The Supreme Court ruled that LG Electronics Philippines, Inc. (LGE) properly availed of the tax amnesty under Republic Act No. 9480, entitling it to immunity from tax liabilities, including penalties, for taxable year 2005 and prior. This decision clarified that only cases with final and executory judgments are excluded from the tax amnesty program, rejecting the Bureau of Internal Revenue’s (BIR) attempt to broaden the exceptions. The ruling underscores the importance of adhering to the precise provisions of tax amnesty laws and their implementing rules, providing a clean tax slate for taxpayers who meet the requirements.

LG Electronics Clears Its Name: Did Tax Amnesty Forgive Past Dues?

This case revolves around LG Electronics Philippines, Inc.’s (LGE) attempt to avail itself of the tax amnesty program established by Republic Act No. 9480, also known as the Tax Amnesty Act of 2007. The central question is whether LGE met all the requirements for the grant of tax amnesty, thus, entitling it to the immunities and privileges provided under the law, despite the Commissioner of Internal Revenue’s (CIR) opposition. In 1998, LGE received a deficiency income tax assessment of P267,365,067.41 for the taxable year 1994. LGE contested this assessment, but before the CIR could resolve the protest, LGE filed a Petition for Review with the Court of Tax Appeals (CTA).

The CTA ruled that LGE was liable for deficiency income tax, albeit a reduced amount. LGE then filed a motion for partial reconsideration, which the CTA partially granted, further reducing the liability. Subsequently, LGE filed a Petition for Review on Certiorari with the Supreme Court. During the pendency of this petition, LGE availed itself of the tax amnesty under Republic Act No. 9480, paid the required amnesty tax, and submitted the necessary documents, prompting a manifestation before the Supreme Court.

The CIR opposed LGE’s availment, arguing that delinquent accounts receivable by the BIR as of the amnesty date, cases already ruled upon by the trial or appellate courts, and cases involving withholding taxes were not covered by the Tax Amnesty Act. The Supreme Court had to determine whether LGE was indeed entitled to the immunities and privileges under the Tax Amnesty Law, considering LGE’s compliance with Republic Act No. 9480.

The Supreme Court ultimately ruled in favor of LG Electronics, determining that LGE had indeed properly availed itself of the tax amnesty granted under Republic Act No. 9480. The Court emphasized that the law is clear: upon submission of the required documents and payment of the amnesty tax, qualified taxpayers may immediately avail themselves of the immunities and privileges provided by the law. Republic Act No. 9480, Section 2 provides:

SEC. 2. Availment of the Amnesty. – Any person, natural or juridical, who wishes to avail himself of the tax amnesty authorized and granted under this Act shall file with the Bureau of Internal Revenue (BIR) a notice and Tax Amnesty Return accompanied by a Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005, in such form as may be prescribed in the implementing rules and regulations (IRR) of this Act, and pay the applicable amnesty tax within six months from the effectivity of the IRR.

Building on this principle, the Court referenced BIR Revenue Memorandum Circular (RMC) No. 55-2007, Sec. 6 which states:

SEC. 6. Method of Availment of Tax Amnesty. –

1. Forms/Documents to be filed. – To avail of the general tax amnesty, concerned taxpayers shall file the following documents/requirements:
   1. Notice of Availment in such form as may be prescribed by the BIR.
   2. Statements of Assets, Liabilities and Networth (SALN) as of December 31, 2005 in such form, as may be prescribed by the BIR.
   3. Tax Amnesty Return in such form as may be prescribed by the BIR.
2. Place of Filing of Amnesty Tax Return. – The Tax Amnesty Return, together with the other documents stated in Sec. 6 (1) hereof, shall be filed as follows:
   1. Residents shall file with the Revenue District Officer (RDO)/Large Taxpayer District Office of the BIR which has jurisdiction over the legal residence or principal place of business of the taxpayer, as the case may be.
   2. Non-residents shall file with the office of the Commissioner of the BIR, or with any RDO.
   3. At the option of the taxpayer, the RDO may assist the taxpayer in accomplishing the forms and computing the taxable base and the amnesty tax payable, but may not look into, question or examine the veracity of the entries contained in the Tax Amnesty Return, Statement of Assets, Liabilities and Networth, or such other documents submitted by the taxpayer.
3. Payment of Amnesty Tax and Full Compliance. – Upon filing of the Tax Amnesty Return in accordance with Sec. 6(2) hereof, the taxpayer shall pay the amnesty tax to the authorized agent bank or in the absence thereof, the Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business.

   The RDO shall issue sufficient Acceptance of Payment Forms, as may be prescribed by the BIR for the use of – or to be accomplished by – the bank, the collection agent or the Treasurer, showing the acceptance of the amnesty tax payment. In case of the authorized agent bank, the branch manager or the assistant branch manager shall sign the acceptance of payment form.

   The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty Return shall be submitted to the RDO, which shall be received only after complete payment. The completion of these requirements shall be deemed full compliance with the provisions of RA 9480.

