FIRST DIVISION

[G.R. No. 188550. August 19, 2013.]

DEUTSCHE BANK AG MANILA BRANCH , petitioner, vs .

COMMISSIONER OF INTERNAL REVENUE , respondent.

DECISION

SERENO , C.J : p

This is a Petition for Review 1 led by Deutsche Bank AG Manila Branch

(petitioner) under Rule 45 of the 1997 Rules of Civil Procedure assailing the Court of
Tax Appeals En Banc(CTA En Banc) Decision 2 dated 29 May 2009 and Resolution 3
dated 1 July 2009 in C.T.A. EB No. 456.
THE FACTS
In accordance with Section 28 (A) (5) 4 of the National Internal Revenue Code
(NIRC) of 1997, petitioner withheld and remitted to respondent on 21 October 2003 the
amount of PHP67,688,553.51, which represented the fteen percent (15%) branch
pro t remittance tax (BPRT) on its regular banking unit (RBU) net income remitted to
Deutsche Bank Germany (DB Germany) for 2002 and prior taxable years. 5
Believing that it made an overpayment of the BPRT, petitioner led with the BIR
Large Taxpayers Assessment and Investigation Division on 4 October 2005 an
administrative claim for refund or issuance of its tax credit certi cate in the total
amount of PHP22,562,851.17. On the same date, petitioner requested from the
International Tax Affairs Division (ITAD) a con rmation of its entitlement to the
preferential tax rate of 10% under the RP-Germany Tax Treaty. 6 EAcIST

Alleging the inaction of the BIR on its administrative claim, petitioner led a
Petition for Review 7 with the CTA on 18 October 2005. Petitioner reiterated its claim
for the refund or issuance of its tax credit certi cate for the amount of
PHP22,562,851.17 representing the alleged excess BPRT paid on branch pro ts
remittance to DB Germany.
THE CTA SECOND DIVISION RULING 8

After trial on the merits, the CTA Second Division found that petitioner indeed
paid the total amount of PHP67,688,553.51 representing the 15% BPRT on its RBU
pro ts amounting to PHP451,257,023.29 for 2002 and prior taxable years. Records
also disclose that for the year 2003, petitioner remitted to DB Germany the amount of
EURO 5,174,847.38 (or PHP330,175,961.88 at the exchange rate of PHP63.804:1
EURO), which is net of the 15% BPRT. cEHITA

However, the claim of petitioner for a refund was denied on the ground that the
application for a tax treaty relief was not led with ITAD prior to the payment by the
former of its BPRT and actual remittance of its branch pro ts to DB Germany, or prior
to its availment of the preferential rate of ten percent (10%) under the RP-Germany Tax
Treaty provision. The court a quo held that petitioner violated the fifteen (15) day period
mandated under Section III paragraph (2) of Revenue Memorandum Order (RMO) No. 1-
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 2000.
Further, the CTA Second Division relied on Mirant (Philippines) Operations
Corporation (formerly Southern Energy Asia-Paci c Operations [Phils.], Inc.) v.
Commissioner of Internal Revenue 9 (Mirant) where the CTA En Banc ruled that before
the bene ts of the tax treaty may be extended to a foreign corporation wishing to avail
itself thereof, the latter should rst invoke the provisions of the tax treaty and prove
that they indeed apply to the corporation.
THE CTA EN BANC RULING 10

The CTA En Banc af rmed the CTA Second Division's Decision dated 29 August
2008 and Resolution dated 14 January 2009. Citing Mirant, the CTA En Banc held that a
ruling from the ITAD of the BIR must be secured prior to the availment of a preferential
tax rate under a tax treaty. Applying the principle of stare decisis et non quieta movere,
the CTA En Banc took into consideration that this Court had denied the Petition in G.R.
No. 168531 led by Mirant for failure to suf ciently show any reversible error in the
assailed judgment. 1 1 The CTA En Banc ruled that once a case has been decided in one
way, any other case involving exactly the same point at issue should be decided in the
same manner. acAESC

