TAXATION

REVIEW NOTE
PART 1
GENERAL PRINCIPLES OF TAXATIONCHAPTER 1
Concepts, Classifcations, an !istinctions
Ta"ation !efne
Ta"ation is t#e act o$ le%&in' a ta"( It is t#e p)ocess o) *eans +& ,#ic# t#e
so%e)ei'n, t#)o-'# its la,.*a/in' +o&, )aises inco*e to e$)a& t#e
necessa)& e"penses o$ 'o%e)n*ent(
As a po,e) it )e$e)s to t#e in#e)ent po,e) o$ t#e State to e*an en$o)ce
cont)i+-tions $o) p-+lic p-)pose o) p-)poses(
It is t#e in#e)ent po,e) o$ a State to collect en$o)ce p)opo)tional
cont)i+-tion to s-ppo)t t#e e"penses o$ 'o%e)n*ent(
0asic P-)poses o$ Ta"ation
1( T#e p)i*a)& p-)pose o$ ta"ation on t#e pa)t o$ t#e 'o%e)n*ent is to
p)o%ie $-ns o) p)ope)t& ,it# ,#ic# to p)o*ote t#e 'ene)al ,el$a)e an
p)otections o$ its citi1ens an to ena+le it to fnance its *-lti$a)io-s
acti%ities(
Al*ost all )e%en-es o$ t#e 'o%e)n*ent a)e e)i%e $)o* ta"es )aise
t#)o-'# ta"ation(
2( Ta"ation *a& also +e e*plo&e $o) p-)poses o$ )e'-lation o) cont)ol(
Ta"es !efne
Ta"es a)e t#e en$o)ce p)opo)tional cont)i+-tions $)o* pe)sons an p)ope)t&
le%ie +& t#e la,.*a/in' +o& o$ t#e State +& %i)t-e o$ its so%e)ei'nt& $o)
t#e s-ppo)t o$ t#e 'o%e)n*ent an all p-+lic nees(
Ta"es a)e en$o)ce p)opo)tionate cont)i+-tions, ,#ic# t#e State collects in
e"e)cisin' its in#e)ent po,e) $)o* pe)sons, p)ope)t& o) inte)est to e$)a&
t#e e"penses o$ t#e 'o%e)n*ent(
Essential ele*ents o$ ta"
1( It is an en$o)ce cont)i+-tion(
2( It is 'ene)all& pa&a+le in *one&(
3( It is p)opo)tionate in c#a)acte)(
4( It is le%ie on pe)sons, p)ope)t&, o) t#e e"e)cise o$ a )i'#t o)
p)i%ile'e(
1
5( It is le%ie +& t#e State ,#ic# #as 6-)isiction o%e) s-+6ect o) o+6ect
o$ ta"ation(
7( It is le%ie +& t#e la,.*a/in' +o& o$ t#e State8 an
9( It is le%ie $o) p-+lic p-)pose o) p-)poses(
It is also i*po)tant c#a)acte)istic o$ a ta" t#at it is co**onl& )e:-i)e to +e
pai at )e'-la) pe)ios o) inte)%als(
0asis o$ Ta"ation
Li$e+loo !oct)ine ;0a) 1<<1=
Ta"es a)e t#e li$e+loo o$ t#e 'o%e)n*ent an t#ei) p)o*pt an ce)tain
a%aila+ilit& is an i*pe)io-s nee( T#e collection o$ ta"es *-st +e *ae
,it#o-t #in)ance i$ t#e state is to *aintain its o)e)l& e"istence(
T#eo)ies o$ Ta"ation
1( Necessit& T#eo)&(
T#e po,e) o$ ta"ation p)ocees -pon t#e t#eo)& t#at t#e e"istence o$
'o%e)n*ent is a necessit&8 t#at it cannot contin-e ,it#o-t *eans to pa&
its e"penses8 an t#at $o) t#is *eans it #as a )i'#t to co*pel all its
citi1ens an p)ope)t& ,it#in its li*its to cont)i+-te(
2( 0enefts.P)otection T#eo)&
T#e +asis o$ ta"ation is $o-n in t#e )ecip)ocal -ties o$ p)otection an
s-ppo)t +et,een t#e State an its in#a+itants( In )et-)n $o) #is
cont)i+-tion, t#e ta"pa&e) )ecei%es +enefts an p)otection $)o* t#e
'o%e)n*ent( T#is is so.calle >+enefts )ecei%e p)inciple?(
Benefts Received Principle (Doctrine of Symbiotic Relationship) @ t#e one
is co*pensation $o) t#e ot#e)A p)otection $o) s-ppo)t an s-ppo)t $o)
p)otection( T#is oes not *ean, #o,e%e), t#at onl& t#ose ,#o a)e a+le to
an o pa& ta"es can en6o& t#e p)i%ile'es an p)otection 'i%en to a
citi1en +& t#e 'o%e)n*ent(
B-estionA
Ca& a pe)son le'all& )e$-se to pa& a ta" on ')o-n t#at #e
,ill e)i%e no pe)sonal +eneft $)o* t#e ta"D
Ans,e)A
No, in )et-)n $o) t#e ta", t#e 'o%e)n*ent p)o*ises o)
)ene)s no efnite specifc co**oit& o) +eneft to an&
pa)tic-la) p)ope)t& o) pe)son( T#e onl& +eneft to ,#ic#
t#e ta"pa&e) is entitle is t#at e)i%e $)o* #is en6o&*ent
o$ t#e p)i%ile'es o$ li%in' in an o)'ani1e societ&
esta+lis#e an sa$e'-a)e +& t#e e%otion o$ ta"es to
p-+lic p-)poses(
2
Nat-)e o) C#a)acte)istics o$ t#e StateEs po,e) to ta" ;0a) 1<<7=
1( It is in#e)ent in so%e)ei'nt& @ it *a& +e e"e)cise alt#o-'# not
e"p)essl& ')ante +& t#e Constit-tion8
2( It is le'islati%e in c#a)acte) @ onl& t#e le'islat-)e can i*pose ta"es
;alt#o-'# t#e po,e) *a& +e ele'ate=8 an
3( It is s-+6ecte to constit-tional an in#e)ent li*itations @ it is not an
a+sol-te po,e) t#an can +e e"e)cise +& t#e le'islat-)e an&,a& it
pleases(
Nat-)e o$ t#e Po,e) o$ Ta"ation ;<7 0a) 1;+= ;5F=
1( In#e)ent po,e) o$ a so%e)ei'n state
2( Le'islati%e in nat-)e
3( Ci%il an not political in c#a)acte)
4( Ta" la,s a)e not penal in nat-)e
;<9 0a)=
B-estionA
Ass-*in' t#at t#e ne, Constit-tion )a$te +& t#e ele'ates an
)atife +& t#e people $aile to p)o%ie $o) t#e enact*ent o$ la,
i*posin' ta"es, *a& t#e le'islati%e +o& c)eate +& t#e sa*e
Constit-tion enact ta" la,sD E"plain &o-) ans,e)(
Ans,e)A
Ges, t#e le'islati%e +o& *a& enact ta" la,s(
Ta"ation is an in#e)ent po,e) o$ a so%e)ei'n state an can +e
e"e)cise ,#et#e) o) not t#e Constit-tion p)o%ies $o) it(
A+sence o$ an& Constit-tional li*itations, t#e ta"in' po,e)
+eco*es -nli*ite p)o%ie )e%en-es )aise t#e)ein a)e $o) a
p-+lic p-)pose(
Scope o$ Le'islati%e Po,e) to Ta" o) e"tent o$ t#e Ta"in' Po,e) ;0a) 2HHH=
T#e po,e) o$ ta"ation )eac#es to e%e)& t)ae o) occ-pation8 to e%e)& o+6ect
o$ in-st)&, -se, en6o&*ent8 to e%e)& species o$ possession, an it i*poses a
+-)en ,#ic# in case o$ $ail-)e to isc#a)'e t#e sa*e *a& +e $ollo,e +&
sei1-)e, confscation o) $o)$eit-)e o$ t#e p)ope)t&(
Ta"ation is sai to +eA
1( Co*p)e#ensi%e
2( Inli*ite
3( Plena)&
4( S-p)e*e
Co*p)e#ensi%e @ it co%e)s pe)sons, +-sinesses, acti%ities, p)o$essions,
)i'#ts an p)i%ile'es(
Inli*ite . t#e po,e) to i*pose ta"es is one so -nli*ite in
$o)ce an so sea)c#in' in e"tent t#at t#e co-)ts
sca)cel& %ent-)e to ecla)e t#at it is s-+6ect to an&
3
)est)ictions ,#ate%e), e"cept s-c# as )est in t#e
isc)etion o$ t#e a-t#o)it& ,#ic# e"e)cises it(
Plena)& as it is co*plete @ Ine) t#e NIRC, t#e 0IR *a& a%ail o$ ce)tain
)e*eies to ens-)e t#e collection o$ ta"es(
S-p)e*e . Alt#o-'# )e$e))e to as t#e st)on'est o$ all t#e
po,e)s o$ t#e 'o%e)n*ent, cannot +e inte)p)ete to
*ean t#at it is s-pe)io) to t#e ot#e) in#e)ent po,e)s
o$ t#e 'o%e)n*ent, onl& t#at it is s-p)e*e inso$a) as
t#e selection o$ t#e s-+6ect o$ ta"ation is conce)ne(
Discretion as to PURPOSE
T#e sole a)+ite) o$ t#e p-)pose $o) ,#ic# ta"es s#all +e le%ie is t#e
