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TAX ATION

San Beda College of LAW – ALABANG

GENERAL PRINCIPLES
b.Regulation – As in the case of taxes levied on
I. Concepts, Nature and Characteristics of excises and privileges like those imposed in
Taxation and Taxes. tobacco or alcoholic products or amusement
places like night clubs, cabarets, cockpits, etc.
In the case of Caltex Phils. Inc. vs COA
Taxation Defined: (G.R. No. 92585, May 8, 1992), it was held that
taxes may also be imposed for a regulatory
As a process, it is a means by which the purpose as, for instance, in the rehabilitation and
sovereign, through its law-making body, raises stabilization of a threatened industry which is
revenue to defray the necessary expenses of the affected with public industry like the oil industry.
government. It is merely a way of apportioning
the costs of government among those who in c.Reduction of Social Inequality – this is
some measures are privileged to enjoy its made possible through the progressive system of
benefits and must bear its burdens. taxation where the objective is to prevent the
under-concentration of wealth in the hands of few
As a power, taxation refers to the inherent individuals.
power of the state to demand enforced
contributions for public purpose or purposes.
d.Encourage Economic Growth – in the realm
of tax exemptions and tax reliefs, for instance,
Rationale of Taxation - The Supreme Court
the purpose is to grant incentives or exemptions
held:
in order to encourage investments and thereby
“It is said that taxes are what we pay for
promote the country’s economic growth.
civilized society. Without taxes, the government
would be paralyzed for lack of the motive power
to activate and operate it. Hence, despite the e.Protectionism – in some important sectors of
natural reluctance to surrender part of one’s the economy, as in the case of foreign
hard-earned income to the taxing authorities, importations, taxes sometimes provide protection
every person who is able must contribute his to local industries like protective tariffs and
share in the running of the government. The customs.
government for its part is expected to respond in
the form of tangible and intangible benefits Taxes Defined
intended to improve the lives of the people and
enhance their moral and material values. The Taxes are the enforced proportional
symbiotic relationship is the rationale of contributions from persons and property levied by
taxation and should dispel the erroneous notion the law-making body of the State by virtue of its
that it is an arbitrary method of exaction by those sovereignty for the support of government and
in the seat of power. for public needs.
Taxation is a symbiotic relationship,
whereby in exchange for the protection that the Essential Characteristic of Taxes [ LEMP3S ]
citizens get from the government, taxes are
paid.” (Commissioner of Internal Revenue vs 1.It is levied by the law-making body of the
Allegre, Inc.,et al., L-28896, Feb. 17, 1988) State
The power to tax is a legislative power
Purposes and Objectives of Taxation which under the Constitution only Congress can
exercise through the enactment of laws.
1.Revenue – to provide funds or property with Accordingly, the obligation to pay taxes is a
which the State promotes the general welfare and statutory liability.
protection of its citizens.
2.It is an enforced contribution
2.Non-Revenue [PR2EP] A tax is not a voluntary payment or
donation. It is not dependent on the will or
contractual assent, express or implied, of the
a.Promotion of General Welfare – Taxation
person taxed. Taxes are not contracts but positive
may be used as an implement of police power in
acts of the government.
order to promote the general welfare of the
people. [see Lutz vs Araneta (98 Phil 148) and
Osmeňa vs Orbos (G.R. No. 99886, Mar. 31, 3.It is generally payable in money
1993)]

TAX ATION
San Beda College of LAW – ALABANG

Tax is a pecuniary burden – an exaction to a.It does not mean that only those who are able
be discharged alone in the form of money which to pay and do pay taxes can enjoy the privileges
must be in legal tender, unless qualified by law, and protection given to a citizen by the
such as RA 304 which allows backpay certificates government.
as payment of taxes. b.From the contributions received, the
government renders no special or commensurate
4.It is proportionate in character - It is ordinarily benefit to any particular property or person.
based on the taxpayer’s ability to pay. c.The only benefit to which the taxpayer is
entitled is that derived from his enjoyment of the
5.It is levied on persons or property - A tax privileges of living in an organized society
may also be imposed on acts, transactions, rights established and safeguarded by the devotion of
or privileges. taxes to public purposes. (Gomez vs Palomar, 25
SCRA 829)
6.It is levied for public purpose or purposes - d.A taxpayer cannot object to or resist the
Taxation involves, and a tax constitutes, a burden payment of taxes solely because no personal
to provide income for public purposes. benefit to him can be pointed out as arising from
the tax. (Lorenzo vs Posadas, 64 Phil 353)
7.It is levied by the State which has jurisdiction
over the persons or property. - The persons, 3.Lifeblood Theory
property or service to be taxed must be subject Taxes are the lifeblood of the government,
to the jurisdiction of the taxing state. being such, their prompt and certain availability
is an imperious need. (Collector of Internal
Revenue vs. Goodrich International Rubber Co.,
Theory and Basis of Taxation Sept. 6, 1965) Without taxes, the government
would be paralyzed for lack of motive power to
1.Necessity Theory activate and operate it.
Taxes proceed upon the theory that the
existence of the government is a necessity; that
it cannot continue without the means to pay its Nature of Taxing Power
expenses; and that for those means, it has the
right to compel all citizens and properties within 1.Inherent in sovereignty – The power of
its limits to contribute. taxation is inherent in sovereignty as an incident
In a case, the Supreme Court held that: or attribute thereof, being essential to the
Taxation is a power emanating from existence of every government. It can be
necessity. It is a necessary burden to preserve the exercised by the government even if the
State’s sovereignty and a means to give the Constitution is entirely silent on the subject.
citizenry an army to resist aggression, a navy to a.Constitutional provisions relating to the power
defend its shores from invasion, a corps of civil of taxation do not operate as grants of the power
servants to serve, public improvements designed to the government. They merely constitute
for the enjoyment of the citizenry and those limitations upon a power which would otherwise
which come with the State’s territory and be practically without limit.
facilities, and protection which a government is b.While the power to tax is not expressly
supposed to provide. (Phil. Guaranty Co., Inc. vs provided for in our constitutions, its existence is
Commissioner of Internal Revenue, 13 SCRA recognized by the provisions relating to taxation.
775). In the case of Mactan Cebu International
Airport Authority vs Marcos, Sept. 11, 1996, as an
2.The Benefits-Protection Theory incident of sovereignty, the power to tax has
The basis of taxation is the reciprocal duty been described as “unlimited in its range,
of protection between the state and its acknowledging in its very nature no limits, so that
inhabitants. In return for the contributions, the security against its abuse is to be found only in
taxpayer receives the general advantages and the responsibility of the legislative which imposes
protection which the government affords the the tax on the constituency who are to pay it.”
taxpayer and his property.
2.Legislative in character – The power to tax is
exclusively legislative and cannot be exercised by
Qualifications of the Benefit-Protection the executive or judicial branch of the
Theory: government.

TAX ATION
San Beda College of LAW – ALABANG

3.Subject to constitutional and inherent for which the taxing power may be used but the
limitations – Although in one decided case the degree of vigor with which the taxing power may
Supreme Court called it an awesome power, the be employed in order to raise revenue (I Cooley
power of taxation is subject to certain limitations. 179-181)
Most of these limitations are specifically provided
in the Constitution or implied therefrom while the •Constitutional Restraints Re: Taxation is
rest are inherent and they are those which spring the Power to Destroy
from the nature of the taxing power itself While taxation is said to be the power to
although, they may or may not be provided in the destroy, it is by no means unlimited. It is equally
Constitution. correct to postulate that the “power to tax is
not the power to destroy while the Supreme
Court sits,” because of the constitutional
Scope of Legislative Taxing Power [S2 A P K A restraints placed on a taxing power that violated
M] fundamental rights.
In the case of Roxas, et al vs CTA (April
1.subjects of Taxation (the persons, property or 26, 1968), the SC reminds us that although the
occupation etc. to be taxed) power of taxation is sometimes called the power
2.amount or rate of the tax to destroy, in order to maintain the general
3.purposes for which taxes shall be levied public’s trust and confidence in the Government,
provided they are public purposes this power must be used justly and not
4.apportionment of the tax treacherously. The Supreme Court held:
5.situs of taxation “The power of taxation is sometimes
6.method of collection called also the power to destroy. Therefore it
should be exercised with caution to minimize
Is the Power to Tax the Power to Destroy? injury to the proprietary rights of a taxpayer. It
must be exercised fairly, equally and uniformly,
In the case of Churchill, et al. vs lest the tax collector kill the ‘hen that lays the
Concepcion (34 Phil 969) it has been ruled that: golden egg’. And, in order to maintain the general
The power to impose taxes is one so public’ trust and confidence in the Government
unlimited in force and so searching in extent so this power must be used justly and not
that the courts scarcely venture to declare that it treacherously.”
is subject to any restriction whatever, except The doctrine seeks to describe, in an
such as rest in the discretion of the authority extreme, the consequential nature of taxation
which exercise it. No attribute of sovereignty is and its resulting implications, to wit:
more pervading, and at no point does the power a.The power to tax must be exercised with
of government affect more constantly and caution to minimize injury to proprietary rights of
intimately all the relations of life than through the a taxpayer;
exaction made under it. b.If the tax is lawful and not violative of any of
And in the notable case of McCulloch vs the inherent and constitutional limitations, the
Maryland, Chief Justice Marshall laid down the fact alone that it may destroy an activity or object
rule that the power to tax involves the power of taxation will not entirely permit the courts to
to destroy. afford any relief; and
According to an authority, the above c.A subject or object that may not be destroyed
principle is pertinent only when there is no power by the taxing authority may not likewise be
to tax a particular subject and has no relation to a taxed. (e.g. exercise of a constitutional right)
case where such right to tax exists. This opt-
quoted maxim instead of being regarded as a Power of Judicial Review in Taxation
blanket authorization of the unrestrained use of The courts cannot review the wisdom or
the taxing power for any and all purposes, advisability or expediency of a tax. The court’s
irrespective of revenue, is more reasonably power is limited only to the application and
construed as an epigrammatic statement of the interpretation of the law.
political and economic axiom that since the Judicial action is limited only to review
financial needs of a state or nation may outrun where involves:
any human calculation, so the power to meet 1.The determination of validity on the tax in
those needs by taxation must not be limited even relation to constitutional precepts or provisions.
though the taxes become burdensome or 2.The determination, in an appropriate case, of
confiscatory. To say that “the power to tax is the the application of the law.
power to destroy” is to describe not the purposes

Theoretical Justice – the tax burden should be the manufacturer might have passed on to him. Internal Revenue vs John Gotamco and Sons. Hence.Administrative Feasibility – tax laws should taxes are not included. customs Basic Principles of a Sound Tax System [FAT] duties excise taxes on certain specific goods 1. The 1987 Constitution Internal Revenue et. TAX ATION San Beda College of LAW – ALABANG Aspects of Taxation 1. 27. L-19707. but the evident intention is to fixed amount upon all persons of a certain class exempt the contractor so that such contractor within the jurisdiction of the taxing power without may no longer shift or pass on any tax to the regard to the amount of their property or contractee. the sum or sums to be raised.As to Subject matter 3. 1987) requires taxation to be equitable and uniform. Inc. then the buyer of the product or service sold has a right to 3. just and effective cannot claim exemption from the payment of administration. but the burden thereof can be “taxation system”.Indirect Taxes – taxes wherein the incidence taxpayer and is referred to as tax administration) of or the liability for the payment of the tax falls The two processes together constitute the on one person. al. exemption covers only those taxes for which such consumer or end-user is directly liable. example: community tax et.Where the exemption from indirect tax is given 1. Macaraig. in proportion to the taxpayer’s ability to pay (Phil. percentage taxes.When the consumer or end-user of a government would be in keeping with the manufacturer product is tax-exempt. 1963) A. Classifications and Distinction tax and shifts the same to the buyer. Acetylene Co. 1987) 2. such principle. (this includes payment by the 2. Aug.. estate tax enforcement of the obligation on the part of those who are taxed. the enjoyment of a sellers passed on to him. estate tax or donor’s tax . clearly manifest therein that legislative intention example: real estate tax to exempt embraces indirect taxes. vs Commissioner of (ability-to-pay principle).Property Taxes – taxes on things or property 4.Direct Taxes – taxes wherein both the manner of levying and collecting taxes (strictly “incidence” as well as the “impact” or burden of speaking. L-10963. Neither an excess regarding Indirect Taxes: nor a deficiency of revenue vis-à-vis the needs of 1. the manufacturer be capable of convenient. and approximate the needs Important Points to Consider of government expenditure.al. examples: income tax. 2.Personal. capitation or poll taxes – taxes of to the contractee.Excise Taxes – charges imposed upon the be reimbursed the amount of the taxes that the performance of an act.Fiscal Adequacy – the sources of tax revenue should coincide with. sales tax.When the law granting tax exemption of a certain class within the jurisdiction of the specifically includes indirect taxes or when it is taxing power.Levy – determination of the persons.supra) examples: income tax. or the engaging in an occupation.. L-31092. but must hold it in trust for Classification of Taxes buyer.Collection – consists of the manner of donor’s tax.17. examples: VAT. value-added tax.As to Burden or excises to be taxed. shifted or passed to another person. 2. the due date thereof and the time and 1. the seller gets the refund. inc.. Indirect 2. (American Rubber Co. case. the contractor may claim tax occupations or businesses in which they may be exemption on the transaction (Commissioner of engaged in.When the transaction itself is the one that is tax-exempt but through error the seller pays the II. such refers to taxation) the tax faces on one person. Feb. neither can the consumer or buyer of the product demand the refund of the tax that 3. community tax. property B. April 30. (Maceda vs privilege.

. of a public nature.imposed by the government government or private 2.imposed only by the 4. 1. Toll – sum of money for the use of Examples: taxes on distilled spirits.Mixed Tax – tax rates are partly progressive and partly regressive. bridge of the like. to achieve some social or A regressive tax.As to Purpose examples: national internal revenue taxes.paid for the use of of the government another’s property 3.e. Regressive System of Taxation: D. estate tax. Government units. customs duties 1. 3.Progressive Tax – the rate or the amount of to amount imposed the cost of construction the tax increases as the amount of the income or or maintenance of the earning (tax base) to be taxed increases.imposed by the examples: real estate tax.imposed only by the 2.demand of 1. with regressive system of taxation.Special Assessment vs Tax tax Special Assessment – an enforced proportional contribution from owners of lands especially or peculiarly benefited by public 1. wines.As to Scope or authority imposing the c.Penalty vs Tax according to De Leon) Penalty – any sanctions imposed as a punishment for violations of law or acts deemed injurious.Proportionate Tax – tax rates are fixed on a raise revenue conduct flat tax base.demand of sovereignty proprietorship E.Specific Tax – tax imposed per head. 2. example: real property taxes.paid for the support 2.General/Fiscal/Revenue – tax imposed for the general purposes of the government.generally intended to 1. i. Note: We have no regressive taxes (this is b. VAT.As to Measure of Application focuses on indirect taxes. public improvement examples: income tax.Municipal/Local Tax – tax imposed by Local revenues for governmental needs.. donor’s used tax 4.Special/Regulatory – tax imposed for special Regressive Tax purposes. professional tax all taxes •Regressive System of Taxation vis-à-vis 2. Government.As to Date 2. 2. something. Tax vs Penalty 1. .Toll vs Tax to be taxed.designed to regulate 4. no limit as 3. TAX ATION San Beda College of LAW – ALABANG C.e.National Tax – tax imposed by the National improvements. Examples: educational fund tax under Real Regressive Tax: tax the rate of which Property Taxation decreases as the tax base increases. or by some standard of weight or Taxes distinguished from other Impositions measurement and which requires no assessment beyond a listing and classification of the subjects a. must not be confused economic needs.Regressive Tax – the tax rate decreases as the individuals or entities amount of income or earning (tax base) to be taxed increases. Examples: income taxes.amount depends on 1. unit or number. generally applied to the consideration and fermented liquors which is paid for the use of a road. and almost examples: real estate tax. VAT. it exists when there are more indirect taxes imposed than direct taxes. and other government government or private percentage taxes individuals or entities F.generally. to raise 2. customs Tax vs Toll duties 1. i.Ad Valorem Tax – tax based on the value of the article or thing subject to tax.

Debt vs Tax License or Permit fee – is a charge Debt is based upon juridical tie.no imprisonment for paid of inspection and sanction for non.generally not subject 4.The general rule is that an exemption from imposition of a tax. maybe considered both Sec.imposed on persons. 234 of the Local Government Code.But a tax may have only a regulatory purpose.levied only on land the act or business illegal property and excise illegal 2.enforced contribution 1.e. Tax vs License/Permit Fee Tax vs Debt 1.generally. it follows that the exemption under for revenue purposes. cannot be 2.non-payment makes Assessment not necessarily make the act or business 1.( see the primary purpose.general application 4.exceptional both as (see Apostolic Prefect time and place vs Treas. TAX ATION San Beda College of LAW – ALABANG persons and property to exercise privilege Tax vs Special 6. and that exemption from taxes may Regarding Special Assessments: not include exemption from license fees.legal compensation or 1. exclusively used for religious.However.non-payment does 6. contracts. the fact that incidentally Aban) revenue is also obtained does not make the 3 . related cases) 2. non-payment of debt regulation payment of tax except 5.generally no limit in 4. Three kinds of licenses are i.based on law 1. 3.The general rule is that the imposition is a tax if educational purposes are not exactly exempt its primary purpose is to generate revenue and from real property taxes but are exempt from the regulation is merely incidental.An extraction. properties which are actually.amount is limited to compensation the amount of tax to be the necessary expenses 5. however. 28(3).Licenses for the regulation or restriction of non- well as on benefits benefits useful occupations or enterprises received 3. (see American Mail Line vs Sec.Since special assessments are not taxes within 2. VI of the Constitution does not City of Butuan. 172 SCRA assessment. delicts or quasi-delicts between of regulation. created by imposed under the police power for the purposes law.based on contracts. May 31. parties for their private interest or resulting from their own acts or omissions.Licenses for revenue only 4. but if regulation is imposition of special assessments as well.for revenue purposes 2. in view of the exempting proviso in 3. directly and 4. 1967 and apply to special assessments.The power to regulate as an exercise of police the constitutional or statutory provisions on tax power does not include the power to impose fees exemptions. (see Progressive taxation does not include exemption from special Development Corp.imprisonment is a 5.imposed also on 5. his liability is limited recognized in the law: only to the land 1. 71 Importance of the distinctions Phil 547) between tax and license fee: 1. vs Quezon City.personal liability of 2.may be subject to taxing power police power to set-off or set-off or compensation 4. assessed by sovereign reward of an officer for express or implied authority to defray specific purposes 2.may be paid in kind purposes money 3.generally payable in 3. a tax and a license fee.Some limitations apply only to one and not to Important Points to Consider the other.based on necessity as 3. charitable and 5. Of Baguio.based wholly on 2. L-12647.an exercise of the 4.for regulation 3.not a personal liability the person assessed of the person assessed. 629) d.imposed on the right poll tax .assignable public expenses assigned 2.License or Permit Fee vs Tax e.an exercise of the 3.Licenses for the regulation of useful involved occupations. 1. 1. Art.

TAX ATION
San Beda College of LAW – ALABANG

6.governed by special 6.governed by the
prescriptive periods ordinary periods of 4.Tariff – it may be used in 3 senses:
provided for in the Tax prescriptions a.As a book of rates drawn usually in
Code alphabetical order containing the names of
7.does not draw 7.draws interest when several kinds of merchandise with the
interest except only so stipulated, or in case corresponding duties to be paid for the same.
when delinquent of default b.As duties payable on goods imported or
exported (PD No. 230)
General Rule: Taxes are not subject to set-off or c.As the system or principle of imposing duties
legal compensation. The government and the on the importation/exportation of goods.
taxpayer are not creditors and debtors or each
other. Obligations in the nature of debts are due 5.Internal Revenue – refers to taxes imposed by
to the government in its corporate capacity, while the legislative other than duties or imports and
taxes are due to the government in its sovereign exports.
capacity (Philex Mining Corp. vs CIR, 294 SCRA
687; Republic vs Mambulao Lumber Co., 6 SCRA 6.Margin Fee – a currency measure designed to
622) stabilize the currency.

