Motion for Reconsideration of Department of Finance Decision Dated 23 November 2012 on the Request for Review of BIR ITAD Ruling No. 251-12 Dated 7 June 2012

March 18, 2013 DOF OPINION Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City 1226 Attention: Atty. Luis Jose P. Ferrer Partner, Tax Advisory and Advocacy Group SUBJECT : Motion for Reconsideration of Department of Finance Decision Dated 23 November 2012 on the Request for Review of BIR ITAD Ruling No. 251-12 Dated 7 June 2012 Gentlemen : This refers to your letter dated 28 December 2012 requesting for the reconsideration of this Department's decision contained in a letter dated 23 November 2012 ("Decision"), which affirmed the Bureau of Internal Revenue ("BIR") International Tax Affairs Division ("ITAD") Ruling No. 251-12 dated 7 June 2012, denying the Tax Treaty Relief Application ("TTRA") filed by Yakult-Honsha Co. Ltd. ("Yakult-Japan"). The TTRA was denied for having been filed beyond the period prescribed in Section III (2) of Revenue Memorandum Order ("RMO") 1-2000. HDTISa Based on a careful review and evaluation of the arguments presented in your request for reconsideration, we see no reason to depart from the findings and conclusions in the Decision which affirmed BIR ITAD Ruling No. 251-12. First, we find no merit in the argument that the BIR superseded its authority when it adopted additional and restrictive requirements through the provisions of RMO 1-2000. As the case of Mirant (Philippines) Operations Corporation v. Commissioner of Internal Revenue (CTA Case No. 6382, 7 June 2005) states, "a foreign corporation wishing to avail of the benefits of a tax treaty should invoke the provisions of the tax treaty and prove that indeed the provisions of the tax treaty applies to it, before the benefits may be extended to such corporation. In other words, a resident or non-resident foreign corporation shall be taxed according to the provisions of the National Internal Revenue Code (NIRC), unless it is shown that the treaty provisions apply to the said corporation, and that, in case the same are applicable, the option to avail of the tax benefits under the tax treaty has been successfully invoked." In the case at bar, by not following the process laid down by the BIR in RMO 1-2000, Yakult-Japan failed to prove that the provisions of the tax treaty it is invoking applies to it. By failing to prove that the treaty provisions apply to it, the assumption that they should be taxed according to the provisions of the NIRC holds. The TTRA denial is, therefore, not strictly a penalty, but is merely the logical result of Yakult-Japan's failure to show that they are entitled to the exemptions provided in the tax treaty. Tax exemptions are not presumed but are strictly construed against the taxpayer and liberally for the taxing authority. 1 Second, we stress that it is an elementary rule in administrative law that administrative regulations and policies by administrative bodies that aim 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 Interpretations of administrative agencies in charge of enforcing a law are entitled to great weight and consideration by the courts, unless such interpretations are in a sharp conflict with the governing statute or the Constitution and other laws. 3 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. 4 Third, we find no merit in Yakult-Japan's reliance on the pronouncement by the BIR in BIR Ruling No. [DA-191-04]. The BIR Commissioner is not bound by his/her predecessors' acts and/or previous rulings, as the BIR Commissioner may render a different construction to a statute if the new interpretation is in congruence with the law. 5 It cannot be over-emphasized that BIR Rulings are issued by the BIR to answer various tax queries from specific entities and, as such, may only be particularly applicable in relation to the specific query. aEHAIS Based on the foregoing, we hereby deny the request for reconsideration filed by Yakult-Japan and affirm this Department's Decision in the letter dated 23 November 2012 which, in turn, upheld BIR ITAD Ruling No. 251-12 dated 7 June 2012. Thank you for your attention. Very truly yours, (SGD.) CESAR V. PURISIMA Secretary Footnotes 1. See Smart Communications, Inc. vs. The City of Davao (G.R. No. 155491, September 16, 2008) and Commissioner of Internal Revenue v. Visayan Electric Company , 132 Phil. 203, 215 (1968). 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. No. L-32370 & 32767, 20 April 1983. 3. Dumaguete Cathedral Credit Cooperative, represented by Felicidad L. Ruiz, vs. Commissioner of Internal Revenue , G.R. No. 182722, 22 January 2010. 4. Asturias Sugar Central, Inc. vs. Commissioner of Customs , G.R. No. 19337, 30 September 1969. 5. Commissioner of Internal Revenue vs. American Express International, Inc. , G.R. No. 152609, 29 June 2005.