Marubeni Corp. v.
CIR ISSUE: W/N Marubeni is subject to the 15%
G.R. No. 76573
March 7, 1990
FACTS:
AG&P of Manila has been paying cash
dividends and withheld 10% final dividend
tax thereon to Marubeni Corporation of
Japan. AG&P, as withholding agent, directly
remitted cash dividends to Marubeni’s head
office in Tokyo, not only of the 10% final
dividend tax but also of the withheld 15%
profit remittance tax based on the remittable
amount after deducting the final withholding
tax of 10%.
Marubeni is claiming for refund or tax
credit, alleging that the dividends remitted
were not subject to the 15% profit
remittance tax as they are not income arising
from sources within the Philippines. CIR
denied the claim on the ground that since
Marubeni is a non-resident foreign
corporation, it is nevertheless subject to 25%
tax pursuant to Art. 10(2) of the Philippines-
Japan Tax Treaty.
Marubeni now claims that it is a resident
foreign corporation because of its principal-
agent relationship with its Philippine Branch
and, therefore, subject only to 10%
intercorporate final tax on dividends.
On October 9, 1989, petitioner similarly
filed its motion for reconsideration
remaining steadfast to its position that it is a
resident foreign corporation subject only to
the ten percent (10%) final intercorporate
dividend tax.
final intercorporate dividend tax.
HELD:
Section 24(b)(1) is explicit on the conditions
for the availment of the preferential fifteen
percent (15%) tax rate. Under said
provision, petitioner must show that Japan
grants a tax credit to Marubeni, taxes
deemed to have been paid in the Philippines
equivalent to at least twenty percent (20%)
against the tax due from Marubeni.
In the case at bar, petitioner similarly failed
to comply with the requisites set forth under
Section 24(b)(1). Petitioner reasons that it
cannot furnish the Commissioner of Internal
Revenue with the confidential income tax
return of Marubeni Japan since such a
requirement is beyond the power of
Philippine taxation laws.
Such reasoning finds no merit. Section
24(b)(i) of the National Internal Revenue
Code of 1977 is clear and explicit on the
conditions for the availment of the
preferential fifteen percent (15%) tax rate.
Normally the Philippines imposes a higher
thirty five percent (35%) tax rate on
corporations. But since the Philippines seeks
to lessen the impact of double taxation
between countries, we impose only the
lower tax rate of fifteen percent (15%) on
dividends subject to the condition that the
country in which the non-resident foreign
corporation is domiciled allows a tax credit
of twenty percent (20%). Such prerequisite
must be strictly complied with because the
fifteen percent (15%) tax rate is a
concession in the nature of a tax exemption
vis-a-vis the normal rate of thirty five (35%)
on corporations.

Petitioner's motion for reconsideration

merely reiterates the same arguments
previously raised in its petition and does not
raise substantial issues not raised upon in
our decision dated September 14, 1989.
Accordingly, since petitioner failed to
comply with the conditions set forth under
Section 24 (b)(1) of the National Internal
Revenue Code of 1977, we hereby modify
the decision dated September 14, 1989 and
rule that petitioner corporation is subject to
the twenty five percent (25%) tax rate on
dividends pursuant to Article 10(2) of the
Philippine-Japan Tax Convention. The
Commissioner of Internal Revenue is hereby
ordered to recompute the tax due from
petitioner corporation using the correct tax
base and rate.