Exception: Where both the claims of the 7.Tribute – synonymous with tax; taxation
government and the taxpayer against each other implies tribute from the governed to some form of
have already become due and demandable as sovereignty.
well as fully liquated. (see Domingo vs Garlitos, L-
18904, June 29, 1963)
8.Impost – in its general sense, it signifies any
tax, tribute or duty. In its limited sense, it means
a duty on imported goods and merchandise.
Pertinent Case:
Inherent Powers of the State
Philex Mining Corp. vs Commissioner of
Internal Revenue 1.Police Power
G.R. No. 125704, Aug. 28, 1998 2.Power of Eminent Domain
3.Power of Taxation
The Supreme Court held that: “We have
consistently ruled that there can be no offsetting Distinctions among the Three Powers
of taxes against the claims that the taxpayer may
have against the government. A person cannot Taxation Police Eminent
refuse to pay a tax on the ground that the Power Domain
government owes him an amount equal to or PURPOSE
greater than the tax being collected. The - levied for - exercised - taking of
collection of a tax cannot await the results of a the to promote property for
lawsuit against the government.” purpose of public public use
raising welfare thru
f.Tax Distinguished from other Terms. revenue regulations
AMOUNT OF EXACTION
1.Subsidy – a pecuniary aid directly granted by - no limit - limited to - no exaction,
the government to an individual or private the cost of compensation
commercial enterprise deemed beneficial to the regulations, paid by the
public. issuance of government
the license
or
2.Revenue – refers to all the funds or income surveillance
derived by the government, whether from tax or
BENEFITS RECEIVED
from whatever source and whatever manner.
- no special - no direct - direct benefit
or direct benefits but results in the
3.Customs Duties – taxes imposed on goods benefits a healthy form of just
exported from or imported into a country. The received economic compensation
term taxes is broader in scope as it includes but the standard of
customs duties. enjoyment society or

TAX ATION
San Beda College of LAW – ALABANG

of the “damnum 5.International Comity
privileges absque
of living in injuria” is b.Constitutional Limitations or those
an attained expressly found in the constitution or implied
organized from its provision
society
NON-IMPAIRMENT OF CONTRACTS
1.Due process of law
- the - contract - contracts may
impairment may be be impaired 2.Equal protection of law
rule subsist impaired 3.Freedom of Speech and of the press
TRANSFER OF PROPERTY RIGHTS 4.Non-infringement of religious freedom
- taxes paid - no transfer - property is 5.Non-impairment of contracts
become but only taken by the 6.Non-imprisonment for debt or non-payment
part of restraint on gov’t upon of poll tax
public the exercise payment of just 7.Origin of Appropriation, Revenue and Tariff
funds of property compensation
Bills
right exists
SCOPE
8.Uniformity, Equitability and Progressitivity of
Taxation
- affects all - affects all - affects only
persons, persons, the particular 9.Delegation of Legislative Authority to Fx Tariff
property property, property Rates, Import and Export Quotas
and excise privileges, comprehended 10.Tax Exemption of Properties Actually,
and even Directly, and Exclusively used for Religious
rights Charitable
BASIS 11.Voting requirements in connection with the
- public - public -public Legislative Grant of Tax Exemption
necessity necessity necessity, 12.Non-impairment of the Supreme Courts’
and the private property jurisdiction in Tax Cases
right of the is taken for 13.Tax exemption of Revenues and Assets,
state and public use including Grants, Endowments, Donations or
the public to Contributions to Education Institutions
self-
protection c. Other Constitutional Provisions related
and self- to Taxation
preservation
AUTHORITY WHICH EXERCISES THE POWER
1.Subject and Title of Bills
- only by - only by the - may be
the government granted to 2.Power of the President to Veto an items in an
governmen or its public service, Appropriation, Revenue or Tariff Bill
t or its political companies, or 3.Necessity of an Appropriation made before
political subdivisions public utilities money
subdivision 4.Appropriation of Public Money
s 5.Taxes Levied for Special Purposes
6.Allotment to LGC
III. Limitations on the Power of Taxation
Inherent Limitations
Limitations, Classified
A. Public Purpose of Taxes
a.Inherent Limitations or those which restrict 1.Important Points to Consider:
the power although they are not embodied in the a.If taxation is for a public purpose, the tax
Constitution [P N I T E] must be used:
a.1) for the support of the state or
1.Public Purpose of Taxes a.2) for some recognized objects of
2.Non-delegability of the Taxing Power governments or
a.3) directly to promote the welfare of
3.Territoriality or the Situs of Taxation the community (taxation as an implement of
4.Exemption of the Government from taxes police power)

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b.The term “public purpose” is synonymous
with “governmental purpose”; a purpose B. Non-delegability of Taxing Power
affecting the inhabitants of the state or
taxing district as a community and not 1. Rationale: Doctrine of Separation of
merely as individuals. Powers; Taxation is purely legislative,
Congress cannot delegate the power to
c. A tax levied for a private purpose others.
constitutes a taking of property without due
process of law. 2. Exceptions:
a. Delegation to the President (Art.VI. Sec.
d. The purposes to be accomplished by 28(2) 1987 Constitution)
taxation need not be exclusively public. Although The power granted to Congress under this
private individuals are directly benefited, the tax constitutional provision to authorize the President
would still be valid provided such benefit is only to fix within specified limits and subject to such
incidental. limitations and restrictions as it may impose,
tariff rates and other duties and imposts include
e. The test is not as to who receives the tariffs rates even for revenue purposes only.
money, but the character of the purpose for Customs duties which are assessed at the
which it is expended; not the immediate result of prescribed tariff rates are very much like taxes
the expenditure but rather the ultimate. which are frequently imposed for both revenue-
raising and regulatory purposes (Garcia vs
g. In the imposition of taxes, public purpose Executive Secretary, et. al., G.R. No. 101273, July
is presumed. 3, 1992)

b. Delegations to the Local Government
2. Test in determining Public Purposes in (Art. X. Sec. 5, 1987 Constitution)
tax It has been held that the general principle
against the delegation of legislative powers as a
a. Duty Test – whether the thing to be consequence of the theory of separation of
threatened by the appropriation of public revenue powers is subject to one well-established
is something which is the duty of the State, as a exception, namely, that legislative power may be
government. delegated to local governments. The theory of
non-delegation of legislative powers does not
b. Promotion of General Welfare Test – apply in maters of local concern. (Pepsi-Cola
whether the law providing the tax directly Bottling Co. of the Phil, Inc. vs City of Butuan, et .
promotes the welfare of the community in equal al., L-22814, Aug. 28, 1968)
measure.
c. Delegation to Administrative Agencies
with respect to aspects of Taxation not legislative
Basic Principles of a Sound Tax System in character.
(FAT) example: assessment and
collection
a. Fiscal Adequacy – the sources of tax revenue
should coincide with, and approximate the needs 3.Limitations on Delegation
of government expenditure. Neither an excess
nor a deficiency of revenue vis-à-vis the needs of a. It shall not contravene any
government would be in keeping with the Constitutional provisions or inherent limitations of
principle. taxation;
b. The delegation is effected either by the
b. Administrative Feasibility – tax laws should Constitution or by validly enacted legislative
be capable of convenient, just and effective measures or statute; and
administration. c. The delegated levy power, except when
the delegation is by an express provision of
c. Theoretical Justice – the tax burden should Constitution itself, should only be in favor of the
be in proportion to the taxpayer’s ability to pay local legislative body of the local or municipal
(ability-to-pay principle). The 1987 Constitution government concerned.
requires taxation to be equitable and uniform.

where b.2) In order that the functions of the imposition of the tax [S2 A P K A M]. TAX ATION San Beda College of LAW – ALABANG 4.Important Points to Consider: intervention of the state. and excise within the territory of the taxing power because: E.It is an inherent mandate that taxation absence of tax exemption provisions in their shall only be exercised on persons. 3 “No person shall be e.2) Property which is wholly and a. the elements that enter into the a. the government Administration .2) usage among states that when one c. A person may be taxed.Basis: Sec. Reasons for Exemptions: 2. another state receives none of the protection for which a tax is supposed to b.location of the subject matter of the tax 1. the the course of its operations.The grounds for the above rule are: be compensation. liberty or property without f. The means employed must be a. delegation is invalid.Due Process of Law c.citizenship of the person a. a. the government may tax itself in the absence of any 1.3) foreign government may not be sued there is between him and the taxing state. through which the government immediately and directly exercises its sovereign powers (Infantry Post Exchange vs Posadas.” occupation is being exercised Requisites : 1.1) sovereign equality among states b.Government-owned or controlled “place of taxation” depending on the nature corporations.Factors to Consider in determining Situs of Taxation Constitutional Limitations a. or tax government shall not be unduly impede. a without its consent so that it is useless to assess privity of relationship justifying the levy. under the jurisdiction of the latter even if he is outside the taxing state. 54 Phil 866) C. but if what is involved is 2. properties. a. . International Comity b. functions are generally subject to tax in the b.Unless otherwise provided by law. when performing proprietary of taxes being imposed.The property of a foreign state or exclusively within the jurisdiction of government may not be taxed by another. the steps taken for its assessment and a. Territoriality or Situs of Taxation 3.Every system of taxation would be taxing itself to raise money to consists of two parts: pay over to itself.4) reciprocity among states 2.Tax Legislation vis-à-vis Tax the tax so laid and thus. charters or law creating them. b. there is an right to tax is the capacity of the government implied understanding that the power does not to provide benefits and protection to the intend to degrade its dignity by placing itself object of the tax.1) Tax laws do not operate beyond a country’s territorial limit. The interest of the public generally D. business or due process of law x x x.place where the privilege.Important Points to Consider: b. regulation. 1 Art.1) To levy tax upon public property reasonably necessary to the would render necessary new taxes on accomplishment for the purpose other public property for the payment of and not unduly oppressive. the tax since it cannot be collected b.kind and Classification of the Tax b. the non-delegability rule exemption applies only to government entities is not violated.Notwithstanding the immunity.However.3) To reduce the amount of money that collection or tax administration has to be handed by the government in If what is delegated is tax legislation.domicile or residence of the person d. and and b. 1.Territoriality or Situs of Taxation means 4.Important Points to Consider: constitutional limitations. the fundamental basis of the enter into the territory of another. Exemption of the Government from Taxes as distinguished from those of a particular class require the 1.source of income deprived of life. the only tax administration.

passed abridging the freedom of speech. the obligation of contract shall be passed. VI. 2.Uniformity. just.Freedom of Speech and of the Press held that in order that due process of law must not be done in an arbitrary. and free exercise and enjoyment of religious 5.Equal Protection of the Law b. x x x” 3. Equal protection of the laws required for the sale or contribution of printed signifies that all persons subject to legislation materials like newspaper for such would be shall be treated under circumstances and imposing a prior restraint on press freedom conditions both in the privileges conferred and 3. 28(1) Art. discrimination or preference. 5 Art. Exercise of Religion clause does not prohibit b.Basis: Sec. The deprivation was done after 5. and SCRA 27) 4. However. capricious. Congress shall evolve a progressive system 2. 164 the constitution. The rule of actually in the nature of a condition or permit of taxation shall be uniform and equitable. Progressive system of Taxation b. Must play equally to all members of a profession and worship. Important Points to Consider: 1. (see the authority of a valid law or of Commissioner vs. Inequality which results in singling out those in the contract. A tax is uniform when the same force and effect in every place where the 6. 1. 235 SCRA 630) taxed at the same rate. (see Tolentino vs Secretary of or kinds or property of the same class shall be Finance. Lingayen Gulf Electric. Must not be arbitrary 5. Important Points to Consider: 2.Requisites for a Valid Classification 1. . made respecting an establishment of religion 4. License fees/taxes would constitute a restraint on the freedom of worship as they are a. or changing 4. shall be forever be allowed. III. “No law impairing and proportionate to one’s ability to pay. under the Constitution. Must not be based upon substantial distinctions a. because reasonable method of procedure this is hardly attainable. The only. The deprivation was done under infringes no constitutional limitation. In a string of cases. TAX ATION San Beda College of LAW – ALABANG 3. III. Must not be limited to exiting conditions or prohibiting the free exercise thereof.Important Points to Consider: places stress on direct rather than indirect taxes. Important Points to Consider: imposing a generally applicable sales and use tax 1. Equitability and b. reasonable a. b.Basis: Sec. a. prescribed by law. or dispenses with those one particular class for taxation or exemption expressed. “No law shall be 3. impairs the obligation. This doctrine prohibits class does not constitute a restraint on press freedom legislation which discriminates against some and since it is not imposed for the exercise of a favors others.Basis: Sec. despotic. privilege but only for the purpose of defraying part of cost of registration. without class. III. Important Points to Consider: Progressivity of Taxation 1.Non-impairment of Contracts subject of it is found. Uniformity (equality or equal on the sale of religious materials by a religious protection of the laws) means all taxable articles organization.1 Art. However.Basis: Sec. No law shall be or whimsical manner. of expression or of the pressx x x “ 2. the Constitution or the Free of taxation.Non-infringement of Religious Freedom 2. A law which changes the terms of the or on the taxpayers’ ability to pay contract by making new conditions. Must be germane to the purpose of law. an annual registration liabilities imposed fee on all persons subject to the value-added tax 2. the Supreme Court 4. Equitable means fair. The rule of uniformity does not call for compliance with fair and perfect uniformity or perfect equality. A business license may not be 1. 4 Art. 10 Art. There is curtailment of press a. 3 “ xxx Nor shall any freedom and freedom of thought if a tax is levied person be denied the equal protection of the in order to suppress the basic right of the people laws. The the exercise of the right.” 3.Basis: Sec.

and enumerated in Sec. however. prescribe.Non-imprisonment for non-payment of educational purposes shall be exempt from poll tax taxation. TAX ATION San Beda College of LAW – ALABANG 2. The prohibition is against facilities which are incidental to and reasonably “imprisonment” for “non-payment of poll tax”. and apportion the jurisdiction of the various subject to such limitations and restrictions as courts but may not deprive the Supreme it may impose. Voting Requirements in connection increase of the public debt.Basis: Sec. 101(9)(3). directly and exclusively used for religious. VI. VIII. However.Basis: Sec. Imports and Export Quotas Courts’ jurisdiction in Tax Cases a. the property b. building.Basis: Sec. Under the above provision. “No person shall be 1. violation of the community tax law other than for 5.Basis: Sec.Basis: Sec. other taxes as prescribed by law. The above provision requires the amendments” but also “to propose concurrence of a majority not of attendees amendments”. To be tax-exempt. revenue or tariff bills.Basis: Sec. 5 hereof. The only penalty for delinquency in the purposes mentioned. III. 28(3) Art. bills of local with the Legislative Grant for tax exemption application. orders of lower courts in x x x all cases Directly and Exclusively used for Religious. bill authorizing 11.Origin or Revenue. a. a person is subject to imprisonment for purposes. 28(4) Art. revise. involving the legality of any tax. 24 Art. import and export Court of its jurisdiction over cases quotas. the Senator’s members of the Congress. VI. payment is the payment of surcharge in the form 3. The exemption is not limited to date until it is paid. charitable or 7. Charitable and Educational Purposes .Delegation of Legislative Authority to 12. Appropriation and charitable and educational organizations would Tariff Bills nevertheless qualify for donor’s gift tax exemption. mosques.Tax Exemption of Properties Actually. of Finance. (Sec. tariff rates. “No law granting but the Senate may propose or concur with any tax exemption shall be passed without amendments. “The Congress Congress may. churches and parsonages or repeal by the Congress when the public interest convents appurtenant thereto.” power is not only to “only concur with b. The constitutional exemption non-payment of the tax and for non-payment of applies only to property tax. NIRC) a. (Sec. shall be added to the unpaid amount from due 4.” b. 5 (2b) Art. “The Supreme of the national development program of the Court shall have the following powers: x x government. Important Points to Consider: a. and improvements actually. constituting a quorum but of all members of supra) the Congress.” the concurrence of a majority of all the b. so requires. LGC) property actually indispensable but extends to 2. modify or affirm on appeal or certiorari x x x final judgments and 10. tonnage and wharfage dues. The word “exclusively” means of interest at the rate of 24% per annum which “primarily’. VI. VI “x x x The a. and private bills shall originate exclusively in the House of Representatives. it would seem that under existing law. 28(2) Art. Lest of the tax exemption: the use imprisoned for debt or non-payment of poll and not ownership of the property tax. Non-impairment of the Supreme Fix Tariff Rates. alteration or institutions. Important Points to Consider: must be actually. 20 Art. “All appropriation. (Tolentino vs Sec. does not apply to public utility franchise since a a. x(2) Review.” 2. The non-impairment rule. necessary for the accomplishment of said Thus. directly and exclusively used for 1. VIII. non-profit cemeteries.” other duties or imposts within the framework Sec. 161. 6. by law. gifts made in favor or religious 8. authorize the shall have the power to define. and all lands. and President to fix within specified limits. “Charitable franchise is subject to amendment. impost. 5 (2) Art. 9.

donations or contributions used library and school facilities. whether the educational institution is Appropriation. use must be school-related. The said constitutional provision granting 7716) was also questioned on the ground that tax exemption to non-stock. Religion (Sec. of proprietary (for profit) educational institutions require prior 2.” 3. and establishment of conditions prescribed by law. Important Points to Consider: Taxation 1. 29(1). and custom duties. in short.Basis: Sec.” operations like income from bank deposits. or toll or any penalty imposed in 3. .Power of the President to Veto items in legislative implementation. Revenue or Tariff bill but the veto proprietary or non-profit. Art. is limited to property tax. however. The tax exemption is not only limited to “No money shall be paid out of the revenues and assets derived from strictly school Treasury except in pursuance of an appropriation operations like income from tuition and other made by law. but it also extends to incidental 4. directly campus.” c. all grants. Constitution) stock. Assets. etc. school building expansion. paid or employed. VI of the 1987 2. church. library. VI of the 1987 Constitution) 6. The exemption granted to non-stock. 16. directly and exclusively for educational embrace only one subject which shall be purpose. “Subject to the faculty development. and improvements actually. property or donation must be used “Every Bill passed by Congress shall actually. VI of the 1987 DOF order governing the tax exemption of non. royalties. assets. Art. a. shall not affect the item or items to which he does not object. 29(2). dated Dec. fees. In the case. Their tax exemption is an Appropriation.Appropriation of Public Money for the income derived from canteen. and donor’s taxes.Necessity of an Appropriation made before money may be paid out of the The following are some of the highlights of the Treasury (Sec. the E-vat. including grants. Lands. benefit. (Sec. sectarian institution. directly. Income which is unrelated to school relation thereto. In the case or religious and charitable entities and non-profit cemeteries. TAX ATION San Beda College of LAW – ALABANG assessment.Department of Finance Order No. Canteens operated by mere or indirectly for the use. trust fund and similar arrangements. Buildings. applied. endowments. To be exempt from tax or duty. like the grant of scholarships. the exemption →in the Tolentino E-VAT case. professional chairs. Sect. non-profit the constitutional requirement on the title of a educational institution is self-executing. The use of the school’s income or assets donations or contributions to Educational must be in consonance with the purposes for Institutions which the school is created. directly and exclusively for educational purposes shall be exempt from tax.” Other Constitutional Provisions related to b. endowments.” miscellaneous feed such as matriculation. Constitution) the facilities mentioned must not only be owned and operated by the school itself but such ”No public money or property shall be facilities must be located inside the school appropriated. of incidental income. expressed in the title thereof. or system of religion or of any priest. or System of dormitory facilities. 1. denomination. 4(4) Art. bookstore and benefit of any Church. 4. 5. and exclusively used for “The President shall have the power to educational purposed are exempt from property veto any particular item or items in an tax. Tax Exemptions of Revenues and dividends and rental income are taxable. 27(2). actually. XIV. 1987 3. 137- 87. the revenue.Subject and Title of Bills (Sec. Tax exemptions. however. bill was not followed. 13. sect. Art. or the Expanded Value Added Tax Law (RA 4. non-profit educational institutions: 1. 26(1) property. preacher. Revenue or Tariff Bill not self-executing. ROTC. 1987 Constitution) 2. non- profit educational institution covers income. support of any concessionaires are taxable. supra.

preacher.Basic Rule – state where the subject to be Criteria in Fixing Tax Situs of Subject of taxed has a situs may rightfully levy and collect Taxation the tax a. The OPSF. of the owner. 104.” the constitutional mandate Example: shares of stock may have situs is not violated. Situs of Taxation and Double Taxation certain intangibles are not categorically spelled out.Double Taxation and the Situs Limitation (see later topic) of Taxation. this special fund is legislative jurisdiction exists.Legislative Power to Fix Situs If no constitutional provisions are violated. according to the for purposes of taxation in a state in which they court. and is for the purpose of taxation where neither the taxable only there. in the national taxes which shall be automatically Example: our law fixes the situs of released to them. Constitution the power of the legislative to fix situs is “Local Government units shall have a undoubted. 2. are or leprosarium.Persons – Poll tax may be levied upon •Some Basic Considerations Affecting persons who are residents of the State. and the insurance policy is delivered to the 29(3). et al. remains as a special fund subject to COA are permanently kept regardless of the domicile audit (Osmeňa vs Orbos. purpose for which a special fund was created has been fulfilled or abandoned the balance.. or the state in which he corporation 99886. In a decide case. there is room for applying the mobilia rule. This is Fund created under P. TAX ATION San Beda College of LAW – ALABANG minister. 1993) is organized. 6. 1956 to stabilize the merely a fiction of law and is not allowed to stand prices of imported crude oil. G. Art. or other religious teacher or dignitary as In the case of Manila Electric Co. Even though the fire insurance contract was executed outside the 5.Real Property – is subject to taxation in the State in which it is located whether the A legal situs cannot be given to property owner is a resident or non-resident.R. or government orphanage covering property situated in the Phils.D. 2. It the insurer is benefited thereby.Allotment to Local Governments →Basis: Sec. if any. Situs of Taxation 1.Situs of Taxation literally means the Place 4. Situs of Taxation 1. transferred from the general fund to a “trust liability account. Art. No.” the situs of personal →An example is the Oil Price Stabilization property is the domicile of the owner. the fund and paid out for such purpose only. This is because the Philippines Government must get something in return for the “All money collected or any tax levied protection it gives to the insured property in the for a special purpose shall be treated as a special Phils. (see Sec.” intangible personal property for purposes of the estate and gift taxes. X of the 1987 3. property nor the person is within the protection of the taxing state →Rule of Lex Rei Sitae .Protection b. the Supreme Court ruled that or dignitary is assigned to the armed forces or to insurance premium paid on a fire insurance policy any penal institution. 6. Phils.” According to this maxim. Mar. as determined by law. just share.Taxes levied for Special Purpose (Sec. 31. in the way of taxation of personalty in the place it was held that where under an executive where it has its actual situs and the requisite order of the President. which means ”movable follow the person.The maxim of Mobilia Sequuntur shall be transferred to the general funds of the Personam and Situs of Taxation government. vs Yatco such except when such priest. VI of the 1987 Constitution) insured therein. minister (69 Phil 89). 1997 NIRC) Note: In those cases where the situs for IV.” taxable in the Phils. and by reason of such protection.

1.Same purpose a situs elsewhere. (see Wells Fargo Bank v. Collector v. donee. January.A tax upon depositions in the bank for their deposits and a tax upon the bank for their V. is subject to taxation in several taxing two different states. 1961) 5.Multiple distinct relationship that may arise with respect to intangible personality. This happens due to: a. Double Taxation →Rule of Lex Rei Sitae Two (2) Kinds of Double Taxation 1.Gratuitous Transfer of Property – as a whole and upon the shareholders for their transmission of property from donor to shares. f.Exemption or allowance of deductions or deduction reduces taxable income while credit tax credit for foreign taxes reduces tax liability . principle.Permissive or Indirect Duplicate jurisdiction and even those who are neither Taxation (Double taxation in its broad sense) – residents nor citizens provided the income is This is the opposite of direct double taxation and derived from sources within the taxing state. 4.During the same taxing period 6.A tax upon the same property imposed by intangible. and 1.A tax on the mortgage as personal property when the mortgaged property is also taxed at its full value as real estate. is not legally objectionable. however. Taxation b. of the •Instances of Double Taxation in its Broad occupation is engaged in of the transaction Sense not place. and same subject of taxation. jurisdictions. or from a decedent to his heirs may 3. 4. like income or 6.Variance in the concept of “domicile” for •Means to Reduce the Harsh Effect of tax purposes. and Transaction – power to levy an excise tax depends upon the place where the business is done. 3. is not controlling when it is inconsistent with express provisions of Requisites: statute or when justice demands that it 1. the property is located. said taxed only once.Tax Deduction – subtraction from gross c.Same property is taxed twice should be. or where shares. Although the owner resides in another jurisdiction.Income – properly exacted from persons who are residents or citizens in the taxing 2.Enter into treaties with other states the state where it has actual situs – where it is physically located. Occupation.Tangible Personal property – taxable in b.Same taxing authority Collector 70 PHIL 325.Business. in accordance with the principle same property is taxed twice when it should be “MOBILIA SEQUUNTUR PERSONAM”. Multiplicity of Situs property in which such deposits are invested 5.Tax Credit – an amount subtracted from an protection of the laws of jurisdiction other than individual’s or entity’s tax liability to arrive at the the domicile of the owner total tax liability Remedy – taxation jurisdiction may provide: →A deduction differ from a tax credit in that a a.Same kind or character of tax e. as where the property has in fact 2.The use to which the property may have income in arriving a taxable income been devoted.An excise tax upon certain use of property There is multiplicity of situs when the and a property tax upon the same property.A tax upon a corporation for its capital stock be subject to taxation in the state where the as a whole and upon the shareholders for their transferor was a citizen or resident.Within the same jurisdiction 11622. 2.Obnoxious or Direct Duplicate Taxation d.Intangible Personal Property – situs or (Double taxation in its strict sense) .In the personal property is the domicile of the objectionable or prohibited sense means that the owner.A tax upon a corporation for its capital stock g. Fisher L. TAX ATION San Beda College of LAW – ALABANG c. The absence of one or more of the foregoing requisites of the obnoxious direct tax makes it indirect. all of which may receive the 2.

