Professional Documents
Culture Documents
Antonio, Regatta Marie Blasco, Leana Mae Cachapero, Oliver Calingasan, Charlene Calvan, Myrtle Cardino, Gian Carlo Casibang, Ruben Castillo, Beverly Cayaban, Iva Freyritz Galvez, Jerico Angelo Lambino, Kaye Coleen Madridijo, Marlon Mutia, Nabil Panganiban, Victoria Payumo, Margielyn Quilates, Donelle Quinto, Ramiila Revilla, Rodrigo Rosalejos, Chyrs Anne Sampaga, Genelou Sandoval, Camhella Santos, Hanzel Sta. Ana, Micaela Sulit, Dioxenos Taguba, Jezreel Caridad Tan, Ma. Theresa Zulueta, Isabel
able of Contentss
The Professor ..............................................................................................2 Dos ................................................................................................................3 Donts ............................................................................................................4 Tips................................................................................................................5 Samplex Collection of Taxation Law of Atty. Anthony Dy ..................9 Assumimg Youre Correct: The Recit Questions ..................................24 2011 Tax Case Doctrines ..........................................................................57
he Professor
Atty. Anthony Dy
Atty. Dy always comes to class donning a huge smile and starts the meeting by a roll call and shuffling of index cars. Come recit time, students find themselves gripping their seats, waiting for their names to be called, for 30-40 minutes worth of recitation. Merely memorizing the codal provisions and commentaries in Atty. Dys class is not enough. One has to learn the law by heart because he asks very unpredictable and out-of-this-world questions ranging from other law subjects to anything under the sun. Students love his class because despite the surprise quizzes, extended class hours, and his cardinal rule that only handwritten notes are allowed in his class, Atty. Dys witty remarks and anecdotes make law subjects interesting and his class, fun and lively. Atty. Dy teaches Property, Taxation I and II, and Taxation Law Review. He ranked No. 16 in the 2002 Bar Examinations and is currently working at SGV & Co.
os
1.) Come to class early. Atty. Dy checks the class attendance on time. 2.) Try to achieve perfect attendance if you want an additional point on your final grade. 3.) Memorize every single detail, from tax remedies, to requisites for exemptions from income tax to tax rates. Youll never know what Atty. Dy will ask you in your recit. 4.) Never take any topic for granted. Read religiously like theres no tomorrow. 5.) Know your laws. Atty. Dy loves to correlate. 6.) Pray. Really hard. But syempre, study harder
Donts
1.) Never come to class unprepared. Atty. Dy is fond of shuffling class cards. 2.) Do not ask for a class party especially when there are only a few meetings left during the sem. Chances are, your request will not be granted. But if youre persistent, you can still try and experience having your first recit with balloons and videoke in the background.
3.) Do not justify your inability to answer a question with an excuse that you were not present when that particular topic was discussed in class. Atty. Dy will always remember you for that.
4.) If you do not know the answer to a question, dont attempt to invent one unless youre willing to risk your former professors name.
5.) Do not attempt to bluff. You will only look like a fool in the end. Atty. Dy knows who really studied and those who really didnt.
6.) Do not ever make the mistake of having a class boycott. Its going to be an automatic 65 for you.
ips
Tax Tips
1. Expect the class to have on overtime every meet ing. Atty. Dys class usually dismisses the class 30 minutes later than the designated time. 2. The types of questions usually asked are classified as follows: a. Enumeration. You know you are being asked to enumerate when Atty. Dy says, There are three theories of a sound tax system, and they are? b. Defintion. What do you understand by the term/concept of <insert concept or term>?
