Philippine court orders corporate regulator to restore license of Rappler

Philippine court orders corporate regulator to restore license of Rappler – Reuters

The Philippine Court of Tax Appeals (CTA) has recently acquitted Nobel laureate Maria Ressa and Rappler Holdings Corporation of four counts of tax violations, bringing relief to the embattled news organization amidst ongoing legal battles (1). This decision marks the first time in at least two decades that the Bureau of Internal Revenue (BIR) has not interpreted Philippine Depositary Receipts (PDRs) as taxable income, and the first time a media company has avoided charges of tax evasion related to PDRs ( 1).

The CTA’s unanimous ruling, which spans 81 pages, challenged the government’s claim that Rappler, through its holding company Rappler Holdings Corporation (RHC), acted as a dealer in securities and thereby earned taxable income from the issuance of PDRs to foreign investors (1) . The court determined that RHC did not engage in the purchase and re-sale of securities on a regular basis and instead acted in accordance with its business purpose as a holding company, which is to raise capital for its subsidiaries (1).

Furthermore, the CTA addressed the question of whether the issuance of PDRs constituted a taxable event. The court noted that PDRs do not transfer ownership of shares to the holder, but rather grant them the right to receive shares upon the satisfaction of certain conditions (1). Consequently, the issuance of PDRs was not deemed a taxable event by the CTA.

This ruling is significant as it not only clears Rappler of the tax evasion charges but also sets a precedent for the interpretation of PDRs as taxable instruments in the Philippines. With three additional court cases still pending, this decision offers some respite for the news organization and its founder.

(1) Rappler. (2023, January 20). Explainers: How court tax appeals ruled in favor of Maria Ressa, Holdings Corporation. https://www.rappler.com/newsbreak/explainers/how-court-tax-appeals-ruled-favor-maria-ressa-holdings-corporation-january-2023/