Exemptions which a tax is originally imposed. endeavors to recoup himself by improving his is something not favored. a. defined – the reduction in are different kinds of tax the price of the taxed object equal to the c. fiscally speaking. Such taxation. b.Evasion tantamount.Tax on manufacturer’s products and capitalized value of future taxes which the another tax on the privilege of storing exportable purchaser expects to be called upon to pay copra in warehouses within a municipality are imposed as first tax is different from the second 3. be avoided units of products at a lower cost.Transformation there are no proceeds. been imposed. should.Principle of Reciprocity which a tax burden finally rests or settles down.Backward Shifting – effected when Government and another by the city for the the burden of tax is transferred from the exercise of occupation or business as the taxes consumer or purchaser through the factors of are not imposed by the same public authority distribution to the factor of production (City of Baguio vs De Leon.Doubts as to whether double taxation has been imposed should be resolved in favor of the 4.Shifting coupled with overstatement of deduction. to the absence 5. and the incidence is the result. Relations among Shifting. Oct. 4. TAX ATION San Beda College of LAW – ALABANG Impact of taxation – is the point at 3. Kinds of Shifting: General Rule: Our Constitution does not a.Tax Avoidance – is the use by the taxpayer 1.Treaties with other States Incidence of Taxation – is the point on 5. and prevented.Exemption 5. 31. Impact and •Constitutionality Incidence of Taxation – the impact is the initial Double Taxation in its stricter sense is phenomenon. payment of a tax.Substantial underdeclaration of income tax Taxation returns of the taxpayer for four consecutive years 1.Capitalization. a license fee is manufacturer or producer upon whom the tax has imposed in the exercise of police power. it has process of production thereby turning out his been held. and • Six Basic Forms of Escape from b.When a Real Estate dealer’s tax is imposed the tax is shifted two or more times either for engaging in the business of leasing real estate forward or backward in addition to Real Estate Tax on the property leased and the tax on the income desired as they 2. settles on the ultimate purchaser or consumer a.Tax Evasion – is the use of the taxpayer of taxpayer. 2. a.The taxpayer may seek relief under the Uniformity Rule or the Equal Protection →Indicia of Fraud in Taxation guarantee. fearing the loss of his market if he should add the tax to the price. whenever possible. Evasion of Taxation is 4.Failure to declare for taxation purposes true Forms of Escape from Taxation and actual income derived from business for two consecutive years. else . it may not be tax is transferred from a factor of production invoked as a defense against the validity of tax through the factors of distribution until it finally laws.Avoidance of taxation.Shifting – Transfer of the burden of a tax by of legally permissible alternative tax rates or the original payer or the one on whom the tax method of assessing taxable property or income was assessed or imposed to another or someone in order to avoid or reduce tax liability. 1968) c. The reason is to avoid injustice and illegal or fraudulent means to defeat or lessen the unfairness.Where.Where a tax is imposed by the National b.Forward Shifting – the burden of prohibit double taxation. the shifting is the intermediate undoubtedly unconstitutional but that in the process.Capitalization →Evasion of the tax takes place only when 3. broader sense is not necessarily so.Transformation – The method whereby the d.Onward Shifting – this occurs when b. hence. 6. aside from the tax. pays the tax and Exception: Double Taxation while not forbidden.

Collector of Public interest would be subserved by the Internal Revenue vs. Acetylene vs CIR.As to basis a.May be based on some ground of public taxpayer has the legal right to decrease the policy. to encourage new amount of what otherwise would be his taxes and necessary industries. but equity can be used as a of the law means which maybe basis for statutory exemption.As to form a.It is generally revocable by the government deemed exempt as they fall outside the scope of unless the exemption is founded on a contract the taxing provision itself which is protected from impairment. (Sec 276. (Asiatic C.Tax Exemption – is a grant of immunity. properties or excises are 2. Feb.. 27. TAX ATION San Beda College of LAW – ALABANG →Tax Avoidance is not punishable by law. 1965) 3.Partial Exemption – One where collection government of its right to collect what otherwise of a part of the tax is dispensed with would be due to it.Kinds of Tax Exemptions the law 1. emanate from Legislation express or implied. or altogether avoid by means which the law 3. At times the law contrary to the intent authorizes condonation of taxes on equitable of the sponsors of the considerations.Total Exemption – Connotes absolute valid cause or consideration. June 29.May be created in a treaty on grounds of permits. 277.Principles Governing the Tax Exemption 4. 49 PHIL 466. 17. (CIR vs 2. 1968) Terminal vs CIR. and in this sense is prejudicial thereto. Local Government tax law but Code) nevertheless do not violate the letter of F.May be based on a contract in which case. 1967) . immunity 3.It implies a waiver on the part of the b. a a. Oct.He who claims exemptions should D. such as. for example. reciprocity or to lessen the rigors of international double or multiple taxation which occur where Distinction between Tax Evasion and there are many taxing jurisdictions.Statutory Exemptions – Those which A.Exemptions from taxation are highly the exemption has a reasonable foundation or disfavored by law. and he who claims an rational basis.Rationale of tax Exemption Petroleum vs Llanes. Manila Jockey Club.Equity.As to extent elements of contracts. Aug. Exemption from Taxation Constitution b. 31. 2.Express Exemption – Whenever expressly B. CIR vs PAL.Implied Exemption – Exist whenever grantee particular persons. (Visayan Cebu 1967. for example. L-19530. as in the Avoidance taxation of income and intangible personal property Tax Evasion vs Tax Avoidance E.Tax exemptions must be strictly construed supposed to receive a full equivalent therefore (Phil. the public represented by the Government is 4.Constitutional Exemptions – Immunities from taxation which originate from the VI. exemption must be able to justify by the clearest grant of organic or statute of law.It is not necessarily discriminatory so long as 1.He who claims an exemption must justify that the legislative intended to exempt him by Bothelo Shipping Corp. to particular persons or corporations from the obligations to pay taxes.Grounds for Tax Exemptions convincingly proved that he is exempt 1. L-21633. words too plain to be mistaken. G. 98 PHIL exemption allowed which the law-making body 670) considers sufficient to offset monetary loss entailed in the grant of the exemption. not a ground for Tax Exemption accomplished by accomplished by There is no tax exemption solely on the breaking the letter legal procedures or ground of equity. such as. but the contract must contain the other essential 3. L-20960. a 2.It is merely a personal privilege of the b. L-19707.Nature of Tax Exemption granted by organic or statute of law 1.

VII. except for the legislative intent. (Lealda Important Point to Consider Electric Co. are construed law itself. 130. charitable.The exemptions. 1999) 8. taxes therein imposed b. No. 1987. Imprescriptibility of Taxes such as tax amnesty and tax condonation) are not presumed and when granted are strictly General Rule: Taxes are imprescriptible construed against the grantee. vs CIR. unsettled tax liabilities should be pertinent only G.It is only when an act Exception: The language of the statute clearly complained of. (Collector vs UST.Exemptions from certain taxes granted under special circumstances to special classes of persons. TAX ATION San Beda College of LAW – ALABANG 5. directly involves the illegal retroactive effect.Constitutional grants of tax exemptions are measure.The exemptions (or equivalent provisions. was rejected by educational functions the Supreme Court. the exceptions to the Justice) law on prescription be strictly construed. much like a tax exemption is by prescription may be allowed to offset never favored or presumed by law (CIR vs CA. 1999) to taxes arising from the same transaction on 10.Deductions for income tax purposes partake of the nature of tax exemptions.The rule of strict construction against the government is not applicable where the language rule in the Constitution against the passage of the of the tax law is plain and there is no doubt as to ex post facto laws cannot be invoked. 108576. L-16428.Tax Exemptions are not presumed. G. 4. Exception: When provided otherwise by the tax 5. which may include legislative demands or express that it shall have a enactment. PHIL934) 2. performing strictly religious.R. saying that it was not convinced of the wisdom and proprietary thereof. and This doctrine. tax statutes are construed nature they are deemed laws of the occupied strictly against the government and liberally territory rather than the occupying enemy. they are Doctrine of Equitable Recoupment strictly construed against the tax payer It provides that a claim for refund barred 9. being a remedial 6. construed in favor of the taxpayer.Interpretation and Construction of Tax 1. legislative intention must be considered.In order to declare a tax transgressing the Statutes due process clause of the Constitution it must be Important Points to Consider: so harsh and oppressive in its retroactive 1.The rule of strict construction of tax which an overpayment is made and exemption should not be applied to organizations underpayment is due. 104 PHIL General Rule: Taxes must only be imposed 1062) prospectively Taxpayer’s Suit . Jan. (Hilado vs Collector.On the interpretation and construction of tax application (Fernandez vs Fernandez. however. 104171.A tax amnesty. . Important Points to Consider VIII.The law on prescription. should be liberally construed to afford self-executing (Opinion No. 100 PHIL 288) 3. Sec. Apr. CA. the penalty imposed.Tax laws not being penal in character. hence.R.Other Doctrines in Taxation and that it may work to tempt both the collecting agency and the taxpayer to delay and neglect Prospectivity of Tax Laws their respective pursuits of legal action within the period set by law. (CIR vs 7.When the law so provides for such liberal limitation in the assessment and collection of construction. 1963) 1. the 3. Feb. No. 99 statutes.In case of doubt. disbursement of public funds derived from taxation that the taxpayer’s suit may be allowed. Of protection as a corollary. 24. however. 30.Tax laws are neither political nor penal in 2. 20.Tax exemption are personal. liberally in favor of the grantee in the following: Example: NIRC provides for statutes of a.

. such and charges. The Commissioner of Customs and his The Government is not estopped by the subordinates with respect to the mistakes or errors of its agents. G. or in extent of tax enforcement duties are collecting any such liability. 1. TAX ATION San Beda College of LAW – ALABANG c. summoning. G. Provincial. Effecting and administering the supervisory and police powers conferred to it by the Tax Code or other Agencies Involved in Tax Administration laws. The head of the appropriate correct application of statutes (E. erroneous collection of national internal revenue application and enforcement of law by taxes on imported goods. 15 April 1988. government office and his Inc. those in favor of charitable institutions. Assessment and Collection of all political subdivisions. therewith. as. decided in its favor by the Court of Tax Appeals and the ordinary courts. 1968). Rodriguez. delegated to the Regional Directors and Revenue District Officers. the interpret provisions of the NIRC and non-application of estoppel to the government other tax laws. et. L-23041. Execution of judgment in all cases 7. Exclusive and original power to 6 Feb 1997 that like other principles of law.The power to tax is presumed to exist. estoppel does not apply to Commissioner with respect to receipt deprive the government of its right to raise of payments of internal revenue taxes defenses even if those defenses are being raised authorized to be made through banks.A. its b. al. Collector of Internal Revenue. national internal revenue taxes. subordinates with respect to the July 31. the preclude the subsequent findings on taxability following are constituted as agents of the (Ibid. Enforcement of all forfeitures. d.R.Exemptions in favor of the Government. TAX ADMINISTRATION AND ENFORCEMENT e. a. City and Municipal Government” assessors and treasures for local and real property taxes.) Bureau of Internal Revenue Exceptions: • Powers and Duties The Court ruled in Commissioner of Internal Revenue vs.) Commissioner: The principle of tax law enforcement is: a. al. It is the correctness of any return or in noteworthy to note that the BIR is determining the liability of any person largely decentralized in that a great for any internal revenue tax. 1969. 66838. public officers do not block the subsequent b. 12 of the 1997 NIRC. June 27. f. L- 19627. fees d. Nowhere is it more true than National Internal Revenue Taxes in the field of taxation (CIR vs. 117982. penalties and fines connected 6. Bureau of Internal Revenue and the examining and taking testimony of Bureau of Customs for internal revenue persons for purposes of ascertaining and customs law enforcement. No. Obtaining information. only for the first time on appeal (CIR vs Procter & Gamble Phil.) collection of energy tax. No. Estoppel does not apply to Under Sec.R.The tax laws are presumed valid. c.. and c. C. Abad. vs.Exemptions to traditional exemptees. Rule of “ No Estoppel Against the 2. the state cannot be estopped by the neglect of its Agents and Deputies for Collection of agents and officers.. et. subject to review by admits of exceptions in the interest of the Secretary of Finance. Banks duly accredited by the Similarly. It is a settled rule of law that in the performance of its governmental functions.

L-24213. is an assessment wherein the tax assessor has no power to act at all Estoppel Against the Taxpayer (Victorias Milling vs.R.R. CTA. The taxpayer did not file any Commissioner to assess will result in the return at all. therefore. to compel him to assess a tax after 2. 98 Phil 290) Nature and Kinds of Assessments  In the absence of any proof of any irregularities in the performance of An assessment is the official action of official duties. The amount ascertained exceeds that which is shown as 3. (Sy Po. as where injustice will c. G. In CIR vs. acceding to the taxpayers request. vs. (Sec. 8 Aug 1988 may be the notice to the effect that the  All presumptions are in favor of tax amount therein stated is due from the assessments (Dayrit vs. 23 Oct 1992). (Bisaya Land  Failure to present proof of error in the Transportation Co. reinvestigation have the effect of placing him in estoppel. No. taxpayer that the payment of the tax or 26 Sept.This result to the taxpayer. the power to assess but errs in the Suyac. postponed the collection Principles Governing Tax Assessments of its liability. 1988) deficiency stated therein. vs CIR. 13 Mar 1968) While the principle of estoppel may not be d. G. assess. an assessment will not an administrative officer determining the be disturbed.Tax is assessed by  A party challenging an appraiser’s the taxpayer himself. 56 [B] ]1] encroachment on executive functions and [2] 1997 NIRC) (Meralco Secuirities Corp.C.This is an assessment made by the tax assessor 2.) requests for the reinvestigation of its tax liabilities such that the government. L- 36181 and L-36748. Mandamus to compel the 3. this is not assessment wherein the assessor has necessarily true in case of the taxpayer. No amount is shown in the investigation if he finds no ground to return or. Self-assessment. No amount of tax due from a taxpayer. CTA. TAX ATION San Beda College of LAW – ALABANG justice and fair play. Cruz. 104151 and 105563. Illegal and Void Assessments. actual facts. CIR. assessed for the following reasons: 1. 10 July 1998) b. Erroneous Assessment – This is an invoked against the government. (Sec. G. 10 Mar 1995) a. L-39910. value is (Caltex vs. 105 Phil 1338) assessment will justify judicial affirmation of said assessments. Vs. Savellano.C. 56 [A] {1]. Mandamus will not lie return. Deficiency Assessment. Assessments are prima facie inasmuch as his previous requests for presumed correct and made in good faith. Assessment is discretionary on the part tax by the taxpayer in his of the Commissioner. 1997 NIRC) 104781. the taxpayer made several exercise of that power (Ibid. The liability test of judicial scrutiny it must be based on is determined and is. In order to stand the investigation is conducted.R. The taxpayer cannot later on be permitted to raise the defense of prescription 1. The amount is finding of value is required to prove reflected in the tax return that is filed not only that the appraised value is by him and the tax is paid at the time erroneous but also what the proper he files his return.  The taxpayer has the duty of proving otherwise (Interprovincial Autobus vs. C. (CIR Classifications: vs C. No. 104 Phil 819. . or it 81446. Assessments should not be based on whereby the correct amount of the tax presumptions no matter how logical the is determined after an examination or presumption might be.

inquiry G. the same may be (Sec. L- 21108. Although Sec. employers. assessments cannot be delegated. (Cu Unjieng. vs. the administrator should be the party to whom the assessment should be sent (Republic vs. 1966). When the inspection of the return is to assess taxes may be delegated. Assessment Based on the Best Evidence the decedent Obtainable Means Employed in the Assessment of Taxes The law authorizes the Commissioner to assess taxes on the basis of the best evidence obtainable in the following cases: A. if a person fails to file a return or other document at the time prescribed by The Tax Code requires that after the return law. dela Rama. etc. Best Evidence Obtainable refers to any statement or declaration has in the meantime data. al. certain exceptions. and in behalf of the Commissioner of 2. clients or patients. 8 June 1993).R. 29 Nov. the exercise of his discretion there is evidence of arbitrariness and grave abuse of discretion as to go beyond The aforesaid rule. 33 of the settled that the power to make final Secretary of Finance. Assessments must be directed to the right himself (Vera vs Cusi L-33115. 1997 NIRC) modified. (City Lumber vs. within three (3) days from facie correct and sufficient for all legal purposes. (Sec gathered by internal revenue officers from 6[A]. the date of such filing. Examination of Returns: Confidentiality Rule 1. Any his knowledge and from such information as he return. Posadas. When inspection is authorized under Internal Revenue is valid. the taxpayer 1979). 71 of the 1997 NIRC vendees and from all other sources. record. with whom provides that tax returns shall constitute public the taxpayer had previous transactions or from . When the production or inspection thereof is authorized by the taxpayer 5. TAX ATION San Beda College of LAW – ALABANG Except: records. it is necessary to know that these are confidential in nature and may not be inquired The BIR Commissioner may be into in unauthorized cases under pain of penalty compelled to assess by mandamus if in of law provided for in Sec 270 of the 1997 NIRC. if for example. and not the heirs of B. into the income tax returns of taxpayers may be authorized: 4. in the result. is subject to statutory authority (Maceda vs. he willfully or otherwise files a false or representative shall examine the same and fraudulent return or other document. However. 8829. however. However. Domingo. When the production of the tax return person to whom a duty is delegated is material evidence in a criminal case cannot lawfully delegate that duty to wherein the Government is interested another. changed or amended. L-18611. An authorized upon the written order of assessment signed by an employee for the President of the Philippines. the upon notice and demand from the Commissioner Commissioner makes or amends the return from or from his duly authorized representative. it is the Finance Regulation No. or is filed. No. papers. the Commissioner or his duly authorized 2. The 3. statement or declaration filed in any office can obtain through testimony or otherwise. being assessed is an estate of a decedent. The tax or the deficiency of the tax so assessed shall be paid When the method is used. 6 [B]. et. The authority vested in the Commissioner 1. 58 Phil 360) 4. provided that no notice for audit or investigation of such return. In the following cases. or any evidence been actually served upon the taxpayer. documents. 1997 NIRC) government offices or agencies. Hence. Macaraig. corporations. assess the correct amount of tax. tenants. 29 June party. 30 Jan 1964). authorized to receive the same shall not be Assessments made as such are deemed prima withdrawn. lessees.

the application for compromise shall not be considered unless and until he waives in .A. In that case. the value of the property shall be inventory-taking of goods of any taxpayer as whichever is the higher of : (1) the fair market a basis for assessment. is not declaring his correct income. of his financial incapacity to pay his tax liability. 6 [C]. the penalties prescribed unless paid within the assessed the corresponding deficiency income time fixed in the demand made by the and specific taxes. value as determined by the Commissioner. on the basis of the preceding year or quarter. That he intends to leave the that a report required by law as basis for the Philippines or remove his property assessment of any internal revenue tax has not therefrom. Notwithstanding any contrary provisions of R. 1997 NIRC) appeal. TAX ATION San Beda College of LAW – ALABANG whom he received any income. of taxpayers. That the taxpayer hides or conceals his any such report is false. Fixing of Real Property Values The Commissioner is authorized at any time For purposes of computing any internal during the taxable year to order the revenue tax. and of a taxpayer terminated at any time when it shall come to his knowledge: 2. The finding made in the surveillance may be used as a basis for Examination of bank deposits enables the assessing the taxes for the other months or Commissioner to assess the correct tax liabilities quarters of the same or different taxable years. That he performs any act tending to A case in point on the use of the best obstruct the proceedings for the evidence obtainable is Sy Po vs CTA. been filed or when there is reason to believe that c. 1405. upheld the legality of the assessment. collection of the tax for the past or there was a demand made by the Commissioner current quarter or year or to render the on the Silver Cup Wine Company owned by same totally or partly ineffective petitioner’s deceased husband Po Bien Seng. That the taxpayer is retiring from under Sec. Inquiry into Bank Deposits observation or surveillance. 204 (A) (@) of the Tax Code by reason business subject to tax. after ascertaining b. Inventory-Taking. his business operation may be placed under F. the immediate payment of the tax for the period so declared terminated and the tax for the The investigators. The unless such proceedings are begun demand was for the taxpayer to submit to the BIR immediately. However. C. or such portion thereof wines seized and the sworn statements of the as may be unpaid. on Commissioner (Sec. a decedent to determine his gross The Commissioner shall declare the tax period estate.A. 6 [d]. 1997 NIRC) confidential under R. bank deposits are (Sec. the Commissioner is authorized to inquire into the bank deposits of. incomplete or erroneous. 1997 NIRC). In this case. so BIR investigators raided the The written decision to terminate the tax factory and seized different brands of alcoholic period shall be accompanied with a request for beverages. property. or (2) the fair market value as shown in the schedule of values of the Provincial and City Assessors for If there is reason to believe that a person real tax purposes (Sec 6 [E]. Said taxes shall be due and factory’s employees on the quantity of raw payable immediately and shall be subject to all materials consumed in the manufacture of liquor. D. any taxpayer who has filed an application for compromise of his tax liability a. 1405 and other general or special laws. sales or receipts for internal revenue tax purposes. Surveillance and Presumptive Gross Sales and Receipts E. The Supreme Court. for examination the factory’s books of accounts and records. Termination of Taxable Period 1. or d.

reason to believe that any such report is false. Conviction in such cases. the to be maintained. This authority has been upheld by the not prove the specific source of courts in a long line of cases. 1405. (Perez vs. he Net Worth Method in Investigation refuses to produce them (Inadequate Records). as in any incomplete or erroneous. the need for evidence of a obtainable whenever a report required by law as likely source of income becomes a basis for the assessment of any national internal prerequisite for a successful revenue tax shall not be forthcoming within the prosecution. Basic Concept and Theory (b) That there is evidence of a possible source or sources of The method is an extension of the basic income to account for the increase accounting principle: assets minus liabilities in net worth or the expenditures equals net worth. 1997 NIRC. rests on proof beyond reasonable doubt. otherwise known as “inventory method of proof where the few records method of income tax verification” is a very of the taxpayer were destroyed. provides However. when the taxpayer for a broad and general investigatory power to is criminally prosecuted for tax assess the proper tax on the best evidence evasion. courts are unanimous in unexplained increase in net worth of a taxpayer is holding that when the tax case is civil presumed to be derived from taxable sources. or the taxpayer has no books. notable among income. 103 assumption that most assets are Phil 1167. . to effective method of determining taxable income require more would be tantamount to and deficiency income tax due from a taxpayer. 1997 NIRC). The theory is that the matter. 43. 6[B]. in civil cases. supra) Moreover. or if he has books. This reasonable on the basic which is the leading case of Perez vs. or when there is always with the Government. for. The increase or decrease in net worth is adjusted by adding all non-deductible items and subtracting therefrom In all leading cases on this non-taxable receipts. TAX ATION San Beda College of LAW – ALABANG writing his privilege under R. holding that skillful concealment is an inevitable barrier to proof. taxpayer is in a position to explain the discrepancy. in nature. CTA.A. CTA. The method is a practical necessity if a derived from a taxable source and fair and efficient system of collecting revenue is that when this is not true. Court. This method of forced to resort to the net worth investigation. criminal case. 43-72. 6[F]. accounts do not clearly reflect his income. The taxpayer’s net worth is (Need for evidence of the sources determined both at the beginning and at the end of income). the assessor need 1997 NIRC. Sec. net worth method and other indirect methods of As stated by the Supreme establishing taxable income is found in Sec. of the same taxable year. The basis of using the Net Worth Method of investigation is Revenue Memorandum The Government may be Circular No. The burden of proof is time fixed by law or regulation. The Legal Source of authority for use of burden of proof is upon the taxpayer the Method to show that his net worth increase The Commissioner’s authority to use the was derived from non-taxable sources. and such waiver shall constitute the authority of the Commissioner to inquire into bank deposits of the taxpayer (a) That the taxpayer's books of (Sec. direct proof of sources of income is not essential-that the government is not required to negate all possible non-taxable sources of the alleged net worth increases. or under Conditions for the use of the method other general or special laws.

