[Tax on Corporations – Income tax at the end of the year]

18 CIR v Wander Philippines

April 15, 1988 | Bidin, J. |

Facts:
● Wander Philippines is a domestic corporation organized under PH law and is a wholly-
owned subsidiary of Glaro SA Ltd, a Swiss corporation not engaged in trade or business in
the PH
● July 1975, Wander remitted P222k in dividends to Glaro, and P77700 was withheld and
paid to BIR as withholding tax (35%)
● July 1976, Wander remitted P355200 in dividends to Glaro, and P124320 was withheld
and paid to BIR as withholding tax (35%)
● July 1977, Wander filed a claim for refund/tax credit in the amount of P115400, contending
that it was liable to only 15% withholding tax in accordance with Sec 24 of the Tax code,
and not 35%
● 1984 CTA granted the refund/tax credit of P115440 representing overpaid withholding tax
Wander paid for 1975 and 1976 (di sinabi why it took so long)
● CIR’s MR denied, hence current petition

Issue:
W/N Wander is entitled to the tax refund by paying only the preferential 15% withholding tax
rate instead of 35%

Held:
YES. Application of Sec 24(b)(1) of the Tax Code imposes only a 15% tax on dividends
received from a domestic corporation if the country where the non-resident corporation
is in allows a tax credit against the tax due from the non-resident foreign corporation taxes
deemed to have been paid in the Philippines equivalent to 20% (sobrang haba sorry ang
daming words)
● Basically, the foreign country should grant at least a 20% credit on dividends received
which would represent the difference between the normal 35% withholding tax rate and
the preferential 15% tax rate. If the condition is satisfied, the preferential 15% tax rate
would apply.
● Switzerland did not impose any tax on the dividends received by Glaro from Wander, thus
full tax credit was granted and not just the 20% condition set by the Tax Code. Wander is
entitled to the preferential 15% tax rate.
● While claims for refund should be construed strictly against the claimant, it is enough that
Switzerland did not impose any tax on the dividends received by Glaro from Wander to
satisfy the condition.
● To deny Wander the preferential 15% withholding tax rate would run counter to the spirit
and intent of the law in attracting foreign corporations to invest capital in our country
● Court also discussed that Wander is the proper entity to claim for refund because it was
compelled to be a withholding agent of the government under Section 53(b) of the Tax
Code

Dispositive
WHEREFORE, petition dismissed for lack of merit