ING Bank v. CIR (2015)

SUPREME COURT REPORTS ANNOTATED VOLUME 763 4/5/21, 6:08 PM
G.R. No. 167679. July 22, 2015.*
ING BANK N.V., engaged in banking operations in the

Philippines as ING BANK N.V. MANILA BRANCH,
petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.
Taxation; Tax Amnesty; Taxpayers with pending tax cases may

avail themselves of the tax amnesty program under Republic Act
(RA) No. 9480.·Taxpayers with pending tax cases may avail
themselves of the tax amnesty program under Republic Act No.
9480. In CS Garment, Inc. v. Commissioner of Internal Revenue, 718
SCRA 614 (2014), this court has „definitively declare[d] . . . the
exception Â[i]ssues and cases which were ruled by any court (even
without finality) in favor of the BIR prior to amnesty availment of
the taxpayerÊ under BIR [Revenue Memorandum Circular No.] 19-
2008 [as] invalid, [for going] beyond the scope of the provisions of
the 2007 Tax Amnesty Law.‰
Same; Same; There is nothing in Republic Act (RA) No. 9480
which can be construed as authority for respondent Commissioner of
Internal Revenue (CIR) to introduce exceptions and/or conditions to
the coverage of the law nor to disregard its provisions and substitute
_______________
* SECOND DIVISION.
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360 SUPREME COURT REPORTS ANNOTATED

ING Bank N.V. vs. Commissioner of Internal Revenue
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his own personal judgment.·Contrary to respondent

Commissioner of Internal RevenueÊs stance, Republic Act No. 9480
confers no discretion on respondent Commissioner of Internal
Revenue. The provisions of the law are plain and simple. Unlike the
power to compromise or abate a taxpayerÊs liability under Section
204 of the 1997 National Internal Revenue Code that is within the
discretion of respondent Commissioner of Internal Revenue, its
authority under Republic Act No. 9480 is limited to determining
whether (a) the taxpayer is qualified to avail oneself of the tax
amnesty; (b) all the requirements for availment under the law were
complied with; and (c) the correct amount of amnesty tax was paid
within the period prescribed by law. There is nothing in Republic
Act No. 9480 which can be construed as authority for respondent
Commissioner of Internal Revenue to introduce exceptions and/or
conditions to the coverage of the law nor to disregard its provisions
and substitute his own personal judgment.
Same; Same; A tax amnesty „partakes of an absolute waiver by
the Government of its right to collect what otherwise would be due
it.‰·Republic Act No. 9480 provides a general grant of tax amnesty
subject only to the cases specifically excepted by it. A tax amnesty
„partakes of an absolute . . . waiver by the Government of its right
to collect what otherwise would be due it[.]‰ The effect of a qualified
taxpayerÊs submission of the required documents and the payment
of the prescribed amnesty tax was immunity from payment of all
national internal revenue taxes as well as all administrative, civil,
and criminal liabilities founded upon or arising from nonpayment of
national internal revenue taxes for taxable year 2005 and prior
taxable years.
Same; Same; Documentary Stamp Tax; Income Taxation; The
documentary stamp tax (DST) and onshore income tax are covered
by the tax amnesty program under Republic Act (RA) No. 9480 and
its Implementing Rules and Regulations (IRR).·The documentary
stamp tax and onshore income tax are covered by the tax amnesty
program under Republic Act No. 9480 and its Implementing Rules
and Regulations. Moreover, as to the deficiency tax on onshore
interest income, it is worthy to state that petitioner ING Bank was
assessed by respondent Commissioner of Internal Revenue, not as a
withholding agent, but as one that was directly liable for the tax on
onshore interest income and failed to pay the same. Considering
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VOL. 763, JULY 22, 2015 361

petitioner ING BankÊs tax amnesty availment, there is no more

issue regarding its liability for deficiency documentary stamp taxes
on its special savings accounts for 1996 and 1997 and deficiency tax
on onshore interest income for 1996, including surcharge and
interest.
Same; Income Taxation; Withholding Tax; Under the National
Internal Revenue Code (NIRC), every form of compensation for
personal services is subject to income tax and, consequently, to
withholding tax.·Under the National Internal Revenue Code,
every form of compensation for personal services is subject to
income tax and, consequently, to withholding tax. The term
„compensation‰ means all remunerations paid for services
performed by an employee for his or her employer, whether paid in
cash or in kind, unless specifically excluded under Sections 32(B)
and 78(A) of the 1997 National Internal Revenue Code. The name
designated to the remuneration for services is immaterial. Thus,
„salaries, wages, emoluments and honoraria, bonuses, allowances
(such as transportation, representation, entertainment, and the
like), [taxable] fringe benefits[,] pensions and retirement pay, and
other income of a similar nature constitute compensation income‰
that is taxable.
Same; Same; Same; The tax on compensation income is
withheld at source under the creditable withholding tax system
wherein the tax withheld is intended to equal or at least approximate
the tax due of the payee on the said income.·The tax on
compensation income is withheld at source under the creditable
withholding tax system wherein the tax withheld is intended to
equal or at least approximate the tax due of the payee on the said
income. It was designed to enable (a) the individual taxpayer to
meet his or her income tax liability on compensation earned; and (b)
the government to collect at source the appropriate taxes on
compensation. Taxes withheld are creditable in nature. Thus, the
employee is still required to file an income tax return to report the
income and/or pay the difference between the tax withheld and the
tax due on the income. For over withholding, the employee is
refunded. Therefore, absolute or exact accuracy in the

determination of the amount of the compensation income is not a
prerequisite for the employerÊs withholding obligation to arise.
Same; Same; Same; Compensation is constructively paid within
the meaning of these regulations when it is credited to the account of
362

or set apart for an employee so that it may be drawn upon by

him at any time although not then actually reduced to possession.
·Constructive payment of compensation is further defined in
Revenue Regulations No. 6-82: Section 25. Applicability;
constructive receipt of compensation.·. . . . Compensation is
constructively paid within the meaning of these regulations when it
is credited to the account of or set apart for an employee so that it
may be drawn upon by him at any time although not then actually
reduced to possession. To constitute payment in such a case, the
compensation must be credited or set apart for the employee
without any substantial limitation or restriction as to the time or
manner of payment or condition upon which payment is to be made,
and must be made available to him so that it may be drawn upon at
any time, and its payment brought within his control and
disposition.
Same; Same; Same; If the taxpayer is on cash basis, the expense
is deductible in the year it was paid, regardless of the year it was
incurred. If he is on the accrual method, he can deduct the expense
upon accrual thereof.·If the taxpayer is on cash basis, the expense
is deductible in the year it was paid, regardless of the year it was
incurred. If he is on the accrual method, he can deduct the expense
upon accrual thereof. An item that is reasonably ascertained as to
amount and acknowledged to be due has „accrued‰; actual payment
is not essential to constitute „expense.‰ Stated otherwise, an expense
is accrued and deducted for tax purposes when (1) the obligation to
pay is already fixed; (2) the amount can be determined with
reasonable accuracy; and (3) it is already knowable or the taxpayer

can reasonably be expected to have known at the closing of its books
for the taxable year.
Same; Same; Same; Section 29(j) of the 1977 National Internal
Revenue Code (NIRC) (Section 34[K] of the 1997 NIRC) expressly
requires, as a condition for deductibility of an expense, that the tax
required to be withheld on the amount paid or payable is shown to
have been remitted to the Bureau of Internal Revenue (BIR) by the
taxpayer constituted as a withholding agent of the government.·
Section 29(j) of the 1977 National Internal Revenue Code (Section
34[K] of the 1997 National Internal Revenue Code) expressly
requires, as a condition for deductibility of an expense, that the tax
required to be withheld on the amount paid or payable is shown to
have been remitted to the Bureau of Internal Revenue by the tax-
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VOL. 763, JULY 22, 2015 363

payer constituted as a withholding agent of the government.

The provision of Section 72 of the 1977 National Internal Revenue
Code (Section 79 of the 1997 National Internal Revenue Code)
regarding withholding on wages must be read and construed in
harmony with Section 29(j) of the 1977 National Internal Revenue
Code (Section 34[K] of the 1997 National Internal Revenue Code) on
deductions from gross income. This is in accordance with the rule on
statutory construction that an interpretation is to be sought which
gives effect to the whole of the statute, such that every part is made
effective, harmonious, and sensible, if possible, and not defeated nor
rendered insignificant, meaningless, and nugatory. If we go by the
theory of petitioner ING Bank, then the condition imposed by
Section 29(j) would have been rendered nugatory, or we would in
effect have created an exception to this mandatory requirement
when there was none in the law.
PETITION for review on certiorari of a decision of the

Court of Tax Appeals En Banc.
The facts are stated in the opinion of the Court.

Tan, Acut & Lopez for petitioner.
Office of the Solicitor General for respondent.
LEONEN, J.:
Qualified taxpayers with pending tax cases may still

avail themselves of the tax amnesty program under
Republic Act No. 9480,1 otherwise known as the 2007 Tax
Amnesty Act. Thus, the provision in BIR Revenue
Memorandum Circular No. 19-2008 excepting „[i]ssues and
cases which were ruled by any court (even without finality)
in favor of the BIR prior to amnesty availment of the
taxpayer‰ from the benefits of the
_______________
1 An Act Enhancing Revenue Administration and Collection by

Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by
the National Government for Taxable Year 2005 and Prior Years (2007).
364

law is illegal, invalid, and null and void.2 The duty to

withhold the tax on compensation arises upon its accrual.
This is a Petition for Review3 appealing the April 5,
2005 Decision4 of the Court of Tax Appeals En Banc, which
in turn affirmed the August 9, 2004 Decision5 and
November 12, 2004 Resolution6 of the Court of Tax Appeals
Second Division. The August 9, 2004 Decision held
petitioner ING Bank, N.V. Manila Branch (ING Bank)
liable for (a) deficiency documentary stamp tax for the
taxable years 1996 and 1997 in the total amount of
P238,545,052.38 inclusive of surcharges; (b) deficiency
onshore tax for the taxable year 1996 in the total amount of
P997,333.89 inclusive of surcharges and interest; and (c)
deficiency withholding tax on compensation for the taxable
years 1996 and 1997 in the total amount of P564,542.67

inclusive of interest. The Resolution denied ING BankÊs
Motion for Reconsideration.7
While this case was pending before this court, ING Bank
filed a Manifestation and Motion8 stating that it availed
itself of the governmentÊs tax amnesty program under
Republic Act No. 9480 with respect to its deficiency
documentary stamp tax
_______________
2 CS Garment, Inc. v. Commissioner of Internal Revenue, G.R. No.