that the validity of the result of any 4. 1969) taxable items. They are: This is an essential condition. losses from sales or exchanges refusal or failure to pay taxes and/or other of property between members violations of taxing provisions. sweepstakes winnings. opening net worth. adjustments to avoid the inclusion of what otherwise are non-taxable receipts. inheritance and gift Additions to the tax consist of the: taxes. The Statutory Offenses and Penalties following non-deductibles. as the case may be. compensation for injuries or The courts have uniformly stressed sickness. personal. 5. vs. the 2. (c) That there is a fixed starting point 10. election expenses and other (1) civil penalty. non-taxable capital gains. and the like or opening net worth. living or family Additions to the tax are increments expenses. to the basic tax incident due to the 2. as surcharge. (Proper adjustments to conform to the income tax laws) Enforcement of Forfeitures and Penalties Proper adjustments for non- deductible items must be made. whole superstructure usually fails. 6. Inc. non-taxable taxpayer’s financial condition can items should be deducted therefrom. gifts and bequests the starting point or opening net received. non-deductible contributions. which may either be 25% or . gifts to others. considered to be the cornerstone of a net worth case. CIR. If 1. premiums paid on any life taxpayer’s non-compliance with certain insurance policy. 6. erroneously listed although equitable credit adjustments were already paid. L-21551. TAX ATION San Beda College of LAW – ALABANG 8. will depend entirely upon a correct 5. 7. worth is proven to be wrong. legal requirements. like the taxpayer’s 3. must be added to the increase or decrease in the net worth: 1. net capital loss. inheritance. the taxpayer’s entries in the books deductible expenditures were relating to indebtedness to certain made and correct. a date beginning with a taxable year or prior to it. interest on government securities and the like (d) That the circumstances are such that the method does not reflect Increase in net worth are not the taxpayer’s income with taxable if they are shown not to be the reasonable accuracy and certainty result of unreported income but to be and proper and just additions of the result of the correction of errors in personal expenses and other non. other non-deductible taxes. otherwise known expenses against public policy. Additions to the Tax 1. 30 Sept. fair and creditors. at which time the On the other hand. of the family. income taxes paid. 3. (Fernandez Hermanos given by way of eliminating non. 9. estate.. proceeds of life insurance investigation under this method policies. be affirmatively established with These items are necessary some definiteness.e. 4. i.

show b. Co. interest per annum on the delinquency Republic Cement Corp. 8 May 1996). C. The amount so added to the tax the instances when the imposition of the shall be collected at the same time.A. does not authorize where such return or list is voluntarily the Commissioner to extend the time filed by the taxpayer without notice prescribed for the payment of taxes or to from the CIR or other officers. In one case. and it is accept them without the additional shown that the failure to file it in due time was due to a reasonable cause. (Connel Bros. 6 Aug. 1188794. No. 30. In the case of failure to make and file a Chinese on certain dates. If the withholding agent is the 1. 26 Dec. A Subsequent reversal by the BIR of a liable for the additions to the tax prior ruling relied upon by the taxpayer prescribed (Sec. G. Where a doubt existed on the part of the Bureau as to whether or not R. applicable regulations thereby or a government owned or controlled resulting in delay in the payment of corporation. G. Supreme Court held that the fact that on 60126. 1997 NIRC). 25 Sept. Posadas. L- responsible for the withholding and 15470. General Considerations on the Addition to tax An extension of time to pay taxes granted by the Commissioner does not a. (CIR vs. in 25% surcharge had been waived: the same manner. 5431 abolished the income tax exemptions of corporations (including Surcharge electric power franchise grantees) The payment of the surcharge is except those exempt under Sec. 1975) imposed in the Tax Code.(Philippine Refining Company vs. 1985) account of riots directed against the 4. 247[b]. 1997 NIRC) Government. L-35677. L-26869. 27 mandatory and the Commissioner of (now. vs CIR. 248 and 249 [C]. and charges Cu Unjieng. revenue taxes on time. . (CIR vs. CA. 1983) 3. 10 (Secs. supra). they were return or list within the time prescribed prevented from paying their internal by law. the employee thereof taxes. a mistake in the interpretation of the political subdivisions or instrumentalities. with any authority to waive or dispense with the collection therof.A. vs. fees.. tax apply to all taxes. however. Where the taxpayer in good faith made government or any of its agencies. No. 460) (2) interest either for a deficiency The Commissioner is not vested tax or delinquency as to payment. (Secs. TAX ATION San Beda College of LAW – ALABANG 50 % of the tax depending upon the penalty (Lim Co Chui vs.. Additions to the tax or deficiency excuse payment of the surcharge (CIR vs. 1997 NIRC) Aug. not due to willful neglect. CIR. The following cases. 47 Phil nature of the violation. and as part of the tax. Sec. 1963) remittance of the tax shall be personally 2. The penalty and interest are not (3) other civil penalties or penal but compensatory for the administrative fines such as for failure to concomitant use of the funds by the file certain information returns and taxpayer beyond the date when he is violations committed by withholding supposed to have paid them to the agents. 1997 NIRC) such may also be a ground for dispensing as the 25% surcharge and the 20% with the 25% surcharge. c. the Internal Revenue is not vested with any imposition of the surcharge may be authority to waive or dispense with the dispensed with (Cagayan Electreic collection thereof.R. the Power & Light Co.R. 247 to 252.

249 [A]. VAT Interest is classified into: 4. 1997 NIRC) 1. Administrative 1. or 1. or amount of tax due on the return. Failure of a Withholding Agent to twenty percent (20%) per annum. Civil Action (3) A deficiency tax. Compromise 5. Sources of revenues: (Sec. but .Income tax 2.Seizure by the government of personal property. if the taxes are not 3. Other Administrative any return required to be filed. in order to avoid the before the date prescribed for its payment. Levy of Real Property This kind of interest is imposed in case 3. Failure of a Withholding Agent to Collect and Remit Taxes This is an increment on any unpaid amount of tax. Forfeiture (1) The amount of the tax due on 6. as the 7. (Sec. shall be subject to the interest of 20% per annum. 249[d].Other as imposed and provided by BIR term is defined in this code. or imposition of the surcharge. Interest on Extended Payment voluntarily paid. 249 [B]. Administrative Offenses 1. assessed at the rate of 3. or any 2. from the date prescribed for payment until the amount is fully paid. Imposed when a person required to pay the tax is qualified and elects to pay the tax on KINDS installment under the provisions of the Code. reasonable causes for failure to file the 1997 NIRC) return on time in the form of an affidavit. TAX ATION San Beda College of LAW – ALABANG no surcharge will be added to the fails to pay the tax or any installment thereof. Excise tax 1. Distraint of Personal Property 2. to be followed by its public sale. tangible or intangible. the where the Commissioner has authorized an taxpayer must make a statement extension of time within which to pay a tax or a showing all the facts alleged as deficiency tax or any part thereof. Estate Tax and dono’r tax 3. Failure to File Certain Information Returns Interest 2. Other percentage taxes 5. to enforce the payment of faces. REMEDIES OF THE GOVERNMENT or such higher rate as may be prescribed by rules and regulations. Judicial which no return is required. Deficiency interest 6. which shall be assessed and collected from the date prescribed for its payment until the full • Enumeration of the Remedies payment thereof (Sec. 1997 NIRC) I. Documentary stamp taxes Any deficiency in the tax due. In any part of such amount or installment on or such case. Distraint. Delinquency interest 2. Remedies or (2) The amount of the tax due for II. or such Refund Excess Withholding Tax higher rate as may be prescribed y rules and regulations. Criminal Action surcharge or interest thereon on the due date appearing in • Distraint of Personal Property the notice and demand of the Commissioner. Tax Lien of failure to pay: 4. which should be attached to the return.

at An immediate step for Such immediate step is the dwelling or place of business collection of taxes not necessary. signed by the officer. manager. Requisites: 2. requisite no. 1. tax due and with someone of suitable age where amount due is may not be definite or and discretion definite. Taxpayer is delinquent in the payment of a. 4. Taxpayer must fail to pay delinquent tax at president. 1 is not essential (see b.000. of distraint or or by leaving a list of left either with the owner or person garnishment. c. abatement of the collection of tax as the cost of c. Disposition of proceeds of the sale. b. other responsible officer of the 4. 1. 205 TC). Constructive – The owner is merely place of sale and the articles distrained. taxpayer whether or less delinquent or not There is actual taking or Taxpayer is merely possession of the prohibited from How Actual Distraint Effected property.000.000. same from whom property was taken. Bank Accounts – garnishment same might even be more than P100. association. Actual – There is taking of possession 1. authority for such person to pay In keeping with the provision on the CIR his credits or debts. taxpayer’s personal property. Copy of an account of the property or by service or warrant receipt of the property distrained. treasurer or time required. Constructive Distraint 1. warrant upon taxpayer and upon 3. Time and place of sale. In case of Tangible Property: Effected by having a list Effected by requiring of the distraint property the taxpayer to sign a a. commissioner or his due In excess of Made on the property May be made on the authorized representative P1.00 taxpayer. company or yet prescribed. Procedure: treasurer or responsible officer of the bank. 2. Stocks and other securities tax. Period with in to assess or collect has not issuing corporation. Serve warrant upon taxpayer and president. In case of intangible property. Service of warrant of distraint upon of personal property out of the taxpayer or upon person in possession of taxpayer into that of the government. Posting of notice is not less than two Taxpayer is also diverted of the power places in the municipality or city and of control over the property notice to the taxpayer specifying time and b. TAX ATION San Beda College of LAW – ALABANG a. RDO P1. Where amount involved does not exceed 2. it is being questioned. Warrant shall be sufficient P100 (Sec. manager. prohibited from disposing of his 3. In case of intangible property: 1. Statement of the sum demanded. Serving a copy of the 2. Debts and credits Sec. disposing of his property. Who may effect distraint Amount Involved Actual vs. . Sale at public auction to highest bidder personal property. 206 TC) 1. Leaving a copy of the warrant with the person owing the debts When remedy not available: or having in his possession such credits or his agent.000. Subsequent demand for its payment. • In case of constructive distraint.00 only of a delinquent property of any 2.

enforceable through out the Philippines a. The taxpayer. In the presence of two witnesses of levy is made. Possession pending redemption – owner simply seizes so much of the deposit with not deprived of possession out having to know how much the deposits d. Both cannot be availed of where amount national government. Both are summary remedies for collection the CIR or his deputy may purchase the of taxes. Price: Amount of taxes. refuses to sign: . 1. leave 3. When the amount of the bid for the property under distraint is not equal to the Distraint and Levy compared amount of the tax or is very much less than the actual market value of articles. a. Obligate him to preserve the same properties. Advertisement of the time and place of Grounds of Constructive Distraint sale. Taxpayer is retiring from any business 6. 5. Officer shall write upon the certificate a property distrained. 3. 5. Taxpayer acts tending to obstruct a. sufficient age and discretion. Levy – Act of seizure of real property in order to How constructive Distraint Effected enforce the payment of taxes. Philippines. violating the confidential nature of bank . the taxes are not voluntarily to paid.Cannot be extended by the courts. him b. Procedure: c. Where Taxpayer or person in possession c. Require taxpayer or person in possession after seizure. If at any time prior to the consummation on said purchase price at 15% per annum of the sale. and property is located. The property may be sold at public sale. Taxpayer is intending to leave the owner. accounts for no inquiry is made. Redemption of property sold or forfeited 4. Bank accounts may be distrained with out sale or declaration of forfeiture. BIR c. the redemption. The excess shall be turned over to 2. subject to tax. . Service of written notice to: a copy in the premises where a. a. Bank shall turn over to CIR so much of the bank accounts as • Levy of Real Property may be sufficient. Prohibit him from disposing the property from disposing the 1. Amount of tax and 2. or 3. Time to redeem: one year from date of Note: sale or forfeiture . penalties and are or where the money or any part of it interest thereon from date of delinquency came from. b. goods distrained shall be restored to the owner. b. if 1. description of the property upon which b. Taxpayer hides or conceals his property. RD where property is located.Begins from registration of the deed of 1. Sale at public auction to highest bidder. International Revenue officer shall prepare property in any manner. with out a duly authenticated certificate showing the authority of the CIR. involved is not more than P100. Officer shall prepare list of the 2. Penalty due. Person entitled: Taxpayer or anyone for collection proceedings. Sign a receipt covering property • The requisites are the same as that of distrained distraint. TAX ATION San Beda College of LAW – ALABANG 2. distrained property on behalf of the 2. 1. all proper charges are paid to from date of purchase to date of the officer conducting the same. 4. Name of taxpayer b. Disposition of proceeds of sale. to the date of sale together with interest 2. To remove his property there from.

1. provided Levy – forfeiture by government Enforcement of Tax Lien vs. in distraint the property seized must be that taxes. 1. Taxpayer must have a tax liability. demonstrates a clear inability to pay the 3. Levy – Taxpayer can redeem properties regardless of its owner. Destruction of the property subject to the than the prescribed minimum lien. Duration: 1. to transfer the was served but from the time the tax was title to the property with out of an order due and demandable. Distraint authorized where there is no bidder or the A tax lien is distinguished from disttraint in highest bid is not sufficient to pay the that.000. Attaches not only from time the warrant declaration of forfeiture. the taxpayer is still liable. in default of the payment of taxes. by collected.000. This is superior to judgment claim of 1. Prescription of the right of the government cases. Philippines when a person liable to pay a tax neglects or fails to do so upon When taxes may be compromised: demand. When basic tax involved exceeds office of register of Deeds. levied upon and sold/forfeited to the government. TAX ATION San Beda College of LAW – ALABANG 3. Payment or remission of the tax b. Those already filed in court 4. Upon all property and rights to property 3. • Enforcement of Tax Lien Requisites: Tax Lien: A legal claim or charge on property. It is the duty of the Register of Deeds private individuals or parties concerned upon registration of the 2. 2. Effectivity against third persons: b. rates. Only when notice of such lien is filed by the CIR in the Register of Deeds Limitations: concerned.00 or judgment creditor. The financial position of the taxpayer and costs. purchases or P1. Distraint – forfeiture by government. of the taxpayer. with interests. Minimum compromise rate: Extinguishment of Tax Lien a. 1 and 2. penalties 2. avoid litigation or put an end to one already commenced. to assess or collect. from a competent court 2. 2. . a. Distraint – Taxpayer no given the right of property in respect to the tax is assessed. Criminal violations. Note: Note: 1. of an amount to be paid by taxpayer. Distraint – personal property  In case Nos. There must be an offer by taxpayer or CIR. penalties and costs. established by law as a security 2. Failure to file notice of such lien in the a. There must be acceptance of the offer in A lien in favor of the government of the settlement of the original claim. real or personal. except: belonging to the taxpayer. including all expenses. b. is Compromise: A contract whereby the parties. Under nos. Where settlement offered is less 4. Nature: 3. 40% of basic tax assessed – other 2. either 1. although it need not be the 5. Extent: assessed tax. reciprocal concessions. A reasonable doubt as to the validity if the Exists from time assessment is made by claim against the taxpayer exists. 10% of the basic tax assessed – in case of financial incapacity. Subject to approval of Evaluation Board 3. Tax redemption lien is directed to the property subject to the tax. 1. there is no Levy – real property more tax liability. the CIR until paid. Those involving fraud. The remedy of distraint or levy may be • Compromise repeated if necessary until the full amount. not 4. 3 and 4.

a return of the taxes and penalties. (wine. manufactured oils. In case of personal property – by the Revenue Collection Officer seizure and sale or destruction of e. enforce the compromise. cigars regional offices involving basic taxes of P 500 K or 4. or about the illicit production 2. b. Personal entitled – taxpayer or exposed for sale. plus the proceeding is duly made. cigarettes. Note: judgment of condemnation and The Register of Deeds is duty sale in a legal action or proceeding. liquors compromise the assessment issued by the 3. It is pain in lieu of a criminal prosecution. If highest bid is for an amount b. Where to be sole: also having the property transferred to another a. Effect of failure to redeem – the specific forfeited property. miscellaneous products. year from forfeiture penalties and costs. TAX ATION San Beda College of LAW – ALABANG injurious to the public health or Delegation of Power to Compromise prejudicial to the enforcement of the law: (at least 20 days after GR: The power to compromise or abate shall not seizure) be delegated by the commissioner. When available: 6. manufactured products of tobacco Remedy in case of failure to comply: 5. notice of not less than 20 days. It is a certain amount of money which the exercise tax. To be destroyed – by order of the • Other Administrative Remedies CIR when the sale for consumption or use of the following would be . products. necessity of an order from a competent 4. labels and tags. Public sale: provided. In case of real property – by a 7. To whom paid – Commissioner or a. 2. When forfeited property to be destroyed court. All other articles subject to 1. Private sale: provided. or sold: a. All apparatus used in or 1. Amount to be paid – full amount of . there is with out the consent of the owner and wrongdoer. tags. 1. How enforced: d. forfeiture shall become absolute.With in two days thereafter. Dies for printing or making IR stamps. Since it is voluntary in character. interest and cost of the sale 3. and other less. distilled spirits E: The Regional Evaluation Board may 2. Forfeiture: Implies a divestiture of property with in imitation of or purport to out compensation. 3.  Enforcement of forfeiture 2. b. Right of Redemption: a. the same non-essential items a may be collected only if the taxpayer is petroleum products) willing to pay them. in consequence of a default or be lawful stamps. taxpayer pays to compromise a tax automobile. the original demand. Regard it as rescinded and insists upon of such articles. 2. bound to transfer the title of property civil or criminal. No bidder for the real property a. b. manufactured or removed in violation of the Tax Code. playing cards The CIR may either: 6. Time to redeem – with in one (1) insufficient to pay the taxes. Includes the idea of not only losing but 5. as the case may forfeited to the government with our require. mineral violation. labels or offense. Finance. To be sold or destroyed – depends upon the discretion of CIR Compromise Penalty 1. anyone for him b. c. Effect: Transfer the title to the specific the approval of the Secretary of thing from the owner to the government. it is with 1.

after decision on taxes. b. the judgment of which shall not his tax liability shall have only impose the penalty but also order become final and executory. Dispute same by filing protest with 6. Brought in the name of the issued. Inquiring into bank deposit on past of taxpayers to evade payment. collected or P1. 3. or enforcement of a fine. Making arrest.000. government to collect internal revenue 5. provided there is a prima must be preserved. 8. search and seizure taxes in regular courts (RTC or MTCs. Deportation in case of aliens – on CIR the following grounds b. generally facie showing of willful attempt to evade. or receipt: a. business or occupation or Civil and Criminal Actions: to practice a profession can be 1. Must be with the approval of the surcharges or fees recovered CIR. Exporter’s bond by reasons of financial d.00 per penalty or forfeiture. become final and executory for failure or committed with in the view of the taxpayer to: Internal Revenue Officer or EE. Limited to violations of any depending on the amount involved) penal law or regulation When assessment made has administered by the BIR. Knowingly and fraudulently CTA evades payment of IR taxes. does not arise from 11. Civil Action 4. Requiring proof of filing income tax returns • Judicial Remedies Before a license to engage in trade. Requiring filing of bonds – in the a. 7. in case of action. A. Appeal adverse decision of CIR to a. Any taxpayer who filed b. Giving reward to informers – Sum 2. TAX ATION San Beda College of LAW – ALABANG 1. whichever is lower. case. Manufacturer’s and incapacity his tax liability. A deceased person to following instances: determine gross estate a. 2. a. Inventory – Taking of stock-in-trade action. Use of National Tax Register Does not exonerate taxpayer his civil 9. Government of the Philippines. for recovery and/or fine or penalty imposed and of taxes. independent of any attempt 13. 000. Estate and donor’s tax b. Inspection of books An assessment of a tax deficiency Books of accounts and other is not necessary to a criminal prosecution accounting records of taxpayer for tax evasion. Registration of Taxpayers. and making surveillance. Reason to believe that records do not correctly Will not operate to extinguish taxpayer’s reflect declaration in return. 3. Conducted by Legal Officer of BIR equivalent to 10% of revenues. payment of taxes. Excise taxes application for compromise c. Prescribing real property values imposed by statute. Willfully refuses to pay such B. importer’s bond 14. Imposition of surcharge and Actions instituted by the interest. criminal liability since the duty to pay the tax is 12. Obtaining information on tax liability to pay the tax due. Person failed to issue Effect of Satisfaction of Tax Liability on Criminal receipts and invoices Liability b. Reason: Tax is an obligation. accounts of . Prescribing presumptive gross sales a criminal act. the liability of any person government may still collect the tax in the same 10. Criminal Action tax and its accessory A direct mode of collection of penalties. Thus. within three years after date the tax return was due or was filed Effect of Acquittal on Tax Liability: whichever is later.

1974) amended return (CIR vs. The fraud contemplated by law is prescribed by law for the filing thereof actual and not constructive. Prescription of Government’s Right to Deceitful with the aim of evading the Assess Taxes: deviation from truth of A. 29. 1966) • A return filed before the last day b. 4 SCRA 872) become final and executory. General Rule: correct tax due. Commissioner 21. 222 ic) the grounds for the extinction of criminal action. CA April 30. . The filing thereof is intended and It merely implies a I. Internal Revenue Taxes shall be fact whether intentional. • Instances/Circumstances negating fraud: June 29. Commissioner. Republic the taxpayer. 30. Dec. ( CIR vs. False return Taxes. assessment. Collector.within ten (10) • PRESCRIPTIVE PERIODS/STATUTE OF years after the date of discovery of the LIMITATION omission. It shall be considered as filed on such last must amount to intentional day. • Fraud may be established by the following the law does not require that the : (Badges of Fraud) demand/notice be received within the a. 1964) Note: The satisfaction of civil liability is not one of B. statue of from the discovery of falsity or fraud. 1. c. (Aznar shall commence from the filing of the case. in case it is filed a. Intentional and substantial • An affidavit executed by a revenue office overstatement of deductions of indicating the tax liabilities of a taxpayer exemption and attached to a criminal complaint for c. Kei & Co. Sept. Recurrence of the foregoing tax evasion. A fraud assessment which has 1965. assessed within three (3) years after the last day prescribed by law for the filing of the return or from the day the • Nature of Fraud: return was filed. When the Commissioner fails • A transcript sheets are not returns. impute fraud in the assessment because they do not contain information notice/demand for payment. TAX ATION San Beda College of LAW – ALABANG This is true in case the criminal action is necessary and required to permit the based on the act to taxpayer of filing a false and computation and assessment of taxes fraudulent tax return and failure to pay the tax. A mere mistake the government right to assess the tax is not a fraudulent intent. circumstances consisting it must be (Section 203 of the Tax Code) alleged and proved to exist by clear & convincing evidence Note: (Republic vs. Fraud is never presumed and the beyond the period prescribed thereof. vs. However. avoiding the tax. wrongdoing with the sole object of • In case a return is substantially amended. SCRA 17. the latter is deemed made taken cognizance of in the civil or when notice to this effect is released. cannot be deemed an circumstances. limitation is primarily designed to protect the rights of the taxpayer’s against unreasonable Note: investigation of the taxing authority with respect • Fraudulent return to assessment and collection of Internal Revenue vs. (Basilan Estates. May 20. understatement of tax liability of vs. 23. Where no return was filed . Where a return was filed but the same was Purpose: false or fraudulent – within ten (10) years For purposes of Taxation. (Sinforo Alca vs. Keir. Pascoi Realty Corp. Intentional and substantial prescriptive period. 222 paragraph (a)) correct address of the taxpayer. the • In computing the prescriptive period for fact of fraud shall be judicially assessment. (Sec. Aug. 1999) a.) Exceptions: (Sec. Phoenix. vs. 2. Inc. 1987) b. criminal action for the collection mailed or sent by the Commissioner to the thereof.