I. TRUE OR FALSE (a) Any excess in allowable de minimis benefit granted by an employer shall form part of the taxable income of the employee. TRUE. Generally, de minimis benefits granted by an employer to an employee are exempt from tax, except wherein there is a provided threshold amount, and such amount is exceeded. The excess will be subject to tax. (b) Taxes paid by a taxpayer are deductible as expenses for purposes of income taxes. FALSE. Taxes paid or incurred within the taxable year in connection with the taxpayers profession, trade or business, shall be allowed as deductions, except (a) the income tax provided for under the NIRC and (b) income taxes imposed by authority of any foreign country. (NIRC, Sec. 34, C) (c) Charitable contributions made by a taxpayer are deductible in full. FALSE. Charitable contributions which are not actually paid or made to the Philippine government or any political subdivision thereof exclusively for public purposes, or exceeds 10% in the case of an individual or 5% in the case of a corporation, of the taxpayers taxable income are not deductible in full. (Sec 34, H) (d) Political contributions by a corporate taxpayer to the campaign of a Presidentiable are deductible for income tax purposes. FALSE. Contributions to partisan political activities are not deductible. II. OBJECTIVE (a) Distinguish a VAT Automatically zero-rated transaction from VAT Effectively zero-rated transaction. An automatically zero-rated sale refers to a sale of goods, properties and services to a Freeport Zone-registered enterprise by a VAT-registered seller/supplier that is regarded as either an export sale or a foreign currency denominated sale under Section 106 of the Tax Code of 1997. An effectively zero-rated sale, On the other hand, refers to the local sale of goods, properties and services by a VAT-registered person to an entity that was granted indirect tax exemption under special laws or international agreements. Since the buyer is exempt from indirect tax, the seller cannot pass on the VAT and therefore, the exemption enjoyed by the buyer shall extend to the seller, making the sale effectively zero-rated. (b) Give 3 areas of distinction between Donors tax and Value Added Tax. 9
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Income reported
Amount
P1M
Under Sec. 24 D(1), the taxpayer is given the option to treat the gains Qualify if the from sales or other dispositions of land is a real property to the government or capital (6% any of its political subdivisions or CGT-final agencies or to government-owned or tax) or an controlled as a capital gain on sale of ordinary real property classified as capital asset (gross asset or as part of her gross income income-ITR). subject to the graduated tax rate 532%. In either case the proceeds can If the land is an ordinary asset, then form part of the income from the sale shall form gross part of gross income subject to the income. graduated tax rate. My instincts tell me this should be treated as 1) a capital asset in the absence of any other facts that tell it is an ordinary asset. 2) subject to
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2. Jueteng income
P50,000
ITR
3. Proceeds of life insurance policy undertaken by her mother, designated her as a revocable beneficiary
P100,000
Exclusion
P20,000
P30,000
ITR
Gross income to be reported: 50,000 Jueteng income + 30,000 dividend from an offshore real estate company = Php 80,000 b) What are the exemptions to be recognized by Lea in 2009. Pursuant to the amendments of RA 9504, Lea is entitled to: 1. Basic personal exemption of P50,000 given to each individual taxpayer, regardless of status. 2. Additional Exemption for each qualified dependent amounting to P25,000. (Maximum of 4)
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Matchbox Phils is engaged in the selling of cars. Due to slow demand and business slow down, it sells all its properties to Micro-Phil Inc. amounting to Php 10M. It also transfers the warranty liabilities of its customers amounting to Php 20,000.00 whereby in the event that warranty expense exceeds said amount, Matchbox Phils agreed to pay the excess. However, in the event that warranty expense is less than that amount, the balance will belong to Micro-Phil Inc. Are the warranty liabilities subject to 12% VAT? Explain. I think yes. Kindly verify this. Absent ata ako nung tinuro ito. Hehehe. In a tax-free exchange pursuant to Sec. 40(C )(2) of the Tax Code, transfer of real property between two real estate dealers in exchange for shares shall be VAT-exempt. If the exchange is not solely in kind (for example, money plus property was exchanged or shares of stock or vice-versa), then there is no tax-free exchange because the gain is taxed but the loss is not allowed to be deductible. Exchange of property (1) General rule: Except as herein provided, upon the sale or exchange of property, the entire amount of the gain or loss, as the case may be, shall be recognized. (2) Exceptions: No gain or loss shall be reorganized if in pursuance of a plan of merger or consolidation (a) a corporation which is a party to a merger or consolidation, exchanges property solely for stock in a corporation which is a party to the merger or consolidation, (b) a shareholder exchanges stock in a corporation which is a party to the merger or consolidation solely for the stock of another corporation, also a party to the merger or consolidation, or (c) a security holder of a corporation which is a party to the merger or consolidation exchanges his securities in such corporation solely for stock or securities in another corporation, a party to the merger or consolidation. (3) Exchanges not solely in kind; (a) If, in connection with an exchange described in the above exceptions, a shareholder or security holder receives not only stock or securities permitted to be received without recognition of gain or loss, but also money and/or other property, the gain, if any, but not the loss, shall be recognized but in an amount not in excess of the sum of the money and the fair market value of such other property received.