182399, March 12, 2014, 718 SCRA 614, 634 [Per CJ. Sereno, First
Division].
3 Rollo, pp. 36-83. The Petition was filed pursuant to Rule 45 of the
Rules of Court.
4 Id., at pp. 10-33. The Decision was penned by Associate Justice
Olga Palanca-Enriquez and concurred in by Presiding Justice Ernesto D.
Acosta and Associate Justices Juanito C. Castañeda, Jr., Lovell R.
Bautista, Erlinda P. Uy, and Caesar A. Casanova.
5 Id., at pp. 387-420. The Decision was penned by Associate Justice
Lovell R. Bautista and concurred in by Presiding Justice Ernesto D.
Acosta and Associate Justice Juanito C. Castañeda, Jr.
6 Id., at pp. 463-467. The Resolution was signed by Presiding Justice
Ernesto D. Acosta and Associate Justices Lovell R. Bautista and Juanito
C. Castañeda, Jr.
7 Id., at pp. 422-450.
8 Id., at pp. 801-805.
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VOL. 763, JULY 22, 2015 365

and deficiency onshore tax liabilities.9 What is at issue

now is whether ING Bank is entitled to the immunities and
privileges under Republic Act No. 9480, and whether the
assessment for deficiency withholding tax on compensation
is proper.
ING Bank, „the Philippine branch of Internationale

Nederlanden Bank N.V., a foreign banking corporation
incorporated in the Netherlands[,] is duly authorized by the
Bangko Sentral ng Pilipinas to operate as a branch with
full banking authority in the Philippines.‰10
On January 3, 2000, ING Bank received a Final
Assessment Notice11 dated December 3, 1999.12 The Final
Assessment Notice also contained the Details of
Assessment13 and 13 Assessment Notices „issued by the
Enforcement Service of the Bureau of Internal Revenue
through its Assistant Commissioner Percival T.
Salazar[.]‰14 The Final Assessment Notice covered the
following deficiency tax assessments for taxable years 1996
and 1997:15
_______________
9 Id., at pp. 801-802.

10 Id., at p. 12.
11 Id., at pp. 88-91.
12 Id., at p. 13.
13 Id., at p. 92.
14 Id., at p. 13.
15 Id., at pp. 13-14.
366

On February 2, 2000, ING Bank „paid the deficiency

assessments for [the] 1996 compromise penalty, 1997
deficiency documentary stamp tax and 1997 deficiency final
tax in the respective amounts of P1,000.00, P1,000.00 and
P75,013.25 [the original amount of P73,752.47 plus
additional interest].‰16 ING Bank, however, „protested [on
the same day] the remaining ten (10) deficiency tax
assessments in the total amount of P672,576,939.18.‰17
ING Bank filed a Petition for Review before the Court of
Tax Appeals on October 26, 2000. This case was docketed
as C.T.A. Case No. 6187.18 The Petition was filed to seek
„the cancellation and withdrawal of the deficiency tax
assessments for the years 1996 and 1997, including the
alleged deficiency documentary stamp tax on special
savings accounts, deficiency onshore tax, and deficiency
withholding tax on compensation mentioned above.‰19
_______________
16 Id., at p. 14.
17 Id., at pp. 14 and 98-111.
18 Id., at p. 42.
19 Id.
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VOL. 763, JULY 22, 2015 367

After trial, the Court of Tax Appeals Second Division

rendered its Decision on August 9, 2004, with the following
disposition:
WHEREFORE, the assessments for 1996 and 1997 deficiency

income tax, 1996 and 1997 deficiency branch profit remittance tax
and 1997 deficiency documentary stamp tax on IBCLs exceeding
five days are hereby CANCELLED and WITHDRAWN. However,
the assessments for 1996 and 1997 deficiency withholding tax on
compensation, 1996 deficiency onshore tax and 1996 and 1997
deficiency documentary stamp tax on special savings accounts are
hereby UPHELD in the following amounts:
Accordingly, petitioner is ORDERED to PAY the respondent the

aggregate amount of P240,106,928.94, plus 20% delinquency
interest per annum from February 3, 2000 until fully paid,
pursuant to Section 249(C) of the National Internal Revenue Code
of 1997.
SO ORDERED.20 (Emphasis in the original).
Both the Commissioner of Internal Revenue and ING

Bank filed their respective Motions for Reconsideration.21
Both
_______________
20 Id., at p. 419
21 Id., at pp. 422-450 (Petitioner ING BankÊs Motion for
Reconsideration) and 451-455 (Respondent Commissioner of Internal
RevenueÊs Motion for Partial Reconsideration).
368

Motions were denied through the Second DivisionÊs

Resolution dated November 12, 2004, as follows:
WHEREFORE, the respondentÊs Motion for Partial

Reconsideration and the petitionerÊs Motion for Reconsideration are
hereby DENIED for lack of merit. The pronouncement reached in
the assailed decision is REITERATED.
SO ORDERED.22
On December 8, 2004, ING Bank filed its appeal before

the Court of Tax Appeals En Banc.23 The Court of Tax
Appeals En Banc denied due course to ING BankÊs Petition
for Review and dismissed the same for lack of merit in the
Decision promulgated on April 5, 2005.24
Hence, ING Bank filed its Petition for Review25 before
this court. The Commissioner of Internal Revenue filed its
Comment26 on October 5, 2005 and ING Bank its Reply27
on December 14, 2005. Pursuant to this courtÊs Resolution28
dated January 25, 2006, the Commissioner of Internal
Revenue filed its Manifestation and Motion29 on February
14, 2006, stating that it is adopting its Comment as its
Memorandum, and ING Bank filed its Memorandum30 on
March 9, 2006.
_______________
22 Id., at p. 467.
23 Id., at p. 47.
24 Id., at p. 32.
25 The Petition was received by this court on May 25, 2005.
26 Rollo, pp. 623-646.
27 Id., at pp. 661-689.
28 Id., at pp. 691-692.
29 Id., at pp. 698-700.
30 Id., at pp. 703-765. On May 10, 2006 and September 19, 2007, this
court received petitioner ING BankÊs Supplemental Memorandum (Rollo,
pp. 769-784) and Supplement to Memorandum (Rollo, pp. 787-798),
respectively.
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On December 20, 2007, ING Bank filed a Manifestation

and Motion31 informing this court that it had availed itself
of the tax amnesty authorized and granted under Republic
Act No. 9480 covering „all national internal revenue taxes
for the taxable year 2005 and prior years, with or without
assessments duly issued therefor, that have remained
unpaid as of December 31, 2005[.]‰32 ING Bank stated that
it filed before the Bureau of Internal Revenue its Notice of
Availment of Tax Amnesty Under Republic Act No. 948033
on December 14, 2007, together with the following
documents:
(1) Statement of Assets, Liabilities and Net Worth
(SALN) as of December 31, 2005 (original and amended
declarations);34
r Years (BIR Form No. 2116);35 and
(3) Tax Amnesty Payment Form (Acceptance of Payment

Form) for Taxable Year 2005 and Prior Years (BIR Form
No. 0617)36 showing payment of the amnesty tax in the
amount of P500,000.00.
ING Bank prayed that this court issue a resolution
taking note of its availment of the tax amnesty, and
confirming its entitlement to all the immunities and
privileges under Section 6 of Republic Act No. 9480,
particularly with respect to the „payment of deficiency
documentary stamp taxes on its special savings accounts
for the taxable years 1996 and 1997
_______________
31 Id., at pp. 801-805.

32 Rep. Act No. 9480, Sec. 1.
33 Rollo, p. 807.
34 Id., at pp. 811-856 (Audited Financial Statements as of December
31, 2005 and 2004) and 858-859 (Statement of Assets, Liabilities and Net
Worth as of December 31, 2005).
(2) Tax Amnesty Return For Taxable Year 2005 and Prio
35 Id., at p. 810.
36 Id., at pp. 808-809.
370

and deficiency tax on onshore interest income derived

under the foreign currency deposit system for taxable year
1996[.]‰37
Pursuant to this courtÊs Resolution38 dated January 23,
2008, the Commissioner of Internal Revenue filed its
Comment39 and ING Bank, its Reply.40
Originally, ING Bank raised the following issues in its
pleadings:
First, whether „[t]he Court of Tax Appeals En Banc
erred in concluding that petitionerÊs Special Saving
Accounts are subject to documentary stamp tax (DST) as
certificates of deposit under Section 180 of the 1977 Tax
Code‰;41
Second, whether „[t]he Court of Tax Appeals En Banc
erred in holding petitioner liable for deficiency onshore tax
considering that under the 1977 Tax Code and the
pertinent revenue regulations, the obligation to pay the ten
percent (10%) final tax on onshore interest income rests on
the payors-borrowers and not on petitioner as payee-
lender‰;42 and
Third, whether „[t]he Court of Tax Appeals En Banc
erred in holding petitioner liable for deficiency withholding
tax on compensation for the accrued bonuses in the taxable
years 1996 and 1997 considering that these were not
distributed to petitionerÊs officers and employees during
those taxable years, hence, were not yet subject to
withholding tax.‰43
However, ING Bank availed itself of the tax amnesty