. Exceptions: • Limitations: 1. Ret. A. less than that granted by law. tax is imprescriptible. When the Commissioner failed to (Carmen vs. Waiver of statute of limitations – any internal revenue tax. Where the law does not provide for any agreed upon. which has C) Imprescriptible Assessments: been assessed within the period 1. the ordinary 5-year period (now Note: 3 years) would apply (Rep. vs. “not 1.. Where no assessment was made 3. unless there distraint or levy or by proceeding in is a sufficient evidence shaving court within 5 years following the fraudulent intent. 3. Where no return is required by law. 21. When the taxpayer omits to file a lapse of the prescriptive period. Where an assessment was made – sure” as to the real amount of the Any internal revenue tax which has taxpayer’s net income. whichever is later. documentary stamp tax. 1962) a. upon in writing before the 2. may be collected be particular period of assessment. 2. When the Commissioner raised the question of fraud only for the first II. Prescription of Government’s Right to time in his memorandum which Collect Taxes was filed the CTA after he had rested his case. A mere understatement of income limitation may be collected by does not prove fraud. been assessed within the period of e. In such case. Nov. before the expiration of the same is not fraudulent or false. Note: B. without assessment. at anytime c. was filed. General Rule: d. Where the BIR itself appeared. .the three (3) year period of limitation have tax should be collected within 3 agree in writing to the extension of said years after the return was due or period. The waiver to be valid must be executed by the parties before the 2. Where a fraudulent/false return a. return – a court proceeding for the b. of the period previously agreed upon. without assessment. Note: 4. TAX ATION San Beda College of LAW – ALABANG b. Where the commissioner and the and a return was filed and the taxpayer. c. the expiration of 5-year period. Ayala Securities Corp. A waiver is inefficient I it is executed collection of such tax may be filed beyond the original three year. The commissioner can not valid agree within 10 years after the discovery to reduce the prescriptive period to of the omission. 3. Assessment of compensating and the case is appealed to the CTA. March • Limitations: 31. where the Note: bases of which is not required by law to be • Distinction reported in a return such as excise taxes. The agreement extending the period of with intent to evade taxes was filed prescription should be in writing and a proceeding in court for the duly signed by the taxpayer and the collection of the tax may be filed commissioner. allege in his answer to the 1980) taxpayer’s petition for review when 4. The agreement to extend the same within ten years after the discovery should be mode before the expiration of the falsity or fraud. Assessment of unpaid taxes. date of assessment. the tax distinct or levy of by a proceeding sought to be assessed becomes in court within the period agreed imprescriptible. at anytime b. appears that there was an assessment. Where there is a written waiver or • The 10-year prescriptive period for renunciation of the original 3-year collector thru action does not apply if it limitation signed by the taxpayer.

TAX ATION San Beda College of LAW – ALABANG a. (RTC) shall be suspended for the period. If not known. Where assessment of the commissioner is protected & appealed a. of be valid. Where a tax obligation is secured court. During which the to the CTA – the collection begin when Commissioner is prohibited the government file its answer to from making the assessment taxpayer’s petition for review. The running of statute of limitations levy procedure. writing to its assessment after such time. When a proceeding is instituted from the last assessment. Interruption of the Prescriptive Period between the commission and the taxpayer – the prescriptive period 1. (Rep. forfeit a bond and enforce such b. 7. b. or beginning distraint/levy or . the tax may be assessed prior 1. Day of the commission of the violation. by a surety bond – the government . if know. may be raised: a. Collection by summary remedies – It is to the expiration of the period agreed effected by summary methods when upon. lower court but pending decision on appeal. the government avail of distraint and 2. Rules of Prescription In Criminal Cases Prescription. Agreement to extend period of vs. It must be made before the period of prescription A. b. vs. from the time of 4. Rule: All violations of any provision of the Expiration of the period agreed upon to tax code shall prescribe after five (5) an agreement waiving the defense years. Agreement renouncing III. both the commissioner C. Collection by judicial action – The beginning of distraint/levy or a collection begins by filing the proceeding in court for collection complaint with the proper court. March 30. on making an assessment and the 2. 1963) b. it is bailed permanently. When the offender is absent from the Philippines. Note: Prescription is till binding to the • When it should commence? : The five (5) year prescriptive period shall begin to run Taxpayer although made beyond from the such a. Where the action is brought to enforce a compromise entered into IV. time prescribed for the assessment of the tax.If can not be raised for the first time on may proceed thru a court action to appeal. taxpayer – the prescriptive period • When it is interrupted: for collection should be counted a. against the guilty person Lopez. In criminal case – It can be raised even contractual obligation within a if the case has been decided by the period of ten years. 3. In civil case – If not raised in the lower 6. • When it should run again : When the proceeding is dismissed for reason not 5. the period for collection is counted • When does the defense of prescription from the last revised assessment. Where before the expiration of the is ten years. Where the government makes discovery and the institution of judicial another assessment on the basis of proceeding for its investigation and reinvestigation requested by the punishment. Where the assessment is revised Constituting because of an amended return – jeopardy. When tax is deemed collected for and the taxpayer have consented in purposes of the prescriptive period. prescriptive period.

e. Philippines. Filing of claim for tax refund. e. otherwise it is b. When the taxpayer requests deemed waived. taxpayer b. When the taxpayer is out of Judicial the Philippines. from filing an ordinary • Reason: No requirement for assessment action to collect the tax. The assessment does not suspend the criminal commissioner is prevented action. A mere request for 4. Filing of claim for tax credit located. The law on prescription remedial measure proof that its collection may should be interpreted liberally in order to jeopardizes the government protect the taxpayer. When the warrant of distraint reconsideration or or levy is duly served upon reinvestigation (Administrative any of the following person: Protest). with sufficient discretion and and no property could be b. of the tax before the criminal action may  When CTA suspends the be instituted. In the event that the collection of the tax the running of the prescriptive has already prescribed. and as defense it must be raised reasonably otherwise it is deemed Note: waived. Entering into compromise 2. When the taxpayer cannot be located in the address given TAXPAYER’S REMEDIES by him in the return. jurisdictional. c. 1. Note: Administrative If the taxpayer informs the Commissioner of any change in (1) Before Payment address the statute will not be suspended. The prescriptive provided in the tax code reinvestigation without any over ride the statute of non-claims in the action or the part of the settlement of the deceased’s estate. for reinvestigation which is 3. a. (1) Civil action 3. Commissioner does not interrupt 5.g. TAX ATION San Beda College of LAW – ALABANG a proceeding in court and for the offender is absent from the 60 days thereafter. and /or the taxpayer. Filing of a petition or request for d. The question of prescription is not granted by commissioner. Appeal to the Court of Tax Appeals . The defense of prescription must be raised by the taxpayer on time. cannot invoke the principle of Equitable The request must not be a recumbent by setting.off the prescribed mere pro-former.  Filing a petition for review in Note: the CTA from the decision of • A petition for reconsideration of a tax the Commissioner. In criminal cases for violation of tax code – the period shall not run when a. the government period. 2. Substantial tax against a tax refused to which the issues must be raised. taxpayer is entitled. collection of tax liability of the taxpayer pursuant to Nota Bene: Section 11 of RA 1125 upon 1. his authorized representative (2) After Payment 3. Member of his household a.

inclusive of the newly-discovered or additional evidence that a applicable penalties (3. and period was determined to have carried c. of the letter of demand showing the following: (a) Assessment Notice shall not be required in the his name. 12-99 dated Sept. traded or Request for reconsideration. shall be considered in default. 6.4. he or both. Procedure otherwise. Action for Damages over and automatically applied the same amount claimed against the (2) Criminal Action estimated tax liabilities for the taxable quarter or quarters of the succeeding a. or erring Bureau of Internal d. TAX ATION San Beda College of LAW – ALABANG b. capital ADMINISTRATIVE PROTEST equipment. vehicles. rules and regulations. and (d) date of receipt a. Revenue Regulations No. 6.2. in which case. It may involve a question of fact or law (15) days from the date of receipt of the PAN. When the finding for the deficiency tax thereof. such as. or Taxpayer or his duly authorized representative c. and spare parts. has been sold. the formal letter of demand and assessment notice shall be void.a plea for the transferred to non-exempt persons.1. When a discrepancy has been Disputed Assessment determined between the tax withheld and the amount actually remitted by the withholding agent. the computation of the tax as appearing on the face of the return. re-evaluation of an assessment on the basis of existing records without need of additional If the taxpayer fails to respond within fifteen evidence. may be. Action to contest forfeiture of creditable withholding tax for a taxable chattel. or employees. Issuance of a Formal Letter of Demand and Assessment Notice issued by the Commissioner Issuance of Assessment or his duly authorized representative. (c) designation and following cases: authority to act for and in behalf of the taxpayer.a plea for shall be caused to be issued. 12-99 is the result of mathematical error in dated Sept. (3. reinvestigation. e. A valid PAN shall be in writing stating the law and facts on which the assessment is made. but not limited to. as the case registered mail or personal delivery. a formal letter of demand and assessment notice Request for reinvestigation. It may also involve question of fact or law or both. calling for payment reinvestigation of an assessment on the basis of of the taxpayer’s tax liability. 228 of the 1997 NIRC) If sent by personal delivery. (b) signature. When the excise tax due on excisable Revenue officials and articles has not been paid. Revenue Regulations taxpayer intends to present in the No.1. or b. the taxpayer or his duly authorized representative shall acknowledge receipt thereof in the duplicate copy Under Sec. if acknowledged or received by a person other than the taxpayer himself. Filing of complaint against taxable year. 1999). 1999). Shall state the facts. 228 of the 1997 NIRC a Pre. machineries. (Sec. or jurisprudence on which the assessment is based. When an article locally purchased or imported by an exempt person. Issuance of written a Preliminary Assessment Notice (PAN) after review and evaluation by the Formal Letter of Demand and Assessment Assessment Division or by the Commissioner or Notice shall be sent to the taxpayer only by his duly authorized representative. When a taxpayer who opted to claim a may administratively protest against a Formal refund or tax credit of excess . the laws.

f. and Assessment Notice Number. Date of receipt of assessment notice or Scope of Claims letter of demand. Nature of request whether reinvestigation or reconsideration specifying newly discovered evidence Legal Principle of quasi-contracts or that he intends to present it it is a solutio indebiti (see Art. the from receipt of the assessment notice. Name of the taxpayer and address for the immediate past three taxable years. Amounts and kind/s of tax involved. if the taxpayer fails to file an administrative protest within the reglementary 30-day Failure of taxpayer to state the facts. For this purpose. 27. Itemized statement of the findings to which the taxpayer agrees. upon the filing of the protest. taxpayer only disputes/protests validity of some If the taxpayer fails to comply with this of the issues requirement. applicable law. the protest shall not be deemed validly filed unless payment of If the protest is denied in whole or part. rules and regulations. Documentary evidence as it may deem necessary and relevant to support its protest to be submitted within sixty Several issues in the assessment notice but (60) days from the filing of the protest.  No action shall be taken on the disputed Effect of taxpayer’s failure to file an issues until payment of deficiency taxes administrative protest or to appeal BIR’s decision on undisputed issues to the CTA  Prescriptive period for assessment or collection of taxes on disputed issues shall be suspended. jurisprudence on which his protest is based shall  After the lapse of the 30-day period. and decision shall become final and executory i. the render his protest void and without force and assessment can no longer be disputed effect. reinvestigation of an assessment shall be  Collection letter to be issued calling for accompanied by a waiver of the Statute of the payment of deficiency tax. including Limitations in favor of the Government. the assessment shall become final (Revenue Regulation No. the taxpayer g.  Assessed already tax collectible. or is the agreed portion of the tax is paid not acted upon within one hundred eighty (180) first. 2142 & 2154 of the Civil request for reinvestigation. which the Commissioner may credit or refund taxes: . Fireman’s assessment. Contents: a. 1985. as a Under Sec. receipt of the said decision. applicable surcharge and/or interest.  As provided in Sec. Code).  Taxpayer required to pay the deficiency 12-85. Legal Basis b.) tax or taxes attributable to the undisputed A request for reconsideration or issues. if any. Statement of facts and/or law in one hundred (180)-day period: otherwise. days from submission of documents. 228 of the Tax Code. the support of the protest. dated Nov. Itemized schedule of the adjustments adversely affected by the decision or inaction with which the taxpayer does not may appeal to the CTA within 30 days from agree. or from lapse of the h. Taxable periods covered by the principle of solutio indebiti (CIR vs. or assessment becomes final. Fund Insurance Co) d. 204 and 209 of the 1997 NIRC basis for computing the tax due. e. The Government is within the scope of the c. TAX ATION San Beda College of LAW – ALABANG Letter of Demand and Assessment notice within amount should be paid immediately thirty (30) days from date of receipt thereof. either administratively or judicially through an appeal in the CTA.

categorical language. interpretation of the taxpayer’s charter 28. 819) . Written claim for refund or tax credit the tax memo covering the filed by the taxpayer with the Commissioner amount determined to be reimbursable  This requirement is mandatory. (Sec. L-16626. and which therefore. vs. Inc. independent single act of voluntary  Suspension of the 2-yaer prescriptive payment of a tax believed to be due. (CIR vs. CTA Case No. Li Yao. 107 Phil 232). therefore. Nov.  Refers not only to the “administrative” Necessity of Proof for Refund Claims claim that the taxpayer should file within 2 years from date of payments with the BIR. period may be had when: collectible and accepted by the (1) there is a pending litigation government. TAX ATION San Beda College of LAW – ALABANG is made. vs. 1997 (a) Erroneously or illegally assessed or NIRC). 1962). 229. commenced in court within two (2) years from date of payment of tax or penalty (b) Penalties imposed without authority regardless of any supervening event. Categorical demand for reimbursement fact. 29. which can be applied  Reasons: (a) to afford the commissioner after proper an opportunity to correct the action of verification. Collector of the face of the return upon which payment Internal Revenue 103 Phil. 1963). (c) Any sum alleged to have been 204 (c) & 229 1997 NIRC) excessive or in any manner wrongfully collected The value of internal revenue stamps  Requirement a condition precedent and when they are returned in good condition by the non-compliance therewith bars recovery purchaser may also be redeemed. Dec. CIR 87 Phil 96). Claim for refund or tax credit must be A tax is illegally collected if filed or the suit proceeding thereof must be payments are made under duress. such notice (2) the commissioner in that litigated should then be borne in mind in case agreed to abide by the decision of estimating the revenue available for the Supreme Court as to the collection expenditure (Bermejo vs. (Phil. but also the judicial claim or the action for  Refund claim partakes of the nature of an refund the taxpayer should commence exemption which cannot be allowed unless with the CTA (see Gibbs vs. and TAX REFUND TAX CREDIT Statutory Requirements for Refund Claims There is actually a The government reimbursement of issues a tax credit a. Acetylene Co. 1966).. Commissioner. Oct.. Collector of granted in the most explicit and Internal Revenue. collected internal revenue taxes Taxpayer pays under the mistake of b. Johnson and  Taxpayer may file an action for refund in Sons the CTA even before the Commissioner  Failure to discharge burden of giving proof decides his pending claim in the BIR is fatal to claim (Commissioner of Internal Revenue vs. of taxes relative thereto (Panay  Except: Tax credit or tax refund where on Electric Co. L-11875. in relation to the disputed tax. 1321. Inc. as for instance in a case where he is not aware of the existing exemption in his favor at the time payments were made c. against subordinate officer and (b) to notify the any sum that may be government that the taxes sought to be due and collectible refunded are under form the taxpayer  question and that. 7. become between the two parties (government part of the state moneys subject to and taxpayer) as to the proper tax to expenditure and perhaps already spent or be paid and of the proper appropriated (CIR vs.. such payment appears clearly to have been erroneous.  It must be shown that payment was an Palanca Jr. (Sec.

taxpayer may appeal the same within thirty (30) days after receipt. No. L-16683. otherwise. American Life Ins. May 29..A. 15. No. 29. Jan. Jr. But where Palanca. supra) an appeal. the decision payment of the last installment (CIR vs becomes final and executory. Tax assessed has not been paid. Jan.. Suit or proceeding in the CTA is made 1. (CIR vs. Taxes payable in installment (Sec. but from the end of the taxable  Motion for reconsideration suspends the year (Gibbs vs. Must advance new grounds not previously alleged to toll the reglementary period. In case of Income Tax withheld on special circumstances. 18 SCRA 861) to the BIR. TAX ATION San Beda College of LAW – ALABANG  Even if the 2-year period has lapsed the Victorias Milling Corp. R. 1125)  Appeal equivalent to a judicial action 2-year period is counted form the  In the absence of appeal. d. Interest on Tax Refund b. a. suspended for reasons of equity and other 2. he could not appeal the same to the CTA within 30 Withholding Taxes days from notice. Refund or credit after such time earn following: interest at the rate of 6% per annum. it would be merely pro VAT Registered Person whose sales are zero-rated forma. starting after the lapse of the 3-month period to the date the reund or credit is made ( Sec 79 (c) (2) 1997 Corporations NIRC) 2-year prescriptive period for overpaid quarterly income tax is counted not from the date the corporation files its quarterly APPEAL to the CTA income tax return.R. disputed assessment or claim for tax refund or credit. The Commissioner acted with within 30 days from receipt of the patent arbitrariness decision Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions (CIR vs. Final decision or ruling has been unless: rendered on such petition. 11. Hence. 112 (A) Assessment 1997 NIRC).R. pay interest on taxes refunded to the taxpayer c. but from the date the final adjusted return is filed after the taxable year (Commissioner of Internal  Adverse decision or ruling rendered by the Revenue vs. the wages of employees. Inc. Effect of Failure to Appeal Assessment . it could not Prescriptive period counted not from become final and executory. (Republic vs. Phil. the date the tax is withheld and remitted De la Rama.. 2-year period computed from the end of the taxable quarter when the sales Requirements for Appeal in Disputed transactions were made (Sec. 105208. Inc. No. 31. Commissioner of Internal running of the 30 –day period of perfecting Revenue. (Roman Catholic Archbishop vs. Nov. G. L-19607. same is not jurisdictional and may be 1966). or effectively zero-rated Coll. 1995). Co.. 1962). Commissioner of Internal Revenue in 83736. Any excess of the taxes withheld over the  2-year prescriptive period for filing of tax tax due from the taxpayer shall be returned or refund or credit claim computed from date credited within 3 months from the fifteenth (15th) of payment of tax of penalty except in the day of April. TMX Sales. supra) the taxpayer adversely affected has not received the decision or ruling. 1992). G. Taxpayer has filed with the Commissioner of Internal Revenue a petition for the reconsideration or The Government cannot be required to cancellation of the assessment..

(see Secs. OFFICIALS 8) allowing or conspiring or colluding with another to allow the unauthorized withdrawal or recall of any return or Taxpayer may file an action for damages statement after the same has been against any internal revenue officer by reason of officially received by the BIR. FILING OF CRIMINAL COMPLAINT AGAINST REVENUE OFFICERS Requirements for Appeal in Refund and Tax Credit A taxpayer may file a criminal complaint against any official. down or rejected any of his offers 229 1997 NIRC). from using defense of excessive or illegal assessment. or b. agent or employee of the BIR a. any act done in the performance of official duty 9) Having knowledge or information of any or neglect of duty. taxpayer’s recourse is under Art 27 of the such knowledge or information to their Civil Code. 7) Making or signing any false entry or entries in any book. In case of willful neglect of violation of the Tax Code. TAX ATION San Beda College of LAW – ALABANG Revenue officer acting negligently or in bad faith or with willful oppression would be a. 3) Knowingly demanding or receiving sums or compensation not authorized or ACTION CONTESTING FORFEITURE OF prescribed by law. Before sale or destruction of the property examination of the books of account or tax to recover the property from the person liability. government. Taxpayer barred. Taxpayer has filed with the CIR a enforcement of the provisions of the Tax Code written claim for refund or tax credit who commits any of the following offenses: within 2 years from payment of the tax or penalty. Sec. failure to report duty. ND . 5. He ceases to be an officer of the collection of the tax by the law and becomes a private wrongdoer. After the sale and within 6 months to conspiring or colluding with another or recover the net proceeds realized at the others to defraud the revenues or sale (see. b. 1997 NIRC) otherwise violate the provisions of the tax Action is partakes of the nature of an ordinary code. CHATTEL 4) Willfully neglecting to give receipts as by law required or to perform any other duties enjoined by law. period of two years from the date of 2) Willful oppression and harassment of a payment regardless of any taxpayer who refused. consideration or compensation. 231. Suit or proceeding is instituted in the 1) Extortion or willful oppression through the CTA also within the same prescriptive use of his office. 204. Tax has been paid. in an action for personally liable. file claim for forfeiture. superior officer. or return. civil action for recovery of personal property or 6) Neglecting or by design permitting the the net proceeds of its sale which must be violation of the law or any false certificate brought in the ordinary courts and not the CTA. or as otherwise required by law. turned supervening cause. declined. mentioned in no. and c. or nay false certificate ACTION FOR DAMAGES AGAINST REVENUE or return. or any other agency charged with the b. or offering or undertaking to seizing the property or in possession submit a report or assessment less than thereof upon filing of the proper bond to the amount due the government for any enjoin the sale. In case of seizure of personal property under 5) Offering or undertaking to accomplish. the owner desiring to contest or submit a report or assessment on a the validity of the forfeiture may bring an action: txpayer without the appropriate a. Assessment is considered correct.

or accepting money or other things of value fore the compromise or settlement b. on missing packages. b. Sec. Claim for refund—a written claim for refund may be submitted by the importer: a. arrival. B. articles lost or destroyed after such conditions. no longer in Customs Custody. TAX ATION San Beda College of LAW – ALABANG 10) Without the authority of law. articles entered under of any charge or complaint for any warehousing entry not violation of the Tax Code. Property in the customs custody shall be subject to sale under the following c. b. Sale of Property packages or shortage before arrival of the goods in the Philippines. abandoned articles. . in the hands or under the control of the importer or a. (see. 269. administrative fine or forfeiture may be affected only. after the tax due. for the satisfaction of the same. Taxpayer’s Remedies In the case of attempted Administrative Recourse importation. In abatement uses such as: b. the provision of this code: and regardless of the ownership while still in the custody or control of the d. Enforcement or tax lien administrative or judicial proceedings in conformity with A tax lien attaches on the goods. TCC) imposed when the importation is unlawful and it may be exercised This is availed of when the tax lien is lost even where the articles are not or by the release of the goods. Seizures The tax liability of the importer constitutes Generally applied when the penalty a personal debt to the government. or 1. demanding a. respectively of the taxpayer Note: Goods in the collector’s This is availed of when the possession or of Customs authorities importation is neither nor pending payment of customs duties improperly made are beyond the reach of attachment. Extrajudicial sale shall have been established by proper 1. A. seized property. withdrawn nor the duties and 1997 NIRC) taxes paid thereon within the Remedies under the period provided under Section Tariff and Customs Code 1908. unless the importation is merely attempted. Government Remedies: c. 1204. other than contraband. person who is aware thereof. TCC. Judicial Action 2. deficiencies in the contents of 3. while the goods are still within the customs jurisdiction. taxes or other charges collectible by the Proceeds of sale are applied to the Bureau of Customs. Any deficiency or excess is expiration of the period allowed for the account or credit. Any articles subject to a valid government lien for customs duties. is fine or forfeiture which is enforceable by action (Sec. after liability to a.