The court likewise ruled that the 15-day rule for tax treaty relief application under
RMO No. 1-2000 cannot be relaxed for petitioner, unlike in CBK Power Company
Limited v. Commissioner of Internal Revenue . 1 2 In that case, the rule was relaxed and
the claim for refund of excess nal withholding taxes was partially granted. While it
issued a ruling to CBK Power Company Limited after the payment of withholding taxes,
the ITAD did not issue any ruling to petitioner even if it led a request for con rmation
on 4 October 2005 that the remittance of branch pro ts to DB Germany is subject to a
preferential tax rate of 10% pursuant to Article 10 of the RP-Germany Tax Treaty. HSTAcI

ISSUE
This Court is now confronted with the issue of whether the failure to strictly
comply with RMO No. 1-2000 will deprive persons or corporations of the bene t of a
tax treaty.
THE COURT'S RULING
The Petition is meritorious.
Under Section 28 (A) (5) of the NIRC, any pro t remitted to its head of ce shall
be subject to a tax of 15% based on the total pro ts applied for or earmarked for
remittance without any deduction of the tax component. However, petitioner invokes
paragraph 6, Article 10 of the RP-Germany Tax Treaty, which provides that where a
resident of the Federal Republic of Germany has a branch in the Republic of the
Philippines, this branch may be subjected to the branch pro ts remittance tax withheld
at source in accordance with Philippine law but shall not exceed 10% of the gross
amount of the profits remitted by that branch to the head office.
By virtue of the RP-Germany Tax Treaty, we are bound to extend to a branch in the
Philippines, remitting to its head of ce in Germany, the bene t of a preferential rate
equivalent to 10% BPRT.
On the other hand, the BIR issued RMO No. 1-2000, which requires that any
availment of the tax treaty relief must be preceded by an application with ITAD at least
15 days before the transaction. The Order was issued to streamline the processing of
the application of tax treaty relief in order to improve ef ciency and service to the
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 taxpayers. Further, it also aims to prevent the consequences of an erroneous
interpretation and/or application of the treaty provisions (i.e., ling a claim for a tax
refund/credit for the overpayment of taxes or for de ciency tax liabilities for
underpayment). 1 3 STECAc

The crux of the controversy lies in the implementation of RMO No. 1-2000.
Petitioner argues that, considering that it has met all the conditions under Article
10 of the RP-Germany Tax Treaty, the CTA erred in denying its claim solely on the basis
of RMO No. 1-2000. The ling of a tax treaty relief application is not a condition
precedent to the availment of a preferential tax rate. Further, petitioner posits that,
contrary to the ruling of the CTA, Mirant is not a binding judicial precedent to deny a
claim for refund solely on the basis of noncompliance with RMO No. 1-2000.
Respondent counters that the requirement of prior application under RMO No. 1-
2000 is mandatory in character. RMO No. 1-2000 was issued pursuant to the
unquestioned authority of the Secretary of Finance to promulgate rules and regulations
for the effective implementation of the NIRC. Thus, courts cannot ignore administrative
issuances which partakes the nature of a statute and have in their favor a presumption
of legality.
The CTA ruled that prior application for a tax treaty relief is mandatory, and
noncompliance with this prerequisite is fatal to the taxpayer's availment of the
preferential tax rate.
We disagree. CSIHDA

A minute resolution is not a binding

precedent
At the outset, this Court's minute resolution on Mirant is not a binding precedent.
The Court has clari ed this matter in Philippine Health Care Providers, Inc. v.
Commissioner of Internal Revenue 1 4 as follows:
It is true that, although contained in a minute resolution, our dismissal of the
petition was a disposition of the merits of the case. When we dismissed the
petition, we effectively af rmed the CA ruling being questioned. As a result, our
ruling in that case has already become nal. When a minute resolution denies or
dismisses a petition for failure to comply with formal and substantive
requirements, the challenged decision, together with its ndings of fact and legal
conclusions, are deemed sustained. But what is its effect on other cases? HECTaA

With respect to the same subject matter and the same issues
concerning the same parties, it constitutes res judicata . However, if
other parties or another subject matter (even with the same parties and
issues) is involved, the minute resolution is not binding precedent . Thus,
i n CIR v. Baier-Nickel, the Court noted that a previous case, CIR v. Baier-Nickel
involving the same parties and the same issues, was previously disposed of by
the Court thru a minute resolution dated February 17, 2003 sustaining the ruling
of the CA. Nonetheless, the Court ruled that the previous case "ha(d) no bearing"
on the latter case because the two cases involved different subject matters as
they were concerned with the taxable income of different taxable years.

