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    CIR vs. PAL

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    Neil de Castro
    The CIR argued that Philippine Airlines was liable for minimum corporate income tax based on its gross income, even though it had zero taxable income. However, Philippine Airlines' franchise exempts it from "all other taxes" as long as it pays the lower of basic corporate income tax on net income or a 2% franchise tax. The Court held that Philippine Airlines was not liable for minimum corporate income tax, as its franchise exemption included this tax, and the tax code distinguishes between taxable income and gross income. The CIR's argument that exemption required actual tax payment was rejected, as the franchise allowed Philippine Airlines to opt out of other taxes.

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    CIR vs. PAL

    Uploaded by

    Neil de Castro
    34 views1 page
    The CIR argued that Philippine Airlines was liable for minimum corporate income tax based on its gross income, even though it had zero taxable income. However, Philippine Airlines' franchise exempts it from "all other taxes" as long as it pays the lower of basic corporate income tax on net income or a 2% franchise tax. The Court held that Philippine Airlines was not liable for minimum corporate income tax, as its franchise exemption included this tax, and the tax code distinguishes between taxable income and gross income. The CIR's argument that exemption required actual tax payment was rejected, as the franchise allowed Philippine Airlines to opt out of other taxes.

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    The CIR argued that Philippine Airlines was liable for minimum corporate income tax based on its gross income, even though it had zero taxable income. However, Philippine Airlines' franchise exempts it from "all other taxes" as long as it pays the lower of basic corporate income tax on net income or a 2% franchise tax. The Court held that Philippine Airlines was not liable for minimum corporate income tax, as its franchise exemption included this tax, and the tax code distinguishes between taxable income and gross income. The CIR's argument that exemption required actual tax payment was rejected, as the franchise allowed Philippine Airlines to opt out of other taxes.

    Copyright:

    © All Rights Reserved
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    Download as odt, pdf, or txt
    34 views1 page

    CIR vs. PAL

    Uploaded by

    Neil de Castro
    The CIR argued that Philippine Airlines was liable for minimum corporate income tax based on its gross income, even though it had zero taxable income. However, Philippine Airlines' franchise exempts it from "all other taxes" as long as it pays the lower of basic corporate income tax on net income or a 2% franchise tax. The Court held that Philippine Airlines was not liable for minimum corporate income tax, as its franchise exemption included this tax, and the tax code distinguishes between taxable income and gross income. The CIR's argument that exemption required actual tax payment was rejected, as the franchise allowed Philippine Airlines to opt out of other taxes.

    Copyright:

    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
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    of 1

    CIR vs. PHILIPPINE AIRLINES, INC.

    - Minimum Corporate Income Tax


    FACTS:
    PHILIPPINE AIRLINES, INC. had zero taxable income for 2000 but would have been liable
    for Minimum Corporate Income Tax based on its gross income. However, PHILIPPINE
    AIRLINES, INC. did not pay the Minimum Corporate Income Tax using as basis its franchise
    which exempts it from all other taxes upon payment of whichever is lower of either (a)
    the basic corporate income tax based on the net taxable income or (b) a franchise tax of
    2%.
    ISSUE:
    Is PAL liable for Minimum Corporate Income Tax?

    HELD:
    NO. PHILIPPINE AIRLINES, INC.s franchise clearly refers to "basic corporate income tax"
    which refers to the general rate of 35% (now 30%). In addition, there is an apparent
    distinction under the Tax Code between taxable income, which is the basis for basic
    corporate income tax under Sec. 27 (A) and gross income, which is the basis for the
    Minimum Corporate Income Tax under Section 27 (E). The two terms have their respective
    technical meanings and cannot be used interchangeably. Not being covered by the
    Charter which makes PAL liable only for basic corporate income tax, then Minimum
    Corporate Income Tax is included in "all other taxes" from which PHILIPPINE AIRLINES,
    INC. is exempted.

    The CIR also can not point to the Substitution Theory which states that Respondent
    may not invoke the in lieu of all other taxes provision if it did not pay anything at all as
    basic corporate income tax or franchise tax. The Court ruled that it is not the fact tax
    payment that exempts Respondent but the exercise of its option. The Court even pointed
    out the fallacy of the argument in that a measly sum of one peso would suffice to exempt
    PAL from other taxes while a zero liability would not and said that there is really no
    substantial distinction between a zero tax and a one-peso tax liability. Lastly, the Revenue
    Memorandum Circular stating the applicability of the MCIT to PAL does more than just
    clarify a previous regulation and goes beyond mere internal administration and thus
    cannot be given effect without previous notice or publication to those who will be affected
    thereby.

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