BAR STAR NOTES

TAXATION
VER. 2010.06.12
copyrighted 2010
Prepared by Pro. Abe!ardo T. "o#o$do$
%AB %Eco$&' BS( %Acctg&' ))B' *A %Eco$&' ))*' "() %(a$d.&.
)a+yer,(PA,(-.to#. Bro/er' *a$age#e$t (o$.-!ta$t' Proe..or o )a+
a$d Pre,Bar Re0ie+er&
How to use the BAR STAR NOTES. The BAR STAR
NOTES i$ the or# o 1-e.tio$. a$d a$.+er. a. +e!! a. te2t-a!
di.c-..io$ +ere specially prepared by Prof. o!o"do" for the
e#clusi$e use of Bar Re$iewees who atte"ded his %&'& (ectures o"
TA)AT*ON he!d at the 3$i0er.ity o the Phi!ippi$e.. 4$c!-ded i$ the
pre.e$tatio$ are doctri$e. co$tai$ed i$ S-pre#e (o-rt deci.io$. -p to
Apri! 2010.
The p-rpo.e o the 5BAR STAR NOTES i. to pro0ide the Bar
Re0ie+ee +ith a ha$dy re0ie+ #ateria! +hich .er0e. a. #e#ory,
6ogger. or the Septe#ber 12' 2010 Bar E2a#i$atio$. i$ Ta2atio$. The
a-thor trie. to .eco$d g-e.. +hat +o-!d be i$c!-ded i$ the Bar E2a#.
-.i$g .tati.tica! a$a!y.i.. The act-a! Bar 1-e.tio$. #ay $ot be
or#-!ated i$ the .a#e #a$$er a. the BAR STAR NOTES. 7o+e0er'
the doctri$e. te.ted i$ the Bar +o-!d i$ a!! probabi!ity be i$c!-ded i$ the.e
Note..
4 pre..ed or ti#e' the a-thor .-gge.t. that the reader .ho-!d
oc-. hi. atte$tio$ o$ the o!!o+i$g8
Nice to /$o+
Sho-!d /$o+
*-.t /$o+ a$d #a.ter
4t i. -rther .-gge.ted that the reader .ho-!d #ere!y bro+.e tho.e
+itho-t .tar..
+ARN*N,-
The.e #ateria!. are copyrighted a$d9or ba.ed o$ the +riter:.
boo/. o$ Ta2atio$ a$d -t-re re0i.io$.. 4t i. prohibited to reprod-ce a$y
part o the.e Note. i$ a$y or# or a$y #ea$.' e!ectro$ic or #echa$ica!'
i$c!-di$g photocopyi$g +itho-t the +ritte$ per#i..io$ o the a-thor.
3$a-thori;ed -.er. .ha!! $ot be pro.ec-ted b-t SHA(( BE S.B/E0T
TO THE (A+ O1 KARMA S.0H THAT THE2 +*(( NE3ER PASS
THE BAR OR +O.( BE .NHAPP2 *N (*1E or .tea!i$g the
i$te!!ect-a! property o the a-thor.
THE BEST O1 (.04 AN
A3AN0E 0ON,RAT.(AT*ONS
TAXATION
,ENERA( PR*N0*P(ES O1 TA)AT*ON
TA)AT*ON5 *N ,ENERA(
'. State briefly a"d co"cisely the "ature of ta#atio".
Alter"ati$ely5 defi"e ta#atio".
S3<<ESTE" ANS=ER8 The i$here$t po+er o the .o0ereig$
e2erci.ed thro-gh the !egi.!at-re to i#po.e b-rde$. -po$ .-b6ect. a$d
ob6ect. +ithi$ it. 6-ri.dictio$ or the p-rpo.e o rai.i$g re0e$-e. to carry
o-t the !egiti#ate ob6ect. o go0er$#e$t.
%. +hat is the "ature of the State6s power to ta# 7
E#plai" briefly.
S3<<ESTE" ANS=ER8 The $at-re o the .tate:. po+er to ta2 i.
t+o,o!d. 4t i. both a$ i$here$t po+er a$d a !egi.!ati0e po+er.
4t i. i$here$t i$ $at-re bei$g a$ attrib-te o .o0ereig$ty. Thi. i. .o'
beca-.e +itho-t the ta2e.' the .tate:. e2i.te$ce +o-!d be i#peri!ed.
There i. th-.' $o $eed or a co$.tit-tio$a! gra$t or the .tate to e2erci.e
thi. po+er.
4t i. a !egi.!ati0e po+er beca-.e it i$0o!0e. the pro#-!gatio$ o
r-!e.. Ta2atio$ i. a .et o r-!e.' ho+ #-ch i. the ta2 to be paid' +ho
pay. the ta2' to +ho# it .ho-!d be paid' a$d +he$ the ta2 .ho-!d be
paid.
8. +hat is the u"derlyi"9 theory of ta#atio" 7 E#plai"
briefly.
S3<<ESTE" ANS=ER8 Ta2e. are the !ieb!ood o the $atio$.
=itho-t re0e$-e rai.ed ro# ta2atio$' the go0er$#e$t +i!! $ot
.-r0i0e' re.-!ti$g i$ detri#e$t to .ociety. =itho-t ta2e.' the go0er$#e$t
+o-!d be para!y;ed or !ac/ o #oti0e po+er to acti0ate a$d operate it.
%Commissioner of Internal Revenue v. Algue, Inc. et al., 1>? S(RA ?' 16,1@&
:. ;arshall said that5 the power to ta# i"$ol$es the
power to destroy. O" the other ha"d5 Hol!es stated that
the power to ta# is "ot the power to destroy while the
court sits.
Reco"cile the state!e"ts.
*" the alter"ati$e5 what are the i!plicatio"s that flow
fro! the abo$e state!e"ts 7
S3<<ESTE" ANS=ERS8 *ar.ha!!:. 0ie+ reer. to a 0a!id ta2
+hi!e the 7o!#e.: 0ie+ reer. to a$ i$0a!id ta2.
a. The i#po.itio$ o a 0a!id ta2 co-!d $ot be 6-dicia!!y
re.trai$ed #ere!y beca-.e it +o-!d pre6-dice ta2payer:. property.
b. A$ i!!ega! ta2 co-!d be 6-dicia!!y dec!ared i$0a!id
a$d .ho-!d $ot +or/ to pre6-dice a ta2payer:. property.
<. iscuss briefly the basis=bases5 or ratio"ale of
ta#atio".
S3<<ESTE" ANS=ER8 a. Reciproca! d-tie. o protectio$ a$d
.-pport bet+ee$ the .tate a$d it. citi;e$. a$d re.ide$t.. A!.o ca!!ed
.y#biotic re!atio$ bet+ee$ the .tate a$d it. citi;e$..
b. A-ri.dictio$ by the .tate o0er per.o$. a$d property
+ithi$ it. territory.
>. iscuss briefly but co!prehe"si$ely the
ob?ecti$es or purposes of ta#atio".
S3<<ESTE" ANS=ER8 The p-rpo.e. or ob6ecti0e. o ta2atio$
are the o!!o+i$g8
a. The pri#ary p-rpo.e8
1& Re0e$-e p-rpo.e.
b. The .eco$dary p-rpo.e.
1& S-#pt-ary or reg-!atory p-rpo.e.
2& (o#pe$.atory p-rpo.e.
B& To i#p!e#e$t the po+er o e#i$e$t do#ai$.
@. isti"9uish a ta# fro! a lice"se fee.
S3<<ESTE" ANS=ER8 The o!!o+i$g are the di.ti$ctio$.8
a. P-rpo.e8 Ta2 i#po.ed or re0e$-e +hi!e !ice$.e ee or
reg-!atio$. Ta2 or ge$era! p-b!ic p-rpo.e. +hi!e !ice$.e ee or
reg-!atory p-rpo.e. o$!y.
b. Ba.i.8 Ta2 i#po.ed -$der po+er o ta2atio$ +hi!e !ice$.e
ee -$der po!ice po+er.
c. A#o-$t8 4$ ta2atio$' $o !i#it a. to a#o-$t +hi!e !ice$.e ee
!i#ited to co.t o the !ice$.e a$d the e2pe$.e. o po!ice .-r0ei!!a$ce a$d
reg-!atio$.
d. Ti#e o pay#e$t8 Ta2e. $or#a!!y paid ater
co##e$ce#e$t o b-.i$e.. +hi!e !ice$.e ee beore.
e. Eect o pay#e$t8 Cai!-re to pay a ta2 doe. $ot #a/e the
b-.i$e.. i!!ega! +hi!e ai!-re to pay !ice$.e ee #a/e. b-.i$e.. i!!ega!.
. S-rre$der8 Ta2e.' bei$g the !ieb!ood o the .tate' ca$$ot
be .-rre$dered e2cept or !a+-! co$.ideratio$ +hi!e a !ice$.e ee #ay be
.-rre$dered +ith or +itho-t co$.ideratio$. %(oo!ey o$ Ta2atio$' pp. 11B@,
11B?D Pacific Commercial Company v. Romualdez, et al., EF Phi!. F2E&
A. How !ay the power to ta# be utiliBed to carry out
the social ?ustice pro9ra! of our 9o$er"!e"t 7
S3<<ESTE" ANS=ER8 The co#pe$.atory p-rpo.e o ta2atio$ i.
to i#p!e#e$t the .ocia! 6-.tice pro0i.io$. o the co$.tit-tio$ thro-gh the
progre..i0e .y.te# o ta2atio$' +hich +o-!d re.-!t to e1-a! di.trib-tio$ o
+ea!th' etc.
Progre..i0e i$co#e ta2e. a!!e0iate the #argi$ bet+ee$ rich a$d
poor. %Southern Cross Cement Corporation v. Cement Manufacturers
Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>&
4$ rece$t year.' the i$crea.i$g .ocia! cha!!e$ge. o the ti#e.
e2pa$ded the .cope o the .tate acti0ity' a$d ta2atio$ ha. beco#e a too!
to rea!i;e .ocia! 6-.tice a$d the e1-itab!e di.trib-tio$ o +ea!th' eco$o#ic
progre.. a$d the protectio$ o !oca! i$d-.trie. a. +e!! a. p-b!ic +e!are
a$d .i#i!ar ob6ecti0e.. %Batangas Poer Corporation v. Batangas City, et
al., <. R. No. 1>26@>' a$d co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Poer
Corporation v. City of Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&
C. E#plai" the su!ptuary purpose of ta#atio".
S3<<ESTE" ANS=ER8 The .-#pt-ary p-rpo.e o ta2atio$ i. to
pro#ote the ge$era! +e!are a$d to protect the hea!th' .aety or #ora!. o
the i$habita$t.. 4t i. i$ the 6oi$t e2erci.e o the po+er o ta2atio$ a$d po!ice
po+er +here reg-!atory ta2e. are co!!ected.
Ta2atio$ #ay be #ade the i#p!e#e$t o the .tate:. po!ice po+er.
The #oti0atio$ behi$d #a$y ta2atio$ #ea.-re. i. the i#p!e#e$tatio$ o
po!ice po+er goa!.. GSouthern Cross Cement Corporation v. Cement
Manufacturers Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B'
200>& The reader .ho-!d $ote that the A-g-.t B' 200> Southern Cross ca.e
i. the deci.io$ o$ the #otio$ or reco$.ideratio$ o the A-!y ?' 200E
Southern Cross deci.io$.
The .o,ca!!ed .i$ ta2e. o$ a!coho! a$d tobacco #a$-act-rer. he!p
di..-ade the co$.-#er. ro# e2ce..i0e i$ta/e o the.e pote$tia!!y har#-!
prod-ct.. %Southern Cross Cement Corporation v. Cement Manufacturers
Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>&
'&. Ta#atio" disti"9uished fro! police power. Ta2atio$
i. di.ti$g-i.hab!e ro# po!ice po+er a. to the #ea$. e#p!oyed to
i#p!e#e$t the.e p-b!ic goa!.. Tho.e doctri$e. that are -$i1-e to ta2atio$
2
aro.e ro# pec-!iar co$.ideratio$. .-ch a. tho.e e.pecia!!y p-$iti0e eect.
%Southern Cross Cement Corporation v. Cement Manufacturers
Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>& a.
the po+er to ta2 i$0o!0e. the po+er to de.troy a$d the be!ie that ta2e. are
!ieb!ood o the .tate. %I"id.# ta2e. bei$g the !ieb!ood o the go0er$#e$t'
their pro#pt a$d certai$ a0ai!abi!ity i. o the e..e$ce.
The.e co$.ideratio$. $ece..itated the e0o!-tio$ o ta2atio$ a. a
di.ti$ct !ega! co$cept ro# po!ice po+er. %I"id.&
''. How the power of ta#atio" !ay be used to
i!ple!e"t power of e!i"e"t do!ai". Ta2 #ea.-re. are b-t
e$orced co$trib-tio$. e2acted o$ pai$ o pe$a! .a$ctio$. a$d c!ear!y
i#po.ed or p-b!ic p-rpo.e. 4$ #o.t rece$t year.' the po+er to ta2 ha.
i$deed beco#e a #o.t eecti0e too! to rea!i;e .ocia! 6-.tice' p-b!ic +e!are'
a$d the e1-itab!e di.trib-tio$ o +ea!th. %Commissioner of Internal Revenue v.
Central $uzon %rug Corporation, <.R. No. 1>F6E@' Apri! 16' 200>&
E.tab!i.h#e$t. gra$ti$g the 20H .e$ior citi;e$. di.co-$t #ay
c!ai# the di.co-$t. gra$ted to .e$ior citi;e$. as ta# deductio" ba.ed o$
the $et co.t o the good. .o!d or .er0ice. re$dered8 Provided' That the
co.t o the di.co-$t .ha!! be a!!o+ed a. ded-ctio$ ro# gro.. i$co#e or
the .a#e ta2ab!e year that the di.co-$t i. gra$ted. Provided, further,
That the tota! a#o-$t o the c!ai#ed ta2 ded-ctio$ $et o 0a!-e added ta2
i app!icab!e' .ha!! be i$c!-ded i$ their gro.. .a!e. receipt. or ta2
p-rpo.e. a$d .ha!! be .-b6ect to proper doc-#e$tatio$ a$d to the
pro0i.io$. o the Natio$a! 4$ter$a! Re0e$-e (ode' a. a#e$ded. GM.&.
'olding Corporation v. Court of Appeals, et al., <.R. No. 1601FB' *arch B' 200?
citi$g E2pa$ded Se$ior (iti;e$. Act o 200B' Sec. E %a&I
'%. +hat are the three basic pri"ciples of a sou"d ta#
syste!7 E#plai" each briefly.
S3<<ESTE" ANS=ER8 The ca$o$. o a .o-$d ta2 .y.te#' a!.o
/$o+$ a. the characteri.tic. or' pri$cip!e. o a .o-$d ta2 .y.te#' are
-.ed a. a criteria i$ order to deter#i$e +hether a ta2 .y.te# i. ab!e to
#eet the p-rpo.e. or ob6ecti0e. o ta2atio$. They are8
a. Ci.ca! ade1-acy.
b. Ad#i$i.trati0e ea.ibi!ity.
c. Theoretica! 6-.tice.
'8. +hat are the ele!e"ts or characteristics of a ta# 7
S3<<ESTE" ANS=ER8
a. E$orced co$trib-tio$.
b. <e$era!!y payab!e i$ #o$ey.
c. Proportio$ate i$ character.
d. )e0ied o$ per.o$.' property or e2erci.e o a right or
pri0i!ege.
e. )e0ied by the .tate ha0i$g 6-ri.dictio$.
. )e0ied by the !egi.!at-re.
g. )e0ied or a p-b!ic p-rpo.e.
h. Paid at reg-!ar period. or i$ter0a!..
':. State the reDuisites of a $alid ta#.
S3<<ESTE" ANS=ER8
a. A 0a!id ta2 .ho-!d be +ithi$ the 6-ri.dictio$ o the ta2i$g
a-thority.
b. That the a..e..#e$t a$d co!!ectio$ o certai$ /i$d. %The
.a#e a. the i$here$t !i#itatio$. o the po+er o ta2atio$& .ho-!d be or a
p-b!ic p-rpo.e.
c. The r-!e o ta2atio$ .ho-!d be -$ior#.
d. That either the per.o$ or property o ta2e. g-ara$tee.
agai$.t i$6-.tice to i$di0id-a!.' e.pecia!!y by +ay or $otice a$d
opport-$ity or heari$g be pro0ided.
e. The ta2 #-.t $ot i#pi$ge o$ the i$here$t a$d (o$.tit-tio$a!
!i#itatio$. o$ the po+er o ta2atio$.
'<. +hat are the classes or Ei"ds of ta#es accordi"9 to
the sub?ect !atter or ob?ect 7
S3<<ESTE" ANS=ER8
a. Per.o$a!' po!! or capita!i;atio$ J i#po.ed o$ a!! re.ide$t.'
+hether citi;e$ or $ot. E2a#p!e J (o##-$ity Ta2.
b. Property , 4#po.ed o$ property. E2a#p!e J Rea! property
ta2.
c. E2ci.e J i#po.ed -po$ the peror#a$ce o a$ act' the
e$6oy#e$t o a pri0i!ege or the e$gagi$g i$ a$ occ-patio$. E2a#p!e J
i$co#e ta2' e.tate ta2.
'>. +hat are the Ei"ds of ta#es classified as to who
bears the burde" 7 E#plai" each briefly.
S3<<ESTE" ANS=ER8 Ba.ed o$ the po..ibi!ity o .hiti$g the
i$cide$ce o ta2atio$' or a. to +ho .ha!! bear the b-rde$ o ta2atio$' ta2e.
#ay be c!a..iied i$to8
a. "irect ta2e.. Tho.e that are e2tracted ro# the 0ery per.o$
+ho' it i. i$te$ded or de.ired' .ho-!d pay the# %Commissioner of Internal
Revenue v. Philippine $ong %istance (elephone Company, <. R. No. 1E02B0'
"ece#ber 1>' 200>&D they are i#po.itio$. or +hich a ta2payer i. direct!y
!iab!e o$ the tra$.actio$ or b-.i$e.. he i. e$gaged i$' %Commissioner of
Internal Revenue v. Philippine $ong %istance (elephone Company, supra&
+hich !iabi!ity ca$$ot be .hited or tra$.erred to a$other. E2a#p!e J
i$co#e ta2' e.tate ta2' do$or:. ta2' etc.
3
b. 4$direct ta2e. are tho.e that are de#a$ded i$ the ir.t
i$.ta$ce' ro#' or are paid by' o$e per.o$ i$ the e2pectatio$ a$d i$te$tio$
that he ca$ .hit the b-rde$ to %Commissioner of Internal Revenue v.
Philippine $ong %istance (elephone Company, supra& to .o#eo$e e!.e $ot a.
a ta2 b-t a. part o the p-rcha.e price. %Commissioner, of Internal
Revenue v. American &)press International, Inc. *Philippine Branch#, <.
R. No. 1>260F' A-$e 2F' 200> citi$g 0ario-. ca.e. a$d a-thoritie.&
E2a#p!e J 0a!-e added ta2 %VAT&' doc-#e$tary .ta#p ta2' e2ci.e ta2'
perce$tage ta2' etc.
'@. SilEair FSi"9aporeG PTE5 (td.5 a" i"ter"atio"al
carrier5 purchased a$iatio" 9as fro! Petro" 0orporatio"5
which it uses for its operatio"s. *t "ow clai!s for refu"d or ta#
credit for the e#cise ta#es it paid clai!i"9 that it is e#e!pt
fro! the pay!e"t of e#cise ta#es u"der the pro$isio"s of Sec.
'8< of the N*R0 of 'CC@ which pro$ides that petroleu!
products are e#e!pt fro! e#cise ta#es whe" sold to E2e#pt
e$titie. or age$cie. co0ered by ta2 treatie.' co$0e$tio$.' a$d other i$ter$atio$a!
agree#e$t. or their -.e a$d co$.-#ptio$8 Pro0ided' ho+e0er' That the co-$try
o .aid oreig$ i$ter$atio$a! carrier or e2e#pt e$titie. or age$cie. e2e#pt. ro#
.i#i!ar ta2e. petro!e-# prod-ct. .o!d to Phi!ippi$e carrier.' e$titie. or age$cie.
SilEair further a"chors its clai! o" Article :F%G of the Air
Tra"sport A9ree!e"t betwee" the ,o$er"!e"t of the
Republic of the Philippi"es a"d the ,o$er"!e"t of the
Republic of Si"9apore FAir Tra"sport A9ree!e"t betwee" RP
a"d Si"9aporeG which reads- C-e!' !-brica$t.' .pare part.' reg-!ar
e1-ip#e$t a$d aircrat .tore. i$trod-ced i$to' or ta/e$ o$ board aircrat i$ the
territory o o$e (o$tracti$g party by' or o$ beha! o' a de.ig$ated air!i$e o the
other (o$tracti$g Party a$d i$te$ded .o!e!y or -.e i$ the operatio$ o the agreed
.er0ice. .ha!!' +ith the e2ceptio$ o charge. corre.po$di$g to the .er0ice
peror#ed' be e2e#pt ro# the .a#e c-.to#. d-tie.' i$.pectio$ ee. a$d other
d-tie. or ta2e. i#po.ed i$ the territorie. o the ir.t (o$tracti$g Party ' e0e$ +he$
the.e .-pp!ie. are to be -.ed o$ the part. o the 6o-r$ey peror#ed o0er the
territory o the (o$tracti$g Party i$ +hich they are i$trod-ced i$to or ta/e$ o$
board. The #ateria!. reerred to abo0e #ay be re1-ired to be /ept -$der
c-.to#. .-per0i.io$ a$d co$tro!.
SilEair liEewise ar9ues that it is e#e!pt fro! i"direct
ta#es because the Air Tra"sport A9ree!e"t betwee" RP a"d
Si"9apore 9ra"ts e#e!ptio" fro! the sa!e custo!s duties5
i"spectio" fees a"d other duties or ta#es i!posed i" the
territory of the first 0o"tracti"9 Party. *t i"$oEes ;aceda $.
;acarai95 /r.5 ,.R. No. AA%C'5 ;ay 8'5 'CC'5 'C@ S0RA
@@'.which upheld the clai! for ta# credit or refu"d by the
Natio"al Power 0orporatio" FNP0G o" the 9rou"d that the NP0
is e#e!pt e$e" fro! the pay!e"t of i"direct ta#es.
*s SilEair e"titled to the ta# refu"d or credit it seeEs 7
Reaso" out your a"swer.
S3<<ESTE" ANS=ER8 Si!/air i. $ot e$tit!ed to ta2 re-$d or
credit or the o!!o+i$g rea.o$.8
a. The e2ci.e ta2 o$ a0iatio$ -e! i. a$ i$direct ta2. The proper
party to 1-e.tio$' or .ee/ a re-$d o' a$ i$direct ta2 i. the .tat-tory
ta2payer' the per.o$ o$ +ho# the ta2 i. i#po.ed by !a+ a$d +ho paid the
.a#e e0e$ i he .hit. the b-rde$ thereo to a$other. %Philippine
+eothermal, Inc. v. Commissioner of Internal Revenue, <.R. No. 1>E02?' A-!y
2F' 200>' E6> S(RA B0?' B1@,B1?& The N4R( pro0ide. that the e2ci.e ta2
.ho-!d be paid by the #a$-act-rer or prod-cer beore re#o0a! o
do#e.tic prod-ct. ro# p!ace o prod-ctio$. Th-.' Petro$ (orporatio$'
$ot Si!/air' i. the .tat-tory ta2payer +hich i. e$tit!ed to c!ai# a re-$d
ba.ed o$ Sectio$ 1B> o the N4R( o 1FF@ a$d Artic!e E%2& o the Air
Tra$.port Agree#e$t bet+ee$ RP a$d Si$gapore.
E0e$ i Petro$ (orporatio$ pa..ed o$ to Si!/air the b-rde$ o the
ta2' the additio$a! a#o-$t bi!!ed to Si!/air or 6et -e! i. $ot a ta2 b-t part o
the price +hich Si!/air had to pay a. a p-rcha.er.

GPhilippine Acetylene Co.,
Inc. v. Commissioner of Internal Revenue, 12@ Phi!. E61' E@0 %1F6@&I
b. Si!/air co-!d $ot .ee/ re-ge -$der Maceda v. Macaraig, ,r.,
<.R. No. ??2F1' *ay B1' 1FF1' 1F@ S(RA @@1.+hich -phe!d the c!ai# or
ta2 credit or re-$d by the Natio$a! Po+er (orporatio$ %NP(& o$ the
gro-$d that the NP( i. e2e#pt e0e$ ro# the pay#e$t o i$direct ta2e..
4$ Commissioner of Internal Revenue v. Philippine $ong %istance
(elephone Company' <.R. No. 1E02B0' "ece#ber 1>' 200>' E@? S(RA
61 the S-pre#e (o-rt c!ariied the r-!i$g i$ Maceda v. Macaraig, ,r., 0i;8
4t #ay be .o that i$ Maceda vs. Macaraig, ,r.' the (o-rt he!d that a$
e2e#ptio$ ro# all ta#es gra$ted to the Natio$a! Po+er (orporatio$
%NP(& -$der it. charter i$c!-de. both direct a$d i$direct ta2e..
A$ e2e#ptio$ ro# a!! ta2e. e2c!-de. i$direct ta2e.' -$!e.. the
e2e#pti$g .tat-te' !i/e NP(:. charter' i. .o co-ched a. to i$c!-de i$direct
ta2 ro# the e2e#ptio$. The a#e$d#e$t -$der Rep-b!ic Act No. 6BF>
e$-#erated the detai!. co0ered by NP(:. e2e#ptio$. S-b.e1-e$t!y' P.".
B?0' #ade e0e$ #ore .peciic the detai!. o the e2e#ptio$ o NP( to
co0er' a#o$g other.' both direct a$d i$direct ta2e. o$ a!! petro!e-#
prod-ct. -.ed i$ it. operatio$. Pre.ide$tia! "ecree No. FB? GNP(:.
a#e$ded charterI a#e$ded the ta2 e2e#ptio$ by .i#p!iyi$g the .a#e !a+
i$ ge$era! ter#.. 4t .-cci$ct!y e2e#pt. NP( ro# a!! or#. o ta2e.'
d-tie.' ee.K The -.e o the phra.e a!! or#. o ta2e. de#o$.trate.
the i$te$tio$ o the !a+ to gi0e NP( a!! the ta2 e2e#ptio$. it ha. bee$
e$6oyi$g beore.
The e2e#ptio$ gra$ted -$der Sectio$ 1B> %b& o the N4R( o 1FF@
a$d Artic!e E%2& o the Air Tra$.port Agree#e$t bet+ee$ RP a$d
Si$gapore ca$$ot' +itho-t a c!ear .ho+i$g o !egi.!ati0e i$te$t' be
co$.tr-ed a. i$c!-di$g i$direct ta2e.. Stat-te. gra$ti$g ta2 e2e#ptio$.
4
#-.t be co$.tr-ed i$ .tricti..i#i 6-ri. agai$.t the ta2payer a$d !ibera!!y i$
a0or o the ta2i$g a-thority' a$d i a$ e2e#ptio$ i. o-$d to e2i.t' it #-.t
$ot be e$!arged by co$.tr-ctio$. %Sil-air *Singapore# P(&, $td., v.
Commissioner of Internal Revenue, <.R. No. 1@B>FE' Cebr-ary 6' 200?&
'A. +hat are the differe"t Ei"ds of ta#es
classified as to purpose 7
S3<<ESTE" ANS=ER8
a. <e$era!' i.ca! or re0e$-e J i#po.ed or the p-rpo.e o
rai.i$g p-b!ic -$d. or the .er0ice o the go0er$#e$t.
b. Specia! or reg-!atory J i#po.ed pri#ari!y or the reg-!atio$ o
-.e-! or $o$,-.e-! occ-patio$ or e$terpri.e. a$d .eco$dari!y o$!y or the
rai.i$g o p-b!ic -$d..
(*;*TAT*ONS OR RESTR*0T*ONS ON THE PO+ER
'. Purpose for the li!itatio"s o" the power of ta#atio".
The i$here$t a$d co$.tit-tio$a! !i#itatio$. to the power of ta#atio" are
safe9uards +hich +o-!d pre0e$t ab-.e i$ the e2erci.e o thi. other+i.e
-$!i#ited a$d p!e$ary po+er.
The !i#itatio$. a!.o .er0e a. a .ta$dard to #ea.-re the 0a!idity o a
ta2 !a+ or the act o a ta2i$g a-thority. A 0io!atio$ o the !i#itatio$. .er0e.
to i$0a!idate a ta2 !a+ or act i$ the e2erci.e o the po+er to ta2.
*NHERENT (*;*TAT*ONS
'. +hat are the i"here"t li!itatio"s o" the power of
ta#atio" 7
S3<<ESTE" ANS=ERS8
a. P-b!ic p-rpo.e. The re0e$-e. co!!ected ro# ta2atio$ .ho-!d
be de0oted to a p-b!ic p-rpo.e.
b. No i#proper de!egatio$ o !egi.!ati0e a-thority to ta2. O$!y
the !egi.!at-re ca$ e2erci.e the po+er o ta2e. -$!e.. the .a#e i.
de!egated to .o#e other go0er$#e$ta! body by the co$.tit-tio$ or thro-gh
a !a+ +hich doe. $ot 0io!ate a$y pro0i.io$ o the co$.tit-tio$.
c. Territoria!ity. The ta2i$g po+er .ho-!d be e2erci.ed o$!y
+ithi$ territoria! bo-$darie. o the ta2i$g a-thority.
d. Recog$itio$ o go0er$#e$t e2e#ptio$.D a$d
e. Ob.er0a$ce o the pri$cip!e o co#ity. (o#ity i. the re.pect
accorded by $atio$. to each other beca-.e they are e1-a!.. O$ the other
ha$d ta2atio$ i. a$ act o .o0ereig$. Th-.' the po+er .ho-!d be i#po.ed
-po$ e1-a!. o-t o re.pect.
So#e a-thoritie. i$c!-de $o do-b!e ta2atio$.

%. +hat are the pri"ciples to co"sider i" the
deter!i"atio" of whether ta# re$e"ues are de$oted for a
public purpose 7
S3<<ESTE" ANS=ER8
a. The ta2 re0e$-e. are or a p-b!ic p-rpo.e i -ti!i;ed or the
be$eit o the co##-$ity i$ ge$era!. A$ a!ter$ati0e #ea$i$g i. that ta2
proceed. .ho-!d be -ti!i;ed o$!y to attai$ the ob6ecti0e. o go0er$#e$t.
b. 4$e1-a!itie. re.-!ti$g ro# the .i$g!i$g o-t o o$e partic-!ar
c!a.. or ta2atio$ or e2e#ptio$ i$ri$ge $o co$.tit-tio$a! !i#itatio$.
REASON8 4t i. i$here$t i$ the po+er to ta2 that the !egi.!at-re i.
ree to .e!ect the .-b6ect. o ta2atio$.
BAS4S8 The !ieb!ood theory.
c. A$ i$di0id-a! ta2payer $eed $ot deri0e direct be$eit. ro#
the ta2.
REASON8 The para#o-$t co$.ideratio$ i. the +e!are o the
greater portio$ o the pop-!atio$.
d. A ta2 #ay be i#po.ed' $ot .o #-ch or re0e$-e p-rpo.e.'
b-t -$der po!ice po+er or the ge$era! +e!are o the co##-$ity. Thi.
+o-!d .ti!! be or a p-b!ic p-rpo.e.
e. P-b!ic p-rpo.e co$ti$-a!!y e2pa$di$g. Area. or#er!y !et to
pri0ate i$itiati0e $o+ !o.e their bo-$darie. a$d #ay be -$derta/e$ by the
go0er$#e$t i it i. to #eet the i$crea.i$g .ocia! cha!!e$ge. o the ti#e..
. Ta2 re0e$-e #-.t $ot be -.ed or p-re!y pri0ate p-rpo.e. or
or the e2c!-.i0e be$eit o pri0ate per.o$..
g. Pri0ate per.o$. #ay be be$eited b-t .-ch be$eit .ho-!d be
#ere!y i$cide$ta! a. it. #ai$ ob6ect i. the be$eit o the co##-$ity i$
ge$era!.
h. "eter#i$ed at the ti#e o e$act#e$t o ta2 !a+ a$d $ot at
the ti#e o i#p!e#e$tatio$.
i. There i. a pre.-#ptio$ o p-b!ic p-rpo.e e0e$ i the ta2 !a+
doe. $ot .peciica!!y pro0ide or it. p-rpo.e. %Santos . Co., v. Municipality
of Meycauayan, et al.' FE Phi!. 10E@&
6. P-b!ic -.e i. $o !o$ger co$i$ed to the traditio$a! $otio$ o -.e
by the p-b!ic b-t he!d .y$o$y#o-. +ith p-b!ic i$tere.t' p-b!ic be$eit'
p-b!ic +e!are' a$d p-b!ic co$0e$ie$ce. %Commissioner of Internal Revenue
v. Central $uzon %rug Corporation, <.R. No. 1>F6E@' Apri! 16' 200>&
8. A law was e"acted i!posi"9 a ta# o" !a"ufacturers
of coco"ut oil5 the proceeds of which are to be used
e#clusi$ely for the protectio" a"d pro!otio" of the coco"ut
i"dustry5 "a!ely5 to i!pro$e the worEi"9 co"ditio"s i"
coco"ut !ills a"d to co"duct research o" the use of coco"ut
oil for !otor fuel. So!e of the !a"ufacturers of coco"ut oil
challe"9e the $alidity of the law5 co"te"di"9 that the ta# is to
5
be used for a pri$ate purpose5 a"d therefore5 the law $iolates
the rule that public re$e"ues shall "ot be appropriated for
a"ythi"9 but a public purpose. ecide with reaso".
S3<<ESTE" ANS=ER8 The !e0y i. or a p-b!ic p-rpo.e. 4t
ca$$ot be de$ied that the coco$-t i$d-.try i. o$e o the #a6or i$d-.trie.
.-pporti$g the $atio$a! eco$o#y. 4t i.' thereore' the .tate:. co$cer$ to
#a/e it a .tro$g a$d .ec-re .o-rce $ot o$!y o the !i0e!ihood o the
.ig$iica$t .eg#e$t o the pop-!atio$' b-t a!.o o e2port ear$i$g.' the
.-.tai$ed gro+th o +hich i. o$e o the i#perati0e. o eco$o#ic gro+th.
%Philippine Coconut Producers /ederation, Inc. *Cocofed v. Presidential
Commission on +ood +overnment, 1@? S(RA 2B6' 2>2&
:. ReDuisites for ta#payers5 co"cer"ed citiBe"s5
$oters or le9islators to ha$e locus standi to sue.
a. 4$ ge$era!' the ca.e .ho-!d i$0o!0e co$.tit-tio$a! i..-e..
%%avid, et al., v. President +loria Macapagal0Arroyo, etc., et al., <. R. No.
1@1BF6' *ay B' 2006&
b. Cor ta2payer.' there #-.t be a .ho+i$g8
1& That ta2 #o$ey i. bei$g e2tracted a$d .pe$t i$
0io!atio$ o .peciic co$.tit-tio$a! protectio$. agai$.t ab-.e. o
!egi.!ati0e po+er. %/last v. Cohen' BF2 3.S. ?B&
2& That p-b!ic #o$ey i. bei$g de!ected to a$y i#proper
p-rpo.e %Pascual v. Secretary of Pu"lic 1or-s' 110 Phi!. BB& or a
c!ai# o i!!ega! di.b-r.e#e$t o p-b!ic -$d. or that the ta2
#ea.-re i. -$co$.tit-tio$a!. %%avid, supra&
B& A ta2payer i. a!!o+ed to .-e +here there i. a c!ai#
that p-b!ic -$d. are i!!ega!!y di.b-r.ed' or that p-b!ic #o$ey i.
bei$g de!ected to a$y i#proper p-rpo.e' or that there i. a +a.tage o
p-b!ic -$d. thro-gh the e$orce#e$t o a$ i$0a!id or
-$co$.tit-tio$a! !a+. %A"aya v. &"dane, <. R. No. 16@F1F'
Cebr-ary 1E' 200@D +arcia v. &nri2uez, ,r. <.R. No. 1126>>
"ece#ber F' 1FFB' *i$-te Re.o!-tio$#
A ta2payer:. .-it i. proper!y bro-ght o$!y +he$ there i.
a$ e2erci.e o the .pe$di$g or ta2i$g po+er o (o$gre...
%Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo,
etc. ,et al., <. R. No. 1>@>0F' Aa$-ary 1?' 200> citi$g
+onzales v. !arvasa, <. R. No. 1E0?B>' A-g-.t 1E' 2000' BB@ S(RA
@BB' @E1&
c. Cor 0oter.' there #-.t be a .ho+i$g o ob0io-. i$tere.t i$
the 0a!idity o the e!ectio$ !a+ i$ 1-e.tio$.
d. Cor co$cer$ed citi;e$.' there #-.t be a .ho+i$g that the
i..-e. rai.ed are o tra$.ce$de$ta! i#porta$ce +hich #-.t be .ett!ed
ear!y.
e. Cor !egi.!ator.' there #-.t be a c!ai# that the oicia! actio$
co#p!ai$ed o i$ri$ge. -po$ their prerogati0e. a. !egi.!ator.. %%avid, et
al., v. President +loria Macapagal0Arroyo, etc., et al., <. R. No. 1@1BF6'
*ay B' 2006&
<. O"ly those directly affected ha$e locus standi to
i!pu9" the alle9ed e"croach!e"t by the e#ecuti$e
depart!e"t i"to the le9islati$e do!ai" of 0o"9ress.
a. O$!y tho.e +ho .ha!! be direct!y aected by .-ch e2ec-ti0e
e$croach#e$t' .-ch a. or e2a#p!e e#p!oyee. +ho +o-!d i$d
the#.e!0e. .-b6ect to di.cip!i$ary po+er. that #ay be i#po.ed -$der the
1-e.tio$ed E2ec-ti0e Order a. they ha0e a direct a$d .peciic i$tere.t i$
rai.i$g the .-b.ta$ti0e i..-e therei$ *Automotive Industry 1or-ers
Alliance *AI1A#,etc., et al., v. Romulo, etc. ,et al., <. R. No. 1>@>0F'
Aa$-ary 1?' 200>& or e#p!oyee. +ho are goi$g to be de#oted'
tra$.erred or other+i.e aected by a$y per.o$$e! actio$ .-b6ect o the
r-!e o$ e2ha-.tio$ o ad#i$i.trati0e re#edie..
b. *oreo0er' a$d i at a!!' o$!y (o$gre..' ca$ c!ai# a$y i$6-ry
ro# the a!!eged e2ec-ti0e e$croach#e$t o the !egi.!ati0e -$ctio$ to
a#e$d' #odiy a$d9or repea! !a+.. %Automotive Industry 1or-ers Alliance
*AI1A#,etc., et al., supra, citi$g +onzales v. !arvasa, <. R. No. 1E0?B>'
A-g-.t 1E'2000' BB@ S(RA @BB' @E1&
>. Locus standi bei"9 !erely a !atter of procedure5
ha$e bee" wai$ed i" certai" i"sta"ces where a party who is
"ot perso"ally i"?ured !ay be allowed to bri"9 suit. The
o!!o+i$g are e2a#p!e. o i$.ta$ce. +here .-it. ha0e bee$ bro-ght by
partie. +ho ha0e $ot ha0e bee$ per.o$a!!y i$6-red by the operatio$ o a !a+
or a$y other go0er$#e$t act b-t by co$cer$ed citi;e$.' ta2payer. or 0oter.
+ho act-a!!y .-e i$ the p-b!ic i$tere.t8
a. Ta2payer:. .-it. to 1-e.tio$ co$tract. e$tered i$to by the
$atio$a! go0er$#e$t or go0er$#e$t,o+$ed or co$tro!!ed corporatio$.
a!!eged!y i$ co$tra0e$tio$ o the !a+.
b. A ta2payer i. a!!o+ed to .-e +here there i. a c!ai# that p-b!ic
-$d. are i!!ega!!y di.b-r.ed' or that p-b!ic #o$ey i. bei$g de!ected to a$y
i#proper p-rpo.e' or that there i. a +a.tage o p-b!ic -$d. thro-gh the
e$orce#e$t o a$ i$0a!id or -$co$.tit-tio$a! !a+. %A"aya v. &"dane, <. R.
No. 16@F1F' Cebr-ary 1E' 200@&
@. The 3AT law pro$ides that5 the Preside"t5 upo" the
reco!!e"datio" of the Secretary of 1i"a"ce5 shall5 effecti$e
/a"uary '5 %&&>5 raise the rate of $alueHadded ta# to twel$e
perce"t F'%IG after a"y of the followi"9 co"ditio"s ha$e bee"
satisfied. FiG $alueHadded ta# collectio" as a perce"ta9e of
,ross o!estic Product F,PG of the pre$ious year e#ceeds
two a"d fourHfifth perce"t F% :=<IG or FiiG "atio"al 9o$er"!e"t
6
deficit as a perce"ta9e of ,P of the pre$ious year e#ceeds
o"e a"d o"eHhalf perce"t F' JIG.
+as there a" i"$alid dele9atio" of le9islati$e power 7
S3<<ESTE" ANS=ER8 No. There i. $o -$d-e de!egatio$ o
!egi.!ati0e po+er b-t o$!y o the di.cretio$ a. to the e2ec-tio$ o the !a+.
Thi. i. co$.tit-tio$a!!y per#i..ib!e.
(o$gre.. doe. $ot abdicate it. -$ctio$. or -$d-!y de!egate po+er
+he$ it de.cribe. +hat 6ob #-.t be do$e' +ho #-.t do it' a$d +hat i. the
.cope o hi. a-thority. 4$ the abo0e ca.e the Secretary o Ci$a$ce
beco#e. #ere!y the age$t o the !egi.!ati0e depart#e$t' to deter#i$e a$d
dec!are the e0e$ -po$ +hich it. e2pre..ed +i!! ta/e. p!ace. The Pre.ide$t
ca$$ot .et a.ide the i$di$g. o the Secretary o Ci$a$ce' +ho i. $ot -$der
the co$ditio$. acti$g a. the e2ec-te a!ter ego or .-bordi$ate. . GA"a-ada
+uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6' Septe#ber
1' 200> a$d co#pa$io$ ca.e. citi$g 0ario-. ca.e.II
A. *"sta"ces of proper dele9atio"- +he" ta#i"9 power
could be dele9ated- E#ceptio"s to the rule o" "o"H
dele9atio"-
a. "e!egatio$ o tari po+er. by (o$gre.. to the Pre.ide$t -$der
the !e2ib!e tari c!a-.e' Sectio$ 2? %2&' Artic!e V4 o the (o$.tit-tio$.
b. "e!egatio$ o e#erge$cy po+er. to the Pre.ide$t -$der
Sectio$ 2B %2& o Artic!e V4 o the (o$.tit-tio$.
c. The de!egatio$ to the Pre.ide$t o the Phi!ippi$e. to e$ter i$to
e2ec-ti0e agree#e$t.' a$d to ratiy treatie. +hich #ay co$tai$ ta2
e2e#ptio$ pro0i.io$. .-b6ect to the co$c-rre$ce by the Se$ate i$ the
ratiicatio$ #ade by the Pre.ide$t.
d. "e!egatio$ to the peop!e at !arge.
e. "e!egatio$ to ad#i$i.trati0e bodie. GA"a-ada +uro Party $ist
*/ormerly AAS,S#, etc., v, &rmita, et al., <. R. No.16?0>6' Septe#ber 1'
200>I' +hich i. reerred to a. .-bordi$ate !egi.!atio$.
4$ thi. i$.ta$ce' there i. a re1-ire#e$t that the !a+ i. co#p!ete i$
a!! a.pect. .o +hat i. de!egated i. #ere!y the i#p!e#e$tatio$ o the !a+
or there e2i.t. .-icie$t!y deter#i$ate .ta$dard. to g-ide the de!egate
a$d pre0e$t a tota! tra$.ere$ce o the ta2i$g po+er.
C. Paradi9! shift fro! e#clusi$e 0o"9ressio"al
power to direct 9ra"t of ta#i"9 power to local le9islati$e
bodies. The po+er to ta2 i. $o !o$ger 0e.ted e2c!-.i0e!y o$ (o$gre..D
!oca! !egi.!ati0e bodie. are $o+ gi0e$ direct a-thority to !e0y ta2e.' ee.
a$d other charge. p-r.-a$t to Artic!e L' .ectio$ > o the 1F?@ (o$.tit-tio$.
%Batangas Poer Corporation v. Batangas City, et al. <. R. No. 1>26@>' a$d
co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Poer Corporation v. City of
Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&
)oca! go0er$#e$t !egi.!atio$' i. $ot regarded a. a tra$.er o
ge$era! !egi.!ati0e po+er' b-t rather a. the gra$t o a-thority to pre.cribe
!oca! reg-!atio$.' accordi$g to i##e#oria! practice' .-b6ect' o co-r.e' to
the i$terpo.itio$ o the .-perior i$ ca.e. o $ece..ity. %People v. 3era' 6>
Phi!. >6&
'&. Ta#i"9 power of the local 9o$er"!e"t is li!ited.
The ta2i$g po+er o !oca! go0er$#e$t. i. !i#ited i$ the .e$.e that
(o$gre.. ca$ e$act !egi.!atio$ gra$ti$g ta2 e2e#ptio$..
=hi!e the .y.te# o !oca! go0er$#e$t ta2atio$ ha. cha$ged +ith
the o$.et o the 1F?@ (o$.tit-tio$' the po+er o !oca! go0er$#e$t -$it. to
ta2 i. .ti!! !i#ited.
=hi!e the po+er to ta2 by !oca! go0er$#e$t. #ay be e2erci.ed by
!oca! !egi.!ati0e bodie.' $o !o$ger #ere!y by 0irt-e o a 0a!id de!egatio$ a.
beore' b-t p-r.-a$t to direct a-thority co$erred by Sectio$ >' Artic!e L o
the (o$.tit-tio$' the ba.ic doctri$e o$ !oca! ta2atio$ re#ai$. e..e$tia!!y
the .a#e' 4the poer to ta) is 5still6 primarily vested in the Congress.7
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'
October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan
(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F i$
t-r$ reerri$g to Mactan Ce"u International Airport Authority, v. Marcos, <.R. No.
1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0#
''. 1urther a!plificatio" by Ber"as of the local
9o$er"!e"t6s power to ta#. =hat i. the eect o Sectio$ > o$ the
i.ca! po.itio$ o #-$icipa! corporatio$.M Sectio$ > doe. $ot cha$ge the
doctri$e that #-$icipa! corporatio$. do $ot po..e.. i$here$t po+er. o
ta2atio$. =hat it doe. i. to co$er #-$icipa! corporatio$. a ge$era!
po+er to !e0y ta2e. a$d other+i.e create .o-rce. o re0e$-e. They $o
!o$ger ha0e to +ait or a .tat-tory gra$t o the.e po+er.. The po+er o
the !egi.!ati0e a-thority re!ati0e to the i.ca! po+er. o !oca! go0er$#e$t.
ha. bee$ red-ced to the a-thority to i#po.e !i#itatio$. o$ #-$icipa!
po+er.. *oreo0er' the.e !i#itatio$. #-.t be co$.i.te$t +ith the ba.ic
po!icy o !oca! a-to$o#y. The i#porta$t !ega! eect o Sectio$ > i. th-.
to re0er.e the pri$cip!e that do-bt. are re.o!0ed agai$.t #-$icipa!
corporatio$.. 7e$ceorth' i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa!
i.ca! po+er.' do-bt. +i!! be re.o!0ed i$ a0or o #-$icipa! corporatio$..
4t i. -$der.tood' ho+e0er' that ta2e. i#po.ed by !oca! go0er$#e$t #-.t
be or a p-b!ic p-rpo.e' -$ior# +ithi$ a !oca!ity' #-.t $ot be
co$i.catory' a$d #-.t be +ithi$ the 6-ri.dictio$ o the !oca! -$it to pa...
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'
October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan
(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F&
7
'%. Reco"ciliatio" of the local 9o$er"!e"t6s authority
to ta# a"d the 0o"9ressio"al 9e"eral ta#i"9 power. (o$gre..
ha. the i$here$t po+er to ta2' +hich i$c!-de. the po+er to gra$t ta2
e2e#ptio$.. O$ the other ha$d' the po+er o !oca! go0er$#e$t.' .-ch
a. pro0i$ce. a$d citie. or e2a#p!e N-e;o$ (ity' to ta2 i. pre.cribed by
Sectio$ 1>1 i$ re!atio$ to Sectio$ 1B@ o the )<( +hich e2pre..!y
pro0ide. that $ot+ith.ta$di$g a$y e2e#ptio$ gra$ted by a$y !a+ or other
.pecia! !a+' the (ity or a pro0i$ce #ay i#po.e a ra$chi.e ta2. 4t #-.t be
$oted that Sectio$ 1B@ o the )<( doe. $ot prohibit gra$t o -t-re
e2e#ptio$..
The S-pre#e (o-rt i$ a .erie. o ca.e. ha. .-.tai$ed the po+er
o (o$gre.. to gra$t ta2 e2e#ptio$. o0er a$d abo0e the po+er o the
!oca! go0er$#e$t:. de!egated po+er to ta2. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City
+overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No.
16201>' *arch 6' 2006' E?E S(RA 16&
4$deed' the gra$t o ta2i$g po+er. to !oca! go0er$#e$t -$it. -$der
the (o$.tit-tio$ a$d the )<( doe. $ot aect the po+er o (o$gre.. to
gra$t e2e#ptio$. to certai$ per.o$.' p-r.-a$t to a dec!ared $atio$a!
po!icy. The !ega! eect o the co$.tit-tio$a! gra$t to !oca! go0er$#e$t.
.i#p!y #ea$. that i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! ta2i$g
po+er.' do-bt. #-.t be re.o!0ed i$ a0or o #-$icipa! corporatio$..
GI"id.' reerri$g to Philippine $ong %istance (elephone Company, Inc. *P$%(# vs.
City of %avao6
'8. ,e"eral pri"ciples of i"co!e ta#atio" i"
the Philippi"es or the source rule of i"co!e ta#atio" as
pro$ided i" the N*R0 of 'CC@.
a. A citiBe" o the Phi!ippi$e. residi"9 therei$ i. ta2ab!e o$ all
i$co#e deri0ed ro# .o-rce. withi" a$d without the Phi!ippi$e.D
b. A "o"reside"t citiBe" i. ta2ab!e o$!y o$ i"co!e deri0ed
ro# .o-rce. withi" the Phi!ippi$e.D
c. A$ i"di$idual citiBe" o the Phi!ippi$e. +ho i. +or/i$g a$d
deri0i$g i$co#e abroad a. a$ o$erseas co"tract worEer i. ta2ab!e o$!y
o$ i"co!e ro# .o-rce. withi" the Phi!ippi$e.8 Pro0ided' That a
sea!a" +ho i. a citi;e$ o the Phi!ippi$e. a$d +ho recei0e.
co#pe$.atio$ or .er0ice. re$dered abroad a. a #e#ber o the
co#p!e#e$t o a 0e..e! e$gaged e2c!-.i0e!y i$ i$ter$atio$a! trade .ha!!
be treated a. a$ o$erseas co"tract worEerD
d. A$ alie" i"di$idual5 +hether a reside"t or "ot o the
Phi!ippi$e.' i. ta2ab!e o$!y o$ i"co!e deri0ed ro# .o-rce. withi" the
Phi!ippi$e.D
e. A do!estic corporatio" i. ta2ab!e o$ a!! i"co!e deri0ed ro#
.o-rce. withi" a$d without the Phi!ippi$e.D a$d
. A forei9" corporatio"' +hether e$gaged or $ot i$ trade or
b-.i$e.. i$ the Phi!ippi$e.' i. ta2ab!e o$!y o$ i"co!e deri0ed ro#
.o-rce. withi" the Phi!ippi$e.. %Sec. 2B' N4R( o 1FF@' e#pha.i. .-pp!ied&
':. /ulia"e a "o"Hreside"t alie" appoi"ted as a
co!!issio" a9e"t by a do!estic corporatio" with a sales
co!!issio" of '&I all sales actually co"cluded a"d collected
throu9h her efforts. The local co!pa"y withheld the a!ou"t of
P'&@5&&& fro! her sales co!!issio" a"d re!itted the sa!e to
the B*R.
She filed a clai! for refu"d alle9i"9 that her sales
co!!issio" is "ot ta#able because the sa!e was a
co!pe"satio" for her ser$ices re"dered i" ,er!a"y a"d
therefore co"sidered as i"co!e fro! sources outside the
Philippi"es.
*s her co"te"tio" correct 7
S3<<ESTE" ANS=ER8 Oe.. The i#porta$t actor +hich
deter#i$e. the .o-rce o i$co#e o per.o$a! .er0ice. i. $ot the re.ide$ce
o the payor' or the p!ace +here the co$tract or .er0ice i. e$tered i$to' or
the p!ace o pay#e$t' b-t the p!ace +here the .er0ice. +ere act-a!!y
peror#ed.
Si$ce the acti0ity o .ec-ri$g the .a!e. +ere i$ <er#a$y' the$ the
i$co#e did $ot origi$ate ro# .o-rce. ro# +ithi$ the Phi!ippi$e..
%Commissioner of Internal Revenue v. Baier0!ic-el, <. R. No. 1>B@FB' A-g-.t 2F'
2006&
'<. E"site5 (td.. is a 0a"adia" corporatio" "ot
doi"9 busi"ess i" the Philippi"es. *t holds :&I of the shares
of Philippi"e Sta!pi"9 Pla"t5 *"c.5.5 a Philippi"e co!pa"y
while the >&I is ow"ed by 1red 0orporatio"5 a 1ilipi"oHow"ed
Philippi"e corporatio". E"site 0o. also ow"s '&&I of the
shares of Susa"to 0o.5 a" *"do"esia" co!pa"y which has a
duly lice"sed Philippi"e bra"ch. ue to worldwide
restructuri"9 of the E"site (td.5. 9roup5 E"site (td.5. decided
to sell all its shares i" Philippi"e Sta!pi"9 Pla"t5 *"c. a"d
Susa"to 0o. The "e9otiatio"s for the buyHout a"d the si9"i"9
of the A9ree!e"t of Sale were all do"e i" the Philippi"es.
The A9ree!e"t pro$ides that the purchase price will be paid
to E"site (td6s ba"E accou"t i" the ..S. a"d that title to the
Philippi"e Sta!pi"9 Pla"t5 *"c. a"d Susa"to 0o. shall be
tra"sferred to ,e"eral 0o.5 i" Toro"to 0a"ada where stocE
certificates will be deli$ered. ,e"eral 0o. seeEs your ad$ice
8
as to whether or "ot it will sub?ect the pay!e"ts of the
purchase price to withholdi"9 ta#. E#plai" your ad$ice.
S3<<ESTE" ANS=ER8 The pay#e$t. o the p-rcha.e price +i!!
be .-b6ect to +ithho!di$g ta2. (o$.ideri$g that a!! the acti0itie. %.a!e.&
occ-rred +ithi$ the Phi!ippi$e.' the i$co#e i. co$.idered a. i$co#e ro#
+ithi$' .-b6ect to Phi!ippi$e i$co#e ta2atio$. E$.ite' )td. bei$g a oreig$
corporatio$ i. to be ta2ed o$ it. i$co#e deri0ed ro# .o-rce. +ithi$ the
Phi!ippi$e..
'>. E"site5 (td. is a 0a"adia" corporatio"5 which
has a duly lice"sed Philippi"e bra"ch e"9a9e i" tradi"9
acti$ities i" the Philippi"es. E"site5 (td.. also i"$ested
directly i" :&I of the shares of stocE of Philippi"e Sta!pi"9
Pla"t5 *"c..5 a Philippi"e corporatio". These shares are
booEed i" the Head Office of E"site5 (td.. a"d are "ot
reflected as assets of the Philippi"e bra"ch. *" %&&C5
Philippi"e Sta!pi"9 Pla"t5 *"c.. declared di$ide"ds to its
stocEholders. Before re!itti"9 the di$ide"ds to E"site (td.5.5
Philippi"e Sta!pi"9 Pla"t5 *"c. 0o. seeEs your ad$ice as to
whether it will sub?ect the re!itta"ce to withholdi"9 ta#.
There is "o "eed to discuss +T rates5 if applicable. 1ocus
your discussio" o" what is the issue.
S3<<ESTE" ANS=ER8 Phi!ippi$e Sta#pi$g P!a$t' 4$c..
.ho-!d .-b6ect the re#itta$ce to +ithho!di$g ta2.. Si$ce Phi!ippi$e
Sta#pi$g P!a$t. i. a Phi!ippi$e corporatio$' it. .hare. o .toc/ ha0e
obtai$ed a b-.i$e.. .it-. i$ the Phi!ippi$e.' he$ce the di0ide$d. are
co$.idered a. i$co#e ro# +ithi$. E$.ite. )td.' bei$g a oreig$
corporatio$' .ho-!d be .-b6ect to ta2 o$ it. i$co#e ro# +ithi$.
'@. Philippi"e Sta!pi"9 Pla"t5 *"c.5 a Philippi"e
corporatio"5 has a" e#ecuti$e (arry who is a 1ilipi"o citiBe".
Philippi"e Sta!pi"9 Pla"t5 *"c5. has a subsidiary i" ;alaysia
F4uala (u!pur ;a"ufacturi"95 *"c.G a"d will assi9" (arry for
a" i"defi"ite period to worE full ti!e for 4uala (u!pur
;a"ufacturi"95 *"c.. (arry will bri"9 his fa!ily to reside i"
;alaysia a"d will lease out his reside"ce i" the Philippi"es.
The salary of (arry will be shouldered <&I by Philippi"e
Sta!pi"9 Pla"t5 *"c.. while the other <&I plus housi"95 cost
of li$i"9 a"d educatio"al allowa"ces of (arry6s depe"de"ts
will be shouldered by 4uala (u!pur ;a"ufacturi"95 *"c..
Philippi"e Sta!pi"9 Pla"t5 *"c.. will credit the <&I of (arry6s
salary to his Philippi"e ba"E accou"t. (arry will si9" the
co"tract of e!ploy!e"t i" the Philippi"es. He will also be
recei$i"9 re"tal i"co!e for the lease of his Philippi"e
reside"ce.
Are these salaries5 allowa"ces a"d re"tals sub?ect to
Philippi"e i"co!e ta#7 E#plai" briefly.
S3<<ESTE" ANS=ER8 The .a!arie. a$d a!!o+a$ce. o )arry'
bei$g deri0ed ro# !abor or per.o$a! .er0ice. re$dered o-t.ide o the
Phi!ippi$e. i. co$.idered a. i$co#e ro# +itho-t. Si$ce )arry i. a$
O(=' the$ he i. to be ta2ed o$!y o$ hi. i$co#e deri0ed ro# +ithi$ the
Phi!ippi$e. .-ch a. the re$ta!. o$ hi. Phi!ippi$e re.ide$ce' a$d $ot o$ hi.
i$co#e ro# +itho-t.
'A. Oba!a Airli"es5 *"c.5 a forei9" airli"e co!pa"y
which does "ot !ai"tai" a"y fli9ht to a"d fro! the Philippi"es
sold air ticEets i" the Philippi"es5 throu9h a 9e"eral sales
a9e"t5 relati"9 to the carria9e of passe"9ers a"d car9o
betwee" two poi"ts5 both outside the Philippi"es.
a. *s Oba!a5 *"c.5 sub?ect to i"co!e ta#es o" the sale
of the ticEets 7
S3<<ESTE" ANS=ER8 Oe.. The .o-rce o i$co#e +hich i.
ta2ab!e i. that acti0ity +hich prod-ced the i$co#e. The .a!e o tic/et. i$
the Phi!ippi$e. i. the acti0ity that deter#i$e. +hether .-ch i$co#e i.
ta2ab!e i$ the Phi!ippi$e..
The tic/et. e2cha$ged ha$d. here a$d pay#e$t. or are. +ere a!.o
#ade here i$ Phi!ippi$e c-rre$cy. The .it-. o the .o-rce o pay#e$t. i.
the Phi!ippi$e.. the !o+ o +ea!th proceeded ro# a$d occ-rred' +ithi$ the
Phi!ippi$e territory' e$6oyi$g the protectio$ accorded by the Phi!ippi$e
<o0er$#e$t. 4$ co$.ideratio$ o .-ch protectio$' the !o+ o +ea!th .ho-!d
.hare the b-rde$ o .-pporti$g the go0er$#e$t. GCommissioner of Internal
Revenue v. British 9verseas Airays Corporation *B9AC#, 1EF S(RA
BF>6
O,!i$e air carrier. ha0i$g ge$era! .a!e. age$t. i$ the Phi!ippi$e.
are e$gaged i$ or doi$g b-.i$e.. i$ the Phi!ippi$e. a$d their i$co#e
ro# .a!e. o pa..age doc-#e$t. here i. i$co#e ro# +ithi$ the
Phi!ippi$e.. Th-.' the o,!i$e air carrier !iab!e or the B2H %$o+ B0H& ta2
o$ it. ta2ab!e i$co#e. GSouth African Airays v. Commissioner of Internal
Revenue, <.R. No. 1?0B>6' Cebr-ary 16' 2010 citi$g Commissioner of Internal
Revenue v. British 9verseas Airays Corporation %British 9verseas Airays&'
No. ),6>@@B,@E' Apri! B0' 1F?@' 1EF S(RA BF>I
b. Supposi"9 that Oba!a5 *"c.5 sells ticEets outside of
the Philippi"es for passe"9ers it carry fro! ,old 0ity5 South
Africa to the Philippi"es but retur"s to South Africa without
a"y car9o or passe"9ers. +ould it the" be sub?ect to a"y
Philippi"e ta# o" such sales 7
9
S3<<ESTE" ANS=ER8 4t +o-!d $ot be .-b6ect to a$y ta2. 4t i.
$ot .-b6ect to a$y i$co#e ta2 beca-.e the acti0ity +hich ge$erated the
i$co#e %the .a!e o the tic/et.& +a. peror#ed o-t.ide o the Phi!ippi$e..
4t i. $ot .-b6ect to the carrier:. ta2 ba.ed o$ gro.. Phi!ippi$e
bi!!i$g. beca-.e there +ere $o !it. that origi$ated ro# the Phi!ippi$e..
<ro.. Phi!ippi$e Bi!!i$g. reer. to the a#o-$t o gro.. re0e$-e deri0ed
ro# carriage o per.o$.' e2ce.. baggage' cargo a$d #ai! origi$ati$g
ro# the Phi!ippi$e. i$ a co$ti$-o-. a$d -$i$terr-pted !ight' irre.pecti0e
o the p!ace o .a!e or i..-e a$d the p!ace o pay#e$t o the tic/et or
pa..age doc-#e$t. GN4R( o 1FF@' Sec. 2?%A&%B&%a&I
c. +ould your a"swer be the sa!e if Oba!a5 *"c. sold
ticEets outside of the Philippi"es for tra$elers who are 9oi"9 to
picEed up by Oba!a5 *"c.5 pla"es fro! the iosdado
;acapa9al *"tl. Airport at 0larE5 A"9eles5 Pa!pa"9a5 bou"d for
Nairobi5 4e"ya 7 Reaso" out your a"swer.
S3<<ESTE" ANS=ER8 No #ore. Thi. ti#e Oba#a' 4$c.' +o-!d
be .-b6ect to the carrier:. ta2 ba.ed o$ <ro.. Phi!ippi$e Bi!!i$g.. %<PB&.
<ro.. Phi!ippi$e Bi!!i$g. reer. to the a#o-$t o gro.. re0e$-e
deri0ed ro# carriage o per.o$.' e2ce.. baggage' cargo a$d #ai!
origi$ati$g ro# the Phi!ippi$e. i$ a co$ti$-o-. a$d -$i$terr-pted !ight'
irre.pecti0e o the p!ace o .a!e or i..-e a$d the p!ace o pay#e$t o the
tic/et or pa..age doc-#e$t. GN4R( o 1FF@' Sec. 2?%A&%B&%a&I
The p!ace o .a!e i. irre!e0a$tD a. !o$g a. the -p!it. o
pa..e$ger. a$d cargo occ-r ro# the Phi!ippi$e.' i$co#e i. i$c!-ded i$
<PB. %South African Airays v. Commissioner of Internal Revenue, <.R. No.
1?0B>6' Cebr-ary 16' 2010&
'C. No i!proper dele9atio" of le9islati$e authority to
ta#. The po+er to ta2 i. i$here$t i$ the State' .-ch po+er bei$g
i$here$t!y !egi.!ati0e' ba.ed o$ the pri$cip!e that ta2e. are a gra$t o the
peop!e +ho are ta2ed' a$d the gra$t #-.t be #ade by the i##ediate
repre.e$tati0e. o the peop!eD a$d +here the peop!e ha0e !aid the po+er'
there it #-.t re#ai$ a$d be e2erci.ed. %Commissioner of Internal Revenue
v. /ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&
0ONST*T.T*ONA( (*;*TAT*ONS
'. 0o"stitutio"al li!itatio"s o" the power of ta#atio" .
The ge$era! or i$direct co$.tit-tio$a! !i#itatio$. a. +e!! a. the .peciic or
direct co$.tit-tio$a! !i#itatio$..
%. The 9e"eral or i"direct co"stitutio"al li!itatio"s o"
the power of ta#atio" are-
a. "-e proce.. c!a-.eD
b. E1-a! protectio$ c!a-.eD
c. Creedo# o the pre..D
d. Re!igio-. reedo#D
e. No ta/i$g o pri0ate property +itho-t 6-.t co#pe$.atio$D
. No$,i#pair#e$t c!a-.eD
g. )a+,#a/i$g proce..8
1& Bi!! .ho-!d e#brace o$!y o$e .-b6ect e2pre..ed i$
the tit!e thereoD
2& Three %B& readi$g. o$ three .eparate day.D
B& Pri$ted copie. i$ i$a! or# di.trib-ted three %B& day.
beore pa..age.
h. Pre.ide$tia! po+er to gra$t reprie0e.' co##-tatio$. a$d
pardo$. a$d re#itta! o i$e. a$d oreit-re ater co$0ictio$ by i$a!
6-dg#e$t.
8. The specific or direct co"stitutio"al li!itatio".
a. No i#pri.o$#e$t or $o$,pay#e$t o a po!! ta2D
b. Ta2atio$ .ha!! be -$ior# a$d e1-itab!eD
c. (o$gre.. .ha!! e0o!0e a progre..i0e .y.te# o ta2atio$D
d. A!! appropriatio$' re0e$-e or tari bi!!. .ha!! origi$ate
e2c!-.i0e!y i$ the 7o-.e o Repre.e$tati0e.' b-t the Se$ate #ay propo.e
a$d co$c-r +ith a#e$d#e$t.D
e. The Pre.ide$t .ha!! ha0e the po+er to 0eto a$y partic-!ar ite# or
ite#. i$ a$ appropriatio$' re0e$-e' or tari bi!!' b-t the 0eto .ha!! $ot aect
the ite# or ite#. to +hich he doe. $ot ob6ectD
. "e!egated po+er o the Pre.ide$t to i#po.e tari rate.' i#port
a$d e2port 1-ota.' to$$age a$d +harage d-e.8
1& "e!egatio$ by (o$gre..
2& thro-gh a !a+
B& .-b6ect to (o$gre..io$a! !i#it. a$d re.trictio$.
E& +ithi$ the ra#e+or/ o $atio$a! de0e!op#e$t progra#.
g. Ta2 e2e#ptio$ o charitab!e i$.tit-tio$.' ch-rche.'
par.o$age. a$d co$0e$t. app-rte$a$t thereto' #o.1-e.' a$d a!! !a$d.'
b-i!di$g. a$d i#pro0e#e$t. o a!! /i$d. act-a!!y' direct!y a$d e2c!-.i0e!y
-.ed or re!igio-.' charitab!e or ed-catio$a! p-rpo.e.D
h. No ta2 e2e#ptio$ +itho-t the co$c-rre$ce o #a6ority 0ote o
a!! #e#ber. o (o$gre..D
i. No -.e o p-b!ic #o$ey or property or re!igio-. p-rpo.e.
e2cept i prie.t i. a..ig$ed to the ar#ed orce.' pe$a! i$.tit-tio$.'
go0er$#e$t orpha$age or !epro.ari-#D
6. *o$ey co!!ected o$ ta2 !e0ied or a .pecia! p-rpo.e to be
-.ed o$!y or .-ch p-rpo.e' ba!a$ce i a$y' to ge$era! -$d.D
/. The S-pre#e (o-rtP. po+er to re0ie+ 6-dg#e$t. or order. o
!o+er co-rt. i$ a!! ca.e. i$0o!0i$g the !ega!ity o a$y ta2' i#po.e'
10
a..e..#e$t or to!! or the !ega!ity o a$y pe$a!ty i#po.ed i$ re!atio$ to the
abo0eD
!. A-thority o !oca! go0er$#e$t -$it. to create their o+$
.o-rce. o re0e$-e' to !e0y ta2e.' ee. a$d other charge. .-b6ect to
g-ide!i$e. a$d !i#itatio$. i#po.ed by (o$gre.. co$.i.te$t +ith the ba.ic
po!icy o !oca! a-to$o#yD
#. A-to#atic re!ea.e o !oca! go0er$#e$tP. 6-.t .hare i$ $atio$a!
ta2e.D
$. Ta2 e2e#ptio$ o a!! re0e$-e. a$d a..et. o $o$,.toc/' $o$,
proit ed-catio$a! i$.tit-tio$. -.ed act-a!!y' direct!y a$d e2c!-.i0e!y or
ed-catio$a! p-rpo.e.D
o. Ta2 e2e#ptio$ o a!! re0e$-e. a$d a..et. o proprietary or
cooperati0e ed-catio$a! i$.tit-tio$. .-b6ect to !i#itatio$. pro0ided by !a+
i$c!-di$g re.trictio$. o$ di0ide$d. a$d pro0i.io$. or rei$0e.t#e$t o
proit.D
p. Ta2 e2e#ptio$ o gra$t.' e$do+#e$t.' do$atio$. or
co$trib-tio$. -.ed act-a!!y' direct!y a$d e2c!-.i0e!y or ed-catio$a!
p-rpo.e. .-b6ect to co$ditio$. pre.cribed by !a+.
<. EDual protectio" of the law clause is sub?ect to
reaso"able classificatio". 4 the gro-pi$g. are characteri;ed by
.-b.ta$tia! di.ti$ctio$. that #a/e rea! diere$ce.' o$e c!a.. #ay be
treated a$d reg-!ated diere$t!y ro# a$other. The c!a..iicatio$ #-.t a!.o
be ger#a$e to the p-rpo.e o the !a+ a$d #-.t app!y to a!! tho.e be!o$gi$g
to the .a#e c!a... *(iu, et al., v. Court of Appeals, et al., <.R. No. 12@E10'
Aa$-ary 20' 1FFF&
>. ReDuisites for $alid classificatio". A!! that i. re1-ired
o a 0a!id c!a..iicatio$ i. that it be rea.o$ab!e' +hich #ea$. that a.
the c!a..iicatio$ .ho-!d be ba.ed o$ .-b.ta$tia! di.ti$ctio$. +hich
#a/e or rea! diere$ce.'
b. that it #-.t be ger#a$e to the p-rpo.e o the !a+D
c. that it #-.t $ot be !i#ited to e2i.ti$g co$ditio$. o$!yD a$d
d. that it #-.t app!y e1-a!!y to each #e#ber o the c!a...
The .ta$dard i. .ati.ied i the c!a..iicatio$ or di.ti$ctio$ i. ba.ed
o$ a rea.o$ab!e o-$datio$ or ratio$a! ba.i. a$d i. $ot pa!pab!y arbitrary.
GABA:A%A +uro Party $ist, etc., v. Purisima, etc., et a!.' <. R. No. 166@1>'
A-g-.t 1E' 200?I
@. EDual protectio" does "ot de!a"d absolute
eDuality. 4t #ere!y re1-ire. that a!! per.o$. .ha!! be treated a!i/e' -$der
!i/e circ-#.ta$ce. a$d co$ditio$.' both a. to the pri0i!ege. co$erred a$d
!iabi!itie. e$orced. %Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26'
200?&
4t i. i#perati0e to d-!y e.tab!i.h that the o$e i$0o/i$g e1-a!
protectio$ a$d the per.o$ to +hich .he i. bei$g co#pared +ere i$deed
.i#i!ar!y .it-ated' i.e.' that they co##itted ide$tica! act. or +hich they
+ere charged +ith the 0io!atio$ o the .a#e pro0i.io$. o the N4R(D a$d
that they pre.e$ted .i#i!ar arg-#e$t. a$d e0ide$ce i$ their dee$.e , yet'
they +ere treated diere$t!y. *Santos, supra#

A. Tests to deter!i"e $alidity of classificatio". The
3$ited State. S-pre#e (o-rt ha. e.tab!i.hed diere$t te.t. to deter#i$e
the 0a!idity o a c!a..iicatio$ a$d co#p!ia$ce +ith the e1-a! protectio$
c!a-.e. The recog$i;ed te.t. are8
a. The traditio$a! %or ratio$a! ba.i.& te.t.
b. The .trict .cr-ti$y %or co#pe!!i$g i$tere.t& te.t.
c. The i$ter#ediate !e0e! o .cr-ti$y %or 1-a.i,.-.pect c!a..& te.t.