under Republic Act No. 9480, with respect to its liabilities
for deficiency documentary stamp taxes on its special
savings ac-
_______________
37 Id., at p. 803.
38 Id., at p. 860.
39 Id., at pp. 871-882. Respondent Commissioner of Internal
RevenueÊs Comment was received by this court on April 25, 2008.
40 Id., at pp. 884-894. Petitioner ING BankÊs Reply was received by
this court on May 26, 2008.
41 Id., at p. 49.
42 Id., at p. 50.
43 Id.
371
VOL. 763, JULY 22, 2015 371

counts for the taxable years 1996 and 1997 and

deficiency tax on onshore interest income under the foreign
currency deposit system for taxable year 1996.
Consequently, the issues now for resolution are:
First, whether petitioner ING Bank may validly avail
itself of the tax amnesty granted by Republic Act No. 9480;
and
Second, whether petitioner ING Bank is liable for
deficiency withholding tax on accrued bonuses for the
taxable years 1996 and 1997.
Tax amnesty availment
Petitioner ING Bank asserts that it is „qualified to avail

of the tax amnesty under Section 5 [of Republic Act No.
9480] and . . . not disqualified under Section 8 [of the same
law].‰44
Respondent Commissioner of Internal Revenue, for its
part, does not deny the authenticity of the documents

submitted by petitioner ING Bank or dispute the payment
of the amnesty tax. However, respondent Commissioner of
Internal Revenue claims that petitioner ING Bank is not
qualified to avail itself of the tax amnesty granted under
Republic Act No. 9480 because both the Court of Tax
Appeals En Banc and Second Division ruled in its favor
that confirmed the liability of petitioner ING Bank for
deficiency documentary stamp taxes, onshore taxes, and
withholding taxes.45
Respondent Commissioner of Internal Revenue asserts
that BIR Revenue Memorandum Circular No. 19-2008
specifically excludes „cases which were ruled by any court
(even without finality) in favor of the BIR prior to amnesty
availment of the taxpayer‰ from the coverage of the tax
amnesty under Republic Act No. 9480.46 In any case,
respondent Commissioner of
44 Id., at p. 802.
45 Id., at pp. 876-879.
46 Id., at pp. 877-878.
372

Internal Revenue argues that petitioner ING BankÊs

availment of the tax amnesty is still subject to its
evaluation,47 that it is „empowered to exercise [its] sound
discretion . . . in the implementation of a tax amnesty in
favor of a taxpayer,‰48 and „petitioner cannot presume that
its application . . . would be granted[.]‰49 Accordingly,
respondent Commissioner of Internal Revenue prays that
„petitioner [ING BankÊs] motion be denied for lack of
merit.‰50
Petitioner ING Bank counters that BIR Revenue
Memorandum Circular No. 19-2008 cannot override
Republic Act No. 9480 and its Implementing Rules and
Regulations, which only exclude from tax amnesty „tax

cases subject of final and [executory] judgment by the
courts.‰51
Petitioner ING Bank asserts that its full compliance
with the conditions prescribed in Republic Act No. 9480
(the conditions being submission of the requisite documents
and payment of the amnesty tax), which respondent
Commissioner of Internal Revenue does not dispute,
confirms that it is „qualified to avail itself, and has actually
availed itself, of the tax amnesty.‰52 It argues that there is
nothing in the law that gives respondent Commissioner of
Internal Revenue the discretion to rescind or erase the
legal effects of its tax amnesty availment.53 Thus, the issue
is no longer about whether „[it] is entitled to avail itself of
the tax amnesty[,]‰54 but rather whether the effects of its
tax amnesty availment extend to the assessments of
deficiency documentary stamp taxes on its
_______________
47 Id., at p. 879.
48 Id., at p. 880.
49 Id., at p. 881.
50 Id.
51 Id., at pp. 886-888.
52 Id., at p. 890.
53 Id.
54 Id., at p. 889.
373
VOL. 763, JULY 22, 2015 373

special savings accounts for 1996 and 1997 and

deficiency tax on onshore interest income for 1996.55
Petitioner ING Bank points out the Court of Tax
AppealsÊ ruling in Metropolitan Bank and Trust Company
v. Commissioner of Internal Revenue,56 to the effect that
full compliance with the requirements of the tax amnesty

law extinguishes the tax deficiencies subject of the amnesty
availment.57 Thus, with its availment of the tax amnesty
and full compliance with all the conditions prescribed in
the statute, petitioner ING Bank asserts that it is entitled
to all the immunities and privileges under Section 6 of
Republic Act No. 9480.58
Withholding tax on compensation
Petitioner ING Bank claims that it is not liable for

withholding taxes on bonuses accruing to its officers and
employees during taxable years 1996 and 1997.59 It
maintains its position that the liability of the employer to
withhold the tax does not arise until such bonus is actually
distributed. It cites Section 72 of the 1977 National
Internal Revenue Code, which states that „[e]very
employer making payment of wages shall deduct and
withhold upon such wages a tax,‰ and BIR Ruling No. 555-
88 (November 23, 1988) declaring that „[t]he withholding
tax on the bonuses should be deducted upon the
distribution of the same to the officers and employees[.]‰60
Since the supposed bonuses were not distributed to the
officers and employees in 1996 and 1997 but were
distributed in the succeeding year when the amounts of the
bonuses were finally determined, petitioner ING Bank
asserts that its duty as
_______________
55 Id., at pp. 890-891.

56 The case is docketed as C.T.A. E.B. No. 269 (formerly CTA Case
No. 6504, March 28, 2008).
57 Rollo, p. 891.
58 Id., at p. 892.
59 Id., at p. 758.
60 Id., at pp. 758-759.
374

employer to withhold the tax during these taxable years

did not arise.61
Petitioner ING Bank further argues that the Court of
Tax AppealsÊ discussion on Section 29(j) of the 1993
National Internal Revenue Code and Section 3 of Revenue
Regulations No. 8-90 is not applicable because the issue in
this case „is not whether the accrued bonuses should be
allowed as deductions from petitionerÊs taxable income but,
rather, whether the accrued bonuses are subject to
withholding tax on compensation in the respective years of
accrual[.]‰62
Respondent Commissioner of Internal Revenue counters
that petitioner ING BankÊs application of BIR Ruling No.
555-88 is misplaced because as found by the Second
Division of the Court of Tax Appeals, the factual milieu is
different:63
In that ruling, bonuses are determined and distributed in the

succeeding year „[A]fter [sic] the audit of each company is
completed (on or before April 15 of the succeeding year).‰ The
withholding and remittance of income taxes were also made in the
year they were distributed to the employees. . . .
In petitionerÊs case, bonuses were determined during the year
but were distributed in the succeeding year. No withholding of
income tax was effected but the bonuses were claimed as an
expense for the year. . . .
Since the bonuses were not subjected to withholding tax during
the year they were claimed as an expense, the same should be
disallowed pursuant to the above quoted law.64
Respondent Commissioner of Internal Revenue contends

that petitioner ING BankÊs act of „claim[ing] [the] subject
_______________
61 Id., at p. 760.
62 Id., at p. 761.
63 Id., at pp. 642-643.
64 Id., at p. 643.
375
VOL. 763, JULY 22, 2015 375

bonuses as deductible expenses in its taxable income

although it has not yet withheld and remitted the
[corresponding withholding] tax‰65 to the Bureau of
Internal Revenue contravened Section 29(j) of the 1997
National Internal Revenue Code, as amended.66
Respondent Commissioner of Internal Revenue claims that
„subject bonuses should also be disallowed as deductible
expenses of petitioner.‰67
Taxpayers with pending tax cases may avail themselves

of the tax amnesty program under Republic Act No. 9480.
In CS Garment, Inc. v. Commissioner of Internal
Revenue,68 this court has „definitively declare[d] . . . the
exception Â[i]ssues and cases which were ruled by any court
(even without finality) in favor of the BIR prior to amnesty
availment of the taxpayerÊ under BIR [Revenue
Memorandum Circular No.] 19-2008 [as] invalid, [for going]
beyond the scope of the provisions of the 2007 Tax Amnesty
Law.‰69 Thus:
[N]either the law nor the implementing rules state that a court
ruling that has not attained finality would preclude the availment
of the benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF
Order No. 29-07 are quite precise in declaring that „[t]ax cases
subject of final and executory judgment by the courts‰ are the
ones excepted from the benefits of the law. In fact, we have already
pointed out the erroneous interpretation of the law in Philippine
Banking Corporation (Now: Global Business Bank, Inc.) v.
Commissioner of Internal Revenue, viz.:
_______________
65 Id., at p. 644.
66 Id.
67 Id., at p. 645.
68 Supra note 2.
69 Id., at p. 634.
376

The BIRÊs inclusion of „issues and cases which were ruled

by any court (even without finality) in favor of the BIR prior
to amnesty availment of the taxpayer‰ as one of the
exceptions in RMC 19-2008 is misplaced. RA 9480 is specifically
clear that the exceptions to the tax amnesty program include „tax
cases subject of final and executory judgment by the courts.‰ The
present case has not become final and executory when Metrobank
availed of the tax amnesty program.70 (Emphasis in the original,
citation omitted)
Moreover, in the fairly recent case of LG Electronics

Philippines, Inc. v. Commissioner of Internal Revenue,71 we
confirmed that only cases that involve final and executory
judgments are excluded from the tax amnesty program as
explicitly provided under Section 8 of Republic Act No.
9480.72
Thus, petitioner ING Bank is not disqualified from
availing itself of the tax amnesty under the law during the
pendency of its appeal before this court.
II
Petitioner ING Bank showed that it complied with the

requirements set forth under Republic Act No. 9480.
Respondent Commissioner of Internal Revenue never
questioned or rebutted that petitioner ING Bank fully
complied with the requirements for tax amnesty under the
law. Moreover, the contestability period of one (1) year from
the time of petitioner ING BankÊs availment of the tax

amnesty law on December 14, 2007 lapsed.
Correspondingly, it is fully entitled to the
_______________
70 Id., at pp. 632-633.

