BIR ordered to refund P57 million to McKinsey’s Philippine office

THE Court of Tax Appeals (CTA) ordered the Bureau of Internal Revenue (BIR) to refund or issue a tax credit certificate to management consultancy firm McKinsey & Co ( Phils) amounting to P56.95 million.

In a unanimous decision promulgated Aug. 11, the tax court reduced the petitioned amount of P97.73 million, partially granting the global firm’s alleged excess credible withholding tax.

The claim covered the years 2011 and 2012.

The CTA justices found merit on the tax refund petition, as the firm had been able to file for their claim within the prescriptive period.

CTA Associate Justices Juanito C. Castaneda, Jr., Caesar A. Casanova, Amelia R. Cotangco-- Manalastas cited Sections 204(C) and 229 of the National Internal Revenue Code of 1997, saying any claim for refund of taxes must be filed within 2 years from date of payment.

The Supreme Court had earlier ruled that this count for tax refunds must start from the filing of a document called Final Adjustment Return, where the exact tax liability of a firm can be determined.

The consultancy firm also said it had paid taxes in 2011 and 2012 using US dollars and covering profit gained from clients based outside the Philippines, causing the excess.

The dollar valuation it used from the supposedly nontaxable income it generated from its foreign affi liates was also higher, the firm’s accounting officer attested in a judicial affidavit.

However, the significant deduction in the CTA’s ruling was due to discrepancies in the documented payments made by McKinsey & Co (Phils).

The tax certificate submitted revealed that P39.06 million of the claim was under McKinsey Phils, Inc., which the CTA justices explained differed from the corporate name of petitioner McKinsey & Co. (Phils).

McKinsey Phils, Inc. and McKinsey & Co. ( Phils) also had tax identification numbers distinct from each other.

The tax appellate court further deducted from the original claim another P614,393.14 and P1.11 million in minimum corporate tax income for 2011 and 2012 respectively due to unsubstantiated excess tax credit in previous years from 1999 to 2006.

The Philippine office of US- based McKinsey & Co. is one of its 6 offices in Southeast Asia.