Scribd
Upload
65 views2 pages

CREBA v. Exec. Sec. Romulo, March 9, 2010

The Supreme Court ruled that the imposition of the minimum corporate income tax (MCIT) and creditable withholding tax (CWT) do not violate the due process clause. For the MCIT, the tax base is a corporation's gross income minus capital costs, not the capital itself. It also approximates the expected net income tax at a reduced 2% rate. For the CWT, any taxes withheld can be claimed as a tax credit or refund at the end of the year if the net income is lower than taxes withheld. The CWT relates to the method and timing of tax payment, not new or increased taxes. It is also less cumbersome for real estate transactions given their larger income and less frequent

Uploaded by

NERNANIE FRONDA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
65 views2 pages

CREBA v. Exec. Sec. Romulo, March 9, 2010

The Supreme Court ruled that the imposition of the minimum corporate income tax (MCIT) and creditable withholding tax (CWT) do not violate the due process clause. For the MCIT, the tax base is a corporation's gross income minus capital costs, not the capital itself. It also approximates the expected net income tax at a reduced 2% rate. For the CWT, any taxes withheld can be claimed as a tax credit or refund at the end of the year if the net income is lower than taxes withheld. The CWT relates to the method and timing of tax payment, not new or increased taxes. It is also less cumbersome for real estate transactions given their larger income and less frequent

Uploaded by

NERNANIE FRONDA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC.

vs.
THE HON. EXECUTIVE SECRETARY ALBERTO ROMULO

G.R. No. 160756               March 9, 2010

FACTS:

Petitioner is an association of real estate developers and builders in the Philippines. It


assails the validity of the imposition of minimum corporate income tax (MCIT) on
corporations and creditable withholding tax (CWT) on sales of real properties classified
as ordinary assets.

Petitioner claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional
because it is highly oppressive, arbitrary and confiscatory which amounts to deprivation
of property without due process of law. It explains that gross income as defined under
said provision only considers the cost of goods sold and other direct expenses; other
major expenditures, such as administrative and interest expenses which are equally
necessary to produce gross income, were not taken into account. Thus, pegging the tax
base of the MCIT to a corporation’s gross income is tantamount to a confiscation of
capital because gross income, unlike net income, is not "realized gain." (Answers Q# 1)

Petitioner avers that the imposition of CWT on GSP/FMV of real estate classified as
ordinary assets deprives its members of their property without due process of law
because, in their line of business, gain is never assured by mere receipt of the selling
price. As a result, the government is collecting tax from net income not yet gained or
earned. (Answers Q#3)

ISSUE:

1. Is the imposition of the MCIT on domestic corporations a violation of the due process
clause?

2. Is the imposition of CWT on income from sales of real properties classified as


ordinary assets a violation of the due process clause?

RULING:

NO. MCIT is not violative of due process. The MCIT is imposed on gross income which
is arrived at by deducting the capital spent by a corporation in the sale of its goods, i.e.,
the cost of goods and other direct expenses from gross sales. Clearly, the capital is
not being taxed. Furthermore, the MCIT is not an additional tax imposition. It is
imposed in lieu of the normal net income tax, and only if the normal income tax is
suspiciously low. The MCIT merely approximates the amount of net income tax due
from a corporation, pegging the rate at a very much reduced 2% and uses as the base
the corporation’s gross income. (Answer Q#3)

It is also stressed that the CWT is creditable against the tax due from the seller of the
property at the end of the taxable year. The seller will be able to claim a tax refund if its
net income is less than the taxes withheld. Nothing is taken that is not due so there is
no confiscation of property repugnant to the constitutional guarantee of due process.
More importantly, the due process requirement applies to the power to tax. The CWT
does not impose new taxes nor does it increase taxes. It relates entirely to the method
and time of payment. Petitioner, in insisting that its industry should be treated similarly
as manufacturing enterprises, fails to realize that what distinguishes the real estate
business from other manufacturing enterprises, for purposes of the imposition of
the CWT, is not their production processes but the prices of their goods sold and
the number of transactions involved. The income from the sale of a real property is
bigger and its frequency of transaction limited, making it less cumbersome for the
parties to comply with the withholding tax scheme. (Answers Q#4)

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy