SC Affirms P6.6-B Tax exemption for Puregold

Source from:  ABS-CBN 09/08/2015

The Supreme Court (SC) has affirmed a P6.6-billion tax exemption in favor of business tycoon Lucio Co's Puregold Duty Free Inc.

The case involves excise taxes and value-added tax (VAT) over Puregold Duty Free's tobacco and alcohol importations through the Clark Special Economic Zone (CSEZ) from January 1998 up to May 2004.

Voting 3-2, the high court's Third Division, in a decision penned by Associate Justice Presbitero Velasco, Jr., ruled that Puregold was entitled to tax exemption for its P2,780,610,174.51-billion deficiency VAT and excise taxes assessed by the Bureau of Internal Revenue (BIR).

The tax assessment has reached the amount of around P6.6-billion in view of the surcharges and interests computed by the BIR.

On November 7, 2005, then BIR Deputy Commissioner for Special Concerns/OIC-Large Taxpayers Service Kim Henares issued a Preliminary Assessment Notice regarding unpaid VAT and excise tax on wines, liquors and tobacco products imported by Puregold from January 1998 to May 2004.

Puregold filed a protest with the BIR.

During the pendency of the protest, Republic Act No. 9399 or the Law that Grants A One-Time Tax Amnesty to Business within the Economic Zones or Freeports was enacted.

On July 27, 2007, Puregold availed of the tax amnesty under this law and paid the amnesty tax.

On October 26, 2007, however, Puregold received a formal letter of demand from the BIR for the payment of P2,780,610,174.51 in deficiency VAT and excise taxes for its alcohol and tobacco importations from January 1998 to May 2004.

The issue was brought before the Court of Tax Appeals (CTA) where Puregold won its case in a decision dated May 9, 2012 and resolution dated July 18, 2012.

These rulings were affirmed in the SC decision.

"Wherefore, the instant petition (filed by BIR) is denied and the May 9, 2012 decision... and resolution of the Court of Tax Appeals en banc in CTA EB No. 723 (CTA Case No. 7812 ) are hereby affirmed.

"Accordingly, the assessment against respondent Puregold Duty Free Inc. in the amount of Two Billion Seven Hundred Eighty Million Six Hundred Ten Thousand One Hundred Seventy Four Pesos and Fifty One Centavos (P2,780,610,174.51), supposedly representing deficiency value added tax (VAT) and excise taxes on its importation of alcohol and tobacco products from January 1998 to May 2004, is hereby cancelled and set aside," the SC said.

The ruling stated that Puregold enjoyed duty-free importations and exemptions from local and national taxes.

"Puregold enjoyed duty-free importations and exemptions from local and national taxes under EO 80, a privilege which extended to business enterprises operating within CSEZ all the incentives granted to enterprises within SSEZ (Subic Special Economic Zone) by RA 7227. Hence, Puregold was repeatedly issued tax exemption certificates and the BIR itself did not assess any deficiency taxes from the time the 1997 NIRC (National Internal Revenue Code) took effect in January 1998," the SC said.

For its part, the BIR questioned Puregold's eligibility to avail of the tax relief considering that Puregold's principal place of business is in Metro Manila and not in CSEZ.

The SC, however, said that this issue was not challenged under RA No. 9399 before the CTA. Enditem