Protest 6. and 1. TCC) 2. dead or injured animals. fees or Made on the property property of any other money charges. property. for manifest classical errors. Forfeiture a. tangible or intangible. . Taxpayer is merely There is actual taking or prohibited from c) fines forfeitures or other penalties possession of the disposing of his imposed in relation thereto. Levy of Real Property 2. Civil Action see earlier discussion on the 8. Note: The owner or importer may c. Distraint of Personal Property f. only of a delinquent taxpayer whether b) seizures. TAX ATION San Beda College of LAW – ALABANG d. (see section 1701-1708. In seizure cases 7. property. detention or release of taxpayer. articles lost or destroyed Administrative e. Other Administrative Remedies see the earlier discussions on “Customs Protest Cases” Judicial b. In case of thus relieving himself of the tax intangible property. Compromise are re-exported 5. Effected by having a list Effected by requiring d) other matters arising under the of the distraint property the taxpayer to sign a customs Law or other laws or by service or warrant receipt of the property administered by the Revenue of of distraint or or by leaving a list of Customs. Constructive Distraint May be made on the a) liability for customs duties. Constructive – The owner is merely of Appeals which has exclusive prohibited from disposing of his personal jurisdiction to review decisions of the property. Taxpayer is also liability but not from the possible diverted of the power of control over the criminal liability. tax due where amount due is may not be definite or Enumeration of the Remedies definite. Criminal Action subject Distraint of Personal Property c. delinquent or not property affected.Seizure by the government of property personal property. it is being questioned. Tax Lien In drawback cases where the goods 4. Settlement of case by the payment of fine or redemption of forfeited Distraint. Commissioner of Custom in cases involving: Actual Distraint. to be followed by see earlier discussions on the its public sale. Judicial relief 3. same An immediate step for Such immediate step is Remedies of the Government collection of taxes not necessary. to enforce the payment of faces. garnishment. Actual – There is taking of possession of abandon either expressly or By personal property out of the taxpayer into importation in favor of the Government that of the government. and property. if the taxes are not voluntarily subject paid. The taxpayer may appeal to the Court d.

company or association. 3. b. Disposition of proceeds of the sale.000. 205 TC). Taxpayer is delinquent in the payment of tax. Period with in to assess or collect has not yet prescribed. Time and place of sale. Prohibit him from disposing the property from disposing the property in a. Service of warrant of distraint upon taxpayer or upon person in possession of 4. Statement of the sum demanded. Subsequent demand for its payment. Obligate him to preserve the same How Actual Distraint Effected properties. requisite no. c. In case of constructive Serving a copy of the warrant upon distraint. with out the authority of distrained. Require taxpayer or person in possession authorized representative P1. at the dwelling or place of business Requisites: and with someone of suitable age and discretion 5. (see Sec.000. Posting of notice is not less than two places in the municipality or city and c. Debts and credits on the abatement of the collection of tax as the cost of same might even be more than P100. 1 is not essential taxpayer and upon president. Taxpayer must fail to pay delinquent tax at 4. Copy of an account of the property any manner. 4. 3. 6. 8. RDO or less a.00 4. treasurer or other responsible officer of the issuing When remedy not available: corporation. In keeping with the provision b. left either with the owner or person . Where amount involved does not exceed P100 (Sec. 6.000. authority for such person to pay CIR his credits or debts. the CIR. a. Warrant shall be sufficient taxpayer’s personal property. 206 TC) manager. Bank Accounts – garnishment notice to the taxpayer specifying time and place of sale and the articles distrained.000. signed by the officer. Sign a receipt covering property distrained b. commissioner or his due In excess of 3. Serve warrant upon taxpayer and president. 5. Sale at public auction to highest bidder treasurer or responsible officer of the bank. manager. Bank shall turn over to CIR so much of the bank accounts as may be sufficient. In case of intangible property: time required. TAX ATION San Beda College of LAW – ALABANG from whom property was taken. Amount How constructive Distraint Effected Who may effect distraint Involved 3. 3.00 to P1. In case of Tangible Property: c. 7. 7. Stocks and other securities 8. Leaving a copy of the warrant with the person owing the debts Procedure: or having in his possession such credits or his agent.

d. BIR simply seizes so much of the deposit with The excess shall be turned over to owner. Philippines. 10. Service of written notice to: 8. penalties and Levy of Real Property interest thereon from date of delinquency to the date of sale together with interest Levy – Act of seizure of real property in on said purchase price at 15% per annum order to enforce the payment of taxes. all proper charges are paid to the officer conducting the same. Officer shall prepare list of the a duly authenticated certificate showing property distrained. Disposition of proceeds of sale. Cannot be extended by the courts. Taxpayer acts tending to obstruct collection proceedings. If at any time prior to the consummation him of the sale. The taxpayer. Penalty due. Officer shall write upon the certificate a description of the property upon which 7. Name of taxpayer b. TAX ATION San Beda College of LAW – ALABANG 4. leave a b. and 9. The requisites are the same as that of distraint. Taxpayer is intending to leave the levy is made. or 9. enforceable through out the Philippines 6. out having to know how much the deposits are or where the money or any part of it Redemption of property sold or forfeited came from. the f. Person entitled: Taxpayer or anyone for 5. a. Note: 11. c. 8. Time to redeem: one year from date of goods distrained shall be restored to the sale or forfeiture owner. property under distraint is not equal to the amount of the tax or is very much less . accounts for no inquiry is made. Advertisement of the time and place of sale. e. 10. Where Taxpayer or person in possession Procedure: refuses to sign: 7. Possession pending redemption – owner distrained property on behalf of the not deprived of possession national government. . h. Sale at public auction to highest bidder. Amount of tax and copy in the premises where property is located. Taxpayer hides or conceals his property. To remove his property there from. The from date of purchase to date of property may be sold at public sale. if after redemption. Taxpayer is retiring from any business subject to tax. c. 4. Bank accounts may be distrained with out violating the confidential nature of bank 12. seizure. RD where property is located. Distraint and Levy compared . In the presence of two witnesses of sufficient age and discretion. When the amount of the bid for the sale or declaration of forfeiture. International Revenue officer shall prepare a. Grounds of Constructive Distraint . than the actual market value of articles. the CIR or his deputy may purchase the g. the taxes are not voluntarily paid. Price: Amount of taxes. Begins from registration of the deed of 6.

Tax repeated if necessary until the full lien is directed to the property subject to the tax. Note: Enforcement of Tax Lien 3. amount. penalties and costs. collected. Failure to file notice of such lien in the office of register of Deeds. Distraint concerned upon registration of the declaration of forfeiture. . Under nos. Both cannot be availed of where amount involved is not more than P100. is regardless of its owner. This is superior to judgment claim of Tax Lien—a legal claim or charge on private individuals or parties property. Distraint – Taxpayer no given the right of judgment creditor.\ or put an end to one already commenced. although it need not be the 6. not Extinguishment of Tax Lien provided 5. In case Nos. 2. 5. to transfer the A tax lien is distinguished from disttraint in title to the property with out of an order that. Upon all property and rights to property belonging to the taxpayer. 7. Attaches not only from time the warrant taxes. 3 and 4. established by law as a security in default of the payment of 4. The remedy of distraint or levy may be property in respect to the tax is assessed. in distraint the property seized must be that from a competent court of the taxpayer. levied upon and sold/forfeited to the government. Distraint – forfeiture by government. Taxpayer must have a tax liability. It is the duty of the Register of Deeds Enforcement of Tax Lien vs. Nature: Compromise A lien in favor of the government of the Philippines when a person liable to pay a Compromise—a contract whereby the tax neglects or fails to do so upon parties. 1 and 2. taxes. 8. the CIR until paid. 5. there is no more tax liability. with interests. Prescription of the right of the government highest bid is not sufficient to pay the to assess or collect. penalties and costs. 7. purchases or 10. Extent: 6. the taxpayer Note: is still liable. 3. There must be an offer by taxpayer or CIR. Payment or remission of the tax Levy – forfeiture by government authorized where there is no bidder or the 6. Distraint – personal property Only when notice of such lien is filed by the CIR in the Register of Deeds Levy – real property concerned. was served but from the time the tax was due and demandable. either real or personal. avoid litigation demand. redemption 8. TAX ATION San Beda College of LAW – ALABANG 7. 9. Both are summary remedies for collection of taxes. Duration: Requisites: Exists from time assessment is made by 4. of an amount to be paid by taxpayer. including all expenses. Effectivity against third persons: 8. Destruction of the property subject to the Levy – Taxpayer can redeem properties lien. by reciprocal concessions.

Effect: Transfer the title to the specific thing from the owner to the government. Criminal violations. of a default or offense. In case of personal property – by Delegation of Power to Compromise seizure and sale or destruction of the specific forfeited property. judgment of condemnation and sale in a legal action or proceeding. as the case may may compromise the assessment issued by the require. No bidder for the real property b. If highest bid is for an amount 4. When basic tax involved exceeds P1. It is a certain amount of money which the When taxes may be compromised: taxpayer pays to compromise a tax violation. c. Subject to approval of Evaluation Board insufficient to pay the taxes. To be destroyed – by order of the CIR when the sale for consumption 3. There must be acceptance of the offer in Compromise Penalty settlement of the original claim. 10% of the basic tax assessed – in case of financial incapacity. Where settlement offered is less than the prescribed minimum 10. cases. in consequence b.000. except: Enforcement of forfeiture a. How enforced: rates. It is pain in lieu of a criminal prosecution. 11. Those involving fraud. Since it is voluntary in character. Minimum compromise rate: 8. enforce the compromise. The financial position of the taxpayer 6. 3. It includes the idea of not only losing but also having the property transferred to another with out the consent of the Limitations: owner and wrongdoer. penalties and costs. or or use of the following would be injurious to the public health or 4. willing to pay them. 5. regional offices involving basic taxes of P 500 K or less. d. 6. 40% of basic tax assessed – other exposed for sale. . When forfeited property to be destroyed Remedy in case of failure to comply: or sold: The CIR may either: c. 4. 9.000. When available: a. In case of real property – by a commissioner. 4. General Rule: The power to compromise or abate shall not be delegated by the d. TAX ATION San Beda College of LAW – ALABANG 6. b. a return of the proceeding is duly made.00 or . Those already filed in court Forfeiture—implies a divestiture of property with out compensation. Regard it as rescinded and insists upon prejudicial to the enforcement of the original demand. Exception: The Regional Evaluation Board civil or criminal. the same demonstrates a clear inability to pay the may be collected only if the taxpayer is assessed tax. c. 5. With in two days thereafter. A reasonable doubt as to the validity if the claim against the taxpayer exists. a.

and other government with our necessity of an order from a manufactured products of competent court. tobacco Other Administrative Remedies 5. Estate and donor’s tax b. products) manufactured or business or occupation or to practice a removed in violation of the Tax profession can be issued. the approval of the Secretary of committed with in the view of the Internal Finance. Inspection of books . automobile. miscellaneous products. whichever is lower. plus and executory. Where to be sold: 7. liquors 3. 2. Requiring filing of bonds – in the following 6. Excise taxes d. To whom paid – Commissioner or seizure) the Revenue Collection Officer 1. Requiring proof of filing income tax returns oils. labels and tags. after decision on h. Dies for printing or making IR 6. To be sold or destroyed – depends upon the discretion of CIR c. Imposition of surcharge and interest. Willfully refuses to pay such tax and its accessory penalties. Private sale: provided. Manufacturer’s and importer’s bond exercise tax. playing cards 4. 4.000. mineral products. Time to redeem – with in one (1) year from forfeiture d. Exporter’s bond 3. search and seizure notice of not less than 20 days. non-essential items a petroleum Before a license to engage in trade. 000. All apparatus used in or about instances: the illicit production of such articles. Right of Redemption: 9. Public sale: provided.00 per case. 12. Giving reward to informers – Sum stamps. Making arrest. 13. manufactured 5. Limited to violations of any penal law or d. Revenue Officer or EE. a. Amount to be paid – full amount of his tax liability shall have become final the taxes and penalties. in equivalent to 10% of revenues. g. cigars Note: The Register of Deeds is duty bound to transfer the title of property forfeited to the 4. surcharges imitation of or purport to be or fees recovered and/or fine or penalty lawful stamps. Effect of failure to redeem – forfeiture shall become absolute. All other articles subject to d. cigarettes. labels or tags. interest and cost of the sale 10. it is with regulation administered by the BIR. Knowingly and fraudulently evades payment of IR taxes. Personal entitled – taxpayer or anyone for him c. c. Deportation in case of aliens – on the following grounds f. there is 8. distilled spirits j. TAX ATION San Beda College of LAW – ALABANG the law: (at least 20 days after i. imposed and collected or P1. Code. (wine.

Prescribing real property values government may still collect the tax in the same action. on past of taxpayers to evade payment. Dispute same by filing protest with CIR 11. independent of any attempt 17. provided there is a prima c. 2. c. Obtaining information on tax liability of any person D. Brought in the name of the Government of Note: The satisfaction of civil liability is not one of the Philippines. Reason to believe that records do not correctly reflect declaration in return. Appeal adverse decision of CIR to CTA 12.\ Does not exonerate taxpayer his civil liability to pay the tax due. Must be with the approval of the CIR. in case of action. Criminal Action A direct mode of collection of taxes. generally within three years after date the When assessment made has become final tax return was due or was filed whichever and executory for failure or taxpayer to: is later. c. or enforcement of a fine. the grounds for the extinction of criminal action. 1. invoices Effect of Acquittal on Tax Liability: d. A deceased person to determine gross estate Effect of Satisfaction of Tax Liability on Criminal Liability d. Any taxpayer who filed application for compromise by reasons of financial Will not operate to extinguish taxpayer’s incapacity his tax liability. Judicial Remedies This is true in case the criminal action is based on the act to taxpayer of filing a false and Civil and Criminal Actions: fraudulent tax return and failure to pay the tax. the 15. statue of limitation Actions instituted by the government to is primarily designed to protect the rights of the collect internal revenue taxes in regular taxpayer’s against unreasonable investigation of . Person failed to issue receipts and facie showing of willful attempt to evade. TAX ATION San Beda College of LAW – ALABANG courts (RTC or MTCs. Statute Of Limitation Purpose: C. Civil Action For purposes of Taxation. Thus. does not arise from a criminal act. the penalty but also order payment of taxes. penalty or Prescriptive Periods / forfeiture. the 13. Inquiring into bank deposit accounts of Reason: Tax is an obligation. for recovery of taxes. Conducted by Legal Officer of BIR 3. Registration of Taxpayers. Prescribing presumptive gross sales or receipt: An assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion. 14. criminal liability since the duty to pay the tax is imposed by statute. 16. depending on the Books of accounts and other accounting amount involved) records of taxpayer must be preserved. Inventory – Taking of stock-in-trade and judgment of which shall not only impose making surveillance. Use of National Tax Register d.

May 20. (Section 203 of the Tax Code) Sept. Republic vs. 1964) b. taxpayer.within ten (10) question of fraud only for the first time years after the date of discovery of the in his memorandum which was filed omission. Recurrence of the foregoing tax evasion. The fraud contemplated by law is actual and not constructive. (Basilan Estates. However. June 29. A return filed before the last day amount to intentional wrongdoing with prescribed by law for the filing thereof the sole object of avoiding the tax. 4 SCRA 872) collection thereof. When the Commissioner raised the 5. Intentional and substantial demand/notice be received within the understatement of tax liability of the prescriptive period. assessment. TAX ATION San Beda College of LAW – ALABANG the taxing authority with respect to assessment and collection of Internal Revenue Taxes. because they do not contain information a. 222 paragraph (a)) 3. c. Commissioner 21. Exceptions: (Sec. Commissioner. A transcript sheets are not returns. Where no return was filed . It must 1. 6. (Aznar case. 30. In case a return is substantially amended. Fraud may be established by the mailed or sent by the Commissioner to the following : (Badges of Fraud) correct address of the taxpayer. in case it is alleged and proved to exist by clear & filed beyond the period prescribed thereof. vs. 1966) Note: b. 1974) 2. the fact of fraud shall commence from the filing of the shall be judicially taken cognizance of amended return (CIR vs. 29. 1987) e. A shall be considered as filed on such last mere mistake is not a fraudulent day. In computing the prescriptive period for assessment. Dec. (Sinforo Alca vs. Kei & Co. When the Commissioner fails impute necessary and required to permit the fraud in the assessment computation and assessment of taxes notice/demand for payment. When the Commissioner failed to allege in his answer to the taxpayer’s petition for review when the case is appealed to the CTA. Phoenix. the law does not require that the d. Aug. Fraud is never presumed and the prescribed by law for the filing of the return or circumstances consisting it must be from the day the return was filed. A fraud assessment which has become the government right to assess the tax final and executory. convincing evidence (Republic vs. the CTA after he had rested his case. cannot be deemed an circumstances. intent. 1999) Instances/Circumstances negating fraud: 5. in the civil or criminal action for the 1965. Keir. 23. . the latter is deemed made when notice to this effect is released. 222 ic) c. Intentional and substantial overstatement of deductions of 4. Inc. SCRA 17. Where a return was filed but the same was false or fraudulent – within ten (10) years Prescription of Government’s Right to from the discovery of falsity or fraud. An affidavit executed by a revenue office exemption indicating the tax liabilities of a taxpayer and attached to a criminal complaint for f. Assess Taxes: Nature of Fraud: General Rule: Internal Revenue Taxes shall be assessed within three (3) years after the last day a. vs. ( CIR vs. Pascoi Realty Corp. Collector. CA April 30. (Sec.

if it appears that there was an assessment. General Rule: Note: Limitations: 1. Ayala Securities Corp. which has been bases of which is not required by law to be assessed within the period agreed . 7. 1980) taxpayer’s net income. Nov. does not prove fraud. The agreement to extend the same 2. D. at anytime within 2. omission. d. “not (Carmen vs. Where no return is required by law. Where there is a written waiver or return was due or was filed. following the date of assessment. the tax 10 years after the discovery of the is imprescriptible. sure” as to the real amount of the 21. unless there is a sufficient evidence shaving fraudulent intent. 4. Assessment of unpaid taxes. at anytime within ten e.. Assessment of compensating and e. the ordinary 5-year period (now 3 years) Imprescriptible Assessments: would apply (Rep. Where the commissioner and the taxpayer. or fraud. E. vs. The agreement extending the period of assessed within the period of limitation prescription should be in writing and may be collected by distraint or levy or duly signed by the taxpayer and the by proceeding in court within 5 years commissioner. In such case. where the internal revenue tax. Where a fraudulent/false return with d. Ret. Where an assessment was made – Any internal revenue tax which has been c. collection of such tax may be filed without assessment. whichever renunciation of the original 3-year is later.. Exceptions: Note: Limitations: 8. the tax 9. Where no assessment was made and a should be mode before the expiration return was filed and the same is not of the period previously agreed upon. f. Waiver of statute of limitations – any 3. Where the BIR itself appeared. the tax may be filed without assessment. limitation signed by the taxpayer. A waiver is inefficient I it is executed years after the discovery of the falsity beyond the original three year. d. TAX ATION San Beda College of LAW – ALABANG reported in a return such as excise taxes. When the taxpayer omits to file a sought to be assessed becomes return – a court proceeding for the imprescriptible. fraudulent or false. before the expiration of the Prescription of Government’s three (3) year period of limitation have Right to Collect Taxes agreed in writing to the extension of said period. Where the law does not provide for any particular period of assessment. 1962) 1. The waiver to be valid must be intent to evade taxes was filed a executed by the parties before the proceeding in court for the collection of lapse of the prescriptive period. 10. The commissioner can not valid agree Note: The 10-year prescriptive period to reduce the prescriptive period to for collector thru action does not apply less than that granted by law. A mere understatement of income documentary stamp tax. March 31.the tax should be collected within 3 years after the 8.

the government avail of distraint and levy procedure. 13. 1963) c.g. Where before the expiration of the time complaint with the proper court. When the offender is absent from the the last revised assessment. When it should commence? . In civil case – If not raised in the lower court. 14. Where assessment of the have consented in writing to its commissioner is protected & appealed assessment after such time. purposes of the prescriptive period. In criminal case – It can be raised even if 4. if can not F. Day of the commission of the violation. When it is interrupted: March 30. c. TAX ATION San Beda College of LAW – ALABANG upon. Rule: All violations of any provision of the tax code shall prescribe after five (5) years. Where a tax obligation is secured by a surety bond – the government may When it should run again: proceed thru a court action to forfeit a bond and enforce such contractual When the proceeding is dismissed for obligation within a period of ten years. Interruption of the Prescriptive Period 5. may be collected be distinct or The five (5) year prescriptive period shall levy of by a proceeding in court within begin to run from the: the period agreed upon in writing before the expiration of 5-year period. The running of statute of limitations on making an assessment and the beginning of distraint/levy or a proceeding in court Rules of Prescription in Criminal Cases for collection shall be suspended for the period. vs. During which the Commissioner is prohibited from making the assessment or Note: beginning distraint/levy or a proceeding in court and for 60 days thereafter. if know. from the time of discovery reinvestigation requested by the and the institution of judicial proceeding taxpayer – the prescriptive period for for its investigation and punishment. Collection by judicial action – The collection begins by filing the 4. Where the action is brought to enforce When does the defense of a compromise entered into between prescription may be raised: the commission and the taxpayer – the prescriptive period is ten years. taxpayer’s petition for review. the tax may to the CTA – the collection begin when be assessed prior to the expiration of the the government file its answer to period agreed upon. Lopez. c. collection should be counted from the last assessment. Philippines. When tax is deemed collected for be raised for the first time on appeal. Where the assessment is revised the guilty person because of an amended return – the period for collection is counted from d. Where the government makes another assessment on the basis of d. Collection by summary remedies – It is the case has been decided by the lower effected by summary methods when court but pending decision on appeal. 5. reason not Constituting jeopardy. it is bailed permanently. d. (Rep. e. If not known. both the commissioner and the taxpayer 6. When a proceeding is instituted against 12. 11. (RTC) prescribed for the assessment of the tax.

fees. . The law on prescription remedial measure tax. and charges. Powers and Duties of the suspended. When CTA suspends the collection of tax liability of the taxpayer pursuant to 7. recumbent by setting. 5. commissioner. 4. and as defense it must be c. The defense of prescription must be raised Section 11 of RA 1125 upon proof that by the taxpayer on time. . Chief Officials of the Bureau of Internal Revenue.The power to interpret the for assessment of the tax before the provisions of this Code and other tax laws criminal action may be instituted. cannot invoke the principle of Equitable Substantial issues must be raised. Reason: No requirement Cases. . his authorized representative and fines connected therewith. __________________________________________________ _____SOME IMPORTANT PROVISIONS ON THE TAX Note: If the taxpayer informs the REFORM ACT OF 1997 Commissioner of any change in address the statute will not be SEC. The property could be located. 3. should be interpreted liberally in order to protect the taxpayer. Filing a petition for review in the CTA from the decision of the Commissioner. Power of the Commissioner to tax assessment does not suspend the Interpret Tax Laws and to Decide Tax criminal action. government and /or the taxpayer. including the execution of judgments in all cases 6. hereinafter referred to as the the Philippines. When the warrant of distraint or the supervision and control of the levy is duly served upon any of the Department of Finance and its powers and following person: duties shall comprehend the assessment and collection of all national internal 4. penalties. or the part of the Commissioner does not interrupt the running of 10. Bureau of Internal Revenue. SEC.The Bureau of Internal Revenue shall be under e. When the taxpayer is out of the conferred to it by this Code or other laws. The question of prescription is not jurisdictional. Bureau shall give effect to and administer the supervisory and police powers f. and the enforcement of all forfeitures. located in the address given by him in the return. the government must not be a mere pro-former. When the taxpayer requests for raised reasonably otherwise it is deemed reinvestigation which is granted by waived. shall be under the exclusive and original . Philippines. When the taxpayer cannot be taxpayer is entitled. 9. TAX ATION San Beda College of LAW – ALABANG a. The request has already prescribed. In the event that the collection of the tax the prescriptive period. Note: A petition for reconsideration of a SEC. Commissioner and four (4) assistant chiefs to be known as Deputy Commissioners. taxpayer revenue taxes. In criminal cases for violation of tax Internal Revenue shall have a chief to be code – the period shall not run known as Commissioner of Internal when the offender is absent from Revenue.off the prescribed tax against a tax refused to which the d. 2. otherwise it is its collection may jeopardizes the deemed waived.The Bureau of g. The prescriptive provided in the tax code Note: A mere request for over ride the statute of non-claims in the reinvestigation without any action settlement of the deceased’s estate. b. Nota Bene: The commissioner is prevented from filing an ordinary action to collect the 6. Member of his household with decided in its favor by the Court of Tax sufficient discretion and no Appeals and the ordinary courts. 8.

