MA. CARMELA LOCSIN, NERISSA LORIA, KRISTA CAMILLE LOZADA, MARIA ISABELITA LOZANO, HEIDEE LOZARI, MARIA CRISELDA LUMBA, LEAH JEAN LUNA, MA SOLITA MABAQUIAO, MARIANNE MACABINGKIL, EMERLINDA MACALINTAL, GEOVANA MACEDA-PAPA, RITCHELLE ANN MADRIGAL, MARIA ANGELA MALIHAN, MAUREEN MAMAYSON, IMELDA MAMPUSTI, MA. THERESA MANAHAN, MA. ROWENA MANALANSAN, NEMROD MANALO, BUENA MARIE MANANSALA, ELNORA MANGAMPAT, JOELITO MANIGO, MADELINA MANRIQUE, MARIROSE MAPUA, ROSELYN MARANTAL, LIZA MARASIGAN, MARITESS MARCELINO, RUZETTE MARIANO, VICTORIA FE MARIANO, GIRARD PACIFICO MARIN, MA. ISABEL MARTIN, ELOISE VALERI

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION MARIA CARMELA LOCSIN, CTA Case No. 9094 ET AL., Members: FABON-VICTORINO, and Petitioner, RINGPIS LIBAN, J..L. -versus- Promulgated: COMMISSIONER OF INTERNAL REVENUE, Respondent. RESOLUTION Fabon - Victorino, J .: Aggrieved, both petitioners and respondent challenge the Decision1 dated February 4, 2019 disposing the present case as follows: WHEREFORE, the Petition for Review dated July 14, 2015 is PARTIALLY GRANTED . Respondent is hereby ORDERED TO REFUND or TO ISSUE TAX CREDIT CERTIFICATE in the total amount of P33,704,567.53, broken down, as follows: NAME OF Income Ta x Paid PETITIONER Ma. Carmela Locsin For 2 0 12 Nerissa Loria Krista Camille Lozada 3,022,590.18 Maria Isabelita Lozano He idee Lozari 213 578.84 Maria Criselda Lumba Leah Jean Luna 490 048.48 315 708.90 703 092.43 148 453.68 / 177 330.16 1 Id. at pp. 602-630.

RESOLUTION 515,525.34 CTA Case No. 9094 163,459.79 Page 2 of 7 162,336.80 Ma. Solita Mabaquiao 36 856.67 Marianne Macabinqkil 178 814.24 Emerlinda Macalintal 100 872.84 Geovanna Maceda-Papa 234 414.86 Ritchelle Ann Madrigal 299 155.00 Maria Angela Malihan 366 266.84 Maureen Mamavson 214 246.15 Imelda Mampusti 700 279.56 Ma. Theresa Manahan 224 483.44 Ma. Rowena Manalansan 371 725.82 Nemrod Manalo 321 969.67 Buena Marie Manansala 251 495.00 Elnora Mangampat 227 511.80 Joelito Maniqo 223,379.242 Madeline Manrique 253 091.09 Marirose Mapua 166,027.00 Roselyn Marantal 176,142.51 Liza Marasiqan 594,514.68 Maritess Marcelino 452,387.38 Ruzette Mariano 152 005.48 Victoria Fe Mariano 232,457.37 Girard Pacifico Marin 233,521.19 Ma. Isabel Martin Eloise Valerie Martinez 704,088.68 Balbina Grace Matullano 156 118.83 Ma Lyn Theresa Medina3 451 398.60 Joselito Mendez 231 234.07 Rachelle Mendinueto 135,160.40 Teresa Mendoza 305,446.00 Vivian Meneses 611 181.80 Kathrina Millan Marichu Milward 82 540.82 Alvin Morales 264 959.94 Allison Grace Miravite 1 100 851.83 Marie Jessamine Mitra 170 322.70 Modesto Modesto 214 907.25 Caren Jov Monocupa 269 538.10 Michael John Monreal 294 866.40 Jemellee Monzuela 123 046.33 Sara Mei Mora 109 600.09 Jackie Moreno 557 670.42 Wesam Mostadi 473,213.38 Edgardo Nacpil 372 471.94 Aldalyn Nada-Bere 261 758.68 Gilda Nanquil 164 759.79 Socorro Narvasa 313,075.04 Laarni Nasi 418,010.08 Jennifer Navarro 296,098.52 Ma. Aqnes Navera 267.482.75 Suzanne Nazal 566,741.61 Belen Kim Nowe 335.374.03 Maria Oliva Nuestro 129.515.90 Ma. Carmela Nunez 143,912.67 Lawrence Obias 267,524.61 Mav Oblefias 291,221.19 Athena Ocamoo Laura Ocamoo 2 Exhibit "P-5-11", docket, vol. 1, p. 318. 3 Exhibit "P-12-1", Annual Income Tax Return for 2012 was denied admission for failure to present originals for comparison.

