The Philippine Court of Tax Appeals ruled on 26 February 2026 concerning the withholding tax exemption on dividends under Section 32(B)(7)(a) of the National Internal Revenue Code (NIRC) of 1997. Section 32(B) excludes certain income items from gross income and exempts them from taxation, including income derived by foreign governments.
This judicial decision from the Philippine Court of Tax Appeals grants a significant tax refund to SN Power Invest Netherlands, B.V. The court ruled that the petitioner, as a financial institution indirectly owned and controlled by Norway, is exempt from paying withholding taxes on dividends under the National Internal Revenue Code.
Evidence established that the dividends originated from local investments made by an entity acting as an instrumentality of a foreign government. Consequently, the Commissioner of Internal Revenue was ordered to return approximately PHP 531.85 million in erroneously collected taxes. The ruling confirms that the petitioner satisfied all legal requirements and filed its claims within the mandatory two-year prescriptive period.
This court decision involves a refund of Final Withholding Taxes (FWT) in the aggregate amount of PHP 531,850,000.00. The petitioner, SN Power Invest Netherlands, B.V. (SNPIN), successfully argued that it was exempt from paying taxes on dividends received from its Philippine subsidiary, SN Power Philippines, Inc. (SNPPI).
The key aspects of the case are as follows:
The basis of the refund claim
The dispute centred on whether the dividends SNPIN received from SNPPI were exempt from income tax under Section 32(B)(7)(a)(ii) of the National Internal Revenue Code (NIRC) of 1997. This provision excludes income from gross income—and thus exempts it from taxation—when it is derived by:
- Foreign governments;
- Financing institutions owned, controlled, or enjoying refinancing from foreign governments; or
- International/regional financial institutions established by foreign governments.
Corporate structure and government ownership
To qualify for the exemption, SNPIN had to prove it was a financial institution controlled by a foreign government. The court established the following chain of ownership:
- Norway established the Norwegian Investment Fund for Developing Countries (Norfund) via the Norfund Act to promote sustainable development in developing countries.
- Norfund wholly owns SN Power AS (SNP Norway).
- SNP Norway wholly owned the petitioner, SNPIN.
- SNPIN owned 100% of SNPPI’s common shares.
Based on this structure, the court concluded that SNPIN is a financial institution owned and controlled by Norway.
Procedural timeliness and jurisdiction
The Court of Tax Appeals (CTA) confirmed it had jurisdiction because SNPIN filed both its administrative and judicial claims within the two-year prescriptive period required by law. The dates of remittance for the three consolidated cases were as follows:
- Batch 1: Remitted 17 December 2019; Judicial claim filed 17 December 2021.
- Batch 2: Remitted 8 June 2020; Judicial claim filed 8 June 2022.
- Batch 3: Remitted 8 January, 2021; Judicial claim filed 9 January 2023 (as 8 January was a Sunday).
Evidence and admissibility
The respondent (the Commissioner of Internal Revenue) challenged the admissibility of the Norfund Act (Exhibit “P-17”), arguing it was a foreign public document that had not been properly authenticated. However, the court overruled this objection because the respondent had expressly admitted the authenticity and due execution of the documents during earlier proceedings. Furthermore, the document was found to be properly Apostilled under the Hague Convention, to which both the Philippines and Norway are parties.
The court’s final ruling
The Court found that SNPIN met all legal requirements for the tax exemption. It ruled that the dividends were income derived from Philippine investments by a foreign-government-controlled entity. Consequently, the FWTs were erroneously collected.
The CTA granted the petitions and ordered the Commissioner of Internal Revenue to refund the full amount of PHP 531,850,000.00 to SN Power Invest Netherlands, B.V.