or in determining (E) To cause revenue officers and the liability of any person for any internal employees to make a canvass from revenue tax. to appear before the matters arising under this Code or other Commissioner or his duly laws or portions thereof administered by authorized representative at a time the Bureau of Internal Revenue is vested and place specified in the in the Commissioner. or from any office or nothing in this Section shall be officer of the national and local construed as granting the governments. That failure to (C) To summon the person liable for file a return shall not prevent the tax or required to file a return. and financial (A) Examination of Returns and statements of corporations. paper. authorized representative may associations. records. or other data which may be revenue tax. and to Summon. 5. any information such as. the correct amount of tax: Provided. papers.After a fund companies. or in evaluating tax compliance. under oath. or in making a return when none has been made. -controlled corporations. management or possession of any object with respect to which a tax (B) To obtain on a regular basis is imposed. from any person other than the person whose internal revenue tax The provisions of the foregoing liability is subject to audit or paragraphs notwithstanding. and their members. . or any imposed in relation thereto. may be liable to pay any internal record. subject person. . as Examine.In ascertaining the correctness inquiry. TAX ATION San Beda College of LAW – ALABANG jurisdiction of the Commissioner. or region and inquire after and the Commissioner is authorized: concerning all persons therein who (A) To examine any book. subject to the summons and to produce such exclusive appellate jurisdiction of the books. Make assessments and Prescribe receipts or sales and gross additional Requirements for Tax incomes of taxpayers. or other other person. refunds of internal revenue entries relating to the business of taxes. Power of the Commissioner to to. possession. and all persons relevant or material to such owning or having the care. inquiry. or any person having to review by the Secretary of Finance. costs and volume of production. and Take Testimony of may be relevant or material to such Persons. and to give testimony. or care of the books of accounts and other The power to decide disputed accounting records containing assessments. or other Court of Tax Appeals. addresses. 6. custody. insurance return has been filed as required companies. person concerned. inquire into bank deposits other including the Bangko Sentral ng than as provided for in Section 6(F) Pilipinas and government-owned or of this Code. or Commissioner from authorizing the any officer or employee of such examination of any taxpayer. but not limited SEC. regional operating under the provisions of this Code. and of any return. and the Administration and Enforcement. Power of the Commissioner to (D) To take such testimony of the Obtain Information. however. penalties the person liable for tax. fees or other charges. joint accounts. or in collecting any such time to time of any revenue district liability. government Commissioner the authority to agencies and instrumentalities. mutual Determination of Tax Due. SEC. investigation. headquarters of multinational the Commissioner or his duly companies. data. - names. . joint ventures of authorize the examination of any consortia and registered taxpayer and the assessment of partnerships.

or Period. In case a person fails to file a required return or other document at (D) Authority to Terminate Taxable the time prescribed by law. incomplete or erroneous. tax liabilities of such person. . statement of declaration and such assessment shall be filed in any office authorized to deemed prima facie correct. shall declare the tax period of such at any time during the taxable year. records do not correctly reflect the statement or declaration has in the declarations made or to be made in meantime been actually served a return required to be filed under upon the taxpayer. the provisions of this Code. That no notice for audit or that the books of accounts or other investigation of such return. believe that such person is not and said taxes shall be due and declaring his correct income. income other Documents. unless paid within the as the basis for assessing the taxes time fixed in the demand made by for the other months or quarters of the Commissioner. a taxpayer is retiring from business the Commissioner shall make or subject to tax.The Commissioner may. together with a determining his internal revenue tax request for the immediate payment liabilities. surveillance and to Prescribe unless such proceedings are begun Presumptive Gross Sales and immediately. the same or different taxable years . receipts. the same totally or partly ineffective taking. the same may be modified. performing any act tending to which shall be prima facie correct obstruct the proceedings for the and sufficient for all legal purposes. receive the same shall not be When it is found that a person has withdrawn: Provided. receipts. collection of the tax for the past or current quarter or year or to render (C) Authority to Conduct Inventory. under observation or preceding year or quarter. Reports and account the sales. changed. or is through testimony or otherwise. the Commissioner Receipts. or when there is reason to believe further. the and such amount so prescribed shall Commissioner shall assess the be prima facie correct for purposes proper tax on the best evidence of determining the internal revenue obtainable. after taking into Returns. That within failed to issue receipts and invoices three (3) years from the date of such in violation of the requirements of filing. sales payable immediately and shall be or receipts for internal revenue tax subject to all the penalties hereafter purposes. TAX ATION San Beda College of LAW – ALABANG Any return. Sections 113 and 237 of this Code. Statements. or amended: Provided. or such surveillance if there is reason to portion thereof as may be unpaid. the (B) Failure to Submit Required Commissioner. taxpayer terminated at any time and order inventory-taking of goods of shall send the taxpayer a notice of any taxpayer as a basis for such decision. natural or terminated and the tax for the juridical. .When it shall come to the willfully or otherwise files a false or knowledge of the Commissioner that fraudulent return or other document.When a report or other taxable base of other required by law as a basis for the persons engaged in similar assessment of any national internal businesses under similar situations revenue tax shall not be or circumstances or after forthcoming within the time fixed considering other relevant by laws or rules and regulations or information may prescribe a when there is reason to believe minimum amount of such gross that any such report is false. or is intending to amend the return from his own leave the Philippines or to remove knowledge and from such his property therefrom or to hide or information as he can obtain conceal his property. or may place the business of the tax for the period so declared operations of any person. The findings may be used prescribed. . sales and taxable base.

(2) any taxpayer who has filed an application for (H) Authority of the Commissioner to compromise of his tax Prescribe Additional Procedural or liability under Sec. Register Tax Agents. The subject to such limitations and restrictions Commissioner shall accredit and as may be imposed under rules and register. the value of the designate from among the senior property shall be. 1405 or under other general or The Commissioner may delegate the special laws. That the following . protests. and appellant. representatives who are denied accreditation by the Commissioner (F) Authority of the Commissioner and/or the national and regional to inquire into Bank Deposit accreditation boards may appeal Accounts. subordinate officials with the rank (G) Authority to Accredit and equivalent to a division chief or higher. the Bureau for taxpayers. before. upon and moral fitness. determine the fair Commissioner shall create national market value of real properties and regional accreditation boards. TAX ATION San Beda College of LAW – ALABANG (E) Authority of the Commissioner to and their representatives who Prescribe Real Property Values. application shall not be considered unless and SEC. For the members of which shall serve purposes of computing any internal for three (3) years. . however. . 1405 and other general or appeal within sixty (60) days from special laws. individuals and recommendation of the Commissioner: general professional partnerships Provided. Commissioner is hereby authorized statements. . upon consultation with competent Within one hundred twenty (120) appraisers both from the private and days from January 1. reports. Authority of the until he waives in writing his privilege under Commissioner to Delegate Power.Notwithstanding any such denial to the Secretary of contrary provision of Republic Act Finance. located in each zone or area. integrity Secretary of finance. or recommendation of the (2) the fair market value as Commissioner. and to divide the Philippines into other papers with or who appear different zones or areas and shall. the public sectors. 1998.The (2) of this Code by reason of Commissioner may prescribe the financial incapacity to pay manner of compliance with any his tax liability. 204 (A) Documentary Requirements. documentary or procedural In case a taxpayer files an application to requirement in connection with the compromise the payment of his tax liabilities on submission or preparation of his claim that his financial position demonstrates financial statements accompanying a clear inability to pay the tax assessed. who shall rule on the No. based on their regulations to be promulgated by the professional competence. the Commissioner is receipt of such appeal. shown in the schedule of Individuals and general professional values of the Provincial and partnerships and their City Assessors. and such waiver shall constitute the powers vested in him under the pertinent authority of the Commissioner to inquire into the provisions of this Code to any or such bank deposits of the taxpayer.The prepare and file tax returns. one (1) higher of: chairman and two (2) members for each board. and shall revenue tax. his the tax returns. subject to such rules (1) the fair market value as and regulations as the Secretary of determined by the Finance shall promulgate upon the Commissioner. . - Republic Act No. 7. whichever is the officials of the Bureau. Failure of the hereby authorized to inquire into Secretary of Finance to rule on the the bank deposits of: Appeal within the prescribed period shall be deemed as approval of the (1) a decedent to determine application for accreditation of the his gross estate.

a change unused stamps that have been rendered return filed before the last day prescribed by law unfit for use and refund their value upon proof of for the filing thereof shall be considered as filed destruction. in his discretion. Provided. TAX ATION San Beda College of LAW – ALABANG powers of the Commissioner shall not be Compromise. Officer having jurisdiction over the taxpayer. No credit or refund of taxes or on such last day. 204. . be compromised by a regional Where the basic tax involved exceeds One million evaluation board which shall be pesos (P1.000) or where the settlement composed of the Regional Director offered is less than the prescribed minimum as Chairman. Authority of the Commissioner to credit or refund within two (2) years after the payment of the tax or penalty: Provided. Assessment and Collection composed of the Commissioner and the four (4) Divisions and the Revenue District Deputy Commissioners. return. abate. a minor criminal violations. . and no proceeding in court without assessment for the collection of such taxes shall (C) Credit or refund taxes erroneously or illegally be begun after the expiration of such period: received or penalties imposed without authority. and. and (B) Abate or Cancel a Tax Liability. discovered by forty percent (40%) of the basic regional and district officials. (b) The power to issue rulings of (1) A reasonable doubt as to the validity first impression or to reverse. when: (d) The power to assign or reassign internal revenue officers to (1) The tax or any portion thereof appears establishments where articles to be unjustly or excessively assessed. Abate and Refund or Credit delegated: Taxes. when: Finance. may assessed tax. a minimum recommendation of the compromise rate equivalent to Commissioner. as members. 203.The Commissioner may - (a) The power to recommend the promulgation of rules and (A) Compromise the Payment of any regulations by the Secretary of Internal Revenue Tax. 204 (A) and (B) of this Code. . redeem or return was filed. or (b) those involving fraud. any tax liability: Provided. the Assistant rates. the compromise shall be subject to the Regional Director. the three they are returned in good condition by the (3)-year period shall be counted from the day the purchaser. penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for SEC. internal revenue taxes All criminal violations may be shall be assessed within three (3) years after the compromised except: (a) those already last day prescribed by law for the filing of the filed in court. Period of Limitation Upon amount due. That The compromise settlement of any tax assessments issued by the regional liability shall be subject to the following offices involving basic deficiency minimum amounts: taxes of Five hundred thousand pesos (P500. under Sec. That in a case where a return is filed refund the value of internal revenue stamps when beyond the period prescribed by law. Assessment and Collection. however.000) or less.000. of the claim against the taxpayer exists. or subject to excise tax are produced (2) The administration and collection or kept. as may minimum compromise rate be determined by rules and equivalent to ten percent (10%) of regulations to be promulgated by the basic assessed tax. For purposes of this Section. and the Secretary of finance.Except as provided in Section 222. costs involved do not justify the collection of the SEC. demonstrates a clear inability to pay the (c) The power to compromise or assessed tax. or revoke or modify any existing (2) The financial position of the taxpayer ruling of the Bureau. the heads of the approval of the Evaluation Board which shall be Legal. and For cases of financial incapacity. upon For other cases.

(6) months. every six improvements thereon. verification and cancellation: Provided. That in no case shall a tax refund be given The Bureau of Internal Revenue shall resulting from availment of incentives granted advance the amounts needed to defray pursuant to special laws for which no actual costs of collection by means of civil or payment was made. amount may place under constructive distraint the involved. Any request for conversion into refund of unutilized tax credits may be allowed. and any increment thereto resulting same intact and unaltered and not to dispose of from delinquency shall be: the same . where the property distrained is located. proceedings for collecting the tax due or which CHAPTER II may be due from him.To safeguard the addresses of taxpayers whose cases have been interest of the Government. Constructive Distraint of the facts and information. That a return filed showing an Either of these remedies or both overpayment shall be considered as a written simultaneously may be pursued in the claim for credit or refund. a report on the exercise of his powers under this Section. in the presence of two (2) witnessed. (a) By distraint of goods. bank be placed under constructive distraint refuses or accounts and interest in and rights to fails to sign the receipt herein referred to. 205. in his opinion. credits. without the express authority of the Commissioner. as well as of real property and Senate and House of Representatives. chattels. for which the taxpayer is directly liable. stating therein the following SEC. or is intending to leave Oversight Committee in Congress that shall be the Philippines or to remove his property constituted to determine that said powers are therefrom or to hide or conceal his property or to reasonably exercised and that the government is perform any act tending to obstruct the not unduly deprived of revenues. That the remedies of distraint provisions of this Code may be applied against and levy shall not be availed of where the any internal revenue tax. criminal action. CIVIL REMEDIES FOR COLLECTION OF TAXES The constructive distraint of personal property shall be affected by requiring the taxpayer or any SEC. the Commissioner the subject of abatement or compromise. and by levy upon real revenue officer effecting the constructive property and interest in rights to real distraint shall proceed to prepare a list of such property. fees or distrained and obligate himself to preserve the charges. further. the personal property. . including stocks and possession and control of the property sought to other securities. That the original copy of the Tax Credit order payment of the taxes subject of the Certificate showing a creditable balance is criminal case as finally decided by the surrendered to the appropriate revenue officer for Commissioner. That taxpayer who. among others: names and Property of a Taxpayer. after which the said property shall be deemed to have been placed under constructive distraint. or effects. and property and. One hundred pesos (P100). amount compromised or abated. A Tax Credit Certificate validly issued under the however. . including the preservation or transportation of personal property The Commissioner shall submit to the Chairmen distrained and the advertisement and sale of the Committee on Ways and Means of both the thereof. and other personal property of In case the taxpayer or the person having the whatever character. excluding withholding amount of tax involve is not more than taxes. 206. Remedies for the Collection of person having possession or control of such Delinquent Taxes. TAX ATION San Beda College of LAW – ALABANG however.in any manner whatever. and property of a delinquent taxpayer or any reasons for the exercise of power: Provided. discretion of the authorities charged with the collection of such taxes: Provided. leave a copy thereof in the premises (b) By civil or criminal action. subject to The judgment in the criminal case shall the provisions of Section 230 of this Code: not only impose the penalty but shall also Provided. debts.The civil remedies for the property to sign a receipt covering the property collection of internal revenue taxes. . is retiring from any the said report shall be presented to the business subject to tax.

in sufficient quantity to satisfy the Within ten (10) days after receipt of the warrant. .000) or less. That the Commissioner or his duly Finance. 208. chattels or effects. real property may be property were taken. further. interests in and rights to personal property of such persons . 207. . or if he be absent from the authority to the person owning the debts or . duly authorized representative shall prepare a duly authenticated certificate showing the name Stocks and other securities shall be distrained by of the taxpayer and the amounts of the tax and serving a copy of the warrant of distraint upon penalty due from him. or at the dwelling or place levied upon.000). or the personal property of the taxpayer is not sufficient Revenue District Officer. debts. and thirty (30) days after execution of the distraint. together with any increment a report on any levy shall be submitted by the thereto incident to delinquency. Levy shall be affected by writing upon said certificate a description of the property upon Debts and credits shall be distrained by leaving which levy is made. account of the goods. subject to rules Commissioner. however.Upon the in question. manager. upon recommendation of the authorized representative shall. days from receipt of the warrant. city where the property is located and upon the The warrant of distraint shall be sufficient delinquent taxpayer. within ten (10) Commissioner as often as necessary: Provided.The officer serving the warrant required by the Commissioner as often as of distraint shall make or cause to be made an necessary. chattels. upon recommendation of the provisions hereof. if the amount involved is to satisfy his tax delinquency. or upon the Register of Deeds for the province or with his agent. . and the excess of One million pesos (P1. or effects or other personal prescribed in this Section. .000. At the same time. (B) Levy on Real Property. chattels. shall have the authority to lift and regulations promulgated by the Secretary of warrants of levy issued in accordance with the Finance. within and distraint any goods. or charge. a copy of the warrant of distraint. That a consolidated SEC. be submitted by further. tax. the Commissioner or his duly authorized issued before or simultaneously with the warrant representative. credits. written with the person owing the debts or having in his notice of the levy shall be mailed to or served possession or under his control such credits. effects or other personal property distrained. company or association. operate with the force of a legal execution treasurer or other responsible officer of the throughout the Philippines. have the power to lift such order of distraint: Provided. Procedure for Distraint and report by the Revenue Regional Director may be Garnishment. That the Commissioner or his duly the distraining officer to the Revenue District authorized representative. subject to rules and Officer. TAX ATION San Beda College of LAW – ALABANG Philippines. before simultaneously or after the of business of such person and with someone of distraint of personal property belonging to the suitable age and discretion. to which list shall be delinquent. Said certificate shall the taxpayer and upon the president. the personal property.After the signed by himself. if the amount involved is in of distraint on personal property. subsequent sale. That a consolidated report by the Revenue Regional Director may be required by the A report on the distraint shall. and to the Revenue Regional Director: regulations promulgated by the Secretary of Provided. or if there be none. failure of the person owing any delinquent tax or delinquent revenue to pay the same at the time In case the warrant of levy on real property is not required. shall seize or his duly authorized representative shall. shall be left either with the expiration of the time required to pay the owner or person from whose possession such delinquent tax or delinquent revenue as goods. to the occupant of the property (A) Distraint of Personal Property. corporation. and the levying officer to the Commissioner or his duly expenses of the distraint and the cost of the authorized representative: Provided. bank accounts. which issued the said stocks or securities. including stocks and other proceed with the levy on the taxpayer's real securities. Commissioner. To this end. any internal revenue added a statement of the sum demanded and officer designated by the Commissioner or his note of the time and place of sale. and property. Summary Remedies. the Commissioner One million pesos (P1. business in respect to which the liability arose.000. to his agent or the manager of the SEC. a copy of which.

the Commissioner or his deputy may The time of sale shall not be less than twenty (20) purchase the same in behalf of the national days after notice.by transfer the stocks or other securities sold in the publication once a week for three (3) weeks in a name of the buyer. district in which the real estate lies and . if required to do so. company or period of a least thirty (30) days. and no charge shall be imposed for the Commissioner the amount of such debts or services of the local internal revenue officer or his credits. manager. including expenses. If he does not do so. and a short pay the entire claim. Property so purchased may be resold by the Commissioner or his deputy. Sale of Property Distrained and the sale.The Revenue District a report of his proceedings in writing to the Officer or his duly authorized representative. or other personal property. 213. twenty (20) days after levy. . the goods or effects distrained shall be over to the Commissioner so much of the bank restored to the owner. according to rules and regulations prescribed by the Secretary of Finance. 211. the officer making the same shall make Disposition of Proceeds. the actual market value of the articles offered for time and place of sale and the articles distrained. Commissioner and shall himself preserve a copy other than the officer referred to in Section 208 of of such report as an official record. 209. the advertise the property or a usable portion thereof officer making the sale shall execute a bill of sale as may be necessary to satisfy the claim and cost which he shall deliver to the buyer. penalties such notice shall be at the Office of the Mayor of and costs due thereon. accounts as may be sufficient to satisfy the claim of the Government. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale. Report of Sale to Bureau of Internal Revenue. forthwith Upon Distraint. The before the day fixed for the sale. deputy. newspaper of general circulation in the the corresponding certificates of stock or other municipality or city where the property is located. penalties and interest. public auction. this Code shall. and a copy of sale. Bank accounts shall be garnished by serving a SEC. At any time returned to the owner of the property sold. securities. the corporation. and such advertisement shall cover a thereof furnished the corporation. the net proceeds therefrom shall be or effects. .Within two (2) days after SEC. . to the highest bidder for cash.When the amount bid for the cause a notification to be exhibited in not less property under distraint is not equal to the than two (2) public places in the municipality or amount of the tax or is very much less than the city where the distraint is made. Upon receipt of charges are paid to the officer conducting the the warrant of garnishment. subject to the rules At the time and place fixed in such notice. Finance. the taxpayer expenses chargeable upon each seizure and sale may discontinue all proceedings by paying the shall embrace only the actual expenses of seizure taxes. Upon receipt of the copy of the bill of entrance of the municipal building or city hall and sale. TAX ATION San Beda College of LAW – ALABANG having in his possession or under his control any and preservation of the property pending .the credits belonging to the taxpayer to pay to the sale. including remitted to the National Treasury and accounted stocks and other securities so distrained.If at any time upon the president. the bank shall tun sale. specifying. at for as internal revenue. the city or municipality in which the property is distrained. Release of Distrained Property warrant of garnishment upon the taxpayer and Upon Payment Prior to Sale. SEC. . upon SEC. One place for the posting of Government for the amount of taxes. 210.Within duly licensed commodity or stock exchanges. company or association in public and conspicuous place in the barrio or shall make the corresponding entry in its books. . the and regulations prescribed by the Secretary of said revenue officer shall sell the goods. the name of the taxpayer Any residue over and above what is required to against whom taxes are levied. It shall be association which issued the stocks or other effectuated by posting a notice at the main securities. 212. or with the approval of the Commissioner. Advertisement and Sale. sale. through SEC. chattels. the officer conducting the proceedings shall proceed to In the case of Stocks and other securities. . shall be description of the property to be sold. treasurer or other prior to the consummation of the sale all proper responsible officer of the bank. and issue. Purchase by Government at Sale recommendation of the Commissioner.