C. The traditio"al For ratio"al basisG test used i" order
to deter!i"e the $alidity of classificatio". The c!a..iicatio$ i.
0a!id i it i. ratio$a!!y re!ated to a co$.tit-tio$a!!y per#i..ib!e .tate i$tere.t.
The co#p!ai$a$t #-.t pro0e that the c!a..iicatio$ i. i$0ido-.'
+ho!!y arbitrary' or capricio-.' other+i.e the c!a..iicatio$ i. pre.-#ed
to be 0a!id. *$indsley v. !atural Car"oinic +as Co., 220 3.S. 61; Mc+oan v.
Maryland, B66 3.S. E20; <nited States Railroad Retirement Board v. /ritz, EEF
3.S. 166#
'&. The strict scruti"y For co!pelli"9 i"terestG test
used i" order to deter!i"e the $alidity of the classificatio".
<o0er$#e$t reg-!atio$ that i$te$tio$a!!y di.cri#i$ate. agai$.t a .-.pect
c!a.. .-ch a. racia! or eth$ic #i$oritie.' i. .-b6ect to .trict .cr-ti$y a$d
co$.idered to 0io!ate the e1-a! protectio$ c!a-.e -$!e.. o-$d $ece..ary
to pro#ote a co#pe!!i$g .tate i$tere.t.
A c!a..iicatio$ i. $ece..ary +he$ it i. $arro+!y dra+$ .o that $o
a!ter$ati0e' !e.. b-rde$.o#e #ea$. i. a0ai!ab!e to acco#p!i.h the .tate
i$tere.t.
Th-.' it +a. he!d that de$ia! o ree p-b!ic ed-catio$ to the chi!dre$
o i!!ega! a!ie$. i#po.e. a$ e$or#o-. a$d !a.ti$g b-rde$ ba.ed o$ a
.tat-. o0er +hich the chi!dre$ ha0e $o co$tro! i. 0io!ati0e o e1-a!
protectio$ beca-.e there i. $o .ho+i$g that .-ch de$ia! -rther. a
.-b.ta$tia! .tate goa!. *Plyler v. %oe' E>@ 3.S. 202#
''. The i"ter!ediate le$el of scruti"y For DuasiH
suspect classG test used i" order to deter!i"e the $alidity of
he classificatio". (!a..iicatio$ ba.ed o$ ge$der or !egiti#acy are $ot
.-.pect' b-t $either are they 6-dged by the traditio$a! or ratio$a! ba.i.
te.t.
11
4$te$tio$a! di.cri#i$atio$. agai$.t #e#ber. o a 1-a.i,.-.pect
c!a.. 0io!ate e1-a! protectio$ -$!e.. they are .-b.ta$tia!!y re!ated to
i#porta$t go0er$#e$t ob6ecti0e.. *Craig v. Boren, E2F 3.S. 1F0#
Th-.' a .tate !a+ gra$ti$g a property ta2 e2e#ptio$ to +ido+.' b-t
$ot +ido+er.' ha. bee$ he!d 0a!id or it -rther. the .tate po!icy o
c-.hio$i$g the i$a$cia! i#pact o .po-.a! !o.. -po$ the .e2 or +ho#
that !o.. -.-a!!y i#po.e. a hea0ier b-rde$. *:ahn v. Shevin, E16 3.S.
B>1#
'%. EDuality a"d u"ifor!ity of ta#atio" !ay !ea" the
sa!e as eDual protectio". 4$ .-ch a ca.e' the ter#. +o-!d #ea$ that
a!! .-b6ect. a$d ob6ect. o ta2atio$ +hich are .i#i!ar!y .it-ated .ha!! be
.-b6ect to the .a#e b-rde$. a$d gra$ted the .a#e pri0i!ege. +itho-t a$y
di.cri#i$atio$ +hat.oe0er.
'8. *t is i"here"t i" the power to ta# that the State be
free to select the sub?ects of ta#atio"5 a$d it ha. bee$ repeated!y
he!d that' Qi$e1-a!itie. +hich re.-!t ro# a .i$g!i$g o-t o o$e partic-!ar
c!a.. o ta2atio$' or e2e#ptio$' i$ri$ge $o co$.tit-tio$a! !i#itatio$.Q
*Commissioner of Internal Revenue, et al., v. Santos, et al., 2@@ S(RA
61@&
C. Be"?ie is a lawHabidi"9 citiBe" who pays his real
estate ta#es pro!ptly. ue to a series of typhoo"s a"d
ad$erse eco"o!ic co"ditio"s5 a" ordi"a"ce is passed by
Soli!a" 0ity 9ra"ti"9 a <&I discou"t for pay!e"t of u"paid
real estate ta#es for the precedi"9 year a"d the co"do"atio"
of all pe"alties o" fi"es resulti"9 fro! the late pay!e"t.
Ar9ui"9 that the ordi"a"ce rewards deli"Due"t ta#
payers a"d discri!i"ates a9ai"st pro!pt o"es5 Be"?ie
de!a"ds that he be refu"ded a" a!ou"t eDui$ale"t to o"eH
half of the real property ta#es he paid. The !u"icipal attor"ey
re"dered a" opi"io" that Be"?ie ca""ot be rei!bursed
because the ordi"a"ce did "ot pro$ide for such
rei!burse!e"t. Be"?ie files suit to declare the ordi"a"ce $oid
o" the 9rou"d that it is a class le9islatio". +ill his suit
prosper 7 E#plai" your a"swer briefly.
S3<<ESTE" ANS=ER8 No. There i. $o c!a.. !egi.!atio$
beca-.e there i. $o 0io!atio$ o the e1-a! protectio$ .-it. There i. a 0a!id
c!a..iicatio$ bet+ee$ tho.e +ho a!ready paid their ta2e. a$d tho.e +ho
ha0e $ot. C-rther#ore' the ta2i$g a-thority ha. the prerogati0e to .e!ect
the .-b6ect. a$d ob6ect. o ta2atio$' i$c!-di$g gra$ti$g a >0H di.co-$t i$
the pay#e$t o -$paid rea! e.tate ta2e.' a$d the co$do$atio$ o a!!
pe$a!tie. o$ i$e. re.-!ti$g ro# !ate pay#e$t.
'&. The rewards law to ta# collectors does "ot $iolate
eDual protectio". The e1-a! protectio$ c!a-.e recog$i;e. a 0a!id
c!a..iicatio$' that i.' a c!a..iicatio$ that ha. a rea.o$ab!e o-$datio$ or
ratio$a! ba.i. a$d $ot arbitrary. =ith re.pect to RA FBB>' it:. e2pre..ed
p-b!ic po!icy i. the opti#i;atio$ o the re0e$-e,ge$eratio$ capabi!ity a$d
co!!ectio$ o the B4R a$d the BO(. Si$ce the .-b6ect o the !a+ i. the
re0e$-e, ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO(' the
i$ce$ti0e. a$d9or .a$ctio$. pro0ided i$ the !a+ .ho-!d !ogica!!y pertai$ to
the .aid age$cie.. *oreo0er' the !a+ co$cer$. o$!y the B4R a$d the BO(
beca-.e they ha0e the co##o$ di.ti$ct pri#ary -$ctio$ o ge$erati$g
re0e$-e. or the $atio$a! go0er$#e$t thro-gh the co!!ectio$ o ta2e.'
c-.to#. d-tie.' ee. a$d charge..
4$d-bitab!y' .-ch .-b.ta$tia! di.ti$ctio$ i. ger#a$e a$d i$ti#ate!y
re!ated to the p-rpo.e o the !a+. 7e$ce' the c!a..iicatio$ a$d treat#e$t
accorded to the B4R a$d the BO( -$der RA FBB> -!!y .ati.y the
de#a$d. o e1-a! protectio$. %ABA:A%A +uro Party $ist, etc., v. Purisima,
etc., et a!.' <. R. No. 166@1>' A-g-.t 1E' 200?&
''. The prosecutio" of o"e 9uilty perso" while others
eDually 9uilty are "ot prosecuted5 howe$er5 is "ot5 by itself5 a
de"ial of the eDual protectio" of the laws. =here the oicia!
actio$ p-rport. to be i$ co$or#ity to the .tat-tory c!a..iicatio$' a$
erro$eo-. or #i.ta/e$ peror#a$ce o the .tat-tory d-ty' a!tho-gh a
0io!atio$ o the .tat-te' i. $ot +itho-t #ore a de$ia! o the e1-a! protectio$
o the !a+..
The -$!a+-! ad#i$i.tratio$ by oicer. o a .tat-te air o$ it. ace'
re.-!ti$g i$ it. -$e1-a! app!icatio$ to tho.e +ho are e$tit!ed to be treated
a!i/e' i. $ot a de$ia! o e1-a! protectio$ -$!e.. there i. .ho+$ to be
pre.e$t i$ it a$ e!e#e$t o i$te$tio$a! or p-rpo.e-! di.cri#i$atio$. Thi.
#ay appear o$ the ace o the actio$ ta/e$ +ith re.pect to a partic-!ar
c!a.. or per.o$' or it #ay o$!y be .ho+$ by e2tri$.ic e0ide$ce .ho+i$g a
di.cri#i$atory de.ig$ o0er a$other $ot to be i$erred ro# the actio$
it.e!.
%Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26' 200?&
'%. EDual protectio" should "ot be used to protect
co!!issio" of cri!e. =hi!e a!! per.o$. acc-.ed o cri#e are to be
treated o$ a ba.i. o e1-a!ity beore the !a+' it doe. $ot o!!o+ that they
are to be protected i$ the co##i..io$ o cri#e. 4t +o-!d be
-$co$.cio$ab!e' or i$.ta$ce' to e2c-.e a dee$da$t g-i!ty o #-rder
beca-.e other. ha0e #-rdered +ith i#p-$ity.
)i/e+i.e' i the ai!-re o pro.ec-tor. to e$orce the cri#i$a! !a+.
a. to .o#e per.o$. .ho-!d be co$0erted i$to a dee$.e or other.
charged +ith cri#e' the re.-!t +o-!d be that the tria! o the di.trict
12
attor$ey or $o$ea.a$ce +o-!d beco#e a$ i..-e i$ the tria! o #a$y
per.o$. charged +ith hei$o-. cri#e. a$d the e$orce#e$t o !a+ +o-!d
.-er a co#p!ete brea/do+$. %Santos v. People, et al, <. R. No. 1@B1@6'
A-g-.t 26' 200?&
'8. *llustratio" of double ta#atio" i" local ta#atio". there
i. i$deed do-b!e ta2atio$ i (oca,(o!a i. .-b6ected to the ta2e. -$der
both Sectio$. 1E a$d 21 o Ta2 Ordi$a$ce No. @@FE' .i$ce the.e are
bei$g i#po.ed8 %1& o$ the .a#e .-b6ect #atter J the pri0i!ege o doi$g
b-.i$e.. i$ the (ity o *a$i!aD %2& or the .a#e p-rpo.e J to #a/e
per.o$. co$d-cti$g b-.i$e.. +ithi$ the (ity o *a$i!a co$trib-te to city
re0e$-e.D %B& by the .a#e ta2i$g a-thority J (ity o *a$i!aD %E& +ithi$ the
.a#e ta2i$g 6-ri.dictio$ J +ithi$ the territoria! 6-ri.dictio$ o the (ity o
*a$i!aD %>& or the .a#e ta2i$g period. J per ca!e$dar yearD a$d %6& o the
.a#e /i$d or character J a !oca! b-.i$e.. ta2 i#po.ed o$ gro.. .a!e. or
receipt. o the b-.i$e... %(he City of Manila, et al., v. Coca0Cola Bottlers
Philippines, Inc., <. R. No. 1?1?E>' A-g-.t E' 200F&
':. A lawful ta# o" a "ew sub?ect5 or a" i"creased ta#
o" a" old o"e5 does "ot i"terfere with a co"tract or i!pairs its
obli9atio"' withi" the !ea"i"9 of the co"stitutio". *(olentino v.
Secretary of /inance, et al., and companion cases, 2B> S(RA 6B0&

'<. The withdrawal of a ta# e#e!ptio" should "ot be
co"strued as prohibiti"9 future 9ra"ts of e#e!ptio" fro! all
ta#es. *Philippine $ong %istance (elephone Company, Inc., v. City of %avao, et
al., etc., <. R. No. 1EB?6@' A-g-.t 22' 2001&
'>. Ta# e#e!ptio"s i" fra"chises are always sub?ect
to withdrawal. A !egi.!ati0e ra$chi.e i. gra$ted +ith the e2pre..
co$ditio$ that it i. .-b6ect to a#e$d#e$t' a!teratio$' or repea!. %1F?@
(o$.tit-tio$' Art. L44' Sec. 11&
4t i. e$o-gh to .ay that the partie. to a co$tract ca$$ot' thro-gh the
e2erci.e o prophetic di.cer$#e$t' etter the e2erci.e o the ta2i$g po+er
o the State. Cor $ot o$!y are e2i.ti$g !a+. read i$to co$tract. i$ order to
i2 ob!igatio$. a. bet+ee$ partie.' b-t the re.er0atio$ o e..e$tia!
attrib-te. o .o0ereig$ po+er i. a!.o read i$to co$tract. a. a ba.ic
po.t-!ate o the !ega! order. The po!icy o protecti$g co$tract. agai$.t
i#pair#e$t pre.-ppo.e. the #ai$te$a$ce o a go0er$#e$t +hich retai$.
ade1-ate a-thority to .ec-re the peace a$d good order o .ociety. %Smart
Communications, Inc. v. (he City of %avao, etc., et al.' <. R. No. 1>>EF1'
Septe#ber 16' 200?&
NOTES AN" (O**ENTS8 Philippine $ong %istance (elephone
Company, Inc., v. City of %avao, et al., etc., <. R. No. 1EB?6@' A-g-.t 22' 2001
#ade the ob.er0atio$ that .i$ce S#art:. ra$chi.e +a. gra$ted ater the eecti0ity
o the )oca! <o0er$#e$t (ode that it. ta2 e2e#ptio$ pri0i!ege +a. rei$.tated.
7o+e0er' Smart Communications, Inc. v. (he City of %avao, etc., et al.' <. R.
No. 1>>EF1' Septe#ber 16' 200? i. e2p!icit i$ it. ho!di$g that S#art i. $ot
e$tit!ed to a ta2 e2e#ptio$.
'@. +he" withdrawal of a ta# e#e!ptio" i!pairs the
obli9atio" of co"tracts. The (o$tract (!a-.e ha. $e0er bee$
tho-ght a. a !i#itatio$ o$ the e2erci.e o the State:. po+er o ta2atio$
.a0e o$!y +here a ta2 e2e#ptio$ ha. bee$ gra$ted or a 0a!id
co$.ideratio$. %Smart Communications, Inc. v. (he City of %avao, etc., et al.'
<. R. No. 1>>EF1' Septe#ber 16' 200?& citi$g (olentino v. Secretary of /inance,
<. R. No. 11>E>>' A-g-.t 2>' 1FFE' 2B> S(RA 6B0' 6?>& The a-thor opi$e.
that .i$ce practica!!y a!! ra$chi.e. gra$ted to te!eco##-$icatio$.
co#pa$ie. are .i#i!ar!y +orded that the abo0e doctri$e i$d. app!icatio$
to the other.&
'A. The pri!ary reaso" for the withdrawal of ta#
e#e!ptio" pri$ile9es 9ra"ted to 9o$er"!e"t ow"ed a"d
co"trolled corporatio"s a$d a!! other -$it. o go0er$#e$t +a. that
.-ch pri0i!ege re.-!ted to .erio-. ta2 ba.e ero.io$ a$d di.tortio$. i$ the ta2
treat#e$t o .i#i!ar!y .it-ated e$terpri.e.' he$ce re.-!ti$g i$ the $eed or
the.e e$titie. to .hare i$ the re1-ire#e$t. o de0e!op#e$t' i.ca! or
other+i.e' by payi$g the ta2e. a$d other charge. d-e the#. %Philippine
Ports Authority v. City of Iloilo, <. R. No. 10F@F1' A-!y 1E' 200B&
'C. Natio"al Power 0orporatio" FNP0G is of the
i"siste"ce that it is "ot sub?ect to the pay!e"t of fra"chises
ta#es i!posed by the Pro$i"ce of *sabela because all of its
shares are ow"ed by the Republic of the Philippi"es. *t is thus5
a" i"stru!e"tality of the Natio"al ,o$er"!e"t which is e#e!pt
fro! local ta#atio". As such it is "ot a pri$ate corporatio"
e"9a9ed i" busi"ess e"?oyi"9 fra"chise
*s such co"te"tio" !eritorious 7
S3<<ESTE" ANS=ER8 No. Philippine $ong %istance (elephone
Company, Inc., v. City of %avao, et al., etc.' <. R. No. 1EB?6@' A-g-.t 22'
2001' -phe!d the a-thority o the (ity o "a0ao' a !oca! go0er$#e$t -$it' to
i#po.e a$d co!!ect a !oca! ra$chi.e ta2 beca-.e the )oca! <o0er$#e$t
(ode ha. +ithdra+$ a!! ta2 e2e#ptio$. pre0io-.!y e$6oyed by a!! per.o$.
a$d a-thori;ed !oca! go0er$#e$t -$it. to i#po.e a ta2 o$ b-.i$e..
e$6oyi$g a ra$chi.e ta2 $ot+ith.ta$di$g the gra$t o ta2 e2e#ptio$ to
the#.
%&. *" lieu of all ta#es i" the fra"chise of ABSH0BN
does "ot e#e!pt it fro! local fra"chise ta#es. 4t doe. $ot
13
e2pre..!y pro0ide +hat /i$d o ta2e. ABS,(BN i. e2e#pted ro#. 4t i.
$ot c!ear +hether the e2e#ptio$ +o-!d i$c!-de both !oca!' +hether
#-$icipa!' city or pro0i$cia!' a$d $atio$a! ta2. =hether the i$ !ie- o a!!
ta2e. pro0i.io$ +o-!d i$c!-de e2e#ptio$ ro# !oca! ta2 i. $ot
-$e1-i0oca!.
The right to e2e#ptio$ ro# !oca! ra$chi.e ta2 #-.t be c!ear!y
e.tab!i.hed a$d ca$$ot be #ade o-t o i$ere$ce or i#p!icatio$. b-t #-.t
be !aid beyo$d rea.o$ab!e do-bt. Veri!y' the -$certai$ty i$ the i$ !ie- o
a!! ta2e. pro0i.io$ .ho-!d be co$.tr-ed agai$.t ABS,(BN. ABS,(BN
ha. the b-rde$ to pro0e that it i. i$ act co0ered by the e2e#ptio$ .o
c!ai#ed b-t ha. ai!ed to do .o. %8uezon City, et al., v. ABS0CB!
Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?&
NOTES AN" (O**ENTS8 Thi. i. practica!!y the .a#e ho!di$g i$ a$
ear!ier ca.e i$0o!0i$g a$other te!eco##-$icatio$. co#pa$y Smart
Communications, Inc. v. (he City of %avao, etc., et al., <. R. No. 1>>EF1'
Septe#ber 16' 200?. The a-thor opi$e. that .i$ce practica!!y a!! ra$chi.e.
gra$ted to te!eco##-$icatio$. co#pa$ie. are .i#i!ar!y +orded that the abo0e
doctri$e i$d. app!icatio$ to the other..&
%'. *" lieu of all ta#es refers to "atio"al i"ter"al
re$e"ue ta#es a"d "ot to local ta#es. The i$ !ie- o a!! ta2e.
c!a-.e app!ie. o$!y to $atio$a! i$ter$a! re0e$-e ta2e. a$d $ot to !oca!
ta2e.. A. appropriate!y poi$ted o-t i$ the .eparate opi$io$ o A-.tice
A$to$io T. (arpio i$ a .i#i!ar ca.e i$0o!0i$g a de#a$d or e2e#ptio$
ro# !oca! ra$chi.e ta2e.8
GTIhe Qi$ !ie- o a!! ta2e.Q c!a-.e i$ S#artP. ra$chi.e reer. o$!y to
ta2e.' other tha$ i$co#e ta2' i#po.ed -$der the Natio$a! 4$ter$a!
Re0e$-e (ode. The Qi$ !ie- o a!! ta2e.Q c!a-.e doe. $ot app!y to !oca!
ta2e.. The pro0i.o i$ the ir.t paragraph o Sectio$ F o S#artP. ra$chi.e
.tate. that the gra$tee .ha!! Qco$ti$-e to be !iab!e or i$co#e ta2e.
payab!e -$der Tit!e 44 o the Natio$a! 4$ter$a! Re0e$-e (ode.Q A!.o' the
.eco$d paragraph o Sectio$ F .pea/. o ta2 ret-r$. i!ed a$d ta2e. paid
to the Q(o##i..io$er o 4$ter$a! Re0e$-e or hi. d-!y a-thori;ed
repre.e$tati0e i$ accorda$ce +ith the Natio$a! 4$ter$a! Re0e$-e (ode.Q
*oreo0er' the .a#e paragraph dec!are. that the ta2 ret-r$. Q.ha!! be
.-b6ect to a-dit by the B-rea- o 4$ter$a! Re0e$-e.Q Nothi$g i. #e$tio$ed
i$ Sectio$ F abo-t !oca! ta2e.. The c!ear i$te$t i. or the Qi$ !ie- o a!!
ta2e.Q c!a-.e to app!y o$!y to ta2e. -$der the Natio$a! 4$ter$a! Re0e$-e
(ode a$d $ot to !oca! ta2e.. E0e$ +ith re.pect to $atio$a! i$ter$a!
re0e$-e ta2e.' the Qi$ !ie- o a!! ta2e.Q c!a-.e doe. $ot app!y to i$co#e
ta2.
4 (o$gre.. i$te$ded the Qi$ !ie- o a!! ta2e.Q c!a-.e i$ S#artP.
ra$chi.e to a!.o app!y to !oca! ta2e.' (o$gre.. +o-!d ha0e e2pre..!y
#e$tio$ed the e2e#ptio$ ro# #-$icipa! a$d pro0i$cia! ta2e.. (o$gre..
co-!d ha0e -.ed the !a$g-age i$ Sectio$ F%b& o (!a0eci!!aP. o!d ra$chi.e'
a. o!!o+.8
2 2 2 i$ !ie- o a$y a$d a!! ta2e. o a$y /i$d' $at-re or de.criptio$
!e0ied' e.tab!i.hed or co!!ected by a$y a-thority +hat.oe0er' municipal,
provincial or $atio$a!' ro# +hich the gra$tee i. hereby e2pre..!y
e2e#pted' 2 2 2. %E#pha.i. .-pp!ied&.
7o+e0er' (o$gre.. did $ot e2pre..!y e2e#pt S#art ro# !oca!
ta2e.. (o$gre.. -.ed the Qi$ !ie- o a!! ta2e.Q c!a-.e o$!y i$ reere$ce to
$atio$a! i$ter$a! re0e$-e ta2e.. The o$!y i$terpretatio$' -$der the r-!e o$
.trict co$.tr-ctio$ o ta2 e2e#ptio$.' i. that the Qi$ !ie- o a!! ta2e.Q
c!a-.e i$ S#artP. ra$chi.e reer. o$!y to $atio$a! a$d $ot to !oca! ta2e..
GSmart Communications, Inc. v. (he City of %avao, etc., et al.' <. R. No. 1>>EF1'
Septe#ber 16' 200? citi$g Philippine $ong %istance (elephone Company, Inc. v.
City of %avao' EE@ Phi!. >@1' >FE %200B&I
NOTES AN" (O**ENTS8 The a-thor opi$e. that the abo0e i$d.
app!icatio$ to a!! te!eco##-$icatio$. co#pa$ie..
%%. The i" lieu of all ta#es clause i" the fra"chise of
ABSH0BN has beco!e fu"ctus officio with the abolitio" of the
fra"chise ta# o" broadcasti"9 co!pa"ies with yearly 9ross
receipts e#ceedi"9 Te" ;illio" Pesos. The c!a-.e i$ !ie- o a!!
ta2e. doe. $ot pertai$ to VAT or a$y other ta2. 4t ca$$ot app!y +he$
+hat i. paid i. a ta2 other tha$ a ra$chi.e ta2. Si$ce the ra$chi.e ta2
o$ the broadca.ti$g co#pa$ie. +ith year!y gro.. receipt. e2ceedi$g te$
#i!!io$ pe.o. ha. bee$ abo!i.hed' the i$ !ie- o a!! ta2e. c!a-.e ha. $o+
beco#e functus officio' re$dered i$operati0e. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?&
NOTES AN" (O**ENTS8 Thi. i. practica!!y the .a#e ho!di$g i$ a$
ear!ier ca.e i$0o!0i$g a$other te!eco##-$icatio$. co#pa$y. S#art
(o##-$icatio$.' 4$c. 0. The (ity o "a0ao' etc.' et a!.' <. R. No. 1>>EF1'
Septe#ber 16' 200?. The a-thor opi$e. that .i$ce practica!!y a!! ra$chi.e.
gra$ted to te!eco##-$icatio$. co#pa$ie. are .i#i!ar!y +orded that the abo0e
doctri$e i$d. app!icatio$ to the other..&
%8. ouble ta#atio" i" its 9e"eric se"se5 this
!ea"s ta#i"9 the sa!e sub?ect or ob?ect twice duri"9 the
sa!e ta#able period. 4$ it. partic-!ar .e$.e' it #ay #ea$ direct
d-p!icate ta2atio$' +hich i. prohibited -$der the co$.tit-tio$ beca-.e it
0io!ate. the co$cept o e1-a! protectio$' -$ior#ity a$d e1-itab!e$e.. o
ta2atio$. 4$direct d-p!icate ta2atio$ i. $ot a$athe#ati;ed by the abo0e
co$.tit-tio$a! !i#itatio$..
%:. Ele!e"ts of direct duplicate ta#atio"-
a. Sa#e
1& S-b6ect or ob6ect i. ta2ed t+ice
2& by the .a#e ta2i$g a-thority
B& or the .a#e ta2i$g p-rpo.e
E& d-ri$g the .a#e ta2ab!e period
14
b. Ta2i$g a!! o the .-b6ect. or ob6ect. or the ir.t ti#e +itho-t
ta2i$g a!! o the# or the .eco$d ti#e.
4 a$y o the e!e#e$t. are ab.e$t the$ there i. i$direct d-p!icate
ta2atio$ +hich i. $ot prohibited by the co$.tit-tio$.
NOTES AN" (O**ENTS8
a. Prese"ce of the %
"d
ele!e"t $iolates the eDual protectio"
clause. 4 o$!y the 1
.t
e!e#e$t i. pre.e$t' ta2i$g the .a#e .-b6ect or ob6ect t+ice'
by the .a#e ta2i$g a-thority' etc.' there i. $o 0io!atio$ o the e1-a! protectio$
c!a-.e beca-.e a!! .-b6ect. a$d ob6ect. that are .i#i!ar!y .it-ated are .-b6ect to
the .a#e b-rde$. a$d gra$ted the .a#e pri0i!ege. +itho-t a$y di.cri#i$atio$
+hat.oe0er'
The pre.e$ce o the 2
$d
e!e#e$t' ta2i$g a!! o the .-b6ect. a$d ob6ect. or
the ir.t ti#e' +itho-t ta2i$g a!! or the .eco$d ti#e' re.-!t. to di.cri#i$atio$ a#o$g
.-b6ect. a$d ob6ect. that are .i#i!ar!y .it-ated' he$ce 0io!ati0e o the e1-a!
protectio$ c!a-.e.
%<. ouble ta#atio" a $alid defe"se a9ai"st the le9ality of
a ta# !easure if the double ta#atio" is direct duplicate
ta#atio"' beca-.e it +o-!d 0io!ate the e1-a! protectio$ c!a-.e o the
co$.tit-tio$.
%>. +he" a" ite! of i"co!e is ta#ed i" the Philippi"es
a"d the sa!e i"co!e is ta#ed i" a"other cou"try5 this would
be E"ow" as i"ter"atio"al ?uridical double ta#atio" +hich i. the
i#po.itio$ o co#parab!e ta2e. i$ t+o or #ore .tate. o$ the .a#e ta2payer
i$ re.pect o the .a#e .-b6ect #atter a$d or ide$tica! gro-$d..
*Commissioner of Internal Revenue v. S.C. ,ohnson and Son, Inc., et al., <.R. No.
12@10>' A-$e 2>' 1FFF&
%@. ;ethods for a$oidi"9 double ta#atio" Fi"direct
duplicate ta#atio"G.
a. Ta2 treatie. +hich e2e#pt. oreig$ $atio$a!. ro# !oca!
ta2atio$ a$d !oca! $atio$a!. ro# oreig$ ta2atio$ -$der the pri$cip!e o
reciprocity.
b. Ta2 credit. +here oreig$ ta2e. are a!!o+ed a. ded-ctio$.
ro# !oca! ta2e. that are d-e to be paid.
c. A!!o+i$g oreig$ ta2e. a. a ded-ctio$ ro# gro.. i$co#e.
%A. Ta# credit ge$era!!y reer. to a$ a#o-$t that i. .-btracted
direct!y ro# o$e:. tota! ta2 !iabi!ity' a$ a!!o+a$ce agai$.t the ta2 it.e!' or a
ded-ctio$ ro# +hat i. o+$ed.
A ta2 credit red-ce. the ta2 d-e' i$c!-di$g J+he$e0er app!icab!e J
the i$co#e ta2 that i. deter#i$ed ater app!yi$g the corre.po$di$g ta2 rate.
to ta2ab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon %rug
Corporation, <. R. No. 1>F6E@' Apri! 1>' 200>&
%C. A ta# deductio" i. dei$ed a. a .-btractio$ ro i$co#e or
ta2 p-rpo.e.' or a$ a#o-$t that i. a!!o+ed by !a+ to red-ce i$co#e prior to
the app!icatio$ o the ta2 rate to co#p-te the a#o-$t o ta2 +hich i. d-e.
A ta2 ded-ctio$ red-ce. the i$co#e that i. .-b6ect to ta2 i$ order to
arri0e at ta2ab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon
%rug Corporation, <. R. No. 1>F6E@' Apri! 1>' 200>&
8&. The petitio"ers alle9e that the RH3AT law is
co"stitutio"al because the Bica!eral 0o"fere"ce 0o!!itted
has e#ceeded its authority i" i"cludi"9 pro$isio"s which were
"e$er i"cluded i" the $ersio"s of both the House a"d Se"ate
such as i"serti"9 the sta"dHby authority to the Preside"t to
i"crease the 3AT fro! '&I to '%IK deleti"9 e"tirely the "o
passHo" pro$isio"s fou"d i" both the House a"d Se"ate BillsK
i"serti"9 the pro$isio" i!posi"9 a @&I li!it o" the a!ou"t of
i"put ta# to be credited a9ai"st the output ta#K a"d i"cludi"9
the a!e"d!e"ts i"troduced o"ly by Se"ate Bill No. 'C<&
re9ardi"9 other Ei"ds of ta#es i" additio" to the $alueHadded
ta#. Thus5 there was a $iolatio" of the co"stitutio"al !a"date
that re$e"ue bills shall ori9i"ate e#clusi$ely fro! the House of
Represe"tati$es.
Are the co"te"tio"s of such wei9ht as to co"stitute 9ra$e
abuse of discretio" which !ay i"$alidate the law 7 E#plai"
briefly.
S3<<ESTE" ANS=ER8 No. There +a. $o gra0e ab-.e o
di.cretio$ beca-.e a!! the cha$ge. a$d #odiicatio$. #ade by the
Bica#era! (o$ere$ce (o##ittee +ere ger#a$e to .-b6ect. o the
pro0i.io$. reerred to it or reco$ci!iatio$.
The Bica#era! (o$ere$ce (o##ittee #ere!y e2erci.ed the
6-dicia!!y recog$i;ed !o$g,.ta$di$g !egi.!ati0e practice o gi0i$g .aid
co$ere$ce co##ittee a#p!e !atit-de or co#pro#i.i$g diere$ce.
bet+ee$ the Se$ate a$d the 7o-.e. GA"a-ada +uro Party $ist *etc.# v. &rmita,
etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e.I
8'. The 3AT while re9ressi$e is NOT $iolati$e of the
!a"date to e$ol$e a pro9ressi$e syste! of ta#atio". o you
a9ree 7 The #a$date to (o$gre.. i. $ot to pre.cribe b-t to e0o!0e a
progre..i0e .y.te# o ta2atio$. Other+i.e' .a!e. ta2e. +hich perhap. are
the o!de.t or# o i$direct ta2e.' +o-!d ha0e bee$ prohibited +ith the
proc!a#atio$ o the co$.tit-tio$a! pro0i.io$. Sa!e. ta2e. are a!.o
regre..i0e. . GA"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No.
16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e. citi$g (olentino v. Secretary of
/inance, et al., <. R. No. 11>E>>' A-g-.t 2>' 1FFE' 2B> S(RA 6B0I
15
8%. All re$e"ues a"d assets of "o"HstocE5 "o"Hprofit
educatio"al i"stitutio"s that are actually5 directly a"d
e#clusi$ely used for educatio"al purposes shall be e#e!pt
fro! ta#atio".
88. Re$e"ues a"d assets of proprietary educatio"al
i"stitutio"s5 i"cludi"9 those which are cooperati$ely ow"ed5
!ay be e"titled to e#e!ptio"s sub?ect to li!itatio"s pro$ided
by law i"cludi"9 restrictio"s o" di$ide"ds a"d pro$isio"s for
rei"$est!e"ts. There i. $o !a+ at the pre.e$t +hich gra$t. e2e#ptio$.'
other the e2e#ptio$. gra$ted to cooperati0e..
OTHER 0ON0EPTS
'. isti"9uish ta# fro! debt.
TAL "EBT
Basis ba.ed o$ !a+ ba.ed o$ co$tract or
6-dg#e$t
1ailure to Pay #ay re.-!t i$
i#pri.o$#e$t
$o i#pri.o$#e$t
;ode of
Pay!e"t
ge$era!!y payab!e i$
#o$ey
payab!e i$ #o$ey'
property or .er0ice
Assi9"ability $ot a..ig$ab!e a..ig$ab!e
Pay!e"t -$!e.. it beco#e. a
debt i. $ot .-b6ect to
co#pe$.atio$ or .et,
o
#ay be a .-b6ect
*"terest doe. $ot dra+ i$tere.t
-$!e.. de!i$1-e$t
dra+. i$tere.t i
.tip-!ated or de!ayed
Authority i#po.ed by p-b!ic
a-thority
ca$ be i#po.ed by
pri0ate i$di0id-a!.
Prescriptio" Pre.cripti0e period.
or ta2 -$der N4R(
debt -$der the (i0i!
(ode
+ARN*N,- o "ot use the abo$e arra"9e!e"t i" a"sweri"9 Bar
Duestio"s.
%. 0o!pe"satio" ta/e. p!ace by operatio$ o !a+' +here the
!oca! go0er$#e$t a$d the ta2payer are i$ their o+$ right reciproca!!y
debtor. a$d creditor. o each other' a$d that the debt. are both d-e a$d
de#a$dab!e' i$ co$.e1-e$ce o Artic!e. 12@? a$d 12@F o the (i0i! (ode.
*%omingo v. +arlitos, ? S(RA EEB&
8. ;ay there be co!pe"satio" or setHoff betwee" a
"atio"al ta# a"d a debt 7 Reaso" out your a"swer.
S3<<ESTE" ANS=ER8 A. a ge$era! r-!e' there co-!d be
$o co#pe$.atio$ or .et,o bet+ee$ a ta2 a$d a debt or the o!!o+i$g
rea.o$.8
a. )ieb!ood theory.
b. Ta2e. are $ot co$tract-a! ob!igatio$. b-t ari.e o-t o a d-ty
to' a$d are the po.iti0e act. o go0er$#e$t' to the #a/i$g a$d e$orci$g
o +hich the per.o$a! co$.e$t o the i$di0id-a! ta2payer i. $ot re1-ired.
*Repu"lic v. Mam"ulao $um"er Co., E S(RA 622&
c. Ta2e. ca$$ot be the .-b6ect o co#pe$.atio$ beca-.e the
go0er$#e$t a$d ta2payer are $ot #-t-a!!y creditor. a$d debtor. o each
other a$d a c!ai# or ta2e. i. $ot .-ch a debt' de#a$d' co$tract or
6-dg#e$t a. i. a!!o+ed to be .et,o.
Th-.' it i. correct to .ay that the o.etti$g o a ta2payer:. ta2
re-$d +ith it. a!!eged ta2 deicie$cy i. -$a0ai!i$g -$der Art. 12@F o the
(i0i! (ode. %South African Airays v. Commissioner of Internal Revenue, <.R.
No. 1?0B>6' Cebr-ary 16' 2010 reiterati$g Calte) Philippines, Inc. v.
Commission on Audit, +hich app!ied /rancia v. Intermediate Appellate Court&
:. E#ceptio"s- +he" setHoff or co!pe"satio" allowed
for local ta#es. a.
=here both c!ai#. a!ready beco#e o0erd-e a$d de#a$dab!e a.
+e!! a. -!!y !i1-idated. (o#pe$.atio$ ta/e. p!ace by operatio$ o !a+
-$der Art. 1200 i$ re!atio$ to Art.. 12@F a$d 12F0 a!! o the (i0i! (ode.
%%omingo v. +arlitos' ? S(RA EEB& b.
(o#pe$.atio$ ta/e. p!ace by operatio$ o !a+' +here the
go0er$#e$t a$d the ta2payer are i$ their o+$ right reciproca!!y debtor.
a$d creditor. o each other' a$d that the debt. are both d-e a$d
de#a$dab!e. Thi. i. i$ co$.e1-e$ce o Artic!e 12@? a$d 12@F o the (i0i!
(ode. %%omingo v. +arlitos, ? S(RA EEB&
c. ,The S-pre#e (o-rt -phe!d the 0a!idity o a .et,o
bet+ee$ the ta2payer a$d the go0er$#e$t. 4$ both ca.e.' the c!ai#. o
the ta2payer. therei$ +ere certai$ a$d !i1-idated. The c!ai#. +ere certai$
.i$ce there +ere $o do-bt. or di.p-te. a. to their re-$dabi!ity. 4$ act'
the go0er$#e$t ad#itted the act o o0er,pay#e$t. %Commissioner of
Internal Revenue v. &sso Standard &astern, Inc., 1@2 S(RA B6E&
d. 4$ ca.e o a ta2 o0erpay#e$t' the B4R:. ob!igatio$ to re-$d
or o,.et ari.e. ro# the #o#e$t the ta2 +a. paid. REASON8 Solutio
16
inde"eti. %Commissioner of Internal Revenue v. &sso Standard &astern, Inc 1@2
S(RA B6E&
e. =hi!e 6-dg#e$t .ho-!d be re$dered i$ a0or o Rep-b!ic
or -$paid ta2e.' 6-dg#e$t o-ght at the .a#e ti#e to i..-e or
Sa#pag-ita Pict-re. co##a$di$g pay#e$t to the !atter by the Rep-b!ic
o the 0a!-e o the bac/pay certiicate. +hich the Rep-b!ic recei0ed.
%Repu"lic v. &ricta' 1@2 S(RA 62B&
<. ,ilbert obtai"ed a ?ud9!e"t for a su! of !o"ey
a9ai"st the !u"icipality of 0a!ili"9. The ?ud9!e"t has
beco!e fi"al althou9h e#ecutio" has "ot issued. .po"
recei$i"9 a" assess!e"t for !u"icipal sales ta#es fro! the
;u"icipal Treasurer5 ,ilbert e#ecuted a partial assi9"!e"t of
his ?ud9!e"t sufficie"t to co$er the assess!e"t i" fa$or of
the ;u"icipality. ;ay the ;u"icipal Treasurer $alidly accept
the assi9"!e"t7 +hyM
S3<<ESTE" ANS=ER8 Oe.. The partie. i$ thi. ca.e are
#-t-a!!y debtor. a$d creditor. o each other' a$d .i$ce both o the c!ai#.
beca#e o0erd-e' de#a$dab!e a$d -!!y !i1-idated' co#pe$.atio$ ta/e.
p!ace by operatio$ o !a+. S-ch +a. the ho!di$g i$ %omingo v. +arlitos, ?
S(RA EEB' a ca.e decided by the S-pre#e (o-rt +ho.e act-a!
a$tecede$t. are .i#i!ar to the prob!e#.
>. *" case of doubt5 ta# laws !ust be co"strued
strictly a9ai"st the State a"d liberally i" fa$or of the ta#payer
beca-.e ta2e.' a. b-rde$. +hich #-.t be e$d-red by the ta2payer' .ho-!d
$ot be pre.-#ed to go beyo$d +hat the !a+ e2pre..!y a$d c!ear!y dec!are..
*$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al.,
2FB S(RA F2' FF&
@. *"terpretatio" i" the i!positio" of ta#es5 is "ot the
si!ilar doctri"e as that applied to ta# e#e!ptio"s. The r-!e i$
the i$terpretatio$ o ta2 !a+. i. that a .tat-te +i!! $ot be co$.tr-ed a.
i#po.i$g a ta2 -$!e.. it doe. .o c!ear!y' e2pre..!y' a$d -$a#big-o-.!y.
A ta2 ca$$ot be i#po.ed +itho-t c!ear a$d e2pre.. +ord. or that
p-rpo.e. Accordi$g!y' the ge$era! r-!e o re1-iri$g adhere$ce to the !etter
i$ co$.tr-i$g .tat-te. app!ie. +ith pec-!iar .trict$e.. to ta2 !a+. a$d the
pro0i.io$. o a ta2i$g act are $ot to be e2te$ded by i#p!icatio$. 4$
a$.+eri$g the 1-e.tio$ o +ho i. .-b6ect to ta2 .tat-te.' it i. ba.ic that i$
ca.e o do-bt' .-ch .tat-te. are to be co$.tr-ed #o.t .tro$g!y agai$.t
the go0er$#e$t a$d i$ a0or o the .-b6ect. or citi;e$. beca-.e b-rde$.
are $ot to be i#po.ed $or pre.-#ed to be i#po.ed beyo$d +hat .tat-te.
e2pre..!y a$d c!ear!y i#port. GCommissioner of Internal Revenue v. /ortune
(o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200? citi$g CIR v. Court
of Appeals' BB? Phi!. B22' BB0,BB1 %1FF@&I A. b-rde$.' ta2e. .ho-!d $ot be
-$d-!y e2acted $or a..-#ed beyo$d the p!ai$ #ea$i$g o the ta2 !a+..
%I"id., citi$g CIR v. Philippine American Accident Insurance Company, Inc., <.R.
No. 1E16>?' *arch 1?' 200>' E>B S(RA 66?&
A. Strict i"terpretatio" of ta# e#e!ptio" laws. Ta2e.
are +hat ci0i!i;ed peop!e pay or ci0i!i;ed .ociety. They are the !ieb!ood
o the $atio$. Th-.' .tat-te. gra$ti$g ta2 e2e#ptio$. are co$.tr-ed
stricissimi =uris agai$.t the ta2payer a$d !ibera!!y i$ a0or o the ta2i$g
a-thority. A c!ai# o ta2 e2e#ptio$ #-.t be c!ear!y .ho+$ a$d ba.ed o$
!a$g-age i$ !a+ too p!ai$ to be #i.ta/e$. Other+i.e .tated' ta2atio$ i.
the r-!e' e2e#ptio$ i. the e2ceptio$. %8uezon City, et al., v. ABS0CB!
Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g Mactan
Ce"u International Airport Authority v. Marcos, <.R. No. 1200?2' Septe#ber 11'
1FF6' 261 S(RA 66@' 6?0& The b-rde$ o proo re.t. -po$ the party
c!ai#i$g the e2e#ptio$ to pro0e that it i. i$ act co0ered by the e2e#ptio$
.o c!ai#ed. %8uezon City, supra citi$g Agpa!o' R.E.' Stat-tory (o$.tr-ctio$'
200B ed.' p. B01&
C. Ratio"ale for strict i"terpretatio" of ta# e#e!ptio"
laws. The ba.i. or the r-!e o$ .trict co$.tr-ctio$ to .tat-tory pro0i.io$.
gra$ti$g ta2 e2e#ptio$. or ded-ctio$. i. to #i$i#i;e diere$tia! treat#e$t
a$d o.ter i#partia!ity' air$e.. a$d e1-a!ity o treat#e$t a#o$g
ta2payer.. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R.
No. 166E0?' October 6' 200?& 7e +ho c!ai#. a$ e2e#ptio$ ro# hi. .hare
o co##o$ b-rde$ #-.t 6-.tiy hi. c!ai# that the !egi.!at-re i$te$ded to
e2e#pt hi# by -$#i.ta/ab!e ter#.. Cor e2e#ptio$. ro# ta2atio$ are
$ot a0ored i$ !a+' $or are they pre.-#ed. They #-.t be e2pre..ed i$
the c!eare.t a$d #o.t -$a#big-o-. !a$g-age a$d $ot !et to #ere
i#p!icatio$.. 4t ha. bee$ he!d that e2e#ptio$. are $e0er pre.-#ed the
b-rde$ i. o$ the c!ai#a$t to e.tab!i.h c!ear!y hi. right to e2e#ptio$ a$d
ca$$ot be #ade o-t o i$ere$ce or i#p!icatio$. b-t #-.t be !aid beyo$d
rea.o$ab!e do-bt. 4$ other +ord.' .i$ce ta2atio$ i. the r-!e a$d
e2e#ptio$ the e2ceptio$' the i$te$tio$ to #a/e a$ e2e#ptio$ o-ght to be
e2pre..ed i$ c!ear a$d -$a#big-o-. ter#.. %8uezon City, supra citi$g
Agpa!o' R.E.' Stat-tory (o$.tr-ctio$' 200B ed.' p. B02&
'&. +hy are ta# e#e!ptio"s are strictly co"strued
a9ai"st the ta#payer a"d liberally i" fa$or of the State 7
S3<<ESTE" ANS=ER8 Ta2e. are $ece..ary or the co$ti$-ed
e2i.te$ce o the State.
''. *" case of a ta# o$erpay!e"t5 where the B*R6s
obli9atio" to refu"d or setHoff arises fro! the !o!e"t the ta#
was paid u"der the pri"ciple of solutio indebeti. *Commissioner of
Internal Revenue v. &sso Standard &astern, Inc, 1@2 SR(A B6E&
17
'%. But "ote Nestle Phil. v. Court of Appeals, et al., ,.R.
No. '8:'':5 /uly >5 %&&' +hich he!d that i$ order or the r-!e o$ solutio
inde"eti to app!y it i. a$ e..e$tia! co$ditio$ that the petitio$er #-.t ir.t
.ho+ that it. pay#e$t o the c-.to#. d-tie. +a. i$ e2ce.. o +hat +a.
re1-ired by the !a+ at the ti#e the .-b6ect 16 i#portatio$. o #i!/ a$d #i!/
prod-ct. +ere #ade. 3$!e.. .ho+$ other+i.e' the di.p-tab!e pre.-#ptio$
o reg-!arity o peror#a$ce o d-ty !ie. i$ a0or o the (o!!ector o
(-.to#..
'8. Strict i"terpretatio" of a ta# refu"d that partaEes of
the "ature of a ta# does "ot apply to ta# refu"d based o"
erro"eous pay!e"t or where there is "o law that authoriBes
collectio" of the ta#. There i. parity bet+ee$ ta2 re-$d a$d ta2
e2e#ptio$ o$!y +he$ the or#er i. ba.ed either o$ a ta2 e2e#ptio$
.tat-te or a ta2 re-$d .tat-te. %Commissioner of Internal Revenue v.
/ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&
Ta2 re-$d. %or ta2 credit.&' o$ the other ha$d' are $ot o-$ded
pri$cipa!!y o$ !egi.!ati0e grace b-t o$ the !ega! pri$cip!e +hich -$der!ie.
a!! 1-a.i,co$tract. abhorri$g a per.o$:. -$6-.t e$rich#e$t at the e2pe$.e
o a$other. GCommissioner, supra citi$g Ramie (e)tiles, Inc. v. 'on. Mathay'
Sr.' 1@? Phi!. E?2 %1F@F&D Puyat . Sons v. City of Manila' et a!.' 11@ Phi!. F?>
%1F6B&I
The dy$a#ic o erro$eo-. pay#e$t o ta2 it. to a tee the
prototypic 1-a.i,co$tract' solutio inde"iti, +hich co0er. $ot o$!y #i.ta/e
i$ act b-t a!.o #i.ta/e i$ !a+. %Commissioner, supra citi$g (4V4) (O"E'
Art.. 21E2' 21>E a$d 21>>&
The <o0er$#e$t i. $ot e2e#pt ro# the app!icatio$ o solutio
inde"iti. %Commissioner, supra citi$g Commissioner of Internal Revenue v.
/ireman>s /und Insurance Co.' <.R. No. ),B06EE' F *arch 1F?@' 1E? S(RA
B1>' B2E,B2>D Ramie (e)tiles, Inc. v. Mathay, supraD +onzales Puyat . Sons v.
City of Manila' supra&
4$deed' the ta2payer e2pect. air dea!i$g ro# the <o0er$#e$t'
a$d the !atter ha. the d-ty to re-$d +itho-t a$y -$rea.o$ab!e de!ay +hat
it ha. erro$eo-.!y co!!ected. %Commissioner, supra citi$g Commissioner of
Internal Revenue v. (o-yo Shipping Co., supra at BB?& 4 the State e2pect. it.
ta2payer. to ob.er0e air$e.. a$d ho$e.ty i$ payi$g their ta2e.' it #-.t
ho!d it.e! agai$.t the .a#e .ta$dard i$ re-$di$g e2ce.. %or erro$eo-.&
pay#e$t. o .-ch ta2e.. 4t .ho-!d $ot -$6-.t!y e$rich it.e! at the
e2pe$.e o ta2payer.. GCommissioner, supra citi$g AB $easing and /inance
Corporation v. Commissioner of Internal Revenue' E>B Phi!. 2F@ i$ t-r$ citi$g
BPI0/amily Savings Ban-, Inc. v. Court of Appeals' BB0 S(RA >0@' >10' >1?
%2000&I A$d .o' gi0e$ it. e..e$ce' a c!ai# or ta2 re-$d $ece..itate. o$!y
prepo$dera$ce o e0ide$ce or it. approbatio$ !i/e i$ a$y other ordi$ary
ci0i! ca.e. %Commissioner, supra&
':. Ta# refu"ds pre!ised upo" a ta# e#e!ptio"
strictly co"strued5 Ta2 e2e#ptio$ i. a re.-!t o !egi.!ati0e grace. A$d
he +ho c!ai#. a$ e2e#ptio$ ro# the b-rde$ o ta2atio$ #-.t 6-.tiy hi.
c!ai# by .ho+i$g that the !egi.!at-re i$te$ded to e2e#pt hi# by +ord.
too p!ai$ to be #i.ta/e$. GCommissioner of Internal Revenue v. /ortune
(o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200? citi$g Surigao
Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue and Court of
(a) Appeals' 11F Phi!. BB' B@ %1F6B&I
The r-!e i. that ta2 e2e#ptio$. #-.t be .trict!y co$.tr-ed .-ch that
the e2e#ptio$ +i!! $ot be he!d to be co$erred -$!e.. the ter#. -$der
+hich it i. gra$ted c!ear!y a$d di.ti$ct!y .ho+ that .-ch +a. the i$te$tio$.
GCommissioner, supra citi$g Phil. Acetylene Co. v. Commission of Internal
Revenue' et a!.' 12@ Phi!. E61' E@2 %1F6@&D Manila &lectric Company v. 3era'
<.R. No. ),2FF?@' 22 October 1F@>' 6@ S(RA B>1' B>@,B>?D Surigao
Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue' supraI
A c!ai# or ta2 re-$d #ay be ba.ed o$ .tat-te. gra$ti$g ta2
e2e#ptio$ or ta2 re-$d. 4$ .-ch ca.e' the r-!e o .trict i$terpretatio$
agai$.t the ta2payer i. app!icab!e a. the c!ai# or re-$d parta/e. o the
$at-re o a$ e2e#ptio$' a !egi.!ati0e grace' +hich ca$$ot be a!!o+ed
-$!e.. gra$ted i$ the #o.t e2p!icit a$d categorica! !a$g-age. The
ta2payer #-.t .ho+ that the !egi.!at-re i$te$ded to e2e#pt hi# ro# the
ta2 by +ord. too p!ai$ to be #i.ta/e$. GCommissioner, supra +ith a $ote to
.ee Surigao Consolidated Mining Co. Inc. v. CIR' supra at @B2,@BBD Phile)
Mining Corp. v. Commissioner of Internal Revenue' B6> Phi!. >@2' >@F %1FFF&D
%avao +ulf $um"er Corp. v. Commissioner of Internal Revenue' B>E Phi!. ?F1,
?F2 %1FF?&D . Commissioner of Internal Revenue v. (o-yo Shipping Co., $td.'
B1E Phi!. 220' 22? %1FF>&I
'<. Effect of a B*R re$ersal of a pre$ious ruli"9
i"terpreti"9 a law as e#e!pti"9 a ta#payer. A re0er.a! o a B4R
r-!i$g a0orab!e to a ta2payer +o-!d $ot $ece..ari!y create a perpet-a!
e2e#ptio$ i$ hi. a0or' or ater a!! the go0er$#e$t i. $e0er e.topped ro#
co!!ecti$g ta2e. beca-.e o #i.ta/e. or error. o$ the part o it. age$t..
*$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al.,
2FB S(RA F2' FF&