71 G.R. No. 165451, December 3, 2014, 743 SCRA 511 [Per J. Leonen,
Second Division].
72 Id., at p. 536.
377
VOL. 763, JULY 22, 2015 377

immunities and privileges mentioned under Section 6 of

Republic Act No. 9480. This is clear from the following
provisions:
SEC. 2. Availment of the Amnesty.·Any person, natural or

juridical, who wishes to avail himself of the tax amnesty authorized
and granted under this Act shall file with the Bureau of Internal
Revenue (BIR) a notice and Tax Amnesty Return accompanied by a
Statement of Assets, Liabilities and Networth (SALN) as of
December 31, 2005, in such form as may be prescribed in the
implementing rules and regulations (IRR) of this Act, and pay the
applicable amnesty tax within six months from the effectivity of the
IRR.
....
SEC. 4. Presumption of Correctness of the SALN.·The SALN as
of December 31, 2005 shall be considered as true and correct except
where the amount of declared networth is understated to the extent
of thirty percent (30%) or more as may be established in
proceedings initiated by, or at the instance of, parties other than the
BIR or its agents: Provided, That such proceedings must be initiated
within one year following the date of the filing of the tax amnesty
return and the SALN. Findings of or admission in congressional
hearings, other administrative agencies of government, and/or
courts shall be admissible to prove a thirty percent (30%) under-

declaration.
....
SEC. 6. Immunities and Privileges.·Those who availed
themselves of the tax amnesty under Section 5 hereof, and have fully
complied with all its conditions shall be entitled to the following
immunities and privileges:
a. The taxpayer shall be immune from the payment of taxes, as
well as addition thereto, and the appurtenant civil, criminal or
administrative penalties under the National Internal Revenue Code
of 1997, as amended, arising from the failure to pay any and all
internal
378

revenue taxes for taxable year 2005 and prior years.

b. The taxpayerÊs Tax Amnesty Returns and the SALN as of
December 31, 2005 shall not be admissible as evidence in all
proceedings that pertain to taxable year 2005 and prior years,
insofar as such proceedings relate to internal revenue taxes, before
judicial, quasi-judicial or administrative bodies in which he is a
defendant or respondent, and except for the purpose of ascertaining
the networth beginning January 1, 2006, the same shall not be
examined, inquired or looked into by any person or government
office. However, the taxpayer may use this as a defense, whenever
appropriate, in cases brought against him.
c. The books of accounts and other records of the taxpayer for the
years covered by the tax amnesty availed of shall not be examined:
Provided, That the Commissioner of Internal Revenue may
authorize in writing the examination of the said books of accounts
and other records to verify the validity or correctness of a claim for
any tax refund, tax credit (other than refund or credit of taxes
withheld on wages), tax incentives, and/or exemptions under
existing laws. (Emphasis supplied)
Contrary to respondent Commissioner of Internal

RevenueÊs stance, Republic Act No. 9480 confers no
discretion on respondent Commissioner of Internal
Revenue. The provisions of the law are plain and simple.
Unlike the power to compromise or abate a taxpayerÊs
liability under Section 20473
_______________
73 SEC. 204. Authority of the Commissioner to Compromise, Abate

and Refund or Credit Taxes.·The Commissioner may ·
(A) Compromise the payment of any internal revenue tax, when:
(1) A reasonable doubt as to the validity of the claim against the
taxpayer exists; or
379
VOL. 763, JULY 22, 2015 379

of the 1997 National Internal Revenue Code that is

within the discretion of respondent Commissioner of
Internal Revenue,74
_______________
(2) The financial position of the taxpayer demonstrates a clear

inability to pay the assessed tax.
The compromise settlement of any tax liability shall be subject to the
following minimum amounts:
For cases of financial incapacity, a minimum compromise rate
equivalent to ten percent (10%) of the basic assessed tax; and
For other cases, a minimum compromise rate equivalent to forty
percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,000,000)
or where the settlement offered is less than the prescribed minimum
rates, the compromise shall be subject to the approval of the Evaluation
Board which shall be composed of the Commissioner and the four (4)
Deputy Commissioners.
(B) Abate or cancel a tax liability, when:

(1) The tax or any portion thereof appears to be unjustly or excessively
assessed; or
(2) The administration and collection costs involved do not justify the
collection of the amount due.
All criminal violations may be compromised except: (a) those already
filed in court, or (b) those involving fraud.
(C) . . .
. . . . The Commissioner shall submit to the Chairmen of the
Committee on Ways and Means of both the Senate and House of
Representatives, every six (6) months, a report on the exercise of his
powers under this Section, stating therein the following facts and
information, among others: names and addresses of taxpayers whose
cases have been the subject of abatement or compromise; amount
involved; amount compromised or abated; and reasons for the exercise of
power: Provided, That the said report shall be presented to the Oversight
Committee in Congress that shall be constituted to determine that said
powers are reasonably exercised and that the government is not unduly
deprived of revenues.
74 See People v. Sandiganbayan, 504 Phil. 407, 436; 467 SCRA 137,
166 (2005) [Per J. Panganiban, Third Division]; Philippine National Oil
Company v. Court of Appeals, 496 Phil. 506, 572-574; 457 SCRA 32, 122-
123 (2005) [Per J. Chico-Nazario, En Banc]; Kop-
380

its authority under Republic Act No. 9480 is limited to

determining whether (a) the taxpayer is qualified to avail
oneself of the tax amnesty; (b) all the requirements for
availment under the law were complied with; and (c) the
correct amount of amnesty tax was paid within the period
prescribed by law. There is nothing in Republic Act No.
9480 which can be construed as authority for respondent
Commissioner of Internal Revenue to introduce exceptions
and/or conditions to the coverage of the law nor to
disregard its provisions and substitute his own personal
judgment.
Republic Act No. 9480 provides a general grant of tax
amnesty subject only to the cases specifically excepted by
it. A tax amnesty „partakes of an absolute . . . waiver by the
Government of its right to collect what otherwise would be
due it[.]‰75 The effect of a qualified taxpayerÊs submission of
the required documents and the payment of the prescribed
amnesty tax was immunity from payment of all national
internal revenue taxes as well as all administrative, civil,
and criminal liabilities founded upon or arising from
nonpayment of national internal revenue taxes for taxable
year 2005 and prior taxable years.76
_______________
pel (Philippines), Inc. v. Collector of Internal Revenue, 87 Phil. 348,

351 (1950) [Per CJ. Moran, En Banc].
75 Republic v. Intermediate Appellate Court, 273 Phil. 573, 578; 196
SCRA 335, 339 (1991) [Per J. Griño-Aquino, First Division], cited in
Bañas, Jr. v. Court of Appeals, 382 Phil. 144, 156; 325 SCRA 259, 273
(2000) [Per J. Quisumbing, Second Division], which was cited in Asia
International Auctioneers, Inc. v. Commissioner of Internal Revenue, G.R.
No. 179115, September 26, 2012, 682 SCRA 49, 55 [Per J. Perlas-
Bernabe, Second Division]. See People v. Castañeda, Jr., 247-A Phil. 420,
430-431; 165 SCRA 327, 338-339 (1988) [Per J. Feliciano, Third Division]
and Nepomuceno v. Montecillo, 203 Phil. 632, 637-638; 118 SCRA 254,
259 (1982) [Per J. Plana, First Division].
76 Philippine Banking Corporation (Now: Global Business Bank, Inc.)
v. Commissioner of Internal Revenue, 597 Phil. 363, 388; 577 SCRA 366,
392-393 (2009) [Per J. Carpio, First Division]. The case involved
deficiency documentary stamp taxes for the taxable years
381
VOL. 763, JULY 22, 2015 381

Finally, the documentary stamp tax and onshore income

tax are covered by the tax amnesty program under
Republic Act No. 9480 and its Implementing Rules and

Regulations.77
_______________
1996 and 1997, respectively, on the bankÊs product called „Special/

Super Savings Deposit Account‰ (SSDA). During the pendency of the
appeal before this court, Metropolitan Bank and Trust Company, the
surviving entity that absorbed petitionerÊs banking business, availed
itself of the tax amnesty program under Rep. Act No. 9480. (pp. 387-388)
See also People v. Castañeda, Jr., supra note 75 at pp. 430-431;
p. 338, which declared that compliance with all the requirements of
availment of tax amnesty under P.D. No. 370 would have the effect of
condoning income tax liabilities including the increments or penalties on
account of nonpayment as provided under the tax amnesty law.
77 Rep. Act No. 9480, Sec. 1 provides:

SECTION 1. Coverage.·There is hereby authorized and granted a tax
amnesty which shall cover all national internal revenue taxes for the
taxable year 2005 and prior years, with or without assessments duly
issued therefore, that have remained unpaid as of December 31, 2005:
Provided, however, That the amnesty hereby authorized and granted
shall not cover persons or cases enumerated under Section 8 hereof.
DOF Department Order No. 29-07 (2007), Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 9480, provides:
SEC. 3. Taxes Covered.·The tax amnesty shall cover all national
internal revenue taxes imposed by the National Government for the
taxable year 2005 and prior years, with or without assessments duly
issued therefor, that have remained unpaid as of December 31, 2005. BIR
Revenue Memorandum Circular No. 69-2007 (2007) provides:
Q-1 What type of taxes and what taxable period/s are covered by the
Tax Amnesty Program under RA 9480 as implemented by DO 29-07?
A-1 The Tax Amnesty Program (TAP) covers all national internal
revenue taxes such as income tax, estate tax, donorÊs tax and capital
gains tax, value added tax, other percentage taxes, excise taxes and
documentary stamp
382

