CIR V. WANDER PHILIPPINES (TAX)

This is a petition for review on certiorari of the Decision of the CTA holding that Wander Philippines is entitle to the preferential rate of 15% withholding tax on the dividends remitted to its foreign parent company, the Glaro S.A. Ltd. of Switzerland, a non-resident corporation.

The dividends received form a domestic corporation liable to tax, the tax shall be 15% of the dividends received, subject to the condition that the country is which the non-resident corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends.

In the instant case, Switzerland did not impose any tax on the dividends received by Glaro. Wander claims that full credit is granted and not merely credit equivalent to 20%. Petitioner on the other hand, avers the tax sparing credit is applicable only if the country of the parent corporation allows a foreign tax credit only for the 15% point portion actually paid but also the equivalent 20% point portion spared, waived, or otherwise deemed as if paid in the Philippines; that private respondent does not cite anywhere a Swiss law to the effect that in case where a foreign tax, such as the Philippine 35% dividend tax, is spared, waived, or otherwise considered as if paid in whole or in part by the foreign country, a Swiss foreign tax credit would be allowed for the whole or for the part, as the case may be, of the foreign tax so spared or waived or considered as if paid by the foreign country.

While it may be true that claims for refund are construed strictly against the claimant, nevertheless, the fact that Switzerland did not impose any tax or the dividends received by Glaro from the Philippines should be considered as a full satisfaction of the given condition. For, as aptly stated by CTA, to deny private respondent the privilege to withhold only 15% tax provided for under the Tax Code, would run counter to the very spirit and intent of said law and definitely will adversely affect foreign corporations' interest here and discourage them form investing capital in our country.