Besides, there are substantial, not simply formal, distinctions between a minute
resolution and a decision. The constitutional requirement under the rst
paragraph of Section 14, Article VIII of the Constitution that the facts and the law
on which the judgment is based must be expressed clearly and distinctly applies
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 only to decisions, not to minute resolutions. A minute resolution is signed only by
the clerk of court by authority of the justices, unlike a decision. It does not require
the certi cation of the Chief Justice. Moreover, unlike decisions, minute
resolutions are not published in the Philippine Reports. Finally, the proviso of
Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this Court lays
down doctrines or principles of law which constitute binding precedent in a
decision duly signed by the members of the Court and certi ed by the Chief
Justice. (Emphasis supplied) IDEScC

Even if we had af rmed the CTA in Mirant, the doctrine laid down in that Decision
cannot bind this Court in cases of a similar nature. There are differences in parties,
taxes, taxable periods, and treaties involved; more importantly, the disposition of that
case was made only through a minute resolution.
Tax Treaty vs. RMO No. 1-2000
Our Constitution provides for adherence to the general principles of international
law as part of the law of the land. 1 5 The time-honored international principle of pacta
sunt servanda demands the performance in good faith of treaty obligations on the part
of the states that enter into the agreement. Every treaty in force is binding upon the
parties, and obligations under the treaty must be performed by them in good faith. 1 6
More importantly, treaties have the force and effect of law in this jurisdiction. 1 7
Tax treaties are entered into "to reconcile the national scal legislations of the
contracting parties and, in turn, help the taxpayer avoid simultaneous taxations in two
different jurisdictions." 1 8 CIR v. S.C. Johnson and Son, Inc. further clari es that "tax
conventions are drafted with a view towards the elimination of international juridical
double taxation, which is de ned as the imposition of comparable taxes in two or more
states on the same taxpayer in respect of the same subject matter and for identical
periods. The apparent rationale for doing away with double taxation is to encourage the
free ow of goods and services and the movement of capital, technology and persons
between countries, conditions deemed vital in creating robust and dynamic economies.
Foreign investments will only thrive in a fairly predictable and reasonable international
investment climate and the protection against double taxation is crucial in creating
such a climate." 1 9 Simply put, tax treaties are entered into to minimize, if not eliminate
the harshness of international juridical double taxation, which is why they are also
known as double tax treaty or double tax agreements. cASIED

"A state that has contracted valid international obligations is bound to make in its
legislations those modi cations that may be necessary to ensure the ful llment of the
obligations undertaken." 2 0 Thus, laws and issuances must ensure that the reliefs
granted under tax treaties are accorded to the parties entitled thereto. The BIR must
not impose additional requirements that would negate the availment of the reliefs
provided for under international agreements. More so, when the RP-Germany Tax Treaty
does not provide for any pre-requisite for the availment of the bene ts under said
agreement.
Likewise, it must be stressed that there is nothing in RMO No. 1-2000 which
would indicate a deprivation of entitlement to a tax treaty relief for failure to comply
with the 15-day period. We recognize the clear intention of the BIR in implementing
RMO No. 1-2000, but the CTA's outright denial of a tax treaty relief for failure to strictly
comply with the prescribed period is not in harmony with the objectives of the
contracting state to ensure that the bene ts granted under tax treaties are enjoyed by
duly entitled persons or corporations.
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 Bearing in mind the rationale of tax treaties, the period of application for the
availment of tax treaty relief as required by RMO No. 1-2000 should not operate to
divest entitlement to the relief as it would constitute a violation of the duty required by
good faith in complying with a tax treaty. The denial of the availment of tax relief for the
failure of a taxpayer to apply within the prescribed period under the administrative
issuance would impair the value of the tax treaty. At most, the application for a tax
treaty relief from the BIR should merely operate to con rm the entitlement of the
taxpayer to the relief. HAISEa