'>. A ta# a!"esty i. a ge$era! pardo$ or i$te$tio$a!
o0er!oo/i$g by the State o it. a-thority to i#po.e pe$a!tie. o$ per.o$.
other+i.e g-i!ty o e0a.io$ or 0io!atio$ o a re0e$-e or a ta2 !a+.
4t parta/e. o a$ ab.o!-te +ai0er by the go0er$#e$t o it. right to
co!!ect +hat i. d-e it a$d to gi0e ta2 e0ader. +ho +i.h to re!e$t a cha$ce
to .tart +ith a c!ea$ .!ate. A ta2 a#$e.ty' #-ch !i/e a ta2 e2e#ptio$' i.
$e0er a0ored $or pre.-#ed i$ !a+. The gra$t o a ta2 a#$e.ty' .i#i!ar to
a ta2 e2e#ptio$' #-.t be co$.tr-ed .trict!y agai$.t the ta2payer a$d
!ibera!!y i$ a0or o the ta2i$g a-thority. %Philippine Ban-ing Corporation,
etc., v. Commissioner of Internal Revenue, <. R. No. 1@0>@E' Aa$-ary B0' 200F&
18
'@. The purpose of ta# a!"esty i. to
a. gi0e ta2 e0ader. +ho +i.h to re!e$t a cha$ce to .tart a c!ea$
.!ate' a$d to
b. gi0e the go0er$#e$t a cha$ce to co!!ect -$co!!ected ta2 ro#
ta2 e0ader. +itho-t ha0i$g to go thro-gh the tedio-. proce.. o a
ta2 ca.e. *Banas, ,r. v. Court of Appeals, et al., <.R. No. 102F6@' Cebr-ary
10' 2000#
'A. Ta# a!"esty disti"9uished fro! ta# e#e!ptio".
a. Ta2 a#$e.ty i. a$ i##-$ity ro# a!! cri#i$a!' ci0i! a$d
ad#i$i.trati0e !iabi!itie. ari.i$g ro# $o$pay#e$t o ta2e. %People v.
Castaneda, <.R. No. ),E6??1' Septe#ber 1>' 1F??& =74)E a ta2
e2e#ptio$ i. a$ i##-$ity ro# ci0i! !iabi!ity o$!y. 4t i. a$ i##-$ity or
pri0i!ege' a reedo# ro# a charge or b-rde$ to +hich other. are .-b6ected.
*/lorer v. Sheridan, ?@A Ind. BC, @D !& @DE#
b. Ta2 a#$e.ty app!ie. o$!y to pa.t ta2 period.' he$ce o
retroacti0e app!icatio$ *Castaneda, supra& =74)E ta2 e2e#ptio$ ha.
pro.pecti0e app!icatio$.
'C. Ta# a$oida"ce i. the -.e o !ega!!y per#i..ib!e #ea$. to
red-ce the ta2 +hi!e ta2 e0a.io$ i. the -.e o i!!ega! #ea$. to e.cape the
pay#e$t o ta2e..
%&. Ta# e$asio" co""otes the i"te9ratio" of three
factors-
a. The e$d to be achie0ed' i.e.' the pay#e$t o !e.. tha$ that
/$o+$ by the ta2payer to be !ega!!y d-e' or the $o$,pay#e$t o ta2 +he$ it
i. .ho+$ that a ta2 i. d-eD
b. a$ acco#pa$yi$g .tate o #i$d +hich i. de.cribed a. bei$g
e0i! o$ bad aith' +i!!-!' or de!iberate a$d $ot accide$ta!D a$d
c. a co-r.e o actio$ or ai!-re o actio$ +hich i. -$!a+-!.
%Commissioner of Internal Revenue v. (he &state of Benigno P. (oda, ,r., , etc.,
<. R. No. 1E@1??' Septe#ber 1E' 200E&
%'. Ta# a$oida"ce disti"9uished fro! ta#
e$asio".
a. Ta2 a0oida$ce i. !ega! +hi!e ta2 e0a.io$ i. i!!ega!.
b. The ob6ecti0e o ta2 a0oida$ce i$ #o.t i$.ta$ce. i. #ere!y to
red-ce the ta2 that i. d-e +hi!e i. ta2 e0a.io$ the ob6ect i. to e$tire!y
e.cape the pay#e$t o ta2e..
c. Ta2 e0a.io$ +arra$t. the i#po.itio$ o ci0i!' ad#i$i.trati0e
a$d cri#i$a! pe$a!tie. +hi!e ta2 a0oida$ce doe. $ot.
%%. Ta# spari"9 i. a pro0i.io$ i$ .o#e ta2 treatie. +hich
pro0ide. that the .tate o re.ide$ce a!!o+. a. credit the a#o-$t that
+o-!d ha0e bee$ paid' a. i $o red-ctio$ ha. bee$ #ade. %Voge!' R!a-. o$
"o-b!e Ta2atio$ (o$0e$tio$.' Third Editio$' p.12>> cited i$ Segarra' Ve$ice 7'
Ta2 Treatie.8 Tric/ or treat M' Phi!ippi$e "ai!y 4$1-irer' "ece#ber 6' 2002' p. (>&
There #ay be i$.ta$ce. +here a partic-!ar i$co#e i. e2e#pt ro#
ta2atio$ i$ order to e$co-rage oreig$ i$0e.t#e$t. +hich #ay !ead to
eco$o#ic de0e!op#e$t. 4 the ta2 credit #ethod i. -.ed' there +o-!d be
$o #ore ta2 to credit .i$ce there i. $o #ore ta2 to credit a. a re.-!t o the
ta2 e2e#ptio$. (o$.e1-e$t!y' +he$ the ta2 #ethod credit #ethod i.
app!ied to the.e ite#. o i$co#e' .-ch i$ce$ti0e. are .ipho$ed o .i$ce'
i$ eect' the ta2 be$eit. are ca$ce!!ed o-t. *I"id.# Th-.' the $eed or the
ta2 .pari$g pro0i.io$.
NAT*ONA( *NTERNA( RE3EN.E 0OE
OR,AN*LAT*ON AN 1.N0T*ONS O1 THE B.REA. O1
*NTERNA( RE3EN.E
'. Rep. Act No. ':&<5 the Ba"E eposits Secrecy (aw
prohibits i"Duiry i"to ba"E deposits. As e#ceptio"s to Rep.
Act No. ':&<5 the 0o!!issio"er of *"ter"al Re$e"ue is o"ly
authoriBed to i"Duire i"to the ba"E deposits of-
a. a decede$t to deter#i$e hi. gro.. e.tateD a$d
b. a$y ta2payer +ho ha. i!ed a$ app!icatio$ or co#pro#i.e o
hi. ta2 !iabi!ity by rea.o$ o i$a$cia! i$capacity to pay hi. ta2 !iabi!ity. GSec.
> %C&' N4R( o 1FF@I
c. A ta2payer +ho a-thori;e. the (o##i..io$er to i$1-ire i$to
hi. ba$/ depo.it..
%. Purpose of the N*R0 of 'CC@. Re$e"ue 9e"eratio"
has u"doubtedly bee" a !a?or co"sideratio" i" the passa9e
of the Ta# 0ode. %Commissioner of Internal Revenue v. /ortune (o"acco
Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&
8. Purpose of shift fro! ad $alore! syste! to
specific ta# syste! i" ta#atio" of ci9arettes. The .hit ro# the
ad valorem .y.te# to the .peciic ta2 .y.te# i. !i/e+i.e #ea$t to
pro#ote air co#petitio$ a#o$g the p!ayer. i$ the i$d-.trie.
co$cer$ed' to e$.-re a$ e1-itab!e di.trib-tio$ o the ta2 b-rde$ a$d to
.i#p!iy ta2 ad#i$i.tratio$ by c!a..iyi$g cigarette.' a#o$g other.' i$to
high' #edi-# a$d !o+,priced ba.ed o$ their $et retai! price a$d
accordi$g!y grad-ati$g ta2 rate.. %Commissioner of Internal Revenue v.
/ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&
19
TA) ON *N0O;E
'. The Ta# 0ode has i"cluded u"der the ter!
corporatio" part"erships5 "o !atter how created or orga$i;ed'
6oi$t,.toc/ co#pa$ie.' 6oi$t acco-$t. %cuentas en participacion&'
a..ociatio$.' or i$.-ra$ce co#pa$ie.. GSec. 2E $o+ Sec. 2E %B& o the
N4R( o 1FF@I
%. 4$ &vangelista v. Collector, 102 Phi!. 1E0, the S-pre#e (o-rt
he!d citi$g *erte$. that the ter! part"ership i"cludes a .y$dicate'
gro-p' poo!' 6oi$t 0e$t-re or other -$i$corporated orga$i;atio$' thro-gh or
by #ea$. o +hich a$y b-.i$e..' i$a$cia! operatio$' or 0e$t-re i. carried
o$.
8. 0ertai" busi"ess or9a"iBatio"s do "ot fall u"der the
cate9ory of corporatio"s u"der the Ta# 0ode' a$d thereore $ot
.-b6ect to ta2 a. corporatio$.' i$c!-de8
a. <e$era! proe..io$a! part$er.hip.D
b. Aoi$t 0e$t-re or co$.orti-# or#ed or the p-rpo.e o
-$derta/i$g co$.tr-ctio$ pro6ect. e$gagi$g i$ petro!e-#' coa!' geother#a!'
a$d other e$ergy operatio$.' p-r.-a$t to a$ operatio$ or co$.orti-#
agree#e$t -$der a .er0ice co$tract +ith the <o0er$#e$t. G1
.t
.e$te$ce'
Sec. 22 %B&' B4R( o 1FF@I
:. 0oHheirs who ow" i"herited properties which
produce i"co!e should "ot auto!atically be co"sidered as
part"ers of a" u"re9istered corporatio" sub?ect to i"co!e ta#
for the followi"9 reaso"s-
a. The .hari$g o gro.. ret-r$. doe. $ot o it.e! e.tab!i.h a
part$er.hip' +hether or $ot the per.o$. .hari$g the# ha0e a 6oi$t or
co##o$ right or i$tere.t i$ a$y property ro# +hich the ret-r$. are
deri0ed. There #-.t be a$ -$#i.ta/ab!e i$te$tio$ to or# a part$er.hip or
6oi$t 0e$t-re. *9"illos, ,r. v. Commissioner of Internal Revenue, 1BF S(RA EB6&
b. There i. $o co$trib-tio$ or i$0e.t#e$t o additio$a! capita! to
i$crea.e or e2pa$d the i$herited propertie.' #ere!y co$ti$-i$g the
dedicatio$ o the property to the -.e to +hich it had bee$ p-t by their
orebear.. %I"id.&
c. Per.o$. +ho co$trib-te property or -$d. to a co##o$
e$terpri.e a$d agree to .hare the gro.. ret-r$. o that e$terpri.e i$
proportio$ to their co$trib-tio$' b-t +ho .e0era!!y retai$ the tit!e to their
re.pecti0e co$trib-tio$' are $ot thereby re$dered part$er.. They ha0e $o
co##o$ .toc/ capita!' a$d $o co##-$ity o i$tere.t a. pri$cipa! proprietor.
i$ the b-.i$e.. it.e! ro# +hich the proceed. +ere deri0ed. %E!e#e$t. o
the )a+ o Part$er.hip by C!oyd R. *eche#' 2
$d
Ed.' Sec. ?B' p. @E cited i$
Pascual v. Commissioner of Internal Revenue, 166 S(RA >60&
<. The co!!o" ow"ership of property does "ot itself
create a part"ership betwee" the ow"ers' tho-gh they #ay -.e it
or p-rpo.e o #a/i$g gai$.' a$d they #ay' +itho-t beco#i$g part$er.' are
a#o$g the#.e!0e. a. to the #a$age#e$t a$d -.e o .-ch property a$d
the app!icatio$ o the proceed. therero#.. %Spurloc- v,. 1ilson, 1E2 S.=.
B6B' 160 !o. App. ?F' cited i$ Pascual v. Commissioner of Internal
Revenue, 166 S(RA >60&
>. The i"co!e fro! the re"tal of the house5 bou9ht
fro! the ear"i"9s of coHow"ed properties5 shall be treated as
the i"co!e of a" u"re9istered part"ership to be ta2ab!e a. a
corporatio$ beca-.e o the c!ear i$te$tio$ o the brother. to 6oi$ together i$
a 0e$t-re or #a/i$g #o$ey o-t o re$ta!..
@. *"co!e i. gai$ deri0ed a$d .e0ered ro# capita!' ro# !abor
or ro# both co#bi$ed. Cor e2a#p!e' to ta2 a .toc/ di0ide$d +o-!d be to
ta2 a capita! i$crea.e rather tha$ the i$co#e. *Commissioner of Internal
Revenue v. Court of Appeals, et al., +.R. !o. ?GCEAD, ,anuary BG, ?HHH#
A. The ter# ta#able i"co!e #ea$. the perti$e$t ite#. o
gro.. i$co#e .peciied i$ the Ta2 (ode' !e.. the ded-ctio$. a$d9or
per.o$a! a$d additio$a! e2e#ptio$.' i a$y' a-thori;ed or .-ch type. o
i$co#e by the Ta2 (ode or other .pecia! !a+.. %Sec. B1' N4R( o 1FF@&
C. The ca"cellatio" a"d for9i$e"ess of i"debted"ess
#ay a#o-$t to %a& pay#e$t o i$co#eD %b& gitD or to a %c& capita!
tra$.actio$ depe$di$g -po$ the circ-#.ta$ce..
'&. *f a" i"di$idual perfor!s ser$ices for a creditor
who5 i" co"sideratio" thereof5 ca"cels the debt5 it is i"co!e to
the e2te$t o the a#o-$t rea!i;ed by the debtor a. co#pe$.atio$ or hi.
.er0ice..
''. A" i"sol$e"t debtor does "ot realiBe ta#able i"co!e
fro! the ca"cellatio" or for9i$e"ess. *Commissioner v. Simmons
+in Co., EB Cd B2@ ((A 10
th
&
'%. The i"sol$e"t debtor realiBes i"co!e resulti"9 fro!
the ca"cellatio" or for9i$e"ess of i"debted"ess whe" he
beco!es sol$e"t. *$a-eland +rocery Co., v. Commissioner B6 BTA %C&
2?F&
20
'8. *f a creditor !erely desires to be"efit a debtor a"d
without a"y co"sideratio" therefor ca"cels the a!ou"t of the
debt it is a 9ift fro! the creditor to the debtor a"d "eed "ot be
i"cluded i" the latter6s i"co!e.
':. *f a corporatio" to which a stocEholder is i"debted
for9i$es the debt5 the tra"sactio" has the effect of pay!e"t of
a di$ide"d. %Sec. >0' Re0. Reg.. No. 2&
'<. ;e!bers of cooperati$es "ot sub?ect to ta# o" the
i"terest ear"ed fro! their deposits with the cooperati$e. No !e..
tha$ o-r (o$.tit-tio$ g-ara$tee. the protectio$ o cooperati0e.. Sectio$ 1>'
Artic!e L44 o the (o$.tit-tio$ co$.ider. cooperati0e. a. i$.tr-#e$t. or .ocia!
6-.tice a$d eco$o#ic de0e!op#e$t. At the .a#e ti#e' Sectio$ 10 o Artic!e 44 o
the (o$.tit-tio$ dec!are. that it i. a po!icy o the State to pro#ote .ocia! 6-.tice i$
a!! pha.e. o $atio$a! de0e!op#e$t. 4$ re!atio$ thereto' Sectio$ 2 o Artic!e L444 o
the (o$.tit-tio$ .tate. that the pro#otio$ o .ocia! 6-.tice .ha!! i$c!-de the
co##it#e$t to create eco$o#ic opport-$itie. ba.ed o$ reedo# o i$itiati0e a$d
.e!,re!ia$ce. Beari$g i$ #i$d the oregoi$g pro0i.io$.' +e i$d that a$
i$terpretatio$ e2e#pti$g the #e#ber. o cooperati0e. ro# the i#po.itio$ o the
i$a! ta2 -$der Sectio$ 2E%B&%1& o the N4R( %ta2 o$ i$tere.t ear$ed by depo.it.&
i. #ore i$ /eepi$g +ith the !etter a$d .pirit o o-r (o$.tit-tio$. %%umaguete
Cathedral Credit Coopertive 5%CCC#6 etc., v. Commissioner of Internal Revenue,
<. R. No. 1?2@22' Aa$-ary 22' 2010&
4$ c!o.i$g' cooperati0e.' i$c!-di$g their #e#ber.' de.er0e a preere$tia!
ta2 treat#e$t beca-.e o the 0ita! ro!e they p!ay i$ the attai$#e$t o eco$o#ic
de0e!op#e$t a$d .ocia! 6-.tice. Th-.' a!tho-gh ta2e. are the !ieb!ood o the
go0er$#e$t' the State:. po+er to ta2 #-.t gi0e +ay to o.ter the creatio$ a$d
gro+th o cooperati0e.. To borro+ the +ord. o A-.tice 4.aga$i A. (r-;8 The
po+er o ta2atio$' +hi!e i$di.pe$.ab!e' i. $ot ab.o!-te a$d #ay be .-bordi$ated
to the de#a$d. o .ocia! 6-.tice. %I"id., citi$g Commissioner of Internal Revenue
v. American &)press International, Inc. *Philippine Branch#' >00 Phi!. >?6 %200>&.
'>. The ,lobal syste! of i"co!e ta#atio" i. a .y.te#
e#p!oyed +here the ta2 .y.te# 0ie+. i$diere$t!y the ta2 ba.e a$d
ge$era!!y treat. i$ co##o$ a!! categorie. o ta2ab!e i$co#e o the
i$di0id-a!. *(an v. del Rosario, ,r., 2B@ S(RA B2E' BB1&
'@. The Schedular syste! of i"co!e ta#atio" i. a .y.te#
e#p!oyed +here the i$co#e ta2 treat#e$t 0arie. a$d i. #ade to depe$d
o$ the /i$d or category o ta2ab!e i$co#e o the ta2payer. *(an v. del
Rosario, ,r., B@A SCRA @BF, @@?#
'A. ."der the Natio"al *"ter"al Re$e"ue 0ode the 9lobal
syste! is applicable to ta#able corporatio"s a"d the schedular
to i"di$iduals.
'C. 0o!pe"satio" i"co!e is co"sidered as ha$i"9
bee" ear"ed i" the place where the ser$ice was re"dered a$d
$ot co$.idered a. .o-rced ro# the p!ace o origi$ o the #o$ey.
%&. Pay!e"t for ser$ices5 other tha" co!pe"satio"
i"co!e5 is co"sidered as ha$i"9 bee" ear"ed at the place
where the acti$ity or ser$ice was perfor!ed.
%'. A "o"Hreside"t alie"5 who has stayed i" the
Philippi"es for a" a99re9ate period of !ore tha" 'A& days
duri"9 a"y cale"dar year5 shall be co"sidered as a "o"H
reside"t alie" doi"9 busi"ess i" the Philippi"es. (o$.e1-e$t!y'
he .ha!! be .-b6ect to i$co#e ta2 o$ hi. i$co#e deri0ed ro# .o-rce. ro#
+ithi$ the Phi!ippi$e.. GSec. 2> %A& %1&' N4R(I
7e i. a!!o+ed to a0ai! o the ite#i;ed ded-ctio$. i$c!-di$g the
per.o$a! a$d additio$a! e2e#ptio$. .-b6ect to the r-!e o$ reciprocity.
%%. +hat are co"sidered as de minimis be"efits
"ot sub?ect to withholdi"9 ta# o" co!pe"satio" i"co!e of
both !a"a9erial a"d ra"E a"d file e!ployees 7
S3<<ESTE" ANS=ER8
a. *o$eti;ed -$-.ed 0acatio$ !ea0e credit. o e#p!oyee. $ot
e2ceedi$g te$ %10& day. d-ri$g the yearD
b. *edica! ca.h a!!o+a$ce to depe$de$t. o e#p!oyee. $ot
e2ceedi$g P@>0.00 per e#p!oyee per .e#e.ter or P12> per #o$thD
c. Rice .-b.idy o P1'000.00 or o$e %1& .ac/ o >0,/g. rice per
#o$th a#o-$ti$g to $ot #ore tha$ P1'000.00D
d. 3$ior#. a$d c!othi$g a!!o+a$ce $ot e2ceedi$g PB'000.00 per
a$$-#D
e. Act-a! year!y #edica! be$eit. $ot e2ceedi$g P10'000.00 per
a$$-#D
. )a-$dry a!!o+a$ce $ot e2ceedi$g PB00 per #o$thD
g. E#p!oyee. achie0e#e$t a+ard.' e.g. or !e$gth o .er0ice or
.aety achie0e#e$t' +hich #-.t be i$ the or# o a ta$gib!e per.o$a
property other tha$ ca.h or git certiicate' +ith a$ a$$-a! #o$etary 0a!-e
$ot e2ceedi$g P10'000.00 recei0ed by a$ e#p!oyee -$der a$ e.tab!i.hed
+ritte$ p!a$ +hich doe. $ot di.cri#i$ate i$ a0or o high!y paid e#p!oyee.D
h. <it. gi0e$ d-ri$g (hri.t#a. a$d #a6or a$$i0er.ary
ce!ebratio$. $ot e2ceedi$g P>'000 per e#p!oyee per a$$-#D
21
i. C!o+er.' r-it.' boo/.' or .i#i!ar ite#. gi0e$ to e#p!oyee.
-$der .pecia! circ-#.ta$ce.' e.g. o$ acco-$t o i!!$e..' #arriage' birth o a
baby' etc.D a$d
6. "ai!y #ea! a!!o+a$ce or o0erti#e +or/ $ot e2ceedi$g t+e$ty
i0e perce$t %2>H& o the ba.ic #i$i#-# +age.
The a#o-$t o de minimis be$eit. co$or#i$g to the cei!i$g herei$
pre.cribed .ha!! $ot be co$.idered i$ deter#i$i$g the PB0'000 cei!i$g o
other be$eit. pro0ided -$der Sectio$ B2 %B&%@&%e& o the (ode. 7o+e0er'
i the e#p!oyer pay. #ore tha$ the cei!i$g pre.cribed by the.e reg-!atio$.'
the e2ce.. .ha!! be ta2ab!e to the e#p!oyee recei0i$g the be$eit. o$!y i
.-ch e2ce.. i. beyo$d the PB0'000.00 cei!i$g' pro0ided' -rther' that a$y
a#o-$t gi0e$ by the e#p!oyer a. be$eit. to it. e#p!oyee.' +hether
c!a..iied a. de minimis be$eit. or ri$ge be$eit.' .ha!! co$.tit-te a.
ded-ctib!e e2pe$.e -po$ .-ch e#p!oyer. GSec. 2.@?.1 %A& %B&' Re0. Reg..
2,F? a. a#e$ded by Re0. Reg.. No. ?,2000I
%8. *"co!e sub?ect to fi"al ta# refers to a" i"co!e
collected throu9h the withholdi"9 ta# syste!. The payor o the
i$co#e +ithho!d. the ta2 a$d re#it. it to the go0er$#e$t a. a i$a!
.ett!e#e$t o the i$co#e ta2 a. a i$a! .ett!e#e$t o the i$co#e ta2 d-e o$
.aid i$co#e. The recipie$t i. $o !o$ger re1-ired to i$c!-de the i$co#e
.-b6ected to a i$a! ta2 a. part o hi. gro.. i$co#e i$ hi. i$co#e ta2 ret-r$.
%:. isti"9uish e#clusio"s fro! deductio"s.
S3<<ESTE" ANS=ER8
a. E2c!-.io$. ro# gro.. i$co#e reer to a !o+ o +ea!th to the
ta2payer +hich are $ot treated a. part o gro.. i$co#e or p-rpo.e. o
co#p-ti$g the ta2payer:. ta2ab!e i$co#e' d-e to the o!!o+i$g rea.o$.8 %1&
4t i. e2e#pted by the -$da#e$ta! !a+D %2& 4t i. e2e#pted by .tat-teD a$d
%B& 4t doe. $ot co#e +ithi$ the dei$itio$ o i$co#e %Sec. 61' Re0. Reg..
No. 2& =74)E ded-ctio$. are the a#o-$t. +hich the !a+ a!!o+. to be
.-btracted ro# gro.. i$co#e i$ order to arri0e at $et i$co#e.
b. E2c!-.io$. pertai$ to the co#p-tatio$ o gro.. i$co#e =74)E
ded-ctio$. pertai$ to the co#p-tatio$ o $et i$co#e.
c. E2c!-.io$. are .o#ethi$g recei0ed or ear$ed by the ta2payer
+hich do $ot or# part o gro.. i$co#e =74)E ded-ctio$. are .o#ethi$g
.pe$t or paid i$ ear$i$g gro.. i$co#e.
A$ e2a#p!e o a$ e2c!-.io$ ro# gro.. i$co#e are !ie i$.-ra$ce
proceed.' a$d a$ e2a#p!e o a ded-ctio$ are !o..e..
%<. +hat are e#cluded fro! 9ross i"co!e 7
S3<<ESTE" ANS=ER8
a. Proceed. o !ie i$.-ra$ce po!icie. paid to the heir. or
be$eiciarie. -po$ the death o the i$.-red +hether i$ a .i$g!e .-# or
other+i.e.
b. A#o-$t. recei0ed by the i$.-red a. a ret-r$ o pre#i-#.
paid by hi# -$der !ie i$.-ra$ce' e$do+#e$t or a$$-ity co$tract. either
d-ri$g the ter#' or at #at-rity o the ter# #e$tio$ed i$ the co$tract' or
-po$ .-rre$der o the co$tract.
c. Va!-e o property ac1-ired by git' be1-e.t' de0i.e' or
de.ce$t.
d. A#o-$t. recei0ed' thro-gh accide$t or hea!th i$.-ra$ce or
=or/#e$:. (o#pe$.atio$ Act. a. co#pe$.atio$ or per.o$a! i$6-rie. or
.ic/$e..' p!-. the a#o-$t. o a$y da#age. recei0ed o$ +hether by .-it or
agree#e$t o$ acco-$t o .-ch i$6-rie. or .ic/$e...
e. 4$co#e o a$y /i$d to the e2te$t re1-ired by a$y treaty
ob!igatio$ bi$di$g -po$ the <o0er$#e$t o the Phi!ippi$e..
. Retire#e$t be$eit. recei0ed -$der Rep-b!ic Act No. @6E1.
Retire#e$t recei0ed ro# rea.o$ab!e pri0ate be$eit p!a$ ater co#p!ia$ce
+ith certai$ co$ditio$.. A#o-$t. recei0ed or beyo$d co$tro! .eparatio$.
Coreig$ .ocia! .ec-rity' retire#e$t grat-itie.' pe$.io$.' etc. 3SVA
be$eit.' SSS be$eit. a$d <S4S be$eit..
%>. +hat are the co"ditio"s for e#cludi"9
retire!e"t be"efits fro! 9ross i"co!e5 he"ce ta#He#e!pt 7
S3<<ESTE" ANS=ER8
a. Retire#e$t be$eit. recei0ed -$der Rep-b!ic Act No. @6E1
a$d tho.e recei0ed by oicia!. a$d e#p!oyee. o pri0ate ir#.' +hether
i$di0id-a! or corporate' i$ accorda$ce +ith the e#p!oyer:. rea.o$ab!e
pri0ate be$eit p!a$ appro0ed by the B4R.
b. Retiri$g oicia! or e#p!oyee
1& 4$ the .er0ice o the .a#e e#p!oyer or at !ea.t te$ %10&
year.D
2& Not !e.. tha$ ity %>0& year. o age at ti#e o
retire#e$tD
B& A0ai!ed o the be$eit o e2c!-.io$ o$!y o$ce. GSec. B2
%B& %6& %a&' N4R( o 1FF@I The retiri$g oicia! or e#p!oyee .ho-!d $ot
ha0e pre0io-.!y a0ai!ed o the pri0i!ege -$der the retire#e$t p!a$ o
the .a#e or a$other e#p!oyer. G1
.t
par.' Sec. 2.@? %B& %1&' Re0.
Reg.. No. 2,F?I
%@. +hat Ei"d of separatio" Fretire!e"tG pay is
e#cluded fro! 9ross i"co!e5 he"ce ta#He#e!pt 7
S3<<ESTE" ANS=ER8
a. A$y a#o-$t recei0ed by a$ oicia!' e#p!oyee or by hi. heir.'
b. Cro# the e#p!oyer
c. A. a co$.e1-e$ce o .eparatio$ o .-ch oicia! or e#p!oyee
ro# the .er0ice o the e#p!oyer beca-.e o
1& "eath' .ic/$e.. or other phy.ica! di.abi!ityD or
22
2& Cor a$y ca-.e beyo$d the co$tro! o .aid oicia! or
e#p!oyee GSec. B2 %B& %6& %b&' N4R( o 1FF@I' .-ch a.
retre$ch#e$t' red-$da$cy a$d ce..atio$ o b-.i$e... G1
.t
par.'
Sec. 2.@? %B&' %1& %b&' Re0. Reg.. No. 2,F?I
%A. +hat are the *te!iBed deductio"s fro! 9ross
i"co!e a"d who !ay a$ail of the! 7
a. Ordi"ary a"d "ecessary trade' b-.i$e.. or proe..io$a!
e#pe"ses.
b. The a#o-$t o i"terest paid or i$c-rred +ithi$ a ta2ab!e year
o$ i$debted$e.. i$ co$$ectio$ +ith the ta2payer:. proe..io$' trade or
b-.i$e...
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
c. Ta#es paid or i$c-rred +ithi$ the ta2ab!e year i$ co$$ectio$
+ith the ta2payer:. proe..io$.
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
d. Ordi$ary losses' !o..e. ro# ca.-a!ty' thet or
e#be;;!e#e$tD a$d $et operati$g !o..e..
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
e. Bad debts d-e to the ta2payer' act-a!!y a.certai$ed to
be +orth!e.. a$d charged o +ithi$ the ta2ab!e year' co$$ected +ith
proe..io$' trade or b-.i$e..' $ot .-.tai$ed bet+ee$ re!ated partie..
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
. epreciatio" or a rea.o$ab!e a!!o+a$ce or the e2ha-.tio$'
+ear a$d tear %i$c!-di$g rea.o$ab!e a!!o+a$ce or ob.o!e.ce$ce& o
property -.ed i$ trade or b-.i$e...
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
g. epletio" or ded-ctio$ ari.i$g ro# the e2ha-.tio$ o a $o$,
rep!aceab!e a..et' -.-a!!y a $at-ra! re.o-rce.
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
h. 0haritable a$d other co"tributio"s. Re.ide$t citi;e$.'
re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are
e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro#
co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic
corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
i. Research a"d de$elop!e"t e2pe$dit-re. treated a. deerred
e2pe$.e. paid or i$c-rred by the ta2payer i$ co$$ectio$ +ith hi. trade'
b-.i$e.. or proe..io$' $ot ded-cted a. e2pe$.e. a$d chargeab!e to
capita! acco-$t b-t $ot chargeab!e to property o a character +hich i.
.-b6ect to depreciatio$ or dep!etio$.
Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$
i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.
other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e..
"o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.
23
No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro#
+ithi$ #ay a!.o ded-ct thi. e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
6. 0o"tributio"s to pe"sio" trusts. Re.ide$t citi;e$.' re.ide$t
a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade
a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are
a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d
tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$
corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi.
e2pe$.e.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
/. *"sura"ce pre!iu!s or hea!th a$d ho.pita!i;atio$. Re.ide$t
citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are
e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro#
co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. No$re.ide$t
citi;e$. a$d $o$re.ide$t a!ie$ i$di0id-a! e$gaged i$ trade or b-.i$e.. i$ the
Phi!ippi$e o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct the.e
pre#i-#..
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct the.e pre#i-#..
!. Perso"al a"d additio"al e#e!ptio"s. Re.ide$t citi;e$.' a$d
re.ide$t a!ie$ o$ their gro.. i$co#e. a$d ro# co#pe$.atio$ i$co#e are
a!!o+ed to ded-ct the.e pre#i-#.. No$re.ide$t citi;e$. o$ their gro..
i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$
i$di0id-a!. e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are a!!o+ed to
ded-ct the.e e2e#ptio$. -$der reciprocity.
No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.
%C. isti"9uish ordi"ary e#pe"ses fro! capital
e#pe"ditures.
S3<<ESTE" ANS=ER8 Ordi$ary e2pe$.e. are tho.e +hich are
co##o$ to i$c-r i$ the trade or b-.i$e.. o the ta2payer =74)E capita!
e2pe$dit-re. are tho.e i$c-rred to i#pro0e a..et. a$d be$eit. or #ore
tha$ o$e ta2ab!e year. Ordi$ary e2pe$.e. are -.-a!!y i$c-rred d-ri$g a
ta2ab!e year a$d be$eit. .-ch ta2ab!e year. Nece..ary e2pe$.e. are
tho.e +hich are appropriate or he!p-! to the b-.i$e...
8&. +hat are the reDuisites for the deductibility of
busi"ess e#pe"ses 7
S3<<ESTE" ANS=ER8 The o!!o+i$g are the re1-i.ite. or
ded-ctibi!ity o b-.i$e.. e2pe$.e.8
a. (o#p!ia$ce +ith the b-.i$e.. te.t8
1& *-.t be ordi$ary a$d $ece..aryD
2& *-.t be paid or i$c-rred +ithi$ the ta2ab!e yearD
B& *-.t be paid or i$c-rred i$ carryi$g o$ a trade or
b-.i$e...
E& *-.t $ot be bribe.' /ic/bac/. or other i!!ega!
e2pe$dit-re.
b. (o#p!ia$ce +ith the .-b.ta$tiatio$ te.t. Proo by e0ide$ce or
record. o the ded-ctio$. a!!o+ed by !a+ i$c!-di$g co#p!ia$ce +ith the
b-.i$e.. te.t.
8'. +hat are the reDuisites for the deductibility of
ordi"ary a"d "ecessary trade5 busi"ess5 or professio"al
e#pe"ses5 liEe e#pe"ses paid for le9al a"d auditi"9 ser$ices 7
S3<<ESTE" ANS=ER8
a. the e2pe$.e #-.t be ordi$ary a$d $ece..aryD
b. it #-.t ha0e bee$ paid or i$c-rred d-ri$g the ta2ab!e year
depe$de$t -po$ the #ethod o acco-$ti$g -po$ the ba.i. o +hich the $et
i$co#e i. co#p-ted.
c. it #-.t be .-pported by receipt.' record. or other perti$e$t
paper.. %Commissioner of Internal Revenue v, Isa"ela cultural
Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@&
8%. T;, 0orporatio" is issui"9 the accrual
!ethod of accou"ti"9. *" %&&< )2L (aw 1ir! a"d AB0
Auditi"9 1ir! re"dered $arious ser$ices which were billed by
these fir!s o"ly duri"9 the followi"9 year %&&>. Si"ce the bills
for le9al a"d auditi"9 ser$ices were recei$ed o"ly i" %&&> a"d
paid i" the sa!e year5 T;, deducted the sa!e fro! its %&&>
9ross i"co!e. The B*R disallowed the deductio" 7
+ho is correct5 T;, or B*R 7 E#plai".
S3<<ESTE" ANS=ER8 The B4R i. correct. T*< .ho-!d ha0e
ded-cted the proe..io$a! a$d !ega! ee. i$ the year they +ere i$c-rred i$
200> a$d $ot i$ 2006 beca-.e at the ti#e the .er0ice. +ere re$dered i$
200>' there +a. a!ready a$ ob!igatio$ to pay the#. %Commissioner of
Internal Revenue v, Isa"ela Cultural Corporation, <. R. No. 1@22B1'
Cebr-ary 12' 200@&
NOTES AN" (O**ENTS8
a. Accou"ti"9 !ethods or ta2 p-rpo.e. co#pri.e a .et o
r-!e. or deter#i$i$g +he$ a$d ho+ to report i$co#e a$d ded-ctio$..
%Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R.
No. 1@22B1' Cebr-ary 12' 200@&
The t+o %2& pri$cipa! acco-$ti$g #ethod. or recog$itio$ o i$co#e
are the %a& accr-a! #ethodD a$d the %b& ca.h #ethod.
24
b. Reco9"itio" of i"co!e a"d e#pe"ses u"der the accrual
!ethod of accou"ti"9. A#o-$t. o i$co#e accr-e +here the right to
recei0e the# beco#e. i2ed' +here there i. created a$ e$orceab!e !iabi!ity.
)iabi!itie.' are i$c-rred +he$ i2ed a$d deter#i$ab!e i$ $at-re +itho-t
regard to i$deter#i$acy #ere!y o ti#e o pay#e$t.. %Commissioner of
Internal Revenue v, Isa"ela cultural Corporation, <. R. No. 1@22B1'
Cebr-ary 12' 200@&
The accr-a! o i$co#e a$d e2pe$.e i. per#itted +he$ the a!!,e0e$t.
te.t ha. bee$ #et. %I"id.&
c. AllHe$e"ts test. Thi. te.t re1-ire.8
1& i2i$g o a right to i$co#e or !iabi!ity to payD a$d
2& the a0ai!abi!ity o the rea.o$ab!e acc-rate
deter#i$atio$ o .-ch i$co#e or !iabi!ity.
The te.t doe. $ot de#a$d that the a#o-$t o .-ch i$co#e or !iabi!ity
be /$o+$ ab.o!-te!y' o$!y that a ta2payer ha. at hi. di.po.a! the
i$or#atio$ $ece..ary to co#p-te the a#o-$t +ith rea.o$ab!e acc-racy.
The a!!,e0e$t. te.t i. .ati.ied +here co#p-tatio$ re#ai$. -$certai$D
i it. ba.i. i. -$cha$geab!e' the te.t i. .ati.ied +here a co#p-tatio$ #ay
be -$/$o+$' b-t i. $ot a. #-ch a. -$/$o+ab!e' +ithi$ the ta2ab!e year.
The a#o-$t o !iabi!ity doe. $ot ha0e to be deter#i$ed e2act!y'D it #-.t be
deter#i$ed +ith rea.o$ab!e acc-racy i#p!ie. .o#ethi$g !e.. tha$ a$
e2act or co#p!ete!y acc-rate a#o-$t.
The propriety o a$ accr-a! #-.t be 6-dged by the act that a
ta2payer /$e+' or co-!d rea.o$ab!y be e2pected to ha0e /$o+$' at the
c!o.i$g o it. boo/. or the ta2ab!e year. Accr-a! #ethod o acco-$ti$g
pre.e$t. !arge!y a 1-e.tio$ o actD .-ch that the ta2payer bear. the b-rde$
o proo o e.tab!i.hi$g the accr-a! o a$ ite# o i$co#e or ded-ctio$.
%Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R.
No. 1@22B1' Cebr-ary 12' 200@&
d. 3$der the cash !ethod i$co#e i. to be co$.tr-ed a. i$co#e
or ta2 p-rpo.e. o$!y -po$ act-a! receipt o the ca.h pay#e$t. 4t i. a!.o
reerred to a. the ca.h receipt. a$d di.b-r.e#e$t. #ethod beca-.e both
the receipt a$d di.b-r.e#e$t. are co$.idered. Th-.' i$co#e i. recog$i;ed
o$!y -po$ act-a! receipt o the ca.h pay#e$t b-t $o ded-ctio$. are a!!o+ed
ro# the ca.h i$co#e -$!e.. act-a!!y di.b-r.ed thro-gh a$ act-a! pay#e$t
i$ ca.h.
88. The fri"9e be"efits ta# i. a i$a! +ithho!di$g ta2 i#po.ed
o$ the gro..ed,-p #o$etary 0a!-e o ri$ge be$eit. -r$i.hed' gra$ted or
paid by the e#p!oyer to the e#p!oyee' e2cept ra$/ a$d i!e e#p!oyee.. G1
.t
par.' Sec. 2.BB %A&' Re0. Reg.. No. B,F?I
8:. +hat is !ea"t by fri"9e be"efit for purposes of
ta#atio" 7
S3<<ESTE" ANS=ER8 Cor p-rpo.e. o ta2atio$' ri$ge be$eit
#ea$. a$y good' .er0ice' or other be$eit -r$i.hed or gra$ted i$ ca.h or i$
/i$d by a$ e#p!oyer to a$ i$di0id-a! e#p!oyee %e2cept ra$/ a$d i!e
e#p!oyee.&' .-ch a. b-t $ot !i#ited to8
a. 7o-.i$gD
b. E2pe$.e acco-$tD
c. Vehic!e o a$y /i$dD
d. 7o-.eho!d per.o$$e!' .-ch a. #aid' dri0er a$d other.D
e. 4$tere.t o$ !oa$ at !e.. tha$ #ar/et rate to the e2te$t o the
diere$ce bet+ee$ the #ar/et rate a$d act-a! rate gra$tedD
. *e#ber.hip ee.' d-e. a$d other e2pe$.e. bor$e by the
e#p!oyer or the e#p!oyee i$ .ocia! a$d ath!etic c!-b. or other .i#i!ar
orga$i;atio$.D
g. E2pe$.e. or oreig$ tra0e!D
h. 7o!iday a$d 0acatio$ e2pe$.e.D
i. Ed-catio$a! a..i.ta$ce to the e#p!oyee or hi. depe$de$t.D
a$d
6. )ie or hea!th i$.-ra$ce a$d other $o$,!ie i$.-ra$ce
pre#i-#. or .i#i!ar a#o-$t. i$ e2ce.. o +hat the !a+ a!!o+.. GSec. BB %B&'
N4R( o 1FF@D 1
.t
par.' Sec. 2.BB %B&' Re0. Reg.. No. B,F?I
8<. 1ri"9e be"efits that are "ot sub?ect to the fri"9e
be"efits ta#-
a. =he$ the ri$ge be$eit i. re1-ired by the $at-re o' or
$ece..ary to the trade' b-.i$e.. or proe..io$ o the e#p!oyerD or
b. =he$ the ri$ge be$eit i. or the co$0e$ie$ce or ad0a$tage
o the e#p!oyer. GSec. B2%A&' N4R( o 1FF@D 1
.t
par.' Sec. 2.BB %A&' Re0.
Reg.. No. B,F?I
c. Cri$ge be$eit. +hich are a-thori;ed a$d e2e#pted ro#
i$co#e ta2 -$der the Ta2 (ode or -$der a$y .pecia! !a+D
d. (o$trib-tio$. o the e#p!oyer or the be$eit o the e#p!oyee
to retire#e$t' i$.-ra$ce a$d ho.pita!i;atio$ be$eit p!a$.D
e. Be$eit. gi0e$ to the ra$/ a$d i!e e#p!oyee.' +hether
gra$ted -$der a co!!ecti0e bargai$i$g agree#e$t or $otD a$d
. %e minimis be$eit. a. dei$ed i$ the r-!e. a$d reg-!atio$. to
be pro#-!gated by the Secretary o Ci$a$ce -po$ reco##e$datio$ o the
(o##i..io$er o 4$ter$a! Re0e$-e. G1
.t
par.' Sec. B2 %(&' N4R( o 1FF@D Sec.
2.BB %(&' Re0. Reg.. No. B,F?I
8>. De minimis be"efits are facilities a"d pri$ile9es
%.-ch a. e$tertai$#e$t' #edica! .er0ice.' or .o,ca!!ed co-rte.y di.co-$t.
o$ p-rcha.e.&' -r$i.hed or oered by a$ e#p!oyer to hi. e#p!oyee..
They are $ot co$.idered a. co#pe$.atio$ .-b6ect to i$co#e ta2 a$d
co$.e1-e$t!y to +ithho!di$g ta2' i .-ch aci!itie. are oered or -r$i.hed by
the e#p!oyer #ere!y a. a #ea$. o pro#oti$g the hea!th' good+i!!'
25
co$te$t#e$t' or eicie$cy o hi. e#p!oyee.. GSec. 2.@?'1 %A& %B&' Re0. Reg..
2,F? a. a#e$ded by Re0. Reg.. No. ?,2000I
8@. Preferred shares are co"sidered capital re9ardless
of the co"ditio"s u"der which such shares are issued a"d
di$ide"ds or i"terests paid thereo" are "ot allowed as
deductio"s fro! the 9ross i"co!e of corporatio"s. %Re0e$-e
*e#ora$d-# (irc-!ar No. 1@,@1&
8A. Bad debts are tho.e +hich re.-!t ro# the +orth!e..$e..
or -$co!!ectibi!ity' i$ +ho!e or i$ part' o a#o-$t. d-e the ta2payer by
other.' ari.i$g ro# #o$ey !e$t or ro# -$co!!ectib!e a#o-$t. o i$co#e
ro# good. .o!d or .er0ice. re$dered. %Sec. 2.a' Re0. Reg.. >,FF&
8C. +ho are related parties 7
S3<<ESTE" ANS=ER8 The o!!o+i$g are re!ated partie.-
a. *e#ber. o the .a#e a#i!y. The a#i!y o a$ i$di0id-a! .ha!!
i$c!-de o$!y hi. brother. a$d .i.ter. %+hether by the +ho!e or ha!,b!ood&'
.po-.e' a$ce.tor.' a$d !i$ea! de.ce$da$t.D
b. A$ i$di0id-a! a$d a corporatio$ #ore tha$ ity perce$t %>0H&
i$ 0a!-e o the o-t.ta$di$g .toc/ o +hich i. o+$ed' direct!y or i$direct!y' by
or or .-ch i$di0id-a!D
c. T+o corporatio$. #ore tha$ ity perce$t %>0H& i$ 0a!-e o the
o-t.ta$di$g .toc/ o +hich i. o+$ed' direct!y or i$direct!y' by or or the
.a#e i$di0id-a!D
d. A gra$tor a$d a id-ciary o a$y tr-.tD or
e. The id-ciary o a tr-.t a$d the id-ciary o a$other tr-.t i the
.a#e per.o$ i. a gra$tor +ith re.pect to each tr-.tD or
. A id-ciary o a tr-.t a$d a be$eiciary o .-ch. GSec. B6 %B&'
N4R( o 1FF@I
:&. +hat are the reDuisites for $alid deductio" of bad
debts fro! 9ross i"co!e 7
S3<<ESTE" ANS=ER8
a. There #-.t be a$ e2i.ti$g i$debted$e.. d-e to the ta2payer
+hich #-.t be 0a!id a$d !ega!!y de#a$dab!eD
b. The .a#e #-.t be co$$ected +ith the ta2payer:. trade' b-.i$e..
or practice o proe..io$D
c. The .a#e #-.t $ot be .-.tai$ed i$ a tra$.actio$ e$tered i$to
bet+ee$ re!ated partie.D
d. The .a#e #-.t be act-a!!y charged o the boo/. o acco-$t. o
the ta2payer a. o the e$d o the ta2ab!e yearD a$d
e. The debt #-.t be act-a!!y a.certai$ed to be +orth!e.. a$d
-$co!!ectib!e d-ri$g the ta2ab!e yearD
. The debt. are -$co!!ectib!e de.pite di!ige$t eort e2erted by the
ta2payer. GSec. BE %E& %1&' N4R( o 1FF@D Sec. B' Re0. Reg.. No. >,FF
reiterated i$ Re0. Reg.. No. 2>,2002D Philippine Refining Corporation v.
Court of Appeals, et al., BED SCRA DDAI
g. *-.t ha0e bee$ reported a. recei0ab!e. i$ the i$co#e ta2 ret-r$
o the c-rre$t or prior year.. %Sec. 10B' Re0. Reg.. No. 2&
8
:'. +hat is the ta# be"efit rule 7
S3<<ESTE" ANS=ER8 The ta2 be$eit r-!e po.it. that the
reco0ery o bad debt. pre0io-.!y a!!o+ed a. ded-ctio$ i$ the precedi$g
year or year. .ha!! be i$c!-ded a. part o the ta2payer:. gro.. i$co#e i$
the year o .-ch reco0ery to the e2te$t o the i$co#e ta2 be$eit o .aid
ded-ctio$.
NOTES AN" (O**ENTS8
a. 4 i$ the year the ta2payer c!ai#ed ded-ctio$ o bad debt.
+ritte$,o' he rea!i;ed a red-ctio$ o the i$co#e ta2 d-e ro# hi# o$
acco-$t o the .aid ded-ctio$' hi. .-b.e1-e$t reco0ery thereo ro# hi.
debtor .ha!! be treated a. a receipt o rea!i;ed ta2ab!e i$co#e. %Sec. E' Re0.
Reg.. >,FF&
b. 4 the .aid ta2payer did $ot be$eit ro# the ded-ctio$ o the
.aid bad debt +ritte$,o beca-.e it did $ot re.-!t to a$y red-ctio$ o hi.
i$co#e ta2 i$ the year o .-ch ded-ctio$ %i.e. +here the re.-!t o hi.
b-.i$e.. operatio$ +a. a $et !o.. e0e$ +itho-t ded-ctio$ o the bad debt.
+ritte$,o&' the$ hi. .-b.e1-e$t reco0ery thereo .ha!! be treated a. a
#ere reco0ery or a ret-r$ o capita!' he$ce' $ot treated a. receipt o
rea!i;ed ta2ab!e i$co#e. %Sec. E' Re0. Reg.. >,FF&
:%. epreciatio" i. the grad-a! di#i$-tio$ i$ the -.e-! 0a!-e o
ta$gib!e property re.-!ti$g ro# ordi$ary +ear a$d tear a$d ro# $or#a!
ob.o!e.ce$ce. The ter# i. a!.o app!ied to a#orti;atio$ o the 0a!-e o
i$ta$gib!e a..et. the -.e o +hich i$ the trade or b-.i$e.. i. dei$ite!y
!i#ited i$ d-ratio$.
:8. The !ethods of depreciatio" are the followi"9-
a. Straight !i$e #ethodD
b. "ec!i$i$g ba!a$ce #ethodD
c. S-# o year. digit. #ethodD a$d
d. A$y other #ethod pre.cribed by the Secretary o Ci$a$ce
-po$ the reco##e$datio$ o the (o##i..io$er o 4$ter$a! Re0e$-e8
1& Apportio$#e$t to -$it. o prod-ctio$D
2& 7o-r. o prod-cti0e -.eD
B& Re0a!-atio$ #ethodD a$d
E& Si$/i$g -$d #ethod.
::. +hat are perso"al a"d additio"al e#e!ptio"s 7
26
S3<<ESTE" ANS=ER8 The.e are the theoretica! per.o$a' !i0i$g
a$d a#i!y e2pe$.e. o a$ i$di0id-a! a!!o+ed to be ded-cted ro# the gro..
or $et i$co#e o a$ i$di0id-a! ta2payer.
The.e are arbitrary a#o-$t. +hich ha0e bee$ ca!c-!ated by o-r
!a+#a/er. to be ro-gh!y e1-i0a!e$t to the #i$i#-# o .-b.i.te$ce' ta/i$g
i$to acco-$t the per.o$a! .tat-. a$d additio$a! 1-a!iied depe$de$t. o the
ta2payer. They are i2ed a#o-$t. i$ the .e$.e that the a#o-$t. ha0e
bee$ predeter#i$ed by o-r !a+#a/er. a$d -$ti! o-r !a+#a/er. #a/e $e+
ad6-.t#e$t. o$ the.e per.o$a! e2e#ptio$.' the a#o-$t. a!!o+ed to be
ded-cted by a ta2payer are i2ed a. predeter#i$ed by (o$gre...
GPansacola v. Commissioner of Internal Revenue, <. R. No. 1>FFF1' No0e#ber
16' 2006 citi$g Madrigal and Paterno v. Rafferty and Concepcion, B? Phi!. E1E' E1?
%1F1?&I
:<. +hat is the a!ou"t allowed as basic perso"al
e#e!ptio" 7
S3<<ESTE" ANS=ER8 There .ha!! be a!!o+ed a ba.ic per.o$a!
e2e#ptio$ a#o-$ti$g to City tho-.a$d pe.o. %P>0'000& or each
i$di0id-a! ta2payer.
4$ the ca.e o #arried i$di0id-a!. +here o$!y o$e o the .po-.e i.
deri0i$g gro.. i$co#e' o$!y .-ch .po-.e .ha!! be a!!o+ed the per.o$a!
e2e#ptio$. GSec. B> %A&' N4R( o 1FF@ a. a#e$ded by Rep. Act No. F>0ED
Sec. 2.@F %4& %1& %a&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10,
200?I
NOTES AN" (O**ENTS8 4t i. c!ear ro# Rep. Act No. F>0E that
each o the .po-.e. #ay c!ai# the P>0'000.00. Th-.' the tota! a#i!ia!
ba.ic per.o$a! e2e#ptio$ or .po-.e. i. P100'000.00.
C-rther#ore' the di.ti$ctio$. bet+ee$ the co$cept. o .i$g!e'
#arried a$d head o the a#i!y or p-rpo.e o a0ai!i$g o the ba.ic
per.o$a! e2e#ptio$ ha. a!ready bee$ e!i#i$ated by Rep. Act No. F>0E.
:<. +hat are the a!ou"ts of additio"al e#e!ptio"s 7
S3<<ESTE" ANS=ER8 A$ i$di0id-a!'
a. +hether .i$g!e or #arried'
b. .ha!! be a!!o+ed a$ additio$a! e2e#ptio$ o T+e$ty,Ci0e
Tho-.a$d Pe.o. %P2>'000.00&
c. or each 1-a!iied depe$de$t chi!d'
d. pro0ided that the tota! $-#ber o depe$de$t. or +hich
additio$a! e2e#ptio$. #ay be c!ai#ed
1& .ha!! $ot e2ceed o-r %E& depe$de$t.. G1
.t
par.' Sec.
2.@F %4& %1& %b&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10,
200?' arra$ge#e$t a$d $-#beri$g .-pp!iedD Sec. B> %B&' N4R( o 1FF@
a. a#e$ded by Rep. Act No. F>0EI
NOTES AN" (O**ENTS8
a. 4t i. c!ear that -$der the a#e$d#e$t' .i$g!e i$di0id-a!. #ay
$o+ c!ai# or the additio$a! e2e#ptio$.. C-rther#ore' the co$cept o
head o a a#i!y doe. $ot i$d app!icatio$ a$y#ore.
b. A depe$de$t #ea$.
a. a !egiti#ate' i!!egiti#ate or !ega!!y adopted chi!d
b. chie!y depe$de$t -po$ a$d !i0i$g +ith the ta2payer
c. i .-ch depe$de$t i.
1& $ot #ore tha$ t+e$ty,o$e %21& year. o age'
2& -$#arried a$d
B& $ot gai$-!!y e#p!oyed or
d. i .-ch depe$de$t'
1& regard!e.. o age
2& i. i$capab!e o .e!,.-pport
B& beca-.e o #e$ta! or phy.ica! deect. G2
$d
par.' Sec.
2.@F %4& %1& %b&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10,
200?' arra$ge#e$t a$d $-#beri$g .-pp!iedD Sec. B> %b&' N4R( o 1FF@'
a. a#e$ded by Rep. Act No. F>0EI
c. 4t i. to be $oted that -$der the N4R( o 1FF@' a. a#e$ded
by Rep. Act No. F>0E' o$!y 1-a!iied depe$de$t chi!dre$ are co$.idered
or additio$a! e2e#ptio$.. <ra$dpare$t.' pare$t.' a. +e!!' a. brother. or
.i.ter.' a$d other co!!atera! re!ati0e. are $ot 1-a!iied depe$de$t. to be
c!ai#ed a. additio$a! e2e#ptio$..
7o+e0er' i they are .e$ior citi;e$. they #ay 1-a!iy a. additio$a!
e2e#ptio$. -$der the Se$ior (iti;e$. )a+ b-t $ot -$der the N4R( o
1FF@' a. a#e$ded by Rep. Act No. F>0E.
Se$ior citi;e$ .ha!! be treated a. depe$de$t. pro0ided or i$ the
Natio$a! 4$ter$a! Re0e$-e (ode' a. a#e$ded' a$d a. .-ch' i$di0id-a!
ta2payer. cari$g or the#' be they re!ati0e. or $ot .ha!! be accorded the
pri0i!ege. gra$ted by the (ode i$.oar a. ha0i$g depe$de$t. are
co$cer$ed. G!a.t par. Sec. > %a&' Rep. Act No. @EB2' a. a#e$ded by Rep. Act
F2>@' The E2pa$ded Se$ior (iti;e$. Act o 200BI
:@. 0apital assets .ha!! reer to a!! rea! propertie. he!d by a
ta2payer' +hether or $ot co$$ected +ith hi. trade or b-.i$e..' a$d +hich
are $ot i$c!-ded a#o$g the rea! propertie. co$.idered a. ordi$ary a..et..
%Sec. 2.a' Re0. Reg.. No. @,200B&
The ter# capita! a..et. #ea$. property he!d by the ta2payer
%+hether or $ot co$$ected +ith hi. trade or b-.i$e..&' B3T "OES NOT
4N()3"E8
a. Stoc/ i$ trade o the ta2payer' or
b. Other property o a /i$d +hich +o-!d proper!y be i$c!-ded i$
the i$0e$tory o the ta2payer i o$ ha$d at the c!o.e o the ta2ab!e year' or
c. Property he!d by the ta2payer pri#ari!y or .a!e to c-.to#er. i$
the ordi$ary co-r.e o hi. trade or b-.i$e..' or
d. Property -.ed i$ the trade or b-.i$e..' o a character +hich i. .-b6ect to
the a!!o+a$ce or depreciatio$D or rea! property -.ed i$ the trade or
27
b-.i$e.. o the ta2payer. GSec. BF %A& %1&' N4R( o 1FF@' capita!i;ed +ord.'
$-#beri$g a$d arra$ge#e$t .-pp!iedD Sec. 2.a' Re0. Reg.. No. @,200BI

:A. E#a!ples of capital assets-
a. Stoc/ a$d .ec-ritie. he!d by ta2payer. other tha$ dea!er. i$
.ec-ritie.D
b. Ae+e!ry $ot -.ed or trade a$d b-.i$e..D
c. Re.ide$tia! ho-.e. a$d !a$d. o+$ed a$d -.ed a. .-chD
d. A-to#obi!e. $ot -.ed i$ trade a$d b-.i$e..D
e. Pai$ti$g.' .c-!pt-re.' .ta#p co!!ectio$.' ob6ect. o art. +hich
are $ot -.ed i$ trade or b-.i$e..D
. 4$herited !arge tract. o agric-!t-ra! !a$d +hich +ere
.-bdi0ided p-r.-a$t to the go0er$#e$t #a$date -$der !a$d reor#' the$
.o!d to te$a$t.. *Ro)as v. Court of (a) Appeals, etc. $0BEGF@, April BD,
?HDC#
g. Rea! property -.ed by a$ e2e#pt corporatio$ i$ it. e2e#pt
operatio$.' .-ch a. a corporatio$ i$c!-ded i$ the e$-#eratio$ o Sectio$ B0
o the (ode' .ha!! $ot be co$.idered -.ed or b-.i$e.. p-rpo.e.' a$d
thereore co$.idered a. capita! a..et. %!a.t .e$te$ce' B
rd
par.' Sec. B.b'
Re0. Reg.. No. @,200B&
h. Rea! property' +hether .i$g!e detached' to+$ho-.e' or
co$do#i$i-# -$it' $ot -.ed i$ trade or b-.i$e.. a. e0ide$ced by a
certiicatio$ ro# the Bara$gay (hair#a$ or ro# the head o
ad#i$i.tratio$' i$ ca.e o co$do#i$i-# -$it' to+$ho-.e or apart#e$t' a$d
a. 0a!idated ro# the e2i.ti$g a0ai!ab!e record. o the B-rea- o 4$ter$a!
Re0e$-e' o+$ed by a$ i$di0id-a! e$gaged i$ b-.i$e..' .ha!! be treated a.
capita! a..et. %!a.t par.' Sec. B.b.' Re0. Reg.. No. @,200B&
:C. Ordi"ary assets shall refer to all real properties
specifically e#cluded fro! the defi"itio" of capital assets5
$a#e!y8
a. Stoc/ i$ trade o a ta2payer or other rea! property o a /i$d +hich
+o-!d proper!y be i$c!-ded i$ the i$0e$tory o a ta2payer i o$ ha$d at the
c!o.e o the ta2ab!e yearD or
b. Rea! property he!d by the ta2payer pri#ari!y or .a!e to c-.to#er.
i$ the ordi$ary co-r.e o hi. trade or b-.i$e..D or
c. Rea! property -.ed i$ trade or b-.i$e.. %i.e. b-i!di$g. a$d9or
i#pro0e#e$t.&' o a character +hich i. .-b6ect to the a!!o+a$ce or
depreciatio$D or
d. Rea! property -.ed i$ trade or b-.i$e.. o the ta2payer. %Sec. 2.
b' Re0. Reg.. No. @,200B&
<&.. E#a!ples of ordi"ary assets he"ce "ot capital
assets-
a. The #achi$ery a$d e1-ip#e$t o a #a$-act-ri$g co$cer$
.-b6ect to depreciatio$D
b. The tractor.' trai!er. a$d tr-c/. o a ha-!i$g co#pa$yD
c. The co$do#i$i-# b-i!di$g o+$ed by a rea!ty co#pa$y the -$it.
o +hich are or re$t or or .a!eD
d. The +ood' pai$t' 0ar$i.h' $ai!.' g!-e' etc. +hich are the ra+
#ateria!. o a -r$it-re actoryD
e. 4$herited parce!. o !a$d o .-b.ta$tia! area. !ocated i$ the
heart o *etro *a$i!a' +hich +ere .-bdi0ided i$to .#a!!er !ot. the$ .o!d o$
i$.ta!!#e$t ba.i. ater i$trod-ci$g co#parati0e!y 0a!-ab!e i#pro0e#e$t.
$ot or the p-rpo.e o .i#p!y !i1-idati$g the e.tate b-t to #a/e the# #ore
.a!eab!e D the e#p!oy#e$t o a$ attor$ey,i$,act or the p-rpo.e o
de0e!opi$g' #a$agi$g' ad#i$i.teri$g a$d .e!!i$g the !ot.D .a!e. #ade +ith
re1-e$cy a$d co$ti$-ityD a$$-a! .a!e. i$co#e ro# the .a!e. +a.
co$.iderab!eD a$d the heir +a. $ot a .tra$ger to the rea! e.tate b-.i$e...
*(uazon, ,r. v. $ingad, EC SCRA ?AG#
. 4$herited agric-!t-ra! property i#pro0ed by i$trod-ctio$ o good
road.' co$crete g-tter.' drai$age a$d !ighti$g .y.te#. co$0ert. the
property to a$ ordi$ary a..et. The property or#. part o the .toc/ i$ trade
o the o+$er' he$ce a$ ordi$ary a..et. Thi. i. .o' a. the o+$er i. $o+
e$gaged i$ the b-.i$e.. o .-bdi0idi$g rea! e.tate. %Calasanz v.
Commissioner of Internal Revenue, 1EE S(RA at p. 6@2&
<'. Ta# treat!e"t of real properties that ha$e bee"
tra"sferred. Rea! propertie. c!a..iied a. capita! or ordi$ary a..et i$ the
ha$d. o the .e!!er9tra$.eror #ay cha$ge their character i$ the ha$d. o
the b-yer9tra$.eree. The c!a..iicatio$ o .-ch property i$ the ha$d. o
the b-yer9tra$.eree .ha!! be deter#i$ed i$ accorda$ce +ith the o!!o+i$g
r-!e.8
a. Rea! property tra$.erred thro-gh .-cce..io$ or do$atio$ to the
heir or do$ee +ho i. $ot e$gaged i$ the rea! e.tate b-.i$e.. +ith re.pect
to the rea! property i$herited or do$ated' a$d +ho doe. $ot .-b.e1-e$t!y
-.e .-ch property i$ trade or b-.i$e..' .ha!! be co$.idered a. a capita!
a..et i$ the ha$d. o the heir or do$ee.
b. Rea! property recei0ed a. di0ide$d by .toc/ho!der. +ho are $ot
e$gaged i$ the rea! e.tate b-.i$e.. a$d +ho $ot .-b.e1-e$t!y -.e .-ch
rea! property i$ trade or b-.i$e.. .ha!! be treated a. capita! a..et. i$ the
ha$d. o the recipie$t e0e$ i the corporatio$ +hich dec!ared the rea!
property di0ide$d i. e$gaged i$ rea! e.tate b-.i$e...
c. The rea! property recei0ed i$ a$ e2cha$ge .ha!! be treated a.
ordi$ary a..et i$ the ha$d. o the tra$.eree i$ the ca.e o a ta2,ree
e2cha$ge by ta2payer $ot e$gaged i$ rea! e.tate b-.i$e.. to a ta2payer
+ho i. e$gaged i$ rea! e.tate b-.i$e..' or to a ta2payer +ho' e0e$ i $ot
e$gaged i$ rea! e.tate b-.i$e..' +i!! -.e i$ b-.i$e.. the property recei0ed
i$ the e2cha$ge. %Sec. B..' Re0. Reg.. No. @,200B&
28
<%. The ta# is i!posed upo" capital 9ai"s presu!ed
to ha$e bee" realiBed fro! the sale5 e#cha"9e5 or other
dispositio" of real property located i" the Philippi"es5
classified as capital assets. GSec. 2E %"& %1S&' N4R( o 1FF@I Re0e$-e
Reg-!atio$. No. @,200B ha. dei$ed rea! property a. ha0i$g the .a#e
#ea$i$g attrib-ted to that ter# -$der Artic!e E1> o Rep-b!ic Act No. B?6'
other+i.e /$o+$ a. the 5Civil Code of the Philippines.> %Sec. 2.c' Re0. Reg..
No. @,200B&
<8. Tra"sactio"s co$ered by the presu!ed capital
9ai"s ta# o" real property-
a. .a!e'
b. e2cha$ge'
c. or other di.po.itio$' i$c!-di$g pacto de retro .a!e. a$d other
or#. o co$ditio$a! .a!e.. GSec. 2E %"& %1&' N4R( o 1FF@' $-#beri$g
a$d arra$ge#e$t .-pp!iedI
d. Sa!e' e2cha$ge' or other di.po.itio$ i$c!-de. ta/i$g by the
go0er$#e$t thro-gh co$de#$atio$ proceedi$g.. *+utierrez v. Court of (a)
Appeals, et al., 101 Phi!. @1B; +onzales v. Court of (a) Appeals, et al., 121 Phi!.
?61&
<:. *" case the !ort9a9or e#ercises his ri9ht of
rede!ptio" +ithi$ o$e %1& year ro# the i..-a$ce o the certiicate o
.a!e' i$ a orec!o.-re o #ortgage .a!e o rea! property' $o capita! gai$. ta2
.ha!! be i#po.ed beca-.e $o capita! gai$. ha. bee$ deri0ed by the
#ortgagor a$d $o .a!e or tra$.er o rea! property +a. rea!i;ed. GSec. B %1&'
Re0. Reg.. No. E,FFI
<<. *" case of "o"Hrede!ptio" of the property sold -po$ a
orec!o.-re o #ortgage .a!e' the pre.-#ed capita! gai$. ta2 .ha!! be
i#po.ed' ba.ed o$ the bid price o the highe.t bidder b-t o$!y -po$ the
e2piratio$ o the o$e year period o rede#ptio$ pro0ided or -$der Sec. 6 o
Act No. B1B>' a. a#e$ded by Act No. E11?' a$d .ha!! be paid +ithi$ thirty
%B0& day. ro# the e2piratio$ o the .aid o$e,year rede#ptio$ period. GSec.
B %2&' Re0. Reg.. No. E,FFI
<>. The basis for the fi"al presu!ed capital 9ai"s ta#
of si# per ce"t F>IG i. +hiche0er i. the higher o the
a. gro.. .e!!i$g price' or
b. the c-rre$t air #ar/et 0a!-e a. deter#i$ed be!o+8
1& the air #ar/et 0a!-e or rea! propertie. !ocated i$ each
;o$e or area a. deter#i$ed by the (o##i..io$er o 4$ter$a!
Re0e$-e ater co$.-!tatio$ +ith co#pete$t apprai.er. both ro#
the pri0ate a$d p-b!ic .ector.D or
2& the air #ar/et 0a!-e a. .ho+$ i$ the .ched-!e o
0a!-e. o the Pro0i$cia! a$d (ity A..e..or.. GSec. 2E %"& %1& i$
re!atio$ to Sec. 6 %E&' both o the N4R( o 1FF@I
4t doe. $ot #atter +hether there +a. a$ act-a! gai$ or !o..
beca-.e the ta2 i. a pre.-#ed capita! gai$. ta2. 4t i. the tra$.actio$ that
i. ta2ed $ot the gai$.
<@. Holdi"9 period "ot applied to the ta2atio$ o the pre.-#ed
capita! gai$. deri0ed ro# the .a!e o rea! property co$.idered a. capita!
a..et..
<A. The ta# liability5 of i"di$idual ta#payers F"ot
corporateG5 if a"y5 o" 9ai"s fro! sales or other dispositio"s of
real property5 classified as capital assets5 to the 9o$er"!e"t or
a$y o it. po!itica! .-bdi0i.io$. or age$cie. or to go0er$#e$t o+$ed or
co$tro!!ed corporatio$. .ha!! be deter#i$ed' at the optio$ o the ta2payer'
by i$c!-di$g the proceed. a. part o gro.. i$co#e to be .-b6ected to the
a!!o+ab!e ded-ctio$. a$d9or per.o$a! a$d additio$a! e2e#ptio$.' the$ to
the .ched-!ar ta2 GSec. 2E %"& %1&' i$ re!atio$ to Sec. 2E %A& %1&' both o the
N4R( o 1FF@I or the i$a! pre.-#ed capita! gai$. ta2 o .i2 perce$t %6H&.
GSec. 2E %"& %1& i$ re!atio$ to Sec. 6 %E&' both o the N4R( o 1FF@I
<C. The seller of the real property5 classified as a capital
asset5 pays the presu!ed capital 9ai"s ta# +hether8
a. a$ i$di0id-a! GSec. 2E %"& %1&' N4R( o 1FF@ID
1& (iti;e$' +hether re.ide$t or $ot GI"id.ID
2& Re.ide$t a!ie$ GI"id.ID
B& No$re.ide$t a!ie$ e$gaged i$ trade or b-.i$e.. i$ the
Phi!ippi$e. GSec. 2> %A& %B& i$ re!atio$ to Sec. 2E %"& %1&' both o
the N4R( o 1FF@ID
E& No$re.ide$t a!ie$ $ot e$gaged i$ trade or b-.i$e.. i$
the Phi!ippi$e. GSec. 2> %B& i$ re!atio$ to Sec. 2E %"& %1&' both o
the N4R( o 1FF@ID
b. a$ e.tate or tr-.t %I"id.&D
c. a do#e.tic corporatio$. GSec. 2@ %"& %>&' N4R( o 1FF@I

