THE Court of Tax Appeals (CTA) has ruled against the Bureau of Internal Revenue (BIR) which assessed Hard Rock Cafe (Makati City) Inc. (HRCM) a deficiency tax charge of over P22 million in 2012.
In a decision dated Aug. 15, the CTA found that HRCM was assessed an 18% amusement tax as a “bar and cafe night club,” resulting in a deficiency percentage tax of P22,098,415.04.
The BIR claimed that HRCM enters into contracts with various artists to perform every night and the talent fees were passed on to customers through higher prices. It added that customers patronize the establishment mainly to watch the artists, to dance, and to mingle with performers.
The CTA said the BIR “failed to present evidence that petitioner’s establishment also functions as a night club.”
“In the case at hand, it was established that although petitioner provides some form of entertainment, the same are but incidental to its main line of business of serving food and drinks. While customers may dance within the dining area, there is no designated dance floor,” the CTA said.
“Likewise, records are bereft of evidence that the petitioner employs dancers to dance with its customers… Records are bereft of evidence that petitioner’s establishment was frequented by customers for dancing either with their own partners or professional dancers furnished by petitioner,” it added.
Section 2 of Revenue Regulation No. 14-67 states that “night clubs” are places “frequented by pleasure seekers at night where food and wines and drinks are served and music furnished and the patrons allowed to dance whether with their own partners or professional hostesses furnished by such resorts.”
According to Revenue Memorandum Circular No. 18-2010, night and day clubs are drinking, dancing, and entertainment venues which “oftentimes also serve food and provide entertainment.” — Vann Marlo M. Villegas