le'islat-)e, p)o%ie t#e p-)poses a)e p-+lic(
T#e co-)ts *a& )e%ie, t#e le%& o$ t#e ta" to ete)*ine ,#et#e) t#e p-)pose
is a p-+lic one +-t once t#at is ete)*ine, t#e co-)ts can *a/e no ot#e)
in:-i)& as to t#e p-)pose o$ t#e ta", as it aJects t#e po,e) to i*pose it(
Discretion as to SUBJE! O" !#$#!%O&
T#e le'islat-)e #as -nli*ite scope as to t#e pe)sons, p)ope)t& o)
occ-pation to +e ta"e, ,#e)e t#e)e a)e no constit-tional )est)ictions,
p)o%ie t#e p)ope)t& is ,it#in t#e te))ito)ial 6-)isiction o$ t#e ta"in' state(
It is in#e)ent in t#e po,e) to ta" t#at a state +e $)ee to select t#e s-+6ect o$
ta"ation, an it #as +een )epeatel& #el t#at >ine:-alit&;ies= ,#ic# )es-lt
$)o* sin'lin' o-t o$ one pa)tic-la) class $)o* ta"ation o) e"e*ption in$)in'e
no constit-tional li*itation(
Discretion as to #'OU&! O" !#$
T#e le'islat-)e #as t#e )i'#t to fnall& ete)*ine t#e a*o-nt o) )ate o$ ta",
in t#e a+sence o$ constit-tional p)o#i+ition(
Not onl& t#at it is -nli*ite, it ac/no,le'es no li*its an *a& +e ca))ie
e%en to t#e e"tent o$ e"#a-stion an est)-ction, t#-s +eco*in' in its
e"e)cise a po,e) to est)o&(
4
Scope
Discretion as to
Purpose
Discretion as to
subject of
taxation
Discretion to
amount or rate
of tax
Discretion to
manner, means
and agency of
collection
Po,e) to Ta" t#e Po,e) to !est)o& ;0a) 1<K3=
T#e po,e) to ta" is t#e st)on'est o$ all t#e po,e)s o$ 'o%e)n*ent( It is
in#e)ent po,e) to ta" %este in t#e le'islat-)e incl-es t#e po,e) to
ete)*ine ,#o to ta", ,#at to ta" an #o, *-c# ta" is to +e i*pose(
T#e po,e) to ta" incl-es t#e po,e) to est)o& i$ it is -se %alil& as an
i*ple*ent o$ t#e police po,e) in isco-)a'in' an in eJect, -lti*atel&
p)o#i+itin' ce)tain t#in's o) ente)p)ises ini*ical to t#e p-+lic ,el$a)e(
T#e po,e) to ta" is a po,e) to est)o& i$ it is -se to )e'-late e%en to t#e
e"tent o$ p)o#i+ition o) est)-ction(
!he po(er to ta) is not the po(er to destroy (hile the S*preme o*rt sits
T#e po,e) to ta" s#o-l +e e"e)cise ,it# -e ca)e an ci)c-*spection,
consie)in' not onl& t#e p)es-*ption o$ %aliit& +-t also t#e )elati%el&
*oest )an/ o$ a cit& co-)t in t#e 6-icial #ie)a)c#&(
I$ so ')eat an a+-se is *ani$este as to est)o& nat-)al an $-na*ental
)i'#ts ,#ic# no $)ee 'o%e)n*ent co-l consistentl& %iolate, it is t#e -t&
o$ t#e 6-icia)& to #ol s-c# an act -nconstit-tional(
Discretion as to '#&&ER+ 'E#&S and #,E&%ES O" O--E!%O& O" !#$ES
P)ocess, aspect, p#ases o$ Ta"ation
1( Le%&in' o) i*position o$ t#e ta" ,#ic# is a le'islati%e in c#a)acte)8
2( Collection o$ t#e ta" le%ie ,#ic# is essentiall& a*inist)ati%e in
c#a)acte)(
T#e f)st is ta"ation, st)ictl& spea/in', ,#ile t#e secon *a& +e )e$e))e
to as ta" a*inist)ation( T#e t,o p)ocesses to'et#e) constit-te t#e
ta"ation s&ste*(
P-)poses o$ Ta"ation
1( P)i*a)& p-)pose ;Gene)al, fscal o) )e%en-e=
To )aise )e%en-e $o) 'o%e)n*ent e"penit-)es( Fo) t#e s-ppo)t o$ t#e
'o%e)n*ent an $o) all p-+lic nees(
2( Secona)& p-)pose ;Special o) )e'-lato)&=;0a) 1<<1=
5
Ley or
!mposition
"ssessment
and #ollection
Payment
$nactment of tax
la%s
&'is is administratie in
c'aracter and can be
delegated
"ct of compliance by t'e
taxpayer
To ac#ie%e so*e social o) econo*ic ens i))especti%e o$ ,#et#e) )e%en-e
is act-all& )aise o) not(
Ta"ation also see/s to LPIERM
;a= P)otect o-) local in-st)ies a'ainst -n$ai) co*petition8
;+= I*ple*ent t#e police po,e) o$ t#e state ;)e'-lato)&=8
;c= Enco-)a'e t#e ')o,t# o$ local in-st)ies8
;= Re-ce social ine:-alit&(
Re-ce social ine:-alit&
O-) p)esent ta" s&ste* #as aopte t#e p)o')essi%e s&ste* o$ ta"ation(
In p)o')essi%e s&ste* o$ ta"ation, t#e ta" )ate inc)eases as t#e ta" +ase
inc)eases( T#is s&ste* ai*s at )e-cin' t#e ine:-alit& in t#e ist)i+-tion
o$ ,ealt# +& p)e%entin' its -n-e concent)ation in t#e #ans o$ a $e,
ini%i-als(
Enco-)a'e t#e G)o,t# o$ Local In-st)ies
It is a settle )-le t#at t#e po,e) to ta" ca))ies ,it# it t#e po,e) to ')ant
ta" e"e*ptions( Ta" e"e*ptions an ta" )elie$s se)%e as incenti%es to
enco-)a'e in%est*ent in o-) local in-st)& an t#e)e+& p)o*ote
econo*ic ')o,t#(
P)otect o-) local in-st)ies a'ainst -n$ai) co*petition
T#e Ta)iJ an C-sto*s Coe allo,s t#e i*position o$ ce)tain ta"es
;co-nte)%ailin' an -*pin' -ties= -pon i*po)te 'oos o) a)ticles to
$-)t#e) p)otect o-) local in-st)&( RA K952 ;Anti.!-*pin' Act= i*poses
st)icte) conitions(
As an i*ple*ent o$ t#e Police Po,e) o$ t#e State ;Re'-lato)& Ceas-)e=
T#e po,e) o$ ta"ation *a& +e -se as an i*ple*ent o$ t#e police po,e)
o$ t#e State t#)o-'# t#e i*position o$ ta"es ,it# t#e en in %ie, o$
)e'-latin' a pa)tic-la) acti%it&(
L-t1 %s( A)aneta
As a p)otection an p)o*otion o$ t#e s-'a) in-st)& is a
*atte) o$ p-+lic conce)n, t#e Le'islat-)e *a& ete)*ine
,it#in )easona+le +o-ns ,#at is necessa)& $o) its p)otection
an e"peient $o) its p)o*otion(
P)inciples o$ a So-n Ta" S&ste* ;0a) 1<93= LFATM
1( Fiscal ae:-ac&
2( A*inist)ati%e Feasi+ilit&
3( T#eo)itical N-stice o) E:-alit&
Fiscal Ae:-ac& @ it *eans t#at t#e so-)ces o$ )e%en-e s#o-l +e
s-Ocient to *eet t#e e*ans o$ p-+lic e"penit-)es(
(
A*inist)ati%e Feasi+ilit& @ it *eans t#at ta" la,s s#o-l +e capa+le o$
con%enient, 6-st an eJecti%e a*inist)ation( Ta" la,s *-st +e capa+le o$
eJecti%e an eOcient en$o)ce*ent( T#e& *-st not o+st)-ct +-siness
')o,t# an econo*ic e%elop*ent(
T#eo)itical N-stice o) E:-alit& @ it *eans t#at t#e ta" +-)en s#o-l +e
p)opo)tionate to t#e ta"pa&e)Es a+ilit& to pa&( T#is is t#e so.calle
>a+ilit& to pa& p)inciple?(
)
Ta"ation !istin'-is#e F)o* Ot#e) In#e)ent Po,e)s an I*positions
!a)ation distin.*ished from Police Po(er
Ta"ation Police Po,e)
As to
PIRPOSE
Is le%ie $o) t#e
p-)pose o$ )aisin'
)e%en-e(
Is e"e)cise to p)o*ote
p-+lic ,el$a)e t#)o-'#
)e'-lation(
As to
ACOINT
OF
EXACTION
T#e a*o-nt 'at#e)e
in t#e e"e)cise o$
ta"ation conte*plates
o$ no li*its(
T#e e"action is li*ite
to t#e cost o$ )e'-lation,
iss-ance, o$ t#e license,
o) s-)%eillance(
As to t#e
0ENEFITS
RECEIVE!
