THE COURT of Tax Appeals (CTA) granted a tax refund of P20.74 million to multinational firm, Royal Caribbean Cruises Ltd., acknowledging its claim that the final withholding tax (FWT) it paid for 2018 was not legally due.
In a 25-page decision last Nov. 7, the CTA Special Second Division ruled that the company’s payment of 15% FWT for employees’ compensation lacked statutory authority as it was based on a vetoed provision of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
On Dec. 19, 2017, then-president Rodrigo R. Duterte vetoed a provision of the TRAIN Law which mandated the 15% special tax for employees of regional headquarters and regional operations headquarters, among others.
Due to this veto, affected employees — including those in the cruise line’s regional operating headquarters in the Philippines — were not required to pay the 15% preferential tax rate on their gross income starting Jan. 1, 2018, the ruling stated.
“[S]aid employees’ salaries, wages, annuities, compensation, remuneration, and other emoluments, such as honoraria and allowances, are now subject to the regular income tax rate,” the ruling penned by Associate Justice Lanee S. Cui-David read. “Accordingly, petitioner’s payment of the 15% FWT is without statutory authority or not legally due.” — Jomel R. Paguian