217. shall giving of not less than twenty (20) days notice. . . shall be entered upon the records of the Revenue the Internal Revenue Officer conducting the sale Collection Officer. Further Distraint or Levy. . Redemption of Property Sold. the excess from a competent court.The certificate from the said Revenue District Officer remedy by distraint of personal property and levy that he has thus redeemed the property. . city hall. Want of Bidder. in consultation with the question and within two (2) days thereafter. and such payment shall Commission on Audit. the Revenue District officer and shall declare the property forfeited to the the Revenue Regional Director. entitle the person paying to the delivery of the certificate issued to the purchaser and a SEC. 215. Taxes. both in cases of personal and real property including improvements found SEC. but if the property be not thus redeemed. In his monthly collection reports. have the right of paying to the Revenue District sell and dispose of the same of public auction or Officer the amount of the public taxes. showing the proceedings of the sale. and the on realty may be repeated if necessary until the Revenue District Officer shall forthwith pay over full amount due. transfer the title of the property forfeited to the however. fee or charge imposed by this Code. Forfeiture to Government for determine and as the notice of sale shall specify. be deprived of the restrain the collection of any national internal possession of the said property and shall be revenue tax. penalties and interest: Provided. In either to the date of sale. together with interest on said case. upon the delinquent taxpayer. entitled to the rents and other income thereof . advance an amount sufficient to Commissioner or the latter's Revenue Collection defray the costs of collection by means of the Officer the full amount of the taxes and penalties. and said property thereafter shall be free form the lien of SEC. penalties and costs. . or any one for him. out of his redeem said property by paying to the collection. Restrain Collection of Tax.the preservation or transportation in sale. case of personal property. 218. however. summary remedies provided for in this Code. The Revenue Government in satisfaction of the claim in Collection Officer. It shall be the duty of the Register of describing the property sold stating the name of Deeds concerned. and said Commissioner may. and the advertisement the forfeiture shall become absolute. is to the purchaser the amount by which such collected. property has thus been redeemed. including all expenses. together with interest thereon and the costs of including . 214. the therefore. Injunction not Available to such taxes and penalties. penalties. the taxpayer. and interest thereon from the date of delinquency dispose of the same at private sale. as the officer conducting the proceedings shall SEC. That in case the proceeds of the sale Government without the necessity of an order exceeds the claim and cost of sale. and an accounting of (15%) per annum from the date of purchase to the same shall rendered to the Chairman of the the date of redemption. or in compromise or adjustment of any claim Within one (1) year from the date of sale. the Philippines in payment or satisfaction of taxes.The Commissioner shall have charge of such advances shall be reflected and supported any real estate obtained by the Government of by receipts. 216. or any one for him may the Revenue District Officer may. shall Revenue district Officer. upon approval by forfeiture. to of all taxes. and subsequent sale. penalties or costs arising under this Code SEC. TAX ATION San Beda College of LAW – ALABANG the sale shall proceed and shall be held either at until the expiration of the time allowed for its the main entrance of the municipal building or redemption. with prior approval of the Secretary of Finance.No court shall have the authority to grant an injunction to The owner shall not.In case there is no bidder for real property exposed for sale as herein above Within five (5) days after the sale. a return by the provided or if the highest bid is for an amount distraining or levying officer of the proceedings insufficient to pay the taxes. or on the premises to be sold. Resale of Real Estate Taken for on the latter. upon registration with his the purchaser and setting out the exact amount office of any such declaration of forfeiture. of his office. Within one (1) year from the date of such The Revenue Collection Officer. shall be turned over to the owner of the property. shall then make out and make a return of his proceedings and the deliver to the purchaser a certificate from his forfeiture which shall be spread upon the records records. the proceeds of the sale shall be deposited purchase price at the rate of fifteen percent with the National Treasury.

shall be SEC. with interests. the fact of fraud shall be is duly served upon the taxpayer. That nothing in the the recovery of taxes or the enforcement of any immediately preceding and paragraph (a) fine. subject to the the making of assessment and the beginning of approval of the Commissioner. the amount shall be a lien in favor agreed upon may be extended by of the Government of the Philippines from the subsequent written agreement made time when the assessment was made by the before the expiration of the period Commissioner until paid. his authorized judicially taken cognizance of in the civil or representative. . 223. Commissioner. and when the taxpayer is out of the prescribed in Section 203 for the Philippines. Form and Mode of Proceeding in hereinabove. The period so after demand. Nature and Extent of Tax Lien. when the taxpayer requests for a return with intent to evade tax or of failure reinvestigation which is granted by the to file a return. into any tax return filed in accordance with the provisions of any tax amnesty law or SEC. and no property could (b) If before the expiration of the time be located. previously agreed upon. distraint or levy a proceeding in court for collection. in respect of any deficiency. 222. . joint. the Commissioner of any change in address. the fraud or omission: Provided. if the taxpayer informs years after the discovery of the falsity.If assessment of the tax. Internal Revenue but no civil or criminal action for (e) Provided. the tax may be assessed. . the tax may be assessed within revenue tax. . 220. neglects or refuses to pay the same the period agreed upon. with sufficient discretion. . corporation. and costs that may accrue in addition thereto (c) Any internal revenue tax which has upon all property and rights to property belonging been assessed within the period of to the taxpayer: Provided. may be collected by distraint Actions Arising under this Code. assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days (a) In the case of a false or fraudulent thereafter. both the any person. 221. association or agreed in writing to its assessment after insurance company liable to pay an internal such time. as the Limitations provided in Sections 203 and 222 on particular situation may require. when the warrant of distraint or levy and executory. penalties. this Code or other law enforced by the Bureau of The period so agreed upon may be Internal Revenue shall be brought in the name of extended by subsequent written the Government of the Philippines and shall be agreements made before the expiration of conducted by legal officers of the Bureau of the period previously agreed upon. Statutory Penal Provisions. been assessed within the period agreed upon as provided in paragraph (b) SEC. 219.The remedy for SEC. Suspension of Running of Statute enforcement of statutory penalties of all sorts of Limitations. however.Civil and or levy or by a proceeding in court within criminal actions and proceedings instituted in the period agreed upon in writing before behalf of the Government under the authority of the expiration of the five (5) -year period. That this lien shall not limitation as prescribed in paragraph (a) be valid against any mortgagee purchaser or hereof may be collected by distraint or judgment creditor until notice of such lien shall be levy or by a proceeding in court within five filed by the Commissioner in the office of the (5) years following the assessment of the Register of Deeds of the province or city where tax. the property of the taxpayer is situated or (d) Any internal revenue tax. penalty or forfeiture under this Code shall be hereof shall be construed to authorize the filed in court without the approval of the examination and investigation or inquiry Commissioner. or a member of his household criminal action for the collection thereof. when the taxpayer cannot be or a proceeding in court for the collection located in the address given by him in the return of such tax may be filed without filed upon which a tax is being assessed or assessment. partnership.The running of the Statute of shall be by criminal or civil action. Remedy for Enforcement of decree. that. TAX ATION San Beda College of LAW – ALABANG SEC. That in a running of the Statute of Limitations will not be fraud assessment which has become final suspended. Exceptions as to Period of suspended for the period during which the Limitation of Assessment and Collection of Commissioner is prohibited from making the Taxes. which has located. Commissioner and the taxpayer have account (cuentas en participacion). at any time within ten (10) collected: Provided. .

or same. costs. any . a penalty the Commissioner or his authorized deputies as equivalent to twenty-five percent (25%) of the taxes themselves are required to be paid. which have political subdivisions or instrumentalities. enforcement of the law. . been manufactured or removed in violation of this or a government-owned or controlled Code. shall be accounted (1) Failure to file any return and for and dealt with the same way. fees and charges imposed in by order of the Commissioner. specific forfeited property. civil or criminal. 227. The forfeiture of real property shall be enforced by a judgment of No such judgment. other manufactured products of tobacco. upon forfeiture. General Provisions. The Amount so added to the tax the same for consumption or use would be shall be collected at the same time. of the repaid or reimbursed to him. upon forfeiture. Forfeitures. (A) There shall be imposed. Satisfaction of Judgment this Code or rules and regulations Recovered Against any Internal Revenue on the date prescribed. or destruction. or if removable fixtures of any sort shall be enforced the same be paid by the person used shall be by the seizure and sale. SEC. and the amount due. - Distilled spirits. 225. or costs shall be condemnation and sale in a legal action or paid or reimbursed in behalf of a person who has proceeding. cigarettes. Civil Penalties. and all (a) The additions to the tax or deficiency apparatus used I or about the illicit production of tax prescribed in this Chapter shall apply such articles may. in addition to forfeitures. fines and penalties shall be paid to the tax required to be paid.When an action is brought against any (2) Unless otherwise authorized by Internal Revenue officer to recover damages by the Commissioner. damages. be destroyed to all taxes. 248. Remedy for Enforcement of action shall be satisfied by the Commissioner. and the Commissioner is notified of other than those with whom the such action in time to make defense against the return is required to be filed. 224. damages or costs recovered in such SEC. SEC. be sold or destroyed liable for the additions to the tax in the discretion of the Commissioner. in the injurious to public health or prejudicial to the same manner and as part of the tax. so far as STATUTORY OFFENSES AND PENALTIES practicable. - recovered and received for taxes. employee or member is under a duty to SEC. . when the sale of this Code. or Officer. 226. oppression. includes an officer or employee least twenty (20) days after seizure. of a corporation who as such officer. Forfeitures. as well as dies for the printing or making of corporation. filing a return reason of any act done in the performance of with an internal revenue officer official duty. as used in this Forfeited property shall not be destroyed until at Chapter. When Property to be Sold or Destroyed.all judgments and monies SEC. the employee thereof internal revenue stamps and labels which are in responsible for the withholding and imitation of or purport to be lawful stamps.The forfeiture of chattels and upon approval of the Secretary of Finance. in the same manner and under the same conditions as the public notice and the time CHAPTER I and manner of sale as are prescribed for sales of ADDITIONS TO TAX personal property distrained for the non-payment of taxes. . All other articles subject to excise tax. (c) the term "person". TAX ATION San Beda College of LAW – ALABANG judgment. Disposition of funds Recovered in perform the act in respect of which the Legal Proceedings or Obtained from violation occurs. (b) If the withholding agent is the Government or any of its agencies. pay the tax due thereon as required under the provisions of SEC. liquors. 247. or with willful require. through the Solicitor General.Sales of forfeited chattels and TITLE X removable fixtures shall be effected. or remittance of the tax shall be personally labels may. as the case may acted negligently or in bad faith. cigars. . in the following cases: except as specially provided. prescribed herein.

further. or not for its payment until the full payment thereof. however. or keep any failure to report sales. interest at the rate of twenty percent (20%) per annum. . or any part of such fifty percent (50%) of the tax or of the amount or installment on or before the date deficiency tax. there shall be assessed and underdeclaration of taxable sales. as mentioned herein. That a substantial or any part thereof. Interest. but fails to pay the tax or made. Provided. That information return. and a prescribed therefor. as the term is defined in this Code. or where the been made on the basis of such return Commissioner has authorized an extension of before the discovery of the falsity or fraud: time within which to pay a tax or a deficiency tax Provided.000). Failure of a Withholding Agent to such higher rate as may be prescribed by rules Collect and Remit Tax. which interest shall be liable upon conviction to a penalty equal to the assessed and collected from the date prescribed total amount of the tax not withheld.Any pay: . any payment has prescribed for its payment. as determined by the part thereof unpaid from the date of notice and Commissioner pursuant to the rules and demand until it is paid. (B) In case of willful neglect to file the (D) Interest on Extended Payment. 251. TAX ATION San Beda College of LAW – ALABANG (3) Failure to pay the deficiency tax (1) The amount of the tax due on any within the time prescribed for its return to be filed. or in elects to pay the tax on installment under the case a false or fraudulent return is willfully provisions of this Code.Any person required to and regulations. statement or list. willful neglect. shall. 252.There shall be assessed and (P25.Any deficiency in the abets in any manner to evade any such tax or the tax due. or no return is required. shall payment thereof. keep or supply the same. or account for and remit such tax. of tax due for which no return is interest at the rate prescribed in required to be filed. upon notice and shall render the taxpayer liable for demand by the Commissioner. . SEC. or supply any information required by this in an amount exceeding thirty percent Code or by the Commissioner on the date (30%) of that declared per return. regulations to be promulgated by the Secretary of Finance. in addition to other be subject to the interest prescribed in penalties provided for under this Chapter. there shall be assessed and regulations. Failure of a Withholding Agent to (C) Delinquency Interest. be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos (A) In General. be paid by the substantial underdeclaration of sales. be Subsection (A) hereof. receipts collected interest at the rate hereinabove or income. and remit any tax imposed payment until the amount is fully paid. which interest shall form part of payment. or any surcharge or the amount of tax shown on any interest thereon on the due date return required to be filed under appearing in the notice and demand of the the provisions of this Code or rules Commissioner. or SEC. from the date prescribed for withhold. . account for. on or before Subsection (A) hereof until the amount is the date prescribed for its fully paid. . 249. the penalty to be imposed shall be any installment hereof. person failing to file. That the aggregate amount to SEC. by this Code or who willfully fails to withhold such tax. or aids or (B) Deficiency Interest.In the case of each failure to file an fraudulent return: Provided. .In case of failure to refund Excess Withholding Tax. in case. .If any return within the period prescribed by this person required to pay the tax is qualified and Code or by rules and regulations.000) for each failure: deductions. or payment in the notice of (2) The amount of the tax due for which assessment. collected on any unpaid amount of tax. receipts or income record. Failure to File Certain Information prima facie evidence of a false or Returns. 250. accounted for and remitted. there shall. receipts or income or for overstatement of One thousand pesos (1. . the tax. shall constitute SEC. or a substantial overstatement prescribed on the tax or deficiency tax or any of deductions. or (4) Failure to pay the full or part of (3) A deficiency tax. or the full amount and collected on the unpaid amount. . unless it is shown that such claim of deductions in an amount failure is due to reasonable cause and not to exceeding (30%) of actual deductions.

Thus. As between CASES and DOCTRINES taxation and religion. would be paralyzed for lack of the motive power buildings and improvements used exclusively for to activate and operate it. every (Abra Valley College vs. the government convents. (Lutz vs Araneta 98 Phil 148) (Lladoc vs. the petitioner as purpose cannot be upheld. in addition 101 PHIL 386) to the penalties provided in this Title. is expected to respond in the form of The phrase “used exclusively for educational tangible and intangible benefits intended to purposes” is not limited to property actually improve the lives of the people and enhance their indispensable therefor but extends to facilities. Commissioner of Internal If objective and methods are alike constitutionally Revenue 14 SCRA 292) valid. VI of the attainment. the latter prevails. substituted by the Head of the Diocese. churches. which refers to lots used as home of the priest who preside over the church must include not only the lot actually occupied by the church but also the adjacent ground destined to meet the ordinary incidental uses of man. no reason is seen why the state may not levy taxes to raise funds for their prosecution and The exemption under Sec. Aquino 162 SCRA person who is able to must contribute his share in 106) the running of the government. This symbiotic which are incidental to and reasonably necessary relationship is the rationale of taxation and to the accomplishment of said purposes should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. City of Manila to refund excess withholding tax shall. Hence. what’s being assessed was a limitation. churches. VI of the Constitution only covers property taxes assessed It is said that taxes are what we pay for on cemeteries. It is cemeteries. The government for its part. Therefore. despite the religious purposes. These taxes are property from a singling out of one particular class for taxes as contra-distinguished from excise taxes. the contention of plaintiff tax is not within the exempting provision of the that the Act was promulgated not for public constitution. specifically the right to disseminate religious information. taxation or exemption infringe no Constitutional In the case at bar. be liable to a penalty to the total amount of refunds which It was contended that said ordinances imposing was not refunded to the employee resulting from license fee on the distribution and sale of bibles any excess of the amount withheld over the tax and other religious literature. (Bishop of Nueva Segovia vs. impair the free actually due on their return exercise of religion. 22(3) Art. protection and of the properties. 22(3) Art.” donee’s gift tax not on the properties themselves. (CIR vs Algue 158 SCRA 9) The exemption under Sec. natural reluctance to surrender part of one's hard earned income to the taxing authorities. and parsonages or inherent in the power to tax that a State be free convents. appurtenant thereto and all lands. Without taxes. upon the exercise of the advancement therefore redound greatly to the privilege of receiving the properties. Province of Ilocos Norte 51 PHIL 352 Exemption from payment of land tax. Taxation may be made the Constitution only covers taxes assessed on implement of the state's police power. appurtenant thereto and all lands. and parsonages or civilized society. . to select the subjects of taxation and it has been buildings and improvements used exclusively for repeatedly held that “irregularities which result religious purposes. This kind of general welfare. is liable to pay the said gift tax. TAX ATION San Beda College of LAW – ALABANG employer/withholding agent who fails or refuses (American Bible Society vs. moral and material values. The gift tax was an excise tax upon the use made The sugar industry’s promotion.

specific period. whereas that which Held: is imposed by the ordinance is a typical tax or The filing of the criminal complaint with revenue measure. Memo Circ. the DOJ cannot be construed as a formal assessment. The G. not to On March 1. Inc. 1993. the Commissioner denied private Subject Matter: Criminal Action respondent’s request for reconsideration (reinvestigation on the ground that no formal assessment has been issued which the latter CIR V CA elevated to the CTA on a petition for review. 1987 and tax due and a demand to private respondents for 1988. 1. It did not state a demand or period Facts: for payment. No. file a criminal complaint for tax evasion. in such tax evasion cases. same purpose. dismissed the petition. with the criminal complaint. The CA sustained the CTA decision and Cebu/Cebu Portland Cement Co. 1999) merely contained a computation of respondent’s tax liability. or to do both. or to file a received a subpoena from the DOJ in connection criminal case against the taxpayer. The revenue officer’s affidavit (GR No. CIR had. On July 1. Naga. 1993 respondent was denied by CTA and ordered the to investigate tax liabilities of manufacturers Commissioner to file an answer but did not engaged in tax evasion schemes. 1993. it was not meant to be a notice of Development Corp. (Fortune) as foreign brands subject report as assessment which may be appealed to to a higher tax rate. They joint affidavit examine the books of accounts and other was meant to support the criminal complaint for accounting records of Pascor Realty and tax evasion. On August 3.65 and P3. Such evasion may be instituted. al. and not to private assessment of P7.434. TAX ATION San Beda College of LAW – ALABANG (San Miguel Brewery. Cebu February 20. The examination resulted in the payment thereof. 1995. vs. 128315. 1996 Commissioner’s motion to dismiss on the ground of the CTA’s lack of jurisdiction inasmuch as no Facts: formal assessment was issued against private A task force was created on June 1. respectively. Whether or not the criminal complaint for there is double taxation only when the same tax evasion can be construed as an person is taxed by the same jurisdiction for the assessment. Whether or not an assessment is business tax is a license tax to engage in the necessary before criminal charges for tax business of wholesale liquor in Cebu City. 1995.015.R. 1973) Issues: This is because double taxation is not prohibited by the Constitution.236. the annual 2. criminal complaint for tax evasion against PRDC.35 respondent. private respondents whether to issue an assessment. 119322. and must demand payment of the taxes described therein within a CIR V PASCOR REALTY & DEV’T CORP et. An assessment is not necessary before its president and treasurer before the DOJ. 37-93 which abuse of discretion and lack of jurisdiction on the reclassified certain cigarette brands part of CTA for considering the affidavit/report of manufactured by private respondent Fortune the revenue officers and the endorsement of said Tobacco Corp. In a letter dated. June 29. discretion on On March 23. May 17. June 4. 1995. Private criminal charges can be filed.498. Neither the Tax Code nor the revenue regulations governing the protest assessments provide a specific definition or form Subject Matter: Criminal Action. license tax constitutes a regulatory measure in the exercise of police power. (PRDC) for 1986. Tax of an assessment. Furthermore. No. In the first case. shows that commissioner intended to for 1986 and 1987. A criminal charge respondents filed immediately an urgent request need not only be supported by a prima facie for reconsideration on reinvestigation disputing showing of failure to file a required return. Fortune . instead filed a petition with the CA alleging grave the CIR issued Rev. vs. The fact that the complaint recommendation for the issuance of an was sent to the DOJ. It was addressed to the Secretary of The CIR authorized certain BIR officers to Justice not to the taxpayer. Commissioner filed a issue an assessment. The the tax assessment and tax liability. City of he CTA. Assessment An assessment must be sent to and received by the taxpayer.

duties in the regular course in ensuring that the In the meantime. The CTA found dismissed/set aside or alternatively. On April 1. that AZNAR’s returns were false because the under-declaration of income constituted a Held: deviation from the truth. If there was the ordinary prescriptive period of 5 years (now 3 fraud on willful attempt to evade payment of ad years) would apply under normal circumstances valorem taxes by private respondent through the but whenever the government is placed at a manipulation of the registered wholesale price of disadvantage as to prevent its lawful agent from the cigarettes. 1993. the Commissioner 1993 directing private respondent to submit their ordered the investigation of the case on the basis counter-affidavits. AZNAR appealed to the CTA. 1951. it must have been with the making a proper assessment of tax liabilities due connivance of cooperation of certain BIR officials to false or fraudulent returns intended to evade and employees who supervised and monitored payment of taxes or failure to the returns. 1974) non-payment of the correct income. a motion to suspend but declarations of income were discovered. Meanwhile 256. ruling that the Commissioner to assess AZNAR’s deficiency tax liability of private respondents first be settled income taxes for 1946. the fact that a tax is due must on September 7. The court stated that Fraud cannot be presumed. The trial court granted the petition for a writ of preliminary injunction to enjoin the Issues: preliminary investigation on the complaint for tax Whether or not the right of the evasion pending before the DOJ. The complaint was referred to Facts: the DOJ Task Force on revenue cases which found Matias Aznar died on May 15. there is the 8. of BIR personnel’s equal protection of laws. tax delinquency of P723. the court opined for fraudulent tax evasion can be initiated. private respondents filed reduced to P381. All motions filed thereafter were denied. TAX ATION San Beda College of LAW – ALABANG questioned the validity of said reclassification as correct taxes were paid. private respondent moved for to evade or defeat any tax under Secs. its corporate officers and 9 other corporations and their respective corporate officers for alleged fraudulent tax evasion for AZNAR CASE (August 23. 1947 and 1948 had before any complaint for fraudulent tax evasion prescribed at the time the assessment was made. 1997 NIRC. November 28. complaint and prosecutor’s orders be 1955. correct taxes were paid by Fortune. on August 3. But it filed a verified motion to of the net worth method. that the that AZNAR made substantial under-declarations preliminary investigation be suspended pending of his income as follows: he under-declared his determination by CIR of Fortune’s motion for income for 1946 by 227%.66 which was later January 4. His sufficient basis to further investigate the charges income tax returns from 1945 to 1951 were against Fortune. ad valorem and VAT for 1992. 1952. Substantial under- dismiss or alternatively. complaint with the DOJ against private respondent Fortune. much less evidence. On September 12. 1994. it cannot be correctly asserted within 30 days from receipt. AZNAR’s properties prayer for preliminary injunction praying the CIR’s were placed under distraint and levy. ad Before the tax liabilities of Fortune are valorem and VAT for 1992 with payment due finally determined. for 1948. can be initiated. 1953. the BIR notified AZNAR of a affidavit. Doubting the truth of the A subpoena was issued on September 8. 1993. The CTA. But there is no being violative of the right to due process and allegation. 564% for 1947.032.096. Held: Issue: On the issue of prescription the count Whether the basis of private respondent’s applied the 10-year prescriptive period and ruled tax liability first be settled before any complaint that prescription had not set in. Fortune was assessed deficiency income. 1958.07 upon reinvestigation. 95% reconsideration/reinvestigation of the August 13. On was denied and thus treated as their counter. on September malfeasance at the very least. 486% for 1949. 946% 1950. examined by the BIR. that private respondents have willfully attempted 1993. 254 and reconsideration of said assessment. income that he had reported. the Commissioner filed a first be proved. 1993 resolved that said reclassification was of presumption that BIR personnel performed their doubtful legality and enjoined its enforcement. 490% 1993 assessment of taxes due. a petition for certiorari and prohibition with On February 20. the Fortune’s production activities to see to it that the period of 10 years provided for in the law from .

TAX ATION San Beda College of LAW – ALABANG the discovery of the falsity. fraud or omission even seems to be inadequate and should be the one enforced. .