799 Phil. 13
BERSAMIN, J.:
WHEREFORE, premises considered, PAGCOR is declared exempt from payment [of] all taxes, save for the franchise tax as provided for under Section 13 of PD 1869, as amended, the presidential issuance not having been expressly repealed by RA 7716.[3]while the March 12, 2007 resolution denied the CIR's motion for reconsideration of the December 22, 2006 resolution.
(2) Income and other Taxes - (a) Franchise Holder:Notwithstanding the aforesaid 5% franchise tax imposed, the Bureau of Internal Revenue (BIR) issued several assessments against PAGCOR for alleged deficiency value-added tax (VAT), final withholding tax on fringe benefits, and expanded withholding tax, as follows:
No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five percent (5%) of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the 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 collected by any municipal, provincial or national government authority. (bold emphasis supplied)
On December 18, 2002, PAGCOR filed a letter-protest with the BIR against Assessment Notice No. 33-1996/199711998 and Assessment Notice No. 33-99.[8]
ASSESSMENT DATE ISSUED PERIOD COVERED TOTAL AMOUNT DUE
(inclusive of interest, surcharge and compromise penalty) No. 33-1996/1997/1998 (for deficiency VAT)[5] November 14, 2002 1996/1997/1998 P4,078,476,977.26 No. 33-99 (for deficiency VAT, final withholding tax on fringe benefits, and expanded withholding tax )[6] November 25, 2002 1999 P6,678,346,966.49 No. 33-2000 (for deficiency VAT and final withholding tax on fringe benefits)[7] March 18, 2003 2000 P2,953,321,685.92 TOTAL P13,710,145,629.67
In a memorandum to the Regional Director dated December 15, 2003 the Chief Legal Division, this Region, confirmed the taxability of PAGCOR under Section 108(A) of the 1997 Tax Code, as amended, effective Jan. 1, 1996 (VAT Review Committee Ruling No. 041-2001).However, the BIR only recomputed the deficiency final withholding tax on fringe benefits and expanded withholding tax, and reduced the assessments to P12,212,199.85 and P6,959,525.10, respectively.[14]
In view of the confirmation of the Legal Division we hereby reiterate the assessments forwarded to your office under Final Assessment No. 33-2000 dated March 18, 2003 amounting to P2,097,426,943.00.
Otherwise put, the issues to be resolved are: (1) whether or not the Secretary of Justice has jurisdiction to review the disputed assessments; (2) whether or not PAGCOR is liable for the payment of VAT; and (3) whether or not PAGCOR is liable for the payment of withholding taxes.I
RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS DISCRETION IN ASSUMING JURISDICTION OVER THE PETITION ON DISPUTED TAX ASSESSMENTS FILED BY RESPONDENT PAGCOR.II
RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS DISCRETION IN HOLDING THAT R.A. NO. 7716 (VAT LAW) DID NOT REPEAL P.D. NO. 1869 (CHARTER OF PAGCOR); HENCE, PAGCOR HAS NOT BECOME LIABLE FOR THE PAYMENT OF THE 10% VAT IN LIEU OF THE 5% FRANCHISE TAX.III
RESPONDENT SECRETARY OF JUSTICE ACTED WITHOUT OR IN EXCESS OF HIS JURISDICTION AND GRAVELY ABUSED HIS DISCRETION IN ABSOLVING PAGCOR OF ITS DUTY AND RESPONSIBILITY AS WITHHOLDING AGENT TO WITHHOLD AND REMIT FRINGE BENEFITS TAX, FINAL WITHHOLDING TAX AND EXPANDED WITHHOLDING TAX.[21]
Although acknowledging the validity of the petitioner's contention, the Secretary of Justice still resolved the disputed assessments on the basis that the prevailing doctrine at the time of the filing of the petitions in the Department of Justice (DOJ) on January 5, 2004 was that enunciated in Development Bank of the Philippines v. Court of Appeals,[22] whereby the Court ruled that:CHAPTER 14. CONTROVERSIES AMONG GOVERNMENT OFFICES AND CORPORATIONS.
SEC. 66. How settled. - All disputes/claims and controversies, solely between or among the departments, bureaus, offices, agencies and instrumentalities of the National Government, including government-owned and controlled corporations, such as those arising from the interpretation and application of statues, contracts or agreements shall be administratively settled or adjudicated in the manner provided for in this Chapter. This Chapter shall, however, not apply to disputes involving the Congress, the Supreme Court, the Constitutional Commission and local governments.
