BIR Ruling [DA-283-00]

July 18, 2000 BIR RULING [DA-283-00] Atty. Samuel Estimo No. 10 Magreville Avenue Magreville Subdivision Capitol Hills, Quezon City S i r : This refers to your letter dated June 27, 2000 requesting for a reconsideration of BIR Ruling No. 026-2000 dated June 13, 2000, imposing a 20% final withholding tax on the P1 Million prize won by your client, GM Joey Antonio, in the recently held Millennium Chess Tournament. Among others, it is alleged that the said ruling constitutes a violation of the constitutional right of your client to equal protection of the laws and a complete disregard and defiance of legislative intent; that your client is entitled to equal protection of the laws since he is in the same league with other outstanding athletes whose sports associations are accredited by the Philippine Olympic Committee; that chess, as a sport has its own Olympiad which is held every two (2) years; that the Philippine Chess Federation (PCF) which sanctioned the chess event gets its accreditation from the World Chess Federation (FIDE) and not from the International Olympic Committee (IOC); that the PCF does not need prior accreditation by the POC before it becomes a member of FIDE; that even as a sport association recognized by the Philippine Sports Commission (PSC), the PCF never sought accreditation from the POC. cdlex It is likewise alleged that in interpreting R.A. 7549, this Office should have followed the generally-accepted rules of statutory construction; that R.A. 7549 is a special law intended for a special purpose while the Tax Code of 1997 is intended for general application; that the settled rule is that "If the general law was enacted after the special law, the special law remains unless the subsequent general law covers the whole subject and is clearly intended to replace the special law on the matter" (citing In re Gusman, 73 Phils. 51; Joaquin v. Navarro, 81 Phil. 373); that this Office should have likewise considered the preamble of the statute and the history of the framing of the law, including the deliberations in Congress; that the title of R.A. 7549 indicates in no uncertain terms that all prizes and awards gained from local and international sports tournaments and competitions are exempt from the payment of income and other forms of taxes; that during the deliberations of House Bill No. 22232, which later became R.A. 7549, Congressman Martin Isidro proposed the inclusion of the sports of chess as one of the beneficiaries of the proposed law; that excerpts of the minutes of said deliberations runs as follows: "AMENDMENTS OF MR ALBANO "As proposed by Mr. Albano and accepted by Sponsor, subject to style, the Body approved on page 1, line 9, to add the word BASEBALL, after, "basketball(,)"; and line 10, to put a comma (,) after "sipa and thereafter add the phrase SOCCER, FOOTBALL, SOFTBALL, VOLLEYBALL. llcd "AMENDMENTS OF MR. MONTEJO "As proposed by Mr. Montejo and accepted by the Sponsor, the Body approved the following amendments on page 2: 1. On line 1, to insert the word EXECUTIVE before orders;" 2. On line 2, to insert the word EXECUTIVE, before "issuances;" 3. On line 3, to insert WHICH ARE before "inconsistent" and 4. On line 3, to change the word "deemed" to HEREBY. "AMENDMENT OF MR. ISIDRO "As proposed by Mr. Isidro, and accepted by the Sponsor, the Body approved on page 1, line 10, to include the sport CHESS." In view of the foregoing; you now request that this Office reconsider or revoke its Ruling dated June 13, 2000 and in lieu thereof, issue another ruling exempting the P1 million prize of GM Joey Antonio from payment of the 20% final withholding tax pursuant to Section 24(B)(1) of the Tax Code of 1997. In reply, please be advised that this Office has carefully considered the merits of your arguments vis-a-vis our questioned ruling. However, after a careful restudy of the said ruling in the light of your arguments, this Office still finds no cogent reason to reverse the same. R.A. 7549 which is the law on the issue is quoted in full as follows: "REPUBLIC ACT NO. 7549 "AN ACT EXEMPTING ALL PRIZES AND AWARDS GAINED FROM LOCAL AND INTERNATIONAL SPORTS TOURNAMENTS AND COMPETITIONS FROM THE PAYMENT OF INCOME AND OTHER FORMS OF TAXES AND FOR OTHER PURPOSES "SEC. 1. All prizes and awards granted to athletes in local and international sports tournaments and competitions held in the Philippines or abroad and sanctioned by their respective national sports associations shall be exempt from income tax: Provided, That such prizes and awards given to said athletes shall be deductible in full from the gross income of the donor: Provided, further, That the donors of said prizes and awards shall be exempt from the payment of donor's tax. cdlex "The benefits herein provided shall cover the XVIth Southeast Asian Games (SEA Games) held in Manila from November 25 to December 5, 1991. "SEC. 2. As used in this Act the term: (1) "Sports tournaments and competitions" shall mean those tournaments and competitions sanctioned by the national sports associations in accordance with