San Beda College of Law 2001 Centralized Bar Operations

Memory Aid
Taxation Law
TABLE O CO!TE!TS
I. GENERAL PRINCIPLES .....................................................................2 A. Power of Taxation.............................................................................2 B. Situs of Taxation...............................................................................4 C. Limitations on the Power of Taxation...............................................4 D. Dou !e Taxation..............................................................................." E. #orms of Es$a%e from Taxation......................................................." #. Tax Enfor$ement an& A&ministration................................................' II. NATI(NAL TA)ATI(N........................................................................* A. In$ome Tax......................................................................................* B. Transfer Taxes..............................................................................+4 C. Ex%an&e& ,a!ue A&&e& Tax..........................................................+' III. L(CAL TA)ATI(N...........................................................................+* I,. REAL PR(PERT- TA)ATI(N........................................................+* ,. TARI## AND C.ST(/S LA0S.......................................................21 ,I. TA) RE/EDIES...............................................................................22 A. .n&er the Nationa! Interna! Re2enue Co&e..................................22 B. .n&er the Lo$a! Go2ernment Co&e..............................................2* C. .n&er the Tariff an& Customs Co&e.............................................31 ,II. C(.RT (# TA) APPEALS............................................................33 ,III. ANNE) A4 C(/PARATI,E TABLE (# TA) RE/EDIES............A5+ I). ANNE) B4 INC(/E TA) TABLES...............................................B5+

"#$E!E%AL &%"!C"&LES
T'E &O(E% O TA)AT"O! *efinitions+
+. Taxation+ Power 6 whi$h the so2erei7n raises re2enue to &efra6 the ne$essar6 ex%enses of the 7o2ernment from amon7 those who in some measure are %ri2i!e7e& to en8o6 its enefits an& must ear its ur&en. 2. Taxes+ Enfor$e& %ro%ortiona! $ontri ution from %ro%erties an& %ersons !e2ie& 6 the State 6 2irtue of its so2erei7nt6 for the su%%ort of 7o2ernment an& for %u !i$ nee&s.

!imits ex$e%t those ex%ress!6 state& in the Constitution. Marshall and Holmes Dictums Reconciled: A!thou7h the %ower to tax is a!most un!imite&; it must not e exer$ise& in an ar itrar6 manner. 0e ha2e $ourts to whi$h %eo%!e ma6 see= re&ress in $ase of irre7u!arities. 3. Benefits5&rote-tion T,eory There exist re$i%ro$a! &uties of %rote$tion an& su%%ort etween State an& its inha itants. Inha itants %a6 taxes an& in return re$ei2e enefits an& %rote$tion from the State.

"mportan-e of Taxes
Taxes are the !ife !oo& of the 7o2ernment an& so shou!& e $a!$u!ate& without unne$essar6 hin&ran$e9 therefore; their %rom%t an& im%erious a2ai!a i!it6 is an im%erious nee&. $eneral %1le+ Taxes are personal to t,e taxpayer# "ll1strations+ +. Cor%oration@s tax &e!inAuen$6 $annot e enfor$e& a7ainst the sto$=ho!&er BCor%orate Entit6 Do$trineC. Exce tion: Sto$=ho!&ers ma6 e he!& !ia !e for un%ai& taxes of a &isso!2e& $or%oration if the $or%orate assets ha2e %asse& into their han&s. 2. Transfer tax on the estate $annot e assesse& a7ainst the heirs. Exce tion: Deirs ma6 e he!& !ia !e for the transfer tax on the estate; if %rior to the %a6ment of the same; the %ro%erties of the &e$e&ent ha2e een &istri ute& to the heirs.

C,ara-teristi-s of Taxes+
+. 2. 3. 4. for$e& $har7e9 7enera!!6 %a6a !e in mone69 !e2ie& 6 the !e7is!ature9 assesse& with some reasona !e ru!e of a%%ortionment9 :. im%ose& 6 the State within its 8uris&i$tion9 ". !e2ie& for %u !i$ %ur%ose.

T,eories or .ases of taxation+

+. Life.lood T,eory Taxes are the !ife !oo& of the nation. 0ithout re2enue raise& from taxation; the 7o2ernment wi!! not sur2i2e; resu!tin7 in &etriment to so$iet6. 0ithout taxes; the 7o2ernment wou!& e %ara!6<e& for !a$= of moti2e %ower to a$ti2ate an& o%erate it. (CIR vs Algue, Inc., et. al.) Illustrations of Lifeblood Theory: a. Co!!e$tion of taxes ma6 not e en8oine& 6 in8un$tion. . Taxes $ou!& not e the su 8e$t of $om%ensation an& set5off. $. A 2a!i& tax ma6 resu!t in &estru$tion of the tax%a6er>s %ro%ert6. 2. !e-essity T,eory Existen$e of a 7o2ernment is a ne$essit6 an& $annot $ontinue without an6 means to %a6 for ex%enses. a. Marshall Dictum / &ower to tax is t,e power to destroy0 ? &es$ri es the un!imite&ness of the %ower an& the &e7ree of 2i7or with whi$h the taxin7 %ower ma6 e em%!o6e& in or&er to raise re2enue. . Oliver Wendell Holmes Dictum /&ower to tax is not t,e power to destroy w,ile t,is -o1rt 23S S1preme Co1rt4 sits0 ? %ower to tax =nows no

!at1re of t,e Taxing &ower

+. attri ute of so2erei7nt6 an& emanates from ne$essit6; re!inAuishment of whi$h is ne2er %resume&9 2. !e7is!ati2e in $hara$ter9 an& 3. su 8e$t to inherent an& $onstitutiona! !imitations.

&1rpose and O.6e-ti7es of Taxation+

+. %e7en1e 2. !on5%e7en1e Bsti!! a tax ut im%ose& un&er its non5re2enue o 8e$ti2eC 8E9+ &%2E& a. %e7u!ation9 . &romotion of 7enera! we!fare9 $. %e&u$tion of so$ia! ineAuit69 &. En$oura7ement of e$onomi$ 7rowth9 an& e. &rote$tionism.

S-ope of legislati7e taxing power 2MS

SA&A84+ +. Su 8e$t to e taxe&; %ro2i&e& it is within its 8uris&i$tion9 2. Amount or rate of the tax9 3. &ur%oses for its !e26; %ro2i&e& it e for %u !i$ %ur%ose9 4. 8in& of tax to e $o!!e$te&9 :. A%%ortionment of the tax9 ". Situs of taxation9 an& '. Metho& of $o!!e$tion.

 Aspe-ts of Taxation+
+. Le26 or im%osition of the tax9 an& 2. Enfor$ement or tax a&ministration

TA)ATI(N

Basi- &rin-iples of a so1nd tax system+

! sound tax system must be: +. suffi$ient to meet 7o2ernmenta! ex%en&itures 2fis-al ade:1a-y49 2. $a%a !e of ein7 effe$ti2e!6 enfor$e& 2administrati7e feasi.ility49 an& 3. ase& on the tax%a6er@s a i!it6 to %a6 2t,eoreti-al 61sti-e4#

P(LICE P(0ER to se!f5 %rote$tion an& se!f5 %reser2ation

E/INENT D(/AIN

TAXATION, POLICE POWER AND

EMINENT DOMAIN DISTING IS!ED TA)ATI(N P(LICE E/INENT P(0ER D(/AIN "ur ose: To fa$i!itate To raise To %romote %u !i$ we!fare the State@s re2enue throu7h nee& of re7u!ations %ro%ert6 for %u !i$ use !mount of exaction: Limite& Not !imite& No exa$tion9 8ust $om%ensation is %ai& 6 the Go2ernment #enefits: Dire$t enefits No s%e$ia! or No &ire$t resu!t in the enefits are &ire$t form of 8ust enefits are re$ei2e&9 $om%ensation re$ei2e& 6 damnum the tax%a6er abs$ue in%uria is attaine& &on' im airment of contracts: Contra$ts ma6 not e im%aire& Effect of transfer: Taxes %ai& e$ome %art of the %u !i$ fun&s

"mpositions not stri-tly -onsidered as taxes+ +. Toll ? amount $har7e& for the $ost an& maintenan$e of %ro%ert6 use&9 2. Compromise penalty ? amount $o!!e$te& in !ieu of $rimina! %rose$ution in $ases of tax 2io!ations9 3. Spe-ial assessment ? !e2ie& on!6 on !an& ase& who!!6 on the enefit a$$ruin7 thereon as a resu!t of im%ro2ements or %u !i$ wor=s un&erta=en 6 7o2ernment within the 2i$init69 4. Li-ense fee ? re7u!ator6 im%osition in the exer$ise of the %o!i$e %ower of the State9 :. Margin fee ? exa$tion &esi7ne& to sta i!i<e the $urren$69 ". C1stom d1ties and fees ? &uties $har7e& u%on $ommo&ities on their ein7 im%orte& into or ex%orte& from a $ountr69 '. *e.t " a tax is not a &e t ut is an o !i7ation im%ose& 6 !aw.

LICENSE #EE $S. TAX

LICENSE #EE #asis: Po!i$e %ower "ur ose: To re7u!ate Limitation: Limite& to $osts of B+C issuin7 the !i$ense9 an& B2C ne$essar6 ins%e$tion or %o!i$e sur2ei!!an$e Effect of non' ayment: /a=es the usiness i!!e7a!. TA) Power of taxation. To raise re2enue. Inherent an& $onstitutiona! !imitations.

Contra$ts ma6 e im%aire&

Contra$ts ma6 e im%aire&

No transfer ut on!6 restrain on the exer$ise of %ro%ert6 ri7hts

Pro%ert6 is ta=en 6 the State u%on %a6ment of 8ust $om%ensation It affe$ts on!6 the %arti$u!ar %ro%ert6 $om%re5 hen&e& Ne$essit6 of the %u !i$ for %ri2ate %ro%ert6

Does not ma=e the usiness i!!e7a!.

Classifi-ation of Taxes+
!s to sub%ect matter +. &ersonal tax ? a!so =nown as $a%ita!i<ation or %o!! tax. 2. &roperty tax ? assesse& on %ro%ert6 of a $ertain $!ass. 3. Ex-ise tax ? im%ose& on the exer$ise of a %ri2i!e7e. 4. C1stom d1ties ? &uties $har7e& u%on $ommo&ities on ein7 im%orte& into or ex%orte& from a $ountr69 :. Lo-al taxes ? taxes !e2ie& 6 !o$a! 7o2ernment units %ursuant to 2a!i&!6 &e!e7ate& %ower to tax9 !s to burden

(co e: It affe$ts a!! %ersons; %ro%ert6; an& ex$ises #asis: Pu !i$ ne$essit6

It affe$ts a!! %ersons; %ro%ert6; %ri2i!e7es; an& e2en ri7hts Pu !i$ ne$essit6 an& ri7ht of State an& of %u !i$

+. *ire-t tax ? in$i&en$e an& im%a$t of taxation fa!! to one %erson an& $annot e shifte& to another. 2. "ndire-t tax ? in$i&en$e an& !ia i!it6 for the tax fa!! to one %erson ut the ur&en thereof $an e %asse& on to another. !s to ur ose +. $eneral taxes ? taxes !e2ie& for or&inar6 or 7enera! %ur%ose of the 7o2ernment. 2. Spe-ial taxes ? !e2ie& for a s%e$ia! %ur%ose. !s to measure of a lication +. Spe-ifi- tax5 tax im%ose& 6 the hea& or num er or 6 some stan&ar& of wei7ht or measurement. 2. Ad 7alorem tax ? tax im%ose& u%on the 2a!ue of the arti$!e. !s to rate: +. &rogressi7e taxes ? rate in$reases as the tax ase in$reases. 2. %egressi7e taxes ? rate in$reases as tax ase &e$reases.

+. fran$hise whi$h must e exer$ise& in the Phi!i%%ines9 2. shares; o !i7ations or on&s issue& 6 a $or%oration or7ani<e& an& $onstitute& in the Phi!i%%ines in a$$or&an$e with its !aws9 3. shares; o !i7ations or on&s issue& 6 a forei7n $or%oration E:F of its usiness is !o$ate& in the Phi!i%%ines9 4. shares; o !i7ations or on&s issue& 6 a forei7n $or%oration if su$h shares; o !i7ations or on&s ha2e a$Auire& a usiness situs in the Phi!i%%ines9 an& :. shares or ri7hts in an6 %artnershi%; usiness or in&ustr6 esta !ishe& in the Phi!i%%ines. 2Se-# 10;< %#A# =;2; or t,e CT%&C

L"M"TAT"O!S O! T'E &O(E% TO TA) A# "n,erent Limitations

T,e following are t,e in,erent limitations on t,e power to tax 2S&"!E4+ +. &u !i$ Pur%ose of taxes9 2. !on5&e!e7a i!it6 of the taxin7 %ower9 3. Territoria!it6 or situs of taxation9 4. Tax exem%tion of 7o2ernment9 :. "nternationa! $omit6

S"T3S O TA)AT"O!
Sit1s of Taxation 5 an inherent man&ate that taxation sha!! on!6 e exer$ise& on %ersons; %ro%erties an& ex$ises within the territor6 of the taxin7 %ower. a-tors t,at determine t,e sit1s of taxation+ +. Nature of the tax9 2. Su 8e$t matter of the tax9 3. Citi<enshi% of the tax%a6er9 4. Resi&en$e of the tax%a6er9 an& :. Sour$e of in$ome

Test in *etermining &1.li- &1rpose

+. whether the thin7 to e furthere& 6 the a%%ro%riation of %u !i$ re2enue is somethin7 whi$h is the &ut6 of the state; as a 7o2ernment; to %ro2i&e 2. whether the %ro$ee&s of the tax wi!! &ire$t!6 %romote the we!fare of the $ommunit6 in eAua! measure.

Appli-ation of Sit1s of Taxation+

+. Tax on persons ? resi&en$e of the tax%a6er9 2. Comm1nity tax ? resi&en$e or &omi$i!e of the %erson taxe&9 3. B1siness tax ? where usiness is $on&u$te&9 4. &ri7ilege or o--1pation tax ? where o$$u%ation is %ursue&9 :. Sales tax ? where transa$tion ta=es %!a$e9 ". %eal property tax ? where %ro%ert6 is !o$ate&9 '. &ersonal property tax ? tan7i !e9 where it is %h6si$a!!6 !o$ate&9 intan7i !e4 su 8e$t to Se$. +14 of CTRP an& %rin$i%!e of mo i!ia seAuuntur %ersonam9 E. "n-ome ? where in$ome is earne& or resi&en$e or $iti<enshi% of the tax%a6er9 *. Transfer tax ? resi&en$e or $iti<enshi% of the tax%a6er or !o$ation of the %ro%ert69 +1. ran-,ise tax ? State whi$h 7rante& the fran$hise9 ++. Tax on -orporations and ot,er 61di-ial entities ? !aw of in$or%oration.

!on5delega.ility of t,e taxing power+

The %ower of taxation is %e$u!iar!6 an& ex$!usi2e!6 !e7is!ati2e. ConseAuent!6; the taxin7 %ower as a 7enera! ru!e ma6 not e &e!e7ate&.

!on5delega.le Legislati7e &ower+

+. se!e$tion of %ro%ert6 to e taxe&9 2. &etermination of the %ur%oses for whi$h taxes sha!! e !e2ie&9 3. fixin7 of the rate of taxation9 4. ru!es of taxation in 7enera!

*elega.le Legislati7e &ower+ +. Authorit6 of the Presi&ent to fix tariff rates; im%ort an& ex%ort Auotas 2Art# >"< Se-# 2=?2@< 1A=B Constit1tion4# 2. Power of !o$a! 7o2ernment units to tax su 8e$t to !imitations as ma6 e %ro2i&e& 6 Lo$a! Go2ernment Co&e 2Art# )< Se-# C< 1A=B Constit1tion4#
Sit1s of taxation as a limitation on t,e power to tax+ BSee the su hea&in7 on Situs of Taxation; su%ra.C

"ntangi.le properties deemed wit, a sit1s

in t,e &,ilippines+

Exemption of t,e $o7ernment from Taxes

As a matter of %u !i$ %o!i$6; %ro%ert6 of the State or an6 of its %o!iti$a! su &i2isions &e2ote& to 7o2ernment uses an& %ur%oses are 7enera!!6 exem%t from taxation.

". Origin

of Appropriation< %e7en1e< and Tariff Bills BArt. ,I; Se$. 24 of the

Constitution9 To!entino 2s. Se$. of #inan$eC.

B# Constit1tional Limitations 1# *1e &ro-ess of Law BSe$.+; Art. III of the

ConstitutionC

'. !on5infringement of the ConstitutionC

of %eligio1s reedom and (ors,ip 2Art. III; Se$. 24

Ameri-an Bi.le So-iety 7s# City of Manila

and Tolentino 7s# Se-# of inan-e r1lings re-on-iled+ The im%osition in the former is a !i$ense tax whi$h is inten&e& to re7u!ate the exer$ise of free&om of re!i7ion whi!e in the !atter is a re2enue tax. 0ith res%e$t to re2enue tax; Con7ress $an $hoose an6one who wi!! e taxe&. Its im%osition is a %o!iti$a! Auestion. E. *elegation of Legislati7e A1t,ority to

%e:1isites+
a. The interests of the %u !i$ 7enera!!6 as &istin7uishe& from those of a %arti$u!ar $!ass reAuire the inter2ention of the State9 an& . The means em%!o6e& must e reasona !6 ne$essar6 to the a$$om%!ishment of the %ur%ose an& not un&u!6 o%%ressi2e.

In a strin7 of $ases; the SC he!& that in or&er

that &ue %ro$ess of !aw wi!! not e 2io!ate&; the im%osition of the tax must not e &one in an ar itrar6; &es%oti$; $a%ri$ious; or whimsi$a! manner.

t,e &resident to ix Tariff %ates< "mport and Export E1otas BArt. ,III;
Se$. 2EB2C of the ConstitutionC

2# E:1al &rote-tion of t,e Law BSe$. +;

Art. III of the ConstitutionC

A# Tax Exemption of &roperties A-t1ally< *ire-tly< and Ex-l1si7ely 3sed for %eligio1s< C,arita.le and Ed1-ational &1rposes BSee Art. ,I; Se$. 2EB3C of the
Constitution9 L!a&o$ 2s. Commissioner9 Pro2in$e of A ra 2s. Dernan&oC. This %ro2ision refers on!6 to %ro%ert6 taxes.

%e:1isites for a 7alid -lassifi-ation+

a. /ust not e ar itrar69 . /ust e ase& u%on su stantia! &istin$tions9 $. /ust e 7ermane to the %ur%oses of !aw9 &. /ust not e !imite& to existin7 $on&itions on!69 an& e. /ust a%%!6 eAua!!6 to a!! mem ers of a $!ass.

10# Ma6ority >ote of all Mem.ers of Congress %e:1ired in Case of a Legislati7e $rant of Tax Exemptions
BArt. ,I; Se$. 2E B4C of the ConstitutionC 11# !on5impairment

of t,e S1preme Co1rtFs G1risdi-tion in Tax Cases GArt.