Moreover, as to the deficiency tax on onshore interest

income, it is worthy to state that petitioner ING Bank was
assessed by respondent Commissioner of Internal Revenue,
not as a withholding agent, but as one that was directly
liable for the tax on onshore interest income and failed to
pay the same.
Considering petitioner ING BankÊs tax amnesty
availment, there is no more issue regarding its liability for
deficiency documentary stamp taxes on its special savings
accounts for 1996 and 1997 and deficiency tax on onshore
interest income for 1996, including surcharge and interest.
III
The Court of Tax Appeals En Banc affirmed the factual

finding of the Second Division that accrued bonuses were
recorded in petitioner ING BankÊs books as expenses for
taxable years 1996 and 1997, although no withholding of
tax was effected:
With the preceding defense notwithstanding, petitioner
now maintained that the portion of the disallowed bonuses
in the amounts of P3,879,407.85 and P9,004,402.63 for the
respective years 1996 and 1997, were actually payments for
reimbursements of representation, travel and
entertainment expenses of its officers. These expenses
according to petitioner are not considered compensation of
employees and likewise not subject to withholding tax.
In order to prove that the discrepancy in the accrued
bonuses represents reimbursement of expenses, pe-
_______________
taxes, except withholding taxes and taxes passed-on and already

collected from the customers for remittance to the BIR, these taxes/funds
being considered as funds held in trust for the government. Moreover, the
time-honored doctrine that „No person shall unjustly enrich himself at
the expense of another‰ should always be observed.
383
VOL. 763, JULY 22, 2015 383

titioner availed of the services of an independent CPA pursuant

to CTA Circular No. 1-95, as amended. As a consequence, Mr. Ruben
Rubio was commissioned by the court to verify the accuracy of
petitionerÊs position and to check its supporting documents.
In a report dated January 29, 2002, the commissioned
independent CPA noted the following pertinent findings: . . .
1996 1997
Supporting document is under the
P1,849,040.70 P930,307.56
name of the employee
Supporting document is under the
1,630,292.14 7,039,976.36
name of the Bank
TOTAL P3,479,332.84P7,970,283.92
Consequently, petitioner is still liable for the amounts of

P167,384.97 and P397,157.70 representing deficiency
withholding taxes on compensation for the respective years
of 1996 and 1997, computed as follows:
1996 1997
Total Disallowed Accrued Bonus P3,879,407.85 P9,004,402.63
Less: Substantiated
Reimbursement of Expense 3,479,332.84 _7,970,283.92
Unsubstantiated P400,075.01 P1,034,119.43
Tax Rate _____26.48%_______27.83%
Basic Withholding Tax Due Thereon P105,939.86 P287,795.44
Interest (Sec. 249) _ 61,445.11 _109,362.26
Deficiency Withholding Tax on 78
P167,384.97 P397,157.70
Compensation
An expense, whether the same is paid or payable, „shall

be allowed as a deduction only if it is shown that the tax
required to be deducted and withheld therefrom [was] paid
to the Bureau of Internal Revenue[.]‰79
_______________
78 Rollo, pp. 405-406.

79 Pres. Decree No. 1158 (1977), Sec. 29(j), as amended/renumbered
by Pres. Decree No. 1351 (1978), Batas Pambansa Blg. 135 (1981), Exec.
Order Nos. 37 (1986) and 273 (1987) and Rep. Act No. 7496 (1992).
385
VOL. 763, JULY 22, 2015 385

Section 29(j) of the 1977 National Internal Revenue

Code80 (now Section 34[K] of the 1997 National Internal
Revenue Code) provides:
Section 29. Deductions from gross income.·In computing taxable

income subject to tax under Sec. 21(a); 24(a), (b) and (c); and 25(a)
(1), there shall be allowed as deductions the items specified in
paragraphs (a) to (i) of this section: . . . .
....
(a) Expenses.·(1) Business expenses.·(A) In general.·All
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
services actually rendered; travelling expenses while away from
home in the pursuit of a trade, profession or business, rentals or
other payments required to be made as a condition to the continued
use or possession, for the purpose of the trade, profession or
business, of property to which the taxpayer has not taken or is not
taking title or in which he has no equity.
....
(j) Additional requirement for deductibility of certain payments.
·Any amount paid or payable which is otherwise deductible from,
or taken into account in computing gross income for which
depreciation or amortization may be allowed under this section,
shall be allowed as a deduction only if it is shown that the tax
required to be deducted and withheld therefrom has been paid to the
Bureau of Internal Revenue in accordance with this section,
_______________
80 Pres. Decree No. 1158 (1977), as amended/renumbered by Pres.
Decree No. 1351 (1978), Batas Pambansa Blg. 135 (1981), Exec. Order
Nos. 37 (1986) and 273 (1987) and Rep. Act No. 7496 (1992).
386

Sections 5181 and 7482 of this Code. (Emphasis supplied)
_______________
81 Pres. Decree No. 1158 (1977), Sec. 51, as amended/renumbered by

Batas Pambansa Blg. 41 (1979), Pres. Decree Nos. 1959 (1984) and 1994
(1985), and Exec. Order No. 273 (1987) provides:
Section 51. Returns and payment of taxes withheld at source.·
(a) Quarterly return and payment of taxes withheld.·Taxes deducted and
withheld under Section 50 shall be covered by a return and paid to the
Revenue District Officer, Collection Agent, or duly authorized Treasurer
of the city, or municipality where the withholding agent has his legal
residence or principal place of business, or where the withholding agent
is a corporation, where the principal office is located. The taxes deducted
and withheld by the withholding agent shall be held as a special fund in
trust for the Government until paid to the collecting officers. The
Commissioner of Internal Revenue may, with the approval of the
Secretary of Finance, require these withholding agents to pay or deposit
the taxes deducted or withheld at more frequent intervals when
necessary to protect the interest of the Government. The return for final
withholding tax shall be filed and the payment made within 25 days from
the close of each calendar quarter, while the return for creditable
withholding taxes shall be filed and the payment made not later than the
last day of the month following the close of the quarter during which
withholding was made.
(b) Penalties for failure to render returns; for rendering false or
fraudulent return; for nonpayment or late payment of taxes withheld.·
The surcharges prescribed in Section seventy-two and the specific
penalties prescribed in Section seventy-three of this Title in cases of
failure to render returns, for filing false or fraudulent returns and for
failure to pay tax shall apply to failure to file returns or pay the tax
required under this Section. In case the taxes deducted and withheld are
not paid within the time prescribed, there shall be added a surcharge of
five per centum on the amount of tax unpaid and interest at the rate of
fourteen per centum per annum from the date the same become due until
paid.
(c) Statement of income payments made and taxes withheld.·Every
withholding agent required to deduct and withhold taxes under Section
[50] shall furnish each recipient, in respect to his or its receipts during
the calendar quarter or year, a written statement showing the income or
other payments made by the withholding
387
VOL. 763, JULY 22, 2015 387

_______________
agent during such quarter or year, and the amount of the tax deducted
and withheld therefrom, simultaneously upon payment at the request of
the payee, but not later than the 20th day following the close of the
quarter in the case of corporate payee, or not later than March 1 of the
following year in the case of individual payee for creditable withholding
taxes. For final withholding taxes, the statement should be given to the
payee on or before January 31 of the succeeding year.
(d) Annual returns.·Every withholding agent required to deduct and
withhold taxes under Section [50] shall submit to the Commissioner of
Internal Revenue a reconciliation statement of quarterly payments and
list of payees and income payments. In the case of final withholding
taxes, the return shall be filed on or before January 31 of the succeeding
year, and for creditable withholding taxes, not later than March 1 of the
year following the year for which the annual report is being submitted.
This return, if made and filed in accordance with regulations approved
by the [Secretary] of Finance, shall be sufficient compliance with the
requirements of Section [61] of this Title in respect to the income
payments.
The Commissioner may, by regulations, grant to any withholding
agent a reasonable extension of time to furnish and submit the return
required in this subsection.
(e) Surcharge and interest for failure to deduct and withhold.·If the

withholding agent, in violation of the provisions of the preceding section
and implementing regulations thereunder, fails to deduct and withhold
the amount of tax required under said section and regulations, he shall
be liable to pay in addition to the tax required to be deducted and
withheld, a surcharge of fifty per centum if the failure is due to willful
neglect or with intent to defraud the Government, or twenty-five per
centum if the failure is not due to such causes, plus interest at the rate of
fourteen per centum per annum from the time the tax is required to be
withheld until the date of assessment.
(f) Income of recipient.·Income upon which any creditable tax is
required to be withheld at source under Section [50] shall be included in
the return of its recipient but any excess of the amount of tax so withheld
over the tax due on his return shall be refunded to him subject to the
provisions of Section [204]; if the income tax collected at source is less
than the tax due on his return, the difference shall be paid in accordance
with the provisions of Section [49].
388