0G THE
TAXPAGER
No special o) i)ect
+eneft is )ecei%e +&
t#e ta"pa&e) ot#e)
t#an t#e $act t#at t#e
'o%e)n*ent sec-)es
t#e citi1en t#at 'ene)al
+eneft )es-ltin' $)o*
t#e p)otection o$ #is
pe)son an p)ope)t&
an t#e ,el$a)e o$ all(
No i)ect +enefts a)e
)ecei%e t#)o-'# t#e
e"e)cise o$ Police Po,e),
&et a #ealt#& econo*ic
stana) o$ societ& is
*aintaine(
As to
SIPERIORI
TG OF
CONTRACT
S
Reco'ni1es t#e
o+li'ations i*pose +&
cont)acts(
T#is li*itation oes not
appl& to Police Po,e)(
As to
TRANSFER
OF
PROPERTG
RIGHTS
T#e ta"es pai $o)*
pa)t o$ t#e p-+lic
$-ns(
Allo,s *e)el& t#e
)est)aint on t#e e"e)cise
o$ p)ope)t& )i'#ts(
!a)ation distin.*ished from Eminent Domain
Ta"ation E*inent !o*ain
As to
PIRPOSE
Is le%ie $o) t#e
p-)pose o$ )aisin'
)e%en-e(
Is ta/in' o$ p)ope)t& $o)
p-+lic -se(
As to
COCPENS
ATION
Pa&*ent o$ ta"es
acc)-e to t#e 'ene)al
+eneft o$ t#e citi1ens
o$ t#e ta"in' state(
N-st co*pensation is
'i%en t#e o,ne) o$ t#e
e"p)op)iate p)ope)t&(
As to t#e
PERSONS
AFFECTE
Applies to all pe)sons,
p)ope)t& an e"e)cises
t#at *a& +e s-+6ect
Onl& pa)tic-la) p)ope)t&
is co*p)e#ene(
*
! t#e)eto(
Li*itations on t#e Ta"in' Po,e)
Classes o$ Li*itations in Ta"in' Po,e)
1( In#e)ent Li*itations on t#e Po,e) to Ta"
2( Constit-tional Li*itations on t#e Po,e) to Ta"
In#e)ent Li*itations on t#e Po,e) to Ta"
T#ese li*itations p)ocee $)o* t#e %e)& nat-)e o$ t#e ta"in' po,e) itsel$(
T#ese a)eA LN( PITT=
1( Non.ele'ation o$ t#e po,e) to ta"
2( P-+lic p-)pose
3( Inte)national co*it&
4( Ta" e"e*ptions ')ante 'o%e)n*ent a'encies o) inst)-*entalities(
5( Te))ito)ialit&
&on/dele.ation of the po(er to ta)
T#e po,e) to ta" is e"cl-si%el& %este in t#e le'islati%e +o&(
E)ceptions0
1( A)ticle VI, Sec( 2K;2= o$ t#e constit-tion ;Fle"i+le Ta)iJ Cla-se= L0a)
2HHH B(1KM
2( A)ticle X, Sec( 5 o$ t#e constit-tion ;LocalPC-nicipal Ta"ation=
0oa) o$ Assess*ent Appeals o$ La'-na %s( Co-)t o$ Ta"
Appeals
K SCRA 224
In t#e a+sence o$ constit-tional p)o%ision, t#e po,e) to ta"
*a& +e ele'ate to local 'o%e)n*ent -nits in acco)ance
,it# t#e ,ell.settle oct)ine t#at t#e po,e) to c)eate local
'o%e)n*ent -nits +& i*plication con$e)s -pon it t#e po,e)
to ta"( So e%en i$ no constit-tional p)o%ision e"ists, local
'o%e)n*ent -nits still possess t#e po,e) to ta"(
P*blic p*rpose
A )e%en-e *eas-)e *-st stan t#e f)st )e:-isite o$ a la,$-l ta"ation @ t#at
t#e p-)pose $o) ,#ic# it is lai +e a p-+lic p-)pose(
T#e le'islat-)e is +e)e$t o$ po,e) to app)op)iate )e%en-es $o) an&tin' ot#e)
t#an a p-+lic p-)pose(
It is t#e p-+lic p-)pose ete)*ines t#e p-+lic c#a)acte) o$ t#e la,, not t#e
n-*+e) o$ pe)sons +eneft( As lon' as t#e -lti*ate )es-lts $a%o)s t#e
,el$a)e o$ t#e p-+lic in 'ene)al, t#e app)op)iation o$ a p-+lic )e%en-e is
ee*e one $o) a p-+lic p-)pose(
+
%nternational comity
A)t( II, Sec( 2 1<K9 Constit-tion
!he Philippines adopts the .enerally accepted principles of
international la( as part of the la( of the land+ and
adheres to the policy of peace+ e1*ality+ 2*stice+ freedom+
cooperation+ and amity (ith all nations3
T#-s, i$ a la, is passe i*posin' ta"es on t#e inco*e o$ $o)ei'n
a*+assao)s o) i*posin' )eal p)ope)t& ta"es -pon $o)ei'n e*+assies, t#is is
not a %ali la, +eca-se t#e i*position is in %iolation o$ t#e -ni%e)sal
p)inciples o$ inte)national la,( Ine) inte)national la,s, $o)ei'n e*+assies
a)e consie)e e"tensions o$ t#e te))ito)ialit& o$ t#e $o)ei'n states8 to
i*pose ta"es -pon t#e* ,o-l +e tanta*o-nt to an e"e)cise o$ 6-)isiction
o%e) t#ese $o)ei'n states(
!erritoriality
Since la,s ceases to ope)ate +e&on a co-nt)&Es 6-)isictional li*its, t#e
ta"in' po,e) o$ a co-nt)& is li*ite to pe)son an p)ope)t& ,it#in an
s-+6ect to its 6-)isiction( T#is sa*e )-le applies to t#e ta"in' po,e) o$ a
te))ito)&(
E)emption from !a)ation of ,overnment #.encies4%nstr*mentalities
,eneral R*le0 A'encies pe)$o)*in' 'o%e)n*ental $-nctions a)e ta".
e"e*pt -nless e"p)essl& ta"e(
A'encies pe)$o)*in' p)op)ieta)& $-nctions a)e s-+6ect to
ta" -nless e"p)essl& e"e*pte(
Ce)tain co)po)ations #a%e +een ')ante e"e*ption -ne) Sec( 29;c= o$ RA
K424A
1= GSIS8 2= SSS8 3= PHIC8 4= PCSO8 an 5= PAGCOR(
Constit-tional Li*itations on t#e Po,e) to Ta"
1( !-e p)ocess o$ la,8
2( E:-al p)otection o$ la,s8
3( Ini$o)*it&8
4( P)o')essi%e s&ste* o$ ta"ation8
5( Non.i*pai)*ent o$ cont)acts8
7( non.i*p)ison*ent $o) non.pa&*ent o$ poll ta"8
9( app)op)iation, )e%en-e an ta)iJ +ills *-st o)i'inate e"cl-si%el& in t#e
Ho-se o$ Rep)esentati%es8
K( P)esiential %eto8
<( P)esiential po,e) to f" ta)iJ )ates8
1H( F)eeo* o$ t#e p)ess8
11( F)eeo* o$ )eli'ion8
12( E"e*ption $)o* p)ope)t& ta" o$ p)ope)ties o$ )eli'io-s, e-cational,
c#a)ita+le instit-tions8
13( Ta" e"e*ptions ')ante to non.stoc/, non p)oft e-cational,
c#a)ita+le instit-tions8
1,
14( No p-+lic *one& o) p)ope)t& -se $o) a pa)tic-la) sec, p)iest,
)eli'io-s *iniste), etc8
15( G)ant o$ ta" e"e*ptions8
17( G)ant o$ po,e) o$ ta"ation to local 'o%e)n*ent -nits8
19( Cone& collecte $o) a special p-)pose s#all +e consie)e a special
$-n8
1K( E"cl-si%e appellate 6-)isiction o$ t#e S-p)e*e co-)t o%e) 6-'*ents
o$ lo,e) co-)ts in%ol%in' t#e le'alit& o$ ta"es, i*po)ts, assess*ent,
$ees, penalt&(
53 D*e Process of -a(
A)t( III, Sec( 1
No pe)son s#all +e ep)i%e o$ li$e, li+e)t& o) p)ope)t&
,it#o-t -e p)ocess o$ la, " " " "(
!-e p)ocess *anates t#at no pe)son s#all +e ep)i%e o$ li$e, li+e)t&, o)
p)ope)t& ,it#o-t -e p)ocess( T#e i*plication is t#at one *a& +e
ep)i%e as lon' as t#e )e:-i)e*ent o$ -e p)ocess @ notice an #ea)in' @
#a%e +een co*plie ,it#(
!-e p)ocess is -s-all& %iolate ,#e)e t#e ta" i*pose is $o) a p)i%ate
p-)pose as istin'-is#e $)o* a p-+lic p-)pose8 a ta" is i*pose on
p)ope)t& o-tsie t#e State, i(e, e"t)a.te))ito)ial ta"ation8 an a)+it)a)& o)
opp)essi%e *et#os a)e -se in assessin' an collectin' ta"es( 0-t, a
ta" oes not %iolate t#e -e p)ocess cla-se, as applie to a pa)tic-la)
ta"pa&e), alt#o-'# t#e p-)pose o$ t#e ta" ,ill )es-lt in in6-)& )at#e) t#an
a +eneft to s-c# ta"pa&e)(
T#e $ollo,in' sit-ations a)e ill-st)ati%e o$ %iolations o$ t#e -e p)ocess
cla-seA
;a= I$ t#e ta" a*o-nts to a confscation o$ p)ope)t&8
;+= I$ t#e s-+6ect o$ confscation is o-tsie t#e 6-)isiction o$ t#e
ta"in' a-t#o)it&8
;c= I$ t#e la, is i*pose $o) a p-)pose ot#e) t#an a p-+lic p-)pose8
;= I$ t#e la, ,#ic# is applie )et)oacti%el& i*poses -n6-st an
opp)essi%e ta"es8
;e= W#e)e t#e la, is in %iolation o$ in#e)ent li*itations(
63 E1*al Protection la*se
E:-al p)otection oes not )e:-i)e e:-al )ates o$ ta"ation on iJe)ent
classes o$ p)ope)t&, no) p)o#i+it -ne:-al ta"ation so lon' as t#e
ine:-alit& is not +ase -pon a)+it)a)& classifcation(
Le'islation ,#ic#, in ca))&in' o-t a p-+lic p-)pose, is li*ite in its
