DOJ Opinion No. 054, s. 2004

DOJ OPINION NO. 054 , s. 2004 June 14, 2004 Secretary Juanita D. Amatong Department of Finance Manila M a d a m : This refers to your request for opinion on whether the assessment fees that the Philippine Deposit Insurance Corporation (PDIC) levies on its member banks, in accordance with Section 6(a) 1 of Republic Act (RA) No. 3591, 2 as amended, are subject to value-added tax (VAT). You state that the PDIC received from the Bureau of Internal Revenue (BIR) Makati Revenue Region No. 8, Preliminary Assessment Notices (PAN) assessing the PDIC for, among others, alleged VAT deficiency for the years 1996-1999, 2000 and 2001-2002 in the total amount of P5,566,673,216.30 on the assessment fees the PDIC levied on its member banks. The Makati Revenue Region maintains that, as a non-life insurance company, the PDIC became liable for the 10% VAT pursuant to Section 102 3 of the National Internal Revenue Code, as amended by RA No. 7716. 4 The PDIC filed its written protest about the PANs but the Makati Revenue Region denied it and issued Formal Assessment Notices. To meet the situation, the PDIC protested about the Formal Assessment Notices. The Makati Revenue Region denied the protest about the VAT assessment for the taxable year 2000, prompting the PDIC to appeal to the BIR Commissioner. Subsequently, the Makati Revenue Region also denied the protest about the VAT assessments for the years 1996-1999 and 2001-2002. The records show that the Commissioner of Internal Revenue, in a letter dated February 20, 2004, requested the Secretary of Finance to resolve the issue, submitting a copy of the letter dated January 20, 2004 from the Makati Revenue Region relative to the VAT assessments for the years 1996-1999 and 2001-2002 that reiterated its position on the issue. Considering that the Secretary of Finance serves as ex officio Chairman of the PDIC and exercises supervision and control over the BIR, you now submit the issue to this Department for opinion. iatdc2004 Given the foregoing facts, and because the subject matter of the request involves a controversy between the PDIC, a government-owned and controlled corporation, and the BIR, a bureau of the National Government, the issue is proper for administrative settlement or adjudication under Presidential Decree (PD) No. 242, 5 as adopted in Chapter 14, 6 Book IV of the Administrative Code of 1987. 7 As a matter of procedure, the petition for administrative settlement of disputes or controversies shall be signed by the chief of the office, bureau or agency concerned, a copy thereof to be furnished the other party as respondent. The petition shall state the name(s) and addresses of all the parties, the facts, the legal question(s), the factual issues and the relief(s) sought. We are enclosing, for your reference and guidance, a copy of this Department's Administrative Order No. 121 dated July 25, 1973, which provides for the rules concerning the administrative settlement or adjudication of cases under PD No. 242, as adopted in the Administrative Code of 1987. AcEIHC Very truly yours, (SGD.) MA. MERCEDITAS N. GUTIERREZ Acting Secretary Footnotes 1. SEC. 6.(a) The assessment rate shall be determined by the Board of Directors: Provided, That the assessment rate shall not exceed one-fifth (1/5) of one per centum (1%) per annum . . . 2. AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, DEFINING ITS POWERS AND DUTIES, AND FOR OTHER PURPOSES. 3. Now Section 108 as renumbered by the NIRC of 1997 (RA No. 8424). 4. AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES. 5. PRESCRIBING THE PROCEDURE FOR ADMINISTRATIVE SETTLEMENT OR ADJUDICATION OF DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN OR AMONG GOVERNMENT OFFICES, AGENCIES AND INSTRUMENTALITIES, INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS, AND FOR OTHER PURPOSES. 6. Controversies Among Government Offices and Corporations. 7. Executive Order No. 292.