contracts, Commonwealth Insurance Co remitted P798,297.47 to Alexander Howden & Co., Ltd., as reinsurance premiums. In behalf of Alexander Howden & Co., Ltd., Commonwealth Insurance Co. filed an income tax return declaring the sum of P798,297.47, with accrued interest in the amount of P4,985.77, as Alexander Howden & Co., Ltd.'s gross income for calendar year 1951. It also paid the BIR P66,112.00 income tax. On May 12, 1954, Alexander Howden & Co., Ltd. filed with the BIR a claim for refund of the P66,112.00, later reduced toP65,115.00, because it agreed to the payment of P977.00 as income tax on the P4,985.77 accrued interest. A ruling of the CIR was invoked, stating that it exempted from withholding tax reinsurance premiums received from domestic insurance companies by foreign insurance companies not authorized to do business in the Philippines. Subsequently, petitioner. instituted an action in the CFI of Manila for the recovery of the amount claimed. Tax Court denied the claim. ISSUE: Are portions of premiums earned from insurances locally underwritten by a domestic corporation, ceded to and received bynon-resident foreign reinsurance companies, thru a non-resident foreign insurance broker, pursuant to reinsurance contracts signed by the reinsurers abroad but signed by the domestic corporation in the Philippines, subject to income tax or not? RULING : YES. Section 24 of the National Internal Revenue Code subjects to tax a non-resident foreign corporation's income from sources within the Philippines. The liabilities insured and the risks originally underwritten by Commonwealth Insurance Co., upon which the reinsurance premiums and indemnity were based, were all situated in the Philippines. contrary to appellants' view, then reinsurance contracts were perfected in the Philippines, for Commonwealth Insurance Co. signed them last in Manila. the parties to the reinsurance contracts in question evidently intended Philippine law to govern. Article 11 thereof provided for arbitration in Manila, and the contracts provided for the use of Philippine currency as the medium of exchange and for the payment of Philippine taxes. TAX6.9 Conwi v. CTA and Commissioner Income of Filipino citizens temporarily residing in a foreign country, even if totally derived from outside the Philippines, is subject to tax by virtue of Sec. 21, NIRC, viz: “A tax is hereby imposed upon the taxable net income received x x x from all sources by every individual, whether a citizen of the Philippines residing therein or abroad x x x” FACTS: Hernando Conwi et al. (Conwi et al.) are employees of Procter & Gamble Philippine Manufacturing Corporation, a local subsidiary of U.S.-based Procter & Gamble. Conwi et al. were temporarily assigned to subsidiaries of Procter & Gamble outside of the Philippines, where they were paid in U.S. dollars.It is claimed that they earned and spent their money exclusively abroad, and that they did not remit money back into the Philippines during the time they were outside of the country earning in dollars.
- Summer '19
- Taxation in the United States