Section 3 of Revenue Regulations No. 8-90 (now Section

2.58.5 of Revenue Regulations No. 2-98) provides:
Section 3. Section 9 of Revenue Regulations No. 6-85 is hereby

amended to read as follows:
Section 9. (a) Requirement for deductibility.·Any income
payment, which is otherwise deductible under Sections 29 and 54 of
the Tax Code, as amended, shall be allowed as a deduction from the
payorÊs gross income only if it is shown that the tax required to be
withheld has been paid to the Bureau of Internal Revenue in
accordance with Sections 50, 51, 72, and 74 also of the Tax Code.
(Emphasis supplied)
Under the National Internal Revenue Code, every form

of compensation for personal services is subject to income
tax
_______________
(g) All taxes withheld pursuant to the provisions of this Code and its
implementing regulations are hereby considered trust funds and shall be
maintained in a separate account and not commingled with any other
funds of the withholding agent. Any violation of this provision shall be
subject to the surcharges and penalties prescribed in paragraph (b) of
this Section.
82 Pres. Decree No. 1158 (1977), Sec. 74, as amended, provides:
Section 74. Return and payment to the Government of taxes withheld.·
Taxes deducted and withheld hereunder by the employer on wages of
employees shall be covered by a return and paid to the collection agent of
the city or municipality in which the employer has his legal residence or
principal place of business, or, in case the employer is a corporation, in
which the principal office is located. The return shall be filed and the
payment made within twenty-five days from the close of each calendar
quarter. The taxes deducted and withheld by employers shall be held in a
special fund in trust for the Government until the same are paid to the
said collecting officers. The Commissioner of Internal Revenue may, with
the approval of the Secretary of Finance, require employers to pay or
deposit the taxes deducted and withheld at more frequent intervals, in
cases where such requirement is deemed necessary to protect the
interest of the Government. (As renumbered by Pres. Decree No. 1994
and Exec. Order No. 273)
389
VOL. 763, JULY 22, 2015 389

and, consequently, to withholding tax. The term

„compensation‰ means all remunerations paid for services
performed by an employee for his or her employer, whether
paid in cash or in kind, unless specifically excluded under
Sections 32(B)83
_______________
83 1997 Tax Code, Sec. 32 provides:

SEC. 32. Gross Income.·
....
(B) Exclusions from Gross Income.·The following items shall not be
included in gross income and shall be exempt from taxation under this
title:
(1) Life Insurance.·The proceeds of life insurance policies paid to the
heirs or beneficiaries upon the death of the insured, whether in a single
sum or otherwise, but if such amounts are held by the insurer under an
agreement to pay interest thereon, the interest payments shall be
included in gross income.
(2) Amount Received by Insured as Return of Premium.·The amount
received by the insured, as a return of premiums paid by him under life
insurance, endowment, or annuity contracts, either during the term or at
the maturity of the term mentioned in the contract or upon surrender of
the contract.
(3) Gifts, Bequests, and Devises.·The value of property acquired by
gift, bequest, devise, or descent: Provided, however, That income from
such property, as well as gift, bequest, devise or descent of income from
any property, in cases of transfers of divided interest, shall be included in
gross income.
(4) Compensation for Injuries or Sickness.·The amounts received,
through Accident or Health Insurance or under WorkmenÊs
Compensation Acts, as compensation for personal injuries or sickness,
plus the amounts of any damages received, whether by suit or
agreement, on account of such injuries or sickness.
(5) Income Exempt under Treaty.·Income of any kind, to the extent
required by any treaty obligation binding upon the Government of the
Philippines.
(6) Retirement Benefits, Pensions, Gratuities, etc.·
(a) Retirement benefits received under Republic Act No. 7641 and
those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private benefit
plan maintained by the employer: Provided, That the retiring
390

_______________
official or employee has been in the service of the same employer for at
least ten (10) years and is not less than fifty (50) years of age at the time
of his retirement: Provided, further, That the benefits granted under this
subparagraph shall be availed of by an official or employee only once. For
purposes of this Subsection, the term Âreasonable private benefit planÊ
means a pension, gratuity, stock bonus or profit-sharing plan maintained
by an employer for the benefit of some or all of his officials or employees,
wherein contributions are made by such employer for the officials or
employees, or both, for the purpose of distributing to such officials and
employees the earnings and principal of the fund thus accumulated, and
wherein its [sic] is provided in said plan that at no time shall any part of
the corpus or income of the fund be used for, or be diverted to, any
purpose other than for the exclusive benefit of the said officials and
employees.
(b) Any amount received by an official or employee or by his heirs from
the employer as a consequence of separation of such official or employee
from the service of the employer because of death sickness or other
physical disability or for any cause beyond the control of the said official
or employee.
(c) The provisions of any existing law to the contrary notwithstanding,
social security benefits, retirement gratuities, pensions and other similar
benefits received by resident or nonresident citizens of the Philippines or
aliens who come to reside permanently in the Philippines from foreign
government agencies and other institutions, private or public.
(d) Payments of benefits due or to become due to any person residing
in the Philippines under the laws of the United States administered by
the United States Veterans Administration.
(e) Benefits received from or enjoyed under the Social Security
System in accordance with the provisions of Republic Act No. 8282.
(f) Benefits received from the GSIS under Republic Act No. 8291,
including retirement gratuity received by government officials and
employees.
(7) Miscellaneous Items.·
(a) Income Derived by Foreign Government.·Income derived from
investments in the Philippines in loans, stocks, bonds or other domestic
securities, or from interest on deposits in banks in the Philippines by (i)
foreign governments, (ii) financing institutions owned,
391
VOL. 763, JULY 22, 2015 391

_______________
controlled, or enjoying refinancing from foreign governments, and (iii)

international or regional financial institutions established by foreign
governments.
(b) Income Derived by the Government or its Political Subdivisions.·
Income derived from any public utility or from the exercise of any
essential governmental function accruing to the Government of the
Philippines or to any political subdivision thereof.
(c) Prizes and Awards.·Prizes and awards made primarily in
recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievement but only if:
(i) The recipient was selected without any action on his part to enter
the contest or proceeding; and
(ii) The recipient is not required to render substantial future services
as a condition to receiving the prize or award.
(d) Prizes and Awards in sports Competition.·All prizes and awards
granted to athletes in local and international sports competitions and
tournaments whether held in the Philippines or abroad and sanctioned
by their national sports associations.
(e) 13th Month Pay and Other Benefits.·Gross benefits received by
officials and employees of public and private entities: Provided, however,
That the total exclusion under this subparagraph shall not exceed Thirty
thousand pesos (P30,000) which shall cover:
(i) Benefits received by officials and employees of the national and
local government pursuant to Republic Act No. 6686;
(ii) Benefits received by employees pursuant to Presidential Decree
No. 851, as amended by Memorandum Order No. 28, dated August 13,
1986;
(iii) Benefits received by officials and employees not covered by
Presidential decree No. 851, as amended by Memorandum Order No. 28,
dated August 13, 1986; and
(iv) Other benefits such as productivity incentives and Christmas
bonus: Provided, further, That the ceiling of Thirty thousand pesos
(P30,000) may be increased through rules and regulations issued by the
Secretary of Finance, upon recommendation of the Commissioner, after

considering among others, the effect on the same of the inflation rate at
the end of the taxable year.
(f) GSIS, SSS, Medicare and Other Contributions.·GSIS, SSS,
Medicare and Pag-ibig contributions, and union dues of individuals.
392

and 78(A)84 of the 1997 National Internal Revenue

Code.85 The name designated to the remuneration for
services is immaterial. Thus, „salaries, wages, emoluments
and honoraria, bonuses, allowances (such as
transportation, representation, entertainment, and the
like), [taxable] fringe benefits[,] pen-
_______________
(g) Gains from the Sale of Bonds, Debentures or other Certificate of

Indebtedness.·Gains realized from the same or exchange or retirement
of bonds, debentures or other certificate of indebtedness with a maturity
of more than five (5) years.
(h) Gains from Redemption of Shares in Mutual Fund.·Gains
realized by the investor upon redemption of shares of stock in a mutual
fund company as defined in Section 22(BB) of this Code.
84 1997 Tax Code, Sec. 78 provides: SEC. 78. Definitions.·As used in
this Chapter:
(A) Wages.·The term ÂwagesÊ means all remuneration (other than fees
paid to a public official) for services performed by an employee for his
employer, including the cash value of all remuneration paid in any
medium other than cash, except that such term shall not include
remuneration paid:
(1) For agricultural labor paid entirely in products of the farm where
the labor is performed, or
(2) For domestic service in a private home, or
(3) For casual labor not in the course of the employerÊs trade or
business, or
(4) For services by a citizen or resident of the Philippines for a foreign

government or an international organization.
If the remuneration paid by an employer to an employee for services
performed during one-half (1/2) or more of any payroll period of not more
than thirty-one (31) consecutive days constitutes wages, all the
remuneration paid by such employer to such employee for such period
shall be deemed to be wages; but if the remuneration paid by an
employer to an employee for services performed during more than one-
half (1/2) of any such payroll period does not constitute wages, then none
of the remuneration paid by such employer to such employee for such
period shall be deemed to be wages.
85 BIR Revenue Regulations No. 6-82, as amended, Sec. 2.
393
VOL. 763, JULY 22, 2015 393

sions and retirement pay, and other income of a similar

nature constitute compensation income‰86 that is taxable.
Hence, petitioner ING Bank is liable for the withholding
tax on the bonuses since it claimed the same as expenses in
the year they were accrued.
Petitioner ING Bank insists, however, that the bonus
accruals in 1996 and 1997 were not yet subject to
withholding tax because these bonuses were actually
distributed only in the succeeding years of their accrual
(i.e., in 1997 and 1998) when the amounts were finally
determined.
Petitioner ING BankÊs contention is untenable.
The tax on compensation income is withheld at source
under the creditable withholding tax system wherein the
tax withheld is intended to equal or at least approximate
the tax due of the payee on the said income. It was designed
to enable (a) the individual taxpayer to meet his or her
income tax liability on compensation earned; and (b) the
government to collect at source the appropriate taxes on
compensation.87
_______________
86 Id.
87 Study on Strengthening the Withholding Tax System on Individual
Taxpayers, NTRC Tax Research Journal, Vol. XXIII.2, March-April 2011
<http://www.ntrc.gov.ph/files/Study-on-Strengthening-the-Withholding-
Tax-System-on-Individual-Taxpayers_48tijve7.pdf> 3 (visited May 4,
2015), citing Consideration of House Bill No. 1127, Congressional Record,
2nd Cong., 1st Session, Vol. I, No. 74, May 10, 1950, p. 2227: „The
withholding tax system was first proposed on May 2, 1950 under House
Bill (HB) No. 1127. The two main justifications for the proposal were
that: Âfirst, it will provide a convenient manner for meeting the
employeeÊs income tax liability on wages and second, it will assure the
Government of the collection of the income tax on wages which otherwise
would have been lost or substantially reduced through failure of the
employees concerned to file the corresponding income tax returns.Ê The
proponents deemed it necessary to put the system in place for the reason
that there are a large number of cases where an employee fails to file an
income tax return (ITR) and/or pay the income tax for the Âsimple reason
that he/she did not
394