application, oes not %iolate t#e p)o%isions i$, ,it#in t#e sp#e)e o$ its
ope)ation, it aJects ali/e all pe)sons si*ila)l& sit-ate( It oes not
p)o#i+it special le'islation o) le'islation t#at is li*ite eit#e) in t#e
11
o+6ects to ,#ic# it is i)ecte, o) +& t#e te))ito)& ,it#in ,#ic# it is to
ope)ate(
It *e)el& )e:-i)es t#at all pe)sons s-+6ecte to s-c# le'islation s#all +e
t)eate ali/e, -ne) li/e ci)c-*stances an conitions, +ot# in t#e
p)i%ile'es con$e))e an in t#e lia+ilities i*pose(
T#e po,e) to select t#e s-+6ects o$ ta"ation an appo)tion t#e p-+lic
+-)en a*on' t#e* incl-es t#e po,e) to *a/e classifcations( T#e
ine:-alities ,#ic# )es-lt $)o* t#e sin'lin' o-t o$ one pa)tic-la) class $o)
ta"ation o) e"e*ption in$)in'e no constit-tional li*itation( ;L-t1 %s(
A)aneta, G(R( L.9K5<, !ec( 22, 1<55, <K P#il( 14K=
Ho,e%e), $o) classifcation to +e %ali, t#e $ollo,in' )e:-isites *-st
conc-)A
;a= it *-st +e +ase on s-+stantial istinction8
;+= it *-st appl& +ot# to p)esent an $-t-)e conitions8
;c= it *-st +e 'e)*ane to t#e p-)pose o$ t#e la,8
;= it *-st appl& e:-all& to all *e*+e)s o$ t#e sa*e class(
73 Uniformity of !a)ation (5889 Bar :*estion &o3 5)
A)t( VI, Sec( 2KL1M o$ t#e Constit-tion
T#e )-le o$ ta"ation s#all +e -ni$o)* an e:-ita+le(
Ini$o)*it& in ta"ation *eans t#at all ta"a+le a)ticles o) /ins o$ p)ope)t&
o$ t#e sa*e class s#all +e ta"e at t#e sa*e )ate( It oes not *ean t#at
lans, c#attels, sec-)ities, occ-pations, $)anc#ises, p)i%ile'es, necessities
an l-"-)ies s#all all +e ta"e o) assesse at t#e sa*e )ate( !iJe)ent
a)ticles *a& +e ta"e at iJe)ent a*o-nts p)o%ie t#at t#e )ate is
-ni$o)* on t#e sa*e class e%e)& ,#e)e, ,it# all t#e people an at all
ti*es(
A ta" is -ni$o)* ,#en it ope)ates ,it# t#e sa*e $o)* an eJect in e%e)&
place ,#e)e t#e s-+6ect o$ it is $o-n(
Do*ble !a)ation
!o-+le Ta"ation is t#e i*position o$ t,o ;2= o) *o)e ta"es -pon t#e sa*e
pe)son, t#e sa*e p)ope)t& o) s-+6ect *atte), $o) t#e sa*e p-)pose, +&
t#e sa*e State, Go%e)n*ent, o) ta"in' a-t#o)it&, ,it#in t#e sa*e
6-)isiction o) ta"in' ist)ict, -)in' t#e sa*e ta"in' pe)io an sa*e
/in' o) c#a)acte) o$ ta"(
1<<9 0a) 1;a=
B-estionA
Is o-+le ta"ation a %ali e$ense a'ainst t#e le'alit& o$ a
ta"D
Ans,e)A
12
No, o-+le ta"ation is not a %ali e$ense a'ainst t#e
le'alit& o$ a ta"( T#e)e is no constit-tional p)o#i+ition
o-+le ta"ation( A ta" enact*ent cannot +e ille'al si*pl&
+eca-se it )es-lts to o-+le ta"ation(
1<<9 0a)( 1;c=
B-estionA
W#at a)e t#e %a)io-s *et#os o$ a%oiin' t#e occ-))ence
o$ o-+le ta"ationD
Ans,e)A
T#e)e a)e t,o *et#os o$ )elie$A
1( T#e e"e*ption *et#o
Inco*e o) capital ta"a+le in t#e state o$ so-)ce o) sit-s
+-t e"e*pte in t#e sate o$ )esience8 an
2( T#e c)eit *et#o
W#ile t#e inco*e o) capital is ta"e in +ot# t#e state o$
so-)ce an in t#e state o$ )esience, t#e ta" pai in t#e
$o)*e) is c)eite a'ainst t#e ta" le%ie in t#e latte)(
1<<7 0a) 2;a= ;5F=8 1<KH 0a) 3,<
;Villan-e%a %s( Cit& o$ Iloilo, 27 SCRA 59K=
B-estionA
X, a lesso) o$ a p)ope)t&, pa&s )eal estate ta" on t#e
p)e*ises, a )eal estate eale)Es ta" +ase on )ental
)eceipts an inco*e ta" on t#e )entals( X clai*s t#at t#is
is o-+le ta"ation( !ecie(
Ans,e)A
1( T#e)e is no o-+le ta"ation( T#e t#)ee ;3= t&pes o$
ta"es #a%e iJe)ent p-)posesPnat-)e an a)e i*pose
+& iJe)ent ta"in' a-t#o)ities(

2( Real estate ta" is i*pose on t#e p)ope)t& itsel$ +& t#e
Local Go%e)n*ents(
3( Real Estate !eale)Es Ta" is i*pose on t#e eale)Es
p)i%ile'e to en'a'e in t#e +-& an sell o$ )eal p)ope)t&(
4( T#e Inco*e Ta" on t#e Rental Inco*e is i*pose on t#e
+-siness*anEs p)i%ile'e to ea)n inco*e an is -ne)
t#e National Go%e)n*entEs 0IR(
1<<9 0a) 1;+=
0IR R-lin' No( H1K.<7, Fe+( 2H, 1<<7
B-estionA
13
W#en an ite* o$ inco*e is ta"e in t#e P#ilippines an t#e
sa*e inco*e is ta"e in anot#e) co-nt)&, is t#e)e a case o$
o-+le ta"ationD
Ans,e)A
No, t#e)e is no o-+le ta"ation( T#e $o)ei'n 'o%e)n*ent
#as t#e )i'#t to ,it##ol ta"es, in t#e e"e)cise o$ its
in#e)ent an so%e)ei'n )i'#t to ta"( T#e)e a)e t,o ;2=
sepa)ate ta"in' a-t#o)ities in%ol%e(
14
;3 Pro.ressive !a)ation
A)t( VI, Sec( 2KL1M o$ t#e Constit-tion
Con')ess s#all e%ol%e a p)o')essi%e s&ste* o$ ta"ation(
Ta"ation is sai to +e e:-ita+le ,#en its +-)en $alls on t#ose +ette)
a+le to pa&8 ta"ation is p)o')essi%e ,#en its )ate 'oes -p epenin'
on t#e )eso-)ces o$ t#e pe)son aJecte(
T#e Constit-tion oes not )eall& p)o#i+it t#e i*position o$ )e')essi%e
ta"es( W#at is si*pl& p)o%ies is t#at Con')ess s#all e%ol%e a
p)o')essi%e s&ste* o$ ta"ation(
<inds of !a)ation System
1( P)o')essi%e Ta"ation
2( Re')essi%e Ta"ation
P)o')essi%e S&ste* o$ Ta"ation $a%o)s t#e i*position o$ *o)e i)ect ta"es
%e)s-s ini)ect ta"es(
Re')essi%e S&ste* o$ Ta"ation is c#a)acte)i1e +& *o)e ini)ect ta"es
+ein' i*pose(
Direct and %ndirect !a)es (6==5 Bar :*estion 6(b) (6>)
!i)ect Ta"es a)e t#ose t#at a)e e*ane $)o* t#e %e)& pe)son, ,#o, it is
intene o) esi)e, s#o-l pa& t#e*(
Ini)ect Ta"es a)e t#ose t#at a)e e*ane in t#e f)st instance $)o* one
pe)son in t#e e"pectation an intention t#at #e can s#i$t t#e +-)en to
so*e else(
1<<9 0a) 5;a= ;2(5F=
B-estionA
!isc-ss t#e *eanin' o$ t#e Glo+al an Sc#e-la) S&ste*s
o$ Ta"ationD
Ans,e)A
1( Glo+al o) Ini$o)* Ta" Rate )e$e)s to ta" st)-ct-)e ,#e)e
onl& one ;1= ta" )ate is applie ac)oss t#e ta" +ase(
2( Sc#e-la) o) P)o')essi%e Ta" Rates )e$e) to t#e
i*position o$ ')a-ate )ates o$ ta"es in scala) )an'e o)
a la&e)e set o$ ta" +ases(
15
1<<9 0a) 5;+= ;2(5F=
B-estionA
To ,#ic# s&ste* ,o-l &o- sa& t#e *et#o o$ ta"ation
-ne) t#e National Inte)nal Re%en-e Coe +elon'sA
Ans,e)A
1( T#e National Inte)nal Re%en-e Coe -ses +ot# t#e
Glo+al an t#e Sc#e-la) S&ste*s o$ Ta"ation( T#e
Co)po)ate Inco*e Ta" Rate an t#e 1HF VAT Rate as
e"a*ples o$ Glo+al )ates o$ ta"es(

2( T#e Inco*e Ta" Ta+le $o) ini%i-al Ta"pa&e)s is an
e"a*ple o$ t#e Sc#e-la) )ates o$ ta"es( Inco*e ta"es
on ini%i-als a)e p)o')essi%e ta" )ates +eca-se t#e
)ates inc)ease as t#e scale o$ inco*e inc)eases(
?3 &on/impairment la*se
A)t( III, Sec( 1H o$ t#e Constit-tion
No la, s#all +e passe i*pai)in' t#e o+li'ations o$
cont)acts(
W#en t#e state #as stip-late +& cont)act to 'i%e e"e*ption $)o*
ta"ation, o) #as co**-te t#e -nce)tain ta"es $o) a efnite an f"e
s-* o) s-*s, an a$te),a)s -ne)ta/es to ta", in t#e sa*e *anne) as it
ta"es ot#e) s-+6ects, t#e pe)sons, co)po)ations o) p)ope)t& ,#ic# ,e)e
t#e s-+6ect o$ t#e e"e*ption o) co**-tation, t#e o+li'ation o$ t#e
cont)act is i*pai)e(
T#e constit-tional p)o#i+ition a'ainst t#e i*pai)*ent o$ t#e o+li'ation o$
cont)acts onl& applies, #o,e%e), ,#e)e it is clai*e t#at t#e o+li'ation o$
a cont)act is i*pai)e +& a la, o$ t#e state @ a stat-te o) constit-tional
