Digest Author: Cecille Mangaser

Deutsche Bank AG Manila Branch v. Commissioner of Internal Revenue

GR Number 188550
Petition: Petition for Review
Petitioner: Deutsche Bank AG Manila Branch
Respondent: Commissioner of Internal Revenue
Ponente: Sereno, C. J.
Date: August 28, 2013
Facts:
Pursuant to the National Internal Revenue Code of 1997, on October 21, 2003, the petitioner
remitted to the respondent the amount of Php 67,688,553.51, representing fifteen (15) percent of
the branch profit remittance tax (BPRT) on its regular banking unit (RBU) net income remitted
to the Deutsche Bank of Germany (DB Germany) for 2002 and prior taxable years.
Believing that they made an overpayment of the BPRT, on October 4, 2005, the petitioner filed
with the BIR Large Taxpayers Assessment and Investigation Division an administrative claim for
refund or a tax credit certificate representing the alleged excess BPRT paid (amount of Php
22,562,851.17). The petitioners also requested from the International Tax Affairs Division
(ITAD) for a confirmation of its entitlement to a preferential tax rate of 10% under the RPGermany Tax Treaty.
Because of the alleged inaction of the BIR on the administrative claim, on October 18, 2005, the
petitioner filed a petition for review with the Court of Tax Appeals (CTA), reiterating its claim
for refund or tax credit certificate representing the alleged excess BPRT paid. The claim was
denied on the ground that application for tax treaty relief was not filed with ITAD prior to the
payment of BPRT, thereby violating the fifteen-day period mandated under Section III, paragraph
2 of the Revenue Memorandum Order No. 1-2000. Also, the CTA Second Division relied on an
en banc decision of the CTA that before the benefits of a tax treaty may be extended to a foreign
corporation, the latter should first invoke the provisions of the tax treaty and prove that they
indeed apply to the corporation (Mirant Operations Corporation v Commissioner of Internal
Revenue).
Hence this petition.
Issue:
Whether or not the failure to strictly comply with the provisions of RMO No. 1-2000 will
deprive persons or corporations the benefit of a tax treaty.
Ruling:
No. The constitution provides for the adherence to the general principles of international law as
part of the law of the land (Article II, Section 2). Every treaty is binding upon the parties, and
obligations must be performed (Article 26, Vienna Convention on the Law on Treaties). There is
nothing in RMO 1-2000 indicating a deprivation of entitlement to a tax treaty for failure to
comply with the fifteen-day period. The denial of availment of tax relief for the failure to apply
within the prescribed period (under the administrative issuance) would impair the value of the

Digest Author: Cecille Mangaser

tax treaty. Also, the obligation to comply with the tax treaty must take precedence over the
objective of RMO 1-2000 because the non-compliance with tax treaties would have negative
implications on international affairs and would discourage foreign investments.
Dispositive:
The petition was granted, the CTA en banc decision was set aside and reversed. The respondent
was ordered to refund or issue a tax credit certificate (the amount of Php 22,562,851.17) in favor
of the petitioner.