UMVA has learned that a landmark ruling by the Court of Tax Appeals (CTA) has ordered the City of Taguig to refund a substantial sum of P2.68 million in local business taxes to Union Cement Holdings Corp.
The ruling, which was promulgated on June 4, found that the city had improperly imposed taxes on the company's dividend income as a holding company. This decision marks a significant victory for Union Cement, which had argued that there was no legal basis for the tax.
According to information obtained by UMVA, the dispute began with a January 15, 2018 billing statement issued by the City of Taguig, which assessed Union Cement P2.68 million in alleged deficiency business taxes. The company paid the amount on January 19, 2018, before seeking a refund.
The CTA's Special Third Division granted Union Cement's petition and reversed a Regional Trial Court (RTC) ruling that had denied the company's claim for refund. The tax court ordered the respondents to refund the amount, representing local business taxes paid by the company in connection with the renewal of its business permit.
In a crucial finding, the CTA ruled that Union Cement properly filed a refund claim under Section 196 of the Local Government Code. The court also established that the billing statement did not constitute a valid tax assessment that could be protested under Section 195.
The tribunal rejected Taguig's position that dividend income of holding companies may be subjected to local business tax under its ordinance. The CTA stressed that the Local Government Code generally prohibits local government units from imposing income taxes, except on banks and other financial institutions.
Ultimately, the CTA granted the petition and reversed the RTC's decision, ordering the respondents to refund P2.68 million to Union Cement. This ruling sets a significant precedent for holding companies and clarifies the limits of local government units' tax authority.