p)o%ision o$ t#e state( It oes not appl& to *e)e ecisions o$ co-)ts
const)-in' a cont)act(
1<<9 0a) ;3=
B-estionA
Is a ta" e"e*ption )e%oca+leD
Ans,e)A
;B-alife Ans,e)=
53 %f the .rant of an e)emption does not constit*te a
contract+ b*t merely @a spontaneo*s concession by the
le.islative+ not connected (ith any service or d*ty
imposed
It is )e%oca+le +& t#e po,e) ,#ic# *ae t#e ')ant( A
state *a&, at its pleas-)e, ,it#)a, an e"e*ption ,#ic#
is a *e)e ')at-it& possessin' no ele*ent o$ a cont)act,
1(
e%en t#o-'# t#e co)po)ation *a& #a%e inc-))e e"pense
on t#e $ait# t#e)eo$(
1)
63 %f the ta) e)emption constit*tes a bindin. contract and
for val*able consideration
T#e 'o%e)n*ent cannot -nilate)all& )e%o/e t#e ta"
e"e*ption(
W#en t#e 'o%e)n*ent ente)s into a cont)act, it
escens to t#e le%el o$ an o)ina)& ini%i-al( It
cannot in%o/e state i**-nit&(
A3 &on/imprisonment for non/payment of poll ta)
A)t( III, Sec( 2H o$ t#e Constit-tion
No pe)son s#all +e i*p)isone $o) non.pa&*ent o$ a e+t o)
poll ta"(
W#ile a pe)son *a& not +e i*p)isone $o) non.pa&*ent o$ a
ce-la o) poll ta", #e *a& +e i*p)isone $o) non.pa&*ent o$
ot#e) /ins o$ ta"es ,#e)e t#e la, so e"p)essl& p)o%ies(
B3 Bills to Ori.inate from the Co*se of Representatives
A)t( III, Sec( 24 o$ t#e Constit-tion
All app)op)iation, )e%en-e o) ta)iJ +ills, +ills a-t#o)i1in'
t#e inc)ease o$ t#e p-+lic e+t, +ills o$ local application
an p)i%ate +ills, s#all o)i'inate e"cl-si%el& in t#e Ho-se o$
Rep)esentati%es, +-t t#e Senate *a& p)opose o) conc-)
,it# a*en*ents(
1<<9 0a) ;2=
Tolentino %s( Sec)eta)& o$ Finance, et a(
GR( No( 115455, A-'-st 25, 1<<4, 235 SCRA 73H
B-estionA
Petitione)s assail t#e constit-tionalit& o$ Rep-+lic Act( No(
9917 i*posin' a %al-e ae ta" ;VAT=( T#e contention o$
petitione)s is t#at in enactin' RA 9917 con')ess %iolate
t#e Constit-tion +eca-se, alt#o-'# H( No( 111<9 #a
o)i'inate in t#e Ho-se o$ Rep)esentati%es, it ,as not
passe +& t#e Senate +-t ,as si*pl& consoliate ,it# t#e
Senate %e)sion ;S( No( 173H= in t#e Con$e)ence Co**ittee
to p)o-ce t#e +ill ,#ic# t#e P)esient si'ne into la,(
!ecie(
Ans,e)A
T#is a)'-*ent ,ill not +ea) anal&sis( W#at t#e
constit-tion si*pl& *eans is t#at t#e initiati%e $o) flin'
)e%en-e, ta)iJ, o) ta" +ills, +ills a-t#o)i1in' an inc)ease o$
t#e p-+lic e+t, p)i%ate +ills an +ills o$ local application
*-st co*e $)o* t#e Ho-se o$ Rep)esentati%es on t#e
1*
t#eo)& t#at, electe as t#e& a)e $)o* t#e ist)icts, t#e
*e*+e)s o$ t#e Ho-se can +e e"pecte to +e *o)e
sensiti%e to t#e local nees an p)o+le*s( On t#e ot#e)
#an, t#e senato)s, ,#o a)e electe at la)'e, a)e e"pecte
to app)oac# t#e sa*e p)o+le*s $)o* t#e national
pe)specti%e( 0ot# %ie,s a)e t#e)e+& *ae to +ea) on t#e
enact*ent o$ s-c# la,s(
No) oes t#e Constit-tion p)o#i+it t#e flin' in t#e Senate
o$ a s-+stit-te +ill in anticipation o$ its )eceipt o$ t#e +ill
$)o* t#e Ho-se, so lon' as action +& t#e Senate as a +o&
is ,it##el penin' )eceipt o$ t#e Ho-se 0ill(
93 Deto Po(er of the President
A)t( VI, Sec( 29L2M o$ t#e Constit-tion
T#e P)esient s#all #a%e t#e po,e) to %eto an& pa)tic-la)
ite* o) ite*s in an app)op)iation, )e%en-e o) ta)iJ +ill +-t
t#e %eto s#all not aJect t#e ite* o) ite*s to ,#ic# #e oes
not o+6ect(
T#e ite* o) ite*s %etoe s#all +e )et-)ne to t#e Lo,e) Ho-se o$
Con')ess to'et#e) ,it# t#e o+6ections o$ t#e P)esient( I$ a$te) a
)econsie)ation 2P3 o$ all t#e *e*+e)s o$ s-c# Ho-se s#all a')ee to pass
t#e +ill, it s#all +e sent, to'et#e) ,it# t#e o+6ection, to t#e ot#e) Ho-se
+& ,#ic# it s#all li/e,ise +e )econsie)e, an i$ app)o%e +& 2P3 o$ all
t#e Ce*+e)s o$ t#at Ho-se, it s#all +eco*e a la,(
83 PresidentEs Po(er to !a)
A)t( VIII, Sec( 2KL2M o$ t#e Constit-tion
T#e Con')ess *a&, +& la,, a-t#o)i1e t#e P)esient to f"
,it#in specife li*its an s-+6ect to s-c# li*itations an
)est)ictions as it *a& i*pose, ta)iJ )ates, i*po)t an
e"po)t :-otas, tonna'e an ,#a)$a'e -es an ot#e)
-ties o) i*po)ts ,it#in t#e $)a*e,o)/ o$ t#e national
e%elop*ent p)o')a* o$ t#e 'o%e)n*ent(
2HHH 0a) ;1K=
B-estionA
W#at is Qe"i+le ta)iJ cla-seD
Ans,e)A
T#e te)* )e$e)s to t#e a-t#o)it& 'i%en to t#e P)esient to
a6-st ta)iJ )ates -ne) Section 4H1 o$ t#e Ta)iJ an
C-sto* Coe, ,#ic# is t#e ena+lin' la, t#at *ae eJecti%e
t#e ele'ation o$ t#e ta"in' po,e) to t#e P)esient -ne)
t#e Constit-tion(
5=3 !a)ation and the "reedom of the Press
1+
A)t( III, Sec( 4 o$ t#e Constit-tion
No la, s#all +e passe a+)i'in' t#e $)eeo* o$ speec#, o$
e"p)ession, o) o$ t#e p)ess " " "
2,
553 !a)ation and the "reedom of the Reli.ion
A)t( III, Sec( 5 o$ t#e Constit-tion
No la, s#all +e *ae )espectin' an esta+lis#*ent o$
)eli'ion o) p)o#i+itin' t#e $)ee e"e)cise t#e)eo$( T#e $)ee
e"e)cise an en6o&*ent o$ )eli'io-s p)o$ession an ,o)s#ip
,it#o-t isc)i*ination o) p)e$e)ence s#all $o)e%e) +e
allo,e( No )eli'io-s test s#all +e )e:-i)e $o) t#e
e"e)cise o$ ci%il o) political )i'#ts(
563 !a) E)emption of Properties #ct*ally+ Directly and E)cl*sively Used
for Reli.io*s+ haritable and Ed*cation P*rposes
A)t( IV, Sec( 2K L3M o$ t#e Constit-tion
C#a)ita+le instit-tions, c#-)c#es an pa)sona'es o)
con%ents app-)tenant t#e)eto, *os:-es, non.p)oft
ce*ete)ies, an all lans, +-ilin's an i*p)o%e*ents
act-all&, i)ectl&, an e"cl-si%el& -se $o) )eli'io-s,
c#a)ita+le, o) e-cational p-)poses s#all +e e"e*pt $)o*
ta"ation(
E)cl*sive b*t not #bsol*te Use
T#e te)* >e"cl-si%el& -se? oes not necessa)il& *ean
total o) a+sol-te -se $o) )eli'io-s, c#a)ita+le an
e-cational p-)poses( E%en i$ t#e p)ope)t& is incientall&
-se $o) sai p-)poses, t#e ta" e"e*ption ,ill appl&(
Co)olla)&, i$ a p)ope)t&, alt#o-'# act-all& o,ne +& a
)eli'io-s, c#a)ita+le an e-cational instit-tion is -se $o)
a non.e"e*pt p-)poses, t#e e"e*ption $)o* ta" s#all not
attac#(
1<<7 0a) No( K
He))e)a %s( B-e1on Cit& 0oa) o$ Assess*ent Appeals
3 SCRA 1K7
B-estionA
T#e Constit-tion e"e*pts $)o* ta"ation c#a)ita+le
instit-tions, c#-)c#es, pa)sona'es o) con%ents app-)tenant
t#e)eto, *os:-es an non.p)oft ce*ete)ies an lans,
e"cl-si%el& -se $o) )eli'io-s, c#a)ita+le an e-cational
p-)poses( Ce)c& Hospital is a 1HH.+e #ospital o)'ani1e
$o) c#a)it& patients(
Can sai #ospital clai* e"e*ption $)o* ta"ation -ne) t#e
a+o%e.:-ote constit-tional p)o%isionD E"plain(
Ans,e)A
21
Ges, +ein' a c#a)ita+le instit-tion, Ce)c& Hospital can clai*
ta" e"e*ption -ne) t#e Constit-tion +-t onl& ,it# )espect
to )eal p)ope)t& ta"es p)o%ie t#at s-c# )eal p)ope)ties
a)e -se act-all& i)ect an e"cl-si%el& $o) c#a)ita+le
p-)poses(
T#e e"e*ption in $a%o) o$ p)ope)t& -se e"cl-si%el& $o)
c#a)ita+le o) e-cational p-)poses is Rnot li*ite to
p)ope)t& act-all& inispensa+leE t#e)e$o)e, +-t e"tens to