RESOLUTION 362 461.97 CTA Case No. 9094 249 237.62 Page 3 of 7 215 062.18 317 652.68 Joseph Ochoada 211 287.83 Marjorie Oliver 629 320.00 Ronald Mark Omana 301 729.90 Carol Onchangco 437 127.60 Dino Tante Ordonez 503 836.18 Maria Cynthia Orendain 337 273.24 Josephine Orense 270 798.47 Christina Orquiola 221 760.19 Maria Rosa Ortega 552 920.28 Lea Maria Ortiz Cecille Pacheco 98 102.00 Madelyn Paclibar 288 724.85 Ru perto Pad iIIa 251,860.21 Rino Paez 564,160.00 Maria Teresa Pagkalinawan 209,744.01 Zenaida Panqan 145,297.69 Corazon Panganiban 823,129.20 Aileen Pangalinan 363,318.57 Maria Virginia Panis 167,019.52 Socorro Panis 955,070.05 Melissa Pascua 332,078.92 Pia Angelica Pascual Wilhelmina Paz 153,650.18 Santiago Raymond Pe- 155,411.54 Aguirre 143,091.88 Ma. Agnes Pedro 173,804.34 Michelle Penalosa 271 525.06 Cecilia Peralta 202 487.10 Paulita Perez de Tagle 262 236.49 Roslyn Perez 210 035.91 Donabelle Pineda 305 319.80 Ma Eloisa Pineda 447 970.83 Mitzi Gay Piol Dario Ponciano 82 557.14 Lilibeth Poot 327 102.08 Mario Antonio Portuqal 152 567.14 Grace Potente 33,704,567.53 Elenita Pura TOTAL SO ORDERED. In their Motion for Partial Reconsideration dated February 27, 20194, petitioners claim that contrary to the finding of the Court, Ma. Lyn Theresa Medina was able to substantiate her 2012 income tax payment of P239,795.69 by presenting the BIR Revenue Official Receipt (OR) 2012 01672201. Admittedly, she presented and formally offered only a photo copy of her 2012 Annual Income Tax Return (AITR) reflecting such payment. However, in her Motion for Partial Reconsideration, she attached the original of the denied 2012 AITR. In view thereof, an additional amount of / 4 Docket, pp. 631-646.

RESOLUTION CTA Case No. 9094 P239,795.69, representing the alleged 2012 income taxes paid by Ma. Lyn Theresa Medina should be refunded. Petitioners insist that they are excused from paying income taxes by virtue of the general tax-exemption provisions in Article 56(2) of the ADB Charter. While they concede that the Philippine Government5 reserved its right to tax Filipino citizens hired at the ADB, however, such reservation needs a specific statute to be effective. Sans any legislation expressly conferring respondent the authority to tax them, they remain to be tax-exempt individuals. For petitioner, the following incidents demonstrate the true intent of the ADB Charter to relieve them of Philippine income taxes: a) long-standing practice not taxing such individuals spanning more than four (4) decades; b) Opinion of Regional Director Antonio Ortega confirming their tax- exempt status; c) Executive Order (EO) No. 161, allegedly stating to respect privileges of the ADB; and d) Member Countries6 of the ADB enacted their respective enabling laws to tax salaries and emoluments of employees/staff of the said international organization. In closing, petitioners state that they are as well entitled to refund the income taxes they paid on TY 2013. Despite directive, respondent failed to file comment/opposition to petitioner's Motion for Partial Reconsideration. 7 In his Motion for Reconsideration8 dated March 5, 2019 with Supplement9 thereto dated March 6, 2019, respondent finds erroneous the prospective application RMC No. 31- 2013. According to him, the imposition of taxes on income realized by petitioners covering TY 2012 is warranted since the government's right to impose income taxes is not / dependent on the efficacy of RMC No. 31-2013, which I 5 As attested to by the then Philippine Senate and former President Ferdinand E. Marcos per Senate Resolution No. 6 dated March 16, 1966. 6 Petitioners enumerated the list of ADB member-countries observing tax-exemption privileges of their nationals by legislative fiat after ratifying the ADB Charter, as follows: Canada, Australia, India, Papua New Guinea, and Singapore. See petitioners' Motion for Partial Reconsideration, pp. 9-11. 7 Records verification report dated April 5, 2019. 8 Ibid. at pp. 647-652. 9 Id. at 654-658.

