June 28, 2022 aviation

CTA affirms canceled P12-M assessment on Kuwait Airways

THE Court of Tax Appeals (CTA) affirmed the cancellation of the tax assessment of Kuwait Airways Corp. for 2016 representing its alleged overpaid income tax worth P12 million.

In a ruling on June 16, the CTA full court said the commissioner of internal revenue (CIR) failed to present new arguments to give the appeal merit and found no reason to overturn its ruling.

“The arguments he presented in this petition for review, lifted verbatim from the answer, the memorandum, and the motion for reconsideration he filed in CTA Case No. 9874, were duly considered and exhaustively discussed in the assailed decision and resolution,” according to the ruling penned by CTA Associate Justice Lanee S. Cui-David.

“Based on the evidence on record and the oft-repeated arguments of the parties, we find that respondent was able to establish its entitlement to the claimed tax credit certificate.”

The tax court noted the airline company sufficiently prove its entitlement to a tax refund by submitting verified certificates of creditable tax withheld at source forms.

The petitioner is a foreign corporation primarily engaged in the air transport services industry.

In a ruling dated May 21 of last year, the CTA Second Division had partially granted the airline company’s petition for a tax credit certificate of the reduced amount of P11.99 million from its initial P12.16 million claim.

The tribunal agreed with its prior ruling as it said Kuwait Airways is entitled to a 1.5% preferential tax rate or exemption as an international carrier, as provided by a treaty entered into by the Philippines and Kuwait.

It ruled the company made an erroneous overpayment of its income tax when it applied the 2.5% tax rate instead of the 1.5% preferential tax rate under the treaty.

Under the National Internal Revenue Code of 1997, international carriers doing business in the Philippines are generally subject to 2.5% on its gross Philippine billings.

“While every citizen must honestly pay the right taxes, the government has a corollary duty to implement tax laws in good faith; to discharge its duty to collect what is due to it, and to justly return what has been erroneously and excessively given to it,” said the CTA.

“Considering all the foregoing, we see no compelling reason to depart from the ruling of the court in division.”


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