$acilities ,#ic# a)e inciental to an )easona+l& necessa)&
$o) t#e acco*plis#*ent o$ sai p-)poses, s-c# as in t#e
case o$ #ospitals, Ra sc#ool $o) t)ainin' n-)ses, a n-)sesE
#o*e, p)ope)t& -se to p)o%ie #o-sin' $acilities $o) inte)ns,
)esient octo)s, s-pe)intenents, an ot#e) *e*+e)s o$
t#e #ospital staJ, an )ec)eational $acilities $o) st-ent
n-)ses, inte)ns, an )esientsE, s-c# as RAt#letic felsE
incl-in' R a f)* -se $o) t#e in*ates o$ t#e instit-tion(
573 !a) E)emption .ranted to non/stocF non/proft ed*cational
instit*tion (6=== Bar (8))
A)t( XIV, Sec( 4 o$ t#e Constit-tion
All )e%en-es an assets o$ non.stoc/, non.p)oft
e-cational instit-tions -se act-all&, i)ectl& an
e"cl-si%el& $o) e-cational p-)poses s#all +e e"e*pt $)o*
ta"es an -ties( Ipon t#e issol-tion an cessation o$
t#e co)po)ation e"istence o$ s-c# instit-tions, t#ei) assets
s#all +e ispose o$ in t#e *anne) p)o%ie +& la,(
S-+6ects to t#e conitions p)esc)i+e +& la,, all ')ants,
eno,*ents, onations o) cont)i+-tions -se act-all&,
i)ectl& an e"cl-si%el& $o) e-cational p-)poses s#all +e
e"e*pt $)o* ta"(
5;3 #ppropriation of P*blic 'oney
A)t( VI, Sec( 2< L1M o$ t#e Constit-tion
No p-+lic *one& o) p)ope)t& s#all +e app)op)iate,
applie, pai o) e*plo&e i)ectl& o) ini)ectl& $o) t#e -se,
+eneft o) s-ppo)t o$ an& sect, c#-)c#, eno*ination,
secta)ian instit-tion, o) s&ste* o$ )eli'ion o) o$ an& p)iest,
p)eac#e), *iniste), o) ot#e) )eli'io-s teac#e) o) i'nita)&
as s-c# EXCEPT s-c# p)iest, p)eac#e), *iniste) o) i'nita)&
is assi'ne to t#e a)*e $o)ces o) to an& penal instit-tion
o) 'o%e)n*ent o)p#ana'e o) lep)osa)i-*(
22
1<<7 0a) 4;a=
Gon1ales %s( Ca)cos, GR L.317K5, N-l& 31, 1<95
Tan %s( Cacapa'al, GR L.34171, Fe+)-a)& 2<, 1<92
B-estionA
W#en *a& a ta"pa&e)Es s-it +e allo,eD
Ans,e)A
1( A ta"pa&e)Es s-it *a& +e allo,e ,#en t#e iss-e
in%ol%es t#e -nla,$-l is+-)se*ent o$ p-+lic $-ns
)aise t#)o-'# ta"ation(
2( W#en t#e iss-e in%ol%es >t#e is+-)se*ent o$ p-+lic
$-ns +& an oOce) o$ t#e State $o) a*iniste)in' an
-nconstit-tional act, constit-tes a *isapplication o$
s-c# $-ns,? s-c# is+-)se*ent >*a& +e en6oine at
t#e )e:-est o$ a ta"pa&e)(
5?3 ,rant of !a) E)emptions
A)t( VI, Sec( 2K L4M o$ t#e Constit-tion
No la, ')antin' an& ta" e"e*ption s#all +e passe ,it#o-t
t#e conc-))ence o$ a *a6o)it& o$ all t#e *e*+e)s o$
Con')ess(
Note t#at in ')antin' an& ta" e"e*ptions, an a+sol-te *a6o)it& %ote o$
t#e Ce*+e)s o$ Con')ess is )e:-i)e, ,#ile in cases o$ ,it#)a,al o$ s-c#
ta" e"e*ption, a )elati%e *a6o)it& %ote is s-Ocient(
Ta" a*nesties, ta" cononations, an ta" )e$-ns a)e in t#e nat-)e o$ ta"
e"e*ptions( S-c# +ein' t#e case, a la, ')antin' ta" a*nesties, ta"
cononations, an ta" )e$-ns )e:-i)es t#e %ote o$ an a+sol-te *a6o)it&
o$ t#e Ce*+e)s o$ Con')ess(
2HH1 0a) 2;a=
B-estionA
!istin'-is# ta" e"e*ption an ta" a*nest&
Ans,e)A
Ta" A*nest& is an i**-nit& $)o* all c)i*inal an ci%il
o+li'ations a)isin' $)o* non.pa&*ent o$ ta"es( It is a
'ene)al pa)on 'i%en to all ta"pa&e)s( It applies onl& to
past ta" pe)ios, #ence o$ )et)oacti%e application(
Ta" E"e*ption is an i**-nit& $)o* ci%il lia+ilit& onl&( It is
an i**-nit& o) p)i%ile'e, a $)eeo* $)o* a c#a)'e o)
+-)en o$ ,#ic# ot#e)s a)e s-+6ecte( It is 'ene)all&
p)ospecti%e in application(
23
1<<7 0a) 3 ;5F=
Asiatic Pet)ole-* Co( %s( Llanes
4< P#il 477, 491.492, ;1<27=
B-estionA
W#& a)e ta" e"e*ptions st)ictl& const)-e a'ainst t#e
ta"pa&e)D
Ans,e)A
A ')ant o$ ta" e"e*ption is loo/e -pon ,it# is$a%o)( T#e
)i'#t o$ ta"ation ,ill not s-))ene)e -nless t#e intention
to s-))ene) is too plain to +e *ista/en $o) t#e state
cannot st)ip itsel$ o$ t#e *ost essential po,e) o$ ta"ation
+& o-+t$-l ,o)s(
So, ,#en e"e*ption is clai*e, it *-st +e s#o,n
in-+ita+l& to e"ist, $o) e%e)& p)es-*ption is a'ainst it,
an a ,ell.$o-ne o-+t is $atal to t#e clai*(
Re%ocation o$ Ta" E"e*ption
1<<9 0a) 3 ;5F=
Ce)alco %s( Ve)a, GR L.23K49, Octo+e) 22, 1<95
B-estionA
X Co)po)ation ,as t#e )ecipient in 1<<H o$ t,o ta"
e"e*ptions +ot# $)o* Con')ess, one la, e"e*ptin' t#e
co*pan&Es +on iss-e $)o* ta"es an t#e ot#e) e"e*ptin'
t#e co*pan& $)o* ta"es in t#e ope)ation o$ its p-+lic
-tilities( T#e t,o la,s e"tenin' t#e ta" e"e*ptions ,e)e
)e%o/e +& Con')ess +e$o)e t#ei) e"pi)& ates(
We)e t#e )e%ocation constit-tionD
Ans,e)A
T#e )e%ocation ,e)e constit-tional p)o%ie t#e co)po)ate
+enefcia)ies i not #a%e to pe)$o)* a )ecip)ocal -t& in
o)e) to a%ail o$ t#e e"e*ptions( T#e con')essional po,e)
to ')ant an e"e*ption ca))ies ,it# it t#e conse:-ent po,e)
to )e%o/e t#e sa*e(
5A3 '*nicipal !a)ation
A)t( X, Sec( 5 o$ t#e Constit-tion
Eac# local 'o%e)n*ent -nit s#all #a%e t#e po,e) to c)eate
its o,n so-)ces o$ )e%en-es an to le%& ta"es, $ees an
c#a)'es s-+6ect to s-c# '-ielines an li*itations as t#e
Con')ess *a& p)o%ie, consistent ,it# t#e +asic polic& o$
local a-tono*&( S-c# ta"es, $ees, an c#a)'es s#all acc)-e
e"cl-si%el& to t#e local 'o%e)n*ents(
24
5B3 Special "*nd
A)t( VI, Sec( 2<;3= o$ t#e Constit-tion
All *one& collecte on an& ta" le%ie $o) a special p-)pose
s#all +e t)eate as a special $-n an pai o-t $o) s-c#
p-)pose onl&( I$ t#e p-)pose $o) ,#ic# a special $-n ,as
c)eate #as +een $-lflle o) a+anone, t#e +alance, i$
an&, s#all +e t)ans$e))e to t#e 'ene)al $-ns o$ t#e
'o%e)n*ent(
593 S*preme o*rtEs J*risdiction over !a) ases
A)t( VIII, Sec( 2 o$ t#e Constit-tion
T#e Con')ess s#all #a%e t#e po,e) to efne, p)esc)i+e,
an appo)tion t#e 6-)isiction o$ t#e %a)io-s co-)ts +-t *a&
not ep)i%e t#e S-p)e*e Co-)t o$ its 6-)isiction o%e) cases
en-*e)ate in section 5 #e)eo$(
A)t( VIII, Sec( 5 o$ t#e Constit-tion
T#e S-p)e*e Co-)t s#all #a%e t#e $ollo,in' po,e)sA
Re%ie,, )e%ise, )e%e)se, *oi$& o) aO)* on appeal o)
ce)tio)a)i as t#e la, o) t#e R-les o$ Co-)t *a& p)o%ie,
fnal 6-'*ents o) o)e)s o$ lo,e)s co-)ts in
;+= all cases in%ol%in' t#e le'alit& o$ an& ta", i*post,
assess*ent o) toll, o) an& penalt& i*pose in )elation
t#e)eto(
SITIS OF TAXATION
Sit-s o$ ta"ation lite)all& *eans place o$ ta"ation(
T#e +asic )-le is t#at t#e state ,#e)e t#e s-+6ect to +e ta"e #as a sit-s
*a& )i'#t$-ll& le%& an collect ta"es8 an t#e sit-s is necessa)il& in t#e
state ,#ic# #as 6-)isiction o) ,#ic# e"e)cises o*inion o%e) t#e s-+6ect
in :-estion(
R-les o+se)%e in f"in' ta" sit-s
1( PollPCapitationPCo**-nit& Ta"
2( P)ope)t& ta"
3( E"cise ta"
i( Inco*e ta"
ii( !ono)Es ta"
iii( Estate ta"
i%( VAT
Poll4apitation4omm*nity !a)
A)e +ase -pon t#e )esience o$ t#e ta"pa&e), )e'a)less o$ t#e so-)ce o$
inco*e o) location o$ t#e p)ope)t& o$ t#e ta"pa&e)(
Property ta)
a= Real p)ope)t& ta"
25
Real estate is s-+6ect to ta"ation in t#e state o) co-nt)& ,#e)e it is
locate, )e'a)less o$ ,#et#e) t#e o,ne) is a )esient o) a non.
