Facts:
Petitioner Marubeni s a foreign corporation duly organized under the existing laws of Japan and duly licensed to engage in business under Philippine laws. Marubeni of Japan has equity investments in Atlantic Gulf & Pacific Co. of Manila. AG&P declared and directly remitted the cash dividends to Marubeni’s head office in Tokyo net of the final dividend tax and withholding profit remittance tax. Thereafter, Marubeni, through SGV, sought a ruling from the BIR on whether or not the dividends it received from AG&P are effectively connected with its business in the Philippines as to be considered branch profits subject to profit remittance tax. The Acting Commissioner ruled that the dividends received by Marubeni are not income from the business activity in which it is engaged. Thus, the dividend if remitted abroad are not considered branch profits subject to profit remittance tax. Pursuant to such ruling, petitioner filed a claim for refund for the profit tax remittance erroneously paid on the dividends remitted by AG&P. Respondent Commissioner denied the claim. It ruled that since Marubeni is a non resident corporation not engaged in trade or business in the Philippines it shall be subject to tax on income earned from Philippine sources at the rate of 35% of its gross income.
On the other hand, Marubeni contends that, following the principal-agent relationship theory, Marubeni Japan is a resident foreign corporation subject only to final tax on dividends received from a domestic corporation.
Issue:
Whether or not Marubeni Japan is a resident foreign corporation
Ruling:
No. The general rule is a foreign corporation is the same juridical entity as its branch office in the Philippines . The rule is based on the premise that the business of the foreign corporation is conducted through its branch office, following the principal-agent relationship theory. It is understood that the branch becomes its agent.
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.
Thus, the alleged overpaid taxes were incurred for the remittance of dividend income to the head office in Japan which is considered as a separate and distinct income taxpayer from the branch in the Philippines.
Petitioner Marubeni s a foreign corporation duly organized under the existing laws of Japan and duly licensed to engage in business under Philippine laws. Marubeni of Japan has equity investments in Atlantic Gulf & Pacific Co. of Manila. AG&P declared and directly remitted the cash dividends to Marubeni’s head office in Tokyo net of the final dividend tax and withholding profit remittance tax. Thereafter, Marubeni, through SGV, sought a ruling from the BIR on whether or not the dividends it received from AG&P are effectively connected with its business in the Philippines as to be considered branch profits subject to profit remittance tax. The Acting Commissioner ruled that the dividends received by Marubeni are not income from the business activity in which it is engaged. Thus, the dividend if remitted abroad are not considered branch profits subject to profit remittance tax. Pursuant to such ruling, petitioner filed a claim for refund for the profit tax remittance erroneously paid on the dividends remitted by AG&P. Respondent Commissioner denied the claim. It ruled that since Marubeni is a non resident corporation not engaged in trade or business in the Philippines it shall be subject to tax on income earned from Philippine sources at the rate of 35% of its gross income.
On the other hand, Marubeni contends that, following the principal-agent relationship theory, Marubeni Japan is a resident foreign corporation subject only to final tax on dividends received from a domestic corporation.
Issue:
Whether or not Marubeni Japan is a resident foreign corporation
Ruling:
No. The general rule is a foreign corporation is the same juridical entity as its branch office in the Philippines . The rule is based on the premise that the business of the foreign corporation is conducted through its branch office, following the principal-agent relationship theory. It is understood that the branch becomes its agent.
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.
Thus, the alleged overpaid taxes were incurred for the remittance of dividend income to the head office in Japan which is considered as a separate and distinct income taxpayer from the branch in the Philippines.
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Pls include GR No of the case. Thank you
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