Marubeni Corp. v. CIR G.R. No.

76573 1 of 2

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 76573 September 14, 1989
MARUBENI CORPORATION (formerly Marubeni Iida, Co., Ltd.), petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS, respondents.
Melquiades C. Gutierrez for petitioner.
The Solicitor General for respondents.
G.R. No. 76573 (Marubeni Corporation vs. Commissioner of Internal Revenue and the Court of Tax Appeals). - In
our decision dated September 14, 1989, we ruled that petitioner was a non-resident foreign corporation subject to
Section 24 (b) (1) of the National Internal Revenue Code of 1977 which states:
"Tax on foreign corporations. (1) Nonresident foreign corporations . . . (iii) On dividends received from a
domestic corporation liable to tax under this Chapter, the tax shall be 15% of the dividends received which shall be
collected and paid as provided in Section 53 (d) of this Code, subject to the condition that the country in which the
non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign
corporation taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference
between the regular tax (35%) on corporations and the tax (15%) on the dividends provided in this section; . . . ."
"Based on this finding, we reversed the decision of respondent Court of Tax Appeals dated February 12, 1986
which affirmed the denial by respondent Commissioner of Internal Revenue of petitioner's claim for refund. We
thus ordered the Commissioner of Internal Revenue to refund or grant as tax credit in favor of petitioner the
amount of P144,452.40.
"On October 5, 1989, the Solicitor General, representing the public respondent, filed a motion for reconsideration
stating that although we correctly ruled that petitioner is a non-resident foreign corporation still petitioner could not
avail itself of the preferential tax rate of 15% under said Section 24(b)(1) because it failed to comply with the
requisites set forth thereunder.
"On October 9, 1989, petitioner similarly filed its motion for reconsideration remaining steadfast to its position that
it is a resident foreign corporation subject only to the ten percent (10%) final intercorporate dividend tax.
"We grant the motion for reconsideration filed by the Solicitor General.
"Section 24(b)(1) is explicit on the conditions for the availment of the preferential fifteen percent (15%) tax rate.
Under said provision, petitioner must show that Japan grants a tax credit to Marubeni, taxes deemed to have been
paid in the Philippines equivalent to at least twenty percent (20%) against the tax due from Marubeni. aisa dc
"Noteworthy is the recent case of Commissioner of Internal Revenue vs. Procter and Gamble PMC (G.R. No.
66835, April 15, 1988, 160 SCRA 560). In that case we denied Procter and Gamble's claim for refund for its parent
company in the United States since it failed to meet the following conditions necessary for the availment of the
preferential fifteen percent (15%) tax namely: (1) to show the actual amount credited by the U.S. Government
Marubeni Corp. v. CIR G.R. No. 76573 2 of 2

against the income tax due from PMC-USA on the dividends received from private respondent; (2) to present the
income tax return of its mother company for 1975 when the dividends were received; (3) to submit any
authenticated document showing that the US Government credited 20% of the tax deemed paid in the Philippines.
"In the case at bar, petitioner similarly failed to comply with the requisites set forth under Section 24(b)(1).
Petitioner reasons that it cannot furnish the Commissioner of Internal Revenue with the confidential income tax
return of Marubeni Japan since such a requirement is beyond the power of Philippine taxation laws. (Rollo, p. 238).
"Such reasoning finds no merit. Section 24(b)(i) of the National Internal Revenue Code of 1977 is clear and
explicit on the conditions for the availment of the preferential fifteen percent (15%) tax rate. Normally the
Philippines imposes a higher thirty five percent (35%) tax rate on corporations. But since the Philippines seeks to
lessen the impact of double taxation between countries, we impose only the lower tax rate of fifteen percent (15%)
on dividends subject to the condition that the country in which the non-resident foreign corporation is domiciled
allows a tax credit of twenty percent (20%). Such prerequisite must be strictly complied with because the fifteen
percent (15%) tax rate is a concession in the nature of a tax exemption vis-a-vis the normal rate of thirty five (35%)
on corporations.
"Petitioner's motion for reconsideration merely reiterates the same arguments previously raised in its petition and
does not raise substantial issues not raised upon in our decision dated September 14, 1989. Accordingly, since
petitioner failed to comply with the conditions set forth under Section 24 (b)(1) of the National Internal Revenue
Code of 1977, we hereby modify the decision dated September 14, 1989 and rule that petitioner corporation is
subject to the twenty five percent (25%) tax rate on dividends pursuant to Article 10(2) of the Philippine-Japan Tax
Convention. The Commissioner of Internal Revenue is hereby ordered to recompute the tax due from petitioner
corporation using the correct tax base and rate." "
Very truly yours, (Sgd.) JULIETA Y. CARREON