)esient(
+= Pe)sonal p)ope)t&
T#e sit-s o$ pe)sonal p)ope)t&, ,#e)e%e) it ,as act-all& /ept o)
locate, ,as #el to +e at t#e o*icile o$ its o,ne), $ollo,in' t#e a'e.
ol oct)ine o$ >mobilia se1**nt*r personamG (movables follo( the
person3 L1<<4 0a) B2=
;0-siness Sit-s !oct)ine=
L1<<7 0a) B7=
Sec( 1H4, RA K424 en-*e)ates ce)tain p)ope)ties
,#ic# #a%e ac:-i)e act-al sit-s in t#e P#ilippinesA
;a= F)anc#ise e"e)cise in t#e P#ilippines8
;+= S#a)es o$ stoc/, o+li'ations, +ons iss-e +&
o*estic co)po)ations o)'ani1e an constit-te
in acco)ance ,it# P#ilippine la,s8
;c= S#a)es, o+li'ations, +ons iss-e +& a $o)ei'n
co)po)ation ,#e)e K5F o$ its +-siness is locate
in t#e P#ilippines( It is s-+6ect to ono)Es ta" an
estate ta"(
;= S#a)es, o+li'ations, +ons iss-e +& $o)ei'n
co)po)ation ,#ic# #as ac:-i)e +-siness sit-s
,#ic# s-c# #a%e +een -se in t#e $-)t#e)ance o$
+-siness o$ t#e $o)ei'n co)po)ation8
;e= S#a)es o) )i'#ts in a pa)tne)s#ip +-siness o)
in-st)& esta+lis#e in t#e P#ilippines(
c= E"cise ta"
E"cise ta"es a)e ta"es i*pose on t#e e"e)cise o$ a )i'#t o) p)i%ile'e(
1= Inco*e ta" ;Place, Nationalit&, Resience= LPNRM
Place
All a)e ta"e -pon so-)ces o$ inco*e e)i%e $)o* ,it#in t#e
P#ilippinesA
;a= Non.Resient Alien8
;+= Non.Resient Fo)ei'n Co)po)ation
;c= Non.Resient Citi1en
Nationalit&
Ta"e -pon so-)ces o$ inco*e e)i%e ,it#in an ,it#o-t t#e
P#ilippinesA
;a= Resient Citi1en
;+= !o*estic Co)po)ation
Resience
Ta"e -pon inco*e e)i%e $)o* so-)ces ,it#in t#e
P#ilippinesA
;a= Resient Alien
;+= Resient Fo)ei'n Co)po)ation
2(
2= !ono)Es ta" ;Place, Nationalit&, Resience= LPNRM
Place
Ta" -pon p)ope)ties sit-ate ,it#in t#e P#ilippinesA
;a= Non.Resient Alien8
Nationalit&
Ta"e -pon p)ope)ties ,#e)e%e) sit-ateA
;a= Resient Citi1en
;+= Non.Resient Citi1en
Resience
Ta"e -pon p)ope)ties ,#e)e%e) sit-ateA
;a= Resient Alien
3= Estate ta" ;Place, Nationalit&, Resience= LPNRM
Place
Ta" -pon p)ope)ties sit-ate ,it#in t#e P#ilippinesA
;a= Non.Resient Alien8
Nationalit&
Ta"e -pon p)ope)ties ,#e)e%e) sit-ateA
;a= Resient Citi1en
;+= Non.Resient Citi1en
Resience
Ta"e -pon p)ope)ties ,#e)e%e) sit-ateA
;a= Resient Alien
4= Val-e Ae Ta"
Its ta" sit-s is t#e place ,#e)e t#e t)ansaction is *ae( I$ t#e
t)ansaction is *ae ;pe)$ecte an cons-**ate= o-tsie o$ t#e
P#ilippines, ,e can no lon'e) ta" s-c# a t)ansaction(
Sins o$ Ta"es !iJe)entiate
1( !i)ect an Ini)ect ;2HH1 0a) 2=
!i)ect Ta" is a ta" $o) ,#ic# a ta"pa&e) is i)ectl& lia+le on t#e
t)ansaction o) +-siness it en'a'es(
Ini)ect Ta" is a ta" p)i*a)il& pai +& pe)sons ,#o can s#i$t t#e +-)en
-pon so*eone else(
2( Specifc an A %alo)e*
Specifc Ta" is i*pose an +ase on ,ei'#t o) %ol-*e capacit& o) an&
ot#e) p#&sical -nit o$ *eas-)e*ent(
A %alo)e* is +ase on sellin' p)ice o) ot#e) specife %al-e o$ t#e
'oos(
2)
3( Gene)al an Special
Gene)al Ta" is i*pose solel& to )aise )e%en-e $o) t#e 'o%e)n*ent(
Special Ta" is i*pose an collecte to ac#ie%e a pa)tic-la) le'iti*ate
o+6ect o$ 'o%e)n*ent(
4( National an Local
National Ta" is i*pose +& t#e national 'o%e)n*ent(
Local Ta" is le%ie an collecte +& t#e local 'o%e)n*ent(
5( Pe)sonal an P)ope)t&
Pe)sonal Ta" is o$ f"e a*o-nt i*pose on ini%i-als, ,#et#e)
citi1ens o) not, )esiin' ,it#in a specife te))ito)&, ,it#o-t )e'a) to
t#ei) p)ope)t& o) occ-pation(
P)ope)t& Ta" is i*pose on p)ope)t&, )eal o) pe)sonal, in p)opo)tion to
its %al-e(
7( P)o')essi%e an Re')essi%e
9( !e+t an Ta"
Ta" @ Cannot +e co*pensate an +e set.oJ(
!e+t @ t#e)e is co*pensation an set.oJ(
Ta" E%asion an Ta" A%oiance !istin'-is#e
1<<7 0a) 3;a=8 1<K< 0a) 4;+=
B-estionA
!istin'-is# ta" e%asion $)o* ta" a%oiance(
Ans,e)A
Ta" E%asion is t#e -se o$ $)a--lent o) $o)+ien sc#e*es o)
e%ices to lessen o) e$eat t#e ta"pa&e)Es ta" o+li'ation(
Ta" A%oiance is t#e le'al *et#o o$ )e-cin' o) alto'et#e)
a%oiin' t#e ta" lia+ilit& +& fnin' an a%ailin' o$ %ali an
le'iti*ate s#o)t$alls in t#e la,(
1<<K 0a) 2H
B-estionA
2*
Is assess*ent necessa)& +e$o)e a ta"pa&e) *a& +e p)osec-te
$o) ,ill$-ll& atte*ptin', in an& *anne), to e%ae o) e$eat an&
ta" i*pose +& t#e Inte)nal Re%en-e CoeD
Ans,e)A
No, an assess*ent is not necessa)& +e$o)e a c)i*inal c#a)'e can
+e fle(
Section 2H5 o$ t#e Ta" Coe clea)l& *anates t#at t#e ci%il an
c)i*inal aspects o$ t#e case *a& +e p-)s-e si*-ltaneo-sl&( A
c)i*inal co*plaint is instit-te not to e*an pa&*ent, +-t to
penali1e t#e ta"pa&e) $o) %iolation o$ t#e Ta" Coe( T#e c)i*e is
co*plete ,#en t#e %iolato) #as /no,in'l& an ,ill$-ll& fle a
$)a--lent )et-)n ,it# intent to e%ae an e$eat a pa)t o$ all o$
t#e ta"(
!oct)ine o$ I*p)esc)ipti+ilit&
1<<9 0a) 48 2HH1 0a) 3;a=
B-estionA
Ta"es ,e)e 'ene)all& i*p)esc)ipti+le8 stat-tes, #o,e%e), *a&
p)o%ie ot#e),ise( State t#e )-les t#at #a%e +een aopte on
t#is sco)e +& @
a= T#e National Inte)nal Re%en-e Coe8
+= T#e Ta)iJ an C-sto*s Coe8
c= T#e Local Go%e)n*ent Coe(
Ans,e)A
T#e )-les t#at #a%e +een aopte a)e as $ollo,sA
a= National Inte)nal Re%en-e Coe
T#e stat-te o$ li*itation $o) assess*ent o$ ta" i$ a )et-)n is
fle is ,it#in t#)ee ;3= &ea)s $)o* t#e last a& p)esc)i+e +&
la, $o) t#e flin' o$ t#e )et-)n o) i$ fle a$te) t#e last a&,
,it#in t#)ee &ea)s $)o* ate o$ act-al flin'( I$ no )et-)n is
fle o) t#e )et-)n fle is $alse o) $)a--lent, t#e pe)io to
assess is ,it#in ten &ea)s $)o* isco%e)& o$ t#e o*ission,
$)a- o) $alsit&(
T#e pe)io to collect t#e ta" is ,it#in t#)ee &ea)s $)o* ate o$
assess*ent( In t#e case, #o,e%e), o$ o*ission to fle o) i$ t#e
)et-)n fle is $alse o) $)a--lent, t#e pe)io to collect is
,it#in ten &ea)s $)o* isco%e)& ,it#o-t nee o$ an
assess*ent(
An& inte)nal )e%en-e ta" ,#ic# #as +een assesse ,it#in t#e
pe)io o$ li*itation *a& +e collecte +& ist)aint o) le%& o) +&
a p)oceein' in co-)t ,it#in f%e ;5= $ollo,in' t#e assess*ent
o$ t#e ta"(
2+
Assess*ent o$ Ta" ;AT=
Collection o$ Ta" ;CT=
+= Ta)iJ an C-sto*s Coe
It oes not e"p)ess an& 'ene)al stat-te o$ li*itation8 it