Taxes withheld are creditable in nature.88 Thus, the

employee is still required to file an income tax return to
report the income and/or pay the difference between the tax
withheld and the tax due on the income.89 For over
withholding, the employee is refunded.90 Therefore,
absolute or exact accuracy in the determination of the
amount of the compensation income is not a prerequisite
for the employerÊs withholding obligation to arise.
It is true that the law and implementing regulations
require the employer to deduct and pay the income tax on
com-
_______________
set aside from his/her income sufficient amounts to meet his/her tax
liability payable the following year.Ê Withholding of the tax on wages
when these are earned was seen as the solution to the problem.‰
88 Pres. Decree No. 1158 (1977), as amended, Sec. 72(c) (Sec. 79[c] of
the 1997 Tax Code), provides:
SECTION 72. Income tax collected at source.·(a) . . .
(c) Refunds or credits.·(1) Employer.·When there has been an
overpayment of tax under this section, refund or credit shall be made to
the employer only to the extent that the amount of such overpayment
was not deducted and withheld hereunder by the employer.
(2) Employees.·The amount deducted and withheld under this
Chapter during any calendar year shall be allowed as a credit to the
recipient of such income against the tax imposed under Section 21(a) of
this Title. Refunds and credits in cases of excessive withholding shall be
granted under rules and regulations promulgated by the Minister of
Finance. Any excess of the taxes withheld over the tax due from the
taxpayer shall be returned or credited within three months from the
fifteenth day of April. Refunds or credits made after such time shall earn
interest at the rate of six percent (6%) per annum starting after the lapse
of the three-month period to the date the refund or credit is made.
Refunds shall be made upon warrants drawn by the Commissioner of
Internal Revenue or by his duly authorized representative without the
necessity of counter-signature by the Chairman, Commission on Audit or
the latterÊs duly authorized representatives as an exception to the
requirement prescribed by Section 621 of the Revised Administrative
Code.
89 See 1997 Tax Code, Secs. 51 and 58(C) and (D).
90 1997 Tax Code, Sec. 79(C).
395
VOL. 763, JULY 22, 2015 395

pensation paid to its employees, either actually or

constructively.
Section 72 of the 1977 National Internal Revenue Code,
as amended,91 states:
SECTION 72. Income tax collected at source.·(a) Requirement of

withholding.·Every employer making payment of wages shall
deduct and withhold upon such wages a tax determined in
accordance with regulations to be prepared and promulgated by the
Minister of Finance. (Emphasis supplied)
Sections 7 and 14 of Revenue Regulations No. 6-82,92 as

amended,93 relative to the withholding of tax on
compensation income, provide:
Section 7. Requirement of withholding.·Every employer or

any person who pays or controls the payment of compensation to an
employee, whether resident citizen or alien, nonresident citizen, or
nonresident alien engaged in trade or business in the Philippines,
must withhold from such compensation paid, an amount computed
in accordance with these regulations.
I. Withholding of tax on compensation paid to resident employees.
·(a) In general, every employer making payment of compensation
shall deduct and withhold from such compensation income for the
entire calendar year, a tax determined in accordance with the
prescribed
_______________
91 Pres. Decree No. 1158 (1977), as amended/renumbered by Batas

Pambansa Blg. 135 (1981), Pres. Decree No. 1994 (1986), and Exec.
Order Nos. 37 (1986) and 273 (1987).
92 Re: Collection at Source of Income Tax on Compensation Income of
Employed Resident Citizens and Aliens, Non-Resident Citizens and Non-
Resident Aliens engaged in trade or business in the Philippines.
93 BIR Revenue Regulations No. 6-82 was amended by BIR Revenue
Regulations Nos. 12-86, 1-92, 3-92, and 4-93.
396

new Withholding Tax Tables effective January 1, 1992 (ANNEX

„A‰).
....
Section 14. Liability for the Tax.·The employer is required to
collect the tax by deducting and withholding the amount thereof
from the employeeÊs compensation as when paid, either actually or
constructively. An employer is required to deduct and withhold the
tax notwithstanding that the compensation is paid in something
other than money (for example, compensation paid in stocks or
bonds) and to pay the tax to the collecting officer. If compensation is
paid in property other than money, the employer should make
necessary arrangements to ensure that the amount of the tax
required to be withheld is available for payment to the collecting
officer.
Every person required to deduct and withhold the tax from the
compensation of an employee is liable for the payment of such tax
whether or not collected from the employee. If, for example, the
employer deducts less than the correct amount of tax, or if he fails
to deduct any part of the tax, he is nevertheless liable for the
correct amount of the tax. However, if the employer in violation of
the provisions of Chapter XI, Title II of the Tax Code fails to deduct
and withhold and thereafter the employee pays the tax, it shall no
longer be collected from the employer. Such payment does not,
however, operate to relieve the employer from liability for penalties
or additions to the tax for failure to deduct and withhold within the
time prescribed by law or regulations. The employer will not be
relieved of his liability for payment of the tax required to be
withheld unless he can show that the tax has been paid by the
employee.
The amount of any tax withheld/collected by the employer is a
special fund in trust for the Government of the Philippines.
When the employer or other person required to deduct and
withhold the tax under this Chapter XI, Title II of the Tax Code has
withheld and paid such tax to the Commissioner of Internal
Revenue or to any authorized
397
VOL. 763, JULY 22, 2015 397
collecting officer, then such employer or person shall be relieved

of any liability to any person. (Emphasis supplied)
Constructive payment of compensation is further

defined in Revenue Regulations No. 6-82:
Section 25. Applicability; constructive receipt of

compensation.·. . . .
Compensation is constructively paid within the meaning of these
regulations when it is credited to the account of or set apart for an
employee so that it may be drawn upon by him at any time although
not then actually reduced to possession. To constitute payment in
such a case, the compensation must be credited or set apart for the
employee without any substantial limitation or restriction as to the
time or manner of payment or condition upon which payment is to
be made, and must be made available to him so that it may be
drawn upon at any time, and its payment brought within his control
and disposition. (Emphasis supplied)
On the other hand, it is also true that under Section 45

of the 1997 National Internal Revenue Code (then Section
39 of the 1977 National Internal Revenue Code, as
amended), deductions from gross income are taken for the
taxable year in which „paid or accrued‰ or „paid or
incurred‰ is dependent upon the method of accounting
income and expenses adopted by the taxpayer.
In Commissioner of Internal Revenue v. Isabela Cultural
Corporation,94 this court explained the accrual method of
accounting, as against the cash method:
Accounting methods for tax purposes comprise a set of rules for

determining when and how to report income and deductions. . . .
_______________
94 544 Phil. 488; 515 SCRA 556 (2007) [Per J. Ynares-Santiago, Third
Division].
398

Revenue Audit Memorandum Order No. 1-2000, provides that

under the accrual method of accounting, expenses not being claimed
as deductions by a taxpayer in the current year when they are
incurred cannot be claimed as deduction from income for the
succeeding year. Thus, a taxpayer who is authorized to deduct
certain expenses and other allowable deductions for the current
year but failed to do so cannot deduct the same for the next year.
The accrual method relies upon the taxpayerÊs right to receive
amounts or its obligation to pay them, in opposition to actual
receipt or payment, which characterizes the cash method of
accounting. Amounts of income accrue where the right to receive
them become fixed, where there is created an enforceable liability.
Similarly, liabilities are accrued when fixed and determinable in
amount, without regard to indeterminacy merely of time of
payment.
For a taxpayer using the accrual method, the determinative
question is, when do the facts present themselves in such a manner
that the taxpayer must recognize income or expense? The accrual of
income and expense is permitted when the all-events test has been
met. This test requires: (1) fixing of a right to income or liability to
pay; and (2) the availability of the reasonable accurate
determination of such income or liability.
The all-events test requires the right to income or liability be
fixed, and the amount of such income or liability be determined with
reasonable accuracy. However, the test does not demand that the
amount of income or liability be known absolutely, only that a
taxpayer has at his disposal the information necessary to compute
the amount with reasonable accuracy. The all-events test is satisfied
where computation remains uncertain, if its basis is unchangeable;
the test is satisfied where a computation may be unknown, but is
not as much as unknowable, within the taxable year. The amount of
liability does not have to be determined exactly; it must be
determined with „reasonable accuracy.‰ Accordingly, the term
„reasonable accuracy‰ implies something less than an exact
399
VOL. 763, JULY 22, 2015 399

or completely accurate amount.95 (Emphasis supplied, citations

omitted)
Thus, if the taxpayer is on cash basis, the expense is

deductible in the year it was paid, regardless of the year it
was incurred. If he is on the accrual method, he can deduct
the expense upon accrual thereof. An item that is
reasonably ascertained as to amount and acknowledged to
be due has „accrued‰; actual payment is not essential to
constitute „expense.‰
Stated otherwise, an expense is accrued and deducted for
tax purposes when (1) the obligation to pay is already fixed;
(2) the amount can be determined with reasonable accuracy;
and (3) it is already knowable or the taxpayer can
reasonably be expected to have known at the closing of its
books for the taxable year.
Section 29(j) of the 1977 National Internal Revenue
Code96 (Section 34[K] of the 1997 National Internal
Revenue Code) expressly requires, as a condition for
deductibility of an expense, that the tax required to be
withheld on the amount paid or payable is shown to have
been remitted to the Bureau of Internal Revenue by the
taxpayer constituted as a withholding agent of the
government.
The provision of Section 72 of the 1977 National Internal
Revenue Code (Section 79 of the 1997 National Internal
Revenue Code) regarding withholding on wages must be
read and construed in harmony with Section 29(j) of the
1977 National Internal Revenue Code (Section 34[K] of the
1997 National Internal Revenue Code) on deductions from
gross income. This is in accordance with the rule on
statutory construction that an interpretation is to be
sought which gives
_______________
95 Id., at pp. 495-496; pp. 564-565.