,III; Se$. 2B+C an& Art. ,III; Se$.:B C of the ConstitutionH

D# 3niformity< E:1ita.ility< and &rogressi7ity of Taxation BArt. ,I; Se$.

2E B+C of the ConstitutionC

12# Tax

*efinitions+
a# 3niformity+ A!! taxa !e arti$!es or =in&s of %ro%ert6 of the same $!ass sha!! e taxe& at the same rate. A tax is uniform when it o%erates with the same for$e an& effe$t in e2er6 %!a$e where the su 8e$t of it is foun&. .# E:1ita.ility+ Taxation is sai& to e eAuita !e when its ur&en fa!!s to those etter a !e to %a6. -# &rogressi7ity+ Rate in$reases as the tax ase in$reases.

Exemption of %e7en1es and Assets of< in-l1ding $rants< Endowments< *onations< or Contri.1tions to< Ed1-ational "nstit1tions BArt. )I,; Se$s. 4B3C an& B4C of
the ConstitutionC

1D# Ot,er &ro7isions of t,e Constit1tion (,i-, are %elated to Taxation

a. Power of the Presi&ent to 2eto item or items in an A%%ro%riation; Re2enue; or Tariff Bi!! 2Art# >"< Se-# 2B 2244 . Ne$essit6 of an a A%%ro%riation efore /one6 ma6 e %ai& out of the Pu !i$ Treasur6 2Art# >"< Se-# 2A 2144 $. Non5a%%ro%riation of Pu !i$ /one6 or Pro%ert6 for the enefit of an6 Chur$h; Se$t; or S6stem of re!i7ion. 2Art# >"< Se-# 2A224 &. Treatment of Taxes Le2ie& for a S%e$ia! Pur%ose.2Art#>"< Se-# 2A 2D44

;# !on5impairment of Contra-ts BArt. III;

Se$. +1 of the ConstitutionC

C# !on5imprisonment for !on5payment of &oll TaxBArt. III; Se$. 21 of the ConstitutionC

e. Interna! Re2enue A!!otments to Lo$a! Go2ernment .nits. 2Art#)< Se-#H4

*O3BLE TA)AT"O!
*efinition+ Taxin7 the same su 8e$t twi$e when it shou!& e taxe& on!6 on$e. A!so =nown as &u%!i$ate taxation.

2. 3. 4. :. ".

Ca%ita!i<ation C Transformation T A2oi&an$e A Exem%tion E e2asion5un!awfu! E 8ey+ ESCATE

A# S,ifting
*efinition+ Pro$ess 6 whi$h tax ur&en is transferre& from statutor6 tax%a6er to another without 2io!atin7 the !aw.

"s do1.le taxation pro,i.ited in t,e

&,ilippinesI !o. There is no $onstitutiona! %rohi ition a7ainst &ou !e taxation in the Phi!i%%ines. It is somethin7 not fa2ore& ut %ermissi !e B &epsi Cola Bottling Co# 7# City of B1t1an; +*"EC.

"mpa-t of taxation? %oint on whi$h tax is ori7ina!!6 im%ose&.

8inds of *o1.le Taxation 2*T4

+. *ire-t d1pli-ate taxationJo.noxio1s ? DT in the o 8e$tiona !e or %rohi ite& sense. REAS(N4 This $onstitutes a 2io!ation of su stanti2e &ue %ro$ess. The same %ro%ert6 is taxe& twi$e when it shou!& e taxe& on!6 on$e. Re$uisites: a. the same %ro%ert6 is taxe& twi$e when it shou!& on!6 e taxe& on$e9 . oth taxes are im%ose& on the same %ro%ert6 or su 8e$t matter for the same %ur%ose9 $. im%ose& 6 the same taxin7 authorit69 &. within the same 8uris&i$tion e. &urin7 the same taxin7 %erio&9 an& f. $o2erin7 the same =in& or $hara$ter of tax. 2# "ndire-t do1.le taxation+ Not !e7a!!6 o 8e$tiona !e. The a sen$e of one or more of the fore7oin7 reAuisites of o noxious DT ma=es the DT in&ire$t.

"n-idents of taxation ? %oint on whi$h the tax ur&en fina!!6 rests or sett!es &own. B# Capitalization *efinition+ Re&u$tion in the %ri$e of the taxe& o 8e$t eAua! to the $a%ita!i<e& 2a!ue of future taxes whi$h the %ur$haser ex%e$ts to e $a!!e& u%on to %a6.

C# Transformation *efinition+ The manufa$turer or %ro&u$er u%on whom the tax has een im%ose&; fearin7 the !oss of his mar=et if he shou!& a&& the tax to the %ri$e; %a6s the tax an& en&ea2ors to re$ou% himse!f 6 im%ro2in7 his %ro$ess of %ro&u$tion; there 6 turnin7 out his units at a !ower $ost.

*# Tax A7oidan-e *efinition+ ex%!oitation

6 the tax%a6er of legally permissi.le a!ternati2e tax rates or metho&s of assessin7 taxa !e %ro%ert6 or in$ome; in or&er to a2oi& or re&u$e tax !ia i!it6.

%eliefs from Effe-ts of *o1.le Taxation

+. Tax ded1-tions Exam%!e4 ,anishin7 &e&u$tions in transfer taxes. 2. Tax -redits An amount a!!owe& as a re&u$tion of the Phi!. In$ome tax on a$$ount of in$ome taxBesC %ai& or in$urre& to forei7n $ountries. It is 7i2en to a tax%a6er in or&er to %ro2i&e a re!ief from too onerous a ur&en of taxation in $ase where the same in$ome is su 8e$t to a forei7n an& Phi!. In$ome tax. This ma6 e $!aime& 6 B+C $iti<ens of the Phi!i%%ines an& B2C &omesti$ $or%orations. 3. Exemptions 4. Treaties wit, ot,er states :. &rin-iple of re-ipro-ity

E# Tax E7asion
*efinition+ .se& 6 the tax%a6er throu7h illegal or fra1d1lent means to &efeat or !essen the %a6ment of the tax.

"ndi-ia of ra1d in Tax E7asion+

+. fai!ure to &e$!are for taxation %ur%oses true an& a$tua! in$ome &eri2e& from usiness for two $onse$uti2e 6ears9 or 2. su stantia! un&er&e$!aration of in$ome tax returns of the tax%a6er for four $onse$uti2e 6ears $ou%!e& with intentiona! o2erstatement of &e&u$tions.

# Tax exemption
*efinition+ A 7rant of immunit6; ex%ress or im%!ie&; to %arti$u!ar %ersons or $or%orations from the o !i7ation to %a6 taxes.

O%MS O ESCA&E %OM TA)AT"O!

T,e following are t,e forms of es-ape

from taxation+ +. Shiftin7 S

8inds of Tax Exemptions

!s to basis:

+. Constit1tional+ Immunities from taxation whi$h ori7inate from the $onstitution 2. Stat1tory+ Those whi$h emanate from !e7is!ation !s to form: +. Express+ Ex%ress!6 7rante& 6 or7ani$ or statute !aw 2. "mplied+ 0hen %arti$u!ar %ersons; %ro%erties; or ex$ises are &eeme& exem%t as the6 fa!! outsi&e the s$o%e of the taxin7 %ro2ision itse!f. !s to extent: +. Total+ Connotes a so!ute immunit6. 2. &artial+ (ne where a $o!!e$tion of a %art of the tax is &is%ense& with.

+. 0here no 2este& ri7ht wi!! e im%aire&9 2. 0here the !aw a!!ows retroa$ti2e a%%!i$ation9 an& 3. If there is a& faith on the %art of the tax%a6er.

Agen-ies "n7ol7ed in Tax Administration+

+. BIR 2. Bureau of Customs 3. Pro2in$ia!; $it6; an& muni$i%a! assessors an& treasurers

&rin-iples $o7erning Tax Exemptions

+. Exem%tions from taxation are hi7h!6 disfa7ored in law# 2. De who $!aims an exem%tion must e a !e to 8ustif6 his $!aim 6 the -learest grant of or7ani$ or statute !aw. If am i7uous; there is no tax exem%tion. Taxation is the ru!e; tax exem%tion is the ex$e%tion. 3. De who $!aims an exem%tion must 8ustif6 that the legislat1re intended to exempt ,im 6 wor&s too %!ain to e mista=en. 4. De who $!aims exem%tion shou!& -on7in-ingly pro7e that he is exem%te&. :. Tax exem%tion must e stri-tly -onstr1ed. ". Tax exem%tions are not pres1med. '. Constitutiona! 7rants of tax exem%tions are self5exe-1ting. E. Tax exem%tions are personal. *. *ed1-tions for in$ome tax %ur%oses %arta=e of the nature of tax exem%tions9 hen$e; the6 are a!so to e stri$t!6 $onstrue& a7ainst the tax%a6er.

&owers and *1ties of t,e B"% 2Se-# 2< CT%&4+ 2A$EE4 +. Assessment an& $o!!e$tion of a!! nationa! interna! re2enue taxes; fees; an& $har7es 2. $i2e effe$t to an& a&minister the su%er2isor6 an& %o!i$e %ower $onferre& to it 6 the Tax Co&e or other !aws 3. Enfor$ement of a!! forfeitures; %ena!ties an& fines in $onne$tion therewith 4. Exe$ution of 8u&7ments in a!! $ases &e$i&e& in its fa2or 6 the Court of Tax A%%ea!s an& the or&inar6 $ourts Assessment *efined+
It is a fin&in7 6 the taxin7 a7en$6 that the tax%a6er has not %ai& his $orre$t taxes. It is a!so a written noti$e to a tax%a6er to the effe$t that the amount state& therein is &ue as a tax; an& $ontainin7 a &eman& for the %a6ment thereof. B1rden of proof in pre5assessment pro-eedings+ There is a %resum%tion of $orre$tness on the %art of the CIR; thus the ur&en of %roof is on the tax%a6er. (therwise; the fin&in7 of the CIR wi!! e $on$!usi2e an& the CIR wi!! assess the tax%a6er. Su$h fin&in7 is $on$!usi2e e2en if CIR is wron7 if the tax%a6er &oes not $ontro2ert.

TA) E! O%CEME!T A!* A*M"!"ST%AT"O! So1r-es of Tax Laws

28ey+ SPEC2TRA BLTC +. Statutes 2. &resi&entia! De$rees 3. Exe$uti2e (r&ers 4. Constitution :. Court De$isions ". Tax Co&es '. %e2enue Re7u!ations E. A&ministrati2e issuan$es *. BIR Ru!in7s +1. Lo$a! Tax (r&inan$es ++. Tax treaties an& $on2entions with forei7n $ountries

&rin-iples $o7erning Tax Assessments+ 2&A***4

+. Assessments are %rima fa$ie presume& $orre$t an& ma&e in 7oo& faith 2. Assessments shou!& e ase& on a$tua! fa$ts 3. Assessment is dis$retionar6 on the %art of the Commissioner 4. The authorit6 2este& in the Commissioner to assess taxes ma6 e de!e7ate&. :. Assessments must e dire$te& to the ri7ht %art6. Means Employed in t,e Assessment of Taxes 2Se-# H< CT%&4+ BBETI5PPEAC +. Examination of tax returns 2. .se of the .est e2i&en$e o taina !e 3. "n2entor6 ta=in7; sur2ei!!an$e an& use of %resum%ti2e 7ross sa!es an& re$ei%ts 4. Termination of taxa !e %erio& :. &res$ri%tion of rea! %ro%ert6 2a!ues ". Examination of an= &e%osits to &etermine the $orre$t amount of the 7ross estate '. A$$re&itation an& re7istration of tax a7ents

%e:1isites of Tax %eg1lations

+. 2. 3. 4. %easona !e 0ithin the authorit6 $onferre& Not $ontrar6 to law /ust e pu !ishe&

%etroa-ti7ity of B"% %1lings+

)eneral Rule: Pros%e$ti2e. Exce tions:

E. &res$ri%tion of a&&itiona! %ro$e&ura! or &o$umentar6 reAuirements.

Examination of "n-ome Tax %et1rns+

)eneral Rule: In$ome tax returns are $onfi&entia!. Exce tions: Ins%e$tion of the return ma6 e authori<e&4 +. u%on written or&er of the Presi&ent of the Phi!i%%ines9 2. un&er #inan$e Re7u!ations no. 33 of the Se$retar6 of #inan$e9 3. when the %ro&u$tion of the tax return is materia! e2i&en$e in a $rimina! $ase wherein the Go2ernment is intereste& in the resu!t9 4. 6 the tax%a6er himse!f9 Cases w,en Commissioner may Assess Taxes on t,e Basis of t,e Best E7iden-e O.taina.le+ +. a %erson fai!s to fi!e a return or other &o$ument at the time %res$ri e& 6 !aw 2. he wi!!fu!!6 or otherwise fi!es a fa!se or frau&u!ent return or other &o$ument

3. fai!ure to %a6 the tax within the time %res$ri e& for its %a6ment 4. fai!ure to %a6 the fu!! amount of tax shown on an6 return reAuire& to e fi!e& un&er the Tax Co&e or re7u!ations or the fu!! amount of tax &ue for whi$h no return is reAuire& to e fi!e&; on or efore the &ate %res$ri e& for its %a6ment

""# !AT"O!AL TA)AT"O!

"!COME TA)
*E "!"T"O!S
1# "n-ome Tax 5 tax on in$ome; whether 7ross or net. B2' Am. Iur. 31EC 2# "n-ome 5 a!! wea!th whi$h f!ows into the tax%a6er other than as a mere return of $a%ita!. D# Capital 5 resour$e of %erson whi$h $an use& in %ro&u$in7 7oo&s an& ser2i$es. e

$ro1nds for Termination of Taxa.le &eriod+ 2C%"&4 +. the tax%a6er is retirin7 from usiness su 8e$t to tax 2. he inten&s to !ea2e the Phi!i%%ines or remo2e his %ro%ert6 therefrom 3. he hi&es or -on$ea!s his %ro%ert6 4. he performs an6 a$t ten&in7 to o stru$t the %ro$ee&in7s for the $o!!e$tion of the tax for the %ast or $urrent Auarter or 6ear or ren&ers the same tota!!6 or %art!6 ineffe$ti2e un!ess su$h %ro$ee&in7s are e7an imme&iate!6.

%e:1isites for "n-ome to .e Taxa.le+

+. 7ain or %rofit 2. rea!i<e& or re$ei2e& 3. not ex$!u&e& 6 !aw or treat6

TESTS O! TA)AB"L"T9 O "!COME

+. low of (ealt, Test 5 whether an6 7ain or the f!ow of wea!th %rofit was &eri2e& from the transa$tion. 2. %ealization Test 5 un!ess the in$ome is &eeme& Jrea!i<e&;J there is no taxa !e in$ome. 3. E-onomi-5Benefit &rin-iple % f!ow of wea!th rea!i<e& is taxa !e on!6 to the extent that the tax%a6er is e$onomi$a!!6 enefite&.

"nstan-es w,en t,e Commissioner may in:1ire into BanK *eposits+ +. 0hen &eterminin7 the 7ross estate of a &e$e&ent9 2. 0here a tax%a6er offers to $om%romise his tax !ia i!it6 on the 7roun& of finan$ia! ina i!it6 in whi$h $ase he must su mit a wai2er.

"nspe-tion and Examination of BooKs and

%e-ords< (,en Made )eneral Rule: Sha!! e ma&e on$e in a taxa !e 6ear. Exce tions: +. in $ases of frau&; irre7u!arit6; or mista=es 2. when tax%a6er reAuests a rein2esti7ation 3. to 2erif6 $om%!ian$e with withho!&in7 tax !aws an& re7u!ations 4. to 2erif6 $a%ita! 7ains tax !ia i!ities :. u%on or&er of the Commissioner

CLASS" "CAT"O! O TA)&A9E%S+

a. "ndi7id1als +C $iti<ens + +.+. resi&ent $iti<ens BRCC 2 +.2. non5resi&ent $iti<ens BNRCC +.3 (C0K 2C a!iens I.+ resi&ent a!iens BRAC I.2 non5resi&ent a!iens 2.2.+.en7a7e& in tra&e or usiness within the Phi!s. BNRAETBC 3 2.2.2.Not en7a7e& in tra&e or usiness within the Phi!i%%ines BNRANETBC . Corporations

2CL S1r-,arge on t,e Amo1nt of t,e Tax

*1e is imposed in t,e ollowing Cases+ +. fai!ure to fi!e an6 return reAuire& un&er Tax Co&e or re7u!ations on the &ate %res$ri e& 2. fi!in7 a return with the wron7 interna! re2enue offi$er

+C Domesti$ BDCC 2C #orei7n 2.+ resi&ent forei7n $or%oration BR#CC 2.2 non5resi&ent forei7n $or%oration BNR#CC $. Estates &. Tr1sts

or en7a7in7 in %etro!eum; $oa!; 7eotherma! an& other ener76 o%erations %ursuant to an o%eratin7 or $onsortium a7reement un&er a ser2i$e $ontra$t with the Go2ernment9 2. 8oint5sto$= $om%anies9 3. 8oint a$$ounts B$uentas en %arti$i%a$ionC 4. asso$iations9 or :. insuran$e $om%anies ?Se-# 222B4@. D. A $eneral &rofessional &artners,ip means4 aC a %artnershi% forme& 6 %ersons for the so!e %ur%ose of exer$isin7 their $ommon %rofession9 an& C no %art of the in$ome of whi$h is &eri2e& from en7a7in7 in an6 tra&e or usiness GSe$. 22BBCH. - if t,e re:1irements are met< it is exempt from in-ome taxation. I. *omestiCorporation ?$reate& or or7ani<e& in the Phi!s. or un&er its !aw G Se$. 22BCCH oreign -orporation ? a $or%oration whi$h is not &omesti$ ?Se-# 222*4@

3nder %#A# =;2; or t,e CT%&+

A# A non5resident -itizen means< a ilipino -itizen+ +. who esta !ishes to the satisfa$tion of the Commissioner the fa$t of their %h6si$a! %resen$e a roa& with a &efinite intention to resi&e therein9 2. who !ea2e the Phi!i%%ines &urin7 the taxa !e 6ear to resi&e a roa&; either as an immi7rant or for em%!o6ment on a %ermanent asis9 3. who wor= an& &eri2e in$ome from a roa& an& whose em%!o6ment thereat reAuires them to e %h6si$a!!6 %resent a roa& most of the time &urin7 the taxa !e 6ear9 4. who are %re2ious!6 $onsi&ere& as a non5 resi&ent an& who arri2e in the Phi!i%%ines at an6time &urin7 the taxa !e 6ear to resi&e thereat %ermanent!6 sha!! e $onsi&ere& non5resi&ent for the taxa !e 6ear in whi$h he arri2es in the Phi!i%%ines with res%e$t to his in$ome &eri2e& from sour$es a roa& unti! the &ate of his arri2a! 2Se-#22e< CT%&#4 B. A resident alien means an in&i2i&ua! whose resi&en$e is within the Phi!i%%ines an& who is not a $iti<en thereof. GSe-#22fH C. A non5resident alien means an in&i2i&ua! whose resi&en$e is not within the Phi!i%%ines an& who is not a $iti<en thereof. GSe-#22$H D. The term trade or .1siness in$!u&es the %erforman$e of the fun$tions of as a %u !i$ offi$e. GSe-# 22SH E. The term trade< .1siness or profession sha!! not in$!u&e %erforman$e of ser2i$es 6 the tax%a6er as an em%!o6ee. GSe-# 22 CCH #. A non5resident alien indi7id1al who sha!! $ome to the Phi!i%%ines an& sta6 therein for an a77re7ate %erio& of more than +E1 &a6s &urin7 an6 $a!en&ar 6ear sha!! e &eeme& a non5resi&ent a!ien &oin7 usiness in the Phi!i%%ines Se$tion 22BGC notwithstan&in7 ?Se-# 2C2A4214@ G. The term -orporation sha!! in$!u&e4 +. Partnershi%s; no matter how forme& or $reate&; e&ce't BiC 7enera! %rofessiona! %artnershi%s an& BiiC a 8oint 2enture or $onsortium forme& for the %ur%ose of un&erta=in7 $onstru$tion %ro8e$ts

I.

