Filipino ADB employees tax-exempt, CA affirms

Filipino personnel of the Asian Development Bank (ADB) scored another victory against the taxman, as the Court of Appeals (CA) last week denied the move of the Bureau of Internal Revenue (BIR) to have the Manila-based employees taxed.

BIR Commissioner Kim S. Jacinto-Henares told the Inquirer on Wednesday that the country’s biggest tax-collection agency will appeal the latest CA ruling before the Supreme Court.

For former internal revenue chief Liwayway Vinzons-Chato, who now serves as legal counsel for the ADB employees, the high court will also likely dismiss BIR’s appeal. “We are praying it will be dismissed [by the Supreme Court] outright if the procedure is to be followed,” Vinzons-Chato said in a telephone interview.

In a resolution dated January 4, 2016, the CA’s former second division denied the BIR’s appeal, noting there was “no review of evidence required in resolving this issue.”

“There is nothing here for the courts to do but to interpret the provision of [Revenue Memorandum Circular] 20-86 and the Administrative Code in order to determine the validity of RMC 31-2013,” the decision penned by Associate Justice Agnes Reyes-Carpio read.

The case stemmed from a petition filed by two ADB employees before a Mandaluyong court after being slapped with tax evasion cases. They questioned Section 2(d)(1) of BIR’s RMC 31-2013 that said “only officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax.”

The Mandaluyong court later ruled that the BIR ruling was “void in absence of legislation and/or regulation to the contrary.”

The BIR raised the issue before the appellate court, but subsequently received an unfavorable ruling in July last year.

The CA had said the BIR had “improperly elevated” the case before it by ordinary appeal when it should have been raised by petition for review on certiorari before the Supreme Court under Rule 45 of the Rules of Civil Procedure. Reyes-Carpio had explained the case filed by the BIR did not call for a review of the evidence, but involved a question of law.

Questions of law are usually raised before the SC.

“The main question now lies in the interpretation of the exemption provided by the ADB charter and its applicability to petitioners-appellees. Thus, there is no review of evidence required. Consequently, the issue of the instant case is one which is a question of law,” read Reyes-Carpio’s previous ruling, to which Associate Justices Remedios Salazar-Fernando and Romeo F. Barza concurred.