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TAX TREATY AS A MODE OF ELIMINATINGDOUBLE TAXATION:1) EXEMPTION
METHOD – the income or capitalwhich is taxable in the state of
sorce or sits isexempte! in the state of resi!ence" altho#h insome
instances it ma$ ta%en into accont in
!eterminin# the rate of tax applicable to the taxpa$er&s
remainin# income or capital 'ex( Taxparin# *re!it scheme)+) *,EDIT
METHOD – the tax pai! in the state of sorce is cre!ite!
a#ainst the tax le-ie! in thestate of resi!ence
Afisco Insurance Corp v. CA (G.R. No. 112675,Jan. 25,
1999)Petitioners are local non.life insrance corps( /hichforme! a
0pool in or!er to enter into a ,einsrance
Treat$ with a 2erman compan$( 3I, assesse!!e4cienc$ taxes
a#ainst the 0pool on the #ron! thatit is consi!ere! a partnership
taxable as a corp(Petitioners insist that the pool is a mere a#ent"
notactin# on its own an! therefore" cannot be taxe! as acorp("
there bein# no ris% n!erta%en b$ the pool" nocommon fn! an! no
control exercise! b$ its boar! inthe mana#ement of its fn!(Issue
(1) : Is the Pool Taxable as a *orp5Held (1): YES. Prsant to 6+7 of
the NI,*" thepool is incl!e! within the !e4nition of
0!omesticcorps( /hich comprises e-en nre#istere!partnerships an!
associations( In this case" thece!in# cos( Entere! into an
association that wol!han!le all bsiness n!er the Treat$( It has
acommon fn! an! an execti-e boar! to mana#e itsa8airs( Moreo-er"
e-en if the pool itself !i! not isse
an$ policies on its own" its wor% was in!ispensable tothe
bsiness of the ce!in# companies an! the2erman *o"Issue (2): Is
there !oble taxation5Held(2)9 NO( Double taxation means taxing
thesame person twice by the same jurisdiction for thesame
thing ( The pool is a taxable entit$ !istinct fromthe
in!i-i!al corporate entities of the ce!in#companies( The tax on its
income is ob-iosl$!i8erent from the tax on the !i-i!en!s recei-e!
b$the sai! companies(P!e" # T$% I&'l'es P!e" # Des#"
*+,e- us#,/e M$"s+$ll0 M/*ullu+ '. M$"l$&d0 L.Ed.
345 (1615)7 The imposition of a -ali! tax col! not be
:!iciall$restraine! merel$ becase it wol! pre:!ice ataxpa$er&s
propert$( ;s lon# as the power to tax!oes not -iolate an$
constittional or stattor$pro-isions" sai! power can be a power to
!estro$(3t for all its plenit!e" the power to tax is notncon4ne! as
there are restrictions( ;!-ersel$e8ectin# as it !oes propert$
ri#hts" both the !e
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process an! e,e$es -( ;lman?or '1@@1)" citing ison -(
;ncheta '1@A7)B Obillos -( *I, '1@AC)(T$% A',d$&/e (T$%
M,&,8,9$#,&) – tax sa-in#!e-ice that is le#all$
permissibleT$% E'$s,& (T$% Dd,&) – connotes fra!thro#h the
se of pretenses an! forbi!!en !e-icesto lessen or !efeat taxesB mst
be willfl an!intentional(*IR 's. T+e Es#$#e - Be&,& Td$0 GR
N.141660 Se#. 10 2;;F$/#s: This *ort is calle! pon to
!etermine inthis case whether the tax plannin# scheme a!opte!b$ a
corporation constittes tax e-asion that wol!
:stif$ an assessment of !e4cienc$ income tax(*I* athori?e!
To!a" =r(" Presi!ent an! ownerof @@(@@1 of its isse! an! otstan!in#
capitalstoc%" to sell the *ibeles 3il!in# an! the twoparcels of
lan! on which the bil!in# stan!s for anamont of not less than P@FM(
To!a thenprporte!l$ sol! the propert$ for P1FF M to ,afael;ltona#a"
who" in trn" sol! the same propert$ onthe same !a$ to ,MI for
P+FFM( These +transactions were e-i!ence! b$ Dee!s of ;bsolteale(
Gor the sale of the propert$ to ,MI" ;ltona#apai! capital #ains tax
in the amont of P1FM(*I* 4le! its corporate annal IT, for the
$ear1@A@" !eclarin#" amon# other thin#s" its #ain fromthe sale of
real propert$ in the amont of PC"+A(F+1( To!a sol! all his
shares( He !ie! $rs( later(
The 3I, sent an assessment notice an!!eman! letter to the
*I* for !e4cienc$ income taxfor the $ear 1@A@ in the amont of
P@"F@@"@@@(++"representin# the tax" srchar#e" J interest on the