L. %esident oreign Corporation ? en7a7e& in tra&e or usiness within the Phi!i%%ines ?Se-# 222'4@ L. !on5resident oreign Corp# ? not en7a7e& in tra&e or usiness within the Phi!i%%ines ?Se-# 222"4@ The in$ome of taxa !e estates an& trusts sha!! e taxe& in the same manner as an6 other in&i2i&ua! tax%a6er. GSe$. "1 BACH

O!L9 %ES"*E!T C"T"ME!S and *OMEST"C CO%&O%AT"O!S are taxa.le for in-ome deri7ed from so1r-es wit,in and wit,o1t t,e &,ilippines# All ot,er in-ome taxpayers are taxa.le only for in-ome deri7ed from so1r-es wit,in t,e &,ilippines#

8"!*S O "!COME TA)ES 3!*E% %#A# =;2;+

B+C B2C B3C B4C Net In$ome Tax Gross In$ome Tax #ina! In$ome Tax Preferentia! Rates or S%e$ia! Rates of In$ome Tax B:C Im%ro%er!6 A$$umu!ate& Earnin7s Tax B"C /inimum Cor%orate In$ome Tax B'C (%tiona! $or%orate In$ome tax

!ET "!COME TA)

*efinition+ /eans 7ross in$ome !ess &e&u$tions an&Mor %ersona! an& a&&itiona! exem%tions 2Se-# D1< %A =;2;4

3.

NET INCOME TAX #ORM LA

Entire In$ome Less4 Ex$!usions an& In$ome su 8e$t to #ina! TaxBe.7. Passi2e In$omeC Gross In$ome Less4 De&u$tions Ban&Mor a&&@! exem%tions; if a%%!i$a !eC Net Taxa !e In$ome ) Tax Rates Net In$ome Tax Due Less4 Tax Cre&it; if an6 Tax Sti!! &ue; if an6

4.

:. ". '.

&C %!an a%%ro2e& 6 the BIR 2%#%# 25 A=4N se%aration %a6 e$ause of &eath; si$=ness; or other %h6si$a! &isa i!it6 or for an6 $ause e6on& the $ontro! of the offi$ia! or em%!o6ee9 so$ia! se$urit6 enefits; retirement 7ratuities; %ensions an& other simi!ar enefits re$ei2e& 6 $iti<ens an& a!iens who $ome to resi&e %ermanent!6 here from forei7n sour$es %ri2ate or %u !i$9 enefits &ue to resi&ents un&er the !aws of the ..S. a&ministere& 6 the ..S. ,eterans A&ministration SSS enefits9 an& GSIS enefits.

Mis-ellaneo1s "tems
+. Passi2e in$ome &eri2e& 6 forei7n 7o2ernment in the Phi!i%%ines9 2. In$ome &eri2e& from an6 %u !i$ uti!it6 or from the exer$ise of an6 7o2ernmenta! fun$tion9 3. Pri<es an& awar&s ma&e %rimari!6 in re$o7nition of re!i7ious; $harita !e; s$ientifi$; e&u$ationa!; artisti$; !iterar6; or $i2i$ a$hie2ement BC2LARESC4 %e:1isites+ a. re$i%ient se!e$te& without an6 a$tion on his %art9 . re$i%ient not reAuire& to ren&er su stantia! future ser2i$es. 4. Pri<es an& awar&s 7rante& to ath!etes in s%orts $om%etitions an& san$tione& 6 their nationa! s%orts asso$iation 9 :. +3th month %a6 an& other enefits u% to P31;111.119 ". GSIS;SSS; /e&i$are an& union &ues of in&i2i&ua!s9 '. Gains &eri2e& from &e t se$urities with a maturit6 of more than : 6ears9 E. Gains from re&em%tion of shares in /utua! #un&

$%OSS "!COME
*efinition+ In$!u&es ut not !imite& to the fo!!owin7 4 +. $om%ensation9 2. usiness in$ome9 3. 7ains form &ea!in7s in %ro%ert69 4. interests9 :. rents9 ". ro6a!ties9 '. &i2i&en&s9 E. annuities9 *. %ri<es an& winnin7s9 +1. %ensions9 ++. %artner@s share in the net in$ome of the 7enera! %rofessiona! %artnershi% 2Se-# D2< CT%&4

8E94 D BIG CARNPO

Ex-l1sions from $ross "n-ome+ +. %ro$ee&s of !ife insuran$e 2. 3. 4. :. ". '.

N(TE4 if the %ro$ee&s are retaine& 6 the insurer; the interest thereon is taxa !e9 Return of %remium9 Gift; eAuest or &e2ise9 N(TE4 in$ome therefrom is taxa !e Com%ensation for in8uries or si$=ness9 In$ome exem%t un&er Treat69 Retirement enefits; %ension; 7ratuities; et$. /is$e!!aneous items

*E*3CT"O!S *efinition+ Items or amounts whi$h the !aw

a!!ows to e &e&u$te& from 7ross in$ome in or&er to arri2e at the taxa !e in$ome.

%etirement Benefits< &ension< $rat1ities< Et-#+ +. those &eri2e& un&er R.A. '"4+ B%ertains to %ri2ate firms without retirement trust fun&C9 2. those re$ei2e& 6 offi$ia!s an& em%!o6ees of %ri2ate em%!o6ers in a$$or&an$e with a reasona !e %ri2ate enefit %!an9 %e:1isites4 aC in the ser2i$e of the same em%!o6er for at !east +1 6ears9 C at !east :1 6ears o!&9 $C must e a2ai!e& of on!6 on$e

8inds of *ed1-tions+
+. Optional standard ded1-tions ?+1F of the 7ross in$ome. 2# "temized ded1-tions BaC or&inar6 A!* ne$essar6 ex%enses B C interests B$C taxes B&C !osses BeC a& &e ts BfC &e%re$iation of %ro%ert69

B7C BhC BiC B8C

&e%!etion of oi! an& 7as we!!s an& mines9 $harita !e an& other $ontri utions9 resear$h an& &e2e!o%ment9 %ension trust $ontri utions of em%!o6ees9 an& B=C %remium %a6ments on hea!th an&Mor hos%ita!i<ation insuran$e 3. &ersonal and additional exemptions

-# TA)ES+

%e:1isites to e &e&u$ti !e4

+. must e in $onne$tion with tax%a6er@s usiness9 2. tax must e im%ose& 6 !aw on ; an& %a6a !e 6; tax%a6er9 an& 3. %ai& or in$urre& &urin7 the taxa !e 6ear.

Ex-eptions+
4. Spe-ial ded1-tions O a%%!i$a !e on!6 to Insuran$e $om%anies; whether &omesti$ or forei7n# 2Se-# DB< CT%&4# a# O%*"!A%9 E)&E!SES+ A!* !ECESSA%9 +. 2. 3. 4. :. in$ome tax9 estate an& &onor@s tax9 s%e$ia! assessments9 ex$ess e!e$tri$ $onsum%tion tax9 forei7n in$ome tax; war %rofits an& ex$ess %rofits tax; if the tax%a6er ma=es use of tax $re&it9 an& ". fina! taxes; ein7 in the nature of in$ome tax. - Taxes a!!owe& as &e&u$tions; when refun&e& or $re&ite&; sha!! e in$!u&e& as %art of 7ross in$ome in the 6ear of re$ei%t to the extent of the in$ome tax enefit of sai& &e&u$tion BTax Benefit Ru!eC. - #or NRAETB an& R#C; taxes %ai& or in$urre& are a!!owe& as &e&u$tions on!6 if an& to the extent that the6 are $onne$te& from in$ome within the Phi!i%%ines. d# LOSSES+

!e-essary Expense 5 a%%ro%riate an& he!%fu! in the &e2e!o%ment of tax%a6er>s usiness.

Ordinary Expense 5 norma! or usua! in the !ine of usiness.

%e:1isites of B1siness Expense to .e *ed1-ti.le+ +. or&inar6 an& ne$essar69 2. %ai& or in$urre& wMin the taxa !e 6ear9 3. %ai& or in$urre& in $arr6in7 on a tra&e or usiness9 4. su stantiate& with offi$ia! re$ei%ts or other a&eAuate re$or&s.

Capital Expendit1re+
An ex%en&iture that enefits not on!6 the $urrent %erio& ut a!so future %erio&s. It is not &e&u$ti !e ut &e%re$ia !e; E)CE&T; if the tax%a6er is a non5%rofit %ro%rietar6 e&u$ationa! institution whi$h ma6 e!e$t either to &e&u$t the $a%ita! ex%ense or &e%re$iate it.

%e:1isites to e &e&u$ti !e+ +. a$tua!!6 sustaine&9 2. $onne$te& with the usiness; tra&e or %rofession9 an& 3. not $om%ensate& 6 insuran$e or otherwise.
T,e following losses are s1.6e-t to spe-ial r1les 1nder t,e CT%& 2taKe note of t,e pertinent pro7isions44 +. Ca%ita! !osses 2. Se$urities e$omin7 worth!ess 3. 0ash sa!es 4. 0a7erin7 !osses :. A an&onment !osses ". Losses of mines other than oi! an& 7as we!!s e# BA* *EBTS

.# "!TE%EST+

%e:1isites to e &e&u$ti !e4

+. &e t e!on7s to the tax%a6er9 2. &e t must e re!ate& to the usiness or %rofession of the tax%a6er9 3. interest shou!& e !e7a!!6 &ue9 4. interest %ai& or a$$rue& &urin7 the taxa !e 6ear.

%e:1isites to e &e&u$ti !e4

+. ,a!i& an& su sistin7 &e t9 2. De t must e a$tua!!6 as$ertaine& to e worth!ess an& un$o!!e$ti !e9 3. ( !i7ation is not etween re!ate& %arties BSe$. 3" CTRPC9 4. De t is ex%ense& within the 6ear9 an& :. De t is $onne$te& with %rofession; tra&e or usiness.

"nterest &ayments not *ed1-ti.le4

+. 2. 3. 4. :. interest %ai& on in&e te&ness to finan$e %etro!eum ex%!orations9 interest on transa$tions 6 re!ate& %arties Btransa$tions5at5arms5!en7thC4 interest to %ur$hase or $arr6 tax5exem%t o !i7ations9 &i2i&en& %a6ments $annot e &e&u$te& as interest9 an& interest %ai& in a&2an$e thru &is$ount or otherwise; E)CE&T that it is &e&u$ti !e in the 6ear in&e te&ness is %ai&.

E:1ita.le *o-trine of Tax Benefit

A re$o2er6 of a& &e ts %re2ious!6 &e&u$te& from 7ross in$ome $onstitutes taxa !e in$ome if in the 6ear the a$$ount was written off; the &e&u$tion resu!te& in a tax enefit.

f#

*E&%EC"AT"O!+

&e%en&ents re7ar&!ess of a7e are in$a%a !e of se!f5su%%ort e$ause of menta! of %h6si$a! &efe$t.

%e:1isites to e &e&u$ti !e4

+. /ust e reasona !e9 2. /ust e on %ro%ert6 use& in the $on&u$t of the usiness9 3. /ust e ex%ense& &urin7 the taxa !e 6ear9 g# *E&LET"O! O O"L A!* $AS (ELLS A!* M"!ES - same reAuisites as &e%re$iation ,# C'A%"TABLE CO!T%"B3T"O!S A!* OT'E%

Clarifi-atory "ll1strations+
+. If on!6 +* 6ears o!& ut marrie&; not Aua!ifie& as a &e%en&ent. 2. E2en if 2: 6ears o!& ut %h6si$a!!6 in$a%a$itate&; Aua!ifie& as a &e%en&ent. 3. De%en&ent &oes not in$!u&e the %arents; rothers an& sisters of the tax%a6er. 4. If there is an6 $han7e of status at an6 time &urin7 the taxa !e 6ear; the !aw ex%ress!6 fa2ors the tax%a6er. :. #or a NRAETB; on!6 to the extent a!!owe& 6 his $ountr6 to #i!i%inos not resi&in7 therein; ut not to ex$ee& the a o2e amounts. A&&itiona!!6; he must fi!e a true an& a$$urate return of the tota! in$ome re$ei2e& 6 su$h NRAETB from a!! sour$es within the Phi!i%%ines.

&artial *ed1-tion+
not in ex$ess of :F of taxa !e in$ome in $ase of a $or%oration not in ex$ess of +1F of the taxa !e in$ome in $ase of an in&i2i&ua!

*ed1-ti.le in 1ll+
+. Donations to the 7o2ernment 2. Donation to $ertain forei7n institutions or internationa! or7ani<ations. 3. Donations to $ertain a$$re&ite& NG(@s .

OT'E% "!COME TA)ES AS *E "!E*

1# inal "n-ome Tax ? is &eri2e& 6 mu!ti%!6in7 the tax rate on the %arti$u!ar in$ome su 8e$t to a fina! in$ome tax. Thus; the in$ome su 8e$t to fina! in$ome tax is no !on7er su 8e$t to the net in$ome tax9 otherwise; there wou!& e a 2io!ation of %rohi ite& &ou !e taxation. A%%!i$a !e to %assi2e in$ome an& from sour$es &eri2e& from within the Phi!i%%ines as &etermine& un&er Se-# ;2 of t,e CT%& . De&u$tions an&Mor %ersona! an& a&&itiona! exem%tions are not a!!owe&.

&E%SO!AL E)EM&T"O!S Amo1nts of &ersonal Exemptions 2Se-# DC

of CT%&4+ +. Sin7!e in&i2i&ua! or marrie& in&i2i&ua! 8u&i$ia!!6 &e$ree& as !e7a!!6 se%arate& with no Aua!ifie& &e%en&ents4 P21;111 2. Dea& of the fami!64 P2:;111 3. Ea$h marrie& %erson4 P32;111

'ead of t,e amily+

+. .nmarrie& or !e7a!!6 se%arate& %erson with one or oth %arents; or one or more rothers or sisters; or one or more !e7itimate; re$o7ni<e& natura! or !e7a!!6 a&o%te& $hi!&ren !i2in7 with an& &e%en&ent u%on the tax%a6er for their $hief su%%ort9 an& 2. 0here su$h rother M sister or $hi!&ren are not more than 2+ 6ears of a7e; unmarrie& an& not 7ainfu!!6 em%!o6e&; or where su$h &e%en&ents re7ar&!ess of a7e; are in$a%a !e of se!f ? su%%ort e$ause of menta! or %h6si$a! &efe$t.

2# "n-ome s1.6e-t to &referential or Spe-ial %ates ? here; the in$ome &eri2e& 6 a %arti$u!ar in&i2i&ua! or $or%oration e!on7in7 to a $!ass of in$ome tax%a6er is su 8e$t to either a %referentia! or s%e$ia! rate. D# "mproperly A--1m1lated Earnings Tax ? a tax eAui2a!ent to +1F of the im%ro%er!6 a$$umu!ate& taxa !e in$ome of e2er6 $or%oration forme& or a2ai!e& of for the %ur%ose of a2oi&in7 the in$ome tax with res%e$t to its shareho!&ers or the shareho!&ers of an6 other $or%oration; 6 %ermittin7 earnin7s an& %rofits to a$$umu!ate instea& of ein7 &i2i&e& or &istri ute&. ;# Minim1m Corporate "n-ome Tax ? A tax at the rate of 2F ase& on 7ross in$ome im%ose& on &omesti$ an& resi&ent forei7n $or%orations not $o2ere& 6 a s%e$ia! in$ome tax s6stem; e7innin7 the 4th taxa !e 6ear in whi$h su$h $or%oration $ommen$e& its usiness o%erations. "t is imposed w,ene7er s1-, -orporation ,as 2a4 <ero or ne7ati2e net taxa !e in$ome9 or 2.4 the amount of minimum $or%orate in$ome tax is

Additional Exemption for *ependents+

PE;111 for ea$h &e%en&ent not to ex$ee& 4.

E1alifi-ations of a dependent+
+. !e7itimate; i!!e7itimate or !e7a!!6 a&o%te& $hi!& of the tax%a6er 2. $hief!6 &e%en&ent u%on an& !i2in7 with the tax%a6er 3. not more than 2+ 6ears o!&; unmarrie& AND not 7ainfu!!6 em%!o6e& or where su$h

7reater than the norma! in$ome tax &ue from su$h $or%oration. C# Optional Corporate "n-ome Tax 5 The Presi&ent; u%on re$ommen&ation of the Se$retar6 of #inan$e ma6; effe$ti2e Ian. +; 2111; a!!ow $or%orations the o%tion to e taxe& at +:F of 7ross in$ome su 8e$t to the fo!!owin7 $on&itions4 +C A tax effort ratio of 21F of GNP9 2C A ratio of 41F of in$ome tax to tota! tax re2enue9 3C A ,AT tax effort of 4F of GNP 4C A (.*F ratio of Conso!i&ate& Pu !i$ Se$tor #inan$ia! Position to GNP. N.B.4 A2ai!a !e on!6 to firms whose ratio of $ost of sa!es to 7ross sa!es or re$ei%ts from a!! sour$es &oes not ex$ee& ::F.

ne$essar6 for 7o2ernment to &etermine the amount of tax. There is %ain of %er8ur6 if not $orre$t. &ersons %e:1ired to %et1rn+

ile "n-ome Tax

"!COME TA) "!C"*E!CE O! SALES O% E)C'A!$ES O &%O&E%T9 Sale on Ex-,ange of Ordinary Assets
Genera! ru!es of in$ome taxation a%%!6 to oth as to the 7ain an& as to the !oss. Transa-tion %es1lting in Taxa.le $ains .1t !on5%e-ognition of Losses a. Sa!e or ex$han7e etween re!ate& %arties9 . 0ash sa!es 6 non5&ea!ers of se$urities an& when not su 8e$t to the sto$= transfer tax9 $. Ex$han7es not so!e!6 in =in& in mer7er an& $onso!i&ation9 an& &. Sa!es or ex$han7es that are not at arms !en7th.

