Singapore sovereign wealth fund to get tax refund

THE COURT of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund P127 million to Republic of Singapore-owned GIC Private Limited for its interest income on its investment in Philippine Treasury bonds (T-bonds).

The Third Division of the tax court, in a decision dated June 22, mandated the BIR to issue a tax certificate refund of P127,673,786.53 to GIC (formerly Government of Singapore Investment Corp.) for its interest income from T-bonds from January 2013 to July 2014.

Petitioner GIC is a sovereign wealth fund of the Singapore government.

The decision said GIC earned P638,368,932.68 from its investment in the bonds for the January 2013 to July 2014 period. This was subjected to a final withholding tax (FWT) of 20%, equivalent to P127,673,786.53. The FWT was withheld by the Bureau of the Treasury and was remitted to the BIR.

GIC filed with the BIR an administrative claim for a refund of the taxes imposed on its interest income from its investment in T-bonds last Dec. 9, 2014, noting that it is a financial institution wholly owned by the Government of Singapore.

The National Internal Revenue Code ( NIRC) of 1997, as amended, provides that interest income from investments are exempt from income tax and consequently, from FWT, if the investing entity is ( 1) a foreign government, or ( 2) a financing institution owned, controlled, or enjoying refinancing from foreign governments, or ( 3) an international or regional financial institution established by foreign governments.

However, the BIR did not act on GIC’s claim, causing the petitioner to bring the case to the CTA.

Weighing in on the case, the tax court said: “Considering that the petitioner was able to prove that it is a financial institution wholly owned and controlled by the Government of Singapore, it is therefore exempt from payment of income tax and consequently from FWT on income derived from its investments in Philippine T-bonds.”

“In sum, the amount of P127,673,786.53 representing 20% FWT on the interest income earned by petitioner from January 2013 to July 2014 on its investments in Philippine T- bonds was erroneously collected, petitioner being exempt from paying income tax and consequently from FWT thereon pursuant to Section 32( B)( 7) ( a) of the NIRC of the 1997, as amended,” the decision read.

“Accordingly, the 20% final tax withheld from the interest income earned by petitioner was erroneously or illegally collected,” the CTA said.

The 16- page decision on the case was penned by Associate Justice Ma. Belen M. RingpisLiban. Concurring are Associate Justices Lovell R. Bautista and Esperanza R. Fabon-Victorino. —