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Mr. Cortez is a non-resident alien based in Hong Kong. During the calendar year 1999, he came to the Philippines several times and stayed in the country for an aggregated period of more than 180 days. How will Mr. Cortez be taxed on his income derived from sources within the Philippines and from abroad? (5%) SUGGESTED ANSWER: Mr. Cortez being a non-resident alien individual who has stayed for an aggregated period of more than 180 days during the calendar year 1999, shall for that taxable year be deemed to be a non-resident alien doing business in the Philippines. Considering the above, Mr. Cortez shall be subject to an income tax in the same manner as an individual citizen and a resident alien individual, on taxable income received from all sources within the Philippines. [Sec. 25 (A) (1), NIRC of 1997] Thus, he is
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Recitation Questions
General Principles
Panganiban, Victoria
Q: What is taxation? Taxation is an inherent power of the sovereign, exercised through the legislature to impose burdens upon subjects and objects within its jurisdiction for raising revenues to carry out the legitimate objects of the government. It is merely a way of apportioning the costs of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Q: Is revenue the only purpose of taxation? What are the other purposes and objectives of taxation? No. The purposes and objectives of taxation are as follows: 1. Revenue 2. Regulation 3. Promotion of General Welfare 4. Reduction of Social Inequality 5. Encourage Economic Growth 6. Protectionism Q: Distinguished tax from license fee 1. A tax is levied in the exercise of the taxing power; license fee emanates from the police power of the State. 2. The purpose of tax is to generate revenue; whereas a license fee is regulatory. 3. The amount of exaction or charge, if it is to be a license fee, must only be of sufficient amount to include expenses of (a) issuing the license; and (b) cost of necessary inspection or police surveillance. Q: How is taxation distinguished from police power? 1. As to Purpose Taxation is levied for the purpose of raising revenue; police power is exercised to promote public welfare through regulations. 2. As to Amount of Exaction In taxation there is no limit; in police power, the exaction should only be such as to cover the cost of regulation, issuance of the license or surveillance. 3. As to Benefits Received In taxation, no special or direct benefit is received by the taxpayer other than the fact that the Government only 24
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Sampaga, Genelou
Q: What are the powers and duties of the Commissioner of Internal Revenue? Q: Can the powers and duties of the Commissioner be delegated? Q: What are the powers and duties of the Commissioner which cannot be delegated? Q: From the decision of the Commissioner of Internal Revenue, what is the remedy of the taxpayer? Under what rule in the Rules of Court?
Income Taxation
Cachapero, Oliver
Q: What is the effect if administrative agencies like the BIR make an interpretation of tax laws through a regulation? ANSWER: Such interpretation must be given much weight and respect since even if it is not a law, it has the efficacy of a law applying the doctrine of subordinate legislation. Q: In a taxicab business, how will you categorize the vehicle used in such business? ANSWER: It cannot be considered as a capital asset because it is a property used in his trade or business. (Sec.39 of NIRC) Q: Which is broader in concept, gross sale or gross income? ANSWER: Gross sale because you have to deduct some allowable items from the gross sale to come up with the gross income. Q: What is tax arbitrage? ANSWER: It is an unsound taxation practice wherein back to back loan is used to take advantage of the lower rate of tax on interest (20%) and a higher rate of tax on interest expense deduction (33%). Q: What are the rates that are needed to be considered in dealing with interests on individuals? ANSWER:
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Casibang, Ruben
Q: What are the governing principles relating to income taxation that are embodied in Section 23 of the Tax Code? a. A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines b. A nonresident citizen is taxable only on income derived from sources within the Philippines c. An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines: provided, that a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker d. An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines e. A domestic corporation is taxable on all income derived from sources within and without the Philippines f. A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines Q: What rules may be inferred from such principles? a. Citizenship principle b. Residence principle c. Source principle Q: What is the importance of knowing the tax treatment of individuals? It is important to know the tax treatment of individuals and corporations because, each and every category has distinct characteristics in a sense that not all income earned by these individuals and corporations are taxable. Some are entitled to preferential rates, some are not. Some income are excluded in computing the gross income and some individuals are entitled to additional exemptions while other are not. Q: Nora Aunor is a known actress. She went to the US and stayed there for several years and earned income. In the middle of the year, say June , she came back and accepted projects in the movie industry. how will her tax on income be treated?
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Quinto, Ramiila
Q: what are the three classification of taxpayers? 1. individual 2. corporations 3. estate and trust Q: who are considered individual taxpayers? 1. resident citizen 2. non resident citizen 3. resident alien 4. non resident alien engaged in business and trade in the Philippines 5. non resident alien not engaged in business and trade in the Philippines 6. aliens employed in multinational companies, offshore banking and petroleum service contractors 7. OCW Q: Gen Principles of Income Taxation 1. A citizen of the Philippines, residing therein in taxable on all income derived from sources within and without the Philippines. 2. A non-resident citizen is taxable only on income derived from sources within the Philippines. 3. An individual citizen of the Philippines who is working and deriving income from abroad as an Overseas Filipino Worker is taxable only on income from sources within the Philippines: Provided that a seaman who is a citizen of the Philippines and receives compensation abroad as a member of the complement
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Payumo, Margielyn Q: Is there a difference between the taxability of dividends received by a resident individual and by a domestic corporation from domestic corporation? Answer: Yes. Dividends received from a domestic corporation by a resident citizen is subject to 10% final tax while those received by a domestic corporation is exempt.
Q: ABC Corp, a domestic corporation declared dividends in favor of X a non-resident alien not engage in trade or business,Y resident alien and EFG Corp a non-resident foreign corporation. Tax implication. Answer:X, Non-resident alien not engage in trade or business in the Philippines - 25% final tax Y, resident alien - 10% final tax EFG non-resident foreign corporation General Rule: Subject to 15% final tax as long as the country in which the NRFC is domiciled allows a tax credit for taxes "deemed paid" in the Philippines equivalent to 15% or does not impose tax on dividends. The fact that the country in which the NRFC is domiciled does not impose any tax on.the dividends received by such corporation should be held as a full satisfaction ofthe condition for the availment of the 15% final tax.
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Quilates, Donelle
1. What are capital assets? 2. In the impeachment proceeding, is the sale of Megaworld of the Bellagio unit to the Chief Justice subject to the capital gains tax? 3. What is the tax base of the capital gains tax from the sale of real property located in the Philippines? Why? 4. What do you mean by tax arbitrage? 5. Is the 33% tax arbitrage reduction an arbitrary amount? ANSWERS: 1. Capital asset is defined in the NIRC in the negative. Meaning, if the asset is not included within the meaning of an ordinary asset, it is considered to be a capital asset. The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business, of a character which is subject to the allowance for depreciation provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer. 2. No, the sale of Megaworld to the Chief Justice is not subject to the capital gains tax on sale of real property located in the Philippines. In order to subject the said transaction to the capital gains tax, it is necessary that the real property be
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Antonio, Regatta
Q: What is an insurance contract? An insurance contract is an agreement whereby one undertakes to indemnify another for any loss, damage or injury arising from a known or contingent event. Q: Are insurance contracts excluded from Income taxes? Yes. Specifically excluded under the NIRC. Q: If, for example, Iggy Arroyo, designated Grace Ibuna, his mistress as the beneficiary in an insurance contract, tax implication? Grace Ibuna, as a mistress, may not be designated as a beneficiary to the insurance contract because she fall sunder the exceptions of void donations under Art. 329 of the NCC. Q: What if Iggy designates Graces sister as beneficiary, can that be done? Yes. She is not among those excepted to receive donations from Iggy. The tax implication would be that Iggy would be liable for donors tax to a stranger. Q: What are the basic principles of an insurance contract? Contract of adhesion, Aleatory contract, Contract of indemnity
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Castillo, Beverly
Q: Kinds of Deductions There are three types of deductions from gross income. These are: a. The itemized deductions in Section 34(A)to (J) and (M) available to all kinds of taxpayers engaged in trade or business or practice of profession in the Philippines; b. The optional standard deduction in Section 34(L) available only to individual taxpayers deriving business, professional, capital gains and passive income not subject to final tax, or other income; and c. The special deductions in Section 37 and 38, both of the Tax Code, and in special laws like the BOI law (E.O.226) ( Mamalateo, Reviewer on taxation, Second Edition 2008). Q: Explain Optional Standard Deduction. This is in lieu of what?
