THE Bureau of Internal Revenue (BIR) has accepted the offer of the Lopez-owned First Philippine Holdings Corporation (FPHC) to pay P135 million as settlement for its more than P1.8 billion in tax obligations.
The judicial compromise agreement involving FPHC’s tax obligations was approved by the Court of Tax Appeals en banc in a decision dated June 17, 2022 and penned by Associate Justice Erlinda Uy.
Based on the agreement, the BIR said, it evaluated FPHC’s proposal for amicable settlement and believes that a judicial compromise to “allow immediate tax collection and also put an end to litigation as provided in the Civil Code of the Philippines, serves the interest of the government.”
The CTA said: “A review of the subject judicial compromise agreement, as well as the documents submitted by the parties in support thereof, shows that the same is in order.”
The CTA continued: “Wherefore, in light of the foregoing considerations, the Judicial Compromise Agreement dated October 5, 2020 entered into by the parties is hereby approved and this Judgment on Compromise Agreement is hereby rendered in accordance therewith. The parties are hereby enjoined to faithfully comply with all the terms and conditions of the aforesaid Judicial Compromise Agreement.”
Prior to this, the BIR issued a formal demand letter with final assessment dated June 27, 2014 for taxable year 2009, for the alleged deficiency income tax, value added tax, expanded withholding tax, withholding tax on compensation, documentary stamp tax and fringe benefits tax in the total basic tax amounting to P831.6 million for a aggregate amount of P1.55 billion, inclusive of interest and compromise agreement. On July 25, 2014 and December 10, 2014, the BIR filed a protest and supplemental protest with the BIR, denying the merit of the final assessment notice.
However, without waiting for the decision of the BIR and, FPHC instituted a suit before the CTA against the BIR seeking the reversal and cancellation of the tax assessment.
On December 17, 2019, the CTA rendered a decision cancelling the deficiency VAT and deficiency fringe benefits for taxable year 2009.
But, the CTA ordered FPHC to pay deficiency income tax, deficiency expanded withholdings tax, and deficiency documentary stamp in the total basic tax amounting to P281.6 million, for an aggregate amount of P12. billion, inclusive of interest and compromise penalty.
The CTA also ordered FPHC to pay delinquency interest amounting to P602.1 million.
On February 24, 2022, FPHC submitted its proposal to the BIR with the intention to enter into a compromise settlement, offering P135 million to settle its obligations.
“Whereas, the parties for the purpose of avoiding and putting an end to a protracted, expensive and mutually prejudicial litigation, have agreed to amicably settle the above-mentioned case, upon terms and conditions hereinafter set forth,” the agreement states.
FPHC president Francis Giles Puno and BIR Commissioner Caesar Dulay signed the agreement.
The P135-million settlement amount represents 47.93 percent of the P281.6 million basic tax as per the decision of CTA’s second division.