Conwi v.

Court of Tax Appeals

Conwi v. Court of Tax Appeals | Nocon
G.R. Nos. 48532 & 48533, August 31, 1992 | 213 SCRA 83
Keywords: Procter & Gamble, Filipino citizens temporarily
working abroad earning in dollars, taxable income

NOTE
This digest was adjusted to meet our needs for the June 29
class.
RATIO DECIDENDI
Income of Filipino citizens temporarily residing in a foreign
country, even if totally derived from outside the Philippines, is
subject to tax by virtue of Sec. 21, NIRC, viz: A tax is hereby
imposed upon the taxable net income received x x x from all
sources by every individual, whether a citizen of the
Philippines residing therein or abroad x x x (italics mine)
FACTS
Hernando Conwi et al. (Conwi et al.) are employees of
Procter & Gamble Philippine Manufacturing
Corporation, a local subsidiary of U.S.-based
Procter & Gamble.
Conwi et al. were temporarily assigned to
subsidiaries of Procter & Gamble outside of the
Philippines, where they were paid in U.S. dollars.
It is claimed that they earned and spent their money
exclusively abroad, and that they did not remit
money back into the Philippines during the time they

were outside of the country earning in dollars.

In the years 1970 and 1971, Conwi et al., since they
were earning in U.S. currency, in order to pay their
income tax liabilities in Philippine peso, used the
prevailing free market rate of conversion prescribed
under a Bureau of Internal Revenue ruling and two
Revenue Memorandum Circulars. However, in 1973,
Conwi et al. filed with the Commissioner of Internal
Revenue (CIR) amended income tax returns for the said
years, this time using the par value of the peso as
conversion rate. The adjustment caused a disparity
between what was initially paid and what they were
now claiming to be their actual tax liabilities.
Consequently, they asked for a refund of the
overpayment.
Even before the CIR could rule on the matter, Conwi et
al. filed a petition for review before the Court of Tax
Appeals (CTA), which eventually denied their claim for
tax refund and/or tax credit.
Aggrieved, Conwi et al., via a petition for review,
elevated the matter to the Supreme Court.

ISSUES & ARGUMENTS

W/N the ruling and circulars above apply to Conwi et al.
(Note: Conti et al. argue that since there were no remittances
and acceptances of their salaries and wages in U.S. dollars into
the Philippines, they are exempt from the coverage of such
ruling and circulars.)
Page 1 of 2

Conwi v. Court of Tax Appeals

HELD & RATIONALE
YES, the said ruling and circulars apply to Conwi et al.

Income may be defined as an amount of money

coming to a person or corporation within a specified
time, whether as payment for services, interest, or profit
from investment. x x x Income can also be thought of
as a flow of the fruits of ones labor. (See pages 87-88
of the case)
The dollar earnings of Conwi et al. are fruits of their
labor in the foreign subsidiaries of Procter & Gamble.
They were given a definite amount of money which
came to them within a specified period of time as
payment for their services.
Sec. 21, NIRC, states: A tax is hereby imposed upon
the taxable net income received x x x from all sources
by every individual, whether a citizen of the
Philippines residing therein or abroad x x x
As such, their income is taxable even if there were no
inward remittances during the time they were earning in
dollars abroad.
The ruling and the circulars are a valid exercise of
power on the part of the Secretary of Finance by virtue
of Sec. 338, NIRC, which empowers him to
promulgate all needful rules and regulations to
effectively enforce its provisions.
Besides, they have already paid their taxes using the

prescribed rate of conversion. There is no need for

the CIR to give them a tax refund and/or credit.
FALLO
Petition of Conwi et al. DENIED. The denial of their claim for
tax refund and/or credit by the CTA is AFFIRMED.

Page 2 of 2