A# "ndi7id1al +. Resi&ent $iti<en9 2. Non5resi&ent $iti<en on in$ome from within the Phi!.9 3. Resi&ent a!ien on in$ome from within the Phi!.9 4. NRAETB on in$ome from within the Phi!. :. An in&i2i&ua! B$iti<ens M a!iensC en7a7e& in usiness or %ra$ti$e of a %rofession within the Phi!. re7ar&!ess of the amount of 7ross in$ome9 ". In&i2i&ua! &eri2in7 $om%ensation in$ome $on$urrent!6 from two or more em%!o6ers at an6 time &urin7 the taxa !e 6ear9 '. In&i2i&ua! whose %ure $om%ensation in$ome &eri2e& from sour$es within the Phi!. ex$ee&s P"1;111. B# Taxa.le Estate and Tr1st C# $eneral &rofessional &artners,ip *# Corporation +. Not exem%t from in$ome tax9 2. Exem%t from in$ome tax un&er Se$. 31 of NIRC ut has not shown %roof of exem%tion. "ndi7id1als Exempt rom iling "n-ome Tax %et1rn+ +. In&i2i&ua! whose 7ross in$ome &oes not ex$ee& tota! %ersona! an& a&&itiona! exem%tions9 2. In&i2i&ua! with res%e$t to %ure $om%ensation in$ome &eri2e& from sour$es within the Phi!s.; the in$ome tax on whi$h has een $orre$t!6 withhe!&9 3. In&i2i&ua! whose so!e in$ome has een su 8e$te& to fina! withho!&in7 in$ome tax9 4. In&i2i&ua! who is exem%t from in$ome tax.

Sale or Ex-,ange of %eal &roperty< and S,ares of Sto-Ks of *omesti- Corporation 'eld as Capital Assets S1.6e-t to Capital $ains Tax !s to individuals and domestic cor orations +. On real property ? ea$h in&e%en&ent transa$tion is su 8e$t to the fina! tax of "F on the 7ross se!!in7 %ri$e or the fair mar=et 2a!ue at the time of sa!e; whi$he2er is hi7her; re7ar&!ess of 7ain or !oss 2. S,ares of sto-K of &omesti$ $or%oration not tra&e& thru a !o$a! ex$han7e taxe& at the rate of :F for net $a%ita! 7ains not o2er P+11T; an& +1F in ex$ess of P+11T.

T%A!S E% TA)ES
T%A!S E% TA) +. Tax on transfer of %ro%ert6. 2. Rates are !ower 55:F to 21F 5 estate tax 55 2F to +: F 5 &onor@s tax 3. Lesser exem%tions "!COME TA) +. Tax on in$ome 2. Rates are hi7her 55 :F to 32F

Tax Exempt Ex-,anges+

a. Ex$han7e so!e!6 in =in& in mer7ers an& $onso!i&ation9 . Ex$han7e of %ro%ert6 for sto$=s resu!tin7 in a $han7e in $or%orate $ontro!

3. /ore exem%tions

"L"!$ O TA) %ET3%! A!* &A9ME!T O T'E TA)

ESTATE TA) ESTATE TAX #ORM LA

Less4 Gross Estate BSe$. E:C B+C De&u$tions BSe$. E"C

Tax %et1rn ? It is the so!e &e$!aration of tax%a6er that in$or%orates a!! the &ataMfa$ts

B2C Net share of the SS in the CP Net Estate Less4 Exem%tions Bfirst P211;111 exem%tion; Se$. E4C Net Taxa !e Estate ) Tax rate BSe$. E4C Estate Tax &ue Less4 Tax Cre&it Gif an6H BSe$. E"GEH or ++1GBH Estate Tax Due; if an6

2. 3. 4. :. ". '.

e. un%ai& mort7a7es f. taxes 7. !osses Transfer for %u !i$ use ,anishin7 &e&u$tion #ami!6 home Stan&ar& &e&u$tion /e&i$a! ex%enses Amounts re$ei2e& 6 heirs un&er RA 4*+' BRetirement BenefitsC

$%OSS ESTATE 2Se-# =C< CT%&4

A# As to resident alien or ilipino de-edent - a!! rea!; tan7i !e %ersona!; intan7i !e %ersona! %ro%ert6 where2er situate&. A# As to non5resident alien de-edent - a!! rea! an& tan7i !e %ersona! %ro%ert6 situate& in the Phi!. - Intan7i !e %ersona! %ro%ert6 with a situs in the Phi!. .n!ess exem%te& on the asis of re$i%ro$it6. "n-l1sions in t,e $ross Estate 2Se-# =C< CT%&4+ a. De$e&ent@s interest . Transfer in $ontem%!ation of &eath $. Re2o$a !e transfer &. Transfer un&er 7enera! %ower of a%%ointment e. Pro$ee&s of !ife insuran$e f. Transfers for insuffi$ient $onsi&eration 7. Prior interests

B. #or non5resi&ent a!iens BELIT5T,C +. Ex%enses; !osses; in&e te&ness; taxes; et$. B#ICC.LTC 2. Transfer for %u !i$ use 3. ,anishin7 &e&u$tion *E*3CT"O!S O! ESTATE TA) A&&L"CABLE TO %ES"*E!T AL"E!S A!* C"T"ME!S+ 1neral Expenses+ The amount &e&u$ti !e is the !owest amon7 the fo!!owin74 +. a$tua! funera! ex%enses 2. :F of the 7ross estate 3. P211;111

Claims against t,e Estate+

Re$uisites to be deductible: +. The &e t instrument must e notari<e& 2. If !oan was $ontra$te& within 3 6ears efore the &eath of the &e$e&ent; the a&ministrator or exe$utor sha!! su mit a statement showin7 the &is%osition of the %ro$ee&s of the !oan. N.B.4 These reAuisites &o not a%%!6 if the $!aim &i& not arise from $ontra$tua! o !i7ations.

Exempt Transmissions 2Se-# =B< CT%&4+

+. The mer7er of usufru$t in the owner of the na=e& tit!e9 2. #i&ei$ommisar6 su stitution9 3. The transmission from the first heir; !e7atee or &onee in fa2or of another enefi$iar6; in a$$or&an$e with the wi!! of the %re&e$essor9 an& 4. A!! eAuests; &e2i$es; !e7a$ies or transfers to so$ia! we!fare; $u!tura! an& $harita !e institutions no %art of the net in$ome of whi$h inures to the enefit of an6 in&i2i&ua!9 Pro2i&e&; that not more than 31F of the sai& eAuests; !e7a$ies or transfers sha!! e use& 6 su$h institutions for a&ministration %ur%oses.

Taxes+
The follo*in+ are not deductible: +. in$ome tax on in$ome re$ei2e& after &eath 2. %ro%ert6 taxes not a$$rue& efore &eath 3. estate tax

Losses+
Re$uisites to be deductible: +. arisin7 from fire; storm; shi%wre$=; or other $asua!t6; ro er6; theft or em e<<!ement9 2. Not $om%ensate& 6 insuran$e or otherwise9 3. Not $!aime& as &e&u$tion in an in$ome tax return of the taxa !e estate9 4. ($$urrin7 &urin7 the sett!ement of the estate9 an& :. ($$urrin7 efore the !ast &a6 for the %a6ment of the estate tax B!ast &a6 to %a64 six months after the &e$e&ent@s &eathC.

>al1e of $ross Estate+

The 7ross estate sha!! e 2a!ue& at its fair mar=et 2a!ue at the time of &eath of the &e$e&ent.

*ed1-tions from t,e $ross Estate

A. #or resi&ent a!iens an& $iti<ens BELIT; T,#SA/C +. Ex%enses; !osses; in&e te&ness; taxes; et$. BELIT5#ICC.LTC a. funera! ex%enses . 8u&i$ia! ex%enses $. $!aims a7ainst the estate &. $!aims a7ainst inso!2ent %erson

Transfer for &1.li- 3se+

Re$uisites to be deductible: +. The &is%osition is in a !ast wi!! an& testament 2. To ta=e effe$t after &eath 3. In fa2or of the 7o2ernment of the Phi!.; or an6 %o!iti$a! su &i2ision thereof 4. #or ex$!usi2e %u !i$ %ur%oses.

 >anis,ing *ed1-tion+
Re$uisites to be deductible: +. the %resent &e$e&ent &ie& within : 6ears from transfer of the %ro%ert6 from a %rior &e$e&ent or &onor. 2. The %ro%ert6 must e !o$ate& in the Phi!s. 3. The %ro%ert6 forme& %art of the taxa !e estate of the %rior &e$e&ent; or of the taxa !e 7ift of the &onor. 4. The estate tax or &onor@s tax on the 7ift must ha2e een fina!!6 &etermine& an& %ai&. :. The %ro%ert6 must e i&entifie& as the one re$ei2e& from the %rior &e$e&ent; or somethin7 a$Auire& in ex$han7e therefor. ". No 2anishin7 &e&u$tion on the %ro%ert6 was a!!owa !e to the estate of the %rior &e$e&ent. amily 'ome+ Re$uisites to be deductible: +. Sai& fami!6 home must ha2e een the &e$e&ent@s fami!6 home. 2. Sai& fa$t must e $ertifie& to 6 the aran7a6 $a%tain of the !o$a!it6 where it is !o$ate&. 3. /aximum of P+;111;111

Limit A. 0hi$he2er is !ower etween4 +. Estate tax %ai& to forei7n $ountr6 2. NTE; forei7n $ountr6 ) Phi!. estate tax NTE; wor!& Limit B. 0hi$he2er is !ower etween4 +. tota! of estate taxes %ai& to a!! forei7n $ountries 2. NTE outsi&e Phi!. ) Phi!. estate tax NTE; wor!&

*O!O%FS TA) %e:1isites+ 2A*"C4

+. $a%a$it6 of the &onor 2. &onati2e intent 3. &e!i2er6; whether a$tua! or $onstru$ti2e; of the su 8e$t 7ift 4. a$$e%tan$e 6 the &onee Stranger 5 a %erson who is not a rother; sister; s%ouse; an$estor an& !inea! &es$en&ant; or of a re!ati2e 6 $onsan7uinit6 in the $o!!atera! within the 4th $i2i! &e7ree.

Medi-al Expenses+
Re$uisites to be deductible: +. in$urre& within one 6ear %rior to his &eath 2. Su stantiate& with re$ei%ts 3. /aximum of P:11;111 *E*3CT"O!S O! ESTATE TA) A&&L"CABLE TO !O!5%ES"*E!T AL"E!S +. Ex%enses; !osses; in&e te&ness an&

#ORM LA(
a. (n the +st &onation of a 6ear4 Gross 7ifts Less4 De&u$tions from 7ross 7ifts Net 7ifts ) Tax Rate Donor@s tax on the net 7ifts xxx xxx xxx xxx

taxes BELITC
orm1la+ Phi!. Gross Estate 0or!& Gross Estate ) 0or!& ELIT

. (n &onation of a su seAuent &ate &urin7 the 6ear4 Gross 7ifts ma&e on this &ate Less4 De&u$tions from 7ross 7ifts Net 7ifts A&&4 A!! %rior net 7ifts within the 6ear A77re7ate net 7ifts ) Tax Rate Donor@s tax on a77re7ate net 7ifts Less4 Donor@s tax on a!! %rior net 7ifts Donor@s tax on the net 7ifts on this &ate xxx xxx xxx xxx xxx xxx xxx xxx xxx

2. Transfer for %u !i$ use. 3. ,anishin7 &e&u$tion on %ro%ert6 in the Phi!i%%ines.

Estate Tax Credit

#ORM LA( a# One foreign -o1ntry only+ 4 5 The tax $re&it is whi$he2er is !ower etween4 +. Estate tax %ai& to the forei7n $ountr6 2. NTE; forei7n $ountr6 ) Phi!. estate tax NTE; wor!& BNTE 5 Net Taxa !e EstateC .# More t,an one foreign -o1ntry 5 The $re&it sha!! e that whi$h is the !ower amount etween Limit A an& Limit B

Exemption of -ertain gifts+

+. Gifts ma&e 6 a resi&ent a. &owries or 7ifts ma&e on a$$ount of marria7e an& efore its $e!e ration or within one 6ear thereafter 6 %arents to ea$h of their !e7itimate; i!!e7itimate or a&o%te& $hi!&ren to the extent of the first P+1;111. . Gifts ma&e to or for the use of the Nationa! Go2ernment or an6 entit6 $reate& 6 an6 of its a7en$ies whi$h is not $on&u$te& for %rofit; or to an6 %o!iti$a! su &i2ision of the sai& 7o2ernment.

$.

Gifts in fa2or of e&u$ationa!; $harita !e; re!i7ious; $u!tura! or so$ia! we!fare $or%oration; institutions; foun&ations; trust or %hi!anthro%i$ or7ani<ation; resear$h institution or or7ani<ation; a$$re&ite& non5 7o2ernment or7ani<ation BNG(C. Pro2i&e&; that no more than 31F of sai& 7ifts sha!! e use& 6 su$h &onee for a&ministration %ur%oses.

E)&A!*E* >AL3E A**E* TA)

&ersons lia.le to &ay t,e >AT+ 2 S B E LS"4
+. An6 %erson whether natura! of 8uri&i$a! who; in the $ourse of tra&e or usiness; se!!s; .arters; ex$han7es; or leases 7oo&s or %ro%erties; or ren&ers ser2i$es9 2. An6 %erson who im%orts 7oo&s whether for usiness or non5 usiness %ur%ose9 an& %ro2i&e&; 7ross re$ei%ts is more than P::1;111.11; otherwise;

2. Gifts ma&e 6 a non5resi&ent not a $iti<en of the Phi!. a. same as B C . same as B$C ex$e%t a$$re&ite& non5 7o2ernment or7ani<ation BNG(C Tax -redit for donorFs taxes paid to a foreign -o1ntry+ +. Donor was a #i!i%ino $iti<en or resi&ent a!ien 2. At time of forei7n &onation 3. Donor@s taxes of an6 $hara$ter an& &es$ri%tion 4. Are im%ose& an& %ai& 6 the authorit6 of a forei7n $ountr6.

more than P+11T ut !ess than P::1T ?3F

%er$enta7e tax !ess than P+11T ? no usiness tax !ia i!it6

Transa-tions S1.6e-t to >AT+ 2S " T S 4

+. e2er6 sa!e; arter; or ex$han7e; !eases 7oo&s or %ro%erties ma&e in the $ourse of tra&e or usiness9 2# transa$tions &eeme& sa!e for ,AT %ur%oses9 D# im%ortation of 7oo&s9 an& 4. e2er6 sa!e of ser2i$e ma&e in the $ourse of tra&e or usiness other than ser2i$es ren&ere& 6 %ersons su 8e$t to Qother %er$enta7e taxesR.

Limitations on tax -redit+

+. The amount of the $re&it in res%e$t to the tax %ai& to an6 $ountr6 sha!! not ex$ee& the same %ro%ortion of the tax a7ainst whi$h su$h $re&it is ta=en; whi$h the &e$e&ent@s net 7ifts situate& within su$h $ountr6 taxa !e un&er the NIRC ears to his entire net 7ift9 an& 2. The tota! amount of the $re&it sha!! not ex$ee& the same %ro%ortion of the tax a7ainst whi$h su$h $re&it is ta=en; whi$h the &e$e&ent@s net 7ift situate& outsi&e the Phi!i%%ines taxa !e un&er the NIRC ears to his entire net 7ift.

Elements of >AT +
+. sa!e must e ma&e in the Phi!i%%ines9 2. sa!e must e of taxa !e 7oo&s; %ro%erties or ser2i$es9 an& 3. sa!e must e ma&e 6 a taxa !e %erson in the $ourse or furtheran$e of his usiness.

#ORM LA(
a. #or &onor@s taxes %ai& to one forei7n $ountr6 NG situate& in a forei7n $ountr6 ) PDT Entire net 7ifts P Tax $re&it !imit BNG 5 Net Gifts9 PDT 5 Phi!. Donor>s TaxC . #or &onor@s taxes %ai& to two or more forei7n $ountr6 NG outsi&e the Phi!. Entire net 7ifts PTax $re&it !imit ) PDT

%ate Str1-t1re 1nder t,e >AT System+

1 +. )* +ate for ex%ort sa!es an& %ersons whose sa!es are effe$ti2e!6 <ero5rate& an& <ero5rate& sa!es of ser2i$es9 an& 2. ,)* for a!! other arti$!es an& transa$tions $o2ere& 6 the ,AT.

"np1t Tax " tax on %ur$hase %ri$e of 7oo&s whi$h is %asse& on or shifte& to a u6er M %ur$haser M!essee 6 the su%%!ier M se!!er M !essor. It is the ,AT %ai& 6 a ,AT5re7istere& %erson in the $ourse of his tra&e or usiness.

The a!!owa !e tax $re&it is the !ower amount etween the tax $re&it !imit un&er BaC an& B C.

O1tp1t Tax55 ,AT &ue on the sa!e of taxa !e

7oo&s or ser2i$es 6 an6 %erson re7istere& or reAuire& to re7ister for ,AT %ur%oses.

Transitional "np1t Tax Credit " %erson who

e$omes !ia !e to ,AT or an6 %erson who e!e$ts

to e a ,AT5re7istere& %erson sha!!; su 8e$t to the fi!in7 of an in2entor6 of 7oo&s; materia! an& su%%!ies eAui2a!ent to EF of 2a!ue of su$h in2entor6 or the a$tua! ,AT %ai& on su$h 7oo&s; materia!s an& su%%!ies; whi$he2er is hi7her; whi$h sha!! e $re&ita !e a7ainst the out%ut tax. Export Sales " sa!e an& shi%ment or ex%ortation of 7oo&s from the Phi!i%%ines to a forei7n Countr6 irres%e$ti2e of an6 shi%%in7 arran7ement that ma6 e a7ree& u%on whi$h ma6 inf!uen$e or &etermine the transfer of ownershi% of the 7oo&s so ex%orte&; or forei7n5 $urren$6 &enominate& sa!es.

others; if the a77re7ate amount of a$tua! or ex%e$te& 7ross sa!es an& M or 7ross re$ei%ts ex$ee&s P::1T for an6 +25month %erio&. 2# Optional 55 an6 of the fo!!owin7 %ersons ma6; at their o%tion; a%%!6 for ,AT re7istration4 a. se!!er of 7oo&s or ser2i$es whose taxa !e sa!e or 7ross re$ei%ts &o not ex$ee& PCC0T for an6 +25month %erio&9 . se!!er of a7ri$u!tura! or marine foo& %ro&u$ts in their ori7ina! state9 $. se!!er of ferti!i<er; see&s; see&!in7s an& fin7er!in7s; fish !i2e sto$= an& %ou!tr6 fee&s; in$!u&in7 in7re&ients whether !o$a!!6 %ro&u$e& or im%orte&; use& in the manufa$ture of finishe& foo&s9 &. se!!er of non5foo& a7ri$u!tura!; marine an& forest %ro&u$ts in their ori7ina! state9 e. se!!er of -otton an& $otton see&s in the ori7ina! state; an& $o%ra. ( ..) #ANC ) N./.( Ite0s 1 t2 e, +e3e+ t2 e&'2+t sales 2nl4

oreign C1rren-y *enominated Sales ? sa!es to non5resi&ents of 7oo&s assem !e& or manufa$ture& in the Phi!i%%ines for &e!i2er6 to resi&ents in the Phi!i%%ines an& %ai& for in $on2erti !e forei7n $urren$6 remitte& throu7h the an=in7 s6stem in the Phi!i%%ines.

