G.R. No. 103092 & 103106. July 21, 1994.
BANK OF AMERICA NT & SA, petitioner, vs. HONORABLE COURT OF APPEALS AND THE COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS

Petitioner Bank of America NT & SA, a foreign corporation licensed to do business in the Philippines, paid a 15% branch profit remittance tax for 1982. The tax was computed by the Bureau of Internal Revenue (BIR) based on the bank’s net profits after income tax but before the deduction of the 15% remittance tax itself. The bank contended that the tax base should be the profit actually remitted abroad, which would be the net profit after income tax less the 15% remittance tax. Consequently, the bank filed a claim for refund for the alleged overpayment, arguing the BIR’s computation erroneously included the tax due within the tax base.
The Court of Tax Appeals ruled in favor of the bank and ordered the refund. On appeal, the Court of Appeals reversed this decision. The appellate court rejected the bank’s interpretation, finding no legislative intent to mitigate successive taxation through a novel computation method. The bank then elevated the case to the Supreme Court via these consolidated petitions for review.

ISSUE

Whether the 15% branch profit remittance tax under Section 24(b)(2)(ii) of the National Internal Revenue Code should be computed based on the profit actually remitted abroad (net of the tax) or on the total profit deemed remitted (inclusive of the tax).

RULING

The Supreme Court ruled in favor of the bank, reversing the Court of Appeals and reinstating the decision of the Court of Tax Appeals. The 15% tax must be levied only on the amount actually remitted, not on an amount that includes the tax itself.
The Court’s legal logic centered on the statutory language and the nature of the tax. The law explicitly taxes “any profit remitted abroad.” This denotes the sum physically sent to the head office. To compute the tax by applying the 15% rate to a base that already includes the tax liability results in a tax on the tax, a construction not supported by the law’s plain wording. The Court distinguished this from the withholding tax system, where the payor acts as a government collection agent and the tax is sourced from the income payment, justifying a “constructive receipt” concept. In contrast, the branch profit remittance tax involves a single taxpayer (the branch) using its own local funds to pay its own tax liability. There is no separate payer and payee relationship to support a fiction of constructive remittance of the tax amount itself. Therefore, the correct base is the profit net of the remittance tax, ensuring the tax is imposed only on the profit actually exiting the country.