Tuesday, November 07, 2006 Tax notes: Refund for taxes on OECF projects
THE Bureau of Internal Revenue (BIR) is not liable to refund taxes paid by Japanese contractors of projects funded by the Overseas Economic Cooperation Fund (OECF). [Commissioner of Internal Revenue v. Mitsubishi Corporation-Manila Branch, Court of Tax Appeals (CTA) EB No. 5, CTA Case 6139 dated May 24, 2006]
Pursuant to the Exchange of Notes between the governments of Japan and the Philippines, the latter, through its instrumentalities, shall assume all fiscal levies or taxes imposed in the Philippines on Japanese firms and nationals operating as suppliers, contractors or consultants in connection with any income that may accrue from the supply of products of Japan and services of Japanese nationals to be provided under the loan.
In case said Japanese contractors paid taxes to the BIR, such taxes cannot later be refunded by the Bureau. Section 229 of the Tax Code authorizes the BIR to refund taxes that were erroneously or excessively paid.
The taxes paid by the Japanese contractors were not erroneously paid because they are legally mandated to pay the taxes.
The Exchange of Notes do not grant tax exemption. Revenue Memorandum Circular 42-99 already clarifies that such taxes should be recovered from the government agency that executed the project. (Source: Punongbayan & Araullo)