the rules and regulations pursuant to Section 3 hereof; and (2) " National sport association" shall mean those duly accredited by the Philippine Olympic Committee ." "SEC. 3. Upon the recommendation of the Commissioner of the Bureau of Internal Revenue, the Philippine Sport Commission (PSC) and the Department of Finance shall, within thirty (30) days from the effectivity of this Act, jointly promulgate rules and regulations necessary for the effective implementation of this Act. "SEC. 4. All laws, decrees, executive orders, other executive issuances, rules and regulations, or parts thereof, which are inconsistent with this Act, are hereby repealed or modified accordingly. "SEC. 5. This Act shall take effect upon the completion of its publication in at least two (2) newspapers of general circulation. "Approved: May 22, 1992" The present provision of the Tax Code, as amended by the CTRP, which included prize and award from sports competition among the items of income exempt from tax, is found in Section 32(B)(7)(d) thereof and this is quoted as follows: "(d) Prizes and Awards in Sports Competition . All prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned by their national sports associations." cdlex This provision was recommended for inclusion into the present Tax Code by the Technical Working Group of the BIR during the formulation of the CTRP in Congress, precisely on account of the special law on the matter, which is R.A. 7549. For all intents and purposes therefore, it is R.A. 7549 which is the governing special law on the matter while the Tax Code as amended by the CTRP, serves as the general law on the subject. It is a well-established principle of legal hermeneutics that a general law on a subject does not operate to repeal a prior special law on the same subject, unless it clearly appears that the legislature has intended by the later general act to modify or repeal the earlier special law. In case of conflict, the rule is that where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the special statute must prevail since it evinces the legislative intent more clearly than that of a general statute. The reason for this rule is that the legislature, in passing a law of special character, has its attention directed to the special facts and circumstances which the special act is intended to meet. (Manila Railroad Co. vs. Rafferty, 40 Phil. 224). Based on R.A. 7549 therefore, this Office held that to be exempt from taxes on prizes and awards received by athletes in sports competition, that competition must be sanctioned by their national sports association. Since the governing special law defined "national sports associations" to mean only those duly accredited by the Philippine Olympic Committee, then the clear intent of the law is to grant exemption only when this condition is met. It likewise seems clear that the law intends to extend the benefit of tax exemption to athletes in sports events played in the Olympic Games, thus the need for accreditation with the Philippine Olympic Committee. The law itself provided the only exception to this rule when it took pains in specifically stating that " (T)he benefits herein provided shall cover the XVIth Southeast Asian Games (SEA Games) held in Manila from November 25 to December 5, 1991 ". You stated, however, that the intention of the law is to include the sports of chess in the coverage of the tax exemption, citing the deliberations in H.B. 22232, as quoted above. But the fact remains that all the proposed amendments to the bill, i.e., the enumeration of the particular sports and competitions such as Sipa, Soccer, Football, Softball, Volleyball, and the inclusion of the sports Chess, were never incorporated in the law as finally passed by Congress and which is now known as R.A. 7549 . This may be an all too clear indication that Congress rejected such proposed amendments in the first place. A tax cannot be imposed unless it is supported by the clear and express language of a statute. On the other hand, once the tax is unquestionably imposed, a claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken . (Davao Gulf Lumber Corporation, Petitioner, vs. Commissioner of Internal Revenue and Court of Appeals, Respondents, G.R. No. 117359, July 23, 1998) There is much to be said about the strong and persuasive arguments which you raised but we are compelled to abide by the maxim that all doubts must be resolved in favor of the taxing authority and that tax exemptions must be strictly construed and can only be given force when the grant is clear and categorical. This is already a too settled rule in this jurisdiction, as to dispense with the need for citations that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. It is therefore with regret that this Office would have to reiterate, as it hereby reaffirms, its previous ruling on the matter. The law may be harsh but we have no other recourse but to apply the law as it is written. This constitutes the final decision of this Office on the matter. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue