Nobel Peace Laureate Maria A. Ressa and Rappler Holdings Corporation (RHC) have been acquitted of tax evasion charges by the Court of Tax Appeals (CTA) on the P162.5 million earned by the news outfit from the 2015 issuance of shares to two foreign entities.
In a decision, the CTA ruled that “accused Rappler Holdings and Maria A. Ressa are acquitted, for failure of the prosecution to prove their guilt beyond reasonable doubt.”
“No civil liability may be adjudged against the accused as the alleged unpaid tax obligations have not been factually and legally established and proven,” the CTA also ruled.
With its decision, the CTA ordered the cancellation of the bail bonds posted by the accused and “ordered released to them upon presentation of proper documents, in accordance with the usual accounting rules and regulations.”
The case involved the Philippine Depository Receipts (PDRs) issued by news outfit Rappler headed by Ressa to NBM Rappler L.P. and Omidyar Network (ON) of eBay founder and entrepreneur Pierre Omidyar.
“There is nothing in the wordings of the PDR Instruments and the PDR Subscription Agreements, that would show that the foreign entities NBM and ON will become owners of the shares of stock of RI (Rappler) upon issuance of the PDRs,” the CTA pointed out.
“Paragraph 4 of the PDR Instrument, stipulates that the ownership of the shares of stock of RI remains with the issuer RHC,” the tax court said.
It pointed out that the PDR holder “only retains an option to purchase the underlying shares of RI subject to certain conditions -- that there is no law restricting foreign ownership in the business of the operating entity.”
“In sum, since accused is not required to pay the income tax and VAT (value added tax) on the PDR transactions for the taxable year 2015, the elements of Sections 254 and 255 of the 1997 NIRC (National Internal Revenue Code), as amended, are rendered nugatory and without legal support. The plaintiff, therefore failed to prove the guilt of the accused beyond reasonable doubt,” the CTA declared.
Under the NIRC, Section 254 concerns the attempt to evade or defeat tax, while, Section 255 is on the failure to file return, supply correct and accurate information, pay tax, withhold and remit tax, and refund excess taxes withheld on compensation.
It said that there are three requisites for the imposition of income tax in the 1997 NIRC: there must be gain or profit; the gain or profit is realized, received, actually or constructively; and it is not exempted by law or treaty from income tax.
“All the above requisites are not present for the income tax liability to attach to accused RHC’s PDR transactions with NBM and ON. Neither is it liable for VAT (value added tax) as it is not a dealer in securities,” it pointed out.
The decision was written by Associate Justice Catherine Triunfante Manahan with the concurrence of Associate Justices Jean Bacorro-Villena and Marian Ivy Reyes-Fajardo of the court’s first division.
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