Tax court rules for airline’s P12-M tax credit claim

Tax court rules for airline’s P12-M tax credit claim

MANILA – The Court of Tax Appeals (CTA) has ruled in favor of a foreign airline’s claim for more than PHP12 million in tax credits filed five years ago.

In its 17-page decision promulgated on March 28, the CTA’s Special 3rd Division partially granted the petition filed by Kuwait Airways Corp. for the issuance by the Bureau of Internal Revenue (BIR) of a tax credit certificate (TCC) for PHP12,398,319 representing the latter’s overpayment of its income tax.

The amount is less than the PHP12,508,611.74 originally sought by the firm in its suit.

The airline originally filed an application for relief from double taxation on shipping and air transport with the BIR’s International Tax Affairs Division (ITAD) in June 2015.

In 2018, it received a BIR ruling, which stated that under a Philippines-Kuwait tax treaty, it is subject to income tax of 1.5 percent of its Gross Philippine Billings (GPB).

In May 2018, the firm filed an application for tax credits and refunds claiming overpaid taxes for the fiscal year ending March 2017 amounting to PHP 12.5 million. After the BIR failed to act on the application, the firm filed a petition before the CTA.

In ruling for the airline company, the CTA said since the firm’s GPB amounting to PHP1,250,861,174 were subjected to a 2.5 percent income tax rate – although it was only subject to 1.5 percent preferential income tax rate – “the income tax due paid there representing the 1 percent difference constitutes erroneously or excessively paid tax, which may be the subject of a claim for issuance of a TCC.” (PNA)

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