CTA grants P128-M tax refund to Singapore sovereign wealth fund

Court of Tax Appeals. PHOTO FROM cta.judiciary.gov.ph

The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to issue a P127.67-million tax refund on interest income earned from the Treasury bond investments of Singapore’s sovereign wealth fund.

In a 16-page decision dated June 22, the CTA Third Division said GIC Private Ltd., wholly owned by the Singaporean government, is entitled to a tax exemption under Section 32(B)(7)(a) of the National Internal Revenue Code (NIRC).

Monetary benefits from interest income on T-bonds are subject to a 20-percent final withholding tax to be remitted by the Bureau of Treasury to the BIR. The NIRC exempts foreign governments and their financing institutions from the said tax, entitling them to refunds or tax credits.

The tax court gave weight to the certificate issued by the Singaporean Ministry of Finance, as authenticated by Philippine Consul in Singapore J. Anthony Reyes, regarding the city-state’s ownership of the firm.

Since GIC was able to prove the Singapore government’s full ownership and control, the CTA said the 20-percent final withholding tax paid for the period of January 2013 to July 2014 was “erroneously or illegally collected” by the BIR.

The tax was remitted to the Philippine government because the BTr automatically withholds the 20-percent final tax from its coupon payments regardless of the status of the T-bond holder.

From January 2013 to July 2014, GIC earned a total of P638.37 million in interest income, but only received the net amount of P510.7 million because of the withheld tax.

The GIC, formerly known as the Government of Singapore Investment Corp. Pte. Ltd., was established to enhance the international purchasing power of the prosperous city-state’s reserves and manage its assets and cash.

Associate Justice Ma. Belen M. Ringpis-Liban penned the decision with the concurrence of Associate Justices Lovell R. Bautista and Esperanza R. Fabon-Victorino. JPV