>&. E#cepted fro! the pay!e"t of the presu!ed
capital 9ai"s ta# are those presu!ed to ha$e bee" realiBed
fro! the dispositio" by "atural perso"s of their pri"cipal place
of reside"ce
a. the proceed. o +hich i. -!!y -ti!i;ed i$ ac1-iri$g or
co$.tr-cti$g a $e+ pri$cipa! re.ide$ceD
b. +ithi$ eightee$ %1?& ca!e$dar #o$th. ro# the date o .a!e or
di.po.itio$
29
c. the B4R (o##i..io$er .ha!! ha0e bee$ d-!y $otiied by the
ta2payer +ithi$ thirty %B0& day. ro# the date o .a!e or di.po.itio$ thro-gh
a pre.cribed ret-r$ o hi. i$te$tio$ to a0ai! o the ta2 e2e#ptio$D a$d
d. the .aid ta2 e2e#ptio$ ca$ o$!y be a0ai!ed o o$ce e0ery te$
%10& year.. GSec. 2E %"& %2&' N4R( o 1FF@I
>'. ;B0 was i"corporated i" 'C>' a"d e"9a9ed i"
co!!ercial ba"Ei"9 operatio"s si"ce 'CA@. O" ;ay %%5 'CA@5
it ceased operatio"s that year by reaso" of i"sol$e"cy a"d its
assets a"d liabilities were placed u"der the char9e of a
9o$er"!e"tHappoi"ted recei$er. O" /u"e %85 'CCC5 the BSP
authoriBed ;B0 to operate as a thrift ba"E.
*" %&&&5 *t filed its ta# retur" for the year 'CCC payi"9 the
a!ou"t of P88 !illio" co!puted i" accorda"ce with the
!i"i!u! corporate i"co!e ta# F;0*TG. *t sou9ht the B*R6s
ruli"9 o" whether it is e"titled to the four F:G year 9race period
for payi"9 o" the basis of ;0*T recEo"ed fro! 'CCC. B*R the"
ruled that cessatio" of busi"ess acti$ities as a result of bei"9
placed u"der i"$olu"tary recei$ership !ay be a" eco"o!ic
reaso" for suspe"di"9 the i!positio" of the ;0*T.
As a result of the ruli"9 ;B0 filed a" applicatio" for
refu"d of the P88 !illio". ue to the B*R6s i"actio"5 ;B0 filed
a petitio" for re$iew with the 0TA.
The 0TA de"ied the petitio" o" the 9rou"d that ;B0 is
"ot a "ewly or9a"iBed corporatio". *" a $olte facie the B*R "ow
!ai"tai"s that ;B0 should pay the ;0*T be9i""i"9 /a"uary '5
'CCA as it did "ot close its busi"ess operatio"s i" 'CA@ but
!erely suspe"ded the sa!e. E$e" if placed u"der
recei$ership5 the corporate e#iste"ce was "e$er affected.
Thus5 it falls u"der the cate9ory of a" e#isti"9 corporatio"
reco!!e"ci"9 its ba"Ei"9 operatio"s.
Should the refu"d be 9ra"ted 7
S3<<ESTE" ANS=ER8 Oe.. The *(4T .ha!! be i#po.ed
begi$$i$g i$ the o-rth ta2ab!e year i##ediate!y o!!o+i$g the year i$ +hich
the corporatio$ co##e$ced it. b-.i$e.. operatio$.. GSec. 2@ %E& %1&'
N4R( o 1FF@I
The date o co##e$ce#e$t o operatio$. o a thrit ba$/ i. the date
it +a. regi.tered +ith the SE( or the date +he$ the (ertiicate o A-thority
to Operate +a. i..-ed to it by the *o$etary Board' +hiche0er co#e. !ater.
%Sec. 6' Re0. Reg.. No. E,F>&
(!ear!y the$. *B( i. e$tit!ed to the grace period o o-r year. ro#
A-$e 2B' 1FFF +he$ it +a. a-thori;ed by the BSP to operate a. a thrit
ba$/ beore the *(4T .ho-!d be app!ied to it. %Manila Ban-ing Corporation
v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-.t 26' 2006&
NOTES AN" (O**ENTS8
a. The ;0*T a"d whe" should be i!posed a"d the four F:G
year 9race period. A #i$i#-# corporate i$co#e ta2 o t+o perce$t %2H&
o the gro.. i$co#e a. o the e$d o the ta2ab!e year' a. dei$ed herei$' i.
hereby i#po.ed o$ a corporatio$ ta2ab!e -$der thi. Tit!e' begi$$i$g o$ the
o-rth ta2ab!e year i##ediate!y o!!o+i$g the year i$ +hich .-ch
corporatio$ co##e$ced it. b-.i$e.. operatio$.' +he$ the #i$i#-#
corporate i$co#e ta2 i. greater tha$ the ta2 co#p-ted -$der S-b.ectio$
%A& o thi. .ectio$ or the ta2ab!e year. GSec. 2@ %E& %1&' N4R( o 1FF@I
b. Period whe" a corporatio" beco!es sub?ect to the ;0*T.
%>& Speciic r-!e. or deter#i$i$g the period +he$ a corporatio$ beco#e.
.-b6ect to the *(4T %#i$i#-# corporate i$co#e ta2& ,
Cor p-rpo.e. o the *(4T' the ta2ab!e year i$ +hich b-.i$e..
operatio$. co##e$ced .ha!! be the year i$ +hich the do#e.tic corporatio$
regi.tered +ith the B-rea- o 4$ter$a! Re0e$-e %B4R&.
Cir#. +hich +ere regi.tered +ith B4R i$ 1FFE a$d ear!ier year. .ha!!
be co0ered by the *(4T begi$$i$g Aa$-ary 1' 1FF?. 2 2 2 %Re0. Reg..
No. F,F?&
Manila Ban-ing Corporation v. Commissioner of Internal Revenue,
<. R. No. 16?11?' A-g-.t 26' 2006 did $ot app!y Re0. Reg.. No. F,F?
beca-.e Re0. Reg.. No. E,F> .peciica!!y reer. to thrit ba$/..&
c. Purpose of the four F:G year 9race period. The i$te$t o
(o$gre.. re!ati0e to the *(4T i. to gra$t a o-r %EB& J year .-.pe$.io$ o
ta2 pay#e$t to $e+!y orga$i;ed corporatio$.. (orporatio$. .ti!! .tarti$g
their b-.i$e.. operatio$. ha0e to .tabi!i;e their 0e$t-re i$ order to obtai$ a
.tro$gho!d i$ the i$d-.try. 4t doe. $ot co#e a. a .-rpri.e the$ +he$ #a$y
co#pa$ie. reported !o..e. i$ their i$itia! year. o operatio$..
Th-.' i$ order to a!!o+ $e+ corporatio$. to gro+ a$d de0e!op at the
i$itia! .tage. o their operatio$.' the !a+#a/i$g body .a+ the $eed to
pro0ide a grace period o o-r year. ro# their regi.tratio$ beore they pay
their #i$i#-# corporate i$co#e ta2. %Manila Ban-ing Corporation v.
Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-.t 26' 2006&
ESTATE TA)ES
'. *" deter!i"i"9 the 9ross estate of a decede"t5
are his properties abroad to be i"cluded5 a"d !ore
particularly5 what co"stitutes 9ross estate 7
S3<<ESTE" ANS=ER8 Oe.' i the decede$t i. a Ci!ipi$o citi;e$
or a re.ide$t a!ie$.
The gro.. e.tate o a Ci!ipi$o citi;e$ or a re.ide$t a!ie$ co#pri.e.
a!! hi. rea! property' +here0er .it-atedD a!! hi. per.o$a! property' ta$gib!e'
30
i$ta$gib!e or #i2ed' +here0er .it-ated' to the e2te$t o hi. i$tere.t
e2i.ti$g therei$ at the ti#e o hi. death.
The gro.. e.tate o a $o$,re.ide$t a!ie$ co#pri.e. a!! hi. rea!
property' .it-ated i$ the Phi!ippi$e.D a!! hi. per.o$a! property' ta$gib!e'
i$ta$gib!e or #i2ed' .it-ated i$ the Phi!ippi$e.' to the e2te$t o hi. i$tere.t
e2i.ti$g therei$ at the ti#e o hi. death.
%. +illia! S!ith5 a" A!erica" citiBe"5 was a
per!a"e"t reside"t of the Philippi"es. He died i" Sa"
1ra"cisco5 0alifor"ia. He left '&5&&& shares of Sa" ;i9uel
0orporatio"5 a co"do!i"iu! u"it at the Twi" Towers
Buildi"9 at Pasi95 ;etro ;a"ila a"d a house a"d lot i"
;ia!i5 1lorida.
+hat assets shall be i"cluded i" the Estate Ta# Retur" to
be filed with the B*R 7
S3<<ESTE" ANS=ER8 A!! o the a..et. .ho-!d be i$c!-ded i$ the
E.tate Ta2 Ret-r$ to be i!ed +ith the B4R.
S#ith' a$ A#erica$ citi;e$ a$d a per#a$e$t re.ide$t o the
Phi!ippi$e. i. co$.idered' or Phi!ippi$e e.tate ta2 p-rpo.e.' a re.ide$t
a!ie$. (o$.e1-e$t!y' the a..et. to be i$c!-ded i$ the E.tate Ta2 Ret-r$
to be i!ed +ith the B4R .ho-!d be a!! property' rea! or per.o$a!' ta$gib!e'
i$ta$gib!e or #i2ed' +here0er .it-ated' to the e2te$t o the i$tere.t that
S#ith ha. at the ti#e o hi. death. Th-.' a!! o the propertie. e$-#erated
i$ the prob!e# irre.pecti0e o +here they are .it-ated are i$c!-dib!e i$ the
gro.. e.tate o S#ith.
8. Proceeds of life i"sura"ce i"cludible i" a
decede"t6s 9ross estate.
a. The decede$t ta/e. the i$.-ra$ce po!icy o$ hi. o+$ !ie
1& The a#o-$t. are recei0ab!e by
a& the decede$t:. e.tate'
b& hi. e2ec-tor' or
c& ad#i$i.trator irre.pecti0e o +hether or $ot the
i$.-red retai$ed the po+er o re0ocatio$' OR
2& The a#o-$t. are recei0ab!e by a$y be$eiciary
de.ig$ated i$ the po!icy o i$.-ra$ce a. re0ocab!e be$eiciary.
GSec. ?> %E&' N4R( o 1FF@I
b. O$e' other tha$ the decede$t ta/e. the i$.-ra$ce po!icy o$
the !ie o the decede$t
1& The a#o-$t. are recei0ab!e by
a& the decede$t:. e.tate'
b& hi. e2ec-tor' or
c& ad#i$i.trator
2& irre.pecti0e o +hether or $ot the i$.-red retai$ed the
po+er o re0ocatio$.
:. Proceeds of life i"sura"ce NOT i"cluded i" a
decede"t6s 9ross estate.
a. The decede$t ta/e. the i$.-ra$ce po!icy o$ hi. o+$ !ie' a$d
b. the proceed. are recei0ab!e by a be$eiciary de.ig$ated a.
irre0ocab!e. GSec. ?> %E&' N4R( o 1FF@&
NOTES AN" (O**ENTS8 The be$eiciary #-.t $ot be the decede$t:.
e.tate' e2ec-tor or ad#i$i.trator' beca-.e the proceed. are i$c!-dib!e a. part o
gro.. e.tate +hether or $ot the decede$t retai$ed the po+er o re0ocatio$.
%I"id.&
c. =here the i$.-ra$ce +a. NOT ta/e$ by the decede$t -po$
hi. o+$ !ie a$d the be$eiciary i. $ot the decede$t:. e.tate' hi. e2ec-tor
or ad#i$i.trator.
:. *te!s deductible fro! the 9ross estate of a reside"t
or "o"reside"t 1ilipi"o decede"t or reside"t alie" decede"t-
a. E2pe$.e.' !o..e.' c!ai#.' i$debted$e.. a$d ta2e.D
b. Property pre0io-.!y ta2edD
c. Tra$.er. or p-b!ic -.eD
d. The Ca#i!y 7o#e -p to a 0a!-e $ot e2ceedi$g P1 #i!!io$D
e. Sta$dard ded-ctio$ o P1 #i!!io$D
. *edica! e2pe$.e. $ot e2ceedi$g P>00'000.00D
g. A#o-$t o e2e#pt retire#e$t recei0ed by the heir. -$der
Rep. Act *o. EF1@D
h. Net .hare o the .-r0i0i$g .po-.e i$ the co$6-ga! part$er.hip.
<. There is "o tra"sfer i" co"te!platio" of death if
there is "o showi"9 that the tra$.eror retai$ed or hi. !ie or or a$y
period +hich doe. $ot i$ act e$d beore hi. death8 %1& the po..e..io$ or
e$6oy#e$t o' or the right to the i$co#e ro# the property' or %2& the right'
either a!o$e or i$ co$6-$ctio$ +ith a$y per.o$' to de.ig$ate the per.o$ +ho
.ha!! po..e.. or e$6oy the property or the i$co#e therero#. GSec. ?> %B&'
N4R( o 1FF@I
>. 3a"ishi"9 deductio" Fdeductio" for property
pre$iously ta#edG5 defi"ed. The ded-ctio$ a!!o+ed ro# the gro..
e.tate. o citi;e$.' re.ide$t a!ie$. a$d $o$re.ide$t e.tate. or propertie.
+hich +ere pre0io-.!y .-b6ect to do$or:. or e.tate ta2e.. The ded-ctio$
i. ca!!ed a 0a$i.hi$g ded-ctio$ beca-.e the ded-ctio$ a!!o+ed di#i$i.he.
o0er a period o i0e %>& year..
4t i. a!.o /$o+$ a. a ded-ctio$ or property pre0io-.!y ta2ed.
31
@. 3a"ishi"9 deductio" Fproperty pre$iously ta#edG
allowed as a deductio" fro! the 9ross estate of a 1ilipi"o
citiBe"5 whether reside"t or "ot5 of a reside"t alie" decede"t5
or of a "o"reside"t alie" decede"t.
a. A$ a#o-$t e1-a! to the 0a!-e .peciied be!o+ o
b. A$y property or#i$g a part o the gro.. e.tate .it-ated i$
the Phi!ippi$e.
c O a$y per.o$ +ho died +ithi$ i0e year. prior to the
death o the decede$t' or tra$.erred to the decede$t by git +ithi$ i0e
year. prior to hi. death'
d. =here .-ch property ca$ be ide$tiied a. ha0i$g bee$
recei0ed by the decede$t ro# the do$or by git' or ro# .-ch prior
decede$t by git' be1-e.t' de0i.e' or i$herita$ce' or
e. =hich ca$ be ide$tiied a. ha0i$g bee$ ac1-ired i$
e2cha$ge or property .o recei0ed8
100H o the 0a!-e i the prior decede$t died +ithi$ o$e year prior to
the death o the decede$t' or i the property +a. tra$.erred to hi# by git
+ithi$ the .a#e period prior to hi. deathD
?0H o the 0a!-e i the prior decede$t died #ore tha$ o$e year b-t
$ot #ore tha$ t+o year. prior to the death o the decede$t' or i the
property +a. tra$.erred to hi# by git +ithi$ the .a#e period prior to hi.
deathD
60H o the 0a!-e i the prior decede$t died #ore tha$ t+o year. b-t
$ot #ore tha$ three year. prior to the death o the decede$t' or i the
property +a. tra$.erred to hi# by git +ithi$ the .a#e period prior to hi.
deathD
E0H o the 0a!-e i the prior decede$t died #ore tha$ three year.
b-t $ot #ore tha$ o-r year. prior to the death o the decede$t' or i the
property +a. tra$.erred to hi# by git +ithi$ the .a#e period prior to hi.
deathD a$d
20H o the 0a!-e i the prior decede$t died #ore tha$ o-r year.
b-t $ot #ore tha$ i0e year. prior to the death o the decede$t' or i the
property +a. tra$.erred to hi# by git +ithi$ the .a#e period prior to hi.
death. GSec. ?6 %A& %2& a$d %B& %2&' N4R( o 1FF@' $-#beri$g' arra$ge#e$t a$d
-$der!i$i$g .-pp!iedI
A. The appro$al of the court sitti"9 i" probate5 or as a
settle!e"t tribu"al o$er the estate of the deceased is "ot a
!a"datory reDuire!e"t for the collectio" of the estate. The
probate co-rt i. deter#i$i$g i..-e. +hich are $ot agai$.t the property o
the decede$t' or a c!ai# agai$.t the e.tate a. .-ch' b-t i. agai$.t the
i$tere.t or property right +hich the heir' !egatee' de0i.ee' etc. ha. i$ the
property or#er!y he!d by the decede$t.
The $otice. o !e0y +ere reg-!ar!y i..-ed +ithi$ the pre.cripti0e
period.
The ta2 a..e..#e$t ha0i$g beco#e i$a!' e2ec-tory a$d
e$orceab!e' the .a#e ca$ $o !o$ger be co$te.ted by #ea$. o a di.g-i.ed
prote.t. *Marcos, II v. Court of Appeals, et al.' 2@B S(RA E@&
ONOR6S TA)ES
'. +hat is the do"or6s ta# rate if the do"ee is a
stra"9er 7
S3<<ESTE" ANS=ER8 =he$ the do$ee or be$eiciary i. a
.tra$ger' the ta2 payab!e by the do$or .ha!! be B0H o the $et git..
%. 1or purposes of the do"or6s ta# who is a
stra"9er 7
S3<<ESTE" ANS=ER8 A .tra$ger i. a i. per.o$ +ho i. $ot a8
a. Brother' .i.ter %+hether by +ho!e or ha!,b!ood&' .po-.e'
a$ce.tor a$d !i$ea! de.ce$da$tD or
b. Re!ati0e by co$.a$g-i$ity i$ the co!!atera! !i$e +ithi$ the o-rth
degree o re!atio$.hip. GSec. FF %B&' N4R( o 1FF@I
NOTES AN" (O**ENTS8 A!! re!ati0e. by ai$ity' irre.pecti0e o
the degree' are co$.idered a. .tra$ger..
8. +hat is the ta# base for do"atio"s 7
S3<<ESTE" ANS=ER8 The $et git. #ade d-ri$g the ca!e$dar
year. GSec. FF %A&' N4R( o 1FF@I
:. 1or purposes of the do"or6s ta#5 what is !ea"t by
"et 9ifts 7
S3<<ESTE" ANS=ER8 The $et eco$o#ic be$eit ro# the
tra$.er that accr-e. to the do$ee. Accordi$g!y' i a #ortgaged property
i. tra$.erred a. a git' b-t i#po.i$g -po$ the do$ee the ob!igatio$ to pay
the #ortgage !iabi!ity' the$ the $et git i. #ea.-red by ded-cti$g ro# the
air #ar/et 0a!-e o the property the a#o-$t o the #ortgage a..-#ed.
%!a.t par.' Sec. 11' Re0. Reg..No.2,200B&
<. How are 9ifts of perso"al property to be $alued for
do"or6s ta# purposes 7
S3<<ESTE" ANS=ER8 The #ar/et 0a!-e o the per.o$a!
property at the ti#e o the git .ha!! be co$.idered the a#o-$t o the git.
%Sec. 102' N4R( o 1FF@&
>. +hat is the $aluatio" of do"ated real property for
do"or6s ta# purposes 7
S3<<ESTE" ANS=ER8 The rea! property .ha!! be apprai.ed at it.
air #ar/et 0a!-e a. o the ti#e o the git.
32
7o+e0er' the apprai.ed 0a!-e o the rea! property at the ti#e o the
git .ha!! be +hiche0er i. the higher o8
a. the air #ar/et 0a!-e a. deter#i$ed by the (o##i..io$er o
4$ter$a! Re0e$-e %;o$a! 0a!-atio$& or
b. the air #ar/et 0a!-e a. .ho+$ i$ the .ched-!e o 0a!-e. i2ed
by the Pro0i$cia! a$d (ity A..e..or.. GSec. 102' i$ re!atio$ to Sec. ?? %B& both
o the N4R( o 1FF@I
@. A died lea$i"9 as his o"ly heirs5 his sur$i$i"9
spouse B5 a"d three !i"or childre"5 )5 2 a"d L. Si"ce B does
"ot wa"t to participate i" the distributio" of the estate5 she
re"ou"ced her hereditary share i" the estate.
a. *s the re"u"ciatio" sub?ect to do"or6s ta# 7
E#plai".
S3<<ESTE" ANS=ER8 No. The ge$era! re$-$ciatio$ by a$ heir'
i$c!-di$g the .-r0i0i$g .po-.e' a. i$ the ca.e B' o her .hare i$ the
hereditary e.tate !et by the decede$t i. $ot .-b6ect to do$or:. ta2. %E
th
par.' Sec. 11' Re0. Reg.. No. 2,200B&
Thi. i. .o beca-.e the ge$era! re$-$ciatio$ by B +a. $ot
.peciica!!y a$d categorica!!y do$e i$ a0or o ide$tiied heir9. to the
e2c!-.io$ or di.ad0a$tage o the other co,heir. i$ the hereditary e.tate.
b. Supposi"9 that i"stead of a 9e"eral re"u"ciatio"5
B re"ou"ced her hereditary share i" A6s estate to ) who is a
special child5 would your a"swer be the sa!e 7 E#plai".
S3<<ESTE" ANS=ER8 *y a$.+er +o-!d be diere$t. The
re$-$ciatio$ i$ a0or o L +o-!d be .-b6ect to do$or:. ta2.
Thi. i. .o beca-.e the re$-$ciatio$ +a. .peciica!!y a$d
categorica!!y do$e i$ a0or o L a$d ide$tiied heir to the e2c!-.io$ or
di.ad0a$tage o O a$d T' the other co,heir. i$ the hereditary e.tate. %E
th
par.' Sec. 11' Re0. Reg.. No. 2,200B&
A. ,i$e so!e do"atio"s that are e#e!pt fro!
do"or6s ta#.
S3<<ESTE" ANS=ER8
a. The ir.t P100'000.00 $et do$atio$ d-ri$g a ca!e$dar year i.
e2e#pt ro# do$or:. ta2 GSec. FF %A&' N4R( o 1FF@I #ade by a re.ide$t or
$o$ re.ide$tD
b. The do$atio$ by a re.ide$t or $o$,re.ide$t o a pri;e to a$
ath!ete i$ a$ i$ter$atio$a! .port. to-r$a#e$t he!d abroad a$d .a$ctio$ed by
the $atio$a! .port. a..ociatio$ i. e2e#pt ro# do$or:. ta2 %Sec. 1' Rep.
Act No. @>EF&
c. Po!itica! co$trib-tio$. #ade by a re.ide$t or $o$,re.ide$t
i$di0id-a! i regi.tered +ith the (O*E)E( irre.pecti0e o +hether do$ated
to a po!itica! party or i$di0id-a!.
7o+e0er' the (orporatio$ (ode prohibit. corporatio$. ro# #a/i$g
po!itica! co$trib-tio$.. %(orp. (ode' Tit!e 4V' Sec. B6.F&
d. "o+rie. or git. #ade o$ acco-$t o #arriage a$d beore
it. ce!ebratio$ or +ithi$ o$e year thereater by re.ide$t. +ho are pare$t.
to each o their !egiti#ate' recog$i;ed $at-ra!' or adopted chi!dre$ to the
e2te$t o the ir.t te$ tho-.a$d pe.o. %P10'000.00&D
e. <it. #ade by re.ide$t. or $o$,re.ide$t. to or or the -.e o
the Natio$a! <o0er$#e$t or a$y e$tity created by a$y o it. age$cie.
+hich i. $ot co$d-cted or proit' or to a$y po!itica! .-bdi0i.io$. o the
.aid <o0er$#e$tD
. <it. #ade by re.ide$t. or $o$ re.ide$t. i$ a0or o a$
ed-catio$a! a$d9or charitab!e' re!igio-.' c-!t-ra! or .ocia! +e!are
corporatio$' i$.tit-tio$' o-$datio$' tr-.t or phi!a$thropic orga$i;atio$ or
re.earch i$.tit-tio$ or orga$i;atio$8 Pro0ided' ho+e0er' That $ot #ore
tha$ thirty perce$t %B0H& o .aid git. .ha!! be -.ed by .-ch do$ee or
ad#i$i.tratio$ p-rpo.e.. GSec. 101 %A&' N4R( o 1FF@' $-#beri$g a$d
arra$ge#e$t .-pp!iedI
g. <it. #ade by $o$,re.ide$t a!ie$. o-t.ide o the Phi!ippi$e. to
Phi!ippi$e re.ide$t. are e2e#pt ro# do$or:. ta2e. beca-.e ta2atio$ i.
ba.ica!!y territoria!. The tra$.actio$' +hich .ho-!d ha0e bee$ .-b6ect to ta2
+a. #ade by $o$,re.ide$t a!ie$. a$d too/ p!ace o-t.ide o the Phi!ippi$e..
C. +hat is the co"cept of do"atio" or 9ift splitti"9 7
*llustrate.
S3<<ESTE" ANS=ER8 "o$atio$ or git .p!itti$g i. .preadi$g the
git o0er $-#ero-. ca!e$dar year. i$ order to a0ai! o !o+er do$or:. ta2e..
4$ 200? )eo$ +a. thi$/i$g o do$ati$g a P200'000.00 to *i/!o.' hi.
ir.t co-.i$. The P200'000.00 i. the tota!ity o the $et git. or 200?. 4
he do$ated the P200'000.00 i$ 200? the ir.t P100'000 +o-!d be
e2e#pt a$d the re#ai$i$g P>0'000.00 +o-!d be .-b6ect to do$or:. ta2
4 )eo$ .pread. the P200'000 do$atio$ o0er t+o %2& ca!e$dar
year.' do$ati$g P100'000.00 o$ "ece#ber B0' 200? a$d the re#ai$i$g
P100'000.00 o$ Aa$-ary 1' 200F the tra$.actio$ +o-!d be e2e#pt ro#
do$or:. ta2. Thi. i. .o e0e$ i the do$atio$ i. .eparated o$!y by t+o day.
beca-.e the ba.i. i. the ca!e$dar year. )eo$ +o-!d be e$6oyi$g the
e2e#ptio$ or the ir.t P100'000.00 $et git. or each ca!e$dar year.
'&. A5 who is e"9a9ed i" the car buy a"d sell
busi"ess sold to B P@ !illio" /a9uar for o"ly P: !illio". The
proper 3AT o" the sale was paid. *f you are the B*R e#a!i"er
assi9"ed to re$iew the sale5 would you issue a ta# assess!e"t
o" the tra"sactio" 7 E#plai" your a"swer briefly.
S3<<ESTE" ANS=ER8 "o$or:. ta2e. +o-!d be d-e o$ the
i$.-icie$cy o co$.ideratio$.
33
=here property' other tha$ rea! property that ha. bee$ .-b6ected
to the i$a! capita! gai$. ta2' i. tra$.erred or !e.. tha$ a$ ade1-ate a$d
-!! co$.ideratio$ i$ #o$ey or #o$ey:. +orth' the$ the a#o-$t by +hich
the air #ar/et 0a!-e o the property at the ti#e o the e2ec-tio$ o the
(o$tract to Se!! or e2ec-tio$ o the "eed o Sa!e +hich i. $ot preceded
by a (o$tract to Se!! e2ceeded the 0a!-e o the agreed or act-a!
co$.ideratio$ or .e!!i$g price .ha!! be dee#ed a git' a$d .ha!! be i$c!-ded
i$ co#p-ti$g the a#o-$t o git. #ade d-ri$g the ca!e$dar year. %>
th
par.'
Sec. 11' Re0. Reg.. No. 2,200B&
3A(.EHAE TA)ES F3ATG
+ARN*N, MMM Appro2i#ate!y 10H o the tota! 1-e.tio$. a./ed i$
the Bar E2a#i$atio$ are .o-rced ro# VAT a$d it. co$cept.. Thi. area i.
probab!y the #o.t diic-!t area to oreca.t beca-.e there are $o .tati.tica!!y
percei0ed patter$.. The a-thor ha. retai$ed the Star. Sy.te# or VAT.
(o$.ideri$g the !i#ited period o ti#e' the reader i. ad0i.ed to oc-. o$
area. #ar/ed +ith .tar. a$d 6-.t bro+.e the -$#ar/ed area..
'. 3alueHadded ta# F3ATG i. a ta2 +hich i. i#po.ed
o$!y o$ the i$crea.e i$ the +orth' #erit or i#porta$ce o good.'
propertie. or .er0ice.' a$d $ot o$ the tota! 0a!-e o the good. or .er0ice.
bei$g .o!d or re$dered.
%. Nature of 3AT. VAT i. a$ i$direct ta2 that #ay be
.hited or pa..ed o$ to the b-yer' tra$.eree or !e..ee o the good.'
propertie. or .er0ice.. A. .-ch' it .ho-!d be -$der.tood $ot i$ the
co$te2t o the per.o$ or e$tity that i. pri#ari!y' direct!y !iab!e or it.
pay#e$t' b-t i$ ter#. o it. $at-re a. a ta2 o$ co$.-#ptio$.
GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R.
No. 1>B?66' Cebr-ary 11' 200> citi$g 0ario-. a-thoritie.U
VAT i. a perce$tage ta2 i#po.ed o$ a$y per.o$ +hether or $ot a
ra$chi.e gra$tee' +ho i$ the co-r.e o trade or b-.i$e..' .e!!.' barter.'
e2cha$ge.' !ea.e.' good. or propertie.' re$der. .er0ice.. 4t i. a!.o
!e0ied o$ e0ery i#portatio$ o good. +hether or $ot i$ the co-r.e o trade
or b-.i$e... The ta2 ba.e o the VAT i. !i#ited o$!y to the 0a!-e added
to .-ch good.' propertie.' or .er0ice. by the .e!!er' tra$.eror or !e..or.
C-rther' the VAT i. a$ i$direct ta2 a$d ca$ be pa..ed o$ to the b-yer.
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'
October 6' 200?&
8. Effect of e#e!ptio"s fro! 3AT which is a"
i"direct ta#. 4 a .pecia! !a+ #ere!y e2e#pt. a party a. a .e!!er ro# it.
direct !iabi!ity or pay#e$t o the VAT' b-t doe. $ot re!ie0e the .a#e party
a. a p-rcha.er ro# it. i$direct b-rde$ o the VAT .hited to it by it. VAT,
regi.tered .-pp!ier.' the p-rcha.e tra$.actio$ i. $ot e2e#pt.
REASON8 The VAT i. a ta2 o$ co$.-#ptio$' the a#o-$t o +hich
#ay be .hited or pa..ed o$ by the .e!!er to the p-rcha.er o the good.'
propertie. or .er0ice.. GCommissioner of Internal Revenue v. Seagate
(echnology *Philippines#, <. R. No. 1>B?66' Cebr-ary 11' 200>&
:. *llustratio" of effects of e#e!ptio"s fro! 3AT
which is a" i"direct ta#. A VAT e2e#pt .e!!er .e!!. to a $o$,VAT
e2e#pt p-rcha.er. The p-rcha.er i. .-b6ect to VAT beca-.e the VAT i.
#ere!y added a. part o the p-rcha.e price a$d $ot a. a ta2 beca-.e the
b-rde$ i. #ere!y .hited. The .e!!er i. .ti!! e2e#pt beca-.e it co-!d pa..
o$ the b-rde$ o payi$g the ta2 to the p-rcha.er.
<. The 3AT is a ta# o" co"su!ptio". ;ea"i"9 of
co"su!ptio" as used u"der the 3AT syste!. (o$.-#ptio$ i.
Qthe -.e o a thi$g i$ a +ay that thereby e2ha-.t. it.Q
App!ied to .er0ice.' the ter# #ea$. the peror#a$ce or
Q.-cce..-! co#p!etio$ o a co$tract-a! d-ty' -.-a!!y re.-!ti$g i$ the
peror#erP. re!ea.e ro# a$y pa.t or -t-re !iabi!ity 2 2 2Q 3$!i/e good.'
.er0ice. ca$$ot be phy.ica!!y -.ed i$ or bo-$d or a .peciic p!ace +he$
their de.ti$atio$ i. deter#i$ed. 4$.tead' there ca$ o$!y be a
Qpredeter#i$ed e$d o a co-r.eQ +he$ deter#i$i$g the .er0ice Q!ocatio$
or po.itio$ 2 2 2 or !ega! p-rpo.e..Q GCommissioner of Internal Revenue v.
Placer %ome (echnical Services *Phils.#, Inc. <. R. No. 16EB6>' A-$e ?' 200@I
>. *llustratio" of the !ea"i"9 of co"su!ptio" as used
u"der the 3AT syste!. Cor e2a#p!e the .er0ice. re$dered by a !oca!
ir# to it. oreig$ c!ie$t are peror#ed or .-cce..-!!y co#p!eted -po$ it.
.e$di$g to a oreig$ c!ie$t the drat. a$d bi!!. it ha. gathered ro# .er0ice
e.tab!i.h#e$t. here. 4t. .er0ice.' ha0i$g bee$ peror#ed i$ the
Phi!ippi$e.' are thereore a!.o co$.-#ed i$ the Phi!ippi$e.. S-ch
aci!itatio$ .er0ice ha. $o phy.ica! e2i.te$ce' yet ta/e. p!ace -po$
re$ditio$' a$d thereore -po$ co$.-#ptio$' i$ the Phi!ippi$e..
GCommissioner of Internal Revenue v. Placer %ome (echnical Services *Phils.#,
Inc. <. R. No. 16EB6>' A-$e ?' 200@I
@. +ho are liable for the $alueHadded ta#.
a. A$y per.o$ +ho' i$ the co-r.e o hi. trade or b-.i$e..'
1& Se!!.' barter.' e2cha$ge. or !ea.e. good. or
propertie.' or
2& re$der. .er0ice.' a$d
b. a$y per.o$ +ho i#port. good. 222
7o+e0er' i$ the ca.e o i#portatio$ o ta2ab!e good.' the i#porter'
+hether a$ i$di0id-a! or corporatio$ a$d +hether or $ot #ade i$ the
34
co-r.e o hi. trade or b-.i$e..' .ha!! be !iab!e to VAT 222. %Re0. Reg..
No. 16,200>'Sec. E.10>,1' paraphra.i$g .-pp!ied&
A. 3arious 3AT !ethods a"d syste!s.
a. 0ost deductio" !ethod. Thi. i. a .i$g!e,.tage ta2 +hich
i. payab!e o$!y by the origi$a! .e!!er.. %A"a-ada +uro Party $ist *etc.# v.
&rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e.&
Thi. +a. .-b.e1-e$t!y #odiied a$d a #i2t-re o co.t ded-ctio$ #ethod
a$d ta2 credit #ethod +a. -.ed to deter#i$e the 0a!-e,added ta2
payab!e. %I"id.&
b. Ta# credit !ethod. Thi. #ethod re!ie. o$ i$0oice.' a$
e$tity ca$ credit agai$.t or .-btract ro# the VAT charged o$ it. .a!e. or
o-tp-t. the VAT paid o$ it. p-rcha.e.' i$p-t. a$d i#port..
GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#,
<. R. No. 1>B?66' Cebr-ary 11' 200>I
4 at the e$d o a ta2ab!e period' the o-tp-t ta2e. charged by a
.e!!er are e1-a! to the i$p-t ta2e. pa..ed o$ by the .-pp!ier.' $o
pay#e$t i. re1-ired. 4t i. +he$ the o-tp-t ta2e. e2ceed the i$p-t ta2e.
that the e2ce.. ha. to be paid.
4 ho+e0er' the i$p-t ta2e. e2ceed the o-tp-t ta2e.' the e2ce..
.ha!! be carried o0er to the .-cceedi$g 1-arter or 1-arter.. Sho-!d the
i$p-t ta2e. re.-!t ro# ;ero,rated or eecti0e!y ;ero,rated tra$.actio$. or
ro# ac1-i.itio$ o capita! good.' a$y e2ce.. o0er the o-tp-t ta2e. .ha!!
i$.tead be re-$ded to the ta2payer or credited agai$.t other i$ter$a!
re0e$-e ta2e.. %I"id.&
C. How the 3AT is i!posed o" the i"crease i" worth5
!erit or i!pro$e!e"t of the 9oods or ser$ices. The VAT
-ti!i;e. the co$cept o the o-tp-t a$d i$p-t ta2e..
O-tp-t VAT !e.. 4$p-t VAT V VAT d-e o$ the i$crea.e i$ +orth'
#erit or i#pro0e#e$t the good. or .er0ice..
'&. The ri9ht to credit the i"put ta# be li!ited by
le9islatio" because it is a !ere creatio" of law. Prior to the
e$act#e$t o #-!ti,.tage .a!e. ta2atio$' the .a!e. ta2e. paid at e0ery
!e0e! o di.trib-tio$ are $ot reco0erab!e ro# the ta2e. payab!e. =ith the
ad0e$t o E2ec-ti0e Order No. 2@B i#po.i$g a 10H #-!ti,.tage ta2 o$ a!!
.a!e.' it +a. o$!y the$ that the crediti$g o the i$p-t ta2 paid o$ p-rcha.e
or i#portatio$ o good. a$d .er0ice. by VAT,regi.tered per.o$. agai$.t
the o-tp-t ta2 +a. e.tab!i.hed. Thi. co$ti$-ed +ith the E2pa$ded VAT
)a+ %R.A. No. @@16&' a$d The Ta2 Reor# Act o 1FF@ %R.A. No. ?E2E&.
The right to credit i$p-t ta2 a. agai$.t the o-tp-t ta2 i. c!ear!y a pri0i!ege
created by !a+' a pri0i!ege that a!.o the !a+ ca$ !i#it. 4t .ho-!d be
.tre..ed that a per.o$ ha. $o 0e.ted right i$ .tat-tory pri0i!ege..
*ABA:A%A +uro Party $ist, etc. et al. vs. &rmita, <.R. No. 16?20@' October 1>'
200>' a$d co#pa$io$ ca.e.' o$ the #otio$ or reco$.ideratio$&
''. Output ta# i. the 0a!-e,added ta2 d-e o$ the .a!e or
!ea.e or ta2ab!e good.' propertie. or .er0ice. by a$y VAT,regi.tered
per.o$.
'%. *"put ta# i. the 0a!-e,added ta2 d-e o$ or paid by a
VAT,regi.tered per.o$ o$ i#portatio$ o good or !oca! p-rcha.e. o
good. or .er0ice.' i$c!-di$g !ea.e or -.e o propertie.' i$ the co-r.e o
hi. trade or b-.i$e... %Re0. Reg.. No. E.110,1' 1
.t
par.&
'8. *"cluded i" the i"put ta#.
a. the tra$.itio$a! i$p-t ta2 a$d
b. the pre.-#pti0e i$p-t ta2 222.
4t i$c!-de.
c. i$p-t ta2e. +hich ca$ be direct!y attrib-ted to tra$.actio$.
.-b6ect to the VAT p!-. a ratab!e portio$ o a$y i$p-t ta2 +hich ca$$ot be
direct!y attrib-ted to either the ta2ab!e or e2e#pt acti0ity. %Re0. Reg..
No. E.110,1' 1
.t
par.' 2
$d
.e$te$ce'. A$d 2
$d
par.' paraphra.i$g'
arra$ge#e$t a$d $-#beri$g .-pp!ied &
':. 0o"cept of tra"sitio"al i"put ta# credits o"
be9i""i"9 i"$e"tories. Ta2payer. +ho beco#e VAT,regi.tered
per.o$. -po$ e2ceedi$g the #i$i#-# t-r$o0er o P1'>00'000.00 i$ a$y
12,#o$th period' or +ho 0o!-$tari!y regi.ter e0e$ i their t-r$o0er doe.
$ot e2ceed P1'>00'000.00 %e2cept ra$chi.e gra$tee. o radio a$d
te!e0i.io$ broadca.ti$g +ho.e thre.ho!d i. P10'000'000.00& .ha!! be
e$tit!ed to a tra$.itio$a! i$p-t ta2 o$ the i$0e$tory o$ ha$d a. o the
eecti0ity o their VAT regi.tratio$' o$ the o!!o+i$g8
a. good. p-rcha.ed or re.a!e i$ their pre.e$t co$ditio$D
b. #ateria!. p-rcha.ed or -rther proce..i$g' b-t +hich ha0e
$ot yet -$dergo$e proce..i$gD
c. good. +hich ha0e bee$ #a$-act-red by the ta2payerD
d. good. i$ proce.. or .a!eD or
e. good. a$d .-pp!ie. or -.e i$ the co-r.e o the ta2payer:.
trade or b-.i$e.. a. a VAT,regi.tered per.o$. GRe0. Reg.. No. 16,200>'
Sec.E.111,1' %a&' 1
.t
par.' arra$ge#e$t a$d $-#beri$g .-pp!iedI
'<. 0o"cept of presu!pti$e i"put ta# credits. Per.o$.
or ir#. e$gaged i$ the proce..i$g o .ardi$e.' #ac/ere!' a$d #i!/' a$d
i$ #a$-act-ri$g rei$ed .-gar' coo/i$g oi! a$d pac/ed $ood!e,ba.ed
i$.ta$t #ea!.' .ha!! be a!!o+ed a pre.-#pti0e i$p-t ta2' creditab!e agai$.t
the o-tp-t ta2' e1-i0a!e$t to o-r perce$t %EH& o the gro.. 0a!-e i$
#o$ey o their p-rcha.e. o pri#ary agric-!t-ra! prod-ct. +hich are -.ed
a. i$p-t. to their prod-ctio$.
35
A. -.ed i$ thi. paragraph' the ter# proce..i$g .ha!! #ea$
pa.te-ri;atio$' ca$$i$g a$d acti0itie. +hich thro-gh phy.ica! or che#ica!
proce.. a!ter the e2terior te2t-re or or# or i$$er .-b.ta$ce o a prod-ct
i$ .-ch a #a$$er a. to prepare it or .pecia! -.e to +hich it co-!d $ot
ha0e bee$ p-t i$ it. origi$a! or# or co$ditio$. GRe0. Reg.. No. 16,200>'
Sec.E.111,1' %b&I
'>. The 3AT re9istratio" fee does NOT $iolate
reli9ious freedo!. The VAT regi.tratio$ ee i#po.ed o$ $o$,VAT
e$terpri.e. +hich i$c!-de. a#o$g other.' re!igio-. .ect. +hich .e!!. a$d
di.trib-te. re!igio-. !iterat-re i. $ot 0io!ati0e o re!igio-. reedo#'
a!tho-gh a i2ed a#o-$t i. $ot i#po.ed or the e2erci.e o a pri0i!ege b-t
o$!y or the p-rpo.e o derayi$g part o the co.t o regi.tratio$.
The regi.tratio$ ee i. th-. #ore o a$ ad#i$i.trati0e ee' o$e $ot
i#po.ed o$ the e2erci.e o a pri0i!ege' #-ch !e.. a co$.tit-tio$a! right.
*(olentino v. Secretary of /inance, et al., and companion cases, 2B> S(RA 6B0&
'@. *"terpretatio" of the ter! *" the 0ourse of Trade
or Busi"ess as used i" the 3AT syste!. The ter# Qdoi$g
b-.i$e..Q or co-r.e o b-.i$e.. co$0ey. the idea o b-.i$e.. bei$g
do$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e. 4t doe. $ot i$c!-de i.o!ated
tra$.actio$.. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., et
al., <. R. No. 1E6F?E' A-!y 2?' 2006&
'A. Pursua"t to a 9o$er"!e"t pro9ra! of
pri$atiBatio"5 N05 a 3ATHre9istered e"tity created for the
purpose of selli"9 real property5 decided to sell to pri$ate
e"terprise all of its shares i" its whollyHow"ed subsidiary the
Natio"al ;ari"e 0orporatio" FN;0G. The N0 decided to sell
i" o"e lot its N;0 shares a"d fi$e F<G of its ships5 which are
85@&& +T Twee"HecEer5 N4loecE"erN type $essels. The
$essels were co"structed for the N0 betwee" 'CA' a"d
'CA:5 the" i"itially leased to (uBo" Ste$edori"9 0o!pa"y5
also its whollyHow"ed subsidiary. SubseDue"tly5 the $essels
were tra"sferred a"d leased5 o" a bareboat basis5 to the N;0.
The N;0 shares a"d the $essels were offered for public
biddi"9. A!o"9 the stipulated ter!s a"d co"ditio"s for the
public auctio" was that the wi""i"9 bidder was to pay Na
$alue added ta# of '&I o" the $alue of the $essels.N
;a9saysay (i"es5 *"c.5 offered to buy the shares a"d the
$essels for P'>A5&&&5&&&.&&. The bid was !ade by
;a9saysay (i"es5 purportedly for a "ew co!pa"y still to be
for!ed co!posed of itself5 Baliwa9 Na$i9atio"5 *"c.5 a"d 1*;
(i!ited of the ;arde" ,roup based i" Ho"9Eo"9 . The bid
was appro$ed by the 0o!!ittee o" Pri$atiBatio"5 a"d a
Notice of Award was issued to ;a9saysay (i"es.
*s the sale sub?ect to 3AT 7
S3<<ESTE" ANS=ER8 No. The ter# Qcarryi$g o$ b-.i$e..Q
doe. $ot #ea$ the peror#a$ce o a .i$g!e di.co$$ected act' b-t #ea$.
co$d-cti$g' pro.ec-ti$g a$d co$ti$-i$g b-.i$e.. by peror#i$g
progre..i0e!y a!! the act. $or#a!!y i$cide$t thereoD +hi!e Qdoi"9
busi"essQ co$0ey. the idea o b-.i$e.. bei$g do$e' $ot ro# ti#e to
ti#e' b-t a!! the ti#e. Q0ourse of busi"essQ i. +hat i. -.-a!!y do$e i$ the
#a$age#e$t o trade or b-.i$e... Q(o-r.e o b-.i$e..Q or Qdoi$g
b-.i$e..Q co$$ote. reg-!arity o acti0ity. 4$ the i$.ta$t ca.e' the .a!e +a.
a$ i.o!ated tra$.actio$.
The .a!e +hich +a. i$0o!-$tary a$d #ade p-r.-a$t to the dec!ared
po!icy o <o0er$#e$t or pri0ati;atio$ co-!d $o !o$ger be repeated or
carried o$ +ith reg-!arity. 4t .ho-!d be e#pha.i;ed that the $or#a! VAT,
regi.tered acti0ity o N"( i. !ea.i$g per.o$a! property. Thi.
i$di$g i. co$ir#ed by the Re0i.ed (harter o the N"( +hich bear. $o
i$dicatio$ that the N"( +a. created or the pri#ary p-rpo.e o .e!!i$g
rea! property. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., et
al., <. R. No. 1E6F?E' A-!y 2?' 2006&
'C. ."der the 3alue Added Ta# F3ATG5 the ta# is
i!posed o" sales5 barter5 or e#cha"9e or 9oods a"d ser$ices.
The 3AT is also i!posed o" certai" tra"sactio"s dee!ed
sales which i"clude-
a. Tra$.er' -.e or co$.-#ptio$ $ot i$ the co-r.e o
b-.i$e.. or propertie. origi$a!!y i$te$ded or .a!e or or -.e i$ the co-r.e
o b-.i$e... 222
b. "i.trib-tio$ or tra$.er to8
1& Shareho!der. or i$0e.tor. a. .hare i$ the proit. o the
VAT, regi.tered per.o$D 222 or
2& (reditor. i$ pay#e$t o debt or ob!igatio$
c. (o$.ig$#e$t o good. i act-a! .a!e i. $ot #ade +ithi$
.i2ty %60& day. o!!o+i$g the date .-ch good. +ere co$.ig$ed.
(o$.ig$ed good. ret-r$ed by the co$.ig$ee +ithi$ the 60,day period are
$ot dee#ed .o!d.
d. Retire#e$t ro# or ce..atio$ o b-.i$e..' +ith re.pect
to a!! good. o$ ha$d'
1& +hether capita! good.' .toc/,i$,trade' .-pp!ie. or
#ateria!. a. o the date o .-ch retire#e$t' or ce..atio$'
2& +hether or $ot the b-.i$e.. i. co$ti$-ed by the $e+
o+$er or .-cce..or. 222 GRe0. Reg.. No. 16,200>' Sec. E.106,@'
paraphra.i$g' arra$ge#e$t a$d $-#beri$g .-pp!iedI
36
%&. Tra"sactio"s co"sidered retire!e"t or cessatio"
of busi"ess dee!ed sale sub?ect to 3AT.
a. (ha$ge o o+$er.hip o the b-.i$e... There i. cha$ge i$
the o+$er.hip o the b-.i$e.. +here a .i$g!e proprietor.hip i$corporate.D
or
1& the proprietor o a .i$g!e proprietor.hip .e!!. hi. e$tire
b-.i$e...
b. "i..o!-tio$ o a part$er.hip a$d creatio$ o a $e+
part$er.hip +hich ta/e. o0er the b-.i$e... GRe0. Reg.. No. 16,200>'
Sec. E.106,@ %a&' %E& paraphra.i$g' arra$ge#e$t a$d $-#beri$g .-pp!iedI
%'. Sale of or lease of real properties sub?ect to 3AT.
Sa!e o rea! propertie. pri#ari!y or .a!e to c-.to#er. or he!d or !ea.e i$
the ordi$ary co-r.e o trade or b-.i$e.. o the .e!!er .ha!! be .-b6ect to
VAT. %Re0. Reg.. No. 16,200>' Sec. E.106,B' 1
.t
par.&
Th-.' capita! tra$.actio$. o i$di0id-a!. are $ot .-b6ect to VAT.
O$!y rea! e.tate dea!er. are .-b6ect to VAT.
%%. O" Septe!ber :5 %&&C5 )2L5 *"c.5 a do!estic
corporatio" e"9a9ed i" the real estate busi"ess5 sold a
buildi"9 for P'&5&&&5&&&.&&. *s the sale sub?ect to the $alueH
added ta# F3ATG7 *f so5 how !uch7 E#plai".
S3<<ESTE" ANS=ER8 Oe.. 12H o$ the gro.. .e!!i$g price
beca-.e the .a!e +a. #ade i$ the ordi$ary co-r.e o trade o b-.i$e.. o
L' a do#e.tic corporatio$ e$gaged i$ the rea! e.tate b-.i$e...
%8. The followi"9 sales of real properties are
e#e!pt fro! 3AT5 "a!ely-
a. Sa!e o rea! propertie. $ot pri#ari!y he!d or .a!e to
c-.to#er. or he!d or !ea.e i$ the ordi$ary co-r.e o trade or b-.i$e..D
b. Sa!e o rea! propertie. -ti!i;ed or !o+,co.t ho-.i$g a.
dei$ed by RA No. @2@F' other+i.e /$o+$ a. the 3rba$ a$d
"e0e!op#e$t 7o-.i$g Act o 1FF2 a$d other re!ated !a+.' .-ch a. RA
No. @?B> a$d RA No. ?@6B.
222 222 222
c. Sa!e o rea! propertie. -ti!i;ed or .ocia!i;ed ho-.i$g a.
dei$ed -$der RA No. @2@F' a$d other re!ated !a+. +herei$ the price
cei!i$g per -$it i. P22>'000.00 or a. #ay ro# ti#e to ti#e be deter#i$ed
by the 73"(( a$d the NE"A a$d other re!ated !a+..
222 222 222
d. Sa!e o re.ide$tia! !ot 0a!-ed at O$e *i!!io$ Ci0e 7-$dred
Tho-.a$d Pe.o. %P1'>00'000.00& a$d be!o+' or ho-.e W !ot a$d other
re.ide$tia! d+e!!i$g. 0a!-ed at T+o *i!!io$ <i0e 7-$dred Tho-.a$d
Pe.o. %P2'>00'000.00& a$d be!o+ +here the i$.tr-#e$t o
.a!e9tra$.er9di.po.itio$ +a. e2ec-ted o$ or ater No0e#ber 1' 200>'
pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year.
thereater' the a#o-$t. .tated herei$ .ha!! be ad6-.ted to it. pre.e$t
0a!-e -.i$g the (o$.-#er Price 4$de2' a. p-b!i.hed by the Natio$a!
Stati.tic. Oice %NSO&D pro0ided' -rther' that .-ch ad6-.t#e$t .ha!! be
p-b!i.hed thro-gh re0e$-e reg-!atio$. to be i..-ed $ot !ater tha$ *arch
B1 o each year.
4 t+o or #ore ad6ace$t re.ide$tia! !ot. are .o!d or di.po.ed i$ a0or
o o$e b-yer' or the p-rpo.e o -ti!i;i$g the !ot. a. o$e re.ide$tia! !ot' the
.a!e .ha!! be e2e#pt ro# VAT o$!y i the aggregate 0a!-e o the !ot. do
$ot e2ceed P1'>00'000.00. Ad6ace$t re.ide$tia! !ot.' a!tho-gh co0ered by
.eparate tit!e. a$d9or .eparate ta2 dec!aratio$.' +he$ .o!d or di.po.ed o
to o$e a$d the .a#e b-yer' +hether co0ered by o$e or .eparate "eed o
(o$0eya$ce' .ha!! be pre.-#ed a. a .a!e o o$e re.ide$tia! !ot. GRe0.
Reg.. No. E.10F,1 %B&' %p&' paraphra.i$g a$d $-#beri$g .-pp!iedI
%:. 3AT o" ser$ices a"d lease of properties.
a. There .ha!! be !e0ied' a..e..ed' a$d co!!ected'
b. a 0a!-e,added ta2 e1-i0a!e$t to t+e!0e perce$t %12H& o
gro.. receipt.
c. deri0ed ro# the .a!e or e2cha$ge o .er0ice.'
1& i$c!-di$g the -.e or !ea.e o propertie.. GN4R( o
1FF@' Sec. 10? %A&' a. a#e$ded by R.A. No. FBB@' arra$ge#e$t a$d
$-#beri$g .-pp!iedI
%<. Sale or e#cha"9e of ser$ices5 defi"ed. The ter#
.a!e or e2cha$ge o .er0ice. #ea$. the peror#a$ce o a!! /i$d. o
.er0ice. i$ the Phi!ippi$e. or other. or a ee' re#-$eratio$ or
co$.ideratio$' +hether i$ /i$d or i$ ca.h' i$c!-di$g tho.e peror#ed or
re$dered by the o!!o+i$g8
a. co$.tr-ctio$ a$d .er0ice co$tractor.D
b. .toc/' rea! e.tate' co##ercia!' c-.to#. a$d i##igratio$
bro/er.D
c. !e..or. o property' +hether per.o$a! or rea!D
d. per.o$. e$gaged i$ +areho-.i$g .er0ice.
e. !e..or. or di.trib-tor. o ci$e#atographic i!#.D
. per.o$. e$gaged i$ #i!!i$g' proce..i$g'
#a$-act-ri$g or repac/i$g good. or other.D
g. proprietor.' operator. or /eeper. o
hote!.' #ote!.' re.t,ho-.e.' pe$.io$ ho-.e.' i$$.' re.ort.D theater.' a$d
#o0ie ho-.e.D h. proprietor. or operator. o
re.ta-ra$t.' rere.h#e$t par!or.' cae. a$d other eati$g p!ace.' i$c!-di$g
c!-b. a$d caterer.D i. dea!er. i$ .ec-ritie.D
6. !e$di$g i$0e.tor.D
37
/. tra$.portatio$
co$tractor. o$ their tra$.port o good. or cargoe.' i$c!-di$g per.o$. +ho
tra$.port good. or cargoe. or hire a$d other do#e.tic co##o$ carrier.
by !a$d re!ati0e to their tra$.port o good. or cargoe.D
!. co##o$ carrier. by
air a$d .ea re!ati0e to their tra$.port o pa..e$ger.' good. or cargoe.
ro# o$e p!ace i$ the Phi!ippi$e. to a$other p!ace i$ the Phi!ippi$e.D
#. .a!e. o e!ectricity by
ge$eratio$ co#pa$ie.' tra$.#i..io$' a$d9or di.trib-tio$ co#pa$ie.D
$. ra$chi.e gra$tee. o
e!ectric -ti!itie.' te!epho$e a$d te!egraph' radio a$d te!e0i.io$
broadca.ti$g a$d a!! other ra$chi.e gra$tee. e2cept ra$chi.e gra$tee.
o radio a$d9or te!e0i.io$ broadca.ti$g +ho.e a$$-a! gro.. receipt. o the
precedi$g year do $ot e2ceed Te$ *i!!io$ Pe.o. %P10'000'000.00&' a$d
ra$chi.e gra$tee. o ga. a$d +ater -ti!itie.D
o. $o$,!ie i$.-ra$ce
co#pa$ie. %e2cept their crop i$.-ra$ce.&' i$c!-di$g .-rety' ide!ity'
i$de#$ity a$d bo$di$g co#pa$ie.D a$d
p.
.i#i!ar .er0ice. regard!e.. o +hether or $ot the peror#a$ce thereo
ca!!. or the e2erci.e or -.e o the phy.ica! or #e$ta! ac-!tie.. GN4R( o
1FF@' Sec. 10? %A&' a. a#e$ded by R.A. No. FBB@D Re0. Reg.. No. 16,200>'
Sec. E'10?,2' 1
.t
par.' arra$ge#e$t a$d $-#beri$g .-pp!iedI
%>. Also i"cluded i" the phrase sale or e#cha"9e of
ser$ices.
a. The !ea.e or the -.e o or the right or pri0i!ege to -.e a$y
copyright' pate$t' de.ig$ or #ode!' p!a$' .ecret or#-!a or proce..'
good+i!!' trade#ar/' trade bra$d or other !i/e property or rightD
b. The !ea.e or the -.e o' or the right to -.e a$y i$d-.tria!'
co##ercia! or .cie$tiic e1-ip#e$tD
c. The .-pp!y o .cie$tiic' tech$ica!' i$d-.tria! or co##ercia!
/$o+!edge or i$or#atio$D
d. The .-pp!y o a$y a..i.ta$ce that i. a$ci!!ary a$d
.-b.idiary to a$d i. -r$i.hed a. a #ea$. o e$ab!i$g the app!icatio$ or
e$6oy#e$t o a$y .-ch property' or right a. i. #e$tio$ed i$ .-bparagraph
%2& hereo or a$y .-ch /$o+!edge or i$or#atio$ a. i. #e$tio$ed i$
.-bparagraph %B& hereoD or
e. The .-pp!y o .er0ice. by a $o$,re.ide$t per.o$ or hi.
e#p!oyee i$ co$$ectio$ +ith the -.e o property or right. be!o$gi$g to' or
the i$.ta!!atio$ or operatio$ o a$y bra$d' #achi$ery or other apparat-.
p-rcha.ed ro# .-ch $o$,re.ide$t per.o$D
. The .-pp!y o tech$ica! ad0ice' a..i.ta$ce or .er0ice.
re$dered i$ co$$ectio$ +ith tech$ica! #a$age#e$t or ad#i$i.tratio$ o
a$y .cie$tiic' i$d-.tria! or co##ercia! -$derta/i$g' 0e$t-re' pro6ect o
.che#eD
g. The !ea.e o #otio$ pict-re i!#.' i!# tape. a$d di.c.D
h. The !ea.e or the -.e o or the right to -.e radio'
te!e0i.io$' .ate!!ite tra$.#i..io$ a$d cab!e te!e0i.io$ ti#e. %Re0. Reg.. No.
16,200>' Sec. E.10?,2' 2
$d
par.&
%@. LeroHrated Sales of ,oods or Properties. A
;ero,rated .a!e o good. or propertie. by a .a!e by a VAT,regi.tered
per.o$ i. a ta2ab!e tra$.actio$ or VAT p-rpo.e. b-t the .a!e doe. $ot
re.-!t i$ a$y o-tp-t ta2.
7o+e0er' the i$p-t ta2 o$ the p-rcha.e. o good.' propertie. or
.er0ice. re!ated to .-ch ;ero,rated .a!e .ha!! be a0ai!ab!e a. ta2 credit or
re-$d i$ accorda$ce +ith Re0. Reg-!atio$. No. 16,200>. %Re0. Reg.. No.
16,200>' 1
.t
par.&
%A. 0o"cept of 3AT BeroHrati"9. The ta2 rate i. .et
at ;ero. =he$ app!ied to the ta2 ba.e' .-ch rate ob0io-.!y re.-!t. i$ $o
ta2 chargeab!e agai$.t the p-rcha.er. The .e!!er o .-ch tra$.actio$.
charge. $o o-tp-t ta2' b-t ca$ c!ai# a re-$d or a ta2 credit certiicate or
the VAT pre0io-.!y charged by .-pp!ier.. GCommissioner of Internal
Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>B?66'
Cebr-ary 11' 200>I
3$der a ;ero,rati$g .che#e' the .a!e or e2cha$ge o a partic-!ar
.er0ice i. co#p!ete!y reed ro# the VAT' beca-.e the .e!!er i. e$tit!ed to
reco0er' by +ay o a re-$d or a. a$ i$p-t ta2 credit' the ta2 that i.
i$c!-ded i$ the co.t o p-rcha.e. attrib-tab!e to the .a!e or e2cha$ge.
The ta2 paid or +ithhe!d i. $ot ded-cted ro# the ta2 ba.e.
%Commissioner, of Internal Revenue v. American &)press International, Inc.
*Philippine Branch#, <. R. No. 1>260F' A-$e 2F' 200> citi$g 0ario-. ca.e.&
%C. Situs of ta#atio" of BeroHrated 3AT ser$ices such
as facilitati"9 the collectio" of recei$ables fro! credit card
!e!bers situated i" the Philippi"es a"d pay!e"t to ser$ice
establish!e"ts i" the Philippi"es. The p!ace +here the .er0ice i.
re$dered deter#i$e. the 6-ri.dictio$ to i#po.e the VAT
Peror#ed i$ the Phi!ippi$e.' the .er0ice i. $ece..ari!y .-b6ect to
it. 6-ri.dictio$ or the State $ece..ari!y ha. to ha0e a .-b.ta$tia!
co$$ectio$ to it i$ order to e$orce a ;ero rate. The p!ace o pay#e$t i.
i##ateria! #-ch !e.. i. the p!ace +here the o-tp-t o the .er0ice +i!! be
-rther or -!ti#ate!y -.ed.
Thi. i. .o beca-.e the !a+ $either #a/e. a 1-a!iicatio$ $or add. a
co$ditio$ i$ deter#i$i$g the ta2 .it-. o a ;ero,rated .er0ice.
%Commissioner of Internal Revenue v. American &)press International, Inc.
*Philipppine Branch#, <. R. No. 1>260F' A-$e 2F' 200>&
38
8&. esti"atio" pri"ciple u"der the 3AT Syste!.
A. a ge$era! r-!e' the VAT .y.te# -.e. the de.ti$atio$ pri$cip!e a. a
ba.i. or the 6-ri.dictio$a! reach o the ta2.
<ood. a$d .er0ice. are ta2ed o$!y i$ the co-$try +here they are
co$.-#ed. Th-.' e2port. are ;ero,rated' +hi!e i#port. are ta2ed.
Thi. i. a!.o /$o+$ a. the (ro.. Border "octri$e.
8'. E#ceptio" to the desti"atio" pri"ciple. The
!a+ c!ear!y pro0ide. or a$ e2ceptio$ to the de.ti$atio$ pri$cip!eD that i.'
or a ;ero perce$t VAT rate or .er0ice. that are peror#ed i$ the
Phi!ippi$e.' Qpaid or i$ acceptab!e oreig$ c-rre$cy a$d acco-$ted or i$
accorda$ce +ith the r-!e. a$d reg-!atio$. o the GBSPI.Q
8%. Ratio"ale for BeroHrati"9 of e#ports. The
Phi!ippi$e VAT .y.te# adhere. to the (ro.. Border "octri$e' accordi$g
to +hich' $o VAT .ha!! be i#po.ed to or# part o the co.t o good.
de.ti$ed or co$.-#ptio$ o-t.ide o the territoria! border o the ta2i$g
a-thority. GCommissioner of Internal Revenue v. (oshi"a Information
&2uipment *Phils.#, Inc., <. R.. No. 1>01>E' A-g-.t F' 200>I The (ro..
Border "octri$e i. a!.o /$o+$ a. the de.ti$atio$ pri$cip!e.
7e$ce' act-a! or co$.tr-cti0e e2port o
good. a$d .er0ice. ro# the Phi!ippi$e. to a oreig$ co-$try #-.t be
;ero,rated or VATD +hi!e' tho.e de.ti$ed or -.e or co$.-#ptio$ +ithi$
the Phi!ippi$e. .ha!! be i#po.ed the t+e!0e perce$t %12H& VAT.
88. LeroHrated sale disti"9uished fro! e#e!pt
tra"sactio"s-
a. A ;ero,rated .a!e i. a ta2ab!e tra$.actio$ b-t doe. $ot re.-!t
i$ a$ o-tp-t ta2 =74)E a$ e2e#pt tra$.actio$ i. $ot .-b6ect to the o-tp-t
ta2.
b. The i$p-t ta2 o$ the p-rcha.e. o a VAT regi.tered per.o$
+ho ha. ;ero,rated .a!e. #ay be a!!o+ed a. ta2 credit. or re-$ded
=74)E the .e!!er i$ a$ e2e#pt tra$.actio$ i. $ot e$tit!ed to a$y i$p-t ta2
o$ hi. p-rcha.e. de.pite the i..-a$ce o a VAT i$0oice or receipt.
c. Per.o$. e$gaged i$ tra$.actio$. +hich are ;ero rated bei$g
.-b6ect to VAT are re1-ired to regi.ter =74)E regi.tratio$ i. optio$a! or
VAT,e2e#pt per.o$..
8:. LeroHrated sales by 3ATHre9istered perso"s.
The o!!o+i$g .a!e. by VAT,regi.tered per.o$. .ha!! be .-b6ect to ;ero
perce$t %0H& rate8
a. E2port .a!e.D
b. (o$.idered e2port .a!e. -$der E2ec-ti0e Order No. 22ED
c. Coreig$ c-rre$cy de$o#i$ated .a!eD a$d
d. Sa!e. to per.o$. or e$titie. dee#ed ta2,e2e#pt -$der
.pecia! !a+ or i$ter$atio$a! agree#e$t. %Re0. Reg.. No. 16,200>' Sec.
E.106,>' 2
$d
par.' paraphra.i$g .-pp!ied&
8<. Sale of 9old to the 0e"tral Ba"E co"sidered as
e#port sales. A. e2port .a!e.' the .a!e o go!d to the (e$tra! Ba$/ i.
;ero,rated' he$ce' $o ta2 i. chargeab!e to it a. p-rcha.er. Tero rati$g i.
pri#ari!y i$te$ded to be e$6oyed by the .e!!er' +hich charge. $o o-tp-t
VAT b-t ca$ c!ai# a re-$d o or a ta2 credit certiicate or the i$p-t VAT
pre0io-.!y charged to it by .-pp!ier.. %Commissioner of Internal Revenue v.
Manila Mining Corporation, <.R. No. 1>B20E' A-g-.t B1' 200>&
8>. Sales to ecoBo"e5 such as PELA5 co"sidered
e#portHsale. Notab!y' +hi!e a$ eco;o$e i. geographica!!y +ithi$ the
Phi!ippi$e.' it i. dee#ed a .eparate c-.to#. territory a$d i. regarded i$
!a+ a. oreig$ .oi!. Sa!e. by .-pp!ier. ro# o-t.ide the border. o the
eco;o$e to thi. .eparate c-.to#. territory are dee#ed a. e2port. a$d
treated a. e2port .a!e.. The.e .a!e. are ;ero,rated or .-b6ect to a ta2
rate o ;ero perce$t. %Commissioner of Internal Revenue v. Se-isui ,ushi
Philippines, Inc., <. R. No. 1EF6@1' A-!y 21' 2006 citi$g 0ario-. a-thoritie.&
8@. EcoBo"e5 defi"ed. A$ E(OTONE or a Specia!
Eco$o#ic To$e ha. bee$ de.cribed a. J GSIe!ected area. +ith high!y
de0e!oped or +hich ha0e the pote$tia! to be de0e!oped i$to agro,
i$d-.tria!' i$d-.tria!' to-ri.t' recreatio$a!' co##ercia!' ba$/i$g'
i$0e.t#e$t a$d i$a$cia! ce$ter. +ho.e #ete. a$d bo-$d. are i2ed or
de!i#ited by Pre.ide$tia! Proc!a#atio$.. A$ E(OTONE #ay co$tai$ a$y
or a!! o the o!!o+i$g8 i$d-.tria! e.tate. %4E.&' e2port proce..i$g ;o$e.
%EPT.&' ree trade ;o$e. a$d to-ri.t9recreatio$a! ce$ter.. The $atio$a!
territory o the Phi!ippi$e. o-t.ide o the proc!ai#ed border. o the
E(OTONE .ha!! be reerred to a. the (-.to#. Territory. GCommissioner of
Internal Revenue v. (oshi"a Information &2uipment *Phils.#, Inc., <. R.. No.
1>01>E' A-g-.t F' 200>I
8A. LeroHrated sale of ser$ice5 defi"ed. A ;ero,
rated .a!e o .er0ice %by a VAT,regi.tered per.o$& i. a ta2ab!e tra$.actio$
or VAT p-rpo.e.' b-t .ha!! $ot re.-!t i$ a$y o-tp-t ta2. 7o+e0er' the
i$p-t ta2 o$ p-rcha.e. o good.' propertie. or .er0ice. re!ated to .-ch
;ero,rated .a!e .ha!! be a0ai!ab!e a. ta2 credit or re-$d i$ accorda$ce
+ith Rev. Regs. !o. ?D0BGGE. GRe0. Reg.. No. 16,200>' Sec. Sec. E.10?,>
%a&' +ord. i$ ita!ic. .-pp!ied&
8C. Ser$ice perfor!ed by A!erica" E#press i"
facilitati"9 the collectio" of recei$ables fro! credit card
39
!e!bers situated i" the Philippi"es a"d pay!e"t to ser$ice
establish!e"ts i" the Philippi"es i" behalf of its Ho"9H4o"9
based clie"t is sub?ect to 3AT but BeroHrated. Thi. i. .o beca-.e
it #eet. a!! the re1-ire#e$t. or VAT i#po.itio$' a. o!!o+.8
a. 4t reg-!ar!y re$der. i$ the Phi!ippi$e. the .er0ice o
aci!itati$g the co!!ectio$ a$d pay#e$t o recei0ab!e. be!o$gi$g to a
oreig$ co#pa$y that i. a c!ear!y .eparate a$d di.ti$ct e$tity.
b. S-ch .er0ice i. co##ercia! i$ $at-reD carried o$ o0er a
.-.tai$ed period o ti#eD o$ a .ig$iica$t .ca!e +ith a rea.o$ab!e degree
o re1-e$cyD a$d $ot at ra$do#' ort-ito-.' or atte$-ated.
c. Cor thi. .er0ice' it dei$ite!y recei0e. co$.ideratio$ i$ oreig$
c-rre$cy that i. acco-$ted or i$ co$or#ity +ith !a+.
d. 4t i. $ot a$ e$tity e2e#pt -$der a$y o o-r !a+. or
i$ter$atio$a! agree#e$t.. %Commissioner, of Internal Revenue v. American
&)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' A-$e 2F'
200>&
:&. +hile the ser$ice perfor!ed by A!erica" E#press
is sub?ect to 3AT it is BeroHrated5 a"d B*R Re$e"ue
Re9ulatio"s that alter the le9al reDuire!e"ts for BeroHrati"9
are ultra vires a"d i"$alid. The VAT .y.te# -.e. the de.ti$atio$
pri$cip!e +hich po.it. that the good. a$d .er0ice. are ta2ed o$!y i$ the
co-$try +here they are co$.-#ed'
7o+e0er' the !a+ it.e! pro0ide. or c!ear e2ceptio$. -$der +hich
the .-pp!y o .er0ice. .ha!! be ;ero,rated' a#o$g +hich are the o!!o+i$g8
a. The .er0ice i. peror#ed i$ the Phi!ippi$e.D
b. The .er0ice. are +ithi$ the categorie. pro0ided or -$der the
Ta2 (odeD a$d
c. 4t i. paid or i$ acceptab!e oreig$ c-rre$cy o the Ba$g/o
Se$tra! $g Pi!ipi$a..
A#erica$ E2pre.. re$der. a..i.ta$ce to it. oreig$ c!ie$t. by
recei0i$g the bi!!. o .er0ice e.tab!i.h#e$t. !ocated i$ the co-$try a$d
or+ardi$g the# to their c!ie$t. abroad. The .er0ice. are peror#ed or
.-cce..-!!y co#p!eted -po$ .e$d to it. oreig$ c!ie$t. the drat. a$d bi!!.
it ha. gathered ro# .er0ice e.tab!i.h#e$t. here' 4t. .er0ice.' ha0i$g
bee$ peror#ed i$ the Phi!ippi$e. are thereore a!.o co$.-#ed i$ the
Phi!ippi$e.. Th-.' it. .er0ice. are e2e#pt ro# the de.ti$atio$ pri$cip!e
a$d are ;ero,rated.
The B4R co-!d $ot cha$ge the !a+. GCommissioner, of Internal
Revenue v. American &)press International, Inc. *Philippine Branch#, <. R. No.
1>260F' A-$e 2F' 200>I
:'. A forei9" 0o"sortiu! co!posed of B+S0H
e"!arE5 ;itsui E"9i"eeri"9 a"d Shipbuildi"9 (td.5 a"d
;itsui a"d 0o.5 (td.5 which e"tered i"to a co"tract with
NAPO0OR for the operatio" a"d !ai"te"a"ce of two power
bar9es appoi"ted B+S0He"!arE as its coordi"atio"
!a"a9er. B+S0;* was established as the subco"tractor to
perfor! the actual worE i" the Philippi"es. The 0o"sortiu!
paid B+S0;* i" acceptable forei9" e#cha"9e a"d accou"ted
for i" accorda"ce with the rules a"d re9ulatio"s of the BSP.
Throu9h a 1ebruary ':5 'CC< ruli"9 the B*R declared
that B+S0;* !ay choose to re9ister as a 3AT perso"s
sub?ect to 3AT at Bero rate. 1or 'CC>5 it filed the proper 3AT
retur"s showi"9 Bero rati"9. O" ece!ber %C5 'CC@5
belie$i"9 that it is co$ered by Re$. Re9s. <HC>5 dated
1ebruary %&5 'CC>5 B+S0;* paid '&I output 3AT for the
period AprilHece!ber 'CC>5 throu9h the 3olu"tary
Assess!e"t Pro9ra! F3APG.
O" /a"uary @5 'CCC5 B+S0;* was able to obtai" a
Ruli"9 fro! the B*R reco"fir!i"9 that it is sub?ect to 3AT at
BeroHrati"9. O" this basis5 B+S0;* applied for a refu"d of
the output 3AT it paid.
a. *s B+S0;* sub?ect to the '&I 3AT or is it Bero
rated 7
S3<<ESTE" ANS=ER8 Oe.. B=S(*4 i. $ot ;ero rated a$d i.
.-b6ect to the 10H VAT. 4t i. re$deri$g .er0ice or the (o$.orti-# +hich
i. $ot doi$g b-.i$e.. i$ the Phi!ippi$e.. Tero,rati$g i$d. app!icatio$ o$!y
+here the recipie$t o the .er0ice. are other per.o$. doi$g b-.i$e..
o-t.ide o the Phi!ippi$e.. B=S(*4 pro0ide. .er0ice. to the (o$.orti-#
+hich by 0irt-e o it. co$tract +ith NAPO(OR i. doi$g b-.i$e.. +ithi$
the Phi!ippi$e.. %Commissioner of Internal Revenue v. Burmeister and 1ain
Scandinavian Contractor Mindanao, Inc., <. R. No. 1>B20>' Aa$-ary 22'
200@&
b. 0ould it obtai" a refu"d of the 3AT it paid throu9h
the 3AP 7 E#plai".
S3<<ESTE" ANS=ER8 Oe.. B=S(*4 i. e$tit!ed to re-$d o
the 10H o-tp-t VAT it paid the ba.ed o$ the $o$,retroacti0ity o the
pre6-dicia! re0ocatio$ o the B4R R-!i$g. +hich he!d that it:. .er0ice. are
.-b6ect to 0H VAT a$d +hich B=S(*4 i$0o/ed i$ app!yi$g or re-$d o
the o-tp-t VAT. %Commissioner of Internal Revenue v. Burmeister and
1ain Scandinavian Contractor Mindanao, Inc., supra&
NOTES AN" (O**ENTS8
a. o "ot co"fuse the B+S0;* case with the
A!erica" E#press case. A#erica$ E2pre.. 4$ter$atio$a!' 4$c.
%Phi!ippi$e Bra$ch&I i. a VAT,regi.tered per.o$ that aci!itate. the
co!!ectio$ a$d pay#e$t o recei0ab!e. be!o$gi$g to it. "o"Hreside"t
forei9" clie"t GA#erica$ E2pre.. 4$ter$atio$a!' 4$c. %7o$g/o$g Bra$ch&I'
40
or +hich it get. paid i$ acceptab!e oreig$ c-rre$cy i$+ard!y re#itted a$d
acco-$ted or i$ accorda$ce +ith BSP r-!e. a$d reg-!atio$..
%Commissioner of Internal Revenue v. Burmeister and 1ain Scandinavian
Contractor Mindanao, Inc., <. R. No. 1>B20>' Aa$-ary 22' 200@&
:%. +hat are 3ATHE#e!pt tra"sactio"s 7 S3<<ESTE"
ANS=ER8 The .a!e o good. or propertie. a$d9or .er0ice. a$d the
-.e or !ea.e o propertie. that i.
b. $ot .-b6ect to VAT %o-tp-t ta2& a$d
c. the .e!!er i. $ot a!!o+ed a$y ta2 credit o$ VAT %i$p-t ta2&
p-rcha.e..
The per.o$ #a/i$g the e2e#pt .a!e o good.' propertie. or
.er0ice. .ha!! $ot bi!! a$y o-tp-t ta2 to hi. c-.to#er. beca-.e the .aid
tra$.actio$ i. $ot .-b6ect to VAT. GRe0. Reg.. No. 16,200>' Sec. E.10F,1 %A&'
arra$ge#e$t a$d $-#beri$g .-pp!iedI
:8. 3ATHe#e!pt tra"sactio"s disti"9uished fro!
3ATHe#e!pt e"tities.
a. A$ e2e#pt tra$.actio$' o$ the o$e ha$d' i$0o!0e. good. or
.er0ice. +hich' by their $at-re' are .peciica!!y !i.ted i$ a$d e2pre..!y
e2e#pted ro# the VAT -$der the Ta2 (ode' +itho-t regard to the ta2
.tat-. J VAT,e2e#pt or $ot J o the party to the tra$.actio$.
A$ e2e#pt party' o$ the other ha$d' i. a per.o$ or e$tity gra$ted
VAT e2e#ptio$ -$der the Ta2 (ode' a .pecia! !a+ or a$ i$ter$atio$a!
agree#e$t to +hich the Phi!ippi$e. i. a .ig$atory' a$d by 0irt-e o +hich
it. ta2ab!e tra$.actio$. beco#e e2e#pt ro# VAT. G(o##i..io$er o
4$ter$a! Re0e$-e 0. To.hiba 4$or#atio$ E1-ip#e$t %Phi!..&' 4$c.' <. R. No.
1>01>E' A-g-.t F' 200>I
b. A$ e2e#pt tra$.actio$ .ha!! $ot be the .-b6ect o a$y bi!!i$g
or o-tp-t VAT b-t it .ha!! $ot a!.o be a!!o+ed a$y i$p-t ta2 credit.
=74)E a$ e2e#pt party bei$g ;ero,rated i. a!!o+ed to c!ai# i$p-t ta2
credit..
::. Tra"sactio"s are e#e!pt fro! 3AT. %S-b6ect to the
e!ectio$ by a VAT,regi.tered per.o$ $ot to be .-b6ect to the 0a!-e,added
ta)#, the o!!o+i$g .ha!! be e2e#pt ro# VAT8
%A& Sa!e or i#portatio$ o agric-!t-ra! a$d #ari$e ood prod-ct. i$
their origi$a! .tate' !i0e.toc/ a$d po-!try o a /i$d ge$era!!y -.ed a.' or
yie!di$g or prod-ci$g ood. or h-#a$ co$.-#ptio$D a$d breedi$g .toc/
a$d ge$etic #ateria!. thereor.
)i0e.toc/ .ha!! i$c!-de co+.' b-!!. a$d ca!0e.' pig.' .heep' goat.
a$d rabbit.. Po-!try .ha!! i$c!-de o+!.' d-c/.' gee.e a$d t-r/ey'
)i0e.toc/ or po-!try doe. $ot i$c!-de ighti$g coc/.' race hor.e.' ;oo
a$i#a!. a$d other a$i#a!. ge$era!!y co$.idered a. pet..
*ari$e ood prod-ct. .ha!! i$c!-de i.h a$d cr-.tacea$.' .-ch a.'
b-t $ot !i#ited to' ee!.' tro-t' !ob.ter' .hri#p.' pra+$.' oy.ter.' #-..e!.
a$d c!a#..
*eat' r-it' i.h' 0egetab!e. a$d other agric-!t-ra! a$d #ari$e ood
Prod-ct. c!a..iied -$der thi. paragraph .ha!! be co$.idered i$ their
origi$a! .tate e0e$ i they ha0e -$dergo$e the .i#p!e proce..e. o
preparatio$ or pre.er0atio$ or the #ar/et' .-ch a. ree;i$g' dryi$g'
.a!ti$g' broi!i$g' roa.ti$g' .#o/i$g or .trippi$g' i$c!-di$g tho.e -.i$g
ad0a$ced tech$o!ogica! #ea$. o pac/agi$g' .-ch a. .hri$/ +rappi$g i$
p!a.tic.' 0ac--# pac/i$g' tetra,pac/' a$d other .i#i!ar pac/agi$g
#ethod.. Po!i.hed a$d9or h-./ed rice' cor$ grit.' ra+ ca$e .-gar a$d
#o!a..e.' ordi$ary .a!t' a$d copra .ha!! be co$.idered i$ their origi$a!
.tate.
S-gar +ho.e co$te$t o .-cro.e by +eight' i$ the dry .tate' ha. a
po!ari#eter readi$g o FF.>o a$d abo0e are pre.-#ed to be rei$ed
.-gar.
(a$e .-gar prod-ced ro# the o!!o+i$g .ha!! be pre.-#ed' or
i$ter$a! re0e$-e p-rpo.e.' to be rei$ed .-gar8
%1& prod-ct o a rei$i$g proce..'
%2& prod-ct. o a .-gar rei$ery' or
%B& prod-ct o a prod-ctio$ !i$e o a .-gar #i!! accredited by
the B4R to be prod-ci$g .-gar +ith po!ari#eter readi$g o FF.>o a$d
abo0e' a$d or +hich the 1-eda$i..-ed thereor' a$d 0eriied by the
S-gar Reg-!atory Ad#i$i.tratio$' ide$tiie. the .a#e to be o a
po!ari#eter readi$g o FF.>o a$d abo0e.
Baga..e i. $ot i$c!-ded i$ the e2e#ptio$ pro0ided or -$der thi.
.ectio$.
%B& Sa!e or i#portatio$ o erti!i;er.D .eed.' .eed!i$g. a$d
i$ger!i$g.D i.h' pra+$' !i0e.toc/ a$d po-!try eed.' i$c!-di$g i$gredie$t.'
+hether !oca!!y prod-ced or i#ported' -.ed i$ the #a$-act-re o i$i.hed
eed. %e2cept .pecia!ty eed. or race hor.e.' ighti$g coc/.' a1-ari-#
i.h' ;oo a$i#a!. a$d other a$i#a!. ge$era!!y co$.idered a. pet.&D
Specia!ty eed. reer. to $o$,agric-!t-ra! eed. or ood or race
hor.e.' ighti$g coc/.' a1-ari-# i.h' ;oo a$i#a!. a$d other a$i#a!.
ge$era!!y co$.idered a. pet..
%(& 4#portatio$ o per.o$a! a$d ho-.eho!d eect. be!o$gi$g to
the re.ide$t. o the Phi!ippi$e. ret-r$i$g ro# abroad a$d $o$re.ide$t
citi;e$. co#i$g to re.ett!e i$ the Phi!ippi$e.8 Pro0ided' That .-ch good.
are e2e#pt ro# c-.to#. d-tie. -$der the Tari a$d (-.to#. (ode o
the Phi!ippi$e.D
%"& 4#portatio$ o proe..io$a! i$.tr-#e$t. a$d i#p!e#e$t.'
+eari$g appare!' do#e.tic a$i#a!.' a$d per.o$a! ho-.eho!d eect.
%e2cept a$y 0ehic!e' 0e..e!' aircrat' #achi$ery' other good. or -.e i$
the #a$-act-re a$d #ercha$di.e o a$y /i$d i$ co##ercia! 1-a$tity&
be!o$gi$g to per.o$. co#i$g to .ett!e i$ the Phi!ippi$e.' or their o+$ -.e
41
a$d $ot or .a!e' barter or e2cha$ge' acco#pa$yi$g .-ch per.o$.' or
arri0i$g +ithi$ $i$ety %F0& day. beore or ater their arri0a!' -po$ the
prod-ctio$ o e0ide$ce .ati.actory to the (o##i..io$er o 4$ter$a!
Re0e$-e' that .-ch per.o$. are act-a!!y co#i$g to .ett!e i$ the
Phi!ippi$e. a$d that the cha$ge o re.ide$ce i. bo$a ideD
%E& Ser0ice. .-b6ect to perce$tage ta2 -$der Tit!e V o the Ta2
(ode' a. e$-#erated be!o+8
%1& Sa!e or !ea.e o good. or propertie. or the
peror#a$ce o .er0ice. o $o$,VAT,regi.tered per.o$.' other
tha$ the tra$.actio$. #e$tio$ed i$ paragraph. %A& to %3& o Sec.
10F %1& o the Ta2 (ode' the a$$-a! .a!e. a$d9or receipt. o
+hich doe. $ot e2ceed the a#o-$t o O$e *i!!io$ Ci0e 7-$dred
tho-.a$d Pe.o. %P1'>00'000.00&' Pro0ided' That $ot !ater tha$
Aa$-ary B1' 200F a$d e0ery three %B& year. thereater' the
a#o-$t herei$ .tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g
the (o$.-#er Price 4$de2' a. p-b!i.hed by the Natio$a! Stati.tic.
Oice %NSO&. %Sec. 116' Ta2 (ode&
%2& Ser0ice. re$dered by do#e.tic co##o$ carrier. by
!a$d or the tra$.port o pa..e$ger. a$d /eeper. o garage..
%Sec. 11@&
%B& Ser0ice. re$dered by i$ter$atio$a! air9.hippi$g
carrier.. %Sec. 11?&
%E& Ser0ice re$dered by ra$chi.e gra$tee. o radio
a$d9or te!e0i.io$ broadca.ti$g +ho.e a$$-a! gro.. receipt. o the
precedi$g year do $ot e2ceed Te$ *i!!io$ Pe.o.
%P10'000'000.00& a$d by ra$chi.e. o ga. a$d +ater -ti!itie..
%Sec. 11F&
%>& Ser0ice re$dered or o0er.ea. di.patch #e..age or
co$0er.atio$ origi$ati$g ro# the Phi!ippi$e.. %Sc. 120&
%6& Ser0ice. re$dered by a$y per.o$' co#pa$y or
corporatio$ %e2cept p-re!y cooperati0e co#pa$ie. or a..ociatio$.
& doi$g !ie i$.-ra$ce b-.i$e.. o a$y .ort i$ the Phi!ippi$e..
%Sec. 12B&
%@& Ser0ice. re$dered by ire' #ari$e or #i.ce!!a$eo-.
i$.-ra$ce age$t. o oreig$ i$.-ra$ce co#pa$ie.. %Sec. 12E&
%?& Ser0ice. o proprietor.' !e..ee. or operator. o
coc/pit.' cabaret.' $ight or day c!-b.' bo2i$g e2hibitio$.
proe..io$a! ba./etba!! ga#e.' 6ai,A!ai a$d race trac/.. %Sec.
12>&. a$d
%F& Receipt. o$ .a!e' barter or e2cha$ge o .hare. o
.toc/ !i.ted a$d traded thro-gh the !oca! .toc/ e2cha$ge or
thro-gh i$itia! p-b!ic oeri$g. %Sec. 12@&
%C& Ser0ice. by agric-!t-ra! co$tract gro+er. a$d #i!!i$g or
other. o pa!ay i$to rice' cor$ i$to grit. a$d .-gar ca$e i$to ra+ .-garD
Agric-!t-ra! co$tract gro+er. reer. to tho.e per.o$. prod-ci$g
or other. po-!try' !i0e.toc/ or other agric-!t-ra! a$d #ari$e ood prod-ct.
i$ their origi$a! .tate.
%<& *edica!' de$ta!' ho.pita! a$d 0eteri$ary .er0ice. e2cept
tho.e re$dered by proe..io$a!.D
)aboratory .er0ice. are e2e#pted. 4 the ho.pita! or c!i$ic operate.
a phar#acy or dr-g .tore' the .a!e o dr-g. a$d #edici$e i. .-b6ect to
VAT.
%7& Ed-catio$a! .er0ice. re$dered by pri0ate ed-catio$a!
i$.tit-tio$.' d-!y accredited by the "epart#e$t o Ed-catio$ %"EPE"&'
the (o##i..io$ o$ 7igher Ed-catio$ %(7E"&' the Tech$ica! Ed-catio$
A$d S/i!!. "e0e!op#e$t A-thority %TES"A& a$d tho.e re$dered by
go0er$#e$t ed-catio$a! i$.tit-tio$.D
Ed-catio$a! .er0ice. .ha!! reer to acade#ic' tech$ica! or
0ocatio$a! ed-catio$ pro0ided by pri0ate ed-catio$a! i$.tit-tio$. d-!y
accredited by the "epE"' the (7E" a$d TES"A a$d tho.e re$dered by
go0er$#e$t ed-catio$a! i$.tit-tio$. a$d it doe. $ot i$c!-de .e#i$ar.' i$,
.er0ice trai$i$g' re0ie+ c!a..e. a$d other .i#i!ar .er0ice. re$dered by
per.o$. +ho are $ot accredited by the "epE"' the (7E" a$d9or the
TES"A.
%4& Ser0ice. re$dered by i$di0id-a!. p-r.-a$t to a$ e#p!oyer,
e#p!oyee re!atio$.hipD
%A& Ser0ice. re$dered by regio$a! or area head1-arter.
e.tab!i.hed i$ the Phi!ippi$e. by #-!ti$atio$a! corporatio$. +hich act a.
.-per0i.ory' co##-$icatio$. a$d coordi$ati$g ce$ter. or their ai!iate.'
.-b.idiarie. or bra$che. i$ the A.ia,Paciic Regio$ a$d do $ot ear$ or
deri0e i$co#e ro# the Phi!ippi$e.D
%R& Tra$.actio$. +hich are e2e#pt -$der i$ter$atio$a!
agree#e$t. to +hich the Phi!ippi$e. i. a .ig$atory or -$der .pecia! !a+.'
e2cept tho.e -$der Pre.ide$tia! "ecree No. >2F J Petro!e-# E2p!oratio$
(o$ce..io$aire. -$der the Petro!e-# Act o 1FEFD a$dD
%)& Sa!e. by agric-!t-ra! cooperati0e. d-!y regi.tered +ith the
(ooperati0e "e0e!op#e$t A-thority %("A& to their #e#ber. a. +e!! a.
.a!e o their prod-ce' +hether i$ it. origi$a! .tate or proce..ed or#' to
$o$,#e#ber.D their i#portatio$ o direct ar# i$p-t.' #achi$erie. a$d
e1-ip#e$t' i$c!-di$g .pare part. thereo' to be -.ed direct!y a$d
e2c!-.i0e!y i$ the prod-ctio$ a$d9or proce..i$g o their prod-ceD
%*& <ro.. receipt. ro# !e$di$g acti0itie. by credit or #-!ti,
p-rpo.e cooperati0e. d-!y regi.tered a$d i$ good .ta$di$g +ith the
(ooperati0e "e0e!op#e$t A-thorityD
%N& Sa!e. by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit
cooperati0e. d-!y regi.tered +ith the (ooperati0e "e0e!op#e$t A-thority8
Pro0ided' That the .hare capita! co$trib-tio$ o each #e#ber doe. $ot
e2ceed Citee$ tho-.a$d pe.o. %P1>'000& a$d regard!e.. o the
aggregate capita! a$d $et .-rp!-. ratab!y di.trib-ted a#o$g the #e#ber.D
42
4#portatio$ by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit
cooperati0e. o #achi$erie. a$d e1-ip#e$t' i$c!-di$g .pare part.
thereo' to be -.ed by the# are .-b6ect to VAT.
%O& E2port .a!e. by per.o$. +ho are $ot VAT,regi.teredD
%P& Sa!e o rea! propertie. $ot pri#ari!y he!d or .a!e to
c-.to#er. or he!d or !ea.e i$ the ordi$ary co-r.e o trade or b-.i$e..' or
rea! property -ti!i;ed or !o+,co.t a$d .ocia!i;ed ho-.i$g a. dei$ed by
Rep-b!ic Act No. @2@F' other+i.e /$o+$ a. the 3rba$ "e0e!op#e$t a$d
7o-.i$g Act o 1FF2' a$d other re!ated !a+.' .-ch a. RA No. @?B> a$d
RA No. ?@6>' re.ide$tia! !ot 0a!-ed at O$e #i!!io$ i0e h-$dred tho-.a$d
pe.o. %P 1'>00'000& a$d be!o+' ho-.e a$d !ot' a$d other re.ide$tia!
d+e!!i$g. 0a!-ed at T+o #i!!io$ i0e h-$dred tho-.a$d pe.o. %P
2'>00'000& a$d be!o+8 Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F
a$d e0ery three %B& year. thereater' the a#o-$t. herei$ .tated .ha!! be
ad6-.ted to their pre.e$t 0a!-e. -.i$g the (o$.-#er Price 4$de2' a.
p-b!i.hed by the Natio$a! Stati.tic. Oice %NSO&D
%N& )ea.e o a re.ide$tia! -$it +ith a #o$th!y re$ta! $ot
e2ceedi$g Te$ tho-.a$d pe.o. %P 10'000& Pro0ided' That $ot !ater tha$
Aa$-ary B1' 200F a$d e0ery three %B& year. thereater' the a#o-$t herei$
.tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price
4$de2 a. p-b!i.hed by the Natio$a! Stati.tic. Oice %NSO&D
%R& Sa!e' i#portatio$' pri$ti$g or p-b!icatio$ o boo/. a$d a$y
$e+.paper' #aga;i$e' re0ie+ or b-!!eti$ +hich appear. at reg-!ar
i$ter0a!. +ith i2ed price. or .-b.criptio$ a$d .a!e a$d +hich i. $ot
de0oted pri$cipa!!y to the p-b!icatio$ o paid ad0erti.e#e$t.D
%S& Sa!e' i#portatio$ or !ea.e o pa..e$ger or cargo 0e..e!. a$d
aircrat' i$c!-di$g e$gi$e' e1-ip#e$t a$d .pare part. thereo or do#e.tic
or i$ter$atio$a! tra$.port operatio$.D Pro0ided' that the e2e#ptio$ ro#
VAT o$ the i#portatio$ a$d !oca! p-rcha.e o pa..e$ger a$d9or cargo
0e..e!. .ha!! be !i#ited to tho.e o o$e h-$dred ity %1>0& to$. a$d
abo0e' i$c!-di$g e$gi$e a$d .pare part. o .aid 0e..e!.D Pro0ided'
-rther' that the 0e..e!. be i#ported .ha!! co#p!y +ith the age !i#it
re1-ire#e$t' at the ti#e o ac1-i.itio$ co-$ted ro# the date o the
0e..e!:. origi$a! co##i..io$i$g' a. o!!o+.8 %i& or pa..e$ger a$d9or
cargo 0e..e!.' the age !i#it i. itee$ year. %1>& year. o!d' %ii& or
ta$/er.' the age !i#it i. te$ %10& year. o!d' a$d %iii& Cor high,.peed
pa..e$ger car.' the age !i#it i. i0e %>& year. o!d' Pro0ided' i$a!!y' that