SEC. 67. Disputes Involving Questions of Law. - All cases involving only questions of law shall be submitted to and settled or adjudicated by the Secretary of Justice as Attorney-General of the National Government and as ex-officio legal adviser of all government-owned or controlled corporations. His ruling or decision thereon shall be conclusive and binding on all the parties concerned.
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 to and settled or adjudicated by:
(1) The Solicitor General, if the dispute, claim or controversy involves only departments, bureaus, offices and other agencies of the National Government as well as government-owned or controlled corporations or entities of whom he is the principal law officer or general counsel; and
(2) The Secretary of Justice, in all other cases not falling under paragraph (1).
x x x (T)here is an "irreconcilable repugnancy x x x between Section 7(2) of R.A. NO. 1125 and P.D. No. 242," and hence, that the latter enactment (P.D. No. 242), being the latest expression of the legislative will, should prevail over the earlier.Later on, the Court reversed itself in Philippine National Oil Company v. Court of Appeals,[23] and held as follows:
Following the rule on statutory construction involving a general and a special law previously discussed, then P.D. No. 242 should not affect R.A. No. 1125. R.A. No. 1125, specifically Section 7 thereof on the jurisdiction of the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and controversies, tailing under Section 7 of R.A. No. 1125, even though solely among government offices, agencies, and instrumentalities, including government-owned and controlled corporations, remain in the exclusive appellate jurisdiction of the CTA. Such a construction resolves the alleged inconsistency or conflict between the two statutes, x x x.Despite the shift in the construction of P.D. No. 242 in relation to R.A. No. 1125, the Secretary of Justice still resolved PAGCOR's petitions on the merits, stating that:
While this ruling (DBP) has been superseded by the ruling in Philippine 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 assume jurisdiction over this case which was filed and has been pending with this Office since January 5, 2004 and rule on the merits of the case.[24]We disagree with the action of the Secretary of Justice.
SEC. 3. Section 102 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:The CIR argues that PAGCOR's gambling operations are embraced under the phrase sale or exchange of services, including the use or lease of properties; that such operations are not among those expressly exempted 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 language used in Section 20 of R.A. No. 7716."SEC. 102. Value-added tax on sale of services and use or lease of properties. - (a) Rate and base of tax. - There shall be levied, assessed and collected, a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use or lease of properties.SEC. 12. Section 117 of the National Internal revenue Code, as amended, is hereby further amended further to read as follows:
"The phrase 'sale or exchange of services' means the performance of all kinds of service in the Philippines for others for a fee, remuneration or consideration, including x x x service of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 117 of this Code; x x x""SEC. 117. Tax on Franchises. Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on electric, gas and water utilities a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise. x x x"SEC. 20. Repealing Clauses. - The provisions of any special law relative to the rate of franchise taxes are hereby expressly repealed. x x x
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 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 the meaning of any of its parts in order to produce a harmonious whole. 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.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 also considers transactions that are subject to 0% VAT.[35] On the other hand, Section 4 of R.A. No. 7716 enumerates the transactions exempt from VAT, viz.:
In construing a statute courts have to take the thought conveyed by the statute as a whole; construe the constituent parts together ascertain the legislative intent from the whole act; consider each and every provision thereof in the light of the general purpose of the statute; and endeavor to make every part effective, harmonious and sensible.
SEC. 4. Section 103 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:Anent the effect of R.A. No. 7716 on franchises, the Court has observed in Tolentino v. The Secretary of Finance[36] that:"SEC. 103. Exempt transactions. - The following shall be exempt from the value-added tax:
x x x x
"(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1590, and nonelectric cooperatives under republic Act No. 6938, or international agreements to which the Philippines is a signatory;
x x x x" (bold emphasis supplied.)
Among the provisions of the NIRC amended is § 103, which originally read:Unlike the case of PAL, however, R.A. No. 7716 does not specifically exclude PAGCOR's exemption under P.D. No. 1869 from the grant of exemptions from VAT; hence, the petitioner's contention that R.A. No. 7716 expressly amended PAGCOR's franchise has no leg to stand on.§103. Exempt transactions. - The following shall be exempt from the value-added tax:Among the transactions exempted from the VAT were those of PAL because it was exempted under its franchise (P.D. No. 1590) from the payment of all "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%.