The Supreme Court, in affirming LG Electronics’ entitlement to tax amnesty, rejected the Commissioner of Internal Revenue’s arguments, particularly the reliance on BIR Revenue Memorandum Circular No. 69-2007, specifically questions 47 and 49, which sought to limit the coverage of the tax amnesty program. The Court emphasized that only final and executory judgments are excluded from the coverage of the tax amnesty program as per Section 8(f) of Republic Act No. 9480. It noted that the BIR’s attempt to expand the exceptions to include cases already ruled upon by the trial or appellate courts was misplaced and had been previously invalidated in cases such as Philippine Banking Corporation v. Commissioner of Internal Revenue and CS Garment Inc. v. Commissioner of Internal Revenue. This insistence on strict adherence to the statutory exceptions reinforces the principle that administrative agencies cannot expand or amend statutory requirements through their rule-making power.

Moreover, the Court clarified that the case did not involve withholding taxes, which are explicitly excluded from the tax amnesty program. The assessed deficiency income taxes were due to the disallowance of certain deductions claimed by LG Electronics, not for any failure to withhold taxes. The liability of a withholding agent is distinct from that of a taxpayer who owes income taxes. This distinction is crucial, as it underscores that the assessment against LG Electronics was for its own income tax liabilities, not for its responsibilities as a withholding agent. In the case of Asia International Auctioneers, Inc. v. Commissioner of Internal Revenue, the Supreme Court clarified the distinction between indirect taxes like VAT and excise tax from withholding taxes.

The Supreme Court also noted that the Bureau of Internal Revenue Legal Division was not the proper representative of the respondent in the appellate proceedings. The Office of the Solicitor General is primarily responsible for representing the government in appellate proceedings. This pronouncement highlights the importance of following proper legal procedures and ensuring that the government’s interests are adequately represented in court. Despite this procedural lapse, the Court acknowledged that the interests of the government had been duly protected, as the Office of the Solicitor General had been apprised of developments in the case from the beginning.

Ultimately, the Supreme Court concluded that because LG Electronics had fully complied with the requirements for availing of the tax amnesty program under Republic Act No. 9480, it was entitled to the immunities and privileges granted by the law. The issue on the assessed deficiency income taxes was, therefore, rendered moot and academic. The decision underscores the importance of adhering to the provisions of tax amnesty laws and the strict interpretation against any attempt to expand exceptions not explicitly provided by law.

FAQs

What was the key issue in this case?	The key issue was whether LG Electronics Philippines, Inc. (LGE) was entitled to the immunities and privileges under the Tax Amnesty Law (Republic Act No. 9480) after availing itself of the tax amnesty program. The Commissioner of Internal Revenue (CIR) contested LGE’s availment, arguing certain exceptions applied.
What did the Supreme Court rule?	The Supreme Court ruled that LGE properly availed itself of the tax amnesty, entitling it to immunity from tax liabilities, including penalties, for taxable year 2005 and prior. The Court found that LGE had complied with all the requirements under Republic Act No. 9480.
What are the main requirements for availing of tax amnesty under Republic Act No. 9480?	The main requirements include filing a notice and Tax Amnesty Return with the Bureau of Internal Revenue (BIR), accompanied by a Statement of Assets, Liabilities, and Networth (SALN) as of December 31, 2005, and paying the applicable amnesty tax within the prescribed period. Compliance with these requirements entitles the taxpayer to the privileges and immunities under the tax amnesty program.
What exceptions to the tax amnesty were considered?	The Commissioner of Internal Revenue (CIR) argued that delinquent accounts receivable by the BIR, cases already ruled upon by courts, and cases involving withholding taxes were not covered. However, the Supreme Court clarified that only cases with final and executory judgments are excluded from the tax amnesty program.
Did the Supreme Court address the BIR’s interpretation of the Tax Amnesty Law?	Yes, the Supreme Court rejected the BIR’s reliance on Revenue Memorandum Circular No. 69-2007, which sought to expand the exceptions to the tax amnesty program. The Court emphasized that administrative agencies cannot expand or amend statutory requirements through their rule-making power.
Was withholding tax involved in this case?	No, the Supreme Court clarified that the case did not involve withholding taxes, which are explicitly excluded from the tax amnesty program. The deficiency income taxes assessed against LG Electronics were due to the disallowance of certain deductions.
Who should represent the government in appellate proceedings involving the BIR?	The Office of the Solicitor General (OSG) is primarily responsible for representing the government in appellate proceedings. While the Bureau of Internal Revenue Legal Division may handle initial civil and criminal actions, the OSG has the main duty to appear for the government in appellate proceedings.
What is the effect of availing the tax amnesty?	Taxpayers who avail themselves of the tax amnesty program are entitled to immunity from the payment of taxes, additions, and penalties under the National Internal Revenue Code of 1997 for taxable year 2005 and prior years. The taxpayer’s Tax Amnesty Return and the Statement of Assets, Liabilities, and Networth (SALN) are inadmissible as evidence in proceedings pertaining to these years.

This ruling solidifies the principle that tax amnesty laws should be interpreted strictly in favor of the taxpayer, and that administrative agencies cannot expand the exceptions beyond what is explicitly provided in the law. It serves as a reminder for taxpayers to ensure full compliance with the requirements for availing of tax amnesty programs and to be aware of their rights under the law.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: LG Electronics Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 165451, December 03, 2014