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Q: You own a Taxi Company. One cab driven by your employee was lost due to theft. Can you deduct the value of the car as a loss from the gross income? YES. Ordinary Losses include losses of property connected with trade, business, or profession, if the loss arises from fires, storms, shipwreck or other casualties, or from ROBBERY, THEFT, or embezzlement. Q: What are the essential requisites in allowing necessary and ordinary expenses as deduction? The expense must be a) ordinary or necessary, b) paid/incurred within the taxable year, c) paid/incurred in carrying on a trade or business, d) substantiated with official receipts or other adequate records, e) reasonable, and f) not contrary to law, public policy or morals. If the transaction giving rise to the expense is subject to withholding tax, proof of payment to the BIR must be shown. Q: When is an expense necessary? Q: When is an expense ordinary
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Transfer Taxes
Calvan, Myrtle
Q: Difference between Donors Tax and Estate Tax Estate tax is a tax on the right of the deceased person to transmit his estate to his lawful heirs and beneficiaries. It is not a tax on property. Estate tax is held to be an excise tax imposed on the privilege of transmitting property upon the death of the owner. The estate tax is generated by death and accrues at the time of death. It is governed by the law in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. Gift tax is an excise on the transfer by a living person to another of money or other property without consideration. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it Q: Who is a stranger? In connection with donors tax?
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NIRC Remedies
Sulit, Dioxenos Q: Abatement vs. Compromise? Abatement involves the cancellation of the whole tax liability, while compromise involves a reduction of the tax liability. Q: Grounds for abatement? - A tax or a portion thereof has been unjustly or excessively assessed. - The collection and administrative cost does not justify the amount of tax collected. Q: Period to assess? What is the exact date? If your 2009 income is filed on April 15 2010, when will the prescription period begin and end? For ordinary assessment, the period to assess is 3 years after the last day prescribed by law for filing a return (April 16, the day after April 15). For extraordinary assessment, the BIR may assess or collect without assessment within 10 years from the discovery of the omission, falsity, and fraud. The period to assess begins on April 16, 2010 and will end April 16, 2013. If you file your return before March 16, when will the prescription period to assess start? What is the reason behind the provision if a return is filed before the last day for filing thereof, it shall be considered filed on such last day? The prescription period to assess will still start April 16. If a return is filed before the last day for filing thereof, it shall be considered filed on such last day The reason is that there will be uniformity in the assessment of the BIR; otherwise there will be different starting points upon which the BIR would assess. Q: How do you compute the 3-year prescription period? Do you consider the leap year? The last day to assess is always the 1095th day from April 16 regardless whether its a leap year or not (RMC No. 48-90).
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Madridijo, Marlon
Q: When can the government assess deficiency tax? It depends. The government can assess deficiency tax under normal circumstances; within 3 years reckoned from the time the tax return is actually filed if the same is filed after the date prescribed by law for its filing otherwise counted from the date set by law for its filing, if no return is filed or in case it is filed earlier than that time. Under abnormal circumstances, the government may assess within ten years from the discovery of the non-filing or the filing of fraudulent or false return. Q: What are the circumstances contemplated by abnormal assessment? There are three instances namely; 1) in cases where no return is filed, 2) in case taxpayer filed a fraudulent return, 3) in case taxpayer files an false return Q: Can tax fraud be presumed? For purposes of determining the prescriptive period of assessing deficiency tax, fraud maybe presumed when there is substantial undervaluation of income, which amounts to more than thirty percent of the actual income earned. Q: When should the ten-year period for prescription be reckoned? It should be reckoned from the date of DISCOVERY of the non-filing, or the filing of a false or fraudulent tax return Q: Is there a difference between a false and fraudulent tax return? False return signifies defect in the execution, that which purports to be true and genuine a falsified or fictitious return; Fraudulent return traces the defect with the substance in case the amount reflected as income is substantially undervalued so as to clearly reflect an intention to evade taxes. Fraud may be presumed in case there is undervaluation of income by more than 30 %.