.....
(q) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory.
As a result of its amendment by Republic Act No. 7716, §103 of the NIRC now provides:§103. Exempt transactions. - The following shall be exempt from the value-added tax:The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned.
.....
(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590 .....
x x x x
x x x Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemption under P.D. No. 1590. This is within the power of Congress 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, alteration or repeal by Congress when the common good so requires.[37]
Petitioner is exempt from the payment of VAT, because PAGCORs charter, P.D. No. 1869, is a special law that grants petitioner exemption from taxes.Clearly, the assessments for deficiency VAT issued against PAGCOR should be cancelled for lack of legal basis.
Moreover, the exemption of PAGCOR from VAT is supported by Section 6 of R.A. No. 9337, which retained Section 108 (B) (3) of R.A. No. 8424, thus:[R.A. No. 9337], SEC. 6. Section 108 of the same Code (R.A. No. 8424), as amended, is hereby further amended to read as follows:Petitioner's exemption from VAT under Section 108 (B) (3) of R.A. No. 8424 has been thoroughly and extensively discussed in Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation. x x x The Court ruled that PAGCOR and Acesite were both exempt from paying VAT, thus:
SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties.
(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 from the sale or exchange of services, including the use or lease of properties: x x x
x x x x
(B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate;
x x x x
(3) Services rendered to persons of entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;
x x x x
As pointed out by petitioner, although R.A. No. 9337 introduced amendments to Section 108 of R.A. No. 8424 by imposing VAT on other services not previously covered, it did not amend the portion of Section 108 (B) (3) that subjects to zero percent rate services performed by VAT-registered persons to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to 0% rate.x x x xAlthough the basis of the exemption of PAGCOR and Acesite from VAT in the case of The Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation was Section 102 (b) of the 1977 Tax Code, 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]
PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from the payment of taxes. Section 13 of P.D. 1869 pertinently provides:
Sec. 13. Exemptions.
x x x x(2) Income and other taxes. - (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (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 quarterly to the 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 collected by any municipal, provincial, or national government authority.Petitioner contends that the above tax exemption refers only to PAGCOR's direct tax liability and not to indirect taxes, like the VAT.
(b) Others: The exemptions herein granted for earnings derived from the 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, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator.
We disagree.
A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with no distinction on whether the taxes are direct or indirect. We are one with the CA ruling that PAGCOR is also exempt from indirect taxes, like VAT, as follows:Under the above provision [Section 13 (2) (b) of P.D. 1869], the term "Corporation" or operator refers to PAGCOR. Although the law does not specifically mention PAGCOR's exemption from indirect taxes, PAGCOR is undoubtedly exempt from such taxes because the law exempts from taxes persons or entities contracting with PAGCOR in casino operations. Although, differently worded, the provision clearly exempts PAGCOR from indirect taxes. In fact, it goes one step further by granting tax exempt status to persons dealing with PAGCOR in casino operations. The unmistakable conclusion is that PAGCOR is not liable for the P30,152,892.02 VAT and neither is Acesite as the latter is effectively subject to zero percent rate under Sec. 108 B (3), R.A. 8424. (Emphasis supplied.)Indeed, by extending the exemption to entities or individuals dealing with PAGCOR, the legislature clearly granted exemption also from indirect taxes. It must be noted that the indirect tax of VAT, as in the instant case, can be shifted or passed to the buyer, transferee, or lessee of the goods, properties, or services subject to VAT. Thus, by extending the tax exemption to entities or individuals dealing with PAGCOR in casino operations, it is exempting PAGCOR from being liable to indirect taxes.
The manner of charging VAT does not make PAGCOR liable to said tax.
It is true that VAT can either be incorporated in the value of the goods, properties, or services sold or leased, in which case it is computed as 1/11 of such value, or charged as an additional 10% to the value. Verily, the seller or lessor has the option to follow either way in charging its clients and 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, the use of either method, and in particular, the first method, does not denigrate the fact that PAGCOR is exempt from an indirect tax, like VAT.
VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable for the payment of it as it is exempt in this particular transaction by operation of law to pay the indirect tax. Such exemption falls within the former Section 102 (b) (3) of the 1977 Tax Code, as amended (now Sec. 108 [b] [3] of R.A. 8424), which provides: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 10% of gross receipts derived by any person engaged in the sale of services x x x; Provided, that the following services performed in the Philippines by VAT registered persons shall be subject to 0%.The rationale for the exemption from indirect taxes provided for in P.D. 1869 and the extension of such exemption to entities or individuals dealing with PAGCOR in casino operations are best elucidated from the 1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the absolute tax exemption of the World Health Organization (WHO) upon an international agreement was upheld. We held in said case that the exemption of contractee WHO should be implemented to mean that the entity or person exempt is the contractor itself who constructed the buiId.ng owned by contractee WHO, and such does not violate the rule that tax exemptions are personal because the manifest intention of the agreement is to exempt the contractor so that no contractor's tax may be shifted to the contractee WHO. Thus, the proviso in P.D. 1869, extending the exemption to entities or individuals dealing with PAGCOR in casino operations, is clearly to proscribe any indirect tax, like VAT, that may be shifted to PAGCOR.
x x x x
(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero (0%) rate (emphasis supplied).
SEC. 13. Exemptions. -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 of goods, services or properties to PAGCOR. Consequently, no withholding tax is due on such transaction.
(1) x x x
(2) (a) x x x(b) Others: The exemption herein granted for earnings derived from the 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, shall inure to the benefit and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator.SEC. 3. Section 102 of the National Internal Revenue Code, as amended is hereby further amended to read as follows:
x x x x"SEC.102. Value-added tax on sale of service and use or lease of properties. - x x x
"(b) Transaction subject to zero-rate. - The following services performed in the Philippines by Vat-registered persons shall be subject to 0%:
"x x x x
"(3) Services rendered to persons or entities whose exemptions under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero rate.
The amount of the assessment for deficiency expanded withholding tax under Assessment No. 33-99 remained at P3,790,916,809.16.
Period Covered Recomputed AmountAssessment No. 33-99 Final Withholding Tax on Fringe Benefits 1999 13,337,414.58, inclusive of penalty and interestAssessment No. 33-2000 Final Withholding Tax on Fringe Benefits 2000 P12,212,199.85, exclusive of penalty and interest
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 monetary value of fringe benefit furnished or granted to the employee (except rank and file employees as defined herein) by the employer, whether 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, or when the fringe benefit is for the convenience or advantage of the employer). The tax herein imposed is payable by the employer which tax shall be paid in the same manner as provided for under Section 57 (A) of this Code.FBT is treated as a final income tax on the employee that shall be withheld and paid by the employer on a calendar quarterly basis.[45] As such, PAGCOR is a mere withholding agent inasmuch as the FBT is imposed on PAGCOR's employees who receive the fringe benefit. PAGCOR's liability as a withholding agent is not covered by the tax exemptions under its Charter.
57. x x x expenses borne by [respondent] to cover various memberships in social, athletic clubs and similar organizations. x x xConsidering that the payments of membership dues and fees are not borne by 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 not liable to withhold FBT from its employees.