e2e#ptio$ .ha!! be .-b6ect to the pro0i.io$. o .ectio$ E o Rep-b!ic Act
No. F2F>' other+i.e /$o+$ a. The "o#e.tic Shippi$g "e0e!op#e$t Act
o 200E.
%T& 4#portatio$ o -e!' good. a$d .-pp!ie. by per.o$. e$gaged
i$ i$ter$atio$a! .hippi$g or air tra$.port operatio$.D Pro0ided' that the
.aid -e!' good. a$d .-pp!ie. .ha!! be -.ed e2c!-.i0e!y or .ha!! pertai$ to
the tra$.port o good. a$d9or pa..e$ger ro# a port i$ the Phi!ippi$e.
direct!y to a oreig$ port +itho-t .toppi$g at a$y other port i$ the
Phi!ippi$e.D pro0ided' -rther' that i a$y portio$ o .-ch -e!' good. or
.-pp!ie. i. -.ed or p-rpo.e. other tha$ that #e$tio$ed i$ thi. paragraph'
.-ch portio$ o -e!' good. a$d .-pp!ie. .ha!! be .-b6ect to 10H VAT
%$o+ 12H&D
%3& Ser0ice. o ba$/.' $o$,ba$/ i$a$cia! i$ter#ediarie.
peror#i$g 1-a.i,ba$/i$g -$ctio$.' a$d other $o$,ba$/ i$a$cia!
i$ter#ediarie.D a$d
%V& Sa!e or !ea.e o good. or propertie. or the
peror#a$ce o .er0ice. other tha$ the tra$.actio$. #e$tio$ed i$ the
precedi$g paragraph.' the gro.. a$$-a! .a!e. a$d9or receipt. do $ot
e2ceed the a#o-$t o O$e #i!!io$ i0e h-$dred tho-.a$d pe.o.
%P1'>00'000&8 Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery
three %B& year. thereater' the a#o-$t herei$ .tated .ha!! be ad6-.ted to
it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2 a. p-b!i.hed by the
Natio$a! Stati.tic. Oice %NSO&.
Cor p-rpo.e. o the thre.ho!d o P1'>00'000.00' the h-.ba$d a$d
+ie .ha!! be c$.idered .eparate ta2payer.. 7o+e0er' the aggregatio$
r-!e or each ta2payer .ha!! app!y. Cor i$.ta$ce' i a proe.io$a!' a.ide
ro# the practice ohi. proe..io$' a!.o deri0e. re0e$-e ro# other !i$e.
o b-.i$e.. +hich are other+i.e .-b6ect to VAT' the .a#e .ha!! be
co#bi$ed or p-rpo.e. o deter#i$i$g +hether the thre.ho!d ha. bee$
e2ceeded. Th-.' the VAT,e2e#pt .a!e. .ha!! to be ic!-ded i$ deter#i$i$g
the thre.ho!d. GN4R( o 1FF@' Sec. 10F %1&' a. a#e$ded by R. A. No. FBB@D
+ord. i$ ita!ic. ro# Re0. Reg.. No. 16,200>' Sec. E.10F,1 %B&' +ord. i$
pare$the.e. .-pp!iedI
:<. Ta# to be paid by perso"s e#e!pt fro! 3AT.
a. A$y per.o$' +ho.e .a!e. or receipt. are e2e#pt -$der Sec.
10F %1& %V& o the Ta2 (ode'
%V& Sa!e or !ea.e o good. or propertie. or the peror#a$ce
o .er0ice. other tha$ the tra$.actio$. #e$tio$ed i$ the
precedi$g paragraph.' the gro.. a$$-a! .a!e. a$d9or receipt. do
$ot e2ceed the a#o-$t o O$e #i!!io$ i0e h-$dred tho-.a$d
pe.o. %P1'>00'000&8 Pro0ided' That $ot !ater tha$ Aa$-ary B1'
200F a$d e0ery three %B& year. thereater' the a#o-$t herei$
.tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er
Price 4$de2 a. p-b!i.hed by the Natio$a! Stati.tic. Oice %NSO&'
ro# the pay#e$t o VAT a$d
b. +ho i. $ot a VAT,regi.tered per.o$
c. .ha!! pay a ta2 e1-i0a!e$t to three perce$t %BH& o hi. gro..
#o$th!y .a!e. or receipt.D
Pro0ided' that cooperati0e. .ha!! be e2e#pt ro# the three %BH&
gro.. receipt. ta2 herei$ i#po.ed. %Re0. Reg.. No. 16,200>' Sec. E.116,1'
arra$ge#e$t' $-#beri$g a$d +ord. i$ ita!ic. .-pp!ied&
43
RET.RNS AN +*THHO(*N,
'. *"co!e ta# retur"s bei"9 public docu!e"ts' -$ti!
co$tro0erted by co#pete$t e0ide$ce' are co#pete$t e0ide$ce' are prima
facie correct +ith re.pect to the e$trie. therei$. *Ropali (rading v. !$RC, et
al., 2F6 S(RA B0F' B1@&
%. *"di$iduals reDuired to file a" i"co!e ta# retur".
a. E0ery Ci!ipi$o citi;e$ re.idi$g i$ the Phi!ippi$e.D
b. E0ery Ci!ipi$o citi;e$ re.idi$g o-t.ide the Phi!ippi$e. o$ hi.
i$co#e ro# .o-rce. +ithi$ the Phi!ippi$e.D
c. E0ery a!ie$ re.idi$g i$ the Phi!ippi$e. o$ i$co#e deri0ed ro#
.o-rce. +ithi$ the Phi!ippi$e.D a$d
d. E0ery $o$re.ide$t a!ie$ e$gaged i$ trade or b-.i$e.. or i$ the
e2erci.e o proe..io$ i$ the Phi!ippi$e.. GSec. >1 %A& %1&' N4R( o 1FF@I
8. ;arried i"di$iduals who are ear"i"9 purely
co!pe"satio" i"co!e allowed to file separate retur"s.
:. ;arried i"di$iduals5 whether citiBe"s5 reside"t or
"o"Hreside"t alie"s5 who do "ot deri$e i"co!e purely fro!
co!pe"satio" shall file a co"solidated retur" for the ta#able
year to i"clude the i"co!e of both spouses5 b-t +here it i.
i#practicab!e or the .po-.e. to i!e o$e ret-r$' each .po-.e #ay i!e a
.eparate ret-r$ o i$co#e b-t the ret-r$. .o i!ed .ha!! be co$.o!idated by
the B-rea- or p-rpo.e. o 0eriicatio$. GSectio$ >1 %"& o the N4R( o
1FF@I
<. 0o!putatio" of i"co!e ta# for !arried i"di$iduals
whether citiBe"s5 reside"t or "o"Hreside"t alie"s5 who do "ot
deri$e i"co!e purely fro! co!pe"satio" reDuired file a
co"solidated retur" for the ta#able year but could "ot do so.
Cor #arried i$di0id-a!.' the h-.ba$d a$d +ie' .-b6ect to $o. 2' supra,'
.ha!! co#p-te .eparate!y their i$di0id-a! i$co#e ta2 ba.ed o$ their
re.pecti0e tota! ta2ab!e i$co#e8 Provided' that i a$y i$co#e ca$$ot be
dei$ite!y attrib-ted to or ide$tiied a. i$co#e e2c!-.i0e!y ear$ed or
rea!i;ed by either o the .po-.e.' the .a#e .ha!! be di0ided e1-a!!y
bet+ee$ the .po-.e. or the p-rpo.e o deter#i$i$g their re.pecti0e
ta2ab!e i$co#e. G2
$d
to the !a.t par.' Sec. 2E %A& %2&' N4R( o 1FF@ a.
a#e$ded by Rep. Act No. F>0EI
>. *"di$iduals who are "ot reDuired to file a" i"co!e
ta# retur".
a. A$ i$di0id-a! +ho.e gro.. i$co#e doe. $ot e2ceed hi. tota!
per.o$a! a$d additio$a! e2e#ptio$. or depe$de$t.' Provided, That a
citi;e$ o the Phi!ippi$e. a$d a$y a!ie$ i$di0id-a! e$gaged i$ b-.i$e.. or
practice o proe..io$ +ithi$ the Phi!ippi$e. .ha!! i!e a$ i$co#e ta2 ret-r$
regard!e.. o the a#o-$t o gro.. i$co#e GSec. >1 %A& %2&' N4R( o 1FF@I
b. A$ i$di0id-a! +ith re.pect to p-re co#pe$.atio$ i$co#e'
deri0ed ro# .-ch .o-rce. +ithi$ the Phi!ippi$e.' the i$co#e ta2 o$ +hich
ha. bee$ correct!y +ithhe!d8 Provided' That a$ i$di0id-a! deri0i$g
co#pe$.atio$ co$c-rre$t!y ro# t+o or #ore e#p!oyer. at a$y ti#e
d-ri$g the ta2ab!e year .ha!! i!e a$ i$co#e ta2 ret-r$ GSec. >1 %A& %2&' N4R(
o 1FF@' a. a#e$ded by Rep. Act No. F>0E' paraphra.i$g .-pp!iedI
c. A$ i$di0id-a! +ho.e .o!e i$co#e ha. bee$ .-b6ect to i$a!
+ithho!di$g ta2D
d. A #i$i#-# +age ear$er %i. a +or/er i$ the pri0ate .ector
paid the .tat-tory #i$i#-# +age' or i. a$ e#p!oyee i$ the p-b!ic .ector
+ith co#pe$.atio$ i$co#e o $ot #ore tha$ the .tat-tory #i$i#-# +age
i$ the $o$,agric-!t-ra! .ector +here he9.he i. a..ig$ed&' a$ i$di0id-a! +ho
i. e2e#pt ro# i$co#e ta2 p-r.-a$t to the pro0i.io$. o the Ta2 (ode
a$d other !a+.' ge$era! or .pecia!. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$
to Sec. 22 %77&' both a. a#e$ded by Rep. Act. F>0EI
@. ;i"i!u! wa9e ear"ers are e#e!pt fro! i"co!e
ta#atio". That #i$i#-# +age ear$er. %i. a +or/er i$ the pri0ate .ector
paid the .tat-tory #i$i#-# +age' or i. a$ e#p!oyee i$ the p-b!ic .ector
+ith co#pe$.atio$ i$co#e o $ot #ore tha$ the .tat-tory #i$i#-# +age
i$ the $o$,agric-!t-ra! .ector +here he9.he i. a..ig$ed& .ha!! be e2e#pt
ro# the pay#e$t o i$co#e ta2 o$ their ta2ab!e i$co#e8 Provided'
further' That the ho!iday pay' o0erti#e pay' $ight .hit diere$tia! pay a$d
ha;ard pay recei0ed by .-ch #i$i#-# +age ear$er. .ha!! !i/e+i.e be
e2e#pt ro# i$co#e ta2. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$ to Sec. 22
%77&' both a. a#e$ded by Rep. Act. F>0EI
A. A" i"di$idual who is "ot reDuired to file a" i"co!e
ta# retur" !ay "e$ertheless be reDuired to file a" i"for!atio"
retur". GSec. >1 %A& %B&' N4R( o 1FF@I
C. A corporatio" files its i"co!e ta# retur" a"d pays
its i"co!e ta# four F:G ti!es duri"9 a si"9le ta#able year.
N-arter!y ret-r$. are re1-ired to be i!ed or the ir.t three 1-arter.' the$ a
i$a! ad6-.t#e$t ret-r$ i. i!ed co0eri$g the tota! ta2ab!e i$co#e or the
+ho!e ta2ab!e year' be it ca!e$dar or i.ca!.
'&. A" i"di$idual ear"i"9 fro! the practice of his
professio" or who e"9a9es i" trade or busi"ess files his
i"co!e ta# retur" a"d pays his i"co!e ta# four F:G ti!es
44
duri"9 a si"9le ta#able year. N-arter!y ret-r$. are re1-ired to be i!ed
or the ir.t three 1-arter.' the$ a$ a$$-a! i$co#e ta2 ret-r$ i. i!ed
co0eri$g the tota! ta2ab!e i$co#e or the +ho!e o the pre0io-. ca!e$dar
year.
''. The purpose of the abo$e four F:G ti!es a year
reDuire!e"t is to !aEe a$ailable sufficie"t fu"ds to !eet the
bud9etary reDuire!e"ts5 o$ a 1-arter!y ba.i. thereby i$crea.i$g
go0er$#e$t !i1-idity. 4t a!.o ea.e. hard.hip. o$ the part o i$di0id-a!. +ho
are re1-ired to #a/e thi. o-r ti#e ret-r$. Th-.' the ta2payer doe. $ot
ha0e to rai.e !arge .-#. o #o$ey i$ order to pay the ta2.
'%. A" i"di$idual ear"i"9 purely co!pe"satio" i"co!e
files o"ly o"e a""ual i"co!e ta# retur" co0eri$g the tota! ta2ab!e
co#pe$.atio$ i$co#e or the +ho!e o the pre0io-. ca!e$dar year.
'8. ."der the withholdi"9 ta# syste!5 ta#es i!posed
or prescribed by the N*R0 of 'CC@ are to be deducted a"d
withheld by the payors fro! pay!e"ts !ade to payees for the
for!er to pay directly to the Bureau of *"ter"al Re$e"ue. 4t i.
a!.o /$o+$ a. co!!ectio$ o the ta2 at .o-rce.
':. A withholdi"9 a9e"t is e#plicitly !ade perso"ally
liable u"der the Ta# 0ode for the pay!e"t of the ta# reDuired
to be withheld5 i$ order to co#pe! the +ithho!di$g age$t to +ithho!d the
ta2 -$der a$y a$d a!! circ-#.ta$ce.. 4$ eect' the re.po$.ibi!ity or the
co!!ectio$ o the ta2 a. +e!! a. the pay#e$t thereo i. co$ce$trated -po$
the per.o$ o0er +ho# the <o0er$#e$t ha. 6-ri.dictio$. %/ilipinas Synthetic
/i"er Corporation v. Court of Appeals, et al., <.R. No.. 11?EF? W 12EB@@' October
12' 1FFF& The .y.te# aci!itate. ta2 co!!ectio$ a$d red-ce. ta2 e0a.io$.
'<. The two F%G types of withholdi"9 at source are the 'G
fi"al withholdi"9 ta#K a"d %G creditable withholdi"9 ta#.
'>. ."der the fi"al withholdi"9 ta# syste! the a!ou"t of
i"co!e ta# withheld by the withholdi"9 a9e"t is co"stituted as
a full a"d fi"al pay!e"t of the i"co!e due fro! the payee o"
the said i"co!e. G1
.t
.e$te$ce' 1
.t
par.' Sec. 2.>@ %A&' Re0. Reg.. No. 2,F?I
The !iabi!ity or pay#e$t o the ta2 re.t. pri#ari!y o$ the payor or the
+ithho!di$g age$t.. Th-.' i$ ca.e o hi. ai!-re to +ithho!d the ta2 or i$
ca.e o -$der +ithho!di$g' the deicie$cy ta2 .ha!! be co!!ected ro# the
payor +ithho!di$g age$t. The payee i. $ot re1-ired to i!e a$ i$co#e ta2
ret-r$ or the partic-!ar i$co#e.
'@. ."der the creditable withholdi"9 ta# syste!5 ta#es
withheld o" certai" i"co!e pay!e"ts are i"te"ded to eDual or
at least appro#i!ate the ta# due fro! the payee o" the said
i"co!e. The i$co#e recipie$t i. .ti!! re1-ired to i!e a$ i$co#e ta2 ret-r$
a$d9or pay the diere$ce bet+ee$ the ta2 +ithhe!d a$d the ta2 d-e o$ the
i$co#e. G1
.t
a$d 2
$d
.e$te$ce.' Sec. 2>@%B&' Re0. Reg.. No. 2,F?I
'A. The two Ei"ds of creditable withholdi"9 ta#es are %a&
ta2e. +ithhe!d o$ i$co#e pay#e$t. co0ered by the e2pa$ded +ithho!di$g
ta2D a$d %b& ta2e. +ithhe!d o$ co#pe$.atio$ i$co#e.
'C. Pay!e"ts to the followi"9 are e#e!pt fro! the
reDuire!e"t of withholdi"9 or whe" "o withholdi"9 ta#es
reDuired-
a. Natio$a! <o0er$#e$t a$d it. i$.tr-#e$ta!itie. i$c!-di$g
pro0i$cia!' city' or #-$icipa! go0er$#e$t.D
b. Per.o$. e$6oyi$g e2e#ptio$ ro# pay#e$t o i$co#e ta2e.
p-r.-a$t to the pro0i.io$. o a$y !a+' ge$era! or .pecia!' .-ch a. b-t $ot
!i#ited to the o!!o+i$g8
1& Sa!e. o rea! property by a corporatio$ +hich i. regi.tered
+ith a$d certiied by the 7)3RB or 73"(( a. e$gaged i$ .ocia!i;ed
ho-.i$g pro6ect +here the .e!!i$g price o the ho-.e a$d !ot or o$!y
the !ot doe. $ot e2ceed P1?0'000.00 i$ *etro *a$i!a a$d other
high!y -rba$i;ed area. a$d P1>0'000.00 i$ other area. or .-ch
ad6-.ted a#o-$t o .e!!i$g price or .ocia!i;ed ho-.i$g a. #ay !ater
be deter#i$ed a$d adopted by the 7)3RBD
2& (orporatio$. regi.tered +ith the Board o 4$0e.t#e$t. a$d
e$6oyi$g e2e#ptio$. ro# i$co#e -$der the O#$ib-. 4$0e.t#e$t
(ode o 1FF@D
B& (orporatio$. e2e#pt ro# i$co#e ta2 -$der Sec. B0'
o the Ta2 (ode' !i/e the SSS' <S4S' the P(SO' etc. 7o+e0er'
i$co#e pay#e$t. ari.i$g ro# a$y acti0ity +hich i. co$d-cted or
proit or i$co#e deri0ed ro# rea! or per.o$a! property .ha!! be
.-b6ect to a +ithho!di$g ta2. %Sec. >@.>' Re0. Reg.. No. 2,F?&
%&. 1or ta# a!"esty purposes5 the withholdi"9 a9e"t is
"ot a ta#payer. 7e i. #ade to pay the ta2 +here he ai!. to +ithho!d a.
a pe$a!ty a$d $ot beca-.e the ta2 i. d-e ro# hi#. %Commissioner of
Internal Revenue v. Court of Appeals, et al.' <.R. No. 10?>@6' Aa$-ary 20' 1FFF'
the Anscor case#
PENA(T*ES5 *NTERESTS AN S.R0HAR,ES
45
'. S-rta2e. or .-rcharge.' a!.o /$o+$ a. the ci0i! pe$a!tie.' are
the a#o-$t. i#po.ed i$ additio$ to the ta2 re1-ired.
They are i$ the $at-re o pe$a!tie. a$d .ha!! be co!!ected at the
.a#e ti#e' i$ the .a#e #a$$er' a$d a. part o the ta2. GSec.2E? %A&'
N4R( o 1FF@I
%. +hat are the two F%G Ei"ds of ci$il pe"alties 7
S3<<ESTE" ANS=ER8
a. the 2>H .-rcharge or !ate i!i$g or !ate pay#e$t GSec. 2E?
%A&' N4R( o 1FF@I %a!.o /$o+$ a. the de!i$1-e$cy .-rcharge&' a$d
b. the >0H +i!!-! $eg!ect or ra-d .-rcharge. GSec. 2E? %B&'
I"id.I
8. efi"e deficie"cy i"co!e ta#.
S3<<ESTE" ANS=ER8 "eicie$cy i$co#e ta2 i. the a#o-$t by
+hich the ta2 i#po.ed -$der the N4R( o 1FF@ e2ceed. the a#o-$t .ho+$
a. the ta2 d-e by the ta2payer -po$ hi. ret-r$. GSec. >6 %B& %1&' N4R( o
1FF@I
:. eficie"cy i"terest5 defi"ed. The i$tere.t a..e..ed a$d
co!!ected o$ a$y -$paid a#o-$t o ta2 at the rate o 20H per a$$-# or
.-ch higher rate a. #ay be pre.cribed by reg-!atio$.' ro# the date
pre.cribed or pay#e$t -$ti! the a#o-$t i. -!!y paid. GSec. 2EF %A& %B&'
N4R( o 1FF@I
<. eli"Due"cy i"terest5 defi"ed. The i$tere.t a..e..ed
a$d co!!ected o$ the -$paid a#o-$t -$ti! -!!y paid +here there i. ai!-re o$
the part o the ta2payer to pay the a#o-$t die o$ a$y ret-r$ re1-ired to be
i!edD or the a#o-$t o the ta2 d-e or +hich $o ret-r$ i. re1-iredD or a
deicie$cy ta2' or a$y .-rcharge or i$tere.t thereo$' o$ the date appeari$g
i$ the $otice a$d de#a$d by the (o##i..io$er o 4$ter$a! Re0e$-e.
GSec.2EF %c&' N4R( o 1FF@I
>. After resol$i"9 the issues the B*R 0o!!issio"er
reduced the assess!e"t. +as it proper to i!pose deli"Due"cy
i"terest despite the reductio" of the assess!e"t 7 +hy 7
S3<<ESTE" ANS=ER8 Oe.. The i$te$tio$ o the !a+ i. to
di.co-rage de!ay i$ the pay#e$t o ta2e. d-e to the State a$d i$ thi. .e$.e
the .-rcharge a$d i$tere.t charged are $ot pe$a! b-t co#pe$.atory i$
$at-re J they are co#pe$.atio$ to the State or the de!ay i$ pay#e$t' or or
the co$co#ita$t t-.e o the -$d. by the ta2payer beyo$d the date he i.
.-ppo.ed to ha0e paid the# to the State. %Ban- of the Philippine Islands v.
Commissioner of Internal Revenue, <. R. No. 1B@002' A-!y 2@' 2006&
@. 0o!pro!ise pe"alty i. the a#o-$t agreed -po$ bet+ee$
the ta2payer a$d the <o0er$#e$t to be paid a. a pe$a!ty i$ ca.e. o a
co#pro#i.e.
A. As a result of di$er9e"t ruli"9s o" whether it is
sub?ect to ta# or "ot5 the ta#payer was "ot able to pay his
ta#es o" ti!e. *!posed surchar9es a"d i"terests for such
delay5 the ta#payer "ot i"$oEes 9ood faith with the B*R
cou"teri"9 by sayi"9 that 9ood faith is "ot a $alid defe"se for
$iolatio" of a special law. 1urther!ore5 the B*R further raises
the defe"se that the 9o$er"!e"t is "ot bou"d by the errors of
its a9e"ts. +ho is correct 7
S3<<ESTE" ANS=ER8 The ta2payer i. correct. The .ett!ed r-!e
i. that good aith a$d ho$e.t be!ie that o$e i. $ot .-b6ect to ta2 o$ the
ba.i. o pre0io-. i$terpretatio$ o go0er$#e$t age$cie. ta./ed to
i#p!e#e$t the ta2' are .-icie$t 6-.tiicatio$ to de!ete the i#po.itio$ o
.-rcharge.. %Michel ,. $huillier Panshop, Inc. v. Commissioner of Internal
Revenue, <. R. No. 166@?6' Septe#ber 11' 2006&
REP.B(*0 A0T NO. ''%<5 0REAT*N, THE
0O.RT O1 TA) APPEA(S *N0(.*N,
/.R*S*0T*ON O1 THE 0TA5 AS A;ENE
0O.RT O1 TA) APPEA(S5 *N ,ENERA(
'. iscuss the role of the ?udiciary i" ta#atio".
S3<<ESTE" ANS=ER8 The ro!e o the 6-diciary i. to be the
.y#pathetic or 0igi!a$t co-rt +hich +o-!d chec/ i$6-.tice. or ab-.e. o
the !egi.!ati0e a$d ad#i$i.trati0e age$t. o the State i$ their e2erci.e o
the po+er o ta2atio$.
%. +hat is the "ature a"d co!positio" of the 0ourt of
Ta# Appeals 7
S3<<ESTE" ANS=ER8 The (o-rt o Ta2 Appea!. i. the .pecia!
ta2 co-rt created -$der Rep-b!ic Act No. 112>' a. a#e$ded' a$d i.
co#po.ed o a Pre.idi$g A-.tice a$d eight %?& A..ociate A-.tice.'
orga$i;ed i$to three %B& di0i.io$..
8. +hat are the purposes for the creatio" of the 0ourt
of Ta# Appeals 7
S3<<ESTE" ANS=ER8
a. To pre0e$t de!ay i$ the di.po.itio$ o ta2 ca.e. by the the$
(o-rt. o Cir.t 4$.ta$ce %$o+ RT(.&' i$ 0ie+ o the bac/!og o ci0i!'
46
cri#i$a!' a$d cada.tra! ca.e. acc-#-!ati$g i$ the doc/et. o .-ch co-rt.D
a$d
b. To ha0e a body +ith .pecia! /$o+!edge +hich ordi$ary
A-dge. o the the$ (o-rt. o Cir.t 4$.ta$ce %$o+ RT(.&' are $ot !i/e!y to
po..e..' th-. pro0idi$g or a$ ade1-ate re#edy or a .peedy
deter#i$atio$ o ta2 ca.e.. %<rsal v. Court of (a) Appeals, et al., 101 Phi!. 20F&
:. /urisdictio" of the 0ourt of Ta# Appeals.
a. E#clusi$e appellate ?urisdictio" to re$iew by appeal5 as
herei" pro$ided-
1. "eci.io$. o the (o##i..io$er o 4$ter$a! Re0e$-e i$ ca.e.
i$0o!0i$g di.p-ted a..e..#e$t.' re-$d. o i$ter$a! re0e$-e ta2e.' ee. or
other charge.' pe$a!tie.' i$ re!atio$ thereto' or other #atter. ari.i$g -$der
the Natio$a! 4$ter$a! Re0e$-e (ode or other !a+. ad#i$i.tered by the
B-rea- o 4$ter$a! Re0e$-e:D %"4V4S4ON&
2. 4$actio$ by the (o##i..io$er o 4$ter$a! Re0e$-e i$ ca.e.
i$0o!0i$g di.p-ted a..e..#e$t.' re-$d. or i$ter$a! re0e$-e ta2e.' ee. or
other charge.' pe$a!tie. i$ re!atio$ thereto' or other #atter ari.i$g -$der
the Natio$a! 4$ter$a! Re0e$-e (ode or other !a+. ad#i$i.tered by the
B-rea- o 4$ter$a! Re0e$-e' +here the Natio$a! 4$ter$a! Re0e$-e (ode
pro0ide. a .peciic period o actio$' i$ +hich ca.e the i$actio$ .ha!! be
dee#ed a de$ia!D %The i$actio$ o$ re-$d. i$ t+o year. ro# the ti#e ta2
+a. paid. Th-.' i the pre.cripti0e period o t+o year. i. abo-t to e2pire'
the ta2payer .ho-!d i$terpo.e a petitio$ or re0ie+ +ith the (TA J
"4V4S4ON&
B. "eci.io$.' order. or re.o!-tio$. o the Regio$a! Tria! (o-rt. i$
!oca! ta2 ca.e. origi$a!!y decided or re.o!0ed by the# i$ the e2erci.e o
their origi$a! or appe!!ate 6-ri.dictio$D %4 origi$a! "4V4S4OND i appe!!ate &!
BA!C&
E. "eci.io$. o the (o##i..io$er o (-.to#. i$ ca.e. i$0o!0i$g
!iabi!ity or c-.to#. d-tie.' ee. or other #o$ey charge.' .ei;-re' dete$tio$
or re!ea.e o property aected' i$e.' oreit-re. or other pe$a!tie. i$
re!atio$ thereto' or other #atter. ari.i$g -$der the (-.to#. )a+ or other
!a+. ad#i$i.tered by the B-rea- o (-.to#.D %"4V4S4ON&
>. "eci.io$. o the (e$tra! Board o A..e..#e$t Appea!. i$ the
e2erci.e o it. appe!!ate 6-ri.dictio$ o0er ca.e. i$0o!0i$g the a..e..#e$t
a$d ta2atio$ o rea! property origi$a!!y decided by the pro0i$cia! or city
board o a..e..#e$t appea!.D %&! BA!C&
6. "eci.io$. o the Secretary o Ci$a$ce o$ c-.to#. ca.e.
e!e0ated to hi# a-to#atica!!y or re0ie+ ro# deci.io$. o the
(o##i..io$er o (-.to#. +hich are ad0er.e to the <o0er$#e$t -$der
Sectio$ 2B1> o the Tari a$d (-.to#. (odeD %Thi. ha. reere$ce to
oreit-re ca.e. +here the deci.io$ i. to re!ea.e the .ei;ed artic!e. J
"4V4S4ON&
@. "eci.io$. o the Secretary o Trade a$d 4$d-.try' i$ ca.e o
$o$agric-!t-ra! prod-ct' co##odity or artic!e' a$d the Secretary o
Agric-!t-re i$ the ca.e o agric-!t-ra! prod-ct' co##odity or artic!e'
i$0o!0i$g d-#pi$g a$d co-$ter0ai!i$g d-tie. -$der Sectio$ B01 a$d B02'
re.pecti0e!y' o the Tari a$d (-.to#. (ode' a$d .aeg-ard #ea.-re.
-$der Rep-b!ic Act No. ??00' +here either party #ay appea! the deci.io$
to i#po.e or $ot to i#po.e .aid d-tie.. %"4V4S4ON&
b. /urisdictio" o$er cases i"$ol$i"9 cri!i"al offe"ses as
herei" pro$ided-
1. E#clusi$e ori9i"al ?urisdictio" o$er all cri!i"al cases
ari.i$g ro# 0io!atio$. o the Natio$a! 4$ter$a! Re0e$-e (ode or Tari a$d
(-.to#. (ode a$d other !a+. ad#i$i.tered by the B-rea- o 4$ter$a!
Re0e$-e or the B-rea- o (-.to#.8 Provided, hoever, That oe$.e. or
e!o$ie. #e$tio$ed i$ thi. paragraph +here the pri$cipa! a#o-$t o ta2e.
a$d ee.' e2c!-.i0e o charge. a$d pe$a!tie. c!ai#ed' i. !e.. tha$ O$e
#i!!io$ pe.o. %P1'000'000.00& or +here there i. $o .peciied a#o-$t
c!ai#ed .ha!! be tried by the reg-!ar (o-rt. a$d the 6-ri.dictio$ o the (TA
.ha!! be appe!!ate. A$y pro0i.io$ o !a+ or the R-!e. o (o-rt to the co$trary
$ot+ith.ta$di$g' the cri#i$a! actio$ a$d the corre.po$di$g ci0i! actio$ or
the reco0ery o ci0i! !iabi!ity or ta2e. a$d pe$a!tie. .ha!! at a!! ti#e. be
.i#-!ta$eo-.!y i$.tit-ted +ith' a$d 6oi$t!y deter#i$ed i$ the .a#e
proceedi$g by the (TA' the i!i$g o the cri#i$a! actio$ bei$g dee#ed to
$ece..ari!y carry +ith it the i!i$g o the ci0i! actio$' a$d $o right to re.er0e
the i!i$g o .-ch ci0i! actio$ .eparate!y ro# the ci0i! actio$ +i!! be
recog$i;ed.
2. E#clusi$e appellate ?urisdictio" i" cri!i"al offe"ses-
a& O0er appea!. ro# the 6-dg#e$t.' re.o!-tio$. or order.
o the Regio$a! Tria! (o-rt. i$ ta2 ca.e. origi$a!!y decided by the#'
i$ their re.pecti0e territoria! 6-ri.dictio$.
b& O0er petitio$. or re0ie+ o the 6-dg#e$t.' re.o!-tio$.
or order. o the Regio$a! Tria! (o-rt. i$ the e2erci.e o their
appe!!ate 6-ri.dictio$ o0er ta2 ca.e. origi$a!!y decided by the
*etropo!ita$ Tria! (o-rt.' *-$icipa! Tria! (o-rt. a$d *-$icipa! (irc-it
Tria! (o-rt. i$ their re.pecti0e 6-ri.dictio$.
c. /urisdictio" o$er ta# collectio" cases-
1. E2c!-.i0e origi$a! 6-ri.dictio$ i$ ta2 co!!ectio$ ca.e. i$0o!0i$g
i$a! a$d e2ec-tory a..e..#e$t. or ta2e.' ee.' charge. a$d pe$a!tie.8
Provided, hoever, That co!!ectio$ ca.e. +here the pri$cipa! a#o-$t o
ta2e. a$d ee.' e2c!-.i0e o charge. a$d pe$a!tie.' c!ai#ed i. !e.. tha$
O$e #i!!io$ pe.o. %P1'000'000& .ha!! be tried by the proper *-$icipa! Tria!
(o-rt' *etropo!ita$ Tria! (o-rt a$d Regio$a! Tria! (o-rt.
2. E2c!-.i0e appe!!ate 6-ri.dictio$ i$ ta2 co!!ectio$ ca.e.8
a& O0er appea!. ro# 6-dg#e$t.' re.o!-tio$.' or order. o
the Regio$a! Tria! (o-rt. i$ ta2 co!!ectio$ ca.e. origi$a!!y decided by
the#' i$ their re.pecti0e territoria! 6-ri.dictio$.
47
b& O0er petitio$. or re0ie+ o the 6-dg#e$t.' re.o!-tio$.
or order. o the Regio$a! Tria! (o-rt. i$ the e2erci.e o their
appe!!ate 6-ri.dictio$ o0er ta2 co!!ectio$ ca.e. origi$a!!y decided by the
*etropo!ita$ Tria! (o-rt.' *-$icipa! Tria! (o-rt. a$d *-$icipa!
(irc-it Tria! (o-rt.' i$ their re.pecti0e 6-ri.dictio$. %Sec. @' R. A. No.
112>' a. a#e$ded by R. A. No. F2?2' e#pha.i. a$d +ord. i$ pare$the.e.
.-pp!ied&
The petitio" for re$iew to be filed with the 0TA en banc
as the !ode for appeali"9 a decisio"5 resolutio"5 or order of
the 0TA i$isio"5 u"der Sectio" 'A of Republic Act No. ''%<5
as a!e"ded5 is "ot a totally "ew re!edy5 u"iDue to the 0TA5
with a special applicatio" or use therei". To the co$trary' the
(TA #ere!y adopt. the proced-re or petitio$. or re0ie+ a$d appea!.
!o$g e.tab!i.hed a$d practiced i$ other Phi!ippi$e co-rt.. Accordi$g!y'
doctri$e.' pri$cip!e.' r-!e.' a$d precede$t. !aid do+$ i$ 6-ri.pr-de$ce by
thi. (o-rt a. regard. petitio$. or re0ie+ a$d appea!. i$ co-rt. o ge$era!
6-ri.dictio$ .ho-!d !i/e+i.e bi$d the (TA' a$d it ca$$ot depart therero#.
%Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26' 200?&
<. *t is the Re9io"al Trial 0ourt that has ?urisdictio" to
rule upo" the co"stitutio"ality of a ta# law or a re9ulatio"
issued by the ta#i"9 authorities. =here +hat i. a..ai!ed i. the
0a!idity or co$.tit-tio$a!ity o a !a+' or a r-!e or reg-!atio$ i..-ed by the
ad#i$i.trati0e age$cy i$ the peror#a$ce o it. 1-a.i,!egi.!ati0e -$ctio$'
the reg-!ar co-rt. ha0e 6-ri.dictio$ to pa.. -po$ the .a#e. The
deter#i$atio$ o +hether a .peciic r-!e or .et o r-!e. i..-ed by a$
ad#i$i.trati0e age$cy co$tra0e$e. the !a+ or the co$.tit-tio$ i. +ithi$ the
6-ri.dictio$ o the reg-!ar co-rt..
4$deed' the (o$.tit-tio$ 0e.t. the po+er o 6-dicia! re0ie+ or the
po+er to dec!are a !a+' treaty' i$ter$atio$a! or e2ec-ti0e agree#e$t'
pre.ide$tia! decree' order' i$.tr-ctio$' ordi$a$ce' or reg-!atio$ i$ the
co-rt.' i$c!-di$g the regio$a! tria! co-rt.. Thi. i. +ithi$ the .cope o
6-dicia! po+er' +hich i$c!-de. the a-thority o the co-rt. to deter#i$e i$
a$ appropriate actio$ the 0a!idity o the act. o the po!itica! depart#e$t..
A-dicia! po+er i$c!-de. the d-ty o the co-rt. o 6-.tice to .ett!e act-a!
co$tro0er.ie. i$0o!0i$g right. +hich are !ega!!y de#a$dab!e a$d
e$orceab!e' a$d to deter#i$e +hether or $ot there ha. bee$ a gra0e
ab-.e o di.cretio$ a#o-$ti$g to !ac/ or e2ce.. o 6-ri.dictio$ o$ the part
o a$y bra$ch or i$.tr-#e$ta!ity o the <o0er$#e$t. %British American
(o"acco v. Camacho et al.' <. R. No. 16B>?B' A-g-.t 20' 200? +ith a$
i$ter0e$or&
NOTES AN" (O**ENTS8 The abo0e doctri$e .-per.ede. Asia
International Auctioneers, Inc., etc et al., .v. Parayno, ,r., etc.,, et al., <. R.
No. 10BEE>' "ece#ber 1?' 200@ +hich r-!ed that it i. the (o-rt o Ta2
Appea!. that ha. 6-ri.dictio$ re!ati0e to #atter. i$0o!0i$g the
co$.tit-tio$a!ity o reg-!atio$. i..-ed by the B4R. The rea.o$ +a. that thi.
a!!. -$der the co$cept o deci.io$. o the B4R (o##i..io$er o$ other
#atter ari.i$g -$der the pro0i.io$. o !a+. ad#i$i.tered by the
(o##i..io$. 4..-a$ce o re0e$-e reg-!atio$. are a-thori;ed -$der the
N4R(.
British American (o"acco re0er.ed Asia International Auctioneers
-po$ the co$cept o the 6-diciary:. e2pa$ded po+er.
>. *"sta"ces where the 0ourt of Ta# Appeals would
ha$e ?urisdictio" e$e" if there is "o decisio" of the
0o!!issio"er of 0usto!s8
a. "eci.io$. o the Secretary o Trade a$d 4$d-.try or the
Secretary o Agric-!t-re i$ a$ti,d-#pi$g a$d co-$ter0ai!i$g d-ty ca.e. are
appea!ab!e to the (o-rt o Ta2 Appea!. +ithi$ thirty %B0& day. ro# receipt
o .-ch deci.io$..
b. 4$ ca.e o a-to#atic re0ie+ by the Secretary o Ci$a$ce i$
.ei;-re or oreit-re ca.e. +here the 0a!-e o the i#portatio$ e2ceed. P>
#i!!io$ or +here the deci.io$ o the (o!!ector o (-.to#. +hich -!!y or
partia!!y re!ea.e. the .hip#e$t .ei;ed i. air#ed by the (o##i..io$er o
(-.to#..
c. 4$ ca.e o a-to#atic re0ie+ by the Secretary o Ci$a$ce o a
deci.io$ o a (o!!ector o (-.to#. acti$g a0orab!y -po$ a c-.to#.
prote.t.
ASSESS;ENT O1 *NTERNA( RE3EN.E TA)ES
'. Outli"e of ta# re!edies of a ta#payer a"d the
9o$er"!e"t relati$e to ASSESS;ENT of i"ter"al re$e"ue
ta#es.
a. The ta2payer i!e. hi. ta2 ret-r$.
b. A )etter o A-thority i. i..-ed a-thori;i$g B4R e2a#i$er to
a-dit or e2a#i$e the ta2 ret-r$ a$d deter#i$e. +hether the -!! a$d
co#p!ete ta2e. ha0e bee$ paid.
c. 4 the e2a#i$er i. .ati.ied that the ta2 ret-r$ i. tr-!y re!ecti0e
o the ta2ab!e tra$.actio$ a$d a!! ta2e. ha0e bee$ paid' the proce.. e$d..
7o+e0er' i the e2a#i$er i. $ot .ati.ied that the ta2 ret-r$ i. tr-!y re!ecti0e
o the ta2ab!e tra$.actio$ a$d that the ta2e. ha0e $ot bee$ -!!y paid' a
Notice o 4$or#a! (o$ere$ce i. i..-ed i$0iti$g the ta2payer to e2p!ai$ +hy
he .ho-!d $ot be .-b6ect to additio$a! ta2e..
d. 4 the ta2payer atte$d. the i$or#a! co$ere$ce a$d the
e2a#i$er i. .ati.ied +ith the e2p!a$atio$ o the ta2payer' the proce.. i.
agai$ e$ded.
4 the ta2payer ig$ore. the i$0itatio$ to the i$or#a! co$ere$ce' or
i the e2a#i$er i. $ot .ati.ied +ith ta2payer:. e2p!a$atio$'' a$d he be!ie0e.
that proper ta2e. .ho-!d be a..e..ed' the (o##i..io$er o 4$ter$a!
48
Re0e$-e or hi. d-!y a-thori;ed repre.e$tati0e .ha!! the$ $otiy the ta2payer
o the i$di$g. i$ the or# o a pre,a..e..#e$t $otice. The pre,
a..e..#e$t $otice re1-ire. the ta2payer to e2p!ai$ +ithi$ itee$ %1>& day.
ro# receipt +hy $o $otice o a..e..#e$t a$d !etter o de#a$d or
additio$a! ta2e. .ho-!d be directed to hi#.
e. 4 the (o##i..io$er i. .ati.ied +ith the e2p!a$atio$ o the
ta2payer' the$ the proce.. i. agai$ e$ded.
4 the ta2payer ig$ore. the pre,a..e..#e$t $otice by $ot
re.po$di$g or hi. e2p!a$atio$. are $ot accepted by the (o##i..io$er'
the$ a $otice o a..e..#e$t a$d a !etter o de#a$d i. i..-ed.
The $otice o a..e..#e$t #-.t be i..-ed by the (o##i..io$er to
the ta2payer +ithi$ a period o three %B& year. ro# the ti#e the ta2 ret-r$
+a. i!ed or .ho-!d ha0e bee$ i!ed +hiche0er i. the !ater o the t+o e0e$t..
=here the ta2payer did $ot i!e a ta2 ret-r$ or +here the ta2 ret-r$ i!ed i.
a!.e or ra-d-!e$t' the$ the (o##i..io$er ha. a period o te$ %10& year.
ro# di.co0ery o the ai!-re to i!e a ta2 ret-r$ or ro# di.co0ery o the
ra-d +ithi$ +hich to i..-e a$ a..e..#e$t $otice. The r-$$i$g o the
abo0e pre.cripti0e period. #ay ho+e0er be .-.pe$ded -$der certai$
i$.ta$ce..
The $otice o a..e..#e$t #-.t be i..-ed +ithi$ the pre.cripti0e
period a$d #-.t co$tai$ the act.' !a+ a$d 6-ri.pr-de$ce re!ied -po$ by the
(o##i..io$er. Other+i.e it +o-!d $ot be 0a!id.
. The ta2payer .ho-!d the$ i!e a$ ad#i$i.trati0e prote.t by
i!i$g a re1-e.t or reco$.ideratio$ or rei$0e.tigatio$ +ithi$ thirty %B0& day.
ro# receipt o the a..e..#e$t $otice.
The ta2payer co-!d $ot i##ediate!y i$terpo.e a$ appea! to the
(o-rt o Ta2 Appea!. beca-.e there i. $o deci.io$ yet o the
(o##i..io$er that co-!d be the .-b6ect o a re0ie+.
To be 0a!id the ad#i$i.trati0e prote.t #-.t be i!ed +ithi$ the
pre.cripti0e period' #-.t .ho+ the error o the B-rea- o 4$ter$a! Re0e$-e
a$d the correct co#p-tatio$. .-pported by a .tate#e$t o act.' a$d the
!a+ a$d 6-ri.pr-de$ce re!ied -po$ by the ta2payer. There i. $o $eed to pay
-$der prote.t. 4 the prote.t +a. $ot .ea.o$ab!y i!ed the a..e..#e$t
beco#e. i$a! a$d co!!ectib!e a$d the B-rea- o 4$ter$a! Re0e$-e co-!d -.e
it. ad#i$i.trati0e a$d 6-dicia! re#edie. i$ co!!ecti$g the ta2.
g. =ithi$ .i2ty %60& day. ro# i!i$g o the prote.t' a!! re!e0a$t
.-pporti$g doc-#e$t. .ha!! be .-b#itted' other+i.e the a..e..#e$t .ha!!
beco#e i$a! a$d co!!ectib!e a$d the B4R co-!d -.e it. ad#i$i.trati0e a$d
6-dicia! re#edie. to co!!ect the ta2.
O$ce a$ a..e..#e$t ha. beco#e i$a! a$d co!!ectib!e' $ot e0e$
the B4R (o##i..io$er co-!d cha$ge the .a#e. Th-.' the ta2payer co-!d
$ot pay the ta2' the$ app!y or a re-$d' a$d i de$ied appea! the .a#e to
the (o-rt o Ta2 Appea!..
h. 4 the prote.t i. de$ied i$ +ho!e or i$ part' or i. $ot acted -po$
+ithi$ o$e h-$dred eighty %1?0& day. ro# the .-b#i..io$ o doc-#e$t.'
the ta2payer ad0er.e!y aected by the deci.io$ or i$actio$ #ay appea! to
the (o-rt o Ta2 Appea!. +ithi$ thirty %B0& day. ro# receipt o the ad0er.e
deci.io$' or ro# the !ap.e o the o$e h-$dred eighty %1?0,& day period'
+ith a$ app!icatio$ or the i..-a$ce o a +rit o pre!i#i$ary i$6-$ctio$ to
e$6oi$ the B4R ro# co!!ecti$g the ta2 .-b6ect o the appea!.
4 the ta2payer ai!. to .o appea!' the de$ia! o the (o##i..io$er
or the i$actio$ o the (o##i..io$er +o-!d re.-!t to the $otice o
a..e..#e$t beco#i$g i$a! a$d co!!ectib!e a$d the B4R co-!d the$ -ti!i;e it.
ad#i$i.trati0e a$d 6-dicia! re#edie. to co!!ect the ta2.
i. A deci.io$ o a di0i.io$ o the (o-rt o Ta2 Appea!. ad0er.e
to the ta2payer or the go0er$#e$t #ay be the .-b6ect o a #otio$ or
reco$.ideratio$ or $e+ tria!' a de$ia! o +hich i. appea!ab!e to the (o-rt o
Ta2 Appea!. en "anc by #ea$. o a petitio$ or re0ie+.
The (o-rt o Ta2 Appea!.' ha. a period o t+e!0e %12& #o$th. ro#
.-b#i..io$ o the ca.e or deci.io$ +ithi$ +hich to decide.
6. 4 the deci.io$ o the (o-rt o Ta2 Appea!. en "anc air#. the
de$ia! o the prote.t by the (o##i..io$er or the a..e..#e$t i$ ca.e o
ai!-re by the (o##i..io$er to decide the ta2payer #-.t i!e a petitio$ or
re0ie+ o$ certiorari +ith the S-pre#e (o-rt +ithi$ itee$ %1>& day. ro#
$otice o the 6-dg#e$t o$ 1-e.tio$. o !a+. A$ e2te$.io$ o thirty %B0&
day. #ay or 6-.tiiab!e rea.o$. be gra$ted. 4 the ta2payer doe. $ot .o
appea!' the deci.io$ o the (o-rt o Ta2 Appea!. +o-!d beco#e i$a! a$d
thi. ha. the eect o #a/i$g the a..e..#e$t a!.o i$a! a$d co!!ectib!e. The
B4R co-!d the$ -.e it. ad#i$i.trati0e a$d 6-dicia! re#edie. to co!!ect the
ta2.
%. The word assess!e"t whe" used i" co""ectio"
with ta#atio"5 !ay ha$e !ore tha" o"e !ea"i"9. *ore
co##o$!y the +ord a..e..#e$t #ea$. the oicia! 0a!-atio$ o a
ta2payer:. property or p-rpo.e o ta2atio$. The abo0e dei$itio$ o
a..e..#e$t i$d. app!icatio$ -$der tari a$d c-.to#. ta2atio$ a. +e!! a.
!oca! go0er$#e$t ta2atio$.
Cor real property ta#atio"5 there !ay be a special !ea"i"9 to
the burde"s that are i!posed upo" real properties that ha$e bee"
be"efited by a public worEs e#pe"diture of a local 9o$er"!e"t. 4t i.
.o#eti#e. ca!!ed a .pecia! a..e..#e$t or a .pecia! !e0y. *Commissioner of
Internal Revenue v. Pascor Realty and %evelopment Corporation, et al., <.R. No.
12?B1>' A-$e 2F' 1FFF&
1or i"ter"al re$e"ue ta#atio" assess!e"t as layi"9 a ta#. The
-!ti#ate p-rpo.e o a$ a..e..#e$t to .-ch a co$$ectio$ i. to a.certai$ the
a#o-$t that each ta2payer i. to pay. %I"id.&
8. A" assess!e"t is a "otice duly se"t to the ta#payer
which is dee!ed !ade o"ly whe" the B*R releases5 !ails or
se"ds such "otice to the ta#payer. *Commissioner of Internal Revenue
49
v. Pascor Realty and %evelopment Corporation, et al., <.R. No. 12?B1>' A-$e 2F'
1FFF&
:. SelfHassessed ta#5 defi"ed. A ta2 that the ta2payer
hi#.e! a..e..e. or co#p-te. a$d pay. to the ta2i$g a-thority. 4t i. a ta2
that .e!,a..e..ed by the ta2payer +itho-t the i$ter0e$tio$ o a$
a..e..#e$t by the ta2 a-thority to create the ta2 !iabi!ity.
The Ta2 (ode o!!o+. the pay,a.,yo-,i!e .y.te# o ta2atio$ -$der
+hich the ta2payer co#p-te. hi. o+$ ta2 !iabi!ity' prepare. the ret-r$' a$d
pay. the ta2 a. he i!e. the ret-r$. The pay,a.,yo-,i!e .y.te# i. a .e!,
a..e..i$g ta2 ret-r$.
4$ter$a! re0e$-e ta2e. are .e!,a..e..i$g. %"i..e$t o A. (arpio i$
Philippine !ational 9il Company v. Court of Appeals, et al., <. R. No. 10FF@6' Apri!
26' 200> a$d co#pa$io$ ca.e&
A c!ear e2a#p!e o a .e!,a..e..ed ta2 i. the a$$-a! i$co#e ta2'
+hich the ta2payer hi#.e! co#p-te. a$d pay. +itho-t the i$ter0e$tio$ o
a$y a..e..#e$t by the B4R. The a$$-a! i$co#e ta2 beco#e. d-e a$d
payab!e +itho-t $eed o a$y prior a..e..#e$t by the B4R. The B4R #ay or
#ay $ot i$0e.tigate or a-dit the a$$-a! i$co#e ta2 ret-r$ i!ed by the
ta2payer. The ta2payer:. !iabi!ity or the i$co#e ta2 doe. $ot depe$d o$
+hether or $ot the B4R co$d-ct. .-ch .-b.e1-e$t i$0e.tigatio$ or a-dit.
7o+e0er' i the ta2i$g a-thority i. ir.t re1-ired to i$0e.tigate' a$d
ater .-ch i$0e.tigatio$ to i..-e the ta2 a..e..#e$t that create. the ta2
!iabi!ity' the$ the ta2 i. $o !o$ger .e!,a..e..ed. %I"id.&
<. Sec. > FBG of the N*R0 of 'CC@ allows the B*R to
!aEe or a!e"d a ta# retur" fro! his ow" E"owled9e or
obtai"ed throu9h testi!o"y or otherwise. Th-.' the (o##i..io$er
o 4$ter$a! Re0e$-e i$0e.tigate. a$y circ-#.ta$ce +hich !ed hi# to
be!ie0e that the ta2payer had ta2ab!e i$co#e !arger tha$ that reported.
Nece..ari!y' thi. i$1-iry +o-!d ha0e to be o-t.ide o the boo/. beca-.e
they .-pported the ret-r$ a. i!ed. 7e #ay ta/e the .+or$ te.ti#o$y o the
ta2payer' he #ay ta/e the te.ti#o$y o third partie.D he #ay e2a#i$e a$d
.-bpoe$a' i $ece..ary' trader.: a$d bro/er.: acco-$t. a$d boo/. a$d the
ta2payer:. boo/. o acco-$t.. The (o##i..io$er i. $ot bo-$d to o!!o+
a$y .et o patter$.. The e2i.te$ce o -$reported i$co#e #ay be .ho+$ by
a$y partic-!ar proo that i. a0ai!ab!e i$ the circ-#.ta$ce. o the partic-!ar
.it-atio$. %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc. <. R.
No. 1B6F@>' *arch B1' 200>&
>. ,e"eral rule- +he" the 0o!!issio"er of *"ter"al
Re$e"ue !ay rely o" esti!ates. The r-!e i. that i$ the ab.e$ce o
acco-$ti$g record. o a ta2payer' hi. ta2 !iabi!ity #ay be deter#i$ed by
e.ti#atio$. The petitio$er %(o##i..io$er o 4$ter$a! Re0e$-e& i. $ot
re1-ired to co#p-te .-ch ta2 !iabi!itie. +ith #athe#atica! e2act$e...
Appro2i#atio$ i$ the ca!c-!atio$ o ta2e. d-e i. 6-.tiied. To ho!d other+i.e
+o-!d be ta$ta#o-$t to ho!di$g that ./i!!-! co$cea!#e$t i. a$ i$0i$cib!e
barrier to proo. %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc.
<. R. No. 1B6F@>' *arch B1' 200>&
7o+e0er' the r-!e doe. $ot app!y +here the e.ti#atio$ i. arri0ed at
arbitrari!y a$d capricio-.!y. %I"id.&
@. ;ea"i"9 of Nbest e$ide"ce obtai"ableQ -$der Sec. 6
%B&' N4R( o 1FF@. Thi. #ea$. that the origi$a! doc-#e$t. #-.t be
prod-ced. 4 it co-!d $ot be prod-ced' .eco$dary e0ide$ce #-.t be
add-ced. %'ante) (rading Co., Inc. v. Commissioner of Internal Revenue' (A ,
<.R. SP No. E@1@2' Septe#ber B0' 1FF?&
A. The o!!o+i$g are the 9e"eral !ethods de$eloped by
the Bureau of *"ter"al Re$e"ue for reco"structi"9 a ta#payer6s
i"co!e +here the record. do $ot .ho+ the tr-e i$co#e or +here $o
ret-r$ +a. i!ed or +hat +a. i!ed +a. a a!.e a$d ra-d-!e$t ret-r$
%a& Perce$tage #ethodD
%b& Net +orth #ethod.D
%c& Ba$/ depo.it #ethodD
%d& (a.h e2pe$dit-re #ethodD
%e& 3$it a$d 0a!-e #ethodD
%& Third party i$or#atio$ or acce.. to record. #ethodD
%g& S-r0ei!!a$ce a$d a..e..#e$t #ethod. %(hapter L444. 4$direct
Approach to 4$0e.tigatio$' 7a$dboo/ o$ A-dit Proced-re. a$d Tech$i1-e.
J Vo!-#e 4' pp. 6?,@E&
C. Third party i"for!atio" or access to records
!ethod. The B4R #ay re1-ire third partie.' p-b!ic or pri0ate to .-pp!y
i$or#atio$ to the B4R' a$d th-.' obtai$ o$ a reg-!ar ba.i. ro# a$y
per.o$ other tha$ the per.o$ +ho.e i$ter$a! re0e$-e ta2 !iabi!ity i. .-b6ect
to a-dit or i$0e.tigatio$' or ro# a$y oice or oicer o the $atio$a! a$d
!oca! go0er$#e$t.' go0er$#e$t age$cie. a$d i$.tr-#e$ta!itie. i$c!-di$g
the Ba$g/o Se$tra! $g Pi!ipi$a. a$d go0er$#e$t,o+$ed or Jco$tro!!ed
corporatio$.' a$y i$or#atio$ .-ch a.' b-t $ot !i#ited to' co.t. a$d 0o!-#e
o prod-ctio$' receipt. or .a!e. a$d gro.. i$co#e. o ta2payer.' a$d the
$a#e. ' addre..e.' a$d i$a$cia! .tate#e$t. o corporatio$.' #-t-a! -$d
co#pa$ie.' i$.-ra$ce co#pa$ie.' regio$a! operati$g head1-arter. or
#-!ti$atio$a! co#pa$ie.' 6oi$t acco-$t.' a..ociatio$.' 6oi$t 0e$t-re. or
co$.ortia a$d regi.tered part$er.hip.' a$d their #e#ber.D 222 GSec. > %B&'
N4R( o 1FF@&
'&. A preHassess!e"t "otice i. a !etter .e$t by the B-rea-
o 4$ter$a! Re0e$-e to a ta2payer a./i$g hi# to e2p!ai$ +ithi$ a period o
50
itee$ %1>& day. ro# receipt +hy he .ho-!d $ot be the .-b6ect o a$
a..e..#e$t $otice. 4t i. part o the d-e proce.. right. o a ta2payer.
A. a ge$era! r-!e' the B4R co-!d $ot i..-e a$ a..e..#e$t $otice
+itho-t ir.t i..-i$g a pre,a..e..#e$t $otice beca-.e it i. part o the d-e
proce.. right. o a ta2payer to be gi0e$ $otice i$ the or# o a pre,
a..e..#e$t $otice' a$d or hi# to e2p!ai$ +hy he .ho-!d $ot be the .-b6ect
o a$ a..e..#e$t $otice.
''. *"sta"ces where a preHassess!e"t "otice is "ot
reDuired before a "otice of assess!e"t is se"t to the ta#payer.
a. =he$ the i$di$g or a$y deicie$cy ta2 i. the re.-!t o
#athe#atica! error i$ the co#p-tatio$ o the ta2 a. appeari$g o$ the ace
o the ret-r$D or
b. =he$ a di.crepa$cy ha. bee$ deter#i$ed bet+ee$ the ta2
+ithhe!d a$d the a#o-$t act-a!!y re#itted by the +ithho!di$g age$tD or
c. =he$ a ta2payer opted to c!ai# a re-$d or ta2 credit o e2ce..
creditab!e +ithho!di$g ta2 or a ta2ab!e period +a. deter#i$ed to ha0e
carried o0er a$d a-to#atica!!y app!ied the .a#e a#o-$t c!ai#ed agai$.t
the e.ti#ated ta2 !iabi!itie. or the ta2ab!e 1-arter or 1-arter. o the
.-cceedi$g tab!e yearD or
d. =he$ the e2ce.. ta2 d-e o$ e2ci.ab!e artic!e. ha. $ot bee$ paidD
or
e. =he$ a$ artic!e !oca!!y p-rcha.ed or i#ported by a$ e2e#pt
per.o$' .-ch a.' b-t $ot !i#ited to 0ehic!e.' capita! e1-ip#e$t' #achi$erie.
a$d .pare part.' ha. bee$ .o!d' trade or tra$.erred to $o$,e2e#pt
per.o$.. %Sec. 22?' N4R( o 1FF@&
'%. Prescripti$e periods for !aEi"9 assess!e"ts of
i"ter"al re$e"ue ta#es.
a. Three %B& year. ro# the !a.t day +ithi$ +hich to i!e a ret-r$
or +he$ the ret-r$ +a. act-a!!y i!ed' +hiche0er i. !ater %Sec. 20B' N4R( o
1FF@&. The (4R ha. three %B& year. ro# the date o act-a! i!i$g o the ta2
ret-r$ to a..e.. a $atio$a! i$ter$a! re0e$-e ta2 or to co##e$ce co-rt
proceedi$g. or the co!!ectio$ thereo +itho-t a$ a..e..#e$t. GBan- of
Philippine Islands */ormerly /ar &ast Ban- and (rust Company# v.
Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch @' 200?I
b. te$ year. ro# di.co0ery o the ai!-re to i!e the ta2 ret-r$ or
di.co0ery o a!.ity or ra-d i$ the ret-r$ GSec. 222 %a&' N4R( o 1FF@G D or
c. +ithi$ the period agreed -po$ bet+ee$ the go0er$#e$t a$d
the ta2payer +here there i. a +ai0er o the pre.cripti0e period or
a..e..#e$t %Sec. 222 %b&' N4R( o 1FF@&.
'8. Purpose of period of li!itatio"s i" ta#atio". Cor the
p-rpo.e o .aeg-ardi$g ta2payer. ro# a$y -$rea.o$ab!e e2a#i$atio$'
i$0e.tigatio$ or a..e..#e$t' o-r ta2 !a+ pro0ide. a .tat-te o !i#itatio$. i$
the co!!ectio$ o ta2e.. GCommissioner of Internal Revenue v. B./. +oodrich Phils,
Inc., %no Sime %ar"y International (ire Co., Inc.&, et al., <.R. No. 10E1@1'
Cebr-ary 2E' 1FFF' B0B S(RA >E6D Philippine ,ournalists, Inc. v. Commissioner of
Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200EI' a. +e!! a. their
a..e..#e$t..
The !a+ pre.cribi$g a !i#itatio$ o actio$. or the co!!ectio$ o the
i$co#e ta2 i. be$eicia! both to the <o0er$#e$t a$d to it. citi;e$.D to the
<o0er$#e$t beca-.e ta2 oicer. +o-!d be ob!iged to act pro#pt!y i$ the
#a/i$g o a..e..#e$t' a$d to citi;e$. beca-.e ater the !ap.e o the
period o pre.criptio$ citi;e$. +o-!d ha0e a ee!i$g o .ec-rity agai$.t
-$.cr-p-!o-. ta2 age$t. +ho +i!! a!+ay. i$d a$ e2c-.e to i$.pect the
boo/. o ta2payer.' $ot to deter#i$e the !atter:. rea! !iabi!ity' b-t to ta/e
ad0a$tage o e0ery opport-$ity to #o!e.t peace-!' !a+,abidi$g citi;e$..
=itho-t .-ch a !ega! dee$.e ta2payer. +o-!d -rther#ore be -$der
ob!igatio$ to a!+ay. /eep their boo/. a$d /eep the# ope$ or i$.pectio$
.-b6ect to hara..#e$t by -$.cr-p-!o-. ta2 age$t.. The !a+ o$
pre.criptio$ bei$g a re#edia! #ea.-re .ho-!d be i$terpreted i$ a +ay
co$d-ci0e to bri$gi$g abo-t the be$eice$t p-rpo.e o aordi$g protectio$
to the ta2payer +ithi$ the co$te#p!atio$ o the (o##i..io$ +hich
reco##e$d the appro0a! o the !a+. GBan- of Philippine Islands */ormerly /ar
&ast Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No.
1@EFE2' *arch @' 200?I
Thi. #a$date go0er$. the 1-e.tio$ o pre.criptio$ o the
go0er$#e$t:. right to a..e.. i$ter$a! re0e$-e ta2e. pri#ari!y to
.aeg-ard the i$tere.t. o ta2payer. ro# -$rea.o$ab!e i$0e.tigatio$.
Accordi$g!y' the go0er$#e$t #-.t a..e.. i$ter$a! re0e$-e ta2e. o$ ti#e
.o a. $ot to e2te$d i$dei$ite!y the period o a..e..#e$t a$d depri0e the
ta2payer o the a..-ra$ce that it +i!! $o !o$ger be .-b6ected to -rther
i$0e.tigatio$ or ta2e. ater the e2piratio$ o rea.o$ab!e period o ti#e.
%Commissioner of Internal Revenue v. /M/ %evelopment Corporation, <. R. No.
16@@6>' A-$e B0' 200? citi$g Philippine ,ournalists, Inc. v. Commissioner of
Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200E' EE@ S(RA 21E' 22>&
':. ."reaso"able i"$esti9atio" co"te!plates cases
where the period for assess!e"t e#te"ds i"defi"itely beca-.e
thi. depri0e. the ta2payer o the a..-ra$ce that it +i!! $ot !o$ger be
.-b6ected to -rther i$0e.tigatio$ or ta2e. ater the e2piratio$ o a
rea.o$ab!e period o ti#e. %Philippine ,ournalists, Inc. v. Commissioner of
Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200E +ith $ote to .ee
Repu"lic v. A"laza, 10? Phi!. 110>. 110?&
)a+. o$ pre.criptio$ .ho-!d be !ibera!!y co$.tr-ed i$ a0or o the
ta2payer. Rea.o$8 or the p-rpo.e o .aeg-ardi$g ta2payer. ro# a$
-$rea.o$ab!e e2a#i$atio$' i$0e.tigatio$ or a..e..#e$t' o-r ta2 !a+.
pro0ide a .tat-te o !i#itatio$ o$ the co!!ectio$ o ta2e.. Th-.' the !a+ o$
pre.criptio$' bei$g a re#edia! #ea.-re' .ho-!d be !ibera!!y co$.tr-ed i$
order to aord .-ch protectio$' A. a coro!!ary' the e2ceptio$. to the !a+ o$
51
pre.criptio$ .ho-!d perorce be .trict!y co$.tr-ed. GPhilippine ,ournalists, Inc.
v. Commissioner of Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200E
citi$g Commissioner of Internal Revenue v. B./. +oodrich Phils, Inc *no Sime
%ar"y International (ire Co., Inc.#,., et al., <.R. No. 10E1@1' Cebr-ary 2E' 1FFF'
B0B S(RA >E6I
The pre.cripti0e period +a. preci.e!y i$te$ded to gi0e the
ta2payer. peace o #i$d. *Commissioner of Internal Revenue v. B./. +oodrich
Phils., Inc., et al.' <.R. No. 10E1@1' Cebr-ary 2E' 1FFF&
'<. A ?eopardy assess!e"t i. a de!i$1-e$cy ta2
a..e..#e$t +hich +a. a..e..ed +itho-t the be$eit o co#p!ete or partia!
a-dit by a$ a-thori;ed re0e$-e oicer' +ho ha. rea.o$ to be!ie0e that the
a..e..#e$t a$d co!!ectio$ o a deicie$cy ta2 +i!! be 6eopardi;ed by de!ay
beca-.e o the ta2payer:. ai!-re to co#p!y +ith the a-dit a$d i$0e.tigatio$
re1-ire#e$t. to pre.e$t hi. boo/. o acco-$t. a$d9or perti$e$t record.' or
to .-b.ta$tiate a!! or a$y o the ded-ctio$.' e2e#ptio$.' or credit. c!ai#ed
i$ hi. ret-r$. GSec. B.1 %a&' Re0. Reg.. No. 6,2000&
Aeopardy a..e..#e$t i. a$ i$dicatio$ o the do-bt-! 0a!idity o the
a..e..#e$t' he$ce it #ay be .-b6ect to a co#pro#i.e. GSec. B.1 %a&' Re0.
Reg.. No. 6,2000I
'>. ReDuisites for 1or!al (etter of e!a"d a"d
Assess!e"t Notice. The or#a! !etter o de#a$d a$d a..e..#e$t
$otice .ha!! be i..-ed by the (o##i..io$er or hi. d-!y a-thori;ed
repre.e$tati0e. The !etter o de#a$d ca!!i$g or pay#e$t o the
ta2payer:. deicie$cy ta2 or ta2e. .ha!! .tate the act.' the !a+' r-!e. a$d
reg-!atio$.' or 6-ri.pr-de$ce o$ +hich the a..e..#e$t i. ba.ed'
other+i.e' the or#a! !etter o de#a$d a$d a..e..#e$t $otice .ha!! be
0oid. The .a#e .ha!! be .e$t to the ta2payer o$!y by regi.tered #ai! or
by per.o$a! de!i0ery.
'@. +hat are the reDuire!e"ts for the $alidity of a
for!al letter of de!a"d a"d assess!e"t "otice 7
S3<<ESTE" ANS=ER8
a. There #-.t ha0e bee$ pre0io-.!y i..-ed a pre,a..e..#e$t
$otice -$ti! e2ceptedD
b. 4t #-.t ha0e bee$ i..-ed prior to the pre.cripti0e periodD a$d
c. The !etter o de#a$d ca!!i$g or pay#e$t o the ta2payer:.
deicie$cy ta2 or ta2e. .ha!! .tate the act.' the !a+' r-!e. a$d reg-!atio$.'
or 6-ri.pr-de$ce o$ +hich the a..e..#e$t i. ba.ed' other+i.e' the or#a!
!etter o de#a$d a$d a..e..#e$t $otice .ha!! be 0oid. %Sec. B.1.E' Re0.
Reg.. No. 12,FF&
'A. +hat are the reaso"s for presu!ptio" of
correct"ess of assess!e"ts 7
S3<<ESTE" ANS=ER8
a. )ieb!ood theory
b. Pre.-#ptio$ o reg-!arity %Commissioner of Internal Revenue v.
'ante) (rading Co., Inc., <' R. No. 1B6F@>' *arch B1' 200>& i$ the
peror#a$ce o p-b!ic -$ctio$.. %Commissioner of Internal Revenue v.
(uazon, Inc., 1@B S(RA BF@&
c. The !i/e!ihood that the ta2payer +i!! ha0e acce.. to the
re!e0a$t i$or#atio$ GCommissioner of Internal Revenue, supra citi$g <nited
States v. Re)ach, E?2 C.2d 10 %1F@B&. The certiorari +a. de$ied by the 3$ited
State. S-pre#e (o-rt o$ No0e#ber 1F' 1F@BI
d. The de.irabi!ity o bo!.teri$g the record,/eepi$g re1-ire#e$t.
o the N4R(. %I"id.&
'C. ,i$e i"sta"ces where pri!a facie correct"ess of a
ta# assess!e"t does "ot apply.
S3<<ESTE" ANS=ER8 The prima facie correct$e.. o a ta2
a..e..#e$t doe. $ot app!y -po$ proo that a$ a..e..#e$t i. -tter!y
+itho-t o-$datio$' #ea$i$g it i. arbitrary a$d capricio-.. =here the B4R
ha. co#e o-t +ith a $a/ed a..e..#e$t i.e.' +itho-t a$y o-$datio$
character' the deter#i$atio$ o the ta2 d-e i. +itho-t ratio$a! ba.i..
GCommissioner of Internal Revenue v. 'ante) (rading Co., Inc., <' R. No. 1B6F@>'
*arch B1' 200> citi$g <nited States v. ,anis, EF ). Ed. 2d 10E6 %1F@6&D E2? 3S
EBB %1F@6&I 4$ .-ch a .it-atio$' the deter#i$atio$ o the (o##i..io$er
co$tai$ed i$ a deicie$cy $otice di.appear.. GCommissioner of Internal
Revenue, supra citi$g a 3.S. (o-rt o Appea!. r-!i$g' i$ Clar- and Clar- v.
Commissioner of Internal Revenue, 266 C. 2d 6F? %1F>F&I 7e$ce' the
deter#i$atio$ by the (TA #-.t re.t o$ a!! the e0ide$ce i$trod-ced a$d it.
-!ti#ate deter#i$atio$ #-.t i$d .-pport i$ credib!e e0ide$ce.
GCommissioner of Internal Revenue, supraI
%&. +hat are the i"sta"ces that suspe"ds the
ru""i"9 of the prescripti$e periods FStatute of (i!itatio"sG
withi" which to !aEe a" assess!e"t a"d the be9i""i"9 of
distrai"t or le$y or of a proceedi"9 i" court for the collectio"5
i" respect of a"y ta# deficie"cies7
S3<<ESTE" ANS=ER8
a. =he$ the (o##i..io$er i. prohibited ro# #a/i$g the
a..e..#e$t' or begi$$i$g di.trai$t' or !e0y or proceedi$g i$ co-rt a$d or
.i2ty %60& day. thereaterD
b. =he$ the ta2payer re1-e.t. or a$d i. gra$ted a
rei$0e.tigatio$ by the co##i..io$erD
c. =he$ the ta2payer co-!d $ot be !ocated i$ the addre.. gi0e$
by hi# i$ the ret-r$ i!ed -po$ +hich the ta2 i. bei$g a..e..ed or co!!ectedD
52
d. =he$ the +arra$t o di.trai$t a$d !e0y i. d-!y .er0ed -po$ the
ta2payer' hi. a-thori;ed repre.e$tati0e' or a #e#ber o hi. ho-.eho!d +ith
.-icie$t di.cretio$' a$d $o property co-!d be !ocatedD a$d
e. =he$ the ta2payer i. o-t o the Phi!ippi$e..
NOTES AN" (O**ENTS8
The ho!di$g i$ Commissioner of Internal Revenue v. Court of
Appeals, et al., <.R. No. 11>@12' Cebr-ary 2>' 1FFF %(ar$atio$ ca.e& that
the +ai0er o the period or a..e..#e$t #-.t be i$ +riti$g a$d ha0e the
+ritte$ co$.e$t o the B4R (o##i..io$er i. .ti!! doctri$a! beca-.e o the
pro0i.io$. o Sec. 22B' N4R( o 1FF@ +hich pro0ide. or the .-.pe$.io$ o
the pre.cripti0e period8
%'. ."der R;O No. %&HC&5 which i!ple!e"ts
Sectio"s %&8 a"d %%% FbG5 the followi"9 procedures should be
followed for a $alid wai$er of the prescripti$e period for a"
assess!e"t8
a. The +ai0er #-.t be i$ the proper or#D
b. The +ai0er .ha!! be .ig$ed by the ta2payer hi#.e! or hi.
d-!y a-thori;ed repre.e$tati0e. 4$ the ca.e o a corporatio$' the +ai0er
#-.t be .ig$ed by a$y o it. re.po$.ib!e oicia!..
Soo$ ater the +ai0er i. .ig$ed by the ta2payer' the (o##i..io$er
o 4$ter$a! Re0e$-e or the re0e$-e oicia! a-thori;ed by hi#' a.
herei$ater pro0ided' .ha!! .ig$ the +ai0er i$dicati$g that the B-rea- ha.
accepted a$d agreed to the +ai0er. The date of such accepta"ce by
the Bureau should be i"dicated. Both the date o e2ec-tio$ by the
ta2payer a$d date o accepta$ce by the B-rea- .ho-!d be beore the
e2piratio$ o the period o pre.criptio$ or beore the !ap.e o the period
agreed -po$ i$ ca.e a .-b.e1-e$t agree#e$t i. e2ec-ted.
c. The o!!o+i$g re0e$-e oicia!. are a-thori;ed to .ig$ the
+ai0er.
A. 4$ the Natio$a! Oice
2 2 2 2
B. 0o!!issio"er
1or ta# cases i"$ol$i"9 !ore tha" P';
B. 4$ the Regio$a! Oice.
1. The Re0e$-e "i.trict Oicer +ith re.pect to
ta2 ca.e. .ti!! pe$di$g i$0e.tigatio$ a$d the period to a..e.. i.
abo-t to pre.cribe regard!e.. o a#o-$t.
2 2 2 2
d. The wai$er !ust be e#ecuted i" three F8G copies' the
origi$a! copy to be attached to the doc/et o the ca.e' the seco"d copy
for the ta#payer a$d the third copy or the Oice accepti$g the +ai0er.
The fact of receipt by the ta#payer of his=her file copy shall be
i"dicated i" the ori9i"al copy.
d. The fore9oi"9 procedures shall be strictly followed.
A$y re0e$-e oicia! o-$d $ot to ha0e co#p!ied +ith thi. Order re.-!ti$g
i$ pre.criptio$ o the right to a..e..9co!!ect .ha!! be ad#i$i.trati0e!y dea!t
+ith. %Re$-#beri$g a$d e#pha.i. .-pp!ied.&
4 the abo0e are $ot o!!o+ed there i. $o 0a!id +ai0er a$d
pre.criptio$ +o-!d r-$. %Commissioner of Internal Revenue v. /M/
%evelopment Corporation, <. R. No. 16@@6>' A-$e B0' 200? citi$g Philippine
,ournalists, Inc. v. Commissioner of Internal Revenue <.R. No. 162?>2'
"ece#ber 16' 200E' EE@ S(RA 21E' 22?,22F&
%%. The procedures i" R;O No. %&HC& are NOT
!erely directory a"d that the e#ecutio" of a wai$er is a
re"u"ciatio" of a ta#payer6s ri9ht to i"$oEe prescriptio".
R;O No. %&HC& !ust be strictly followed. A +ai0er o the .tat-te o
!i#itatio$. -$der the N4R(' to a certai$ e2te$t bei$g a derogatio$ o the
ta2payer:. right to .ec-rity agai$.t pro!o$ged a$d -$.cr-p-!o-.
i$0e.tigatio$.' #-.t be care-!!y a$d .trict!y co$.tr-ed. The +ai0er o the
.tat-te o !i#itatio$. doe. $ot #ea$ that the ta2payer re!i$1-i.he. the right
to i$0o/e pre.criptio$ -$e1-i0oca!!y' partic-!ar!y +here the !a$g-age o the
doc-#e$t i. e1-i0oca!.
Th-. a +ai0er beco#e. -$!i#ited i$ ti#e' a$d i$0a!id' beca-.e it
did $ot .peciy a dei$ite date' agreed -po$ bet+ee$ the B4R a$d the
ta2payer' +ithi$ +hich the or#er #ay a..e.. a$d co!!ect ta2e.. 4t a!.o
+o-!d ha0e $o bi$di$g eect o$ the ta2payer i there +a. $o co$.e$t by the
(o##i..io$er. O$ thi. ba.i.' $o i#p!ied co$.e$t ca$ be pre.-#ed' $or
ca$ it be co$te$ded that the co$c-rre$ce to .-ch +ai0er i. a #ere
or#a!ity. %Commissioner of Internal Revenue v. /M/ %evelopment Corporation,
<. R. No. 16@@6>' A-$e B0' 200? citi$g Philippine ,ournalists, Inc. v.
Commissioner of Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200E' EE@
S(RA 21E' 22F i$ t-r$ citi$g 4d. at 22F' citi$g Commissioner of Internal Revenue
v. Court of Appeals' <.R. No. 11>@12' Cebr-ary 2>' 1FFF' B0B S(RA 61E' 620,
622.&
%8. B*R ca""ot rely o" its i"$ocatio" of the rule that the
9o$er"!e"t ca""ot be estopped by the !istaEes of its re$e"ue
officers i" the e"force!e"t of R;O No. %&HC& beca-.e the !a+ o$
pre.criptio$ .ho-!d be i$terpreted i$ a +ay co$d-ci0e to bri$gi$g abo-t the
be$eice$t p-rpo.e o aordi$g protectio$ to the ta2payer +ithi$ the
co$te#p!atio$ o the (o##i..io$ +hich reco##e$ded the appro0a! o the
!a+. To the <o0er$#e$t' it. ta2 oicer. are ob!iged to act pro#pt!y i$ the
#a/i$g o a..e..#e$t .o that ta2payer.' ater the !ap.e o the period o
pre.criptio$' +o-!d ha0e a ee!i$g o .ec-rity agai$.t -$.cr-p-!o-. ta2
age$t. +ho +i!! a!+ay. try to i$d a$ e2c-.e to i$.pect the boo/. o
ta2payer.' $ot to deter#i$e the !atter:. rea! !iabi!ity' b-t to ta/e ad0a$tage o
53
a po..ib!e opport-$ity to hara.. e0e$ !a+,abidi$g b-.i$e..#e$. =itho-t
.-ch !ega! dee$.e' ta2payer. +o-!d be ope$ .ea.o$ to hara..#e$t by
-$.cr-p-!o-. ta2 age$t.. GCommissioner of Internal Revenue v. /M/
%evelopment Corporation, <. R. No. 16@@6>' A-$e B0' 200? citi$g Repu"lic of
the Phils. v. A"laza, 10? Phi!. 110>' 110? %1F60&I
%:. The si9"atures of both the 0o!!issio"er a"d
the ta#payer5 are reDuired for a wai$er of the prescripti$e
period' th-. a -$i!atera! +ai0er o$ the part o the ta2payer doe. $ot
.-.pe$d the pre.cripti0e period. GCommissioner of Internal Revenue v. Court
of Appeals, et al., <.R. No. 11>@12' Cebr-ary 2>' 1FFF %(ar$atio$ ca.e&I
:@. The act of reDuesti"9 a rei"$esti9atio" alo"e does
"ot suspe"d the ru""i"9 of the prescripti$e period. The
reDuest for rei"$esti9atio" !ust be 9ra"ted by the 0*R. The
S-pre#e (o-rt dec!ared that the b-rde$ o proo that the re1-e.t or
rei$0e.tigatio$ had bee$ act-a!!y gra$ted .ha!! be o$ the (o##i..io$er
o 4$ter$a! Re0e$-e. S-ch gra$t #ay be e2pre..ed i$ it.
co##-$icatio$. +ith the ta2payer or i#p!ied ro# the actio$ o the
(o##i..io$er or hi. a-thori;ed repre.e$tati0e i$ re.po$.e to the re1-e.t
or rei$0e.tigatio$. GBan- of Philippine Islands */ormerly /ar &ast Ban- and
(rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch
@' 200?I
PROTEST*N, *NTERNA( RE3EN.E TA) ASSESS;ENTS
'. +hat is the presu!ptio" that flows fro! a ta#payer6s
failure to protest a" assess!e"t 7
S3<<ESTE" ANS=ER8 Ta2 a..e..#e$t. by ta2 e2a#i$er. are
pre.-#ed correct a$d #ade i$ good aith. The ta2payer ha. the d-ty to
pro0e other+i.e. 4$ the ab.e$ce o proo o a$y irreg-!aritie. i$ the
peror#a$ce o d-tie.' a$ a..e..#e$t d-!y #ade by a B-rea- o 4$ter$a!
Re0e$-e e2a#i$er a$d appro0ed by hi. .-perior oicer. +i!! $ot be
di.t-rbed. A!! pre.-#ptio$. are i$ a0or o the correct$e.. o ta2
a..e..#e$t.. %Commissioner of Internal Revenue v. Ban- of Philippine
Islands., <' R. No. 1BE062' Apri! 1@' 200@ citi$g Sy Po v. Court of Appeals, <. R.
No. ),?1EE6' 1? A-g-.t 1F??' 16E S(RA >2E' >B0' citatio$. o#itted&
%. +hat are the two ways of protesti"9 a" assess!e"t
"otice for a" i"ter"al re$e"ue ta# 7 Alter"ati$ely5 what are the
two types of protests 7 E#plai" briefly.
S3<<ESTE" ANS=ER8
a. Re1-e.t or reco$.ideratio$ +hich reer. to a p!ea or re,
e0a!-atio$ o a$ a..e..#e$t o$ the ba.i. o e2i.ti$g record. +itho-t $eed
o additio$a! e0ide$ce. 4t #ay i$0o!0e both a 1-e.tio$ o act or o !a+ or
both.
b. Re1-e.t or rei$0e.tigatio$ +hich reer. to a p!ea or re,
e0a!-atio$ o a$ a..e..#e$t o$ the ba.i. o $e+!y,di.co0ered e0ide$ce or
additio$a! e0ide$ce that a ta2payer i$te$d. to pre.e$t i$ the i$0e.tigatio$.
4t #ay a!.o i$0o!0e a 1-e.tio$ o act or !a+ or both. %Commissioner of
Internal Revenue v. Philippine +lo"al Communication, Inc., <. R. No. 16@1E6'
October B1' 2006 citi$g Re0. Reg.. No. 12,?>&
8. +hat is that type of protest that suspe"ds the
ru""i"9 of the statute of li!itatio"s for the be9i""i"9 of
distrai"t or le$y or a proceedi"9 i" court for collectio" 7
+hy 7
S3<<ESTE" ANS=ER8 4t i. that type o prote.t +he$ the
ta2payer re1-e.t. or a rei$0e.tigatio$ +hich i. gra$ted by the
(o##i..io$er %Sec. 22B' N4R( o 1FF@&' that .-.pe$d. the r-$$i$g o the
.tat-te o !i#itatio$. or co!!ectio$ o the ta2. %Commissioner of Internal
Revenue v. Philippine +lo"al Communication, Inc., <. R. No. 16@1E6' October B1'
2006 citi$g Sec. 2@1' $o+ Sec. 22B' N4R( o 1FF@& =he$ a ta2payer de#a$d.
a rei$0e.tigatio$' the ti#e e#p!oyed i$ rei$0e.tigatio$ .ho-!d be ded-cted
ro# the tota! period o !i#itatio$. GCommissioner of Internal Revenue, supra
citi$g Repu"lic v. $opez, 11@ Phi!. >@>' >@?D @ S(RA >66' >6?,>6F %1F6B&I
3$do-bted!y' a rei$0e.tigatio$' +hich e$tai!. the receptio$ a$d
e0a!-atio$ o additio$a! e0ide$ce' +i!! ta/e #ore ti#e tha$ a reco$.ideratio$
o a ta2 a..e..#e$t +hich +i!! be !i#ited to the e0ide$ce a!ready at ha$dD
thi. 6-.tiie. +hy the or#er ca$ .-.pe$d the r-$$i$g o the .tat-te o
!i#itatio$. o$ co!!ectio$ o the a..e..ed ta2' +hi!e the !atter ca$$ot.
%Commissioner of Internal Revenue v. Philippine +lo"al Communication, Inc., <.
R. No. 16@1E6' October B1' 2006 citi$g Ban- of Philippine Islands v.
Commissioner of Internal Revenue, <. R. No. 1BF@B6' 1@ October 200>' E@B
S(RA 20>' 2B0,2B1&
:. +hat are the reDuire!e"ts for the $alidity of a
ta#payer6s protest 7
S3<<ESTE" ANS=ER8
a. 4t #-.t be i!ed +ithi$ the reg!e#e$tary period o thirty %B0&
day. ro# receipt o the $otice o a..e..#e$t.
b. The ta2payer #-.t $ot o$!y .ho+ the error. o the B-rea- o
4$ter$a! Re0e$-e b-t a!.o the correct co#p-tatio$ thro-gh
1& A .tate#e$t o the act.' the app!icab!e !a+' r-!e. a$d
reg-!atio$.' or 6-ri.pr-de$ce o$ +hich the ta2payer:. prote.t i.
ba.ed'
2& 4 there are .e0era! i..-e. i$0o!0ed i$ the di.p-ted
a..e..#e$t a$d the ta2payer ai!. to .tate the act.' the app!icab!e
!a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce i$ .-pport o hi. prote.t
agai$.t .o#e o the .e0era! i..-e. o$ +hich the a..e..#e$t i.
54
ba.ed' the .a#e .ha!! be co$.idered -$di.p-ted i..-e or i..-e.' i$
+hich ca.e' the ta2payer .ha!! be re1-ired to pay the corre.po$di$g
deicie$cy ta2 or ta2e. attrib-tab!e thereto. %Sec. B.1.>' Re0. Reg..
12,FF&
c. =ithi$ .i2ty %60& day. ro# i!i$g o the prote.t' the ta2payer
.ha!! .-b#it a!! re!e0a$t .-pporti$g doc-#e$t.. GE
th
par.' Sec. 22? %e&' N4R(
o 1FF@I
<. Rele$a"t supporti"9 docu!e"ts5 defi"ed. The
ter# re!e0a$t .-pporti$g doc-#e$t. .ho-!d be -$der.tood a. tho.e
doc-#e$t. $ece..ary to .-pport the !ega! ba.i. i$ di.p-ti$g a ta2
a..e..#e$t a. deter#i$ed by the ta2payer. The B4R ca$ o$!y i$or# the
ta2payer to .-b#it additio$a! doc-#e$t..
The B4R ca$$ot de#a$d +hat type o .-pporti$g doc-#e$t. .ho-!d
be .-b#itted. Other+i.e' a ta2payer +i!! be at the #ercy o the B4R'
+hich #ay re1-ire the prod-ctio$ o doc-#e$t. that a ta2payer ca$$ot
.-b#it. %Commissioner of Internal Revenue v. /irst &)press Panshop Company,
Inc., <. R. 1@20E>,E6' A-$e 16' 200F&
/.*0*A( RE;E*ES *N3O(3*N, PROTESTE
ASSESS;ENTS
'. Acts of B*R 0o!!issio"er that !ay be
co"sidered as de"ial of a protest which ser$e as basis for
appeal to the 0ourt of Ta# Appeals.
a. Ci!i$g by the B4R o a ci0i! .-it or co!!ectio$ o the deicie$cy
ta2 i. co$.idered a de$ia! o the re1-e.t or reco$.ideratio$. %Commissioner
of Internal Revenue v. <nion Shipping Corporation, 1?> S(RA >E@&
b. A$ i$dicatio$ to the ta2payer by the (o##i..io$er i$ c!ear
a$d -$e1-i0oca! !a$g-age o hi. i$a! de$ia! $ot the i..-a$ce o the
+arra$t o di.trai$t a$d !e0y. =hat i. the .-b6ect o the appea! i. the i$a!
deci.io$ $ot the +arra$t o di.trai$t. *I"id.#
c. A B4R de#a$d !etter .e$t to the ta2payer ater hi. prote.t o
the a..e..#e$t $otice i. co$.idered a. the i$a! deci.io$ o the
(o##i..io$er o$ the prote.t. *Surigao &lectric Co., Inc. v. Court of (a)
Appeals, et al., >@ S(RA >2B&
d. A !etter o the B4R (o##i..io$er reiterati$g to a ta2payer hi.
pre0io-. de#a$d to pay a$ a..e..#e$t i. co$.idered a de$ia! o the
re1-e.t or reco$.ideratio$ or prote.t a$d i. appea!ab!e to the (o-rt o Ta2
Appea!.. *Commissioner v. Ayala Securities Corporation, @0 S(RA 20E&
e. Ci$a! $otice beore .ei;-re co$.idered a. co##i..io$er:.
deci.io$ o ta2payer:. re1-e.t or reco$.ideratio$ +ho recei0ed $o other
re.po$.e. Commissioner of Internal Revenue v. Isa"ela Cultural
Corporation' <.R. No. 1B>210' A-!y 11' 2001 he!d that $ot o$!y i. the
Notice the o$!y re.po$.e recei0ed8 it. co$te$t a$d te$or .-pport. the
theory that it +a. the (4R:. i$a! act regardi$g the re1-e.t or
reco$.ideratio$. The 0ery tit!e e2pre..!y i$dicated that it +a. a final $otice
prior to .ei;-re o property. The !etter it.e! c!ear!y .tated that the ta2payer
+a. bei$g gi0e$ thi. )AST OPPORT3N4TO to payD other+i.e' it.
propertie. +o-!d be .-b6ected to di.trai$t a$d !e0y.
%. The ta#payer seaso"ably protested the assess!e"t
issued by the 0o!!issio"er of *"ter"al Re$e"ue. uri"9 the
pe"de"cy of the protest the 0*R issued a warra"t of distrai"t
a"d le$y to collect the ta#es sub?ect of the protest.
As cou"sel what ad$ice shall you 9i$e the ta#payer.
E#plai" briefly your a"swer.
S3<<ESTE" ANS=ER8 The ta2payer .ho-!d appea!' by +ay o a
petitio$ or re0ie+' to the (o-rt o Ta2 Appea!. $ot o$ the gro-$d o the
de$ia! o the prote.t b-t o$ other #atter ari.i$g -$der the pro0i.io$. o the
Natio$a! 4$ter$a! Re0e$-e (ode. The act-a! i..-a$ce o a +arra$t o
di.trai$t a$d !e0y i$ certai$ ca.e. ca$$ot be co$.idered a i$a! deci.io$ o$
a di.p-ted a..e..#e$t.
To be a 0a!id deci.io$ o$ a di.p-ted a..e..#e$t' the deci.io$ o
the (o##i..io$er or hi. d-!y a-thori;ed repre.e$tati0e .ha!! %a& .tate the
act.' the app!icab!e !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce o$ +hich
.-ch deci.io$ i. ba.ed' other+i.e' the deci.io$ .ha!! be 0oid' i$ +hich ca.e
the .a#e .ha!! $ot be co$.idered a deci.io$ o$ the di.p-ted a..e..#e$tD
a$d %b& that the .a#e i. hi. i$a! deci.io$. %Sec. B.1.6' Re0. Reg.. 12,FF&
The.e co$ditio$. are $ot co#p!ied +ith by the #ere i..-a$ce o a +arra$t
o di.trai$t a$d !e0y. *Commissioner of Internal Revenue v. <nion Shipping
Corp., 1?> S(RA >E@#
C-rther#ore' a #otio$ or the .-.pe$.io$ o the co!!ectio$ o the ta2
#ay be i!ed together +ith the petitio$ or re0ie+ %Sec. B' R-!e 10' RR(TA
eecti0e "ece#ber 1>' 200>& beca-.e the co!!ectio$ o the ta2 #ay
6eopardi;e the i$tere.t o the ta2payer.
8. As a 9e"eral rule5 there !ust always be a decisio"
of the 0o!!issio"er of *"ter"al Re$e"ue or 0o!!issio"er of
0usto!s before the 0ourt of Ta# Appeals5 would ha$e
?urisdictio". 4 there i. $o .-ch deci.io$' the petitio$ +o-!d be di.#i..ed
or !ac/ o 6-ri.dictio$ -$!e.. the ca.e a!!. -$der a$y o the o!!o+i$g
e2ceptio$..
:. *"sta"ces where the 0ourt of Ta# Appeals would
ha$e ?urisdictio" e$e" if there is "o decisio" yet by the
0o!!issio"er of *"ter"al Re$e"ue-
a. =here the (o##i..io$er ha. $ot acted o$ the di.p-ted
a..e..#e$t ater a period o 1?0 day. ro# .-b#i..io$ o co#p!ete
55
.-pporti$g doc-#e$t.' the ta2payer ha. a period o B0 day. ro# the
e2piratio$ o the 1?0 day period +ithi$ +hich to appea! to the (o-rt o Ta2
Appea!.. %!a.t par.' Sec. 22? %e&' N4R( o 1FF@; Commissioner of Internal
Revenue v. Isa"ela Cultural Corporation, <.R. No. 1B>210' A-!y 11' 2001&
b. =here the (o##i..io$er ha. $ot acted o$ a$ app!icatio$ or
re-$d or credit a$d the t+o year period ro# the ti#e o pay#e$t i. abo-t
to e2pire' the ta2payer ha. to i!e hi. appea! +ith the (o-rt o Ta2 Appea!.
beore the e2piratio$ o t+o year. ro# the ti#e the ta2 +a. paid.
4t i. di.hearte$i$g e$o-gh to a ta2payer to be /ept +aiti$g or a$
i$dei$ite period or the r-!i$g'. 4t +o-!d #a/e #atter. #ore e2a.perati$g
or the ta2payer i the door. o 6-.tice +o-!d be c!o.ed or .-ch a re!ie -$ti!
ater the (o##i..io$er' +o-!d ha0e' at hi. per.o$a! co$0e$ie$ce' gi0e$ hi.
go .ig$a!. *Commissioner of Customs, et al, v. Court of (a) Appeals, et al., <.R.
No. ?261?' *arch 16' 1F?F' -$rep.&
<. The characteristic of a B*R de"ial of a protest such
as would e"able the ta#payer to appeal the sa!e to the 0ourt
of Ta# Appeals. The (o##i..io$er o 4$ter$a! Re0e$-e .ho-!d a!+ay.
i$dicate to the ta2payer i$ c!ear a$d -$e1-i0oca! !a$g-age +he$e0er hi.
actio$ o$ a$ a..e..#e$t 1-e.tio$ed by a ta2payer co$.tit-te. hi. i$a!
deter#i$atio$ o$ the di.p-ted a..e..#e$t.
O$ the ba.i. o hi. .tate#e$t i$d-bitab!y .ho+i$g that the
(o##i..io$er:. co##-$icated actio$ i. hi. i$a! deci.io$ o$ the co$te.ted
a..e..#e$t' the aggrie0ed ta2payer +o-!d the$ be ab!e to ta/e reco-r.e to
the ta2 co-rt at the opport-$e ti#e. =itho-t $eed!e.. diic-!ty' the
ta2payer +o-!d be ab!e to deter#i$e +he$ hi. right to appea! to the ta2
co-rt accr-e.. %Commissioner of Internal Revenue v. Ban- of the Philippines
Islands, <. R. No. 1BE062' Apri! 1@' 200@&