-ERO%RATED TRANSACTIONS SER(5RATED

$S.

EXEMPT

E)E/PT TRANSACTI(NS (n!6 remo2es the 2a!ue a&&e& tax at the exem%t sta7e

Extent: A!! 2a!ue a&&e& tax is remo2e&

Transa-tions deemed sales for >AT p1rposes 2Se-# 10HB4

+. Transfer; use or $onsum%tion not in the $ourse of tra&e or usiness of 7oo&s ori7ina!!6 inten&e& for sa!e or for use in the $ourse of usiness9 2. Distri ution or transfer to share5 ho!&ers or in2estors as share in the %rofits of the ,AT 5re7istere& %ersons9 3. Consi7nment of 7oo&s if a$tua! sa!e is not ma&e within "1 &a6s fo!!owin7 the &ate of $onsi7nment9 4. Distri ution or transfer to $re&itors in %a6ment of &e t9 :. Retirement from or $essation of usiness; with res%e$t to in2entories of taxa !e 7oo&s existin7 as of su$h retirement or $essation.

,laim for refund: Tax%a6er $an $!aim the refun& of in%ut taxes %asse& on to him 6 the su%%!ier; et$. or $re&it su$h in%ut taxes a7ainst his !ia i!ities for out%ut taxes on his other non5 <ero rate& transa$tions (co e: Genera!!6; taxa !e sa!es; an& ta=en into a$$ount in &eterminin7 turn5o2er or sa!es for sa!es for ,AT5 re7istration %ur%oses. Re+istration re$uirement: Sero5rate& %erson ma6 sti!! re7ister for ,AT.

Tax%a6er is not entit!e& to $re&it or refun& of the in%ut tax %asse& on to him 6 the su%%!ier; et$.

Not taxa !e sa!es an& therefore not ta=en into a$$ount in &eterminin7 turn5o2er or ,AT5 re7istration %ur%oses

"""# LOCAL TA)AT"O!

*efinition+
The %ower of !o$a! 7o2ernment unit to B+C $reate its own sour$es of re2enue an& B2C to !e26 taxes; fees; an& $har7es. (See Sec. ., A+t. X, ,567 C2nst8tut82n an9 Sec. ,:5, LGC)

Exem%t %erson ma6 not re7ister for ,AT.

!at1re of t,e Taxing &ower of Lo-al $o7ernments %egistration %e:1irements+

1# Mandatory O e2er6 %erson who in the $ourse of tra&e or usiness; se!!s; arters; ex$han7es; !eases 7oo&s or ser2i$es for +. Not inherent9 2. Exer$ise& on!6 if &e!e7ate& to them 6 !aw or Constitution. 3. Not a so!ute9 su 8e$t to !imitations %ro2i&e& 6 !aw.

 Aspe-ts of Lo-al Taxing &ower

+. Lo$a! taxation; an& 2. Rea! %ro%ert6 taxation &-#-: #oth as ects are +overned by the Local )overnment ,ode .L),/-

*o-trine of preemption or ex-l1sion

0here the Nationa! Go2ernment e!e$ts to tax a %arti$u!ar area; it im%!ie&!6 withho!&s from the !o$a! 7o2ernment the &e!e7ate& %ower to tax the same fie!&. This &o$trine %rin$i%a!!6 rests u%on the intention of Con7ress. Ex-l1ded impositions 2p1rs1ant to t,e do-trine of preemption4+ +. Taxes whi$h are !e2ie& un&er the NIRC; un!ess otherwise %ro2i&e& 6 LGC of +**+9 2. Taxes; fees; et$. whi$h are im%ose& un&er the Tariffs an& Customs Co&e9 3. Taxes; fees; et$.; the im%osition of whi$h $ontra2enes existin7 7o2ernmenta! %o!i$ies or whi$h 2io!ates the fun&amenta! %rin$i%!es of taxation9 an& 4. Taxes; fees an& other $har7es im%ose& un&er s%e$ia! !aw.

". Co!!e$tion of !o$a! taxes an& other im%ositions sha!! not e !et to an6 %erson '. The re2enues $o!!e$te& un&er the Co&e sha!! inure so!e!6 to the enefit of; an& su 8e$t to &is%osition 6; the LG. !e26in7 the tax or other im%osition un!ess otherwise s%e$ifi$a!!6 %ro2i&e& therein E. Ea$h LG. sha!!; as far as %ra$ti$a !e; e2o!2e a %ro7ressi2e s6stem of taxation.

"># %EAL &%O&E%T9 TA)AT"O!

*efinitions+
1# %eal &roperty Taxation+ A &ire$t tax on ownershi% of !an&s an& ui!&in7s or other im%ro2ements thereon %a6a !e re7ar&!ess of whether the %ro%ert6 is use& or not. 2. %eal property ? su 8e$t to the &efinition 7i2en 6 !rt- 012 of the ,ivil ,ode. 3. "mpro7ement ? 2a!ua !e a&&ition ma&e to a %ro%ert6 or an ame!ioration in its $on&ition amountin7 to more than a mere re%!a$ement of %arts.

Sit1s of M1ni-ipal Taxation 2Se-# 1C0< 1AA1 L$C4

+. P!a$e of sa!eB with ran$h or sa!es out!et thereinC4 /uni$i%a!it6 or $it6 where the ran$h or out!et is !o$ate&. 2. P!a$e of sa!e Bno ran$h or sa!es out!etC4 /uni$i%a!it6 or $it6 of %rin$i%a! offi$e Bnot in the %!a$e of sa!eC. 3. If manufa$turer; assem !er; $ontra$tor; %ro&u$er or ex%orter B/ACPEC with fa$tor6; %ro8e$t offi$e; %!ant or %!antation B#PPPC4 a. 31F of re$or&e& sa!es in the %rin$i%a! offi$e4 $it6 or muni$i%a!it6 where the %rin$i%a! offi$e is !o$ate&9 . '1F of re$or&e& sa!es in the %rin$i%a! offi$e4 $it6 or muni$i%a!it6 where the #PPP is !o$ate& B%ro rata if #PPP are !o$ate& in &ifferent muni$i%a!ities or $itiesC. $. If %!antation is !o$ate& in some other %!a$e than that where the fa$tor6 is !o$ate&; the fore7oin7 '1F sha!! e su &i2i&e& as fo!!ows4 - "1F to the $it6 or muni$i%a!it6 where the fa$tor6 is !o$ate&; - 41F to the $it6 or muni$i%a!it6 where the %!antation is !o$ate&.

C,ara-teristi-s+
+. Dire$t on ownershi%9 ( 2. a& 2a!orem tax A 3. %ro%ortionate P 4. $reates a sin7!e in&i2isi !e o !i7ation S C# !o$a! tax L 8ey+ SA&OL

Taxing A1t,orities+
+. Pro2in$e; at the rate of not T +F of assesse& 2a!ue9 2. Cit6 at the rate of not T 2F9 an& 3. /uni$i%a!it6 within /etro /ani!a at the rate of not T 2F.

Extent of t,e power to le7y+

+. Basi$ rea! %ro%ert6 tax9 2. +F a&&itiona! rea! estate tax to finan$e the S%e$ia! E&u$ation #un&9 3. :F a&&itiona! tax on i&!e !an&s9 an& 4. S%e$ia! !e26 or s%e$ia! assessments Bma6 e im%ose& e2en 6 muni$i%a!ities outsi&e /etro /ani!aC.

1ndamental &rin-iples $o7erning %eal &roperty Taxation

+. Rea! %ro%ert6 sha!! e a%%raise& at its $urrent an& fair mar=et 2a!ue9 3 2. Rea! %ro%ert6 sha!! e $!assifie& for assessment %ur%oses on the asis of a$tua! use. 3 3. Rea! %ro%ert6 sha!! e assesse& on the asis of uniform $!assifi$ation within ea$h LG. & 4. The a%%raisa!; assessment; !e26 an& $o!!e$tion of RPTax sha!! not e !et to an6 %ri2ate %erson.

1ndamental &rin-iples $o7erning Lo-al Taxation+

+. Sha!! e uniform in ea$h !o$a! su 5unit 2. Sha!! e eAuita !e an& ase& as mu$h as %ossi !e on the tax%a6er@s a i!it6 to %a6 3. Le2ie& for %u !i$ %ur%oses 4. Sha!! not e un8ust; ex$essi2e; o%%ressi2e; or $onfis$ator6 :. Sha!! not e $ontrar6 to !aw; %u !i$ %o!i$6; nationa! e$onomi$ %o!i$6; or in restraint of tra&e

E :. The a%%raisa! an& assessment of rea! %ro%ert6 sha!! e eAuita !e. 8ey+ E353&

&roperties Exempt from %eal &roperty Tax 2Se-# 1AD< 1AA1 L$C4+
+. Rea! %ro%ert6 owne& 6 the 7o2ernment ex$e%t when the enefi$ia! use thereof has een 7rante& to a taxa !e %erson9 2. $harita !e institutions; $hur$hes; %ersona7es or $on2ents a%%urtenant thereto; mosAues; non5%rofit or re!i7ious $emeteries an& a!! !an&s; ui!&in7s an& im%ro2ements a$tua!!6; &ire$t!6 an& ex$!usi2e!6 use& for re!i7ious; $harita !e or e&u$ationa! %ur%oses BArt. ,I; Se$. 2E; ConstitutionC9 3. ma$hineries an& eAui%ment that are a$tua!!6; &ire$t!6 an& ex$!usi2e!6 use& 6 !o$a! water uti!ities an& G(CC@s en7a7e& in the su%%!6 an& &istri ution of water an&Mor e!e$tri$ %ower9 4. rea! %ro%ert6 owne& 6 &u!6 re7istere& $oo%erati2es as %ro2i&e& for in RA "*3E9 an& :. ma$hiner6 an& eAui%ment use& for %o!!ution $ontro! an& en2ironmenta! %rote$tion.

a. Assessment an& $o!!e$tion of re2enues from im%orte& arti$!es an& a!! other im%ositions un&er the tariff an& $ustoms !aws9 . Contro! smu77!in7 an& re!ate& frau&s9 $. Su%er2ision an& $ontro! o2er the entran$e an& $!earan$e of 2esse!s an& air$raft en7a7e& in forei7n $ommer$e9 &. Enfor$ement of TCC an& re!ate& !aws9 e. Su%er2ision an& $ontro! o2er the han&!in7 of forei7n mai!s arri2in7 in the Phi!i%%ines9 f. Su%er2ise an& $ontro! a!! im%ort an& ex%ort $ar7oes for the %rote$tion of 7o2ernment re2enue9 7. Ex$!usi2e ori7ina! 8uris&i$tion o2er sei<ure an& forfeiture $ases un&er the tariff an& $ustoms !aws.

G1risdi-tion of Colle-tor of C1stoms o7er

importation of arti-les +. Cause a!! arti$!es for im%ortation to e entere& in the $ustomhouse; 2. Cause a!! su$h arti$!es to e a%%raise& an& $!assifie&; 3. Assess an& $o!!e$t the &uties; taxes an& other $har7es thereon; an& 4. Do!& %ossession of a!! im%orte& arti$!es unti! the &uties; taxes an& other $har7es are %ai& thereon. 2Se-# 120H< TCC4

*1ty of %eal .eginning 1AA1+

&roperty

Owners

Rea! %ro%ert6 owner must fi!e with Assessor@s (ffi$e a sworn statement of rea! %ro%ert6 2a!ue whether exem%t or non5exem%t. E2er6 u6er of rea! %ro%ert6 must ma=e a new &e$!aration thereof. B#ai!ure to &o so sha!! ma=e the assessment in the name of the %re2ious owner in&in7C.

Territorial 61risdi-tion of t,e BOC+

+. A!! seas within the 8uris&i$tion of the Phi!i%%ines 2. A!! $oasts; %orts; air%orts; har ors; a6s; ri2ers an& in!an& waters whether na2i7a !e or not from the sea. 21st par< Se-# H0D< TCC4

(,en tariff and -1stoms applied+

"># TA%" A!* C3STOMS CO*E

*E "!"T"O!S+
+. Tariff+ Customs &uties; to!! or tri ute %a6a !e u%on mer$han&ise to the Go2@t. 2. C1stom *1ties+ Tax assesse& u%on mer$han&ise from or ex%orte& to; a forei7n $ountr6. (Ga+c8a v. E&ecut8ve Sec., :,, SCRA ::7 ;,55:<) &-#-: ,ustoms and tariffs are synonymous *ith one another- They both refer to the taxes im osed on im orted or ex orted *ares3 articles3 or merchandise-

(n!6 after im%ortation has e7un ut efore

im%ortation is terminate&. Im ortation be+ins: a. when the $on2e6in7 2esse! or air$raft . enters the 8uris&i$tion of the Phi!. $. with intention to un!oa& therein Im ortation is deemed terminated: a. BiC u%on %a6ment of the &uties; taxes an& other $har7es &ue u%on the arti$!es. BiiC an& !e7a! %ermit for with&rawa! sha!! ha2e een 7rante&. . In $ase the arti$!es are free of &uties; taxes an& other $har7es; unti! the6 ha2e !e7a!!6 !eft the 8uris&i$tion of the $ustoms 2Se-# 1202< TCC4

T'E B3%EA3 O C3STOMS 2BOC4

1n-tions of t,e B1rea1 of C1stoms 2ACE SD4+

A%T"CLES 3!*E% TCC MA9 E"T'E% BE+

a. Su 8e$t to &ut6 . Prohi ite& from ein7 BProhi ite& im%ortationC im%orte&

$.

Con&itiona!!65free from tariff an& $ustoms &uties B$on&itiona!!65free im%ortationC &. #ree from TC &uties B&ut65freeC Im%orte& 7oo&s must e entere& in a $ustomhouse at their %ort of entr6 otherwise the6 sha!! e $onsi&ere& as $ontra an& an& the im%orter is !ia !e for smu77!in7 BSee Se$. +1+; TCCC.

"mport Entry
It is a &e$!aration to the B(C showin7 %arti$u!ars of the im%orte& arti$!e that wi!! ena !e the $ustoms authorities to &etermine the $orre$t &uties. An im%orter is reAuire& to fi!e an im%ort entr6. It must e a$$om%!ishe& from &isem ar=in7 of !ast $ar7o from 2esse!.

Transa-tion 7al1e 1nder %A =1=1

It is the in2oi$e 2a!ue of the 7oo&s %!us frei7ht; insuran$e; $osts; ex%enses an& other ne$essar6 ex%enses. This re%!a$es the Dome Consum%tion ,a!ue as asis of 2a!uation of 7oo&s.

L"AB"L"T9 O% C3STOMS *3T"ES

)eneral Rule: A!! im%ortations M ex%ortations of 7oo&s are su 8e$t to $ustoms &uties 2Se-# 10C< TCC4# Exce tions: a. Exem%tions un&er the TCC9 . Exem%tions 7rante& to 7o2@t a7en$ies; instrumenta!ities or G(CCs with existin7 $ontra$ts; $ommitments; a7reements; or o !i7ations with forei7n $ountries9 $. Exem%tions of internationa! or7ani<ations %ursuant to a7reements or s%e$ia! !aws9 an& &. Exem%tions 7rante& 6 the Pres. of the Phi!. u%on re$ommen&ation of NEDA 2Se-# 10C< TCC4#

CLASS" "CAT"O! O C3STOM *3T"ES+ %eg1lar *1ties+

+. Ad 7alorem d1ty+ This is a &ut6 ase& on the 2a!ue of the im%orte& arti$!e. 2. Spe-ifi- d1ty+ This is a &ut6 ase& on the &utia !e wei7ht of 7oo&s Beither the 7ross wei7ht; !e7a! wei7ht; or net wei7htC. 3. Alternating d1ties+ This is a &ut6 whi$h a!ternates a& 2a!orem an& s%e$ifi$. 4. Compo1nd *1ty+ This is a &ut6 $onsistin7 of a& 2a!orem an& s%e$ifi$ &uties.

Lia.ility of importer for -1stom d1ties4

a. A personal de.t whi$h $an e &is$har7e& on!6 6 %a6ment in fu!! thereof9 . A lien u%on the im%orte& arti$!es whi!e the6 are in $usto&6 or su 8e$t to the $ontro! of the 7o2@t 2Se-# 120;< TCC4#

Spe-ial d1ties
a. . $. &. Dum%in7 &ut6 Counter2ai!in7 &ut6 /ar=in7 &ut6 Dis$riminator6 &ut6

!at1re of spe-ial -1stoms d1ties+

S%e$ia! $ustoms &uties are a&&itiona! im%ort &uties im%ose& on s%e$ifi$ =in&s of im%orte& arti$!es un&er $ertain $on&itions.

*raw.a-K
A &e2i$e resorte& to for ena !in7 a $ommo&it6 affe$te& 6 taxes to e ex%orte& an& so!& in forei7n mar=ets u%on the same terms as if it ha& not een taxe& at a!! ( 4 C=8ac2 S2ns vs. C2llect2+ 23 Cust20s, :> P=8l .?:)

&1rpose of spe-ial -1stoms d1ties+

The s%e$ia! $ustoms &uties are im%ose& for the %rote$tion of $onsumers an& manufa$turers; as we!! as Phi!. %ro&u$ts from un&ue $om%etition %ose& 6 forei7n5ma&e %ro&u$ts.

SPECIAL D TIES COMPARED

D./PING D.TIm%ose& u%on forei7n %ro&u$ts with 2a!ue !ower than their fair mar=et 2a!ue to the &etriment of !o$a! %ro&u$ts. C(.NTER,AILING D.TIm%ose& u%on forei7n 7oo&s en8o6in7 su si&6 thus a!!owin7 them to se!! at !ower %ri$es to the &etriment of !o$a! %ro&u$ts simi!ar!6 situate&. EAui2a!ent to the ount6; su si&6; or su 2ention. /ARLING D.TIm%ose& u%on those not %ro%er!6 mar=e& as to %!a$e of ori7in of the 7oo&s. DISCRI/INAT(RD.TIm%ose& u%on 7oo&s $omin7 from $ountries that &is$riminates a7ainst Phi!i%%ine %ro&u$ts.

NAT.RE

A/(.NTM RATE

Differen$e etween the a$tua! %ri$e an& the norma! 2a!ue of the arti$!e.

