Nobel Peace Prize Laureate Maria A. Ressa and Rappler Holdings Corporation (RHC) were acquitted of tax evasion charges by the Pasig City regional trial court (RTC) in a decision handed down on Tuesday, Sept. 12.

RTC Judge Ana Teresa T. Cornejo-Tomacruz of Branch 157 ruled that “RHC and Ms. Ressa did not violate Section 255 of Republic Act No. 8424, the National Internal Revenue Code (NIRC) of 1997."

“This is a victory not just for Rappler but for everyone who has kept the faith that a free and responsible press empowers communities and strengthens democracy,” Rappler said in a statement.

“The ruling came eight months after the Court of Tax Appeals also dismissed four other tax cases filed against Rappler by the Duterte-era Bureau of Internal Revenue and Department of Justice,” it said. 

“All the dismissed tax cases were based on the false and flimsy premise that, when Rappler issued Philippine Depositary Receipts (PDR) in 2015, it was not raising capital but earning a taxable profit, which it supposedly willfully did not declare,” it added.

It also said it shares its legal victory with “our colleagues in the industry who have been besieged by relentless online attacks, unjust arrests and detentions, and red-tagging that have resulted in physical harm” and “Filipinos doing business for social good but who, like us, have suffered at the hands of oppressive governments.”

Ressa and RHC were accused of violating Section 255 of the NIRC for the alleged willful and unlawful failure to supply the correct and accurate information in the RHC’s value added tax (VAT) return for the second quarter of taxable year 2015.

The Bureau of Internal Revenue (BIR) accused RHC of acting as a dealer of securities when PDRs were issued to foreign firms NBM Rappler, L.P. and Omidyar Network Fund, L.L.C. without payment of VAT.

In her decision, Judge Tomacruz ruled that "the PDR subscriptions were not proceeds arising from the sale of PDRs to NBM that should have been declared in RHC’s VAT return."

“As a result, it cannot be said that RHC willfully filed an inaccurate VAT return or that it is liable for deficiency VAT relative to the PDR transaction with NBM,” the judge said. 

Tomacruz also said RA 8799, the Securities Regulation Code, has defined a PDR as “a warrant and/or option to purchase shares of stock,” while, a merchant of stock securities, according to the Tax Code, is “an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and the resale thereof to customers.”

“For RHC to be regarded as dealer in securities, therefore, it was incumbent upon the prosecution to prove that RHC bought RI (Rappler, Inc.) shares for resale as PDRs to customers, in the ordinary course of business, for the specific purpose of obtaining gains or profits,” the judge pointed out.

"The prosecution evidence shows that RHC did not in fact habitually and consistently engage in the purchase of RI’s shares and resale of PDRs to customers," the judge said.

“RHC’s Articles of Incorporation quoted above authorized it to ’deal in and with’ shares of stock or other securities, provided that it does not act as a dealer in securities. As such, RHC could legally engage in transactions involving PDRs to raise funds for its wholly-owned subsidiary (RI). Its transactional activities relative to the PDRs are consistent with the purpose for which it was created. However, these financial and investment activities did not necessarily transform RHC from a holding company into a dealer in security,” the judge said. 

“Apart from the fact that the PDR transactions undertaken by RHC were neither regular nor recurring, RHC also did not gain any profit from these business activities. As stated earlier, PDR is merely an option to purchase stocks that gives a holder the right to subscribe to the shares of the corporation. While it is in the nature of a security, it is not the same as the underlying shares,” she added.

The judge reiterated: “PDR subscription price cannot be regarded as revenue on the part of RHC as it was solely intended to be used as a fund for RHC to subscribe to RI shares, and treated by NBM to any future subscription to RI’s shares, and treated as a deposit by NBM to any future subscription.”

Thus, "it was a ‘capital’ obtained by RHC to generate revenue, but is not revenue itself,” she ruled.