Tax Updates January 2023 (SyCipLaw Tax Issues And Practical Solutions (T.I.P.S.) Vol. 22) – Withholding Tax – Philippines

Tax Updates January 2023 (SyCipLaw Tax Issues And Practical Solutions (T.I.P.S.) Vol. 22)  – Withholding Tax – Philippines

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  1. Does the Court of Tax Appeals have jurisdiction over a
    tax dispute involving solely two government agencies under the
    Executive Department?

None. In The Department of Energy (“DOE”) v. Court of
Tax Appeals (“CTA”) (G.R. No. 260912, August 17, 2022),
the Supreme Court held that it is the Executive, acting through the
Solicitor General or the Secretary of Justice, as the case may be,
that has jurisdiction over a tax dispute involving two government
agencies under the Executive Department.

In DOE v. CTA, the Bureau of Internal Revenue (“BIR”)
assessed deficiency excise taxes against the DOE. The DOE filed a
petition for review before the CTA Second Division, which dismissed
the petition for lack of jurisdiction. The CTA En Banc affirmed the

In affirming the dismissal by the CTA, the Supreme Court held
that the CTA is not the proper forum to resolve a purely
intra-governmental dispute. The Supreme Court ruled that all
disputes, claims, and controversies, including disputes on tax
assessments, solely between or among executive agencies, must be
submitted to administrative settlement by the Secretary of Justice
or the Solicitor General, as the case may be.

SyCipLaw TIP 1:

If a tax dispute involves solely two government agencies, even
if one of them is the BIR, jurisdiction to resolve the case lies
with the Executive. However, if the parties to the tax dispute
include not only government agencies but also individual taxpayers
and/or non-individual taxpayers that are not government agencies,
the jurisdiction lies with the tax courts.

The Supreme Court explained that Presidential Decree No. 242
(Prescribing the Procedure for Administrative Settlement or
Adjudication of

Disputes, Claims and Controversies, between or among Government
Offices, Agencies and Instrumentalities, including Government-
Owned or Controlled Corporations and for Other Purposes) (“PD
No. 242”), as a special law, prevails over Republic Act No.
1125 (An Act

Creating the Court of Tax Appeals), as amended (“RA
1125”), and the National Internal Revenue Code of 1997, as
amended (“NIRC”), with respect to provisions on the
jurisdiction of the CTA over tax disputes. The Supreme Court
reiterated its ruling in PSALM v. Commissioner of Internal Revenue
(“CIR”) (GR No. 198146, August 8, 2017) where the Court
made a definitive and binding pronouncement that PD No. 242 is a
special law and must be read as a carve-out from the general
jurisdiction of the CTA over tax cases.

The provisions in the NIRC and RA 1125, on the jurisdiction of
the CTA over tax disputes involving tax laws enforced by the BIR,
should be read as general provisions governing the settlement of
disputes involving tax claims. These provisions apply with equal
force to all persons involved in disputes pertaining to all tax
claims arising from all tax laws being implemented by the BIR. In
contrast, PD No. 242, as now embodied in the Revised Administrative
Code, applies only to particular persons involved in a uniquely
specific category of cases — disputes, claims, and
controversies where all the parties involved are government

The Supreme Court said that it was categorical in its ruling in
PSALM v. CIR that when the law says “all disputes, claims and
controversies solely among government agencies,” the law means
all, without exception. Therefore, so long as such dispute arises
from any of the following – “the interpretation and
application of statutes, contracts, or agreements” – the
same falls under the administrative settlement proceedings directed
by PD No. 242.

The Supreme Court also held that the Executive’s power of
control necessitates administrative settlement of disputes. Given
that the President, as Chief Executive, has control over all
agencies in dispute, including the BIR and the CIR, it is only
proper and logical that he first be given a chance to resolve the
dispute before resorting to the courts. Only after the President
has decided or settled the dispute can the court’s jurisdiction
be invoked.

Tax Updates January 2023 (SyCipLaw Tax
Issues and Practical Solutions (T.I.P.S.) Vol. 22)

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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