The obligation to comply with a tax treaty must take precedence over the
objective of RMO No. 1-2000. Logically, noncompliance with tax treaties has negative
implications on international relations, and unduly discourages foreign investors. While
the consequences sought to be prevented by RMO No. 1-2000 involve an administrative
procedure, these may be remedied through other system management processes, e.g.,
the imposition of a ne or penalty. But we cannot totally deprive those who are entitled
to the bene t of a treaty for failure to strictly comply with an administrative issuance
requiring prior application for tax treaty relief.
Prior Application vs. Claim for
Refund
Again, RMO No. 1-2000 was implemented to obviate any erroneous
interpretation and/or application of the treaty provisions. The objective of the BIR is to
forestall assessments against corporations who erroneously availed themselves of the
bene ts of the tax treaty but are not legally entitled thereto, as well as to save such
investors from the tedious process of claims for a refund due to an inaccurate
application of the tax treaty provisions. However, as earlier discussed, noncompliance
with the 15-day period for prior application should not operate to automatically divest
entitlement to the tax treaty relief especially in claims for refund.
ATcaHS

The underlying principle of prior application with the BIR becomes moot in refund
cases, such as the present case, where the very basis of the claim is erroneous or there
is excessive payment arising from non-availment of a tax treaty relief at the rst
instance. In this case, petitioner should not be faulted for not complying with RMO No.
1-2000 prior to the transaction. It could not have applied for a tax treaty relief within the
period prescribed, or 15 days prior to the payment of its BPRT, precisely because it
erroneously paid the BPRT not on the basis of the preferential tax rate under the RP-
Germany Tax Treaty, but on the regular rate as prescribed by the NIRC. Hence, the prior
application requirement becomes illogical. Therefore, the fact that petitioner invoked
the provisions of the RP-Germany Tax Treaty when it requested for a con rmation from
the ITAD before ling an administrative claim for a refund should be deemed
substantial compliance with RMO No. 1-2000. AaEcHC

Corollary thereto, Section 229 2 1 of the NIRC provides the taxpayer a remedy for
tax recovery when there has been an erroneous payment of tax. The outright denial of
petitioner's claim for a refund, on the sole ground of failure to apply for a tax treaty
relief prior to the payment of the BPRT, would defeat the purpose of Section 229.
Petitioner is entitled to a refund
It is signi cant to emphasize that petitioner applied — though belatedly — for a
tax treaty relief, in substantial compliance with RMO No. 1-2000. A ruling by the BIR
would have con rmed whether petitioner was entitled to the lower rate of 10% BPRT
pursuant to the RP-Germany Tax Treaty.

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 Nevertheless, even without the BIR ruling, the CTA Second Division found as
follows:
Based on the evidence presented, both documentary and testimonial, petitioner
was able to establish the following facts:
a. That petitioner is a branch of ce in the Philippines of Deutsche Bank AG, a
corporation organized and existing under the laws of the Federal Republic of
Germany;
b. That on October 21, 2003, it led its Monthly Remittance Return of Final
Income Taxes Withheld under BIR Form No. 1601-F and remitted the amount of
P67,688,553.51 as branch profits remittance tax with the BIR; and
c. That on October 29, 2003, the Bangko Sentral ng Pilipinas having issued a
clearance, petitioner remitted to Frankfurt Head Of ce the amount of
PHP5,174,847.38 (or P330,175,961.88 at 63.804 Peso/Euro) representing its 2002
profits remittance. 2 2 HcSCED