Sampaga, Genelou Q: What is the procedure in the issuance of a Deficiency Tax Assessment? Q: What is a Letter of Authority? Q: What are the instances when a Preliminary Assessment Notice is not required? Q: What happens when the taxpayer fails to respond after receipt of the Preliminary Assessment Notice?
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No civil proceeding involving matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained until and unless an appeal has been previously filed with the CTA. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc. A party adversely affected by a decision or ruling of the CTA en banc may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure.
Panganiban, Victoria
Q: Does Court of Tax Appeals exercise original jurisdiction? Yes. 1. Exclusive original jurisdiction over all criminal offenses arising from violation of NIRC, Tariff and Customs Code and other laws administered by the BIR of the Bureau of Customs where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is one Million pesos (Php1,000,000.00) or more. 2. Exclusive original jurisdiction in tax collection cases involving final and executory assessment for taxes, fees, charges and penalties where the principal amount of taxes, fees, exclusive of charges and penalties, claimed is One Million Pesos (Php1,000,000.00) or more.
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1. General Principles
a. Non Impairment of Contracts In Philippine Amusement and Gaming Corporation (PAGCOR) vs. The Bureau of Internal Revenue, (G.R. No. 172087, March 15, 2011), PAGCOR contends that Section 1 (c) of Republic Act (RA) No. 9337 is null and void ab initio for violating the non-impairment clause of the Constitution. PAGCOR avers that laws form part of, and is read into, the contract even without the parties expressly saying so. PAGCOR states that the private parties/investors transacting with it considered the tax exemptions, which inure to their benefit, as the main consideration and indumenta for their decision to transact or invest with it. PAGCOR argues that the withdrawal of its exemption from corporate income tax by RA No. 9337 has the effect of changing the main consideration and inducement for the transactions of private parties with it and thus violative of the non-impairment clause. This contention lacks merit. The nonimpairment clause, which provides that no law impairing the obligations of contracts shall be passed, is limited in application to laws that derogate from prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties. There is impairment of a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws remedies for the enforcement of the rights of the parties. As regards franchises, Section 11, Article XII of the Constitution provides that no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. In Timbol vs. Sec. of Finance,( G.R. No. 193007; July 19, 2011), Petitioner Timbol has no personality to invoke the non-impairment of contract clause on behalf of private investors in the tollway projects. She will neither be prejudiced by nor be affected by the alleged diminution of return of investments that may result from the value-added tax imposition. She has no interest at all in the profits to be earned under the toll operating agreements. The interest in and right to recover investments solely belongs to private investors. b. Administrative feasibility. In the same case of Timbol vs. Sec. of Finance,( G.R. No. 193007; July 19, 2011) Administrative feasibility is one of the canons of a sound tax system. It simply means 57
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5. Income taxation
a. Power of Commissioner of Internal Revenue In Commissioner of Internal Revenue vs. Filinvest Development Corporation, (G.R. No. 163653, July 19, 2011 ), Section 43 [now Section 50] of the 1993 National Internal Revenue Code (NIRC) provides that. (i)n case of two or more organizations, trades or businesses (whether or not incorporated and whether or not organized in the Philippines) owned or controlled directly or indirectly by the same interests, the Commissioner of Internal Revenue [(CIR)] is authorized to distribute, apportion or allocate gross income or deductions between or among such organization, trade of business, if he determines that such distribution, apportionment or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organization, trade or business, Section 179 of Revenue Regulations No. 2 provides in part that (i)n determining the true net income of a controlled taxpayer, the [CIR] is not restricted to the case of improper accounting, to the case of a fraudulent, colorable, or sham transaction, or to the case of a device designed to reduce of avoid tax by shifting or distorting income or deductions. The authority to determine true net income extends to any case in which either by inadvertence or design the taxable net income in whole or in part, of a controlled taxpayer, is other than it would have been had the taxpayer in the conduct of his affairs been an uncontrolled taxpayer dealing at arms length with another uncontrolled taxpayer. Despite the broad parameters provided, however, the CIRs power of distribution, apportionment or allocation of gross income and deductions under the