0O((E0T*ON O1 *NTERNA( RE3EN.E TA)ES
'. ,e"eral rule- 0ollectio" of ta#es is i!prescriptible.
=hi!e thi. #ay be .o' .tat-te. #ay pro0ide or period. o pre.criptio$'
%. +hy is the collectio" of ta#es i!prescriptible 7
S3<<ESTE" ANS=ER8
a. A. a ge$era! r-!e' re0e$-e !a+. are $ot i$te$ded to be
!ibera!!y co$.tr-ed' a$d e2e#ptio$. are $ot gi0e$ retroacti0e app!icatio$'
co$.ideri$g that ta2e. are the !ieb!ood o the go0er$#e$t a$d i$ 7o!#e.:
#e#orab!e #etaphor' the price +e pay or ci0i!i;atio$' ta2 !a+. #-.t be
aith-!!y a$d .trict!y i#p!e#e$ted. %Commissioner of Internal Revenue v.
Acosta, etc.,<. R. No. 1>E06?' A-g-.t B' 200@& 7o+e0er' .tat-te. #ay pro0ide
or pre.cripti0e period. or the co!!ectio$ o partic-!ar /i$d. o ta2e..
b. Ta2 !a+.' -$!i/e re#edia! !a+.' are $ot to be app!ied
retroacti0e!y. Re0e$-e !a+. are .-b.ta$ti0e !a+. a$d their app!icatio$
#-.t $ot be e1-ated +ith re#edia! !a+.. %Acosta, supra#
8. +hat is the prescripti$e period for collecti"9
i"ter"al re$e"ue ta#es 7
S3<<ESTE" ANS=ER8 There are o-r %E& pre.cripti0e period. or
the co!!ectio$ o a$ i$ter$a! re0e$-e ta28
a. (o!!ectio$ -po$ a a!.e or ra-d-!e$t ret-r$ or $o ret-r$
+itho-t a..e..#e$t. 4$ ca.e o a a!.e or ra-d-!e$t ret-r$ +ith the i$te$t
to e0ade ta2 or o ai!-re to i!e a ret-r$' a proceedi$g i$ co-rt or the
co!!ectio$ o .-ch ta2 #ay be i!ed +itho-t a..e..#e$t' at a$y ti#e +ithi$
te$ %10& year. ater the di.co0ery o the a!.ity' ra-d or o#i..io$. GSec.
222 %a&' N4R( o 1FF@I
b. (o!!ectio$ -po$ a a!.e or ra-d-!e$t ret-r$ or $o ret-r$ +ith
a..e..#e$t. A$y i$ter$a! re0e$-e ta2 +hich ha. bee$ a..e..ed %beca-.e
the ret-r$ i. a!.e or ra-d-!e$t +ith i$te$t to e0ade ta2 or o ai!-re to ai! a
ret-r$&' +ithi$ a period o te$ %10& year. ro# di.co0ery o the a!.ity' ra-d
or o#i..io$ !ay be collected by distrai"t or le$y or by a proceedi"9
i" court withi" fi$e F<G years followi"9 the assess!e"t of the ta#.
GSec. 222 %c&' i$ re!atio$ to Sec. 222 %a& N4R( o 1FF@' e#pha.i. .-pp!iedI
c. (o!!ectio$ -po$ a$ e2te$ded a..e..#e$t. =here a ta2 ha.
bee$ a..e..ed +ith the period agreed -po$ bet+ee$ the (o##i..io$er
a$d the ta2payer i$ +riti$g %+hich .ho-!d i$itia!!y be +ithi$ three %B& year.
ro# the ti#e the ret-r$ +a. i!ed or .ho-!d ha0e bee$ i!ed&' or a$y
e2te$.io$. beore the e2piratio$ o the period agreed -po$' the ta# !ay
be collected by distrai"t or le$y or by a proceedi"9 i" court withi"
the period a9reed upo" i" writi"9 before the e#piratio" of the fi$e F<G
year period. The period .o agreed -po$ #ay be e2te$ded by .-b.e1-e$t
+ritte$ agree#e$t. #ade beore the e2piratio$ o the period pre0io-.!y
agreed -po$. GSec. 222 %d&' i$ re!atio$ to Sec.. 222 %b& a$d 20B' N4R( o 1FF@'
e#pha.i. .-pp!iedI
d. (o!!ectio$ -po$ a ret-r$ that i. $ot a!.e or ra-d-!e$t' or
+here the a..e..#e$t i. $ot a$ e2te$ded a..e..#e$t. E2cept a.
pro0ided i$ Sectio$ 222' i$ter$a! re0e$-e ta2e. .ha!! be a..e..ed +ithi$
three %B& year. ater the !a.t day pre.cribed by !a+ or the i!i$g o the
ret-r$' a$d "o proceedi"9 i" court without assess!e"t for the
collectio" of such ta#es shall be be9u" after the e#piratio" of such
periodD Pro0ided' That i$ ca.e +here a ret-r$ i. i!ed beyo$d the period
pre.cribed by !a+' the three %B& year period .ha!! be co#p-ted ro# the day
the ret-r$ +a. i!ed. Cor p-rpo.e. o thi. Sectio$' a ret-r$ i!ed beore the
!a.t day pre.cribed by !a+ or the i!i$g thereo .ha!! be co$.idered i!ed o$
.-ch !a.t day. %Sec. 20B' N4R( o 1FF@' e#pha.i. .-pp!ied&
=he$ the B4R 0a!id!y i..-e. a$ a..e..#e$t +ithi$ the three %B&,
year period' it ha. a$other three %B& year. +ithi$ +hich to co!!ect the ta2
56
d-e by di.trai$t' !e0y' or co-rt proceedi$g. The a..e..#e$t o the ta2 i.
dee#ed #ade a$d the three %B&,year period or co!!ectio$ o the a..e..ed
ta2 begi$. to r-$ o$ the date the a..e..#e$t $otice had bee$ re!ea.ed'
#ai!ed or .e$t to the ta2payer. GBan- of Philippine Islands */ormerly /ar &ast
Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No.
1@EFE2' *arch @' 200? citi$g BPI v. Commissioner of Internal Revenue' <.R.
No. 1BF@B6' 1@ October 200>' E@B S(RA 20>' 222,22BI
NOTES AN" (O**ENTS8
a. Both the for!er Sec. %>C5 N*R0 of 'C@@ a"d Sec.%%% of
N*R0 of 'CC@ do "ot refer to a re9ular retur". 4t i. c!ear that i$
e$acti$g Sec. 222' e$tit!ed E2ceptio$. a. to the period o !i#itatio$ o
a..e..#e$t a$d co!!ectio$ o ta2e.' the N4R( o 1FF@ ha. e!i#i$ated .-b,
paragraph c o the or#er Sec. 26F o the N4R(' a!.o e$tit!ed E2ceptio$.
a. to the period o !i#itatio$ o a..e..#e$t a$d co!!ectio$ o ta2e.. Said
Sec. 26F %c&' read. A$y i$ter$a! re0e$-e ta2 +hich ha. bee$ a..e..ed
+ithi$ the period o !i#itatio$ abo0e,pre.cribed #ay be co!!ected by
di.trai$t or !e0y or by a proceedi$g i$ co-rt +ithi$ three year. o!!o+i$g the
a..e..#e$t o the ta2.
A per-.a! o Sec. 222 o the N4R( i. c!ear that it co0er. o$!y three
.ce$ario. o$!y. 1& No a..e..#e$t +a. #ade -po$ a a!.e or ra-d-!e$t
ret-r$ or o#i..io$ to i!e a ret-r$D 2& a$ a..e..#e$t +a. #ade -po$ a
a!.e or ra-d-!e$t ret-r$ or o#i..io$ to i!e a ret-r$D a$d B& a$ e2te$ded
a..e..#e$t i..-ed +ithi$ a period agreed -po$ by the (o##i..io$er a$d
the ta2payer. The .a#e .ce$ario. are tho.e reerred to i$ the or#er Sec.
26F +hich pro0ided or a pre.cripti0e period or co!!ectio$ o three %B& year..
4t i. c!ear thereore that $either Sec. 222 $or the or#er Sec. 26F
pro0ide or a$ i$.ta$ce +here the a..e..#e$t +a. #ade -po$ a reg-!ar
ret-r$ or o$e that i. $ot a!.e or ra-d-!e$t' or that there +a. a$
agree#e$t to e2te$d the period or a..e..#e$t.
Re.ort .ho-!d thereore be #ade to the three %B& year period
reerred to i$ Sec. 20B o the N4R( o 1FF@ +hich read.' E2cept a.
pro0ided i$ Sectio$ 222' i$ter$a! re0e$-e ta2e. .ha!! be a..e..ed +ithi$
three %B& year. ater the !a.t day pre.cribed by !a+ or the i!i$g o the
ret-r$' a$d "o proceedi"9 i" court without assess!e"t for the
collectio" of such ta#es 2 2 2 %paraphra.i$g a$d e#pha.i. .-pp!ied&
:. +hat is a co!pro!ise 7
S3<<ESTE" ANS=ER8 A co#pro#i.e i. a co$tract +hereby the
partie.' by #a/i$g reciproca! co$ce..io$.' a0oid a !itigatio$ or p-t a$ e$d
to o$e a!ready co##e$ced. %Art. 202?' (i0i! (ode&
A co#pro#i.e pe$a!ty co-!d $ot be i#po.ed by the B4R' i the
ta2payer did $ot agree. A co#pro#i.e bei$g' by it. $at-re' #-t-a! i$
e..e$ce re1-ire. agree#e$t. The pay#e$t #ade -$der prote.t co-!d o$!y
.ig$iy that there +a. $o agree#e$t that had eecti0e!y bee$ reached
bet+ee$ the partie.. %3da. de San Agustin, et al., v. Commissioner of Internal
Revenue, <. R. No. 1B?E?>' Septe#ber 10' 2001&
<. +hat ta# cases !ay be the sub?ect of a
co!pro!ise 7
S3<<ESTE" ANS=ER8 The o!!o+i$g ca.e. #ay' -po$
ta2payer:. co#p!ia$ce +ith the ba.i. or co#pro#i.e' be the .-b6ect #atter
o co#pro#i.e .ett!e#e$t8
a. "e!i$1-e$t acco-$t.D
b. (a.e. -$der ad#i$i.trati0e prote.t ater i..-a$ce o the Ci$a!
A..e..#e$t Notice to the ta2payer +hich are .ti!! pe$di$g i$ the Regio$a!
Oice.' Re0e$-e "i.trict Oice.' )ega! Ser0ice' )arge Ta2payer Ser0ice
%)TS&' (o!!ectio$ Ser0ice' E$orce#e$t Ser0ice a$d other oice. i$ the
Natio$a! OiceD
c. (i0i! ta2 ca.e. bei$g di.p-ted beore the co-rt.D
d. (o!!ectio$ ca.e. i!ed i$ co-rt.D
e. (ri#i$a! 0io!atio$.' other tha$ tho.e a!ready i!ed i$ co-rt' or
tho.e i$0o!0i$g cri#i$a! ta2 ra-d. %Sec. 2' Re0. Reg.. No. B0,2002&
>. +hat ta# cases could "ot be the sub?ect of
co!pro!ise 7
S3<<ESTE" ANS=ER8
a. =ithho!di$g ta2 ca.e. -$!e.. the app!ica$t,ta2payer i$0o/e.
pro0i.io$. o !a+ that ca.t do-bt o$ the ta2payer:. ob!igatio$ to +ithho!d.D
b. (ri#i$a! ta2 ra-d ca.e.' co$ir#ed a. .-ch by the
(o##i..io$er o 4$ter$a! Re0e$-e or hi. d-!y a-thori;ed repre.e$tati0eD
c. (ri#i$a! 0io!atio$. a!ready i!ed i$ co-rtD
d. "e!i$1-e$t acco-$t. +ith d-!y appro0ed .ched-!e o
i$.ta!!#e$t pay#e$t.D
e. (a.e. +here i$a! report. o rei$0e.tigatio$ or reco$.ideratio$
ha0e bee$ i..-ed re.-!ti$g to red-ctio$ i$ the origi$a! a..e..#e$t a$d the
ta2payer i. agreeab!e to .-ch deci.io$ by .ig$i$g the re1-ired agree#e$t
or# or the p-rpo.e. O$ the other ha$d' other prote.ted ca.e. .ha!! be
ha$d!ed by the Regio$a! E0a!-atio$ Board %REB& or the Natio$a! E0a!-atio$
Board %NEB& o$ a ca.e to ca.e ba.i.D
. (a.e. +hich beco#e i$a! a$d e2ec-tory ater i$a! 6-dg#e$t
o a co-rt +here co#pro#i.e i. re1-e.ted o$ the gro-$d o do-bt-! 0a!idity
o the a..e..#e$tD a$d
g. E.tate ta2 ca.e. +here co#pro#i.e i. re1-e.ted o$ the
gro-$d o i$a$cia! i$capacity o the ta2payer. %Sec. 2' Re0. Reg.. No. B0,
2002&
@. +he" !ay the 0o!!issio"er of *"ter"al Re$e"ue
co!pro!ise the pay!e"t of a"y i"ter"al re$e"ue ta# 7
Alter"ati$ely5 what are the 9rou"ds for a co!pro!ise5 a"d
57
what are the a!ou"ts for which a co!pro!ise !ay be e"tered
i"to 7
S3<<ESTE" ANS=ER8
a. A rea.o$ab!e do-bt a. to the 0a!idity o the c!ai# agai$.t the
ta2payer e2i.t. pro0ided that the #i$i#-# co#pro#i.e e$tered i$to i.
e1-i0a!e$t to orty perce$t %E0H& o the ba.ic ta2D or
b. The i$a$cia! po.itio$ o the ta2payer de#o$.trate. a c!ear
i$abi!ity to pay the a..e..ed ta2 pro0ided that the #i$i#-# co#pro#i.e
e$tered i$to i. e1-i0a!e$t to te$ perce$t %10H& o the ba.ic a..e..ed ta2
4$ the abo0e i$.ta$ce. the (o##i..io$er i. a!!o+ed to e$ter i$to a
co#pro#i.e o$!y i the ba.ic ta2 i$0o!0ed doe. $ot e2ceed O$e #i!!io$
pe.o. %P1'000'000.00&' a$d the .ett!e#e$t oered i. $ot !e.. tha$ the
pre.cribed perce$tage.. GSec. 20E %A&' N4R( o 1FF@I
4$ i$.ta$ce. +here the (o##i..io$er i. $ot a-thori;ed' the
co#pro#i.e .ha!! be .-b6ect to the appro0a! o the E0a!-atio$ Board
co#po.ed o the (o##i..io$er a$d the o-r %E& "ep-ty (o##i..io$er..
A. +he" is the 0o!!issio"er of *"ter"al Re$e"ue
authoriBed to abate or ca"cel a ta# liability 78
S3<<ESTE" ANS=ER8
a. The ta2 or a$y portio$ thereo appear. to be -$6-.t!y or
e2ce..i0e!y a..e..edD or
b. The ad#i$i.tratio$ a$d co!!ectio$ co.t. i$0o!0ed do $ot 6-.tiy the
co!!ectio$ o the a#o-$t d-e. GSec. 20E %B&' N4R( o 1FF@I
C. The collectio" of a ta# !ay "ot be suspe"ded. O$!y
the (o-rt o Ta2 Appea!. #ay i..-e a$ order .-.pe$di$g the co!!ectio$ o a
ta2.
'&. As a 9e"eral rule5 No court shall ha$e the
authority to 9ra"t a" i"?u"ctio" to restrai" the collectio" of a"y
"atio"al i"ter"al re$e"ue ta#5 fee or char9e. %Sec. 21?' N4R(&
No appea! ta/e$ to the (TA ro# the deci.io$ o the (o##i..io$er
o 4$ter$a! Re0e$-e or the (o##i..io$er o (-.to#. or the Regio$a! Tria!
(o-rt' pro0i$cia!' city or #-$icipa! trea.-rer or the Secretary o Ci$a$ce'
the Secretary o Trade a$d 4$d-.try a$d Secretary o Agric-!t-re' a. the
ca.e #ay be .ha!! .-.pe$d the pay#e$t' !e0y' di.trai$t' a$d9or .a!e o a$y
property o the ta2payer or the .ati.actio$ o hi. ta2 !iabi!ity a. pro0ided by
e2i.ti$g !a+8 Pro0ided' ho+e0er' That +he$ i$ the opi$io$ o the (o-rt the
co!!ectio$ by the aore#e$tio$ed go0er$#e$t age$cie. #ay 6eopardi;e the
i$tere.t o the <o0er$#e$t a$d9or the ta2payer the (o-rt at a$y .tage o
the proceedi$g #ay .-.pe$d the .aid co!!ectio$ a$d re1-ire the ta2payer
either to depo.it the a#o-$t c!ai#ed or to i!e a .-rety bo$d or $ot #ore
tha$ do-b!e the a#o-$t +ith the (o-rt. %Sec. 11' Rep. Act No. 112>' a.
a#e$ded by Sec. F' Rep. Act No. F2?2 &
The S-pre#e (o-rt #ay e$6oi$ the co!!ectio$ o ta2e. -$der it.
ge$era! 6-dicia! po+er b-t it .ho-!d be appare$t that the .o-rce o the
po+er i. $ot .tat-tory b-t co$.tit-tio$a!.
''. +hat is the procedure for suspe"sio" of
collectio" of ta#es 7
S3<<ESTE" ANS=ER8 =here the co!!ectio$ o the a#o-$t o
the ta2payer:. !iabi!ity' .o-ght by #ea$. o a de#a$d or pay#e$t' by
!e0y' di.trai$t or .a!e o property o the ta2payer' or by +hate0er #ea$.'
a. pro0ided -$der e2i.ti$g !a+.' #ay 6eopardi;e the i$tere.t o the
go0er$#e$t or the ta2payer' a$ i$tere.ted party #ay i!e a #otio$ or the
.-.pe$.io$ o the co!!ectio$ o the ta2 !iabi!ity %Sec. 1' R-!e 10' RR(TA
eecti0e "ece#ber 1>' 200>& +ith the (o-rt o Ta2 Appea!..
The #otio$ or .-.pe$.io$ o the co!!ectio$ o the ta2 #ay be i!ed
together +ith the petitio$ or re0ie+ or +ith the a$.+er' or i$ a .eparate
#otio$ i!ed by the i$tere.ted party at a$y .tage o the proceedi$g.. %Sec.
B' R-!e 10' RR(TA eecti0e "ece#ber 1>' 200>&
RE1.N O1 *NTERNA( RE3EN.E TA)ES
'. +hat are the 9rou"ds for refu"d or credit of i"ter"al
re$e"ue ta#es 7
S3<<ESTE" ANS=ER8 The gro-$d. or re-$d or credit or
i$ter$a! re0e$-e ta2e. are the o!!o+i$g8
a. The ta2 +a. i!!ega!!y co!!ected. There i. $o !a+ that
a-thori;e. the co!!ectio$ o the ta2.
b. The ta2 +a. e2ce..i0e!y co!!ected. There i. a !a+ that
a-thori;e. the co!!ectio$ o a ta2 b-t the ta2 co!!ected +a. #ore tha$ +hat
the !a+ a!!o+..
c. The ta2 +a. paid thro-gh a #i.ta/e$ be!ie that the ta2payer
.ho-!d pay the ta2 %solution inde"eti&
%. +hat are the three F8G co"ditio"s for the 9ra"t of a
clai! for refu"d of creditable withholdi"9 ta# 7
S3<<ESTE" ANS=ER8
a. The c!ai# i. i!ed +ith the (o##i..io$er o 4$ter$a! Re0e$-e
+ithi$ the t+o,year period ro# the date o the pay#e$t o the ta2.
b. 4t i. .ho+$ o$ the ret-r$ o the recipie$t that the i$co#e
pay#e$t recei0ed +a. dec!ared a. part o the gro.. i$co#eD a$d
c. The act o +ithho!di$g i. e.tab!i.hed by a copy o a .tate#e$t
d-!y i..-ed by the payee .ho+i$g the a#o-$t paid a$d the a#o-$t o ta2
+ithhe!d therero#. %Banco /ilipino Savings and Mortgage Ban- v. Court of
Appeals, et al., <. R. No. 1>>6?2' *arch 2@' 200@&
NOTES AN" (O**ENTS8
58
a. Proof of fact of withholdi"9. Sec. 10. Claim for ta) credit
or refund. I %a& (!ai#. or Ta2 (redit or Re-$d o 4$co#e ta2 ded-cted
a$d +ithhe!d o$ i$co#e pay#e$t. .ha!! be gi0e$ d-e co-r.e o$!y +he$ it i.
.ho+$ o$ the ret-r$ that the i$co#e pay#e$t recei0ed ha. bee$ dec!ared
a. part o the gro.. i$co#e a$d the act o +ithho!di$g i. e.tab!i.hed by a
copy o the =ithho!di$g Ta2 State#e$t d-!y i..-ed by the payor to the
payee .ho+i$g the a#o-$t paid a$d the a#o-$t o the ta2 +ithhe!d
therero# )))7 %Re0. Reg.. No. 6,?>' a. a#e$ded&
The doc-#e$t +hich #ay be accepted a. e0ide$ce o the third
co$ditio$' that i.' the act o +ithho!di$g' #-.t e#a$ate ro# the payor
it.e!' a$d $ot #ere!y ro# the payee' a$d #-.t i$dicate the $a#e o the
payor' the i$co#e pay#e$t ba.i. o the ta2 +ithhe!d' the a#o-$t o the ta2
+ithhe!d a$d the $at-re o the ta2 paid. %Banco /ilipino Savings and
Mortgage Ban- v. Court of Appeals, et al., <. R. No. 1>>6?2' *arch 2@' 200@&
8. +hat should be established by a ta#payer for the
9ra"t of a ta# refu"d 7 +hy 7
S3<<ESTE" ANS=ER8 A ta2payer $eed. to e.tab!i.h $ot o$!y
that the re-$d i. 6-.tiied -$der the !a+' b-t a!.o the correct a#o-$t that
.ho-!d be re-$ded.
4 the !atter re1-i.ite ca$$ot be a.certai$ed +ith partic-!arity' there i.
ca-.e to de$y the re-$d' or a!!o+ it o$!y to the e2te$t o the .-# that i.
act-a!!y pro0e$ a. d-e.
Ta2 re-$d. parta/e o the $at-re o ta2 e2e#ptio$. a$d are th-.
co$.tr-ed strictissimi =uris agai$.t the per.o$ c!ai#i$g the e2e#ptio$. The
b-rde$ i$ pro0i$g the c!ai# or re-$d $ece..ari!y a!!. o$ the ta2payer.
%/ar &ast Ban- (rust and Company, etc., v. Commissioner of Internal Revenue, et
al., <. R. No. 1B?F1F' *ay 2' 2006&
:. +hat is The le9al re!edy u"der the N*R0 of 'CC@
at the ?udicial le$el with respect to refu"d or reco$ery of ta#
erro"eously or ille9ally collected 7
S3<<ESTE" ANS=ER8 Ci!i$g o a .-it or proceedi$g +ith the
(o-rt o Ta2 Appea!.
a. beore the e2piratio$ o t+o %2& year. ro# the date o
pay#e$t o the ta2 regard!e.. o a$y .-per0e$i$g ca-.e that #ay ari.e
ater pay#e$t %2
$d
par.' Sec. 22F' N4R( o 1FF@&' or
b. +ithi$ thirty %B0& day. ro# receipt o the de$ia! by the
(o##i..io$er o the app!icatio$ or re-$d or credit. %Sec. 11' R.A. No.
112>&
<. The two F%G year period a"d the thirty F8&G day
period should be applied o" a whiche$er co!es first basis.
Th-.' i the B0 day. i. +ithi$ the 2 year.' the B0 day. app!ie.' i the 2 year
period i. abo-t to !ap.e b-t there i. $o deci.io$ yet by the (o##i..io$er
+hich +o-!d trigger the B0,day period' the ta2payer .ho-!d i!e a$ appea!'
de.pite the ab.e$ce o a deci.io$. *Commissioners, etc. v. Court of (a)
Appeals, et al., <. R. No. ?261?' *arch 16' 1F?F' -$rep.&
>. +here the ta#payer is a corporatio" the two year
prescripti$e period fro! date of pay!e"t for refu"d of
i"co!e ta#es should be the date whe" the corporatio" filed its
fi"al ad?ust!e"t retur" $ot o$ the date +he$ the ta2e. +ere paid o$ a
1-arter!y ba.i.. *Philippine Ban- of Communications v. Commissioner of Internal
Revenue, et al., <.R. No. 11202E' Aa$-ary 2?' 1FFF&
4t i. o$!y +he$ the ret-r$' co0eri$g the +ho!e year' i. i!ed that the
ta2payer +i!! be ab!e to a.certai$ +hether a ta2 i. .ti!! d-e or re-$d ca$ be
c!ai#ed ba.ed o$ the ad6-.ted a$d a-dited ig-re.. *Ban- of the Philippine
Islands v. Commissioner of Internal Revenue, <.R. No. 1EE6>B' A-g-.t 2?' 2001&
@. +hat is solutio i"debeti as applied to ta#
cases 7
S3<<ESTE" ANS=ER8 3$der the pri$cip!e o solutio inde"iti
pro0ided i$ Art. 21>E' (i0i! (ode' 4 .o#ethi$g i. recei0ed +he$ there i.
$o right to de#a$d it' a$d it +a. -$d-!y de!i0ered thro-gh #i.ta/e' the
ob!igatio$ to ret-r$ it ari.e.. The B4R recei0ed .o#ethi$g +he$ there
G+a.I $o right to de#a$d it' a$d th-.' it ha. the ob!igatio$ to ret-r$ it.
GState $and Investment Corporation v. Commissioner of Internal
Revenue, <. R. No. 1@1F>6' Aa$-ary 1?' 200?citing Citi"an-, !. A. v.
Court of Appeals and Commissioner of Internal Revenue' <.R. No.
10@EBE' October 10' 1FF@' 2?0 S(RA E>F' i$ t-r$ citi$g Ramie (e)tiles,
Inc. v. Mathay, Sr.' ?F S(RA >?6 %1F@F&I. 4t i. a$ a$cie$t pri$cip!e that $o
o$e' $ot e0e$ the .tate' .ha!! e$rich o$e.e! at the e2pe$.e o a$other.
4$deed' .i#p!e 6-.tice re1-ire. the .peedy re-$d o the +ro$g!y he!d
ta2e.. %I"id.&
<>. +hat are the reaso"s for reDuiri"9 the fili"9 of a"
ad!i"istrati$e applicatio" for refu"d or credit with the BS3<<ESTE"
A. +hy is it "ecessary to file a" ad!i"istrati$e clai!
for refu"d with the B*R5 before fili"9 a case with the 0ourt of
Ta# Appeals 7
59
a. a. To
aord the (o##i..io$er a$ opport-$ity to correct hi. error. or that o
.-bordi$ate oicer.. *+onzales v. Court of (a) Appeals, et al., 1E S(RA@F&
b. To $otiy the <o0er$#e$t that .-ch ta2e. ha0e bee$
1-e.tio$ed a$d the $otice .ho-!d be bor$e i$ #i$d i$ e.ti#ati$g the
re0e$-e a0ai!ab!e or e2pe$dit-re..

