005, the appellate court rendered a Decision affirming the assailed judgment of the CTA.
Sec. 27. Rates of Income Tax on Domestic Corporations. – x x xUpon the other hand, Revenue Regulation No. 9-98 specifies the period when a corporation becomes subject to the minimum corporate income tax, thus:
(E) Minimum Corporate Income Tax on Domestic Corporations. -
(1) Imposition of Tax. - A minimum corporate income tax of two percent (2%) of the gross income as of the end of the taxable year, as defined herein, is hereby imposed on a corporation taxable under this Title, beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum corporate income tax is greater than the tax computed under Subsection (A) of this Section for the taxable year.
(2) Carry Forward of Excess Minimum Tax. - Any excess of the minimum corporate income tax over the normal income tax as computed under Subsection (A) of this Section shall be carried forward and credited against the normal income tax for the three (3) immediately succeeding taxable years.x x x
(5) Specific Rules for Determining the Period When a Corporation Becomes Subject to the MCIT (minimum corporate income tax) -The intent of Congress relative to the minimum corporate income tax is to grant a four (4)-year suspension of tax payment to newly formed corporations. Corporations still starting their business operations have to stabilize their venture in order to obtain a stronghold in the industry. It does not come as a surprise then when many companies reported losses in their initial years of operations. The following are excerpts from the Senate deliberations:
For purposes of the MCIT, the taxable year in which business operations commenced shall be the year in which the domestic corporation registered with the Bureau of Internal Revenue (BIR).
Firms which were registered with BIR in 1994 and earlier years shall be covered by the MCIT beginning January 1, 1998.x x x
Senator Romulo: x x x Let me go now to the minimum corporate income tax, which is on page 45 of the Journal, which is to minimize tax evasion on those corporations which have been declaring losses year in and year out. Here, the tax rate is three-fourths, three quarter of a percent or .75% applied to corporations that do not report any taxable income on the fourth year of their business operation. Therefore, those that do not report income on the first, second and third year are not included here.Thus, in order to allow new corporations to grow and develop at the initial stages of their operations, the lawmaking body saw the need to provide a grace period of four years from their registration before they pay their minimum corporate income tax.
Senator Enrile: We assume that this is the period of stabilization of new company that is starting in business.
Senator Romulo: That is right.
Sec. 6. Period of exemption. – All thrift banks created and organized under the provisions of the Act shall be exempt from the payment of all taxes, fees, and charges of whatever nature and description, except the corporate income tax imposed under Title II of the NIRC and as specified in Section 2(A) of these regulations, for a period of five (5) years from the date of commencement of operations; while for thrift banks which are already existing and operating as of the date of effectivity of the Act (March 18, 1995), the tax exemption shall be for a period of five (5) years reckoned from the date of such effectivity.As mentioned earlier, petitioner bank was registered with the BIR in 1961. However, in 1987, it was found insolvent by the Monetary Board of the BSP and was placed under receivership. After twelve (12) years, or on June 23, 1999, the BSP issued to it a Certificate of Authority to Operate as a thrift bank. Earlier, or on January 21, 1999, it registered with the BIR. Then it filed with the SEC its Articles of Incorporation which was approved on June 22, 1999.
For purposes of these regulations, "date of commencement of operations" shall be understood to mean the date when the thrift bank was registered with the Securities and Exchange Commission or the date when the Certificate of Authority to Operate was issued by the Monetary Board of the Bangko Sentral ng Pilipinas, whichever comes later.x x x