Motion for Reconsideration of the Department of Finance Decision dated 20 March 2012 on the Request for Review of BIR ITAD Ruling No. 275-11

April 27, 2012 DOF OPINION Caguioa & Gatmaytan 30th Floor 88 Corporate Center Sedeo corner Valero Streets Salcedo Village, Makati City 1227 Attention: Atty. Alfredo Benjamin S. Caguioa Atty. Anthony Mark A. Gutierrez Atty. Lyra Miragrace C. Flores Atty. Miguel Antonio G. Zablan SUBJECT : Motion for Reconsideration of the Department of Finance Decision dated 20 March 2012 on the Request for Review of BIR ITAD Ruling No. 275-11 Gentlemen : This is in reference to your Motion for Reconsideration dated 17 April 2012 ("Motion for Reconsideration") seeking to reverse and set aside this Department's Decision dated 20 March 2012 ("Decision") and the Bureau of Internal Revenue ("BIR") International Tax Affairs Division ("ITAD") Ruling No. 275-11 dated 18 November 2011, which denied the Tax Treaty Relief Application ("TTRA") filed by Holcim Philippines, Inc. ("Holcim") on 01 July 2010 for application of the preferential tax rate of ten percent (10%) to the dividends paid by Holcim to Holderfin B.V. ("Holderfin"), due to its failure to comply with the fifteen (15) day period for filing the TTRA under Section III (2) of Revenue Memorandum Order No. 1-2000 ("RMO 1-2000"). Based on a careful review and evaluation of the arguments presented in the Motion for Reconsideration, we see no reason to depart from the findings and conclusions in the Decision which affirmed BIR ITAD Ruling No. 275-11 in its entirety. In the Motion for Reconsideration, it is argued that the date of payment of dividends on 25 June 2010 as indicated on the Secretary's Certificate dated 07 June 2010 cannot be considered as proof of the actual date of payment of the dividends. This position is maintained by Holcim in light of its alleged actual date of dividend payment on 16 July 2010. As noted in the Decision, curiously, this supposed later date of payment of dividends than that shown on the Secretary's Certificate dated 07 June 2010 was never raised nor proven while its request for application of the preferential tax rate was pending with the BIR ITAD. The records show that from the time it filed its TTRA on 01 July 2010, Holcim has been regularly communicating and even submitting additional supporting documents to the BIR until its last submission on 01 September 2011. It should be emphasized that the supposed later date of payment of the dividends was not even brought to the attention of the BIR notwithstanding the supposed knowledge by Holcim of the fifteen (15) day period for filing the TTRA prescribed under RMO 1-2000. TcCSIa Further, Holcim contends that the application of the preferential tax rate pursuant to the Convention between the Republic of the Philippines and Kingdom of Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income ("RP-Netherlands Tax Treaty") cannot be defeated by a mere administrative issuance. It bears stressing to note that no less than the Supreme Court has consistently recognized that revenue regulations and other administrative issuances are entitled to great weight and shall have the binding force and effect of law. 1 It is an elementary rule in administrative law that administrative regulations and policies by administrative bodies to interpret the law which they are entrusted to enforce have the force of law and are entitled to great respect, and have in their favor a presumption of legality. 2 Considering that the BIR is the administrative agency charged with the implementation, interpretation and enforcement of taxation laws in the Philippines, the construction placed by it thereon should be given controlling weight. 3 In applying the said doctrine, the courts often refer to several factors which may be regarded as bases of the principle which lead the courts into giving the principle controlling weight. These factors include the respect due the governmental agencies charged with administration of the law, as well as their competence, expertise, experience and informed judgment. Further, the administrative agency is usually the one which the legislature must rely on to advise it as to the practical working out of the statute, and the practical application of the statute presents the administrative agency with unique opportunity and experiences for discovering deficiencies, inaccuracies or improvements. 4 Based on the foregoing, we hereby deny the Motion for Reconsideration filed by Holcim and affirm the Decision dated 20 March 2012 as well as the ruling of the BIR Commissioner in its entirety. The dividends paid by Holcim to Holderfin on 16 July 2010 shall be subject to regular income tax at the rate of thirty percent (30%) of the gross amount thereof, pursuant to Section 28 (B) (1) (a) of NIRC, as amended. Very truly yours, (SGD.) CESAR V. PURISIMA Secretary Footnotes 1. Atlas Consolidated Mining Corporation vs. Commissioner of Internal Revenue , G.R. No. 159490, 18 February 2008. 2. Warren Manufacturing vs. Bureau of Labor Relations , G.R. No. 76185, 30 March 1988, citing Espanol vs. Philippine Veterans Administration , 1985; Sierra Madre Trust vs. Secretary of Agriculture and Natural Resources , G.R. Nos. L-32370 & 32767, 20 April 1983; Antique Sawmill, Inc. vs. Zayco , G.R. No. L-20051, 30 May 1966; Valerio vs. Secretary of Agriculture , G.R. No. L-18587, 23 April 1963. 3. Asturias Sugar Central, Inc. vs. Commissioner of Customs , G.R. No. 19337, 30 September 1969. 4. Supra .