The amount of PHP67,688,553.51 paid by petitioner represented the 15% BPRT

on its RBU net income, due for remittance to DB Germany amounting to
PHP451,257,023.29 for 2002 and prior taxable years. 2 3
Likewise, both the administrative and the judicial actions were led within the
two-year prescriptive period pursuant to Section 229 of the NIRC. 2 4
Clearly, there is no reason to deprive petitioner of the bene t of a preferential tax
rate of 10% BPRT in accordance with the RP-Germany Tax Treaty.
Petitioner is liable to pay only the amount of PHP45,125,702.34 on its RBU net
income amounting to PHP451,257,023.29 for 2002 and prior taxable years, applying
the 10% BPRT. Thus, it is proper to grant petitioner a refund of the difference between
the PHP67,688,553.51 (15% BPRT) and PHP45,125,702.34 (10% BPRT) or a total of
PHP22,562,851.17.
WHEREFORE , premises considered, the instant Petition is GRANTED .
Accordingly, the Court of Tax Appeals En Banc Decision dated 29 May 2009 and
Resolution dated 1 July 2009 are REVERSED and SET ASIDE . A new one is hereby
entered ordering respondent Commissioner of Internal Revenue to refund or issue a tax
credit certi cate in favor of petitioner Deutsche Bank AG Manila Branch the amount of
TWENTY TWO MILLION FIVE HUNDRED SIXTY TWO THOUSAND EIGHT HUNDRED
FIFTY ONE PESOS AND SEVENTEEN CENTAVOS (PHP22,562,851.17), Philippine
currency, representing the erroneously paid BPRT for 2002 and prior taxable years.
SO ORDERED . DIAcTE

Leonardo-de Castro, Bersamin, Mendoza * and Reyes, JJ., concur.

Footnotes

* Designated additional member in lieu of Associate Justice Martin S. Villarama, Jr. per
Special Order No. 1502.
1. Rollo, pp. 12-60.
2. Id. at 68-78; penned by Associate Justice Lovell R. Bautista and concurred in by then
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 Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda Jr., Erlinda
P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez.
3. Id. at 79-80.
4. SEC. 28. Rates of Income Tax on Foreign Corporations. —
(A) Tax on Resident Foreign Corporations. —
xxx xxx xxx
(5) Tax on Branch Pro ts Remittances. — Any pro t remitted by a branch to its head of ce
shall be subject to a tax of fteen percent (15%) which shall be based on the total pro ts
applied or earmarked for remittance without any deduction for the tax component
thereof (except those activities which are registered with the Philippine Economic Zone
Authority). The tax shall be collected and paid in the same manner as provided in
Sections 57 and 58 of this Code: Provided, That interests, dividends, rents, royalties,
including remuneration for technical services, salaries, wages, premiums, annuities,
emoluments or other xed or determinable annual, periodic or casual gains, pro ts,
income and capital gains received by a foreign corporation during each taxable year
from all sources within the Philippines shall not be treated as branch pro ts unless the
same are effectively connected with the conduct of its trade or business in the
Philippines.
5. Rollo, pp. 69-70.
6. Id. at 70.
7. Id. at 150-157.
8. Id. at 109-125; CTA Second Division Decision dated 29 August 2008, penned by
Associate Justice Erlinda P. Uy and concurred in by Associate Justices Juanito C.
Castañeda, Jr. and Olga Palanca-Enriquez.

9. C.T.A. EB No. 40 (CTA Case No. 6382), 7 June 2005, penned by Associate Justice Erlinda
P. Uy and concurred in by then Presiding Justice Ernesto D. Acosta, and Associate
Justices Juanito C. Castañeda Jr., Lovell R. Bautista, Caesar A. Casanova and Olga
Palanca-Enriquez. The case was af rmed by the Supreme Court in the Resolutions dated
12 November 2007 and 18 February 2008 in G.R. No. 168531;
<http://cta.judiciary.gov.ph/decres#> (visited 5 June 2013). Pertinent portion of Mirant
provides:
"However, it must be remembered that a foreign corporation wishing to avail of the
bene ts of the tax treaty should invoke the provisions of the tax treaty and prove that
indeed the provisions of the tax treaty applies to it, before the bene ts may be extended
to such corporation. In other words, a resident or non-resident foreign corporation shall
be taxed according to the provisions of the National Internal Revenue Code, unless it is
shown that the treaty provisions apply to the said corporation, and that, in cases the
same are applicable, the option to avail of the tax bene ts under the tax treaty has been
successfully invoked.
Under Revenue Memorandum Order 01-2000 of the Bureau of Internal Revenue, it is
provided that the availment of a tax treaty provision must be preceded by an application
for a tax treaty relief with its International Tax Affairs Division (ITAD). This is to prevent
any erroneous interpretation and/or application of the treaty provisions with which the
Philippines is a signatory to. The implementation of the said Revenue Memorandum
Order is in harmony with the objectives of the contracting state to ensure that the
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 granting of the bene ts under the tax treaties are enjoyed by the persons or corporations
duly entitled to the same."
10. Supra note 2.
11. SC Minute Resolutions dated 12 November 2007 and 18 February 2008.

12. CBK Power Company Limited v. Commissioner of Internal Revenue , C.T.A. Case Nos.
6699, 6884 & 7166, 12 February 1999, penned by Associate Justice Caesar A. Casanova
and concurred in by then Presiding Justice Ernesto D. Acosta and Associate Justice
Lovell R. Bautista.
13. REVENUE MEMORANDUM ORDER NO. 01-00
SUBJECT: Procedures for Processing Tax Treaty Relief Application
TO: All Internal Revenue Officers and Others Concerned

I. Objectives:
This Order is issued to streamline the processing of the tax treaty relief application in order
to improve efficiency and service to the taxpayers.

Furthermore, it is to the best interest of both the taxpayer and the Bureau of Internal
Revenue that any availment of the tax treaty provisions be preceded by an application
for treaty relief with the International Tax Affairs Division (ITAD). In this way, the
consequences of any erroneous interpretation and/or application of the treaty provisions
(i.e., claim for tax refund/credit for overpayment of taxes, or de ciency tax liabilities for
underpayment) can be averted before proceeding with the transaction and or paying the
tax liability covered by the tax treaty.
xxx xxx xxx
III. Policies:

In order to achieve the above-mentioned objectives, the following policies shall be

observed:

xxx xxx xxx

2. Any availment of the tax treaty relief shall be preceded by an application by ling BIR
Form No. 0901 (Application for Relief from Double Taxation) with ITAD at least 15 days
before the transaction i.e., payment of dividends, royalties, etc., accompanied by
supporting documents justifying the relief. Consequently, BIR Form Nos. TC 001 and TC
002 prescribed under RMO 10-92 are hereby declared obsolete.
xxx xxx xxx.
14. G.R. No. 167330, 18 September 2009, 600 SCRA 413, 446-447.
15. Art. 2, Sec. 2.

16. Vienna Convention on the Law on Treaties (1969), Art. 26.

17. Luna v. Court of Appeals , G.R. No. 100374-75, 27 November 1992, 216 SCRA 107, 111-
112.
18. CIR v. S.C. Johnson and Son, Inc., 368 Phil. 388, 404 (1999).
19. Id. at 404-405.
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 20. Tañada v. Angara, 388 Phil. 546, 592 (1997).
21. Section 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or
proceeding shall be maintained in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously or illegally assessed or collected,
or of any penalty claimed to have been collected without authority, of any sum alleged to
have been excessively or in any manner wrongfully collected without authority, or of any
sum alleged to have been excessively or in any manner wrongfully collected, until a
claim for refund or credit has been duly led with the Commissioner; but such suit or
proceeding may be maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be led after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening cause that
may arise after payment: Provided, however, That the Commissioner may, even without
a written claim therefor, refund or credit any tax, where on the face of the return upon
which payment was made, such payment appears clearly to have been erroneously paid.
22. Rollo, pp. 114-115.
23. Id. at 117-118.
24. Id. at 117.

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