C. As a
9e"eral rule the fili"9 of a" applicatio" for refu"d or credit with
the Bureau of *"ter"al Re$e"ue is a" ad!i"istrati$e
preco"ditio" before a suit !ay be filed with the 0ourt of Ta#
Appeals 7
S3<<ESTE"
ANS=ER8

S3<<ESTE" ANS=ER8 Oe.. The ai!-re to ir.t i!e a +ritte$ c!ai# or
re-$d or credit i. $ot ata! to a petitio$ or re0ie+ i$0o!0i$g a di.p-ted
a..e..#e$t +here a$ a..e..#e$t +a. di.p-ted b-t the prote.t +a.
de$ied by the B-rea- o 4$ter$a! Re0e$-e. To ho!d that the
ta2payer ha. $o+ !o.t the right to appea! ro# the r-!i$g o$ the di.p-ted
a..e..#e$t a$d re1-ire hi# to i!e a c!ai# or a re-$d o the ta2e. paid a.
a co$ditio$ precede$t to hi. right to appea!' +o-!d i$ eect re1-ire o hi# to
go thro-gh a -.e!e.. a$d $eed!e.. cere#o$y that +o-!d o$!y de!ay the
di.po.itio$ o the ca.e' or the (o##i..io$er +o-!d certai$!y di.a!!o+ the
c!ai# or re-$d i$ the .a#e +ay a. he di.a!!o+ed the prote.t agai$.t the
a..e..#e$t. The !a+' .ho-!d $ot be i$terpreted a. to re.-!t i$ ab.-rditie..
*vda. de San Agustin., etc., v. Commissioner of Internal Revenue, <.R. No.
1B?E?>' Septe#ber 10' 2001 citi$g Roman Catholic Arch"ishop of Ce"u v.
Collector of Internal Revenue, F SCRA BAH# NOTE8 Reco"ciliatio" betwee"
abo$e two "u!bers FA a"d CG. A$ app!icatio$ or re-$d or credit -$der
Sec. 22F o the N4R( o 1FF@ i. re1-ired +here the ca.e i!ed beore the
(TA i. a re-$d ca.e' +hich i. $ot pre#i.ed -po$ a di.p-ted a..e..#e$t.
There i. $o $eed or a prior app!icatio$ or re-$d or credit' i the re-$d i.
#ere!y a co$.e1-e$ce o the re.o!-tio$ o the B4R:. de$ia! o a prote.ted
a..e..#e$t.
+ho could apply for
a ta# refu"d or credit 7
'&. +ho could apply for a refu"d or credit 7
S3<<ESTE" ANS=ER8 The per.o$ +ho paid the ta2 #ay app!y
or a re-$d or credit.
60
A +ithho!di$g ta2 age$t #ay a!.o app!y or a re-$d. 4$ a .e$.e'
he i. a!.o a ta2payer beca-.e the ta2 #ay be co!!ected ro# hi# i he doe.
$ot +ithho!d.
''. +hat is the "ature of the ta#payer6s re!edy of
either to asE for a refu"d of e#cess ta# pay!e"ts or to apply
the sa!e i" pay!e"t of succeedi"9 ta#able periods6 ta#es 7
S3<<ESTE" ANS=ER8 Sec. 6F o the 1F@@ N4R( %$o+ Sec. @6
o the N4R( o 1FF@& pro0ide. that a$y e2ce.. o the tota! 1-arter!y
pay#e$t. o0er the act-a! i$co#e ta2 co#p-ted i$ the ad6-.t#e$t or i$a!
corporate i$co#e ta2 ret-r$' .ha!! either %a& be re-$ded to the corporatio$'
or %b& #ay be credited agai$.t the e.ti#ated 1-arter!y i$co#e ta2 !iabi!itie.
or the 1-arter. o the .-cceedi$g ta2ab!e year. To ea.e the ad#i$i.tratio$
o ta2 co!!ectio$' the.e re#edie. are i$ the a!ter$ati0e a$d the choice o
o$e prec!-de. the other. Si$ce the Ba$/ ha. cho.e$ the ta2 credit
approach it ca$$ot a$y#ore a0ai! o the ta2 re-$d. *Philippine Ban- of
Communications v. Commissioner of Internal Revenue, et al., <.R. No.
11202E' Aa$-ary 2?' 1FFF&
NOTES AN" (O**ENTS8
a. The choice5 is 9i$e" to the ta#payer5 whether to clai! for
refu"d u"der Sec. @> or ha$e its e#cess ta2e. app!ied a. ta2 credit or
the .-cceedi$g ta2ab!e year' .-ch e!ectio$ i. $ot i$a!. Prior 0eriicatio$
a$d appro0a! by the (o##i..io$er o 4$ter$a! Re0e$-e i. re1-ired. The
a0ai!#e$t o the re#edy o ta2 credit i. $ot ab.o!-te a$d #a$datory. 4t
doe. $ot co$er a$ ab.o!-te right o$ the part o the ta2payer to a0ai! o the
ta2 credit .che#e i it .o choo.e.. Neither doe. it i#po.e a d-ty o$ the
part o the go0er$#e$t to .it bac/ a$d a!!o+ a$ i#porta$t acet o ta2
co!!ectio$ to be at the .o!e co$tro! a$d di.cretio$ o the ta2payer. %Paseo
Realty . %evelopment Corporation v. Court of Appeals, et al., <. R. No.
11F2?6' October 1B' 200E&
'%. +hat is the irre$ocability rule i" clai!s for refu"d
a"d what is the ratio"ale behi"d this 7
S3<<ESTE" ANS=ER8 A corporatio$ e$tit!ed to a ta2 credit or
re-$d o the e2ce.. e.ti#ated 1-arter!y i$co#e ta2e. paid ha. t+o
optio$.8 %1& to carry o0er the e2ce.. credit or %2& to app!y or the i..-a$ce
o a ta2 credit certiicate or to c!ai# a ca.h re-$d. 4 the optio$ to carry
o0er the e2ce.. credit i. e2erci.ed' the .a#e .ha!! be irre0ocab!e or that
ta2ab!e period.
4$ e2erci.i$g it. optio$' the corporatio$ #-.t .ig$iy i$ it. a$$-a!
corporate ad6-.t#e$t ret-r$ %by #ar/i$g the optio$ bo2 pro0ided i$ the
B4R or#& it. i$te$tio$ either to carry o0er the e2ce.. credit or to c!ai# a
re-$d. To aci!itate ta2 co!!ectio$' the.e re#edie. are i$ the a!ter$ati0e
a$d the choice o o$e prec!-de. the other. GSystra Philippines, Inc., v.
Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@
citi$g Philippine Ban- of Communications v. Commissioner of Internal Revenue'
B61 Phi!. F16 %1FFF&I
Thi. i. /$o+$ a. the irre0ocabi!ity r-!e a$d i. e#bodied i$ the !a.t
.e$te$ce o Sectio$ @6 o the Ta2 (ode. The phra.e .-ch optio$ .ha!! be
co$.idered irre0ocab!e or that ta2ab!e period #ea$. that the optio$ to
carry o0er the e2ce.. ta2 credit. o a partic-!ar ta2ab!e year ca$ $o
!o$ger be re0o/ed.
The r-!e pre0e$t. a ta2payer ro# c!ai#i$g t+ice the e2ce..
1-arter!y ta2e. paid8 %1& a. a-to#atic credit agai$.t ta2e. or the ta2ab!e
1-arter. o the .-cceedi$g year. or +hich $o ta2 credit certiicate ha.
bee$ i..-ed a$d %2& a. a ta2 credit either or +hich a ta2 credit certiicate
+i!! be i..-ed or +hich +i!! be c!ai#ed or ca.h re-$d. %Systra Philippines,
Inc., supra citi$g "e )eo$' 7ector' T7E NAT4ONA) 4NTERNA) REVEN3E
(O"E' Se0e$th Editio$' 2000' p. EB0&
'8. *" the year %&&& Systra deri$ed e#cess ta# credits
a"d e#ercised the optio" to carry the! o$er as ta# credits for
the "e#t ta#able year. Howe$er5 the ta# due for the "e#t
ta#able year is lower tha" e#cess ta# credits. *t "ow applies
for a refu"d of the u"applied ta# credits. ;ay its refu"d be
9ra"ted 7 *f the refu"d is de"ied5 does Systra lose the
u"applied ta# credits 7 E#plai" briefly your a"swer.
S3<<ESTE" ANS=ER8 Sy.tra:. c!ai# or re-$d .ho-!d be
de$ied. O$ce the carry o0er optio$ +a. #ade' act-a!!y or co$.tr-cti0e!y'
it beca#e ore0er irre0ocab!e regard!e.. o +hether the e2ce.. ta2
credit. +ere act-a!!y or -!!y -ti!i;ed 3$der Sectio$ @6 o the Ta2 (ode' a
c!ai# or re-$d o .-ch e2ce.. credit. ca$ $o !o$ger be #ade. The
e2ce.. credit. +i!! o$!y be app!ied agai$.t i$co#e ta2 d-e or the ta2ab!e
1-arter. o the .-cceedi$g ta2ab!e year..
"e.pite the de$ia! o it. c!ai# or re-$d' Sy.tra doe. $ot !o.e the
-$app!ied ta2 credit.. The a#o-$t +i!! $ot be oreited i$ a0or o the
go0er$#e$t b-t +i!! re#ai$ i$ the ta2payer:. acco-$t. Petitio$er #ay
c!ai# a$d carry it o0er i$ the .-cceedi$g ta2ab!e year.' creditab!e agai$.t
-t-re i$co#e ta2 !iabi!itie. -$ti! -!!y -ti!i;ed. %Systra Philippines, Inc., v.
Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@
citi$g Philam Asset Management, Inc. v. Commissioner of Internal Revenue'
<.R. No.. 1>66B@916200E' 1E "ece#ber 200>' E@@ S(RA @61&
Supposi"9 i" the abo$e proble! that Systra per!a"e"t
ceased operatio"s5 what happe"s to the u"applied credits 7
S3<<ESTE" ANS=ER8 =here' the corporatio$ per#a$e$t!y
cea.e. it. operatio$. beore -!! -ti!i;atio$ o the ta2 credit. it opted to
carry o0er' it #ay the$ be a!!o+ed to c!ai# the re-$d o the re#ai$i$g ta2
credit.. 4$ .-ch a ca.e' the re#ai$i$g ta2 credit. ca$ $o !o$ger be carried
o0er a$d the irre0ocabi!ity r-!e cea.e. to app!y. Cessante ratione legis,
cessat ipse le). %Coot$ote $o. 2B' Systra Philippines, Inc., v.
61
Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21'
200@&
NOTES AN" (O**ENTS8 The ho!di$g i$ State $and
Investment Corporation v. Commissioner of Internal Revenue, <. R. No.
1@1F>6' Aa$-ary 1?' 200? that the ta2payer i. e$tit!ed to a re-$d
beca-.e d-ri$g the .-cceedi$g year there +a. $o ta2 d-e agai$.t +hich
the e2ce.. ta2 credit. #ay be app!ied i. $ot doctri$a!. Thi. i. .o beca-.e
it i$terpreted the pro0i.io$. o the$ Sec. 6F o the N4R(' +hich did $ot
pro0ide or the irre0ocabi!ity r-!e $o+ co$tai$ed i$ Sec. @6 o the N4R(
o 1FF@.
':. A si!ulta"eous fili"9 of the applicatio" with the B*R
for refu"d=credit a"d the i"stitutio" of the court suit with the
0TA is allowed. There i. $o $eed to +ait or a B4R de$ia!. REASONS8
a. The po.iti0e re1-ire#e$t o Sectio$ 2B0 N4R( %$o+ Sec. 22F'
N4R( o 1FF@&D
b. The doctri$e that de!ay o the (o##i..io$er i$ re$deri$g
deci.io$ doe. $ot e2te$d the pere#ptory period i2ed by the .tat-teD
c. The !a+ i2ed the .a#e period t+o year. or i!i$g a c!ai# or
re-$d +ith the (o##i..io$er -$der Sec. 20E' par. B' N4R( %$o+ Sec. 20E
G(I' N4R( o 1FF@&' a$d or i!i$g .-it i$ co-rt -$der Sec. 2B0' N4R( %$o+
Sec. 22F' N4R( o 1FF@&' -$!i/e i$ prote.t. o a..e..#e$t. -$der Sec. 22F
%$o+ Sec. 22?' N4R( o 1FF@&' +hich i2ed the period %thirty day. ro#
receipt o deci.io$& or appea!i$g to the co-rt' th-. c!ear!y i#p!yi$g that the
prior deci.io$ o the (o##i..io$er i. $ece..ary to ta/e cog$i;a$ce o the
ca.e. *Commissioner of Internal Revenue v. Ban- of Philippine Islands, etc. et al.'
(A,<.R. SP No. BE102' Septe#ber F' 1FFED +i""s v. Collector of Internal
Revenue, et al., 10@ Phi!' 2BB; ,ohnston $um"er Co. v. C(A, 101 Phi!. 1>1&
'<. The 9ra"t of a refu"d is fou"ded o" the assu!ptio"
that the ta# retur" is $alid5 i.e. that the act. .tated therei$ are tr-e
a$d correct. %Commissioner of Internal Revenue v. Court of (a) Appeals,
<. R. No. 106611' A-!y 21' 1FFE' 2BE S(RA BE?& =itho-t the ta2 ret-r$ it
+o-!d be 0irt-a!!y i#po..ib!e to deter#i$e +hether the proper ta2e. ha0e
bee$ a..e..ed a$d paid. Ater a!!' it i. a2io#atic that a c!ai#a$t ha. the
b-rde$ o proo to e.tab!i.h the act-a! ba.i. o hi. or her c!ai# or ta2
credit or re-$d. Ta2 re-$d.' !i/e ta2 e2e#ptio$.' are co$.tr-ed .trict!y
agai$.t the ta2payer. %Paseo Realty . %evelopment Corporation v. Court of
Appeals, et al., <. R. No. 11F2?6' October 1B' 200E&
7o+e0er' i$ BPI0/amily Savings Ban- v. Court of Appeals' B?6 Phi!.
@1FD B26 S(RA 6E1 %2000&' re-$d +a. gra$ted' de.pite the ai!-re to
pre.e$t the ta2 ret-r$' beca-.e other e0ide$ce +a. pre.e$ted to pro0e that
the o0erpaid ta2e. +ere $ot app!ied. %I"id.&
'>. iscuss the differe"ce betwee" ta# refu"d a"d ta#
credit..
S3<<ESTE" ANS=ER8 There are -$#i.ta/ab!e or#a! a$d
practica! diere$ce. bet+ee$ the t+o #ode.. Cor#a!!y' a ta2 re-$d
re1-ire. a phy.ica! ret-r$ o the .-# erro$eo-.!y paid by the ta2payer'
+hi!e a ta2 credit i$0o!0e. the app!icatio$ o the rei#b-r.ab!e a#o-$t
agai$.t a$y .-# that #ay be d-e a$d co!!ectib!e ro# the ta2payer.
O$ the practica! .ide' the ta2payer to +ho# the ta2 i. re-$ded
+o-!d ha0e the optio$' a#o$g other.' to i$0e.t or proit the ret-r$ed .-#'
a$ optio$ $ot pro2i#ate!y a0ai!ab!e i the ta2payer choo.e. i$.tead to
recei0e a ta2 credit. %Commissioner of Customs v. Philippine Phosphate
/ertilizer Corporation, <. R. No. 1EEEE0' Septe#ber 1' 200E&
NOTES AN" (O**ENTS8 4t #ay be that there i. $o e..e$tia!
diere$ce bet+ee$ a ta2 re-$d a$d a ta2 credit .i$ce both are #o0e. o
reco0eri$g ta2e. erro$eo-.!y or i!!ega!!y paid to the go0er$#e$t.
%Commissioner of Customs v. Philippine Phosphate /ertilizer Corporation, <. R.
No. 1EEEE0' Septe#ber 1' 200E&
'@. A ba"EHtrustee of e!ployee trusts filed a"
applicatio" for the refu"d of ta#es withheld o" the i"terest
i"co!es of the i"$est!e"ts !ade of the fu"ds of the
e!ployees6 trusts. *"stead of prese"ti"9 separate accou"ts
for i"terest i"co!es !ade of these i"$est!e"ts5 the ba"EH
trustee i"stead prese"ted wit"ess to establish that it would
"e#t to i!possible to si"9le out the specific tra"sactio"s
i"$ol$i"9 the e!ployees6 trust fu"ds fro! the totality of all
i"terest i"co!e fro! its total i"$est!e"ts. O" the abo$e
basis will the applicatio" for refu"d prosper 7
S3<<ESTE" ANS=ER8 No. The app!icatio$ or re-$d +i!! $ot
pro.per.
The ba$/,tr-.tee $eed. to e.tab!i.h $ot o$!y that the re-$d i.
6-.tiied -$der the !a+ %+hich i. .o beca-.e i$co#e. o e#p!oyee.: tr-.t.
are ta2 e2e#pt&' b-t a!.o the correct a#o-$t that .ho-!d be re-$ded.
Ta2 re-$d. parta/e o the $at-re o ta2 e2e#ptio$. a$d are th-.
co$.tr-ed strictissimi =uris agai$.t the per.o$ or e$tity c!ai#i$g the
e2e#ptio$. The b-rde$ i$ pro0i$g the a#o-$t to be re-$ded $ece..ari!y
a!!. o$ the ba$/,tr-.tee' a$d there i. a$ appare$t ai!-re to do .o.
A $ece..ary co$.e1-e$ce o the .pecia! e2e#ptio$ e$6oyed a!o$e
by e#p!oyee.: tr-.t. +o-!d be a $ece..ary .egregatio$ i$ the acco-$ti$g
o .-ch i$co#e' i$tere.t or other+i.e' ear$ed ro# tho.e tr-.t. ro# that
ear$ed by the other c!ie$t. o the ba$/,tr-.tee. %/ar &ast Ban- and
(rust Company, etc., v. Commissioner, etc., et al., <.R. No. 1B?F1F' *ay
2' 2006& The a#o-$t. that are the e2e#pt ear$i$g. o the e#p!oyee:.
62
tr-.t ha. $ot bee$ .ho+$ a. they ha0e bee$ co##i$g!ed +ith the i$tere.t
i$co#e o the other c!ie$t. o the ba$/,tr-.tee.
'A. 0TA 0ircular No. 'HC< clearly reDuires that
photocopies of the receipts or i"$oices !ust be preH!arEed
a"d sub!itted to the 0TA to $erify the correct"ess of the
su!!ary listi"9 a"d the 0PA certificatio". (TA (irc-!ar No. 1,
F>' i..-ed o$ 2> Aa$-ary 1FF>' read.8
1. The party +ho de.ire. to i$trod-ce a. e0ide$ce .-ch
0o!-#i$o-. doc-#e$t. #-.t pre.e$t8 %a& S-##ary co$tai$i$g the tota!
a#o-$t9. o the ta2 acco-$t or ta2 paid or the period i$0o!0ed a$d a
chro$o!ogica! or $-#erica! !i.t o the $-#ber.' date. a$d a#o-$t.
co0ered by the i$0oice. or receipt.D a$d %b& a (ertiicatio$ o a$
i$depe$de$t (ertiied P-b!ic Acco-$ta$t atte.ti$g to the correct$e.. o
the co$te$t. o the .-##ary ater #a/i$g a$ e2a#i$atio$ a$d e0a!-atio$
o the 0o!-#i$o-. receipt. a$d i$0oice.. S-ch .-##ary a$d certiicatio$
#-.t proper!y be ide$tiied by a co#pete$t +it$e.. ro# the acco-$ti$g
ir#.
2. The #ethod o i$di0id-a! pre.e$tatio$ o each a$d e0ery receipt
or i$0oice or other doc-#e$t. or #ar/i$g' ide$tiicatio$ a$d co#pari.o$
+ith the origi$a!. thereo $eed $ot be do$e beore the (o-rt or the
(o##i..io$er a$y#ore ater the i$trod-ctio$ o the .-##ary a$d (PA
certiicatio$. 4t i. e$o-gh that the receipts5 i"$oices a"d other
docu!e"ts co$eri"9 the said accou"ts or pay!e"ts !ust be preH
!arEed by the party co"cer"ed a"d sub!itted to the 0ourt i" order
to be !ade accessible to the ad$erse party whe"e$er he=she desires
to checE a"d $erify the correct"ess of the su!!ary a"d 0PA
certificatio". 7o+e0er' the origi$a!. o the .aid receipt.' i$0oice. or
doc-#e$t. .ho-!d be ready or 0eriicatio$ a$d co#pari.o$ i$ ca.e do-bt
o$ the a-the$ticity o the partic-!ar doc-#e$t. pre.e$ted i. rai.ed d-ri$g
the heari$g o the ca.e. %E#pha.i. .-pp!ied&
'C. ;a"ila Electric 0o!pa"y a 9ra"tee of a le9islati$e
fra"chise u"der Act No. :A:5 as a!e"ded by Republic Act No.
:'<C a"d Preside"tial ecree No. <<'5
'O8P
had bee" payi"9 a
%I fra"chise ta# based o" its 9ross receipts5 i" lieu of all
other ta#es a"d assess!e"ts of whate$er "ature. .po" the
effecti$ity of E#ecuti$e Order No. @% o" 1ebruary '&5 'CA@5
howe$er5 respo"de"t beca!e sub?ect to the pay!e"t of
re9ular corporate i"co!e ta#.
1or the last Duarter e"di"9 ece!ber 8'5 'CA@5
respo"de"t filed o" April '<5 'CAA its te"tati$e i"co!e ta#
1
reflecti"9 a refu"dable a!ou"t of P'&'5AC@5@:'5 but o"ly
P@@5C8'5A'% was applied as ta# credit for the succeedi"9
ta#able year 'CAA.
Acti"9 o" a yearly routi"ary (etter of Authority No.
&&'A&>: NA dated /u"e %@5 'CAA issued by petitio"er5
directi"9 the i"$esti9atio" of ta# liabilities of respo"de"t for
ta#able year 'CA@5 a" i"$esti9atio" was co"ducted by
Re$e"ue Officer 1redericE 0apita" which showed that
respo"de"t was liable for '. deficie"cy i"co!e ta# i" the
a!ou"t of P%58:&5C&%.<%K a"d %. deficie"cy fra"chise ta# i"
the a!ou"t of P%5A8A588<.A:.
O" April '@5 'CAC5 respo"de"t filed a" a!e"ded fi"al
corporate *"co!e Ta# Retur" e"di"9 ece!ber 8'5 'CAA
reflecti"9 a refu"dable a!ou"t of P'&@5>:C5@%C.
Respo"de"t thus filed o" ;arch 8&5 'CC& a letterHclai!
for refu"d or credit i" the a!ou"t of P'&@5>:C5@%C
represe"ti"9 o$erpaid i"co!e ta#es for the years 'CA@ a"d
'CAA.
Petitio"er "ot ha$i"9 acted o" its reDuest5 respo"de"t
filed o" April >5 'CC& a ?udicial clai! for refu"d or credit with
the 0ourt of Ta# Appeals.
*t is 9athered that respo"de"t paid the deficie"cy
fra"chise ta# i" the a!ou"t of P%5A8A588<.A:. *t protested the
pay!e"t of the alle9ed deficie"cy i"co!e ta# a"d clai!ed as
a" alter"ati$e re!edy the deductio" thereof fro! its clai! for
refu"d or credit.
The 0ourt of Ta# Appeals 9ra"ted the P'&@5>:C5@%C
clai! for refu"d5 or i" the alter"ati$e for the B*R to issue a ta#
credit. *s the 0ourt of Ta# Appeals correct 7
S3<<ESTE" ANS=ER8 Oe.. Sectio$ 6F o the Natio$a! 4$ter$a!
Re0e$-e (ode o 1F?6' $o+ Sec. @6 pro0ide.' i the .-# o the 1-arter!y
ta2 pay#e$t. #ade d-ri$g a ta2ab!e year i. $ot e1-a! to the tota! ta2 d-e
o$ the e$tire ta2ab!e i$co#e o that year a. .ho+$ i$ it. i$a! ad6-.t#e$t
ret-r$' the corporatio$ ha. the optio$ to either8 %a& pay the e2ce.. ta2
.ti!! d-e' or %b& be re-$ded the e2ce.. a#o-$t paid. The ret-r$.
.-b#itted are #ere!y pre,a-dited +hich co$.i.t #ai$!y o chec/i$g
#athe#atica! acc-racy o the ig-re. i$ the ret-r$. Ater .-ch chec/i$g'
the p-rpo.e o +hich bei$g to i$.-re pro#pt actio$ o$ corporate a$$-a!
i$co#e ta2 ret-r$. .ho+i$g re-$dab!e a#o-$t. ari.i$g ro# o0erpaid
1-arter!y i$co#e ta2e.' %Re0e$-e *e#ora$d-# Order No. B2,@6 dated
A-$e 11' 1F@6& the re-$d or ta2 credit i. gra$ted. %Commissioner of
63
Internal Revenue v. Manila &lectric Company, <. R. No. 121666' October
10' 200@&
TAR*11 AN 0.STO;S (A+S
OR,AN*LAT*ON AN 1.N0T*ONS O1 THE B.REA. O1
*NTERNA( RE3EN.E
TAR*11 AN 0.STO;S 0OE
'. +he" does i!portatio" be9i"5 a"d why is it
i!porta"t to E"ow whether i!portatio" has already be9u" or
"ot 7
S3<<ESTE" ANS=ER8 4#portatio$ begi$. +he$ the co$0eyi$g
0e..e! or aircrat e$ter. the 6-ri.dictio$ o the Phi!ippi$e. +ith i$te$tio$ to
-$!ade therei$. %Sec. 1202' T((P&
The 6-ri.dictio$ o the B-rea- o (-.to#. to e$orce the pro0i.io$.
o the T((P i$c!-di$g .ei;-re a$d oreit-re a!.o begi$. ro# the begi$$i$g
o i#portatio$. Th-.' the B-rea- o (-.to#. obtai$. 6-ri.dictio$ o0er
i#ported artic!e. o$!y ater i#portatio$ ha. beg-$.
%. +he" is i!portatio" dee!ed ter!i"ated a"d
why is it i!porta"t to E"ow whether i!portatio" has already
e"ded7
S3<<ESTE" ANS=ER8 4#portatio$ i. dee#ed ter#i$ated -po$
pay#e$t o the d-tie.' ta2e. a$d other charge. d-e -po$ the age$cie.' or
.ec-red to be paid' at the port o e$try a$d the !ega! per#it or +ithdra+a!
.ha!! ha0e bee$ gra$ted.
4$ ca.e the artic!e. are ree o d-tie.' ta2e. a$d other charge.' -$ti!
they ha0e !ega!!y !et the 6-ri.dictio$ o the c-.to#.. %Sec. 1202' T((P&
The B-rea- o (-.to#. !o.e. 6-ri.dictio$ to e$orce the T((P a$d to
#a/e .ei;-re. a$d oreit-re. ater i#portatio$ i. dee#ed ter#i$ated.
8. The fle#ible tariff clause is a pro$isio" i" the Tariff
a"d 0usto!s 0ode' +hich i#p!e#e$t. the co$.tit-tio$a!!y de!egated
po+er to the (o$gre.. to -rther de!egate to the Pre.ide$t o the
Phi!ippi$e.' i$ the i$tere.t o $atio$a! eco$o#y' ge$era! +e!are a$d9or
$atio$a! .ec-rity -po$ reco##e$datio$ o the NE"A %a& to i$crea.e'
red-ce or re#o0e e2i.ti$g protecti0e rate. o i#port d-ty' pro0ided that' the
i$crea.e .ho-!d $ot be higher tha$ 100H ad 0a!ore#D %b& to e.tab!i.h
i#port 1-ota or to ba$ i#port. o a$y co##odity' a$d %c& to i#po.e
additio$a! d-ty o$ a!! i#port. $ot e2ceedi$g 10H ad 0a!ore#' a#o$g
other..
:. 0usto!s duties defi"ed. (-.to#. d-tie. i. the $a#e
gi0e$ to ta2e. o$ the i#portatio$ a$d e2portatio$ o co##oditie.' the tari
or ta2 a..e..ed -po$ #ercha$di.e i#ported ro#' or e2ported to' a oreig$
co-$try. %!estle Phils. v. Court of Appeals, et al., <.R. No. 1BE11E' A-!y 6'
2001&
<. Special custo!s duties are additio"al i!port duties
i!posed o" specific Ei"ds of i!ported articles u"der certai"
co"ditio"s. The .pecia! c-.to#. d-tie. -$der the Tari a$d (-.to#.
(ode %T((P& are the a$ti,d-#pi$g d-ty' the co-$ter0ai!i$g d-ty' the
di.cri#i$atory d-ty' a$d the #ar/i$g d-ty' a$d -$der the Saeg-ard
*ea.-re. Act %S*A& additio$a! tari. a. .aeg-ard #ea.-re..
>. The special custo!s duties are i!posed for the
protectio" of co"su!ers a"d !a"ufacturers5 as well as
Philippi"e products.
@. u!pi"9 duty is a" additio"al special duty
a!ou"ti"9 to the differe"ce betwee" the e#port price a"d the
"or!al $alue of such product5 co!!odity or article %Sec. B01 %.&
%1&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF.&
i#po.ed o$ the i#portatio$ o a prod-ct' co##odity or artic!e o co##erce
i$to the Phi!ippi$e. at !e.. tha$ it. $or#a! 0a!-e +he$ de.ti$ed or
do#e.tic co$.-#ptio$ i$ the e2porti$g co-$try +hich i. ca-.i$g or i.
threate$i$g to ca-.e #ateria! i$6-ry to a do#e.tic i$d-.try' or #ateria!!y
retardi$g the e.tab!i.h#e$t o a do#e.tic i$d-.try prod-ci$g the !i/e
prod-ct. GSec. B01 %.& %>&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,
"-#pi$g Act o 1FFFI
A. +he" is the a"tiHdu!pi"9 duty i!posed 7
S3<<ESTE" ANS=ER8 The a$ti,d-#pi$g d-ty i. i#po.ed
a. =here a prod-ct' co##odity or artic!e o co##erce i. e2ported
i$to the Phi!ippi$e. at a price !e.. tha$ it. $or#a! 0a!-e +he$ de.ti$ed or
do#e.tic co$.-#ptio$ i$ the e2porti$g co-$try'
b. a$d .-ch e2portatio$ i. ca-.i$g or i. threate$i$g to ca-.e
#ateria! i$6-ry to a do#e.tic i$d-.try' or #ateria!!y retard. the
e.tab!i.h#e$t o a do#e.tic i$d-.try prod-ci$g the !i/e prod-ct. GSec. B01
%a&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFFI

C. Nor!al $alue for purposes of i!posi"9 the a"tiH
du!pi"9 duty i. the co#parab!e price at the date o .a!e o !i/e prod-ct'
co##odity' or artic!e i$ the ordi$ary co-r.e o trade +he$ de.ti$ed or
64
co$.-#ptio$ i$ the co-$try o e2port. GSec. B01 %.& %B &' T((' a. a#e$ded
by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFFI
'&. The i!posi"9 authority for the a"tiHdu!pi"9 duty is
the Secretary of Trade a"d *"dustry i" the case of "o"H
a9ricultural product5 co!!odity5 or article or the Secretary of
A9riculture5 i" the case of a9ricultural product5 co!!odity or
article5 ater or#a! i$0e.tigatio$ a$d air#ati0e i$di$g o the Tari
(o##i..io$. GSec. B01 %a&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,
"-#pi$g Act o 1FFFI
''. E$e" whe" all the reDuire!e"ts for the i!positio"
ha$e bee" fulfilled5 the decisio" o" whether or "ot to i!pose a
defi"iti$e a"tiHdu!pi"9 duty re!ai"s the prero9ati$e of the
Tariff 0o!!issio". GSec. B01 %a&' T((' a. a#e$ded by Rep. Act No. ?@>2'
A$ti,"-#pi$g Act o 1FFFI Th-.' the cabi$et .ecretarie. co-!d $ot
co$tra0e$e the reco##e$datio$ o the Tari (o##i..io$. They co-!d $ot
i#po.e the a$ti,d-#pi$g d-ty or a$y .pecia! c-.to#. d-ty +itho-t the
a0orab!e reco##e$datio$ o the Tari (o##i..io$.
'%. *" the deter!i"atio" of whether to i!pose the a"tiH
du!pi"9 duty5 the Tariff 0o!!issio"5 !ay co"sider a!o"9
others5 the effect of i!posi"9 a" a"tiHdu!pi"9 duty o" the
welfare of the co"su!ers a"d=or the 9e"eral public5 a"d other
related local i"dustries. %Sec. B01 %a&' T((' a. a#e$ded by Rep. Act No.
?@>2' A$ti,"-#pi$g Act o 1FFF&
'8. The a!ou"t of a"tiHdu!pi"9 duty that !ay be
i!posed is the differe"ce betwee" the e#port price a"d the
"or!al $alue of such product5 co!!odity or article. %Sec. B01 %.&
%1&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF&
The a$ti,d-#pi$g d-ty .ha!! be e1-a! to the #argi$ o d-#pi$g o$
.-ch prod-ct' co##odity or artic!e thereater i#ported to the Phi!ippi$e.
-$der .i#i!ar circ-#.ta$ce.' i$ additio$ to ordi$ary d-tie.' ta2e. a$d
charge. i#po.ed by !a+ o$ the i#ported prod-ct' co##odity or artic!e.
':. +hat are cou"ter$aili"9 duties a"d whe" are they
i!posed 7
S3<<ESTE" ANS=ER8 (o-$ter0ai!i$g d-tie. are additio$a!
c-.to#. d-tie. i#po.ed o$ a$y prod-ct' co##odity or artic!e o co##erce
+hich i. gra$ted direct!y or i$direct!y by the go0er$#e$t i$ the co-$try o
origi$ or e2portatio$' a$y /i$d or or# o .peciic .-b.idy -po$ the
prod-ctio$' #a$-act-re or e2portatio$ o .-ch prod-ct co##odity or
artic!e' a$d the i#portatio$ o .-ch .-b.idi;ed prod-ct' co##odity' or
artic!e ha. ca-.ed or threate$. to ca-.e #ateria! i$6-ry to a do#e.tic
i$d-.try or ha. #ateria!!y retarded the gro+th or pre0e$t. the
e.tab!i.h#e$t o a do#e.tic i$d-.try. %Sec. B02' T((P a. a#e$ded by
Sectio$ 1' R.A. No. ?@>1&
'<. The i!posi"9 authority for the cou"ter$aili"9 duties
is the Secretary of Trade a"d *"dustry i" the case of "o"H
a9ricultural product5 co!!odity5 or article or the Secretary of
A9riculture5 i" the case of a9ricultural product5 co!!odity or
article5 ater or#a! i$0e.tigatio$ a$d air#ati0e i$di$g o the Tari
(o##i..io$.
E0e$ +he$ a!! the re1-ire#e$t. or the i#po.itio$ ha0e bee$ -!i!!ed'
the deci.io$ o$ +hether or $ot to i#po.e a dei$iti0e a$ti,d-#pi$g d-ty
re#ai$. the prerogati0e o the Tari (o##i..io$. %Sec. B01 %a&' T((' a.
a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF&
'>. The cou"ter$aili"9 duty is eDui$ale"t to the $alue of
the specific subsidy.
'@. ;arEi"9 duties are the additio$a! c-.to#. d-tie.
i#po.ed o$ oreig$ artic!e. %or it. co$tai$er. i the artic!e it.e! ca$$ot be
#ar/ed&' $ot #ar/ed i$ a$y oicia! !a$g-age i$ the Phi!ippi$e.' i$ a
co$.pic-o-. p!ace a. !egib!y' i$de!ib!y a$d per#a$e$t!y i$ .-ch #a$$er a.
to i$dicate to a$ -!ti#ate p-rcha.er i$ the Phi!ippi$e. the $a#e o the
co-$try o origi$.

'A. The 0o!!issio"er of 0usto!s i!poses the !arEi"9
duty.
'C. The !arEi"9 duty is eDui$ale"t to fi$e perce"t F<IG
ad $alore!.
%&. A discri!i"atory duty i. a $e+ a$d additio$a! c-.to#.
d-ty i#po.ed -po$ artic!e. +ho!!y or i$ part the gro+th or prod-ct o' or
i#ported i$ a 0e..e!' o a$y oreig$ co-$try +hich i#po.e.' direct!y or
i$direct!y' -po$ the di.po.itio$ or tra$.portatio$ i$ tra$.it thro-gh or re,
e2portatio$ ro# .-ch co-$try o a$y artic!e +ho!!y or i$ part the gro+th or
prod-ct o the Phi!ippi$e.' a$y -$rea.o$ab!e charge' e2actio$' reg-!atio$ or
!i#itatio$ +hich i. $ot e1-a!!y e$orced -po$ !i/e artic!e. o e0ery oreig$
co-$try' or di.cri#i$ate. agai$.t the co##erce o the Phi!ippi$e.' direct!y
or i$direct!y' by !a+ or ad#i$i.trati0e reg-!atio$ or practice' by or i$ re.pect
to a$y c-.to#.' to$$age' or port d-ty' ee' charge' e2actio$' c!a..iicatio$'
reg-!atio$' co$ditio$' re.trictio$ or prohibitio$' i$ .-ch #a$$er a. to p!ace
65
the co##erce o the Phi!ippi$e. at a di.ad0a$tage co#pared +ith the
co##erce o a$y oreig$ co-$try.
%'. The Preside"t of the Philippi"es i!poses the
discri!i"atory duties.
%%. Safe9uard !easures are e#erge$cy #ea.-re.'
i$c!-di$g tari.' to protect do#e.tic i$d-.trie. a$d prod-cer. ro#
i$crea.ed i#port. +hich i$!ict or co-!d i$!ict .erio-. i$6-ry o$ the#.
The (TA i. 0e.ted +ith 6-ri.dictio$ to re0ie+ deci.io$. o the
Secretary o Trade a$d 4$d-.try i#po.i$g .aeg-ard #ea.-re. a. pro0ided
-$der Rep. Act No. ??00 the Saeg-ard *ea.-re. Act %S*A&. %Southern
Cross Cement Corporation v. (he Philippine Cement Manufacturers Corp., et al.,
<. R. No. 1>?>E0' A-!y ?' 200E&
The "T4 Secretary ca$$ot i#po.e the .aeg-ard #ea.-re. i the
Tari (o##i..io$ doe. $ot a0orab!y reco##e$d it. i#po.itio$.
%8. *!posi"9 authority for safe9uard !easures. The
i!posi"9 authority for the cou"ter$aili"9 duties is the
Secretary of Trade a"d *"dustry i" the case of "o"Ha9ricultural
product5 co!!odity5 or article or the Secretary of A9riculture5
i" the case of a9ricultural product5 co!!odity or article5 ater
or#a! i$0e.tigatio$ a$d air#ati0e i$di$g o the Tari (o##i..io$.
%:. Safe9uards !easures that !ay be i!posed.
Additio$a! tari.' i#port 1-ota. or ba$$i$g o i#port..
%<. The basis of dutiable $alue of !ercha"dise that is
sub?ect to ad $alore! custo!s duties is the tra"sactio" $alue'
+hich .ha!! be the price act-a!!y paid or payab!e or the good. +he$ .o!d
or e2port to the Phi!ippi$e.' ad6-.ted by addi$g certai$ co.t e!e#e$t. to
the e2te$t that they are i$c-rred by the b-yer b-t are $ot i$c!-ded i$ the
price act-a!!y paid or payab!e or the i#ported good.' a$d #ay i$c!-de the
o!!o+i$g8
a. (o.t o co$tai$er. a$d pac/i$g'
b. 4$.-ra$ce' a$d
c. Creight. %Sec. 201' T(( a. a#e$ded by Sec. 1' Rep. Act No.
F1B>&
%>. The abo$e tra"sactio" $alue is the pri!ary
!ethod of deter!i"i"9 dutiable $alue. *f the tra"sactio" $alue
of the i!ported article could "ot be deter!i"ed usi"9 the
abo$e5 the followi"9 alter"ati$e !ethods should be used o"e
after the other-
a. Tra$.actio$ 0a!-e o ide$tica! good.
b. Tra$.actio$ 0a!-e o .i#i!ar good.
c. "ed-cti0e #ethod
d. (o#p-ted #ethod
e. Ca!!bac/ #ethod
%@. How a"d to who! should clai!s for refu"d of
custo!s duties be !ade 7
S3<<ESTE" ANS=ER8 A!! c!ai#. or re-$d o d-tie. .ha!! be
#ade i$ +riti$g a$d or+arded to the (o!!ector o (-.to#. to +ho# .-ch
d-tie. are paid' +ho -po$ receipt o .-ch c!ai#' .ha!! 0eriy the .a#e by
the record. o hi. Oice' a$d i o-$d to be correct a$d i$ accorda$ce +ith
!a+' .ha!! certiy the .a#e to the (o##i..io$er o (-.to#. +ith hi.
reco##e$datio$ together +ith a!! $ece..ary paper. a$d doc-#e$t.. 3po$
receipt by the (o##i..io$er o .-ch certiied c!ai# he .ha!! ca-.e the
.a#e to be paid i o-$d correct. %Sec. 1@0?' T((&
%A. +hat is !ea" by the ter! e"try i" 0usto!s
(aw 7
S3<<ESTE" ANS=ER8 4t ha. a trip!e #ea$i$g.
a. the doc-#e$t. i!ed at the (-.to#. ho-.eD
b. the .-b#i..io$ a$d accepta$ce o the doc-#e$t.D a$d
c. (-.to#. dec!aratio$ or#. or c-.to#. e$try or#. re1-ired
to be acco#p!i.hed by pa..e$ger. o i$co#i$g 0e..e!. or pa..e$ger
p!a$e. a. e$0i.aged -$der Sec. 2>0> o the T((P %Cai!-re to dec!are
baggage&. %,ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&
%C. A fli9ht stewardess arri$ed fro! Si"9apore. .po"
her arri$al she was asEed whether she has a"ythi"9 to declare.
She a"swered "o"e5 a"d she sub!itted her 0usto!s
Ba99a9e eclaratio" 1or! which she acco!plished a"d
si9"ed with "othi"9 or writte" o" the space for ite!s to be
declared. +he" her ha"9er ba9 was e#a!i"ed so!e pieces of
?ewelry were fou"d co"cealed withi" the li"i"9 of said ba9.
She was the" co"$icted of $iolati"9 of Sec. 8>&' of the
Tariff a"d 0usto!s 0ode for u"lawful i!portatio" which
pe"aliBes a"y perso" who shall fraudule"tly i!port or bri"9
i"to the Philippi"es a"y article co"trary to law.
She "ow appeals clai!i"9 that lower court erred "
co"$icti"9 her u"der Sec. 8>&' whe" the facts alle9ed both i"
the i"for!atio" a"d those show" by the prosecutio" co"stitute
the offe"se u"der Sec. %<&< 1ailure to eclare Ba99a9e5 of
which she was acDuitted. *s she correct 7
66
S3<<ESTE" ANS=ER8 No. Sec. B601 doe. $ot dei$e a cri#e.
4t #ere!y pro0ide.' inter alia, the ad#i$i.trati0e re#edie. +hich ca$ be
re.orted to by the B-rea- o (-.to#. +he$ .ei;i$g d-tiab!e artic!e. o-$d
the baggage o a$y per.o$ arri0i$g i$ the Phi!ippi$e. +hich i. $ot i$c!-ded
i$ the acco#p!i.hed baggage dec!aratio$ .-b#itted to the c-.to#.
a-thoritie.' a$d the ad#i$i.trati0e pe$a!tie. that .-ch per.o$ #-.t pay or
the re!ea.e o .-ch good. i $ot i#ported co$trary to !a+.
S-ch ad#i$i.trati0e pe$a!tie. are i$depe$de$t o the cri#i$a! !iabi!ity
or .#-gg!i$g that #ay be i#po.ed -$der Sec. B601' a$d other pro0i.io$.
o the T(( +hich ca$ o$!y be deter#i$ed ater the appropriate cri#i$a!
proceedi$g.' pre.ci$di$g ro# the o-tco#e i$ a$y ad#i$i.trati0e ca.e that
#ay ha0e bee$ i!ed a$d di.po.ed o by the c-.to#. a-thoritie..
4$deed the .eco$d paragraph o Sec. 2>0> pro0ide. that $othi$g
.ha!! pre0e$t the bri$gi$g o a cri#i$a! actio$ agai$.t the oe$der or
.#-gg!i$g -$der Sectio$ B601. %,ardeleza v. People, <. R. No. 16>26>'
Cebr-ary 6' 2006&
8&. Pay!e"t is "ot a defe"se i" s!u99li"9. =he$ -po$
tria! or 0io!atio$ o thi. .ectio$' the dee$da$t i. .ho+$ to ha0e po..e..io$
o the artic!e i$ 1-e.tio$' po..e..io$ .ha!! be dee#ed .-icie$t e0ide$ce to
a-thori;e co$0ictio$' -$!e.. the dee$da$t .ha!! e2p!ai$ the po..e..io$ to
the .ati.actio$ o the co-rt8 Pro0ided' ho+e0er' That pay#e$t o the ta2
d-e ater apprehe$.io$ .ha!! $ot co$.tit-te a 0a!id dee$.e i$ a$y
pro.ec-tio$ -$der thi. .ectio$. %!a.t par.' Sec. B601' T((&
8'. Ho is smu!!lin! committed "
S3<<ESTE" ANS=ER8 S#-gg!i$g i. co##itted by a$y per.o$
+ho8
a. ra-d-!e$t!y i#port. or bri$g. i$to the co-$try a$y artic!e
co$trary to !a+D
b. a..i.t. i$ .o doi$g a$y artic!e co$trary to !a+D or
c. recei0e.' co$cea!.' b-y.' .e!!. or i$ a$y #a$$er aci!itate.
the tra$.portatio$' co$cea!#e$t or .a!e o .-ch good. ater i#portatio$'
/$o+i$g the .a#e to ha0e bee$ i#ported co$trary to !a+. %,ardeleza v.
People, <.R. No. 16>26>' Cebr-ary 6' 2006 citi$g Rodriguez v. Court of
Appeals, <. R. No. 11>21?' Septe#ber 1?' 1FF>' 2E? S(RA 2??' 2F6&
NOTES AN" (O**ENTS8
a. *!portatio" co$.i.t. o bri$gi$g a$ artic!e i$to the co-$try
ro# the o-t.ide. 4#portatio$ begi$. +he$ the co$0eyi$g 0e..e! or
aircrat e$ter. the 6-ri.dictio$ o the Phi!ippi$e. +ith i$te$tio$ to -$!oad
therei$.
b. +he" u"lawful i!portatio" is co!plete. 4$ the ab.e$ce
o a bo$a ide i$te$t to #a/e e$try a$d pay d-tie. +he$ the prohibited
artic!e e$ter. the Phi!ippi$e territory. 4#portatio$ i. co#p!ete +he$ the
ta2ab!e' d-tiab!e co##odity i. bro-ght +ithi$ the !i#it. o the port o
e$try. E$try thro-gh a c-.to# ho-.e i. $ot the e..e$ce o the act.
%,ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&
8%. The 0ollector of 0usto!s sitti"9 i" seiBure a"d
forfeiture proceedi"9s has e#clusi$e ?urisdictio" to hear a"d
deter!i"e all Duestio"s touchi"9 o" the seiBure a"d forfeiture
of dutiable 9oods. RT0s are precluded fro! assu!i"9
co9"iBa"ce o$er such !atters e$e" throu9h petitio"s of
certiorari5 prohibitio" or !a"da!us. *(he Bureau of Customs, et
al., v. 9gario, et al., <.R. No. 1B?0?1' *arch 20' 2000&
+hat is the ratio"ale for this doctri"e 7
S3<<ESTE" ANS=ER8
a. Regio$a! Tria! (o-rt. ha0e $o 6-ri.dictio$ to rep!e0i$ a
property +hich i. .-b6ect to .ei;-re a$d oreit-re proceedi$g. or 0io!atio$
o the Tari a$d (-.to#. (ode other+i.e' actio$. or oreit-re o property
or 0io!atio$ o the (-.to#. !a+. co-!d ea.i!y be -$der#i$ed by the .i#p!e
de0ice o rep!e0i$. %%e la /uente v. %e 3eyra, et al., 120 S(RA E>>&
b. The doctri$e o e2c!-.i0e c-.to#. 6-ri.dictio$ o0er c-.to#.
ca.e. to the e2c!-.io$ o the RT(. i. a$chored -po$ the po!icy o p!aci$g
$o -$$ece..ary hi$dra$ce o$ the go0er$#e$t:. dri0e' $ot o$!y to pre0e$t
.#-gg!i$g a$d other ra-d. -po$ (-.to#.'
c. b-t #ore i#porta$t!y' to re$der eecti0e a$d eicie$t the
co!!ectio$ o i#port a$d e2port d-tie. d-e the State' +hich e$ab!e. the
go0er$#e$t to carry o-t the -$ctio$. it ha. bee$ i$.tit-ted to peror#.
*,ao, et al., v. Court of Appeals, et al., and companion case, 2EF S(RA B>'
EB&
d. The i..-a$ce by reg-!ar co-rt. o +rit. o pre!i#i$ary
i$6-$ctio$ i$ .ei;-re a$d oreit-re proceedi$g. beore the B-rea- o
(-.to#. #ay aro-.e .-.picio$ that the i..-a$ce or gra$t +a. or
co$.ideratio$ other tha$ the .trict #erit. o the ca.e. %Juno v. Ca"redo,
E02 S(RA @> G200BI&
e. 3$der the doctri$e o pri#ary 6-ri.dictio$' the B-rea- o (-.to#.
ha. e2c!-.i0e ad#i$i.trati0e 6-ri.dictio$ to co$d-ct .earche.' .ei;-re. a$d
oreit-re. o co$traba$d +itho-t i$terere$ce ro# the co-rt.. 4t co-!d
co$d-ct .earche. a$d .ei;-re. +itho-t $eed o a 6-dicia! +arra$t e2cept i
the .earch i. to be co$d-cted i$ a d+e!!i$g p!ace.
=here a$ ad#i$i.trati0e oice ha. obtai$ed a tech$ica! e2perti.e i$
a .peciic .-b6ect' e0e$ the co-rt. #-.t deer to thi. e2perti.e.
NOTES AN" (O**ENTS8 The B-rea- o (-.to#. co-!d .earch
a$d .ei;e artic!e. +itho-t $eed o a 6-dicia! +arra$t -$!e.. the p!ace to be
.earched i. a d+e!!i$g p!ace. 4$ .-ch a ca.e c-.to#. re1-ire. a 6-dicia!
+arra$t.
67
88. A clai!i"9 to be the ow"er of a $essel which is
the sub?ect of custo!s warra"t of seiBure a"d dete"tio"
sou9ht the i"tercessio" of the RT0 to restrai" the Bureau of
0usto!s fro! i"terferi"9 with his property ri9hts o$er the
$essel. +ould the suit prosper7
S3<<ESTE" ANS=ER8 No. 7i. re#edy +a. $ot +ith the RT(
b-t +ith the (TA' a. i..-e. o o+$er.hip o good. i$ the c-.tody o
c-.to#. oicia!. are +ithi$ the po+er o the (TA to deter#i$e.
The (o!!ector o (-.to#. ha. e2c!-.i0e 6-ri.dictio$ o0er .ei;-re
a$d oreit-re proceedi$g. a$d tria! co-rt. are prec!-ded ro# a..-#i$g
cog$i;a$ce o0er .-ch #atter. e0e$ thro-gh petitio$. or certiorari'
prohibitio$ or #a$da#-.. %Commissioner of Customs v. Court of
Appeals, et al., <. R. No.. 111202,0>' Aa$-ary B1' 2006&
8:. The custo!s authorities do "ot ha$e to pro$e to the
satisfactio" of the court that the articles o" board a $essel
were i!ported fro! abroad or are i"te"ded to be shipped
abroad before they !ay e#ercise the power to effect custo!s
searches5 seiBures5 or arrests pro$ided by law a"d co"ti"ue
with the ad!i"istrati$e heari"9s. *(he Bureau of Customs, et al., v.
9gario, et al.' <.R. No. 1B?0?1' *arch 20' 2000&
8<. The Tari a$d (-.to#. (ode a!!o+. the B-rea- o
(-.to#. to re.ort to the ad!i"istrati$e re!edy of seiBure5 such
as by e"forci"9 the ta# lie" o" the i!ported article whe" the
i!ported articles could be fou"d a"d be sub?ect to seiBure a"d
forfeiture.
8>. The Tari a$d (-.to#. (ode a!!o+. the B-rea- o
(-.to#. to re.ort to the ?udicial re!edy of fili"9 a" actio" i"
court whe" the i!ported articles could "ot a"y!ore be fou"d.
8@. Sectio" %8&' of the T00P states that seiBed
articles !ay "ot be released u"der bo"d if there is prima
facie e$ide"ce of fraud i" their i!portatio". Commissioner of
Customs v. Court of (a) Appeals, et al., <. R. No. 1@1>16,1@' Cebr-ary
1B' 200F
Sectio$ 2B01. 1arrant for %etention of Property0Cash Bond. J
3po$ #a/i$g a$y .ei;-re' the (o##i..io$er .ha!! i..-e a +arra$t or the
dete$tio$ o the propertyD a$d i the o+$er or i#porter de.ire. to .ec-re
the re!ea.e o the property or !egiti#ate -.e' the (o!!ector .ha!!' +ith the
appro0a! o the (o##i..io$er o (-.to#.' .-rre$der it -po$ the i!i$g o
a ca.h bo$d' i$ a$ a#o-$t i2ed by hi#' co$ditio$ed -po$ the pay#e$t o
the apprai.ed 0a!-e o the artic!e a$d9or a$y i$e' e2pe$.e. a$d co.t.
+hich #ay be ad6-dged i$ the ca.e8 Provided, That such i!portatio"
shall "ot be released u"der a"y bo"d whe" there is prima facie
e$ide"ce of fraud i" the i!portatio" of the articleK Provided, -rther'
That artic!e. the i#portatio$ o +hich i. prohibited by !a+ .ha!! $ot be
re!ea.ed -$der a$y circ-#.ta$ce. +hat.oe0erK Provided' i$a!!y' That
$othi$g i$ thi. .ectio$ .ha!! be co$.tr-ed a. re!ie0i$g the o+$er or
i#porter ro# a$y cri#i$a! !iabi!ity +hich #ay ari.e ro# a$y 0io!atio$ o
!a+ co##itted i$ co$$ectio$ +ith the i#portatio$ o the artic!e. %e#pha.i.
.-pp!ied&
8A. *"sta"ces where there is "o ri9ht of rede!ptio" of
seiBed a"d forfeited articles-
a. There i. ra-dD
b. The i#portatio$ i. ab.o!-te!y prohibited' or
c. The re!ea.e o the property +o-!d be co$trary to !a+.
*(ransglo"e International, Inc. v. Court of Appeals, et al., <.R. No. 1266BE'
Aa$-ary 2>' 1FFF&
8C. 4$ Aznar v. Court of (a) Appeals, EC SCRA E?H' reiterated i$
/arolan, ,r. v. Court of (a) appeals, et al., B?A SCRA BHC' the S-pre#e
(o-rt c!ariied that the fraud co"te!plated by law !ust be actual
a"d "ot co"structi$e. 4t #-.t be i$te$tio$a!' co$.i.ti$g o deceptio$'
+i!!-!!y a$d de!iberate!y do$e or re.orted to i$ order to i$d-ce a$other to
gi0e -p .o#e right.
:&. ReDuisites for forfeiture of i!ported 9oods-
a. =ro$g-! #a/i$g by the o+$er' i#porter' e2porter or
co$.ig$ee o a$y dec!aratio$ or aida0it' or the +ro$g-! #a/i$g or de!i0ery
by the .a#e per.o$ o a$y i$0oice' !etter or paper J a!! to-chi$g o$ the
i#portatio$ or e2portatio$ o #ercha$di.e.
b. the a!.ity o .-ch dec!aratio$' aida0it' i$0oice' !etter or
paperD a$d
c. a$ i$te$tio$ o$ the part o the i#porter9co$.ig$ee to e0ade
the pay#e$t o the d-tie. d-e. *Repu"lic, etc., v. (he Court of Appeals, et
al.' <.R. No. 1BF0>0' October 2' 2001&
:'. O" /a"uary @5 'CAC5 the $essel ;=3 Star Ace5
co!i"9 fro! Si"9apore lade" with car9o5 e"tered the Port of
Sa" 1er"a"do5 (a ."io" for "eeded repairs. +he" the Bureau
of 0usto!s later beca!e suspicious that the $essel6s real
purpose i" docEi"9 was to s!u99le car9o i"to the cou"try5
seiBure proceedi"9s were i"stituted a"d subseDue"tly two
68
+arra"ts of SeiBure a"d ete"tio" were issued for the $essel
a"d its car9o.
0esar does "ot ow" the $essel or a"y of its car9o but
clai!ed a preferred !ariti!e lie". 0esar the" brou9ht se$eral
cases i" the RT0 to e"force his lie". +ould these suits
prosper 7
S3<<ESTE" ANS=ER8 No. The B-rea- o (-.to#. ha0i$g ir.t
obtai$ed po..e..io$ o the 0e..e! a$d it. good. ha. obtai$ed 6-ri.dictio$
to the e2c!-.io$ o the tria! co-rt..
=he$ (e.ar ha. i#p!eaded the 0e..e! a. a dee$da$t to e$orce hi.
a!!eged #ariti#e !ie$' i$ the RT(' he bro-ght a$ actio$ in rem -$der the
(ode o (o##erce -$der +hich the 0e..e! #ay be attached a$d .o!d.
7o+e0er' the ba.ic operati0e act i. the act-a! or co$.tr-cti0e
po..e..io$ o the res by the trib-$a! e#po+ered by !a+ to co$d-ct the
proceedi$g.. Thi. #ea$. that to ac1-ire 6-ri.dictio$ o0er the 0e..e!' a. a
dee$da$t' the tria! co-rt #-.t ha0e obtai$ed either act-a! or co$.tr-cti0e
po..e..io$ o0er it. Neither +a. acco#p!i.hed by the RT( a. the 0e..e!
+a. a!ready i$ the po..e..io$ o the B-rea- o (-.to#.. %Commissioner
of Customs v. Court of Appeals, et al., <. R. No.. 111202,0>' Aa$-ary B1'
2006&
NOTES AN" (O**ENTS8
a. 1orfeiture of seiBed 9oods i" the Bureau of 0usto!s is i"
the "ature of a proceedi"9 in rem 5 i.e. directed agai$.t the res or
i#ported good. a$d e$tai!. a deter#i$atio$ o the !ega!ity o their
i#portatio$. 4$ thi. proceedi$g' it i. i$ !ega! co$te#p!atio$ the property
it.e! +hich co##it. the 0io!atio$ a$d i. treated a. the oe$der' +itho-t
reere$ce +hat.oe0er to the character or co$d-ct o the o+$er.
The i..-e i. !i#ited to +hether the i#ported good. .ho-!d be
oreited a$d di.po.ed o i$ accorda$ce +ith !a+ or 0io!atio$ o the Tari
a$d (-.to#. (ode. .*(ransglo"e International, Inc. v. Court of Appeals, et
al.' <.R. No. 1266BE' Aa$-ary 2>' 1FFF&
Coreit-re o .ei;ed good. i$ the B-rea- o (-.to#. i. a proceedi$g
agai$.t the good. a$d $ot agai$.t the o+$er. %Asian (erminals, Inc. v.
Bautista0Ricafort, < .R. No. 166F01' October 2@' 2006 citi$g (ransglo"e#
:%. The 0ollector of 0usto!s upo" probable cause that
the articles are i!ported or e#ported5 or are atte!pted to be
i!ported or e#ported5 i" $iolatio" of the tariff a"d custo!s
laws shall issue a warra"t of seiBure. %Sec. 6' Tit!e 444' (AO No. F,
FB&
4 the .earch a$d .ei;-re i. to be co$d-cted i$ a d+e!!i$g p!ace' the$
a .earch +arra$t .ho-!d be i..-ed by the reg-!ar co-rt. $ot the B-rea- o
(-.to#..
There #ay be i$.ta$ce. +here $o +arra$t. i..-ed by the B-rea- o
(-.to#. or the reg-!ar co-rt. i. re1-ired' a. i$ .earch a$d .ei;-re. o
#otor 0ehic!e. a$d 0e..e!..
:8. S!u99led 9oods seiBed by $irtue of a court warra"t
should be surre"dered to the court that issued the warra"t a"d
"ot to the Bureau of 0usto!s beca-.e the good. are i$ custodia
legis.
::. ecisio"s of the 0o!!issio"er of 0usto!s
i" cases i"$ol$i"9 liability for custo!s duties5 fees or other
!o"ey char9es that !ust be appealed to the 0ourt of Ta#
Appeals i$isio" withi" thirty F8&G days fro! receipt .peciica!!y
reer to hi. deci.io$. o$ administrative ta) protest cases' a. .tated i$
Sectio$ 2E02 o the Tari a$d (-.to#. (ode o the Phi!ippi$e. %(CCP&8
Sectio$ 2E02. Revie "y Court of (a) Appeals.
J The party a99rie$ed by a ruli"9 of the
0o!!issio"er i" a"y !atter brou9ht before hi!
upo" protest or by hi. actio$ or r-!i$g i$ a$y ca.e o
.ei;-re !ay appeal to the 0ourt of Ta# Appeals' i$ the
#a$$er a$d +ithi$ the period pre.cribed by !a+ a$d
reg-!atio$..
3$!e.. a$ appea! i. #ade to the (o-rt o Ta2 Appea!. i$ the
#a$$er a$d +ithi$ the period pre.cribed by !a+. a$d reg-!atio$.' the
actio$ or r-!i$g o the (o##i..io$er .ha!! be i$a! a$d co$c!-.i0e.
GE#pha.i. .-pp!ied.I %Pilipinas Shell Petroleum Corporation v. Commissioner
of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&
:<. Ad!i"istrati$e ta# protest u"der the Tariff a"d
0usto!s 0ode FT00PG. A ta2 prote.t ca.e' -$der the T((P'
i$0o!0e. a prote.t o the !i1-idatio$ o i#port e$trie.. %Pilipinas Shell
Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6B?0' A-$e
1?' 200F&

