MARUBENI V. CIR (TAX)

Under the Tax Code, a RESIDENT FOREIGN CORPORATION is one that is engaged in trade or business within the Philippines. Petitioner contends that precisely because it is engaged in business in the Philippines through its Philippine branch that it must be considered as a resident foreign corporation. Petitioner reasons that since the Philippine branch and the Tokyo head office are one and the same entity, whoever made the investment in AG&P Manila, doe snot matter at all.

A single corporate entity cannot be both a resident and not-resident corporation depending on the nature of the particular transaction involved. Accordingly, whether the dividends are paid directly to the head office or coursed through its local branch is of no moment for after all, the head office and the office branch constitute but one corporate entity, the Marubeni corporation, which, under Philippine tax and corporate laws, is a resident foreign corporation because it is transacting business in the Philippines.

The general rule that a foreign corporation is the same juridical entity as its branch office in the Philippines cannot apply here. This rule is based on the premise that the business of the foreign corporation is conducted through its branch office, following the principal-agent relationship theory. It is understood that the branch becomes its agent here. So that when the foreign corporation transacts business in the Philippines indipendently of its branch, the principal-agent relationship is set aside. the transaciton becomes one of the foreign corporation, not of the branch. Consequestly, the taxpayer is the foreign corporation, not the branch or the resident foreign corporation.

In other words, the alleged overpaid taxes were incurred for the remittance of dividend income to the head office in Japan which is a separate and distinct income taxpayer form the branch in the Philippines. There can be no other logical conclusion considering the undisputed fact that the investment was made for purposes peculiarly germane to the conduct of the corporate affairs of Marubeni Japan, but certainly not of the branch in the Philippines. It is thus clear that petitioner, having made this independent investment attributable only to the head office, cannot now claim the increments as ordinary consequences of its trade or business in the Philippines and avail itself of the lower tax rate of 10& other than 25%.