:F a& 2a!orem of arti$!es

An6 amount not ex$ee&in7 +11F a& 2a!orem of the su 8e$t arti$!es

I/P(S5 ING A.TD(5 RIT-

S%e$ia! Committee on Anti5 Dum%in7 B$om%ose& of the Se$. of #inan$e as Chairman9 /em ers4 the Se$. of DTI9 an& either the Se$. of A7ri$u!ture if arti$!e in Auestion is a7ri. %ro&u$t or the Se$. of La or if non5a7ri.C

Se$. of #inan$e

Commissioner of Customs

Presi&ent of the Phi!i%%ines

lexi.le Tariff Cla1se The Presi&ent ma6 fix tariff rates; im%ort an& ex%ort Auotas; et$. un&er TCC 2See Se-# 2=< Art# >"< Constit1tion and Se-# ;01< TCC4

G. Crimina! A$tion BSe$s. 221; 22+; an& 22*C D. Sus%ension of usiness o%erations in 2io!ation of ,AT BSe$. ++:C I. Enfor$ement of A&ministrati2e #ine

A# Tax Lien

># TA) %EME*"ES

TA) %EME*"ES 3!*E% T'E !AT"O!AL "!TE%!AL %E>E!3E CO*E
I. TAX REMEDIES GO$ERNMENT "mportan-e
+. 2. The6 enhan$e an& su%%ort the 7o2ernment@s tax $o!!e$tion. The6 are safe7uar&s of tax%a6er@s ri7hts a7ainst ar itrar6 a$tion.

*efinition+ It is a !e7a! $!aim or $har7e on %ro%ert6; either rea! or %ersona!; esta !ishe& 6 !aw as a se-1rity in &efau!t of the %a6ment of taxes B:+ AmIur EE+C. Genera!!6; it atta$hes to the %ro%ert6 irres%e$ti2e of ownershi% or transfer thereof.

Extent and nat1re+ O# T!E

The tax; to7ether with interests; %ena!ties; an& $osts that ma6 a$$rue in a&&ition thereto is a lien 1pon all property and rig,ts to property .elonging to t,e taxpayer# The !ien sha!! not e 2a!i& a7ainst an6 mort7a7ee; %ur$haser; or 8u&7ment $re&itor 1ntil noti$e of su$h !ien sha!! e fi!e& 6 the Commissioner of Interna! Re2enue in the (ffi$e of the Re7ister of Dee&s of the %ro2in$e or $it6 where the %ro%ert6 of the tax%a6er is situate& or !o$ate& BSe-. 21A< CT%&4#

Tax -olle-tion -annot .e restrained .y -o1rt in61n-tion 2Se-# 21A< CT%&4 4ustification: Life !oo& Theor6.

B# Compromise
*efinition+ A $ontra$t where 6 the %arties; 6 re$i%ro$a! $on$essions; a2oi& a !iti7ation or %ut an en& to one a!rea&6 $ommen$e& B Art# 202=; !ew Ci7il CodeC.

Exce tion: In8un$tion ma6 e issue& 6 the CTA in ai& of its a%%e!!ate 8uris&i$tion un&er RA ++2: Bsee reAuisites thereof; un&er the su hea&in7 QCourt of Tax A%%ea!s;R infra.C.

%e:1isites 2TAO4+
1# The tax%a6er must ha2e a tax lia.ility. 2# There must e an offer B 6 the tax%a6er of an amount to e %ai& 6 the tax%a6erC D# There must e an a--eptan-e B 6 the Commissioner or tax%a6er as the $ase ma6 eC of the offer in the sett!ement of the ori7ina! $!aim.

T,e following are generally t,e tax remedies of t,e go7ernment to effe-t -olle-tion of taxes+
A. Tax Lien BSe$. 2+*C B. Com%romise BSe$. 214C C. Distraint BA$tua! an& Constru$ti2eC BSe$s. 21:521EC D. Le26 BSe$. 21'BC E. #orfeiture of Pro%ert6 BSe$. 2+:C #. Ci2i! A$tion BSe$. 221C

Offi-ers a1t,orized to -ompromise+

1# The Commissioner of "nternal %e7en1e BCIRC is the on!6 offi$ia! 2este& with %ower an& &is$retion to $om%romise $rimina! an&

$i2i! $ases arisin7 from 2io!ations of the Tax Co&e BSe$s. 'C an& 214; CTRPC. 2# S1.ordinate offi-ials ma6 %re!iminari!6 enter into a $om%romise. The effe$ts are4 i# A--eptan-e of an offer of $om%romise4 not final an& ma6 e re2iewe& 6 the Commissioner. ii# %e6e-tion of an offer of $om%romise4 final an& in&in7 un!ess re2o=e& or set asi&e 6 the Commissioner. BGi s 2s. Co!!e$tor; +' Phi!. 232C Commissioner may -ompromise any internal re7en1e tax w,en O +. A reasona.le do1.t as to the 2a!i&it6 of the $!aim a7ainst the tax%a6er exists9 or 2. The finan$ia! %osition of the tax%a6er &emonstrates a -lear ina.ility to pay the assesse& tax GSe$. 214BAC; CTRPH. In su$h $ase; the tax%a6er shou!& wai2e the $onfi&entia!it6 %ri2i!e7e on an= &e%osits un&er RA +41: BSee Se$. "#2; CTRPC.

1# Enfor-e the $om%romise a# If it is a 61di-ial -ompromise; it $an e enfor$e& .y mere exe-1tion. A 8u&i$ia! $om%romise is one where a &e$ision ase& on the $om%romise a7reement is ren&ere& 6 the $ourt on reAuest of the %arties. .# An6 other $om%romise is extra61di-ial an& !i=e an6 other $ontra$t $an on!6 e enfor$e& .y -o1rt a-tion. 2# Re7ar& it as res-inded an& insist u%on ori7ina! &eman& BArt. 214+; Ci2i! Co&eC.

Compromise &enalty
It is an amount of mone6 whi$h the tax%a6er %a6s to $om%romise a tax 2io!ation. This is %ai& in !ieu of $rimina! %rose$ution. A tax%a6er $annot e $om%e!!e& to %a6 a $om%romise %ena!t6. If he &oes not want to %a6; the CIR must institute a $rimina! a$tion.

C# *istraint
*efinition+ It is the sei<ure 6 the 7o2ernment of %ersona! %ro%ert6; tan7i !e or intan7i !e; to enfor$e the %a6ment of taxes. The %ro%ert6 ma6 e offere& in a %u !i$ sa!e; if taxes are not 2o!untari!6 %ai&. It is a summar6 reme&6.

Minim1m -ompromise rates 2MC%4 of any

tax lia.ilities+ +. In case of financial inca acity: /CR P +1F of the asi$ assesse& tax 2. Other cases: /CR P 41F of the asi$ assesse& tax GSe$. 214BAC; CTRPH Appro7al of t,e -ompromise .y t,e E7al1ation Board is re:1ired w,en+ +. the asi$ tax in2o!2e& ex$ee&s P+;111;111.11; or 2. the sett!ement offere& is !ess than the minimum $om%romise rates B/CRC.

&-#-: The /CR ma6 e !ess than the %res$ri e& rates of +1F or 41F; as the $ase ma6 e; %ro2i&e& it is a%%ro2e& 6 the E2a!uation Boar&.

Two types of distraint+ 1# A-t1al+ there is ta=in7 of %ossession of the %ersona! %ro%ert6 from the tax%a6er 6 the 7o2ernment. Ph6si$a! transfer of %ossession is not a!wa6s reAuire&. This is true in the $ase of intan7i !e %ro%ert6 su$h as sto$=s an& $re&its. 2# Constr1-ti7e+ the owner is mere!6 %rohi ite& from &is%osin7 of his %ro%ert6.

Compromise of Criminal >iolations

)eneral Rule: Crimina! 2io!ations ma6 e $om%romise&. Exce tions: +. Those a!rea&6 fi!e& in $ourt 2. Those in2o!2in7 frau& GSe$. 214BAC; CTRPH. Extent of t,e CommissionerFs dis-retion to -ompromise -riminal 7iolations+ +. #efore the com laint is filed *ith the "rosecutor5s Office: The CIR has fu!! &is$retion to $om%romise ex$e%t those in2o!2in7 frau&. 2. !fter the com laint is filed *ith the "rosecutor5s Office but before the information is filed *ith the court: The CIR $an sti!! $om%romise %ro2i&e& the %rose$utor must 7i2e $onsent. 3. !fter information is filed *ith the court: The CIR is no !on7er %ermitte& to $om%romise with or without the $onsent of the Prose$utor BPeo%!e 2s. /a7&a!u6o; A%ri! 21; +*"+C.

%e:1isites for t,e exer-ise of t,e remedy

of distraint+ 1# The tax%a6er must e delin:1ent Bex$e%t in $onstru$ti2e &istraintC in the %a6ment of tax9 2# There must e a su seAuent demand for its %a6ment BassessmentC9 D# The tax%a6er must fail to pay the tax at the time reAuire&9 an& 4. The %erio& within whi$h to assess or $o!!e$t the tax has not yet pres-ri.ed#

!at1re of t,e warrant of distraint or le7y

The warrant is a summar6 %ro$e&ure Qfor$in7R the tax%a6er to %a6. The re$ei%t of a warrant ma6 or ma6 not %arta=e the $hara$ter of a fina! &e$ision. If it is an in&i$ation of a fina! &e$ision; the tax%a6er ma6 a%%ea! to the CTA within 31 &a6s from ser2i$e of the warrant.

*1ties of t,e offi-er ser7ing t,e warrant of

distraint+ 1# /a=e an a--o1nt of the %ersona! %ro%erties &istraine&9 2# Sign the !ist of %ersona! %ro%erties &istraine& to whi$h sha!! e a&&e&; a

%emedy in -ase t,e taxpayer ref1ses or fails to a.ide t,e tax -ompromise+

statement of the sum &eman&e& an& note of the time an& %!a$e of sa!e9 D# Lea7e either with the owner or %erson from whose %ossession su$h %ersona! %ro%erties were ta=en; or at the &we!!in7 or %!a$e of usiness of su$h %erson with someone of suita !e a7e an& &is$retion BSe$. 21E; CTRPC &ro-ed1res for t,e a-t1al distraint or garnis,ment+

&e ts or ha2in7 in his %ossession or un&er his $ontro! an6 $re&its e!on7in7 to the tax%a6er to %a6 to the Commissioner the amount of su$h &e ts or $re&its BSe$. 21E; CTRPC. T,e taxpayerFs property may .e pla-ed 1nder -onstr1-ti7e distraint w,en ,e+ 1# is retiring from an6 usiness su 8e$t to tax9 or 2. is inten&in7 to ? a# lea7e the Phi!i%%ines; or .# remo7e his %ro%ert6 therefrom; or $. ,ide or $on$ea! his %ro%ert6; or D# is %erformin7 an6 a$t ten&in7 to o.str1-t the %ro$ee&in7 for $o!!e$tin7 the tax &ue or whi$h ma6 e &ue from him BSe$. 21"; NIRCC.

+. &ersonal &roperty Ser2i$e of 0arrant of Distraint " Ser7i-e of t,e warrant of distraint u%on the %erson in %ossession of the tax%a6er@s %ro%ert6 BSe$. 21E; CTRPC. "" &osting of noti-e in not !ess than two B2C %u !i$ %!a$es in the muni$i%a!it6 or $it6 BSe$. 21*; CTRPC """ Noti$e to the tax%a6er s%e$if6in7 the time and pla-e of sale an& the arti$!es &istraine&. "> *isposition of pro-eeds of sa!e BSe$. 21*; CTRPC.

Postin7 of Noti$e

&ro-ed1re for t,e -onstr1-ti7e distraint of

personal property+ CIR sha!! reAuire the tax%a6er or Tax%a6er an6 %erson ha2in7 %ossession must si7n or $ontro! of su$h %ro%ert6 to BaC re$ei%t sign a re$ei%t $o2erin7 the %ro%ert6 &istraine& and Tax%a6er@s o !i7. to %reser2e B C o !i7ate himse!f to 1# preser7e the same inta$t an& una!tere& an& 2# not to dispose of the same in an6 manner whatsoe2er without the ex%ress authorit6 of the Commissioner of Interna! Re2enue. If the tax%a6er or %erson in %ossession of the %ro%ert6 ref1ses or fails to sign t,e re-eipt referre& to; the re2enue offi$er effe$tin7 the $onstru$ti2e &istraint sha!! BaC %ro$ee& to prepare a list of su$h %ro%ert6 an& B C in the %resen$e of two B2C witnesses lea7e a -opy thereof in the %remises where the %ro%ert6 &istraine& is !o$ate&; after wh*$h the sai& %ro%ert6 sha!! e &eeme& to ha2e een %!a$e& un&er $onstru$ti2e &istraint. C(NSTR.CTI,E DISTRAINT /a&e on the %ro%ert6 of an6 tax%a6er; whether &e!inAuent or not The tax%a6er is mere!6 %rohi ite& from &is%osin7 of his %ro%ert6 Effe$te& 6 reAuirin7

Noti$e of Time an& P!a$e of Sa!e

Dis%osition

D# Sto-Ks and ot,er se-1rities+ B6 ser2in7 a $o%6 of the warrant of &istraint u%on the a# tax%a6er and . u%on the %resi&ent; mana7er; treasurer or other res%onsi !e offi$er of the $or%oration; $om%an6 or asso$iation whi$h issue& the sai& sto$= an& se$urities BSe$. 21E; CTRPC. ;# BanK a--o1nts+ The6 sha!! e 7arnishe& 6 ser2in7 a warrant of &istraint u%on the a# tax%a6er and . u%on the %resi&ent; mana7er; treasurer; or other res%onsi !e offi$er of the an=. NB4 .%on re$ei%t of the warrant of &istraint; the an= sha!! turn o2er to the Commissioner so mu$h of the an= a$$ounts as ma6 e suffi$ient to satisf6 the $!aim of the 7o2ernment BSe$. 21E; CTRPC. C# *e.ts and -redits+ B6 ser2in7 a $o%6 of the warrant of &istraint u%on the a# %erson owin7 the &e ts or .# ha2in7 in his %ossession or un&er his $ontro! su$h $re&its or $. u%on his a7ent. NB4 The warrant of &istraint sha!! e suffi$ient authorit6 to the %erson owin7 the

Reme&6 when tax%a6er &i&n@t si7n re$ei%t

ACT AL $S. CONSTR CTI$E DISTRAINT

ACT.AL DISTRAINT /a&e on!6 on the %ro%ert6 of a &e!inAuent tax%a6er There is ta=in7 of %ossession

Effe$te&

6 !ea2in7 a

!ist of &istraine& %ro%ert6 or 6 ser2i$e of a warrant of &istraint or 7arnishment

An imme&iate ste% for $o!!e$tion of taxes Both Are summar6 reme&ies for the $o!!e$tion of taxes9 Refer on!6 to %ersona! %ro%ert69 an& Cannot e a2ai!e& of where the amount of the tax in2o!2e& is not more than P+11

the tax%a6er to si7n a re$ei%t of the %ro%ert6 or 6 the re2enue offi$er %re%arin7 an& !ea2in7 a !ist of su$h %ro%ert6 Not ne$essari!6 so

$!aim within 21 &a6s after !e26; an& it sha!! $o2er a %erio& of at !east 31 &a6s BSe$. 2+3; CTRPC. Sa!e "> Sale at p1.li- a1-tion to the hi7hest i&&er BSe$. 2+3; CTRPC. > *isposition of pro-eeds of sa!e. In $ase the %ro$ee&s of the sa!e ex$ee& the $!aim Btaxes; %ena!ties an& interestC an& $ost of the sa!e; the ex$ess sha!! e turne& o2er to the owner of the %ro%ert6 BSe$. 2+3; CTRPC.

Dis%osition

*# Le7y
*efinition+ It refers to the a$t of sei<ure of real property in or&er to enfor$e the %a6ment of taxes. The %ro%ert6 ma6 e offere& in a %u !i$ sa!e; if after sei<ure; the taxes are not 2o!untari!6 %ai&.

DISTRAINT $S. LE$@

DISTRAINT Refers to %ersona! %ro%ert6 #orfeiture 6 the 7o2ernment is not %ro2i&e& The tax%a6er is not 7i2en the ri7ht of re&em%tion with res%e$t to &istraine& %ersona! %ro%ert6. LE,Refers to %ro%ert6 #orfeiture authori<e& rea! is

%e:1isites for t,e exer-ise of t,e remedy

of le7y+ Same as in the reme&6 of &istraint.

(,en may le7y .e effe-tedI

Rea! %ro%ert6 ma6 e !e2ie& u%on .efore< sim1ltaneo1sly< or after t,e distraint of %ersona! %ro%ert6 e!on7in7 to the &e!inAuent BSe$. 21'B; CTRPC9 an& the reme&6 6 &istraint an& !e26 ma6 e re%eate& if ne$essar6 unti! the fu!! amount; in$!u&in7 a!! ex%enses; is $o!!e$te& BSe$. 2+'; CTRPC.

&ro-ed1re of le7y on real property+

Pre%are Certifi$ate of Le26 " Pre%aration of a &u!6 authenti$ate& $ertifi$ate $ontainin74 BaC des-ription of t,e property !e2ie& B C name of t,e taxpayer; an& B$C the amo1nts of tax and penalty d1e from him. This $ertifi$ate sha!! o%erate with the for$e of a !e7a! exe$ution throu7hout the Phi!i%%ines BSe$. 21'B; CTRPC. "" Ser7i-e of written noti-e to the &e!inAuent tax%a6er or o$$u%ant of the %ro%ert6. The %ro%er Re7ister of Dee&s sha!! a!so e notifie& of the !e26 BSe$. 21'B; CTRPC. """ Ad7ertisement of t,e time and pla-e of sale of the tax%a6er@s %ro%ert6 or so mu$h thereof as ma6 e ne$essar6 to satisf6 the

The ri7ht of re&em%tion is 7rante& in $ase of rea! %ro%ert6 !e2ie& u%on an& so!&; or forfeite& to the 7o2ernment. Both Are summar6 reme&ies for the $o!!e$tion of taxes9 an& Cannot e a2ai!e& of where the amount of the tax in2o!2e& is not more than P+11

E# orfeit1re
*efinition+ &i2estiture of %ro%ert6 without $om%ensation; in $onseAuen$e of a &efau!t or offense.

Enfor-ement of t,e remedy of forfeit1re+

1# "n -ase of personal property O The forfeiture of $hatte!s an& remo2a !e fixtures of an6 sort is enfor$e& .y seiz1re and sale or destr1-tion of the s%e$ifi$ forfeite& %ro%ert6. 2# "n -ase of real property O The forfeiture of rea! %ro%ert6 is enfor$e& 6 a 61dgment of -ondemnation and sale in a !e7a! a$tion or %ro$ee&in7; $i2i! or $rimina!; as the $ase ma6 reAuire. Effe-t of t,e forfeit1re of property wit, respe-t to title t,ereto+ The effe$t is to transfer

Ser2i$e of Noti$e

Time an& P!a$e of Sa!e

the tit!e to the s%e$ifi$ thin7 from the owner to the 7o2ernment.

4. Pro2isions on %res$ri%tion; ein7 reme&ia! in nature; shou!& e !i era!!6 inter%rete& to $arr6 out its intent.

# Ci7il A-tions
*efinition+ #or tax reme&6 are a$tions institute& 6 the $o!!e$t interna! re2enue taxes. 6 the 7o2ernment with the %ro a7ainst the &e$ease& tax%a6er.