NIRC and Revenue Regulations No. 2 do not include the power to impute theoretical interests to the taxpayers transactions. Pursuant to Section 28 [now Section 32] of the NIRC, the term gross income is understood to mean all income from whatever source derived, including, but not limited to certain items. While it has been held that the phrase from whatever source derived indicates a legislative policy to include all income not expressly exempted within the class of taxable income under Philippine laws, the term income has been variously interpreted to mean cash received or its equivalent, the amount of money coming to a person within a specific time or something distinct from principal or capital. Otherwise stated, there must be proof of the actual or, at the very least, probable receipt or realization by the controlled taxpayer of the item of gross income sought to be distributed, apportioned or allocated by the CIR. In this case, there is no evidence of actual or possible showing that the advances taxpayer extended to its affiliates had resulted to interests subsequently assessed by the CIR. Even if the Court were to accord credulity to the CIRs assertion that taxpayer had deducted substantial
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6. Tax Remedies
The requisites for claiming a tax credit or a refund of creditable withholding tax are as follows: (1) the claim must be filed with the Commissioner of Internal Revenue within the two-year period from the date of the payment of the tax; (2) it must be shown on the return that the income received was declared as part of the gross income; and (3) the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld. Commissioner of Internal Revenue vs. Mirant (Philippines) Operations, Corporation, G.R. No. 171742; Mirant (Philippines) Operations, Corporation vs. Commissioner of Internal Revenue, G.R. No. 176165; June 15, 2011.
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8. Excise tax
According to Exxonmobil Petroleum and Chemical Holdings, Inc.- Philippine Branch vs Commissioner of Internal Revenue, G.R. No. 180909, January 19, 2011, Excise taxes are imposed under Title VI of the National Internal Revenue Code (Tax Code). They apply to specific goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and to those that are imported. In effect, these taxes are imposed when the following conditions concur: (1) the articles subject to tax belong to any of the categories of goods enumerated in Title VI of the Tax Code and (2) that said articles are for domestic sale or consumption, excluding those that are actually exported. There are certain exemptions to the coverage of excise taxes, such as petroleum products sold to international carriers and exempt entities or agencies such as under section 135 of the Tax Code. Under section 135 of the National Internal Revenue Code (Tax Code), petroleum products sold to international carriers of [Philippine or] foreign registry for their use or consumption outside the Philippines are exempt from excise tax, provided that the petroleum products sold to such international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue. Excise taxes are of the nature of indirect taxes, the liability for payment of which may fall on a person other than he who actually bears the burden of the tax. Accordingly, the party liable for the tax can shift the burden to another, as part of the purchase price of the goods or services. Although the manufacturer/seller is the one who is statutorily liable for the tax, it is the buyer who actually shoulders or bears the burden of the tax, albeit not in the nature of a tax, but part of the purchase price or the cost of the goods or services sold. The proper party to question, or to seek a refund of, an indirect tax, is the statutory taxpayer, or the person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another. Under the case of Commissioner of Internal Revenue vs. Fortune Tobacco Corporation, G.R. No. 180006, September 28, 2011, The provision in Section 1 of Revenue Regulations No. 17-99 (that requires the payment of excise tax actually being paid prior to January 1, 2000 if this amount is higher than the new specific tax rate) clearly went beyond the terms of the law it was supposed to implement and, therefore, entitles the taxpayer to claim a refund of the overpaid excise taxes collected pursuant
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10. Estoppel
Taxpayer assails the validity of the waivers of the statute of limitations on the ground that the waivers were merely attested to by the coordinator for the Commissioner of Internal Revenue (CIR) and he failed to indicate the acceptance or agreement of the CIR, as required under Section 223 of the National Internal Revenue Code. Taxpayer argues that the principle of estoppel cannot be used against it because its payment of the other tax assessment does not signify a clear intention on its part to give up its right to question the validity of the waivers. The Court ruled that estoppel applied to the taxpayer. Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored
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Submitted on: March 29, 2012 San Beda Collge of Law, 2012 CLASS 4C Taxation Law Review by Atty. Anthony Dy