58. Respondent's nature of business is casino operations and it derives 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 and other organizations are intended to benefit respondent's customers and 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 memberships.[48]
Later, BIR issued a letter dated December 12, 2003 showing therein a recomputation of the assessment, to wit:[50]
Taxable Basis per Investigation P 2,441,948,878.00Expanded Withholding Tax due per investigation 45,762,839.60Less: Tax paid 43,490,484.05Deficiency Expanded Withholding Tax Due P 2,398,458,393.95Add: 25% surcharge 20% interest per annum from ___ 12-20-02 1,392,433,415.21Compromise Penalty TOTAL AMOUNT DUE & COLLECTIBLE P3,790,891,809.16
PAGCOR submits that the BIR erroneously assessed it for the deficiency expanded withholding taxes, explaining thusly:
Taxable Basis per Investigation P2,441,948,878.00EWT due per investigation 45,762,839.60Less: Tax paid 43,490,484.05Def. EWT P2,272,355.55Add: Interest 1-26-00 to 12-26-03 P1,780,311.85Compromise 25,000.00 1,805,311.85Def. EWT P4,077,667.40
44. The computation made by the revenue officers for the year 1999 for expanded withholding taxes against respondent are also not correct because it included payments amounting to P682,120,262 which should not be subjected to withholding tax;PAGCOR's submission is partly meritorious. The Court finds that PAGCOR is not liable for deficiency expanded withholding tax on its payment for: (1) audit services rendered by the Commission on Audit (COA), amounting to P4,243,977.96,[52] and (2) prizes and other promo items amounting to P16,185,936.61.[53]
45. Of the said amount, P194,999,366 cover importations or various items for the sole and exclusive use of the casinos x x x:
x x x x
46. The breakdown of respondent's payments which were assessed expanded withholding tax by the BIR but which should not have been made subject thereto are as follows:a) Taxable Compensation Income amounting to P71,611,563.60, representing salaries of contractuals and casuals, clerical and messengerial and other services, cost of COA services and unclaimed salaries and other benefits recognized as income but subsequently claimed (attached as Annexes "10" to "18" and made integral parts hereof);
b) Prizes and other promo items amounting to 16,185,936.61 which were already subjected to 20% final withholding tax. Pursuant to Revenue 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);
c) Reimbursements amounting to 18,246,090.35 which were paid directly by agents/employees as over the counter purchases subsequently liquidated/reimbursed by PAGCOR pursuant to BIR rulings 129-92 and 345-88;
d) Taxes amounting to P6,679,807.53, the amount of which should not be subjected to expanded withholding tax for obvious reasons;
e) Security Deposit amounting to P3,450,000.00 which was written off after the Regional Trial Court, Branch 226 of Quezon City through Presiding 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 "52" and made an integral part hereof);[51]
SEC. 2.57.5. Exemption from Withholding Tax - The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following:On the other hand, the prizes and other promo items amounting to P16,185,936.61 were already subjected to the 20% final withholding tax[54] pursuant to Section 24(B)(1) of the NIRC.[55] To impose another tax on these items would amount to obnoxious or prohibited double taxation because the taxpayer would be taxed twice by the same jurisdiction for the same purpose.[56]
(A) National government and its instrumentalities, including provincial, city or municipal governments;
Sec. 79 Income Tax Collected at Source. -In addition, Section 2.57.3(C) of RR 2-98 states that:(A) Requirement of Withholding. Every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner: Provided, however, That no withholding of a tax shall be required where the total compensation income of an individual does not exceed the statutory minimum wage, or Five thousand pesos (P5,000) per month, whichever is higher.
SEC. 2.57.3 Persons Required to Deduct and Withhold. - The following persons are hereby constituted as withholding agents for purposes of the creditable tax required to be withheld on income payments enumerated in Section 2.57.2:As for the rest of the assessment for deficiency expanded withholding tax arising from PAGCOR's (1) reimbursement for over-the-counter purchases by its agents amounting to P18,246,090.34; (2) tax payments of P6,679,807.53; (3) security deposit totalling P3,450,000.00; and (4) importations worth P194,999,366.00, the Court observes that PAGCOR did not present sufficient and convincing proof to establish its non-liability.
x x x x
(c) All government offices including government-owned or controlled corporations, as well as provincial, city and municipal governments.
(a) | value-added tax; |
(b) | expanded withholding value-added tax on payments made by PHILIPPINE AMUSEMENT AND GAMING CORPORATION to its catering service contractor; |
(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; and |
(d) | expanded withholding tax on compensation income paid by PHILIPPINE AMUSEMENT AND GAMING CORPORATION to the Commission on Audit for its audit services, and expanded withholding tax on the prizes and other promo items, which were already subjected to the 20% final withholding tax; |
(a) | value-added tax; |
(b) | expanded withholding value-added tax on payments made by PHILIPPINE AMUSEMENT AND GAMING CORPORATION to its catering service contractor; and |
(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; |
SEC. 102. Value-added tax on sale of service and use or lease of properties. - x x x[36] G.R. No. 115455, August 25, 1994, 235 SCRA 630.
(b) Transaction subject to zero-rate. - The following services performed in the Philippines by Vat-registered persons shall be subject to 0%:
(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
(3) Services rendered to persons or entities whose exemptions under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero rate.
(4) Services rendered to vessels, engaged exclusively in international shipping; and
(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production.