&res-ripti7e &eriod for t,e assessment of

taxes+ %ur%oses; these 7o2ernment to It in$!u&es fi!in7 ate $ourt $!aims )eneral Rule: TDREE B3C -EARS after the &ate the return is &ue or fi!e&; whi$he2er is !ater BSe$. 213; CTRPC. Exce tions: +. #AIL.RE T( #ILE A RET.RN4 TEN B+1C -EARS from the &ate of the &is$o2er6 of the omission to fi!e the return BSe$.222GaHC9 2. #ALSE (R #RAD.LENT RET.RN with INTENTI(N T( E,ADE TDE TA)4 TEN B+1C -EARS from the &ate of the &is$o2er6 of the fa!sit6 or frau& BSe$.222C9 3. AGREE/ENT IN 0RITING to the extension Bnot re&u$tionC of the %erio& to assess etween the CIR an& the tax%a6er efore the ex%iration of the 356ear %erio&. NB4 The exten&e& %erio& a7ree& u%on $an further e exten&e& 6 a su seAuent written a7reement ma&e efore the ex%iration of the exten&e& %erio& %re2ious!6 a7ree& u%on BSe$. 222G HC. 4. 0RITTEN 0AI,ER or REN.NCIATI(N of the ori7ina! three B3C 6ear !imitation; si7ne& 6 the tax%a6er BSam rano 2s. CTA +1+ Phi!. +C. &res-ripti7e &eriod for t,e Colle-tion of Taxes+

(,en resorted toI

+. 0hen a tax is assesse& ut the assessment e$omes fina! an& una%%ea!a !e e$ause t,e taxpayer fails to file an administrati7e protest wit, t,e C"% wit,in D0 days from re-eipt9 or 2. 0hen a %rotest a7ainst assessment is fi!e& an& a &e$ision of the CIR was ren&ere& ut the sai& &e$ision e$omes fina!; exe$utor6; an& &eman&a !e for fail1re of t,e taxpayer to appeal t,e de-ision to t,e CTA wit,in D0 days from re-eipt of t,e de-ision#

(,ere to file+ Ci2i! a$tions for the $o!!e$tion

of &e!inAuent taxes are fi!e& in the re7u!ar $ourts an& not efore the CTA. *efenses w,i-, are pre-l1ded .y final and exe-1tory assessments+ +. In2a!i&it6 or i!!e7a!it6 of the assessment9 an& 2. Pres$ri%tion of the 7o2ernment@s ri7ht to assess.

A.atement T,e Commissioner may a.ate or -an-el a

tax lia.ility w,en+ +. The tax or an6 %ortion thereof a%%ears to e 1n61stly or ex-essi7ely assessed9 or 2. The a&ministration an& $o!!e$tion $osts in2o!2e& do not 61stify t,e -olle-tion of the amount &ue GSe$. 214BAC; CTRPH.

)eneral "eriods for the ,ollection of Taxes: : 6ears ? from assessment or within %erio& for $o!!e$tion a7ree& u%on in writin7 efore ex%iration of the :56ear %erio& BSe$. 222; CTRPC. +1 6ears ? without assessment in $ase of fa!se or frau&u!ent return with intent to e2a&e or fai!ure to fi!e return BSe$. 222; CTRPC.

&res-ripti7e &eriods for t,e Assessment and Colle-tion of Taxes %ationale of ,erein pres-ripti7e periods+
Su$h %erio&s are &esi7nate& to se$ure the tax%a6ers a7ainst unreasona !e in2esti7ation after the !a%se of the %erio& %res$ri e&. The6 are a!so enefi$ia! to the 7o2ernment e$ause tax offi$ers wi!! e o !i7e& to a$t %rom%t!6.

$ro1nds for s1spension of t,e r1nning of

t,e stat1te of limitations+ 1# 0hen the C"% is pro,i.ited from ma=in7 the assessment or e7innin7 the &istraint or !e26 or a %ro$ee&in7 in $ourt; an& for sixt6 B"1C &a6s thereafter9 2# 0hen the taxpayer re:1ests for a re-onsideration whi$h is 7rante& 6 the CIR9 D# 0hen the taxpayer -annot .e lo-ated in the a&&ress 7i2en 6 him in the return; un!ess he informs the CIR of an6 $han7e in his a&&ress. ;# 0hen the warrant of &istraint or !e26 is &u!6 ser2e&; and no property is lo-ated9 an& C# 0hen the taxpayer is o1t of t,e &,ilippines BSe$. 223; CTRPC.

%1les on &res-ription+
+. 0hen the tax !aw itse!f is si!ent on %res$ri%tion; the tax is im%res$ri%ti !e9 2. 0hen no return is reAuire&; tax is im%res$ri%ti !e9 NB4 Reme&6 of tax%a6er is to fi!e a return. 3. Defense of %res$ri%tion is wai2a !e9

A tax ret1rn is -onsidered "LE* for p1rposes of starting t,e r1nning of t,e period of limitations if+ 1# The return is 7alid ? it has $om%!ie& su stantia!!6 with the reAuirements of the !aw9 an& 2. The return is appropriate ? it is a return for the %arti$u!ar tax reAuire& 6 !aw.

D# Sum $o!!e$te& is ex-essi7e#

TAX RE# ND $S. TAX CREDIT

TA) RE#.ND The tax%a6er as=s for restitution of the mone6 %ai& as tax Two56ear %erio& to fi!e $!aim with the CIR starts after the %a6ment of the tax or %ena!t6 TA) CREDIT The tax%a6er as=s that the mone6 so %ai& e a%%!ie& to his existin7 tax !ia i!it6 Two56ear %erio& starts from the &ate su$h $re&it was a!!owe& Bin $ase $re&it is wron7!6 ma&eC.

A defe-ti7e tax ret1rn is t,e same as if no ret1rn was filed at all#

II. TAX REMEDIES O# T!E TAXPA@ER $eneral %emedies of a Taxpayer Administrati7e

1# Before &ayment O a# &rotest ? fi!in7 a %etition for re$onsi&eration or rein2esti7ation within 31 &a6s from re$ei%t of assessment BSe$. 22E; CTRPC9 A %rotest is a 2ita! &o$ument whi$h is a forma! &e$!aration of resistan$e of the tax%a6er. It is a re%ositor6 of a!! ar7uments. It $an e use& in $ourt in $ase a&ministrati2e reme&ies ha2e een exhauste&. It is a!so the forma! a$t of the tax%a6er Auestionin7 the offi$ia! a$tuation of the CIR. This is eAui2a!ent to a %!ea&in7. .# Entering into a -ompromise BSe$. 214; CTRPC. 2# After &ayment O #i!in7 of -laim for ref1nd or tax -redit within 2 6ears from &ate of %a6ment re7ar&!ess of an6 su%er2enin7 $ause BSe$. 22*; CTRPC.

%e:1isites of Tax %ef1nd or Tax Credit

1# C!aim must e in writing9 2# It must e fi!e& with the CIR within T(O 224 9EA%S after the %a6ment of the tax or %ena!t6. 0here the %a6ment was ma&e 6 wron7!6 $re&itin7 a %rior o2er %a6ment; the two 6ear %erio& shou!& start from the &ate su$h $re&it was a!!owe&. D# Show proof of payment. S1spension of t,e Two5year &res-ripti7e &eriod+ +. There is a %en&in7 !iti7ation etween the Go2ernment an& the tax%a6er9 an& 2# CIR in that !iti7ate& $ase a7ree& to a i&e 6 the &e$ision of the SC as to the $o!!e$tion of taxes re!ati2e thereto (Pana4 Elect+8c C2. vs. C2llect2+, Ma4 :6, ,5.6).

%eglementary &eriods in "n-ome Tax "mposed .y Law 1pon t,e Taxpayer 2p1rs1ant to %e7# %eg# !o# 125AA< Se-# 22= of t,e CT%&< and %1les of Co1rt4
BIR ma=es a tax assessment

G1di-ial
1# Ci7il A-tion O a# Appeal to t,e Co1rt of Tax Appeals ? within 31 &a6s from re$ei%t of &e$ision on the %rotest or from the !a%se of +E1 &a6s &ue to ina$tion of the Commissioner BSe$. 22E; CTRPC. .# A$tion to -ontest forfeit1re of $hatte! BSe$. 23+; CTRPC9 an& -# A$tion for damages BSe$. 22'; CTRPC. 2# Criminal A-tion O a# #i!in7 of -riminal -omplaint against erring B"% offi-ials and employees. .# "n61n-tion ? when the CTA in its o%inion the $o!!e$tion 6 the BIR ma6 8eo%ar&i<e tax%a6er.

If tax%a6er is not satisfie& with the assessment file a protest within 31 &a6s from re$ei%t thereof

S1.mit s1pporting do-1ments within "1 &a6s from &ate of the fi!in7 of the %rotest

If %rotest is &enie&; ele7ate the matter to the Commissioner of Interna! Re2enue BCIRC within 31 &a6s from re$ei%t of the &e$ision of the CIR@s &u!6 authori<e& re%resentati2e offi$er

Appeal to t,e Co1rt of Tax Appeals 2CTA4 within 31 &a6s from re$ei%t of fina! &e$ision of CIR or his &u!6 authori<e& re%resentati2e Bthe tax%a6er has the o%tion to a%%ea! strai7ht to the CTA u%on re$ei%t of the &e$ision of the CIR@s &u!6 authori<e& re%resentati2eC

iling of -laim for Tax %ef1nd or Tax Credit $ro1nds for filing a -laim for tax ref1nd or
tax -redit+ 1# Tax is $o!!e$te& erroneo1sly or illegally. 2# Pena!t6 is $o!!e$te& wit,o1t a1t,ority.

If the CIR or his &u!6 authori<e& re%resentati2e fails to a-t on t,e protest wit,in 1=0 days

from &ate of su mission 6 tax%a6er; the !atter ma6 appeal within 31 &a6s from !a%se of the +E1 &a6 %erio&

Appeal to t,e Co1rt of Appeals BCAC within +: &a6s from re$ei%t of the CTA@s &e$ision

Lo$a! taxes; fees; or $har7es ma6 e $o!!e$te& 0ITDIN #I,E B:C -EARS from the &ate of assessment 6 a&ministrati2e or 8u&i$ia! a$tion. No su$h a$tion sha!! e institute& after the ex%iration of su$h %erio& BSe$. +*4; LGCC. $ro1nds for t,e S1spension of t,e %1nning of t,e &res-ripti7e &eriods+ +. The treasurer is !e7a!!6 %re2ente& from the assessment or $o!!e$tion of the tax9 2. The tax%a6er reAuests for a rein2esti7ation an& exe$utes a wai2er in writin7 efore the ex%iration of the %erio& within whi$h to assess or $o!!e$t9 an& 3. The tax%a6er is out of the $ountr6 or otherwise $annot e !o$ate& BSe$. +*4; LGCC.

Appeal to t,e S1preme Co1rt within +: &a6s from re$ei%t of the CA@s &e$ision As a general r1le< payment 1nder protest is not re:1ired 1nder t,e !"%C< ex-ept w,en partial payment of 1n-ontro7erted taxes is re:1ired as pro7ided 1nder %% 125AA#

TA) %EME*"ES 3!*E% T'E LOCAL $O>E%!ME!T CO*E 2L$C4

LOCAL TA)AT"O! %EME*"ES I. TAX REMEDIES O# T!E LOCAL GO$ERNMENT NITS T,e following are t,e Ci7il %emedies of t,e Lo-al $o7ernment 3nits 2L$34 to effe-t -olle-tion of taxes+
+. 2. 3. 4. :. Tax Lien BSe$. +'3; LGCC Distraint BSe$. +':; LGCC Le26 BSe$. +':; LGCC Ci2i! A$tion BSe$. +E3; LGCC Pur$hase of %ro%ert6 6 LG.s for want of i&&er BSe$. +E+; LGCC9 Pro%ert6 &istraine& not &is%ose& within +21 &a6s from &ate of &istraint ? $onsi&ere& so!& to the LG. BSe$. +':; LGCC.

II. TAX TAXPA@ER

REMEDIES

O#

T!E

T,e following are t,e remedies of t,e taxpayer in lo-al taxation+ I. A&ministrati2e A. &rotest ? within "1 &a6s from re$ei%t of assessment BSe$. +*: LGCC. Pa6ment un&er %rotest not ne$essar6 B. &ayment P s1.se:1ent ref1nd or tax -redit ? within 2 6rs. from %a6ment of tax to !o$a! treasurer BSe$. +*" LGCC It is to e note& that; un!i=e in interna! re2enue taxes; the s1per7ening -a1se a%%!ies in !o$a! taxation e$ause the %erio& for the fi!in7 of $!aims for refun& or $re&it of !o$a! taxes is $ounte& not ne$essari!6 from the &ate of %a6ment ut from the &ate the tax%a6er is entit!e& to a refun& or $re&it. C. %ig,t of redemption ? + 6r. #rom the &ate of sa!e or from the &ate of forfeiture BSe$. +E+ LGCC II. Iu&i$ia! A. Appeal ? an6 Auestion on $onstitutiona!it6 or !e7a!it6 of tax or&inan$e within 31 &a6s from effe$ti2it6 thereof to Se$retar6 of Iusti$e BSe$. +E' LGCC B. Co1rt a-tion ? within 31 &a6s after re$ei%t of &e$ision or !a%se of "1 &a6s of Se$retar6 of Iusti$e@s ina$tion BSe$. +E' LGCC 5 within 31 &a6s from re$ei%t when %rotest of assessment is &enie& BSe$. +*: LGCC 5 if no a$tion is ta=en 6 the treasurer in refun& $ases an& the two 6ear %erio& is a out to !a%se BSe$. +*: LGCC 5 if reme&ies a2ai!a !e &oes not %ro2i&e %!ain; s%ee&6 an& a&eAuate reme&6. C# A-tion for de-laratory relief D. "n61n-tion ? if irre%ara !e &ama7e wou!& e $ause& to the tax%a6er an& no a&eAuate reme&6 is a2ai!a !e.

G1risdi-tion of -o1rts o7er lo-al taxation -ases+

+. The Court of Tax A%%ea!s has no 8uris&i$tion o2er !o$a! taxation $ases. 2. Re7u!ar 8u&i$ia! $ourts are not %rohi ite& from en8oinin7 the $o!!e$tion of !o$a! taxes; su 8e$t to Ru!e :E BPre!iminar6 In8un$tionC of the Ru!es of Court.

&res-ripti7e &eriods in t,e Assessment and Colle-tion of Lo-al Taxes &res-ripti7e &eriods of Assessment
+. Lo$a! taxes; fees; or $har7es ? #I,E B:C -EARS from the &ate the6 e$ame &ue. BSe$. +*4; LGCC. 2. 0hen there is frau& or intent to e2a&e the %a6ment of taxes; fees or $har7es ? TEN B+1C -EARS from &is$o2er6 of the frau& or intent to e2a&e the %a6ment BSe$. +*4; LGCC.

&res-ripti7e &eriod of Colle-tion

%EAL &%O&E%T9 TA) %EME*"ES I. TAX REMEDIES O# T!E LOCAL GO$ERNMENT TO E##ECT COLLECTION O# TAXES
+. Rea! Pro%ert6 tax !ien BSe$s. 24" an& 2:+; LGCC9 2. Distraint BSe$. 2:4; LGCC9 3. Le26 BSe$. 2:4; LGCC9 4. Ci2i! A$tion ? forma! &eman& not reAuire& BSe$. 2""; LGCC9 :. Pur$hase of %ro%ert6 6 !o$a! treasurer for want of i&&er BSe$. 2"3; LGCC.

There is 7enera! fai!ure of $ro%s9 There is su stantia! &e$rease in the %ri$e of a7ri$u!tura! or a7ri ase& %ro&u$ts9 or iii. There is $a!amit6. . B6 the Presi&ent of the Phi!i%%ines when %u !i$ interest so reAuires.

i. ii.

TA) %EME*"ES 3!*E% T'E TA%" A!* C3STOMS CO*E 2TCC4

%emedies of t,e $o7ernment to effe-t -olle-tion of taxes+
+. Tax Lien BSe$. +214 TCCC 2. Re&u$tion of $ustoms &utiesM$om%romise ? su 8e$t to a%%ro2a! of Se$. of #inan$e BSe$. '1*; 23+" TCCC 3. Ci2i! A$tion BSe$. +214 TCCC 4. Crimina! A$tion :. Sei<ure; Sear$h; Arrest BSe$. 221:; 22+1; 22++ TCCCM forfeiture BSe$. 2:31 TCCC

/&roperty *is-o7ered for t,e irst Time0

Pro%ert6 that for so man6 6ears ha& not een &e$!are& an& when &is$o2ere& owner must %a6 a$= taxes %!us in$rementa! %ena!ties. Assesse& taxes sha!! $o2er not more than ten B+1C 6ears %rior to the &ate of the initia! assessment.

II. TAX REMEDIES O# T!E TAXPA@ER

I. A&ministrati2e A. Protest ? %a6ment un&er %rotest is reAuire& within 31 &a6s to %ro2in$ia!; $it6; or muni$i%a! treasurer B. Refun& or tax $re&it ? within 2 6ears from the &ate the tax %a6er is entit!e& thereto BSe$. 2:3 LGCC C. Re&em%tion of rea! %ro%ert6 BSe$. 2"+ LGCC II. Iu&i$ia! A. A%%ea! ? within "1 &a6s from assessment of %ro2in$ia!; $it6 or muni$i%a! assessor to LBAA BSe$. 22" LGCC - within 31 &a6s from re$ei%t of &e$ision of LBAA to CBAA BSe$. 231 LGCC - in $ase of &enia! of refun& or $re&it; a%%ea! to BAA as in %rotest $ase BSe$. 2:3 LGCC B. Court A$tion ? a%%ea! of CBAA@s &e$ision to Su%reme Court 6 $ertiorari. C. Suit assai!in7 2a!i&it6 of tax9 re$o2er6 of refun& of taxes %ai& BSe$. "4 PD 4"4C. D. Suit to &e$!are in2a!i&it6 of tax &ue to irre7u!arit6 in assessment an& $o!!e$tion BSe$. "4 PD 4"4C. E. Suit assai!in7 the 2a!i&it6 of tax sa!e BSe$. E3 PD 4"4C

%emedies of t,e taxpayer+

I. A&ministrati2e A. Protest a. An6 im%orter or intereste& %art6 if &issatisfie& with %u !ishe& 2a!ue within +: &a6s from &ate of %u !i$ation . Tax%a6er ? within +: &a6s from assessment. Pa6ment un&er %rotest is ne$essar6 BSe$. 231E; 22+1 TCCC B. Refun& ? a atement or &raw a$= BSe$. +'1+5+'1E TCCC C. Sett!ement of an6 sei<ure 6 %a6ment of fine or re&em%tion ? B.T this sha!! not e a!!owe& in an6 $ase where im%ortation is a so!ute!6 %rohi ite& or the re!ease wou!& e $ontrar6 to !aw BSe$. 231' TCCC II. Iu&i$ia! 2 A. A%%ea! ? within +: &a6s to Commissioner 3 after notifi$ation 6 $o!!e$tor of his &e$ision BSe$. 23+3 TCCC within 31 &a6s from re$ei%t of &e$ision of the Commissioner or Se$retar6 of #inan$e to the CTA BSe$. 2413 TCC; Se$. ' RA ++2:C B. A$tion to Auestion the !e7a!it6 of sei<ure C. A an&onment BSe$. +E1+ TCCC

Two Kinds of pro-eedings in t,e B1rea1 of C1stoms 2BOC4+

+. C1stoms protest -ases 2. C1stoms seiz1re and forfeit1re -ases

Condonation of %eal &roperty Taxes

a. Rea! %ro%ert6 taxes ma6 e $on&one& who!!6 or %artia!!6 in a 7i2en !o$a! 7o2ernment unit when

A# C1stoms &rotest Cases

*efinition+ These are $ases whi$h &ea! so!e!6 with !ia i!it6 for $ustoms &uties; fees; an& other $har7es.