96 Pres. Decree No. 1158 (1977), as amended/renumbered by Pres.
Decree No. 1351 (1978), Batas Pambansa Blg. 135 (1981), Exec. Order
Nos. 37 (1986) and 273 (1987), and Rep. Act No. 7496 (1992).
400

effect to the whole of the statute, such that every part is

made effective, harmonious, and sensible,97 if possible, and
not defeated nor rendered insignificant, meaningless, and
nugatory.98 If we go by the theory of petitioner ING Bank,
then the condition imposed by Section 29(j) would have
been rendered nugatory, or we would in effect have created
an exception to this mandatory requirement when there
was none in the law.
Reading together the two provisions, we hold that
the obligation of the payor/employer to deduct and
withhold the related withholding tax arises at the
time the income was paid or accrued or recorded as
an expense in the payorÊs/employerÊs books,
whichever comes first.
Petitioner ING Bank accrued or recorded the bonuses as
deductible expense in its books. Therefore, its obligation to
withhold the related withholding tax due from the
deductions for accrued bonuses arose at the time of accrual
and not at the time of actual payment.
In Filipinas Synthetic Fiber Corporation v. Court of
Appeals,99 the issue was raised on „whether the liability to
withhold tax at source on income payments to nonresident
foreign corporations arises upon remittance of the amounts
due to the foreign creditors or upon accrual thereof.‰100 In
resolving this issue, this court considered the nature of the
accounting method employed by the withholding agent,
which was the accrual method, wherein it was the right to
receive income, and not the actual receipt, that determined

when to report
_______________
97 Commissioner of Internal Revenue v. TMX Sales, Inc., G.R. No.

83736, January 15, 1992, 205 SCRA 184, 188 [Per J. Gutierrez, Jr., En
Banc].
98 Asturias Sugar Central, Inc. v. Commissioner of Customs, 140 Phil.
20, 31; 29 SCRA 617, 628 (1969) [Per J. Castro, En Banc].
99 374 Phil. 835; 316 SCRA 480 (1999) [Per J. Purisima, Third
Division].
100 Id., at p. 840; p. 483.
401
VOL. 763, JULY 22, 2015 401

the amount as part of the taxpayerÊs gross income.101 It

upheld the lower courtÊs finding that there was already a
definite liability on the part of petitioner at the maturity of
the loan contracts.102 Moreover, petitioner already deducted
as business expense the said amounts as interests due to
the foreign corporation.103 Consequently, the taxpayer
could not claim that there was „no duty to withhold and
remit income taxes as yet because the loan contract was
not yet due and demandable.‰104 Petitioner, „[h]aving
Âwritten-off Ê the amounts as business expense in its books, .
. . had taken advantage of the benefit provided in the law
allowing for deductions from gross income.‰105
Here, petitioner ING Bank already recognized a definite
liability on its part considering that it had deducted as
business expense from its gross income the accrued
bonuses due to its employees. Underlying its accrual of the
bonus expense was a reasonable expectation or probability
that the bonus would be achieved. In this sense, there was
already a constructive payment for income tax purposes as
these accrued bonuses were already allotted or made
available to its officers and employees.

We note petitioner ING BankÊs earlier claim before the
Court of Tax Appeals that the bonus accruals in 1996 and
1997 were disbursed in the following year of accrual, as
reimbursements of representation, travel, and
106
entertainment expenses incurred by its employees. This
shows that the
_______________
101 Id., at p. 842; p. 486.

102 Id., at p. 843; p. 487.
103 Id.
104 Id.
105 Id.
106 Rollo, pp. 270-271 (Dated January 29, 2002, the Second and Final
Report of Mr. Ruben R. Rubio, SGV & Co., the duly commissioned
independent CPA, was submitted to the Court of Tax Appeals), 324-328
(Memorandum for petitioner ING Bank filed in CTA Case No. 6187) and
402-406 (Court of Tax Appeals Decision).
402

accrued bonuses in the amounts of P400,075.01 (1996)

and P1,034,119.43 (1997) on which deficiency withholding
taxes of P167,384.97 (1996) and P397,157.70 (1997) were
imposed, respectively, were already set apart or made
available to petitioner ING BankÊs officers and employees.
To avoid any tax issue, petitioner ING Bank should
likewise have recognized the withholding tax liabilities
associated with the bonuses at the time of accrual.
WHEREFORE, the Petition is PARTLY GRANTED.
The assessments with respect to petitioner ING BankÊs
liabilities for deficiency documentary stamp taxes on its
special savings accounts for the taxable years 1996 and
1997 and deficiency tax on onshore interest income under
the foreign currency deposit system for taxable year 1996

are hereby SET ASIDE solely in view of petitioner ING
BankÊs availment of the tax amnesty program under
Republic Act No. 9480. The April 5, 2005 Decision of the
Court of Tax Appeals En Banc, which affirmed the August
9, 2004 Decision and November 12, 2004 Resolution of the
Court of Tax Appeals Second Division holding petitioner
ING Bank liable for deficiency withholding tax on
compensation for the taxable years 1996 and 1997 in the
total amount of P564,542.67 inclusive of interest, is
AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Brion, Del Castillo and

Mendoza, JJ., concur.
Petition partly granted, assessments for deficiency

documentary stamp taxes for taxable years 1996 and 1997
set aside in view of ING BankÊs availment of tax amnesty
program. The April 5, 2005 decision of Court of Tax Appeals
En Banc as to ING BankÊs deficiency withholding tax on
compensation for taxable years 1996 and 1997 affirmed.
403
VOL. 763, JULY 22, 2015 403

Notes.·The withholding agent is liable only insofar as

he failed to perform his duty to withhold the tax and remit
the same to the government · the liability for the tax,
however, remains with the taxpayer because the gain was
realized and received by him; The taxpayer shares the
responsibility of making certain that the tax is properly
withheld by the withholding agent, so as to avoid any
penalty that may arise from the nonpayment of the
withholding tax due. (Rizal Commercial Banking
Corporation vs. Commissioner of Internal Revenue, 657
SCRA 70 [2011])
A tax amnesty is a general pardon or the intentional

overlooking by the State of its authority to impose penalties
on persons otherwise guilty of violating a tax law. (Asia
International Auctioneers, Inc. vs. Commissioner of Internal
Revenue, 682 SCRA 49 [2012])
··o0o··
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SUPREME COURT REPORTS ANNOTATED VOLUME 763 4/5/21, 6:08 PM

G.R. No. 167679. July 22, 2015.*

ING BANK N.V., engaged in banking operations in the

Taxation; Tax Amnesty; Taxpayers with pending tax cases may

360 SUPREME COURT REPORTS ANNOTATED

his own personal judgment.·Contrary to respondent

VOL. 763, JULY 22, 2015 361

petitioner ING BankÊs tax amnesty availment, there is no more

refunded. Therefore, absolute or exact accuracy in the

362 SUPREME COURT REPORTS ANNOTATED

or set apart for an employee so that it may be drawn upon by

reasonable accuracy; and (3) it is already knowable or the taxpayer

VOL. 763, JULY 22, 2015 363

payer constituted as a withholding agent of the government.

PETITION for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

Qualified taxpayers with pending tax cases may still

1 An Act Enhancing Revenue Administration and Collection by

364 SUPREME COURT REPORTS ANNOTATED

law is illegal, invalid, and null and void.2 The duty to

years 1996 and 1997 in the total amount of P564,542.67

2 CS Garment, Inc. v. Commissioner of Internal Revenue, G.R. No.

VOL. 763, JULY 22, 2015 365

and deficiency onshore tax liabilities.9 What is at issue

ING Bank, „the Philippine branch of Internationale

9 Id., at pp. 801-802.

366 SUPREME COURT REPORTS ANNOTATED

On February 2, 2000, ING Bank „paid the deficiency

VOL. 763, JULY 22, 2015 367

After trial, the Court of Tax Appeals Second Division

WHEREFORE, the assessments for 1996 and 1997 deficiency

Accordingly, petitioner is ORDERED to PAY the respondent the

Both the Commissioner of Internal Revenue and ING

368 SUPREME COURT REPORTS ANNOTATED

Motions were denied through the Second DivisionÊs

WHEREFORE, the respondentÊs Motion for Partial

On December 8, 2004, ING Bank filed its appeal before

VOL. 763, JULY 22, 2015 369

On December 20, 2007, ING Bank filed a Manifestation

(3) Tax Amnesty Payment Form (Acceptance of Payment

31 Id., at pp. 801-805.

370 SUPREME COURT REPORTS ANNOTATED

and deficiency tax on onshore interest income derived

However, ING Bank availed itself of the tax amnesty

VOL. 763, JULY 22, 2015 371

counts for the taxable years 1996 and 1997 and

Tax amnesty availment

Petitioner ING Bank asserts that it is „qualified to avail

part, does not deny the authenticity of the documents

372 SUPREME COURT REPORTS ANNOTATED

Internal Revenue argues that petitioner ING BankÊs

Regulations, which only exclude from tax amnesty „tax

VOL. 763, JULY 22, 2015 373

special savings accounts for 1996 and 1997 and

full compliance with the requirements of the tax amnesty

Withholding tax on compensation

Petitioner ING Bank claims that it is not liable for

55 Id., at pp. 890-891.

374 SUPREME COURT REPORTS ANNOTATED

employer to withhold the tax during these taxable years

81 Pres. Decree No. 1158 (1977), Sec. 51, as amended/renumbered by