MANILA – The Court of Tax Appeals (CTA) has denied a PHP156 million tax credit claim filed by mining firm Oceanagold (Phils.) Inc. for taxes paid for the year 2017.
In its 21-page decision dated Nov. 10 and written by Associate Justice Jean Marie A. Bancorro-Villena, the tax court’s Second Division said it “finds no erroneous or illegal collection of excise taxes refundable in favor of the petitioner,”.
Oceanagold is a mining service contractor and under its Financial or Technical Assistance Agreement (FTAA) with the government, it is given a period of five years from the commencement of its operations to recover its pre-operating expenses, part of which are excise taxes on minerals.
The firm identified a suitable area for the Dipidio Gold-Copper Project in 2005. The firm then requested confirmation from the Bureau of Internal Revenue (BIR) of its exemption from payment of excise taxes and on May 2007, the BIR issued BIR Ruling No. 10-2007 confirming the firm’s petitioner’s tax exemption within the five year recovery period beginning from the approval of its Partial Declaration of Mining Feasibility (PDMF) with the Department of Environment and Natural Resources (DENR) which was finally approved in October 2005.
In 2013, the firm was able to obtain an Ore Transport Permit (OTP) from the Mines and Geosciences Bureau (MGB) authorizing the sale and delivery of copper concentrates from the mine to Poro Point, La Union. However, the BIR in December 2012 detained 800,000 metric tons of mineral ores it stockpiled for processing and in February the next year seized another 100 metric tons of copper concentrates.
In 2013, the BIR also issued a circular denying the firm’s exemption from payment of excise taxes and detained another delivery of 160 metric tons of copper concentrate citing that the firm failed to pay the excise taxes on all of its previously seized ores and copper concentrates.
To secure the release of its ores and copper concentrates, the firm paid under protest the excise taxes and then filed an administrative claim for a tax refund. The firm claims that the time when excise taxes were collected by the BIR was still within the five-year recovery period under the FTAA.
Ruling otherwise, the tax court said under the provisions of the FTAA, the firm had only until October 2008 to develop and construct mining production facilities and thereafter had to submit a work program for the period of three years for the actual production activities.
The court said the firm “should have commenced commercial operation and production within the fourth quarter of 2008 up to the fourth quarter of 2011” and “consequently, the recovery period would have ended in the fourth quarter of 2016 “ regardless of its claim that the commercial production commenced in 2013.
“The subject payments of excise taxes that were made between February 2017 and June 2017 which are beyond the recovery period are not rendered erroneous nor illegal,” the court said.
It added that the firm “did not submit to the Court pertinent documents such as notice/s to the government stating the reason and duration of the delay and work programs in order to ascertain the date of the recovery period”. (PNA)
