BIR, First Philippine Holdings reach P135-million tax settlement

MANILA, Philippines – The government and First Philippine Holdings Corporation (FPHC) reached a P135-million settlement over the latter’s tax obligations which totaled more than P1.8 billion.

FPHC, which is owned by the Lopez family, offered to pay the amount to the Bureau of Internal Revenue (BIR) to settle its tax obligations, as part of a compromise agreement.

The BIR accepted the offer, saying that it ultimately “serves the interest of the government.”

The Court of Tax Appeals (CTA) approved the deal in a decision promulgated on June 17 and penned by Associate Justice Erlinda Uy.

Both parties entered into the judicial compromise agreement to avoid a “protracted, expensive, and mutually prejudicial litigation.” The agreement allows “immediate tax collection” and puts an end to court battles.

In its review of the deal, the CTA saw that it was in order. “The parties are hereby enjoined to faithfully comply with all the terms and conditions of the aforesaid judicial compromise agreement,” the court said in its decision.

How the case progressed

Back in June 2014, the BIR wrote a letter with final assessment notice to FPHC, demanding payment of the company’s various tax obligations worth an aggregate amount of P1,555,240,774.37, inclusive of interest and compromise penalty for the year 2009.

The BIR listed FPHC’s “alleged deficiency income tax, value-added tax (VAT), expanded withholding tax, withholding tax on compensation, documentary stamp tax, and fringe benefits tax,” adding up to a basic tax of P831,607,100.27.

FPHC protested the BIR’s move, asking the agency to deny the merit of the demand letter. However, the company also filed a plea with the CTA – without waiting for the BIR’s action on its protest – to reverse the bureau’s demand altogether.

In December 2019, the CTA’s 2nd Division canceled the deficiency VAT and deficiency fringe benefits tax, but ordered FPHC to pay the rest of the deficiencies in the total basic tax amounting to P281,637,398.67, for an aggregate amount of P1.214 billion, inclusive of interest and compromise penalty. 

The CTA also ordered the firm to pay over P602 million in delinquency interest.

In February 2020, FPHC first made its proposal to the BIR for a compromise agreement. Months later, in August, FPHC made an amended offer of P135 million, which is almost half or 47.93% of the P281,637,398.67 basic tax in the CTA’s December 2019 ruling.

Then-BIR chief Caesar Dulay and FPHC president Francis Giles Puno signed the judicial compromise agreement dated October 5, 2020.

The settlement also received approval from the National Evaluation Board, in accordance with the National Internal Revenue Code. – Rappler.com