Scribd
Upload
203 views2 pages

Banking Tax Dispute Resolution

The Hongkong & Shanghai Banking Corporation Limited provided custodial services for foreign investors in the Philippines. It paid documentary stamp taxes on instructions from foreign clients regarding their investments. The bank sought a refund, arguing the instructions were not negotiable instruments subject to the tax. The Court of Tax Appeals agreed, but the Court of Appeals did not. The Supreme Court ruled in favor of the bank, finding the SWIFT messages were not true negotiable instruments as they lacked key features of negotiability like unconditional orders to pay and designation as payable to order or bearer.

Uploaded by

TrudgeOn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
203 views2 pages

Banking Tax Dispute Resolution

The Hongkong & Shanghai Banking Corporation Limited provided custodial services for foreign investors in the Philippines. It paid documentary stamp taxes on instructions from foreign clients regarding their investments. The bank sought a refund, arguing the instructions were not negotiable instruments subject to the tax. The Court of Tax Appeals agreed, but the Court of Appeals did not. The Supreme Court ruled in favor of the bank, finding the SWIFT messages were not true negotiable instruments as they lacked key features of negotiability like unconditional orders to pay and designation as payable to order or bearer.

Uploaded by

TrudgeOn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Case no.

7
THE HONGKONG & SHANGHAI BANKING CORPORATION LIMITED – PHILIPPINE
BRANCHES vs. COMMISSIONER OF INTERNAL REVENUE
(G.R. No. 166018, June 4, 2014)

FACTS:

Petitioner performs custodial services on behalf of its investor-clients with respect to their
passive investments in the Philippines, such as shares of stocks in domestic corporations. As a
custodian bank, it serves the collection/payment agent with respect to dividends and other
income derived from its investor-clients’ passive investments. Petitioner likewise pays
Documentary Stamp Tax amounting to at least P19.5 million & P32.904 million.

BIR Commissioner Beethoven Rualo issued BIR ruling to the effect that instructions or advises
from abroad on the management of funds located in the Philippines which do not involve
transfer of funds from abroad are not subject to DST.

Base on the said ruling, petitioner filed an administrative claim for the refund of their DST
payment. After their claim was denied, petitioner filed a complaint at the CTA, which ordered for
their refund. The CTA held that the electronic instructions (SWIFT) sent by the clients of
petitioner cannot be considered as negotiable instruments as they lack the feature of
negotiability, the ability to be transferred. These instructions therefore are mere memoranda.

On appeal, the CA reversed CTA decision & ruled that the instructions are subject to DST. The
CA ruled that the imposition of DST is not on the exchange or order for payment of money but
on the acceptance/payment of the said bill or order. It further ruled that what is vital to the valid
imposition of DST is the existence of the requirement of acceptance/payment by the drawee
(HSBC) of the order of payment from its investor/clients & that the order was drawn from a
foreign country & payable in the PHL. Lastly, the CA held that the DST was exacted on HSBC’s
exercise of its privilege under tits drawee-drawer relationship with its client-investors through the
execution of a specific instrument, which, in the case at bar, is the acceptance of the order for
payment of money.

ISSUE:
Whether or not SWIFT is a negotiable instrument subject to payment of DST.

HELD:
No. The High Court held that SWIFT messages are not negotiable instruments as they lack the
feature of negotiability which is the ability to be transferred. SWIFT messages are mere
memoranda of the transaction consisting of the actual debiting of the investor-client’s-payor’s
local or foreign currency account in the Philippines. SWIFT messages are not signed by the
investor-clients as supposed drawers of a bill of exchange; (2) they do not contain an
unconditional order to pay a sum certain in money as the payment is supposed to come from a
specific fund or account of the investor-clients; & (3) SWIFT messages are not payable to order
or to bearer but to a specifically designated 3td party.

Negotiable Instruments Law


BMVC
The High Court further ruled that a bill of exchange is an unconditional order in writing
addressed by 1 person to another, signed by the person giving it, requiring the person to whom
it addressed to pay on demand or at a fixed or determinable future time a sum certain money to
order or to bearer.

Negotiable Instruments Law


BMVC

You might also like