6 A%%ea! with the Court of Tax A%%ea!s within 31 &a6s from noti$e

Automati$ re2iew the Se$. of #inan$e

(,en -1stoms protest appli-a.le+

The $ustoms %rotest is reAuire& to e fi!e& on!6 in $ase the !ia i!it6 of the tax%a6er for &uties; taxes; fees an& other $har7es is &etermine& an& the tax%a6er &is%utes sai& !ia i!it6.

If &e$ision of Commissioner or Se$. of #inan$e is a&2erse to the %rotestant; he ma6 a%%ea! to the CA; an& SC un&er the same %ro$e&ure on the !eft

A%%ea! with the Court of A%%ea!s within +: &a6s from noti$e

(,en C1stoms protest !OT re:1ired

0here there is no &is%ute; ut the $!aim for refun& arises 6 reason of the ha%%enin7 of su%er2enin7 e2ents su$h as when the raw materia! im%orte& is uti!i<e& in the %ro&u$tion of finishe& %ro&u$ts su seAuent!6 ex%orte& an& a &ut6 &raw a$= is $!aime&.

CTA; A%%ea! 6 $ertiorari with the Su%reme Court within +: &a6s from noti$e

%e:1irements for maKing a protest+

a. must e in writing . must %oint out the %arti$u!ar de-ision or r1ling of t,e Colle-tor of C1stoms to whi$h ex$e%tion is ta=en or o 8e$tion ma&e9 $. must state the gro1nds re!ie& u%on for re!ief9 &. must e limited to the su 8e$t matter of a single ad61stment9 e. must e filed when the amount $!aime& is %ai& or wit,in 1C days after the %a6ment9 f. %rotestant must f1rnis, samples of goods un&er %rotest when reAuire&.

%easons for t,e a1tomati- re7iew of de-isions ad7erse to t,e $o7ernment +. To %rote$t the interest of the Go2ernment 2. A fa2ora !e &e$ision wi!! not e a%%ea!e& 6 the tax%a6er an& $ertain!6 a Co!!e$tor wi!! not a%%ea! his own &e$ision. 3. Life !oo& Theor6

B# Seiz1re and orfeit1re Cases

*efinition+ These refer to matters in2o!2in7 smu77!in7. It is a&ministrati2e an& $i2i! in nature an& is &ire$te& a7ainst the res or im%orte& arti$!es an& entai!s a &etermination of the !e7a!it6 of their im%ortation. These are a$tions in rem.

&ro-ed1re on C1stoms &rotest Cases+

The Co!!e$tor a$tin7 within his 8uris&i$tion sha!! $ause the im%orte& 7oo&s to e entere& at the $ustomhouse

Sm1ggling
A. An a$t of an6 %erson who sha!!4 4 +. #rau&u!ent!6 im%ort an6 arti$!e $ontrar6 to 5 !aw; or 6 2. Assist in so &oin7; or 7 3. Re$ei2e; $on$ea!; u6; se!!; fa$i!itate; 8 trans%ort; $on$ea! or se!! su$h arti$!e 9 =nowin7 its i!!e7a! im%ortation 2Se-# DH01< 10 TCC4 4. Ex%ort $ontrar6 to !aw. BSe-# DC1;< TCC4 B. The Phi!i%%ines is &i2i&e& into 2arious %orts of entr6 ? entr6 other than %ort of entr6; wi!! e S/.GGLING. E7iden-e for -on7i-tion in sm1ggling -ases# /ere %ossession of the arti$!e in Auestion 5 .NLESS &efen&ant $ou!& ex%!ain that his %ossession is !awfu! to the satisfa$tion of the $ourt 2Se-# DH01< TCC4# Pa6ment of the tax &ue after a%%rehension is not a 2a!i& &efense (R29+8gueA v. CA, :>6 SCRA :66)

The Co!!e$tor sha!! assess; !iAui&ate; an& $o!!e$t the &uties thereon; or &etain the sai& 7oo&s if the %art6 !ia !e &oes not %a6 the same

The %art6 a&2erse!6 affe$te& Bthe %rotestantC ma6 fi!e a written %rotest on his fore7oin7 !ia i!it6 with the Co!!e$tor within +: &a6s after %a6in7 the !iAui&ate& amount Bthe %a6ment un&er %rotest ru!e a%%!iesC

Dearin7 within +: &a6s from re$ei%t of the &u!6 %resente& %rotest. .%on termination of the hearin7; the Co!!e$tor sha!! &e$i&e on the same within 31 &a6s

If &e$ision is a&2erse to the %rotestant

If &e$ision is a&2erse to the Go2ernment

A%%ea! with the Commissioner within +: &a6s from noti$e

Automati$ re2iew 6 Commissioner

Contra.and+ Arti$!es of %rohi ite& im%ortations or ex%ortations. 2Se-# DC1;< TCC4

T,ings s1.6e-t sm1ggling -ases+

to

-onfis-ation

in

An6thin7 that was use& for smu77!in7 is su 8e$t to $onfis$ation; !i=e the 2esse!; %!ane; et$. (Lla0a92 vs. C200. 23 Cust20s, ,56B). E)CEPTI(N4 Common $arriers that are not %ri2ate!6 $hartere& $annot e $onfis$ate&.

&. offi$ers 7enera!!6 em%owere& 6 !aw to effe$t arrests an& exe$ute %ro$esses of $ourts; when a$tin7 un&er the &ire$tion of the Co!!e$tor. 2Se-# 220D< TCC4 Administrati7e and G1di-ial &ro-ed1res relati7e to C1stoms Seiz1res and orfeit1res

%ig,t of -1stoms offi-ers to effe-t seiz1re

P arrest a. /a6 sei<e an6 2esse!; air$raft; $ar7o; arti$!e; anima! or other mo2a !e %ro%ert6 when the same is su 8e$t to forfeiture or !ia !e for an6 time as im%ose& un&er tariff an& $ustoms !aws; ru!es U re7u!ations . /a6 exer$ise su$h %owers on!6 in $onformit6 with the !aws an& %ro2isions of the TCC 2Se-# 220C4

Determination of %ro a !e $ause an& issuan$e of warrant

A$tua! sei<ure of the arti$!es

Listin7 of &es$ri%tion; a%%raisa! an& $!assifi$ation of sei<e& %ro%ert6

Re%ort of sei<ure to the Comm. of Customs an& the Chairman; Comm. on Au&it

*o-trine of 'ot &1rs1it

Re$uisites: 1# O7er >essels a. An a$t is &one in Phi!. 0aters whi$h $onstitutes a 2io!ation of the tariff an& $ustoms !aws . a %ursuit of su$h 2esse! e7an within the 8uris&i$tiona! waters whi$h i. ma6 $ontinue e6on& the maritime <one; an& ii. the 2esse! ma6 e sei<e& on the hi7h seas. 2# O7er "mported Arti-les a. There is a 2io!ation of the tariff an& $ustoms !aws . As a $onseAuen$e the6 ma6 e %ursue& in the Phi!s. $. 0ith 8uris&i$tion o2er them at an6 %!a$e therein for the enfor$ement of the !aw. 2 2nd par# Se-# H0D< TCC4

Issuan$e 6 the Co!!e$tor of a warrant of &etention

Notifi$ation to owner or im%orter

#orma! hearin7

Distri$t $o!!e$tor ren&ers his &e$isions

If &e$ision is not fa2ora !e to the a77rie2e& owner or im%orter

If &e$ision is not fa2ora !e to the Go2ernment

Automati$ re2iew 6 the Commissioner

A%%ea! 6 the a77rie2e& owner or im%orter

%TC 7s# BOC

The RTCs &o not ha2e 8uris&i$tion o2er sei<ure an& forfeiture %ro$ee&in7s $on&u$te& 6 the B(C an& to interfere with these %ro$ee&in7s. The Co!!e$tor of Customs has ex$!usi2e 8uris&i$tion o2er a!! Auestions tou$hin7 on the sei<ure an& forfeiture of &utia !e 7oo&s. No %etitions for $ertiorari; %rohi ition or man&amus fi!e& with the RTC wi!! !ie e$ause these are in rea!it6 attem%ts to re2iew the Commissioner>s a$tuations. Neither re%!e2in fi!e& with the RTC wi!! issue. %ationale+ Do$trine of Primar6 Iuris&i$tion. &ersons ,a7ing poli-e a1t,ority to enfor-e t,e Tariff P C1stoms Laws and effe-t sear-,es< seiz1res and arrests+ a. offi$ia!s of the B(C; &istri$t $o!!e$tors; %o!i$e offi$ers; a7ents; ins%e$tors; an& 7uests of the B(C9 . offi$ers of the Phi!. Na26 an& other mem ers of the A#P an& nationa! !aw enfor$ement a7en$ies when authori<e& 6 the Commissioner of Customs $. offi$ia!s of the BIR on a!! $ases fa!!in7 within the re7u!ar %erforman$es of their &uties; when the %a6ment of interna! taxes are in2o!2e&9

%e:1irements for -1stoms forfeit1re

1# The wrongf1l maKing 6 the owner; im%orter; ex%orter or $onsi7nee of an6 &e$!aration or affi&a2it; or the wron7fu! ma=in7 or &e!i2er6 6 the same %ersons of an6 in2oi$e; !etter or %a%er 5 a!! tou$hin7 on the im%ortation or ex%ortation of mer$han&ise.9 an& 2# That su$h &e$!aration; affi&a2it; in2oi$e; !etter or %a%er is false. (#a+2lan, C+. v. CTA, :,7 SCRA :56)

&la-es w,ere sear-,es P seiz1res may .e

-ond1-ted+ a. en$!osures . &we!!in7 house Bthere must e sear$h warrant issue& 6 a 8u&7eC $. 2esse!s or air$rafts an& %ersons or arti$!es $on2e6e& therein &. 2ehi$!es; easts an& %ersons e. %ersons arri2in7 from forei7n $ountries.

B1rden of proof in seiz1re or forfeit1re+

$!aimant BSe$. 2:3:; TCCC.

%e:1irements for manifest

A manifest in $oastwise tra&e for $ar7o an& %assen7ers trans%orte& from one %!a$e or %ort in the Phi!i%%ines to another is reAuire& when one or oth of su$h %!a$es is a %ort of entr6 BSe$. *1"; TCCC. /anifests are a!so reAuire& of 2esse! from a forei7n %ort BSe$. +11:; TCCC. E1ery+ "s manifest re:1ired only for imported goodsI No. Arti$!es su 8e$t to sei<ure &o not ha2e to e im%orte& 7oo&s. /anifests are a!so reAuire& for arti$!es foun& on 2esse!s or air$raft en7a7e& in $oastwise tra&e (R8g2+ vs. R2sales, ,,7 SCRA 76)).

+. 2. 3. 4.

Dama7e in$urre& &urin7 2o6a7e9 Defi$ien$6 in $ontents %a$=a7es Loss or &estru$tion of arti$!es after arri2a! Death or in8ur6 of anima!s

3nmanifested Cargo is s1.6e-t to orfeit1re whether the a$t of smu77!in7 is esta !ishe& or not un&er the %rin$i%!e of res i%sa !oAuitur. It is enou7h that the $ar7o was unmanifeste& an& that there was no showin7 that %a6ment of &uties thereon ha& een ma&e for it to e su 8e$t to forfeiture.

Cargo< sea store< and pro7isions disting1is,ed+ +. Cargo+ Arti$!e of 2a!ue Bin$!u&in7 forei7n $urren$iesC; usua!!6 mo2a !es; other than those as %art of sea stores or %ro2isions. 2. Sea Store+ It is where the %assen7ers $an u6 their ne$essities. 3. &ro7isions+ Those ne$essar6 for the su sisten$e of the $rew.

ra1d1lent &ra-ti-es -onsidered as Criminal Offenses against C1stoms %e7en1e Laws+ a. .n!awfu! im%ortation9 . Entr6 of im%orte& or ex%orte& arti$!e 6 means of an6 fa!se or frau&u!ent %ra$ti$es; in2oi$e; &e$!aration; affi&a2it; or other &o$uments9 $. Entr6 of 7oo&s at !ess than their true wei7hts or measures or u%on a $!assifi$ation as to Aua!it6 or 2a!ue9 &. Pa6ment of !ess than the amount &ue9 e. #i!in7 an6 fa!se or frau&u!ent $!aim for the %a6ment of &raw a$= or refun& of &uties u%on the ex%ortation of mer$han&ise9 or f. #i!in7 an6 affi&a2it; $ertifi$ate or other &o$ument to se$ure to himse!f or others the %a6ment of an6 &raw a$=; a!!owan$e or refun& of &uties on the ex%ortation of m&se. 7reater than that !e7a!!6 &ue thereon. 2Se-# DH02< TCC4

>"# CO3%T O TA) A&&EALS 2%A 112C4

Salient feat1res of t,e CTA+
+. It is a 8u&i$ia! o&69 2. It is a $ourt of s%e$ia! 8uris&i$tion9 3. It is not 7o2erne& 6 te$hni$a! ru!es of e2i&en$e.

Settlement of orfeit1re Cases

)eneral Rule: Sett!ement of $ases 6 %a6ment of fine or re&em%tion of forfeite& %ro%ert6 is allowed# Exce tions: +. the im%ortation is a.sol1tely pro,i.ited or 2. the surren&er of the %ro%ert6 to the %erson offerin7 to re&eem wou!& e -ontrary to law; or 3. when there is fra1d. 2Se-# 2D0B< TCC4 A-:1ittal in Criminal C,arge !OT %es G1di-ata in Seiz1re or orfeit1re &ro-eedings Reasons: +. Crimina! %ro$ee&in7s are a$tions in %ersonam whi!e sei<ure or forfeiture %ro$ee&in7s are a$tions in rem. 2. Customs $om%romise &oes not extin7uish $rimina! !ia i!it6 BPeo%!e 2s. Desi&erio; No2. 2"; +*":C.

&owers of t,e CTA+ T,e following are t,e powers of t,e CTA+
+. 2. 3. 4. :. ". '. E. *. to a&minister oat,s9 to re-ei7e e7iden-e9 to summon witnesses 6 s1.poena9 to reAuire %ro&u$tion or %a%ers or &o$uments 6 s1.poena d1-es te-1mN to %unish -ontempt9 to prom1lgate r1les and reg1lations for the $on&u$t of its usiness9 to assess damage a7ainst a%%e!!ant if a%%ea! to CTA is foun& to e fri2o!ous or &i!ator69 to s1spend t,e -olle-tion of t,e tax pending appeal9 an& to render de-isions on $ases rou7ht efore it.

At an6 time %rior to the sa!e; the &e!inAuent im%orter may settle ,is o.ligations with the Bureau of Customs; in whi$h $ase the aforesai& arti$!es ma6 e &e!i2ere& u%on %a6ment of the $orres%on&in7 &uties an& taxes an& $om%!ian$e with a!! other !e7a! reAuirements 2Se-# 1C0=< TCC4

A.atement
The re&u$tion or non5im%osition of $ustoms &uties on $ertain im%orte& materia!s as a resu!t of4

%e:1isites for a >alid S1spension of Colle-tion of t,e Tax pending Appeal+ There must be a +. Showin7 that $o!!e$tion of the tax ma6 6eopardize t,e interest of the 7o2ernment an& M or the tax%a6er9

2. *eposit of the amount $!aime& or fi!e a suret6 on& for not more than &ou !e the amount of tax with the Court when reAuire&9 an& 3. Showin7 6 tax%a6er that a%%ea! is not fri7olo1s nor dilatory.

G1risdi-tion of t,e CTA4 Ex-l1si7e appellate 61risdi-tion to re7iew on appeal+ +. &e$isions of CIR in ? a. &is%ute& assessments; refun&s of interna! re2enue taxes; fees or other $har7es9 %ena!ties im%ose& in re!ation thereto9 or . other matters arisin7 un&er the NIRC; or other !aw or %art of !aw a&ministere& 6 the BIR. 2. &e$ision of Commissioner of Customs in ? a. $ases in2o!2in7 !ia i!it6 from $ustom &uties; fees or other mone6 $har7es9 sei<ure; &etention or re!ease of %ro%ert6 affe$te&9 fines; forfeitures or other %ena!ties im%ose& in re!ation thereto9 or . other matters arisin7 un&er the Customs Law; or other !aw or %art of !aw a&ministere& 6 the Bureau of Customs /Ot,er matters0
Those $ontro2ersies whi$h $an e $onsi&ere& within the s$o%e of the fun$tion of the BIR M B(C un&er e8us&em 7eneris ru!e Be.7. a$tion for the nu!!it6 of &istraint an& !e269 Auestionin7 the %ro%riet6 of the assessment9 $o!!e$tion of $om%romise %ena!tiesC.

CTA. The two56ear %erio& for oth starts from the &ate after the %a6ment of the tax or %ena!t6; or from the a%%ro2a! of the a%%!i$ation for $re&it. O.ser7ation+ If we are not 7oin7 to a!!ow the tax%a6er to fi!e a refun& efore the CTA an& !et him wait for the CIR@s &e$ision; an& the !atter fai!e& to ren&er a &e$ision within the 25 6ear %erio&; the sai& tax%a6er $an no !on7er fi!e a refun& efore the CTA e$ause his ri7ht to a%%ea! has %res$ri e&.

$eneral %1le+ New issues $annot e raise&

for the first time on a%%ea!. Ex-eptions+ +. Defense of %res$ri%tion REAS(N4 This is a statutor6 ri7ht ($8sa4an Lan9 T+ans'2+tat82n vs C2llect2+) 2. Errors of a&ministrati2e offi$ia!s REAS(N4 State $an ne2er e in esto%%e! an& !ife !oo& theor6. (CIR vs P+2cte+ an9 Ga01le P=8ls. M3g. C2+'.) Sim1ltaneo1s filing of an appli-ation for ref1nd or -redit and instit1tion of a -ase .efore t,e CTA allowed The !aw fixes the same %erio& of two B2C 6ears for fi!in7 a $!aim for refun& with the Commissioner an& for fi!in7 a $ase with the