:>. (iDuidatio"5 defi"ed. A !i1-idatio$ i. the i$a!
co#p-tatio$ a$d a.certai$#e$t by the co!!ector o the d-tie. o$ i#ported
#ercha$di.e' ba.ed o$ oicia! report. a. to the 1-a$tity' character' a$d
0a!-e thereo' a$d the co!!ector:. o+$ i$di$g a. to the app!icab!e rate o
d-tyD it i. a/i$ to a$ a..e..#e$t o i$ter$a! re0e$-e ta2e. -$der the
Natio$a! 4$ter$a! Re0e$-e (ode +here the ta2 !iabi!ity o the ta2payer i.
dei$ite!y deter#i$ed. %Pilipinas Shell Petroleum Corporation v. Commissioner
of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&
69
:@. The followi"9 letters of de!a"d ca" "ot be
co"sidered as a liDuidatio" or a" assess!e"t of Shell6s
i!port ta# liabilities that ca" be the sub?ect of a"
ad!i"istrati$e ta# protest proceedi"9 before the
0o!!issio"er of 0usto!s whose decisio" is appealable to
the 0ourt of Ta# Appeals8
a. the O$e Stop Shop 4$ter,Age$cy Ta2 (redit a$d "-ty
"ra+bac/ (e$ter *the Center# No0e#ber B !etter' .ig$ed by the Secretary
o Ci$a$ce' i$or#i$g it o the ca$ce!!atio$ o the Ta2 (redit (ertiicate.
%T((.&D
b. the (o##i..io$er o (-.to#.: No0e#ber 1F !etter re1-iri$g
She!! to rep!ace the a#o-$t e1-i0a!e$t to the a#o-$t o the ca$ce!!ed
T((. -.ed by She!!D a$d
c. the (o##i..io$er o (-.to#.: co!!ectio$ !etter.' i..-ed
thro-gh "ep-ty (o##i..io$er Atty. Va!era' or#a!!y de#a$di$g the
a#o-$t co0ered by the ca$ce!!ed T((..
No$e o the.e !etter.' ho+e0er' ca$ be co$.idered a. a !i1-idatio$
or a$ a..e..#e$t o She!!:. i#port ta2 !iabi!itie. that ca$ be the .-b6ect o
a$ ad#i$i.trati0e ta2 prote.t proceedi$g beore the re.po$de$t +ho.e
deci.io$ i. appea!ab!e to the (TA. She!!:. i#port ta2 !iabi!itie. had !o$g
bee$ co#p-ted a$d a.certai$ed i$ the origi$a! a..e..#e$t.' a$d She!!
paid the.e !iabi!itie. -.i$g the T((. tra$.erred to it a. pay#e$t.
4t i. e0e$ a$ error to co$.ider the !etter. a. a rea..e..#e$t
beca-.e they reer to the .a#e ta2 !iabi!itie. o$ the .a#e i#portatio$.
co0ered by the origi$a! a..e..#e$t.. The !etter. #ere!y rei..-ed the
origi$a! a..e..#e$t. that +ere pre0io-.!y .ett!ed by She!! +ith the -.e o
the T((.. 7o+e0er' o$ acco-$t o the ca$ce!!atio$ o the T((.' the ta2
!iabi!itie. o She!! -$der the origi$a! a..e..#e$t. +ere co$.idered -$paidD
he$ce' the !etter. a$d the actio$. or co!!ectio$.
=he$ She!! +e$t to the (TA' the i..-e. it rai.ed i$ it. petitio$ +ere
a!! re!ated to the fact a$d eicacy o the pay#e$t. #ade' .peciica!!y the
ge$-i$e$e.. o the T((.D the ab.e$ce o d-e proce.. i$ the
e$orce#e$t o the deci.io$ to ca$ce! the T((.D the act. .-rro-$di$g
the ra-d i$ origi$a!!y .ec-ri$g the T((.D a$d the app!icatio$ o e.toppe!.
The.e are pay#e$t a$d co!!ectio$ i..-e.' $ot ta2 prote.t i..-e. +ithi$ the
(TA:. 6-ri.dictio$ to r-!e -po$.
She!! $e0er prote.ted the origi$a! a..e..#e$t. o it. ta2 !iabi!itie.
a$d i$ act .ett!ed the# -.i$g the T((.. The.e origi$a! a..e..#e$t.'
thereore' ha0e beco#e i$a!' i$co$te.tab!e' a$d beyo$d a$y .-b.e1-e$t
prote.t proceedi$g' ad#i$i.trati0e or 6-dicia!' to r-!e -po$.
To be 0ery preci.e' She!!:. petitio$ beore the (TA pri$cipa!!y
1-e.tio$ed the 0a!idity o the ca$ce!!atio$ o the T((. J a deci.io$ that
+a. #ade $ot by the (o##i..io$er o (-.to#.' b-t by the (e$ter. A.
the (TA ha. $o 6-ri.dictio$ o0er deci.io$. o the (e$ter' She!!:. re#edy
agai$.t the ca$ce!!atio$ .ho-!d ha0e bee$ a certiorari petitio$ beore the
reg-!ar co-rt.' $ot a ta2 prote.t ca.e beore the (TA. Record. do $ot
.ho+ that She!! e0er a0ai!ed o thi. re#edy.
A!ter$ati0e!y' a. he!d i$ Shell v. Repu"lic of the Philippines, <.R.
No. 161F>B' *arch 6' 200?' >E@ S(RA @01' the appropriate or-# or
She!! -$der the circ-#.ta$ce. o thi. ca.e .ho-!d be at the co!!ectio$
ca.e. beore the RT( +here She!! ca$ p-t -p the act o it. pay#e$t a. a
dee$.e. %Pilipinas Shell Petroleum Corporation v. Commissioner of
Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&
:A. A case beco!es ripe for fili"9 with the
Re9io"al Trial 0ourt FRT0G5 as a collectio" !atter after the
fi"ality of the 0o!!issio"er of 0usto!s assess!e"t. %Pilipinas
Shell Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6B?0'
A-$e 1?' 200F citi$g Shell v. Repu"lic of the Philippines, <.R. No. 161F>B'
*arch 6' 200?' >E@ S(RA @01&
The a..e..#e$t ha. !o$g bee$ i$a!' a$d thi. recognition o i$a!ity
re#o0e. a!! percei0ed hi$dra$ce.' ba.ed o$ thi. ca.e' to the co$ti$-atio$
o the co!!ectio$ .-it..
A .-it or the co!!ectio$ o i$ter$a! re0e$-e ta2e.' +here the
a..e..#e$t ha. a!ready beco#e i$a! a$d e2ec-tory' the actio$ to co!!ect
i. a/i$ to a$ actio$ to e$orce the 6-dg#e$t. No i$1-iry ca$ be #ade
therei$ a. to the #erit. o the
4$ !ight o the co$c!-.io$ that the pre.e$t ca.e doe. $ot i$0o!0e a
deci.io$ o the (o##i..io$er o (-.to#. o$ a #atter bro-ght to hi# a.
a ta2 prote.t' Atty. Va!era:. !ac/ o a-thority to i..-e the co!!ectio$ !etter.
a$d to i$.tit-te the co!!ectio$ .-it. i. irre!e0a$t. Cor thi. .a#e rea.o$' the
i$6-$ctio$ agai$.t Atty. Va!era ca$$ot be i$0o/ed to e$6oi$ the co!!ectio$
o -$paid ta2e. d-e ro# She!!. %Pilipinas Shell Petroleum Corporation v.
Commissioner of Customs, supra&
(O0A( ,O3ERN;ENT TA)AT*ON
'. The fu"da!e"tal pri"ciples of local ta#atio" are8
a. 3$ior#ityD
b. Ta2e.' ee.' charge. a$d other i#po.itio$. .ha!! be e1-itab!e
a$d ba.ed o$ abi!ity to pay' or p-b!ic p-rpo.e.' $ot -$6-.t' e2ce..i0e'
oppre..i0e or co$i.catory' $ot co$trary to !a+' p-b!ic po!icy' $atio$a!
eco$o#ic po!icy or i$ re.trai$t o tradeD
c. The !e0y a$d co!!ectio$ .ha!! $ot be !et to a$y pri0ate per.o$D
d. 4$-re. .o!e!y to the !oca! go0er$#e$t -$it !e0yi$g the ta2D
e. The progre..i0ity pri$cip!e #-.t be ob.er0ed.
%. A law which depri$es local 9o$er"!e"t u"its of
their power to ta# would be u"co"stitutio"al. The co$.tit-tio$ ha.
70
de!egated to !oca! go0er$#e$t. the po+er to !e0y ta2e.' ee. a$d other
charge.. Thi. co$.tit-tio$a! de!egatio$ #ay o$!y be re#o0ed by a
co$.tit-tio$a! a#e$d#e$t.
8. ."der the "ow pre$aili"9 0o"stitutio"5 where there is
"either a 9ra"t "or prohibitio" by statute5 the ta#i"9 power of
local 9o$er"!e"ts !ust be dee!ed to e#ist althou9h
0o"9ress !ay pro$ide statutory li!itatio"s a"d 9uideli"es i$
order to .aeg-ard the 0iabi!ity a$d .e!,.-icie$cy o !oca! go0er$#e$t
-$it. by direct!y gra$ti$g the# ge$era! a$d broad ta2 po+er.. %City
+overnment of San Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No.
12@@0?' *arch 2>' 1FFF&
:. The (ocal ,o$er"!e"t 0ode e#plicitly authoriBes
pro$i"ces a"d cities5 "otwithsta"di"9 a"y e#e!ptio" 9ra"ted
by a"y law or other special law to i!pose a ta# o" busi"esses
e"?oyi"9 a fra"chise. 4$dicati0e o the !egi.!ati0e i$te$t to carry o-t the
co$.tit-tio$a! #a$date o 0e.ti$g broad ta2 po+er. to !oca! go0er$#e$t
-$it.' the )oca! <o0er$#e$t (ode ha. +ithdra+$ ta2 e2e#ptio$. or
i$ce$ti0e. theretoore e$6oyed by certai$ e$titie.. *City +overnment of San
Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No. 12@@0?' *arch 2>' 1FFF&
<. Philippine Lon! Distance #elephone Compan$, %nc.,
v. Cit$ of Davao, et al., etc., ,. R. No. ':8A>@5 Au9ust %%5 %&&'5
-phe!d the a-thority o the (ity o "a0ao' a !oca! go0er$#e$t -$it' to
i#po.e a$d co!!ect a !oca! ra$chi.e ta2 beca-.e the )oca! <o0er$#e$t
ha. +ithdra+$ a!! ta2 e2e#ptio$. pre0io-.!y e$6oyed by a!! per.o$. a$d
a-thori;ed !oca! go0er$#e$t -$it. to i#po.e a ta2 o$ b-.i$e.. e$6oyi$g a
ra$chi.e ta2 $ot+ith.ta$di$g the gra$t o ta2 e2e#ptio$ to the#.
>. E#plai" the co"cept of the paradi9! shift i"
local 9o$er"!e"t ta#atio".
S3<<ESTE" ANS=ER8 Paradig# .hit ro# e2c!-.i0e
(o$gre..io$a! po+er to direct gra$t o ta2i$g po+er to !oca! !egi.!ati0e
bodie.. The po+er to ta2 i. $o !o$ger 0e.ted e2c!-.i0e!y o$ (o$gre..D
!oca! !egi.!ati0e bodie. are $o+ gi0e$ direct a-thority to !e0y ta2e.' ee.
a$d other charge. p-r.-a$t to Artic!e L' .ectio$ > o the 1F?@ (o$.tit-tio$.
%Batangas Poer Corporation v. Batangas City, et al. <. R. No. 1>26@>'
a$d co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Poer Corporation v.
City of Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&
@. The fu"da!e"tal law did "ot i"te"d the direct 9ra"t to
local 9o$er"!e"t u"its to be absolute a"d u"co"ditio"al' the
co$.tit-tio$a! ob6ecti0e ob0io-.!y i. to e$.-re that' +hi!e !oca! go0er$#e$t
-$it. are bei$g .tre$gthe$ed a$d #ade #ore a-to$o#o-.' the !egi.!at-re
#-.t .ti!! .ee to it that8
a. the ta2payer +i!! $ot be o0er,b-rde$ed or .add!ed +ith
#-!tip!e a$d -$rea.o$ab!e i#po.itio$.D
b. each !oca! go0er$#e$t -$it +i!! ha0e it. air .hare o a0ai!ab!e
re.o-rce.D
c. the re.o-rce. o the $atio$a! go0er$#e$t +i!! be -$d-!y
di.t-rbedD a$d
d. !oca! ta2atio$ +i!! be air' -$ior# a$d 6-.t. %Manila &lectric
Company v. Province of $aguna, et al., <.R. No. 1B1B>F' *ay >' 1FFF&
A. Ta#i"9 power of the local 9o$er"!e"t is li!ited.
The ta2i$g po+er o !oca! go0er$#e$t. i. !i#ited i$ the .e$.e that
(o$gre.. ca$ e$act !egi.!atio$ gra$ti$g ta2 e2e#ptio$..
=hi!e the .y.te# o !oca! go0er$#e$t ta2atio$ ha. cha$ged +ith
the o$.et o the 1F?@ (o$.tit-tio$' the po+er o !oca! go0er$#e$t -$it. to
ta2 i. .ti!! !i#ited.
=hi!e the po+er to ta2 by !oca! go0er$#e$t. #ay be e2erci.ed by
!oca! !egi.!ati0e bodie.' $o !o$ger #ere!y be 0irt-e o a 0a!id de!egatio$ a.
beore' b-t p-r.-a$t to direct a-thority co$erred by Sectio$ >' Artic!e L o
the (o$.tit-tio$' the ba.ic doctri$e o$ !oca! ta2atio$ re#ai$. e..e$tia!!y
the .a#e' 4the poer to ta) is 5still6 primarily vested in the Congress.7
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'
October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan
(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F i$
t-r$ reerri$g to Mactan Ce"u International Airport Authority, v. Marcos, <.R. No.
1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0#
C. 1urther a!plificatio" by Ber"as of the local
9o$er"!e"t6s power to ta#. =hat i. the eect o Sectio$ > o$ the
i.ca! po.itio$ o #-$icipa! corporatio$.M Sectio$ > doe. $ot cha$ge the
doctri$e that #-$icipa! corporatio$. do $ot po..e.. i$here$t po+er. o
ta2atio$. =hat it doe. i. to co$er #-$icipa! corporatio$. a ge$era!
po+er to !e0y ta2e. a$d other+i.e create .o-rce. o re0e$-e. They $o
!o$ger ha0e to +ait or a .tat-tory gra$t o the.e po+er.. The po+er o
the !egi.!ati0e a-thority re!ati0e to the i.ca! po+er. o !oca! go0er$#e$t.
ha. bee$ red-ced to the a-thority to i#po.e !i#itatio$. o$ #-$icipa!
po+er.. *oreo0er' the.e !i#itatio$. #-.t be co$.i.te$t +ith the ba.ic
po!icy o !oca! a-to$o#y. The i#porta$t !ega! eect o Sectio$ > i. th-.
to re0er.e the pri$cip!e that do-bt. are re.o!0ed agai$.t #-$icipa!
corporatio$.. 7e$ceorth' i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa!
i.ca! po+er.' do-bt. +i!! be re.o!0ed i$ a0or o #-$icipa! corporatio$..
4t i. -$der.tood' ho+e0er' that ta2e. i#po.ed by !oca! go0er$#e$t #-.t
be or a p-b!ic p-rpo.e' -$ior# +ithi$ a !oca!ity' #-.t $ot be
co$i.catory' a$d #-.t be +ithi$ the 6-ri.dictio$ o the !oca! -$it to pa...
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'
71
October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan
(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F&
'&. Reco"ciliatio" of the local 9o$er"!e"t6s authority
to ta# a"d the 0o"9ressio"al 9e"eral ta#i"9 power. (o$gre..
ha. the i$here$t po+er to ta2' +hich i$c!-de. the po+er to gra$t ta2 e2e#ptio$..
O$ the other ha$d' the po+er o !oca! go0er$#e$t.' .-ch a. pro0i$ce. a$d
citie. or e2a#p!e N-e;o$ (ity' to ta2 i. pre.cribed by Sectio$ 1>1 i$ re!atio$ to
Sectio$ 1B@ o the )<( +hich e2pre..!y pro0ide. that $ot+ith.ta$di$g a$y
e2e#ptio$ gra$ted by a$y !a+ or other .pecia! !a+' the (ity or a pro0i$ce #ay
i#po.e a ra$chi.e ta2. 4t #-.t be $oted that Sectio$ 1B@ o the )<( doe. $ot
prohibit gra$t o -t-re e2e#ptio$..
The S-pre#e (o-rt i$ a .erie. o ca.e. ha. .-.tai$ed the po+er
o (o$gre.. to gra$t ta2 e2e#ptio$. o0er a$d abo0e the po+er o the
!oca! go0er$#e$t:. de!egated po+er to ta2. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City
+overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No.
16201>' *arch 6' 2006' E?E S(RA 16&
4$deed' the gra$t o ta2i$g po+er. to !oca! go0er$#e$t -$it. -$der
the (o$.tit-tio$ a$d the )<( doe. $ot aect the po+er o (o$gre.. to
gra$t e2e#ptio$. to certai$ per.o$.' p-r.-a$t to a dec!ared $atio$a!
po!icy. The !ega! eect o the co$.tit-tio$a! gra$t to !oca! go0er$#e$t.
.i#p!y #ea$. that i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! ta2i$g
po+er.' do-bt. #-.t be re.o!0ed i$ a0or o #-$icipa! corporatio$..
GI"id.' reerri$g to Philippine $ong %istance (elephone Company, Inc.
*P$%(# vs. City of %avao6
''. Professio"al ta# !ay be i!posed by a
pro$i"ce or city but "ot by a !u"icipality or bara"9ay.
a. Tra$.actio$ ta2ed8 E2erci.e or practice o proe..io$ re1-iri$g
go0er$#e$t !ice$.-re e2a#i$atio$.
b. Ta2 rate8 4$ Accorda$ce +ith a ta2i$g ordi$a$ce +hich .ho-!d
$ot e2ceed PB00.00.
c. Ta2 ba.e8 Rea.o$ab!e c!a..iicatio$ by the .a$gg-$ia$.
d. E2ceptio$8 Pay#e$t to o$e pro0i$ce or city $o !o$ger .-b6ect
to a$y other $atio$a! or !oca! ta2' !ice$.e or ee or the practice o .-ch
proe..io$ i$ a$y part o the Phi!ippi$e proe..io$a!. e2c!-.i0e!y e#p!oyed
i$ the go0er$#e$t.
e. "ate o pay#e$t8 or o$ beore Aa$-ary B1 or e$gagi$g i$ the
proe..io$.
. P!ace o pay#e$t8 Pro0i$ce or city +here the proe..io$a!
practice. hi. proe..io$ or +here he #ai$tai$. hi. pri$cipa! oice i$ ca.e
he practice. hi. proe..io$ i$ .e0era! p!ace..
'%. ReDuire!e"ts- A$y i$di0id-a! or corporatio$
e#p!oyi$g a per.o$ .-b6ect to proe..io$a! ta2 .ha!! re1-ire pay#e$t by
that per.o$ o the ta2 o$ hi. proe..io$ beore e#p!oy#e$t a$d a$$-a!!y
thereater.
A$y per.o$ .-b6ect to the proe..io$a! ta2 .ha!! +rite i$ deed.'
receipt.' pre.criptio$.' report.' boo/. o acco-$t' p!a$. a$d de.ig$.'
.-r0ey. a$d #ap.' a. the ca.e #ay be' the $-#ber o the oicia! receipt
i..-ed to hi#.
E2e#ptio$8 Proe..io$a!. e2c!-.i0e!y e#p!oyed i$ the go0er$#e$t
.ha!! be e2e#pt ro# pay#e$t. %Sec. 1BF' )<(&
NOTE8 Cor the p-rpo.e o co!!ecti$g the ta2' the pro0i$cia! or city
trea.-rer or hi. d-!y a-thori;ed repre.e$tati0e .ha!! re1-ire ro# .-ch
proe..io$a!. their c-rre$t a$$-a! regi.tratio$ card. i..-ed by co#pete$t
a-thority beore accepti$g pay#e$t o their proe..io$a! ta2 or the c-rre$t
year. The PR( .ha!! !i/e+i.e re1-ire the proe..io$a!. pre.e$tatio$ o
proo o pay#e$t beore regi.tratio$ o proe..io$a!. or re$e+a! o their
!ice$.e.. %!a.t par.' Art. 22?' R-!e. a$d Reg-!atio$. 4#p!e#e$ti$g the
)oca! <o0er$#e$t (ode o 1FF1&
'8. +ho are the professio"als who5 if they are i"
practice of their professio"5 are sub?ect to professio"al ta# 7
S3<<ESTE" ANS=ER8 The proe..io$a!. .-b6ect to the
proe..io$a! ta2 are o$!y tho.e +ho ha0e pa..ed the bar e2a#i$atio$.' or
a$y board or other e2a#i$atio$. co$d-cted by the Proe..io$a! Reg-!atio$
(o##i..io$ %PR(&. or e2a#p!e' a !a+yer +ho i. a!.o a (ertiied P-b!ic
Acco-$ta$t %(PA& #-.t pay the proe..io$a! ta2 i#po.ed o$ !a+yer. a$d
that i2ed or (PA.' i he i. to practice both proe..io$.. GSec. 2B? %&' R-!e
LLL' R-!e. a$d Reg-!atio$. 4#p!e#e$ti$g the )oca! <o0er$#e$t (ode o
1FF1I
':. ) 0ity issued a "otice of assess!e"t a9ai"st AB0
0o"do!i"iu! 0orporatio" for u"paid busi"ess ta#es. The
0o"do!i"iu! 0orporatio" is a duly co"stituted co"do!i"iu!
corporatio" i" accorda"ce with the 0o"do!i"iu! Act which
ow"s a"d holds title to the co!!o" a"d li!ited co!!o" areas
of the co"do!i"iu!. *ts !e!bership co!prises the u"it
ow"ers a"d is authoriBed u"der its ByH(aws to collect re9ular
assess!e"ts fro! its !e!bers for operati"9 e#pe"ses5 capital
e#pe"ditures o" the co!!o" areas a"d other special
assess!e"ts as pro$ided for i" the ;aster eed with 7
eclaratio" of Restrictio"s of the 0o"do!i"iu!.
AB0 0o"do!i"iu! 0orporatio" i"sists that the ) 0ity
Re$e"ue 0ode a"d the (ocal ,o$er"!e"t 0ode do "ot co"tai"
pro$isio"s upo" which the assess!e"t could be based.
Resol$e the co"tro$ersy.
72
S3<<ESTE" ANS=ER8 AB( i. correct. (o$do#i$i-#
corporatio$. are ge$era!!y e2e#pt ro# !oca! b-.i$e.. ta2atio$ -$der the
)oca! <o0er$#e$t (ode' irre.pecti0e o a$y !oca! ordi$a$ce that .ee/. to
dec!are other+i.e.
L (ity' i. a-thori;ed -$der the )oca! <o0er$#e$t (ode' to i#po.e a
ta2 o$ b-.i$e..' +hich i. dei$ed -$der the (ode a. trade or co##ercia!
acti0ity reg-!ar!y e$gaged i$ a. a #ea$. o !i0e!ihood or +ith a 0ie+ to
proit. By it. 0ery $at-re a co$do#i$i-# corporatio$ i. $ot e$gaged i$
b-.i$e..' a$d a$y proit that it deri0e. i. #ere!y i$cide$ta!' he$ce it #ay
$ot be .-b6ect to b-.i$e.. ta2e.. %Lamane , etc. v. BA $epanto
Condominium Corporation, <. R. No. 1>EFFB' October 2>' 200>&
'<. Authority of (ocal ,o$er"!e"t ."its F(,.sG such
as the 0ity of ;a"ila to i!pose busi"ess ta#es. Sectio$ 1EB o
the )<(' i. the 0ery .o-rce o the po+er o #-$icipa!itie. a$d citie. to
i#po.e a !oca! b-.i$e.. ta2' a$d to +hich a$y !oca! b-.i$e.. ta2 i#po.ed
by citie. or #-$icipa!itie. .-ch a. the (ity o *a$i!a #-.t co$or#. 4t i.
appare$t ro# a per-.a! thereo that +he$ a #-$icipa!ity or city ha.
a!ready i#po.ed a b-.i$e.. ta2 o$ #a$-act-rer.' etc. o !i1-or.' di.ti!!ed
.pirit.' +i$e.' a$d a$y other artic!e o co##erce' p-r.-a$t to Sectio$
1EB%a& o the )<(' .aid #-$icipa!ity or city #ay $o !o$ger .-b6ect the
.a#e #a$-act-rer.' etc. to a b-.i$e.. ta2 -$der Sectio$ 1EB%h& o the
.a#e (ode. Sectio$ 1EB%h& #ay be i#po.ed o$!y o$ b-.i$e..e. that are
.-b6ect to e2ci.e ta2' VAT' or perce$tage ta2 -$der the N4R(' a$d that
are "ot otherwise specified i" precedi"9 para9raphs. 4$ the .a#e
+ay' b-.i$e..e. .-ch a. re.po$de$t:.' a!ready .-b6ect to a !oca!
b-.i$e.. ta2 -$der Sectio$ 1E o Ta2 Ordi$a$ce No. @@FE G+hich i.
ba.ed o$ Sectio$ 1EB%a& o the )<(I' ca$ $o !o$ger be #ade !iab!e or
!oca! b-.i$e.. ta2 -$der Sectio$ 21 o the .a#e Ta2 Ordi$a$ce G+hich i.
ba.ed o$ Sectio$ 1EB%h& o the )<(I. %(he City of Manila, et al., v. Coca0
Cola Bottlers Philippines, Inc., <. R. No. 1?1?E>' A-g-.t E' 200F&
REA( PROPERT2 TA)AT*ON
'. The fu"da!e"tal pri"ciples of real property ta#atio"
are-
a. Apprai.a! at c-rre$t a$d air #ar/et 0a!-eD
b. (!a..iicatio$ or a..e..#e$t o$ the ba.i. o act-a! -.eD
c. A..e..#e$t o$ the ba.i. o -$ior# c!a..iicatio$D
d. Apprai.a!' a..e..#e$t' !e0y a$d co!!ectio$ .ha!! $ot be !et to a
pri0ate per.o$D
e. Apprai.a! a$d a..e..#e$t .ha!! be e1-itab!e.
NOTES AN" (O**ENTS8 Rea! propertie. .ha!! be apprai.ed at
the c-rre$t a$d air #ar/et 0a!-e pre0ai!i$g i$ the !oca!ity +here the
property i. .it-ated a$d c!a..iied or a..e..#e$t p-rpo.e. o$ the ba.i. o
it. act-a! -.e. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et
al., <. R. No. 1>E126' October 11' 200>&
%. The reaso"able !arEet $alue is deter!i"ed by the
assessor i" the for! of a schedule of fair !arEet $alues.
The .ched-!e i. the$ e$acted by the !oca! sanggunian.
8. 1air !arEet $alue is the price at which a property
!ay be sold by a seller who is "ot co!pelled to sell a"d
bou9ht by a buyer who is "ot co!pelled to buy5 ta/i$g i$to
co$.ideratio$ a!! -.e. to +hich the property i. adopted a$d #ight i$ rea.o$
be app!ied.
The criterio$ e.tab!i.hed by the .tat-te co$te#p!ate. a hypothetica!
.a!e. 7e$ce' the b-yer. $eed $ot be act-a! a$d e2i.ti$g p-rcha.er..
%Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R.
No. 1>E126' October 11' 200> &
NOTES AN" (O**ENTS8 4$ i2i$g the 0a!-e o rea! property'
a..e..or. ha0e to co$.ider a!! the circ-#.ta$ce. a$d e!e#e$t. o 0a!-e
a$d #-.t e2erci.e pr-de$t di.cretio$ i$ reachi$g co$c!-.io$.. %Allied
Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No.
1>E126' October 11' 200>&
Preparatio" of fair !arEet $alues-
a. The city or #-$icipa! a..e..or .ha!! prepare a .ched-!e o air
#ar/et 0a!-e. or the diere$t c!a..e. o rea! property .it-ated i$ their
re.pecti0e )oca! <o0er$#e$t 3$it. or the e$act#e$t o a$ ordi$a$ce by
the sanggunian co$cer$edD a$d
b. The .ched-!e o air #ar/et 0a!-e. .ha!! be p-b!i.hed i$ a
$e+.paper o ge$era! circ-!atio$ i$ the pro0i$ce' city or #-$icipa!ity
co$cer$ed or the po.ti$g i$ the pro0i$cia! capito! or other p!ace. a.
re1-ired by !a+. *$opez v. City of Manila, et al., <.R. No. 12@1BF' Cebr-ary
1F' 1FFF&
Proposed fair !arEet $alues of real property i" a local
9o$er"!e"t u"it as well as the ordi"a"ce co"tai"i"9 the schedule
!ust be published i" full or three %B& co$.ec-ti0e day. i$ a $e+.paper
o !oca! circ-!atio$' +here a0ai!ab!e' +ithi$ te$ %10& day. o it. appro0a!' a$d
po.ted i$ at !ea.e t+o %2& pro#i$e$t p!ace. i$ the pro0i$cia! capito!' city'
#-$icipa! or "arangay ha!! or a #i$i#-# o three %B& co$.ec-ti0e +ee/..
*/iguerres v. Court of Appeals, et al,. <.R. No. 11F1@2' *arch 2>' 1FFF&
:. Approaches i" esti!ati"9 the fair !arEet $alue of
real property for real property ta# purposes 7
a. Sa!e. A$a!y.i. Approach. The .a!e. price paid i$ act-a!
#ar/et tra$.actio$. i. co$.idered by ta/i$g i$to acco-$t 0a!id .a!e. data
acc-#-!ated ro# a#o$g the Regi.trar o "eed.' $otarie. p-b!ic'
73
apprai.er.' bro/er.' dea!er.' ba$/ oicia!.' a$d 0ario-. .o-rce. .tated
-$der the )oca! <o0er$#e$t (ode.
b. 4$co#e (apita!i;atio$ Approach. The 0a!-e o a$ i$co#e,
prod-ci$g property i. $o #ore tha$ the ret-r$ deri0ed ro# it. A$ a$a!y.i.
o the i$co#e prod-ced i. $ece..ary i$ order to e.ti#ate the .-# +hich
#ight be i$0e.ted i$ the p-rcha.e o the property.
c. Reprod-ctio$ co.t approach i. a or#a! approach -.ed
e2c!-.i0e!y $ apprai.i$g #a$,#ade i#pro0e#e$t. .-ch a. b-i!di$g. a$d
other .tr-ct-re.' ba.ed o$ .-ch data a. #ateria!. a$d !abor co.t. to
reprod-ce a $e+ rep!ica o the i#pro0e#e$t.
The a..e..or -.e. a$y or a!! o the.e approache. i$ a$a!y;i$g the
data gathered to arri0e at the e.ti#ated air #ar/et 0a!-e to be i$c!-ded i$
the ordi$a$ce co$tai$i$g the .ched-!e o air #ar/et 0a!-e.. %Allied
Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No.
1>E126' October 11' 200> citi$g )oca! A..e..#e$t Reg-!atio$. No. 1,F2&
<. A" ordi"a"ce whereby the parcels of la"d sold5
ceded5 tra"sferred a"d co"$eyed for re!u"eratory
co"sideratio" after the effecti$ity of this re$isio" shall be
sub?ect to real estate ta# based o" the actual a!ou"t reflected
i" the deed of co"$eya"ce or the curre"t appro$ed Bo"al
$aluatio" of the Bureau of *"ter"al Re$e"ue pre$aili"9 at the
ti!e of sale5 cessio"5 tra"sfer a"d co"$eya"ce5 whiche$er is
hi9her5 as e$ide"ced by the certificate of pay!e"t of the
capital 9ai"s ta# issued therefore is *N3A(* bei$g co$trary to
p-b!ic po!icy a$d or re.trai$i$g trade or the o!!o+i$g rea.o$.8
a. 4t #a$date. a$ e2c!-.i0e r-!e i$ deter#i$i$g the air #ar/et
0a!-e a$d depart. ro# the e.tab!i.hed proced-re. .-ch a. the .a!e.
a$a!y.i. approach' the i$co#e capita!i;atio$ approach a$d the reprod-ctio$
approach pro0ided -$der the r-!e. i#p!e#e$ti$g the .tat-te. 4t -$d-!y
i$terere. +ith the d-tie. .tat-tori!y p!aced -po$ the !oca! a..e..or by
co#p!ete!y di.pe$.i$g +ith hi. a$a!y.i. a$d di.cretio$ +hich the )oca!
<o0er$#e$t (ode a$d the reg-!atio$. re1-ire to be e2erci.ed. A$
ordi$a$ce that co$tra0e$e. a$y .tat-te i. ultra vires a$d 0oid.
b. The co$.ideratio$ approach i$ the ordi$a$ce i. i!!ega! .i$ce
the apprai.a!' a..e..#e$t' !e0y a$d co!!ectio$ o rea! property ta2 .ha!! $ot
be !et to a$y pri0ate per.o$' it +i!! a!.o co#p!ete!y de.troy the -$da#e$ta!
pri$cip!e i$ rea! property ta2atio$ J that rea! property .ha!! be c!a..iied'
0a!-ed a$d a..e..ed o$ the ba.i. o it. act-a! -.e regard!e.. o +here
!ocated' +hoe0er o+$. it' a$d +hoe0er -.e. it. A!!o+i$g the partie. to a
pri0ate .a!e to dictate the air #ar/et 0a!-e o the property +i!! di.pe$.e
+ith the di.ti$ctio$. o act-a! -.e .tated i$ the )oca! <o0er$#e$t (ode a$d
i$ the reg-!atio$..
c. The i$0a!idity i. $ot c-red by the prha.e +hiche0er i. higher
beca-.e a$ i$tegra! part o that .y.te# .ti!! per#it. 0a!-i$g rea! property i$
di.regard o it. act-a! -.e.
d. The ordi$a$ce +o-!d re.-!t to rea! property a..e..#e$t.
#ore tha$ o$ce e0ery three %B& year. a$d that i. $ot the co$gre..io$a!
i$te$t a. .ho+$ i$ the pro0i.io$. o the )oca! <o0er$#e$t (ode a$d the
reg-!atio$.. (o$.e1-e$t!y' the rea! property ta2 b-rde$ .ho-!d $ot be
i$terpreted to i$c!-de tho.e beyo$d +hat the (ode or the reg-!atio$.
e2pre..!y c!ear!y .tate.
e. The pro0i.o +o-!d pro0ide a chi!!i$g eect o$ rea! property
o+$er. or ad#i$i.trator. to e$ter ree!y i$to co$tract. re!ecti$g the
i$crea.i$g 0a!-e o rea! propertie. i$ accorda$ce +ith pre0ai!i$g #ar/et
co$ditio$..
=hi!e the )oca! <o0er$#e$t (ode pro0ide. that the a..e..#e$t o
rea! property .ha!! $ot be i$crea.ed o$ce e0ery three %B& year.' the
1-e.tio$ed pro0i.o .-b6ect. the property to a higher a..e..#e$t e0ery
ti#e a .a!e. tra$.actio$ i. #ade. Rea! property o+$er. +o-!d thereore
po.tpo$e .a!e. -$ti! ater the !ap.e o the three %B& year period' or i they do
.o +ithi$ the .aid period they .ha!! be co#pe!!ed to di.po.e o the property
at a price $ot e2ceedi$g the !a.t prior co$0eya$ce i$ order to a0oid a higher
ta2 a..e..#e$t.
4$ the abo0e t+o .ce$ario. rea! property o+$er. are eecti0e!y
pre0e$ted ro# obtai$i$g the be.t price po..ib!e or their propertie. a$d
-$d-!y ha#per. the e1-itab!e di.trib-tio$ o +ea!th. %Allied Ban-ing
Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>E126' October
11' 200>&
>. E#a!ples of perso"al property u"der the ci$il law
that !ay be co"sidered as real property for purposes of ta#es.
Per.o$a! property -$der the ci0i! !a+ #ay be co$.idered a. rea! property
or p-rpo.e. o ta2e. +here the property i. e..e$tia! to the co$d-ct o the
b-.i$e...
a. 3$dergro-$d ta$/. are e..e$tia! to the co$d-ct o the
b-.i$e.. o a ga.o!i$e .tatio$ +itho-t +hich it +o-!d $ot be operatio$a!.
%Calte) Phils., Inc. v. Central Board of Assessment Appeals, et al., 11E S(RA 2F6&
b. )ight Rai! Tra$.it %)RT& i#pro0e#e$t. .-ch a. b-i!di$g.'
carriage+ay.' pa..e$ger ter#i$a!. .tatio$.' a$d .i#i!ar .tr-ct-re. do $ot
or# part o the p-b!ic road. .i$ce the or#er are co$.tr-cted o0er the
!atter i$ .-ch a +ay that the !o+ o 0ehic-!ar traic +o-!d $ot be i#paired.
The carriage+ay. a$d ter#i$a!. .er0e a -$ctio$ diere$t ro# the p-b!ic
road.. C-rther#ore' they are $ot ope$ to -.e by the ge$era! p-b!ic he$ce
$ot e2e#pt ro# rea! property ta2e.. E0e$ gra$ti$g that the $atio$a!
go0er$#e$t o+$. the carriage+ay. a$d ter#i$a! .tatio$.' the property i.
$ot e2e#pt beca-.e their be$eicia! -.e ha. bee$ gra$ted to )RTA a
ta2ab!e e$tity. *$ight Rail (ransit Authority v. Central Board of Assessment
Appeals, et al., <. R. No. 12@B16' October 12' 2000&
74
c. Barge. o$ +hich +ere #o-$ted ga. t-rbi$e po+er p!a$t.
de.ig$ated to ge$erate e!ectrica! po+er' the -e! oi! barge. +hich .-pp!ied
-e! oi! to the po+er p!a$t barge.' a$d the acce..ory e1-ip#e$t #o-$ted
o$ the barge. +ere .-b6ect to rea! property ta2e..
*oreo0er' Artic!e E1>%F& o the (i0i! (ode pro0ide. that GdIoc/. a$d
.tr-ct-re. +hich' tho-gh !oati$g' are i$te$ded by their $at-re a$d ob6ect to
re#ai$ at a i2ed p!ace o$ a ri0er' !a/e or coa.t are co$.idered i##o0ab!e
property by de.ti$atio$ bei$g i$te$ded by the o+$er or a$ i$d-.try or +or/
+hich #ay be carried o$ i$ a b-i!di$g or o$ a piece o !a$d a$d +hich te$d
direct!y to #eet the $eed. o .aid i$d-.try or +or/. %/&$S &nergy, Inc., v.
Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ ca.e&
@. ."paid realty ta#es attach to the property a"d is
char9eable a9ai"st the perso" who had actual or be"eficial
use a"d possessio" of it re9ardless of whether or "ot he is the
ow"er. To i#po.e the rea! property ta2 o$ the .-b.e1-e$t o+$er +hich
+a. $either the o+$er $ot the be$eicia! -.er o the property d-ri$g the
de.ig$ated period. +o-!d $ot o$!y be co$trary to !a+ b-t a!.o -$6-.t.
(o$.e1-e$t!y' *ERA)(O the or#er o+$er9-.er o the property
+a. re1-ired to pay the ta2 i$.tead o the $e+ o+$er NAPO(OR. *Manila
&lectric Company v. Barlis, <.R. No. 11E2B1' *ay 1?' 2001&
NOTES AN" (O**ENTS8 The abo0e *ay 1?' 2001 deci.io$
+a. .et a.ide by the S-pre#e (o-rt +he$ it gra$ted the petitio$er:.
.eco$d #otio$ or reco$.ideratio$ o$ A-$e 2F' 200E. The a-thor .-b#it.
that the abo0e r-!i$g i$ the *ay 1?' 2001 deci.io$ i. .ti!! 0a!id' $ot o$ the
ba.i. o the *ay 1?' 2001 deci.io$ b-t i$ the !ight o pro$o-$ce#e$t. o
the S-pre#e (o-rt i$ other ca.e.. Th-.' do $ot cite the doctri$e a.
e#a$ati$g ro# the *ay 1?' 2001 deci.io$.

A. Secretary of /ustice ca" taEe co9"iBa"ce of a case
i"$ol$i"9 the co"stitutio"ality or le9ality of ta# ordi"a"ces
where there are factual issues i"$ol$ed. */iguerres v. Court of
Appeals, et al., <.R. No. 11F1@2' *arch 2>' 1FFF&
Ta#payer files appeal to the Secretary of /ustice5 withi"
8& days fro! effecti$ity thereof. 4$ ca.e the Secretary decide. the
appea!' a period a!.o o B0 day. i. a!!o+ed or a$ aggrie0ed party to go to
co-rt. B-t i the Secretary doe. $ot act thereo$' ater the !ap.e o 60 day.'
a party co-!d a!ready .ee/ re!ie i$ co-rt +ithi$ B0 day. ro# the !ap.e o
the 60 day period.
The.e three .eparate period. are c!ear!y gi0e$ or co#p!ia$ce a. a
prere1-i.ite beore .ee/i$g redre.. i$ a co#pete$t co-rt. S-ch .tat-tory
period. are .et to pre0e$t de!ay. a. +e!! a. e$ha$ce the order!y a$d
.peedy di.charge o 6-dicia! -$ctio$.. Cor thi. rea.o$ the co-rt. co$.tr-e
the.e pro0i.io$. o .tat-te. a. #a$datory. *Reyes, et al., v. Court of Appeals,
et al.' <.R. No. 11?2BB' "ece#ber 10' 1FFF&
C. Public heari"9s are !a"datory prior to appro$al of
ta# ordi"a"ce' b-t thi. .ti!! re1-ire. the ta2payer to add-ce e0ide$ce to
.ho+ that $o p-b!ic heari$g. e0er too/ p!ace. *Reyes, et al., v. Court of
Appeals, et al., <.R. No. 11?2BB' "ece#ber 10' 1FFF& P-b!ic heari$g. are
re1-ired to be co$d-cted prior to the e$act#e$t o a$ ordi$a$ce i#po.i$g
rea! property ta2e.. %/iguerres v. Court of Appeals, et al., <.R. No. 11F1@2'
*arch 2>' 1FFF&
'&. The co"curre"t a"d si!ulta"eous re!edies
afforded local 9o$er"!e"t u"its i" e"forci"9 collectio" of real
property ta#es-
a. "i.trai$t o per.o$a! propertyD
b. Sa!e o de!i$1-e$t rea! property' a$d
c. (o!!ectio$ o rea! property ta2 thro-gh ordi$ary co-rt actio$.
''. Notice a"d publicatio"5 as well as the le9al
reDuire!e"ts for a ta# deli"Due"cy sale5 are !a"datory' a$d the
ai!-re to co#p!y there+ith ca$ i$0a!idate the .a!e. The pre.cribed $otice.
#-.t be .e$t to co#p!y +ith the re1-ire#e$t. o d-e proce... *%e :necht,
et al,. v. Court of Appeals; %e :necht, et al., v. 'onora"le Sayo, 2F0 S(RA
22B'2B6&
'%. The reaso" behi"d the "otice reDuire!e"t is that
ta# sales are ad!i"istrati$e proceedi"9s which are in
personam i" "ature. *Puzon v. A"ellera, 16F S(RA @?F' @F>; %e Asis v.
I.A.C., 16F S(RA B1E&
'8. 1E(S E"er9y5 *"c.5 had a co"tract to supply
NP0 with the electricity 9e"erated by 1E(S6 power bar9es.
The co"tract also stated that NP0 shall be respo"sible for all
real estate ta#es a"d assess!e"ts. 1E(S the" recei$ed a"
assess!e"t of real property ta#es o" its power bar9es fro!
the Pro$i"cial Assessor of Bata"9as. *f filed a !otio" for
reco"sideratio" with the Pro$i"cial Assessor.
a. .po" de"ial5 1E(S ele$ated the !atter to the (ocal
Board of Assess!e"t Appeals F(BAAG5 where it raised the
followi"9 issues-
'G Si"ce NP0 is ta#He#e!pt the" 1E(6s should
also be ta#He#e!pt because of its co"tract with NP0.
%G The power bar9es are "ot real property
sub?ect to real property ta#es.
75
b. .po" the other ha"d the (ocal Treasurer i"sists
that the assess!e"t has attai"ed a state of fi"ality he"ce the
appeal to the (BAA should be dis!issed.
Rule o" the co"flicti"9 co"te"tio"s.
S3<<ESTE" ANS=ER8
a. A!! the co$te$tio$. o CE)S are +itho-t #erit8
1& NP( i. $ot the o+$er o the po+er barge. $or the
operator o the po+er barge.. The ta2 e2e#ptio$ pri0i!ege gra$ted
to NP( ca$$ot be e2te$ded to CE)S. the co0e$a$t i. bet+ee$
NP( a$d CE). a$d doe. $ot bi$d a third per.o$ $ot pri0y to the
co$tract .-ch a. the Pro0i$ce o Bata$ga..
2& The S-pre#e (o-rt o Ne+ Oor/ i$ Consolidated
&dison Company of !e Lor-, Inc., et al., v. (he City of !e Lor-,
et al., ?0 *i.c. 2d 106> %1F@>& cited i$ /&$S &nergy, Inc., v.
Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d
co#pa$io$ ca.e' he!d that barge. o$ +hich +ere #o-$ted ga.
t-rbi$e po+er p!a$t. de.ig$ated to ge$erate e!ectrica! po+er' the
-e! oi! barge. +hich .-pp!ied -e! oi! to the po+er p!a$t barge.' a$d
the acce..ory e1-ip#e$t #o-$ted o$ the barge. +ere .-b6ect to
rea! property ta2e..
*oreo0er' Artic!e E1>%F& o the (i0i! (ode pro0ide. that
GdIoc/. a$d .tr-ct-re. +hich' tho-gh !oati$g' are i$te$ded by their
$at-re a$d ob6ect to re#ai$ at a i2ed p!ace o$ a ri0er' !a/e or coa.t
are co$.idered i##o0ab!e property by de.ti$atio$ bei$g i$te$ded by
the o+$er or a$ i$d-.try or +or/ +hich #ay be carried o$ i$ a
b-i!di$g or o$ a piece o !a$d a$d +hich te$d direct!y to #eet the
$eed. o .aid i$d-.try or +or/.
b. The Trea.-rer i. correct. The proced-re do $ot a!!o+ a
#otio$ or reco$.ideratio$ to be i!ed +ith the Pro0i$cia! A..e..or.
To a!!o+ the proced-re +o-!d i$deed i$0ite corr-ptio$ i$ the .y.te#
o apprai.a! a$d a..e..#e$t. it co$0e$ie$t!y co-rt. a grat,pro$e .it-atio$
+here 0a!-e. o rea! property ay be i$itia!!y .et -$rea.o$ab!y high' a$d the$
.-b.e1-e$t!y red-ced -po$ the re1-e.t o a property o+$er. 4$ the !atter
i$.ta$ce' a!!-.io$. o po..ib!e co0er' i!!icit trade,o ca$$ot be a0oided' a$d
i$ act ca$ co$0e$ie$t!y ta/e p!ace. S-ch occa.io$ or #i.chie #-.t be
pre0e$ted a$d e2ci.ed ro# o-r .y.te#. %/&$S &nergy, Inc., v. Province of
Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ ca.e&
':. A special le$y or special assess!e"t is a"
i!positio" by a pro$i"ce5 a city5 a !u"icipality withi" the
;etropolita" ;a"ila Area5 a !u"icipality or a bara"9ay -po$ rea!
property .pecia!!y be$eited by a p-b!ic +or/. e2pe$dit-re o the )<3 to
reco0er $ot #ore tha$ 60H o .-ch e2pe$dit-re.
'<. *f the 9rou"d for the protest is $alidity of the real
property ta# ordi"a"ce a$d $ot the -$rea.o$ab!e$e.. o the a#o-$t
co!!ected the ta2 #-.t be paid -$der prote.t' a$d the i..-e o !ega!ity #ay
be rai.ed to the proper co-rt. o$ certiorari +itho-t $eed o e2ha-.ti$g
ad#i$i.trati0e re#edie..
'>. *f the 9rou"d for the protest is u"reaso"able"ess of
the a!ou"ts collected there is "eed to pay u"der protest a$d
ad#i$i.trati0e re#edie. #-.t be re.orted to beore reco-r.e to the proper
co-rt..
'@. Procedure for refu"d of real property ta#es based o"
u"reaso"able"ess or e#cessi$e"ess of a!ou"ts collected.
a. Pay#e$t -$der prote.t at the ti#e o pay#e$t or +ithi$ thirty
%B0& day. thereater' prote.t bei$g !odged to the pro0i$cia!' city or i$ the
ca.e o a #-$icipa!ity +ithi$ the *etro *a$i!a Area the #-$icipa! trea.-rer.
b. The trea.-rer ha. a period o .i2ty %60& day. ro# receipt o
the prote.t +ithi$ to decide.
c. =ithi$ thirty %B0& day. ro# receipt o trea.-rer:. deci.io$ or i
the trea.-rer doe. $ot decide' +ithi$ thirty %B0& day. ro# the e2piratio$ o
the .i2ty %60& period or the trea.-rer to decide' the ta2payer .ho-!d i!e a$
appea! +ith the )oca! Board o A..e..#e$t Appea!..
d. The )oca! Board o A..e..#e$t Appea!. ha. 120 day. ro#
receipt o the appea! +ithi$ +hich to decide.
e. The ad0er.e deci.io$ o the )oca! Board o A..e..#e$t
Appea!. .ho-!d be appea!ed +ithi$ thirty %B0& day. ro# receipt to the
(e$tra! Board o A..e..#e$t Appea!..
. The ad0er.e deci.io$ o the (e$tra! Board o A..e..#e$t
Appea!. .ha!! be appea!ed to the (o-rt o Ta2 Appea!. %&n Banc& by
#ea$. o a petitio$ or re0ie+ +ithi$ thirty %B0& day. ro# receipt o the
ad0er.e deci.io$.
g. The deci.io$ o the (TA #ay be the .-b6ect o a #otio$ or
reco$.ideratio$ or $e+ tria! ater +hich a$ appea! #ay be i$terpo.ed by
#ea$. o a petitio$ or re0ie+ o$ certiorari directed to the S-pre#e (o-rt
o$ p-re 1-e.tio$. o !a+ +ithi$ a period o itee$ %1>& day. ro# receipt
e2te$dib!e or a period o thirty %B0& day..
'A. The e"title!e"t to a ta# refu"d does "ot "ecessarily
call for the auto!atic pay!e"t of the su! clai!ed. The a#o-$t
o the c!ai# bei$g a act-a! #atter' it #-.t .ti!! be pro0e$ i$ the $or#a!
co-r.e a$d i$ accorda$ce +ith the ad#i$i.trati0e proced-re or obtai$i$g a
re-$d o rea! property ta2e.' a. pro0ided -$der the )oca! <o0er$#e$t
(ode. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R.
No. 1>E126' Septe#ber 1>' 2006&
76
NOTES AN" (O**ENTS8 4$ the abo0e Allied Ban-ing ca.e' the
S-pre#e (o-rt pro0ided or the .tarti$g date o co#p-ti$g the t+o,year
pre.cripti0e period +ithi$ +hich to i!e the c!ai# +ith the Trea.-rer' +hich i.
ro# i$a!ity o the "eci.io$. The proced-re to be o!!o+ed i. that .ho+$
be!o+.
'C. Procedure for refu"d of real property ta#es based
o" $alidity of the ta# !easure or solutio indebeti.
a. Pay#e$t -$der prote.t $ot re1-ired' c!ai# #-.t be directed to
the !oca! trea.-rer' +ithi$ t+o %2& year. ro# the date the ta2payer i.
e$tit!ed to .-ch red-ctio$ or read6-.t#e$t' +ho #-.t decide +ithi$ .i2ty
%60& day. ro# receipt.
b. The de$ia! by the !oca! trea.-rer o the prote.t +o-!d a!!
+ithi$ the Regio$a! Tria! (o-rt:. origi$a! 6-ri.dictio$' the re0ie+ bei$g the
i$itia! 6-dicia! cog$i;a$ce o the #atter. "e.pite the !a$g-age o Sectio$
1F> o the )oca! <o0er$#e$t (ode +hich .tate. that the re#edy o the
ta2payer +ho.e prote.t i. de$ied by the !oca! trea.-rer i. to appea! +ith
the co-rt o co#pete$t 6-ri.dictio$' !abe!i$g the .aid re0ie+ a. a$ e2erci.e
o appe!!ate 6-ri.dictio$ i. i$appropriate .i$ce the de$ia! o the prote.t i. $ot
the 6-dg#e$t or order o a !o+er co-rt' b-t o a !oca! go0er$#e$t oicia!.
%Lamane , etc. v. BA $epanto Condominium Corporation, <. R. No.
1>EFFB' October 2>' 200>&
c. The deci.io$ o the Regio$a! Tria! (o-rt .ho-!d be appea!ed
by #ea$. o a petitio$ or re0ie+ directed to the (o-rt o Ta2 Appea!.
%"i0i.io$&.
d. The deci.io$ o the (o-rt o Ta2 Appea!. %"i0i.io$& #ay be
the .-b6ect o a re0ie+ by the (o-rt o Ta2 Appea!. %en "anc&.
e. The deci.io$ o the (o-rt o Ta2 Appea!. %en "anc& #ay be
the .-b6ect o a petitio$ or re0ie+ o$ certiorari o$ p-re 1-e.tio$. o !a+
directed to the S-pre#e (o-rt.
%&. 0haritable i"stitutio"s5 churches a"d
parso"a9es or co"$e"ts appurte"a"t thereto5 !osDues5 "o"H
profit ce!eteries5 a"d all la"ds5 buildi"9s a"d i!pro$e!e"ts
that are actually5 directly a"d e#clusi$ely used for reli9ious5
charitable or educatio"al purposes are e#e!pt fro! ta#atio".
GSec.2? %B& Artic!e V4' 1F?@ (o$.tit-tio$I
%'. The co"stitutio"al ta# e#e!ptio"s refer o"ly
to real property that are act-a!!y' direct!y a$d e2c!-.i0e!y -.ed or
re!igio-.' charitab!e or ed-catio$a! p-rpo.e.' a$d that the o$!y
co$.tit-tio$a!!y recog$i;ed e2e#ptio$ ro# ta2atio$ o re0e$-e. are tho.e
ear$ed by $o$,proit' $o$,.toc/ ed-catio$a! i$.tit-tio$. +hich are act-a!!y'
direct!y a$d e2c!-.i0e!y -.ed or ed-catio$a! p-rpo.e.. *Commissioner of
Internal Revenue v. Court of Appeals, et al., 2F? S(RA ?B&
The co$.tit-tio$a! ta2 e2e#ptio$ co0er. property ta2e. o$!y. =hat i.
e2e#pted i. $ot the i$.tit-tio$ it.e!' tho.e e2e#pted ro# rea! e.tate ta2e.
are !a$d.' b-i!di$g. a$d i#pro0e#e$t. act-a!!y' direct!y a$d e2c!-.i0e!y
-.ed or re!igio-.' charitab!e or ed-catio$a! p-rpo.e.. %$ung Center of the
Philippines v. 8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&
%%. The 'C8< 0o"stitutio" stated that the la"ds5
buildi"9s5 a"d i!pro$e!e"ts are used e#clusi$ely but the
prese"t 0o"stitutio" reDuires that the la"ds5 buildi"9s a"d
i!pro$e!e"ts are actually5 directly a"d e#clusi$ely used.
The cha$ge .ho-!d $ot be ig$ored. Re!ia$ce o$ pa.t deci.io$. +o-!d ha0e
.-iced +ere the +ord. act-a!!y a. +e!! a. 8direct!y are $ot added. There
#-.t be proo thereore o the act-a! a$d direct -.e to be e2e#pt ro#
ta2atio$. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No.
1EE10E' A-$e 2F' 200E&
%8. The actual5 direct a"d e#clusi$e use of the
property for charitable purposes is the direct a"d i!!ediate
a"d actual applicatio" of the property itself to the p-rpo.e. or
+hich the charitab!e i$.tit-tio$ i. orga$i;ed. 4t i. $ot the -.e o the i$co#e
ro# the rea! property that i. deter#i$ati0e o +hether the property i. -.ed
or ta2,e2e#pt p-rpo.e..
4 rea! property i. -.ed or o$e or #ore co##ercia! p-rpo.e.' it i.
$ot e2c!-.i0e!y -.ed or the e2e#pted p-rpo.e b-t i. .-b6ect to ta2atio$'.
The +ord. do#i$a$t -.e or pri$cipa! -.e ca$$ot be .-b.tit-ted or the
+ord. -.ed e2c!-.i0e!y +itho-t doi$g 0io!e$ce to the (o$.tit-tio$ a$d the
!a+. So!e!y i. .y$o$y#o-. +ith e2c!-.i0e!y. %$ung Center of the Philippines v.
8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&
%:. Portio"s of the la"d of a charitable i"stitutio"5 such
as a hospital5 leased to pri$ate e"tities as well as those parts
of the hospital leased to pri$ate i"di$iduals are "ot e#e!pt
fro! real property ta#es. O$ the other ha$d' the portio$ o the !a$d
occ-pied by the ho.pita! a$d portio$. o the ho.pita! -.ed or it. patie$t.'
+hether payi$g or $o$,payi$g' are e2e#pt ro# rea! property ta2e.. %$ung
Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 1EE10E'
A-$e 2F' 200E&
%<. As a 9e"eral pri"ciple5 a charitable i"stitutio" does
"ot lose its character as such a"d its e#e!ptio" fro! ta#es
si!ply because it deri$es i"co!e fro! payi"9 patie"ts5
whether outHpatie"t5 or co"fi"ed i" the hospital5 or recei$es
77
subsidies fro! the 9o$er"!e"t. So !o$g a. the #o$ey recei0ed i.
de0oted or -.ed a!together to the charitab!e ob6ect +hich it i. i$te$ded to
achie0eD a$d $o #o$ey i$-re. to the pri0ate be$eit o the per.o$.
#a$agi$g or operati$g the i$.tit-tio$. %$ung Center of the Philippines v.
8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&
%>. Property that are e#e!pt fro! the pay!e"t of
real property ta# u"der the (ocal ,o$er"!e"t 0ode.
a. Rea! property o+$ed by the Rep-b!ic o the Phi!ippi$e. or a$y
o it. po!itica! .-bdi0i.io$. e2cept +he$ the be$eicia! -.e thereo ha. bee$
gra$ted to a ta2ab!e per.o$ or a co$.ideratio$ or other+i.eD
b. (haritab!e i$.tit-tio$.' ch-rche.' par.o$age. or co$0e$t.
app-rte$a$t thereto' #o.1-e.' $o$,proit or re!igio-. ce#eterie.' a$d a!!
!a$d.' b-i!di$g. a$d i#pro0e#e$t. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed
or re!igio-.' charitab!e a$d ed-catio$a! p-rpo.e.D
c. *achi$erie. a$d e1-ip#e$t' act-a!!y' direct!y a$d e2c!-.i0e!y
-.ed by !oca! +ater di.trict.D a$d go0er$#e$t o+$ed a$d co$tro!!ed
corporatio$. e$gaged i$ the .-pp!y a$d di.trib-tio$ o +ater a$d ge$eratio$
a$d tra$.#i..io$ o e!ectric po+erD
d. Rea! property o+$ed by d-!y regi.tered cooperati0e.D
e. *achi$ery a$d e1-ip#e$t -.ed or po!!-tio$ co$tro! a$d
e$0iro$#e$ta! protectio$.
%@. ;a"ila *"ter"atio"al Airport Authority F;*AAG it is
"ot a 9o$er"!e"t ow"ed or co"trolled corporatio" but a"
i"stru!e"tality of the 9o$er"!e"t that is e#e!pt fro!
ta#atio".
4t i. $ot a .toc/ corporatio$ beca-.e it. capita! i. $ot di0ided i$to
.hare.' $either i. it a $o$,.toc/ corporatio$ beca-.e there are $o
#e#ber.. 4t i. i$.tead a$ i$.tr-#e$ta!ity o the go0er$#e$t -po$ +hich
the !oca! go0er$#e$t. are $ot a!!o+ed to !e0y ta2e.' ee. or other
charge..
A$ i$.tr-#e$ta!ity reer. to a$y age$cy o the Natio$a!
<o0er$#e$t' $ot i$tegrated +ithi$ the depart#e$t ra#e+or/ 0e.ted +ith
.pecia! -$ctio$. or 6-ri.dictio$ by !a+' e$do+ed +ith .o#e i $ot a!!
corporate po+er.' ad#i$i.teri$g .pecia! -$d.' a$d e$6oyi$g operatio$a!
a-to$o#y' -.-a!!y thro-gh a charter. Thi. ter# i$c!-de. reg-!atory
age$cie. chartered i$.tit-tio$. a$d go0er$#e$t,o+$ed or co$tro!!ed
corporatio$.. GSec. 2 %10&' 4$trod-ctory Pro0i.io$.' Ad#i$i.trati0e (ode
o 1F?@I 4t i. a$ i$.tr-#e$ta!ity e2erci.i$g $ot o$!y go0er$#e$ta! b-t a!.o
corporate po+er.. 4t e2erci.e. go0er$#e$ta! po+er. o e#i$e$t do#ai$'
po!ice po+er a-thority' a$d !e0yi$g o ee. a$d charge..
Ci$a!!y' the airport !a$d. a$d b-i!di$g. are property o+$ed by the
go0er$#e$t that are de0oted to p-b!ic -.e a$d are propertie. o the
p-b!ic do#ai$. %Manila International Airport Authority v. City of Pasay, et al., <.
R. No. 16B0@2' Apri! 2' 200F&
%A. A teleco!!u"icatio"s co!pa"y was 9ra"ted by
0o"9ress o" /uly %&5 'CC%5 after the effecti$ity of the (ocal
,o$er"!e"t 0ode o" /a"uary '5 'CC%5 a le9islati$e fra"chise
with ta# e#e!ptio" pri$ile9es which partly reads5 The
9ra"tee5 its successors or assi9"s shall be liable to pay the
sa!e ta#es o" their real estate5 buildi"9s a"d perso"al
property' e2c!-.i0e o thi. ra$chi.e' as other perso"s or
corporatio"s are "ow or hereafter !ay be reDuired by law to
pay. This pro$isio" e#isted i" the co!pa"y6s fra"chise prior
to the effecti$ity of the (ocal ,o$er"!e"t 0ode. A 0ity the"
e"acted a" ordi"a"ce i" 'CC8 i!posi"9 a real property o" all
real properties located withi" the city li!its5 a"d withdrawi"9
all ta# e#e!ptio"s pre$iously 9ra"ted. A!o"9 properties
co$ered are those ow"ed by the co!pa"y fro! which the 0ity
is "ow collecti"9 P:8 !illio". The properties of the co!pa"y
were the" scheduled by the 0ity for sale at public auctio".
The co!pa"y the" filed a petitio" for the issua"ce of a
writ of prohibitio" clai!i"9 e#e!ptio" u"der its le9islati$e
fra"chise. The 0ity defe"ded its positio" raisi"9 the
followi"9-
a. There was "o e#haustio" of ad!i"istrati$e
re!edies because the !atter should ha$e first bee" filed
before the (ocal Board of Assess!e"t AppealsK
b. The co!pa"y6s properties are e#e!pt fro! ta#
u"der its fra"chise.
Resol$e the issues raised.
S3<<ESTE" ANS=ERS8
a. There i. $o $eed to e2ha-.t ad#i$i.trati0e re#edie. a. the
appea! to the )BAA i. $ot a .peedy a$d ade1-ate re#edy +ithi$ the !a+.
Thi. i. .o beca-.e the propertie. are a!ready .ched-!ed or a-ctio$ .a!e.
C-rther#ore o$e o the recog$i;ed e2ceptio$. to the r-!e o$
e2ha-.tio$ i. that i the i..-e i. p-re!y !ega! i$ character +hich i. .o i$
thi. ca.e.
b. The propertie. are e2e#pt ro# ta2atio$. The gra$t o
ta2i$g po+er. to !oca! go0er$#e$t. -$der the (o$.tit-tio$ a$d the )oca!
<o0er$#e$t (ode doe. $ot aect the po+er o (o$gre.. to gra$t ta2
e2e#ptio$..
The ter# e2c!-.i0e o thi. ra$chi.e i. i$terpreted to #ea$
propertie. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed i$ the radio or
te!eco##-$icatio$. b-.i$e... The .-b.e1-e$t piece o !egi.!atio$ +hich
78
reiterated the phra.e e2c!-.i0e o thi. ra$chi.e o-$d i$ the pre0io-.
ta2 e2e#ptio$ gra$t to the co#pa$y i. a$ e2pre.. a$d rea! i$te$tio$ o$
the part o (o$gre.. to o$ce agai$.t re#o0e ro# the )<(:. de!egated
ta2i$g po+er' a!! o the co#pa$y:. propertie. that are act-a!!y' direct!y
a$d e2c!-.i0e!y -.ed i$ the p-r.-it o it. ra$chi.e. %(he City
+overnment of 8uezon City, et al., v. Bayan (elecommunications, Inc.,
<. R. No. 16201>' *arch 6' 2006&
%C. The ow"er operator of a BOT a"d "ot the
ulti!ate ow"er is sub?ect to real property ta#es. (o$.i.te$t +ith
the BOT co$cept a$d a. i#p!e#e$ted' BPP( J the o+$er,#a$ager,
operator o the pro6ect J i. the act-a! -.er o it. #achi$erie. a$d
e1-ip#e$t. BPP(:. o+$er.hip a$d -.e o the #achi$erie. a$d
e1-ip#e$t are act-a!' direct' a$d i##ediate' +hi!e NAPO(OR:. i.
co$ti$ge$t a$d' at thi. .tage o the BOT Agree#e$t' $ot .-icie$t to
.-pport it. c!ai# or ta2 e2e#ptio$. %!ational Poer Corporation v. Central
Board of Assessment Appeals, et al., <' R. No. 1@1E@0' Aa$-ary B0' 200F&
ADVANCE CONGRATULATIONS
AND SEE YOU IN COURT
79