RESOLUTION CTA Case No. 9094 merely clarifies existing revenue laws. He points out that petitioners' income tax liability arose from Sections 23 and 24 of the Tax Code which were already in effect in 1998, or way before the realization of their compensation income in TYs 2012 and 2013. In other words, the compensation received by petitioners from ADB in 2012 and 2013 are subject to Philippine income taxes. Reliance by petitioners on the general tax-exempt provision of the ADB Charter is also misplaced. Respondent explains that such absolution from income taxes under the foregoing international agreement only applies if the Philippine Government did not reserve its taxing power on the Filipino ADB Employees. Given that the Philippine government explicitly retained the right to its citizens by virtue of Senate Resolution No. 06, the general tax-exempt privileges accorded by the ADB Charter finds no application on petitioners. Finally, respondent asserts that the alleged long- standing practice of not taxing petitioners will not ripen into a valid right as the alleged customs are repugnant to with the provisions of the NIRC, as amended. Since there is no legal impediment to collect the income taxes against petitioners, respondent concludes that their refund claim for TYs 2012 and 2013 must be rejected. In the comment/opposition, petitioners reiterated that the reservation of taxing power by the Philippine government to be effective, there must first be a legislation to that effect which is wanting in the present case. Hence, the general tax-exemption privileges conferred to by the ADB Charter equally applies to them. They insist that their income tax-exempt status as regards their compensation income was enjoyed by them for more than four (4) decades, hence, it may not be taken away by respondent through RMC No. 31-2013. Besides, the issuance is neither a law nor a treaty, hence, may not be a valid source of respondent's taxing power. Moreover, the RTC-Mandaluyong invalidated such circular, thereby J ' upholding their income tax-exempt privileges. Petitioners / conclude that the income taxes collected by respondent for

RESOLUTION CTA Case No. 9094 TY 2013, similar to TY 2012, should also be returned to them. THE RULING OF THE COURT Petitioners' Motion for Partial Reconsideration and respondent's Motion for Reconsideration are denied. On whether petitioner Ma. Lyn Theresa Medina is entitled to the refund of income taxes she allegedly paid on TY 2012, the Court rules in the negative. It has been held that [s]ince tax refunds partake of the nature of tax exemptions, which are construed strictissimi juris against the taxpayer, evidence in support of a claim must likewise be strictissimi scrutinized and duly proven. 10 Very clearly indicated in the revenue official receipt issued in favor of petitioner Ma. Lyn Theresa Medina, that the income tax payment in the sum of P239,735.69 was for TY 2013. 11 With the unexplained irreconcilable discrepancy between the taxable periods covered by the AITR for TY 2012 and the revenue official receipt and sans official receipt accurately reflecting petitioner Ma. Lyn Theresa Medina's payment of income taxes forTY 2012, her refund claim must be disallowed. Anent the remaining matters raised by both petitioners and respondent, suffice it to say that they were exhaustively discussed and passed upon by the Court in the impugned Decision of February 4, 2019. To repeat, Sections 23 and 24 of the National Internal Revenue Code (NIRC), as amended imposes taxes on the compensation income derived from sources within or outside the Philippines realized by resident citizens such as petitioners. The general tax-exempt provisions under the ADB Charter may not be applied to them as the Philippine government retained its right to tax its citizens working at the said international organization. Nevertheless, since retroactivity of revenue circulars i s / �1 Commissioner of Internal Revenue vs. Far East Bank & Trust Company (now Bank of the Philippine Islands), G.R. No. 173854, March 15, 2010. 11 Docket, p. 646.

RESOLUTION CTA Case No. 9094 proscribed under Section 246 of the same Code, RMC No. 31-2013 should operate prospectively and may not be applied to their income realized in TY 2012, or prior to its effectivity. Thus, save for petitioner Ma. Lyn Theresa Medina, the 2012 income taxes paid by the other petitioners must be returned to them. However, refund of 2013 income taxes paid should be rejected. WHEREFORE, petitioner's Motion for Partial Reconsideration dated February 27, 2019 and respondent's Motion for Reconsideration dated March 5, 2019 with Supplement thereto dated March 6, 2019 are DENIED. The impugned Decision of February 4, 2019 is AFFIRMED. SO ORDERED. I Concur: . ~. ~ ~.._ MA. BELEN M. RINGPIS-LIBAN Associate Justice