CTA partially grants refund claim of Kuwait Airways


THE Court of Tax Appeals (CTA) has granted part of Kuwait Airways Corp.’s appeal to refund its overpaid income taxes in the amount of P12.3 million for the year 2017.

In a 17-page decision dated March 28 and made public on March 29, the CTA Special Third Division said the firm was entitled to a preferential tax rate of 1.5 % of its gross Philippine billings (GPBs) as an international carrier, citing a 2014 tax treaty with Kuwait.

“Bearing in mind the rationale of tax treaties, there is no reason to deprive petitioner (Kuwait Airways) of its availment of the preferential tax of 1.5% on its GPBs in accordance with the Philippines-Kuwait tax treaty,” Associate Justice Maria Belen M. Ringpis-Liban said in the ruling.

Under the country’s tax code, an international air carrier doing business in the Philippines shall pay 2.5% of its GPBs. An airline may avail of a preferential rate on the basis of an applicable tax treaty or international agreement with the Philippines.

Kuwait Airways is licensed under the Securities and Exchange Commission to do business in the Philippines. It is primarily engaged in the air transport services industry.

The court said the firm erroneously paid its income tax liabilities since it applied the 2.5% tax rate instead of the 1.5% provided for in the Philippines-Kuwait tax treaty.

It said the airline company sufficiently proved its entitlement to the refund by submitting verified certificates of creditable tax withheld at source forms.

“Apropos, the government of the Philippines is obligated to observe the terms and conditions of the Philippines-Kuwait tax treaty to keep the agreement between the parties in good faith,” the tribunal said.

“The application of the provisions of the National Internal Revenue Code must be subject to the provision of tax treaties entered into by the Philippines with foreign countries.” — John Victor D. Ordoñez

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