CIR vs. Covanta Energy Philippine Holdings Inc.

Tax Amnesty. — Taxpayers are eligible to the immunities of the government tax amnesty program once all the suspensive conditions imposed under the law and implementing rules were complied by the taxpayer.

A careful scrutiny of the 2007 Tax Amnesty Law would tell us that the law contains two types of conditions one suspensive, the other resolutory. Borrowing from the concepts under our Civil Code, a condition may be classified as suspensive when the fulfillment of the condition results in the acquisition of rights. On the other hand, a condition may be considered resolutory when the fulfillment of the condition results in the extinguishment of rights. In the context of tax amnesty, the rights referred to are those arising out of the privileges and immunities granted under the applicable tax amnesty law.

In the case, the Bureau of Internal Revenue questioned the entitlement of Covanta Energy Philippines Holding, Inc. to tax amnesty for failure to sufficiently comply with documentary requirements under the tax amnesty law. The Court pointed out that while the immunities and privileges granted under the tax amnesty law is not absolute, the immunities only cease upon proof of underdeclaration of the taxpayer’s net worth by 30% and ruled that the documentary requirements were sufficiently complied by the taxpayer. Considering that CEPHI completed the requirements and paid the corresponding amnesty tax, it is considered to have totally complied with the tax amnesty program. As a matter of course, CEPHI is entitled to the immediate enjoyment of the immunities and privileges of the tax amnesty program. Nonetheless, the Court emphasizes that the immunities and privileges granted to taxpayers under R.A. No. 9480 is not absolute. It is subject to a resolutory condition insofar as the taxpayers' enjoyment of the immunities and privileges of the law is concerned. These immunities cease upon proof that they underdeclared their net worth by 30%.