p)o%ie, #o,e%e), t#at >,#en a)ticles #a%e ente)e an
passe $)ee o$ -t& o) fnal a6-st*ent o$ -ties *ae, ,it#
s-+se:-ent eli%e)&, s*ch entry and passa.e free of d*ty or
settlement of d*ties (ill after the e)piration of one (5) year+
from the date of the fnal payment of d*ties, in t#e a+sence o$
$)a- o) p)otest, +e fnal an concl-si%e -pon all pa)ties,
-nless t#e li:-iation o$ i*po)t ent)& ,as *e)el& tentati%e(
3,
AT
With a
RETURN
FILED
Without a
RETURN
FILED
3 years
-a. if filed before deadline
&'e 3 year period is
counted from t'e last
day prescribed by la%
for filing of a return/
-b. !f filed after deadline
0rom t'e date of
actual filing
10 years
0rom date of discoery of
t'e omission, fraud or falsity
CT
With a
RETURN
FILED
Without a
RETURN
FILED
With
assessment
Without
need of
assessment
3 years from date of
assessment 1#as' collection2
5 years from date of
assessment 1Ley, distraint
or court action2
1, years from date of
discoery
c= Local Go%e)n*ent Coe
Local ta"es, $ees, o) c#a)'es s#all +e assesse ,it#in f%e ;5=
&ea)s $)o* t#e ate t#e& +eco*e -e( In case o$ $)a- o)
intent to e%ae t#e pa&*ent o$ ta"es, $ees o) c#a)'es t#e
sa*e *a& +e assesse ,it#in ten ;1H= &ea)s $)o* isco%e)& o$
t#e $)a- o) intent to e%ae pa&*ent( T#e& s#all also +e
collecte eit#e) +& a*inist)ati%e o) 6-icial action ,it#in f%e
;5= &ea)s $)o* ate o$ assess*ent(
Assess*ent o$ Ta" ;AT=
Collection o$ Ta" ;CT=
5 &ea)s $)o* ate o$ assess*ent eit#e) a*inist)ati%e o) 6-icial
action(
PART 2
INCOCE TAXATIONGENERAL FORCILA OF INCOCE TAXATION
G)oss Inco*e s-+6ect to ta" P""""""
LessA !e-ctions """"""
Ta"a+le Inco*e P"""""
TTTTTT
Sins o$ G)oss Inco*eA
1( G)oss Inco*e s-+6ect to ta" ;Incl-sion $)o* G)oss Inco*e=
2( G)oss Inco*e not s-+6ect to ta" ;E"cl-sion $)o* G)oss Inco*e=
31
AT
No intent to Fraud!
e"ade #ayment of ta$!
fees or charges
With intent Fraud!
e"ade #ayment of ta$!
fees or charges
% years from
due date
10 years from
due date
Re:-isites $o) inco*e to +e ta"a+le
1( T#e)e *-st +e 'ain o) p)oft
2( T#e 'ain *-st +e )eali1e o) )ecei%e
3( T#e 'ain *-st not +e e"cl-e +& la, o) t)eat)& $)o* ta"ation(
!intinction +et,een inco*e $)o* capital
1<<5 0a) 1+
Vicente Ca)i'al, et al %s( Na*es RaJe)t&
3K P#il( 414
B-estionA
Ho, oes >inco*e? iJe) $)o* >capital?D E"plain(
Ans,e)A
Inco*e *eans an& ,ealt#, ,#ic# Qo,s into t#e ta"pa&e) ot#e)
t#an a )et-)n o$ capital( Inco*e is t#e se)%ice o$ ,ealt#(
Capital is t#e in%est*ent t#at +)in's a+o-t inco*e( Capital is a
$-n o) p)ope)t& e"istin' at one istinct point o$ ti*e( Capital is
,ealt#(
Inco*e !efne
Inco*e, in its +)oa sense, *eans all ,ealt# ,#ic# Qo,s into t#e ta"pa&e)
ot#e) t#an as a *e)e )et-)n on capital(
!oct)ine o$ Const)-cti%e Receipt o$ inco*e
T#e oct)ine is esi'ne to p)e%ent t#e ta"pa&e) on t#e cas# +asis $)o*
e$e))in' o) postponin' t#e act-al )eceipt o$ ta"a+le inco*e( Wit#o-t t#e
)-le, t#e ta"pa&e) can con%enientl& select t#e &ea) in ,#ic# #e ,ill )epo)t
#is inco*e(
32
Gene)al P)inciples o$ Inco*e Ta"ation
S-+6ect o$ Ta"ation 0asis o$ Ta"ation
Resient Citi1en Inco*e e)i%e $)o* so-)ces
,it#in an ,it#o-t t#e
P#ilippines(
Non.)esient Citi1en an
O%e)seas Cont)act Wo)/e)
Ta"a+le onl& on inco*e e)i%e
$)o* so-)ces ,it#in t#e
P#ilippines(
Alien Ini%i-al, ,#et#e)
)esient o) not
Ta"a+le onl& on inco*e e)i%e
$)o* so-)ces ,it#in t#e
P#ilippines(
!o*estic Co)po)ation Inco*e e)i%e $)o* so-)ces
,it#in an ,it#o-t t#e
P#ilippines(
Fo)ei'n Co)po)ation,
,#et#e) en'a'e o) not in
t)ae o) +-siness in t#e
P#ilippines
Ta"a+le onl& on inco*e e)i%e
$)o* so-)ces ,it#in t#e
P#ilippines(
Concept o$ G)oss Inco*e
Ta"a+le Inco*e !efne
Ta"a+le Inco*e *eans t#e pe)tinent ite*s o$ ')oss inco*e specife in t#e
Coe less t#e e-ctions anPo) pe)sonal an aitional e"e*ptions, i$ an&,
a-t#o)i1e $o) s-c# t&pes o$ inco*e +& t#e Coe, o) ot#e) special la,s(
G)oss Inco*e !efne ;1<<5 0a) 1a= LCGG.IRR.!AP.PPM
G)oss Inco*e *eans all inco*e e)i%e $)o* ,#ate%e) so-)ce, incl-in'
;+-t not li*ite to= t#e $ollo,in' ite*sA
;1= Co*pensation $o) se)%ices, in ,#ate%e) $o)* pai incl-in' $ees,
sala)ies, ,a'es, co**issions, an si*ila) ite*s8
;2= G)oss inco*e e)i%e $)o* t#e con-ct o$ t)ae o) +-siness o) t#e
e"e)cise o$ a p)o$ession8
;3= Gains e)i%e $)o* ealin's in p)ope)t&8
;4= Inte)ests8
;5= Rents8
;7= Ro&alties8
;9= !i%iens8
;K= Ann-ities8
;<= P)i1es an ,innin's8
;1H= Pensions8 an
;11= Pa)tne)sE ist)i+-ti%e s#a)e $)o* t#e net inco*e o$ a 'ene)al
p)o$essional pa)tne)s#ip(
33
1( Co*pensation Inco*e
R*les on %ncl*sion of the orrespondin. amo*nt as income from
compensation paid for services rendered
Coe o$ Pa&*ent Val-e o$ Inco*e s-+6ect to ta"
Cas# F-ll a*o-nt )ecei%e(
Pai ot#e) t#an
*one&
Fai) *a)/et %al-e o$ t#e t#in' ta/en in
pa&*ent(
At a stip-late
p)ice
P)ice s#all +e p)es-*e to +e t#e $ai)
*a)/et %al-e(
In stoc/s Fai) %al-e o$ t#e stoc/ at t#e ti*e #e
)ecei%e it(
Li%in' :-a)te)s
$-)nis#e in
aition to sala)&
T#e )ental %al-e o$ s-c# :-a)te)s s#o-l
+e )epo)te as inco*e(
0on-ses
)ep)esentin'
aitional
pa&*ents $o)
satis$acto)&
se)%ices )ene)e
Repo)te as inco*e( T#e& a)e, #o,e%e),
not ta"a+le as inco*e i$ 'i%en in t#e
nat-)e o$ o-t)i'#t 'i$ts( T#en it ,ill +e
s-+6ect to ono)Es ta"(
,ross ompensation %ncome (Reven*e Re.*lation 6/5889)
All )en-*e)ation $o) se)%ices pe)$o)*e +& t#e e*plo&ee $o) #is
e*plo&e) -ne) an e*plo&ee.e*plo&e) )elations#ip -nless e"plicitl&
e"cl-e +& t#e ta" coe(
Test o$ e*plo&ee.e*plo&e) )elations#ip LAC.!CM
3( Appoint*ent
4( Co*pensation
5( !is*issal
7( Cont)ol
R*les on -ife %ns*rance Premi*m
Ass-*ption o)
Sit-ation
Ta" i*plication on
E*plo&e)
Ta" incience on
E*plo&ee
1( T#e +enefcia)&
is t#e estate,
#ei), $a*il& o$
t#e e*plo&ee(
Can clai* as
e-ction -ne)
Sec( 34 pa)( A s-+(
Pa)( 1
I$ e*plo&ee is )an/
an fle
Pa)t o$ ')oss
inco*e(
I$ e*plo&ee is
34
s-pe)%iso)& o)
*ana'e)ial
S-+6ect to $)in'e
+eneft ta"
2( T#e e*plo&e) is
t#e +enefcia)&(
Cannot +e clai*e
as e-ction
-ne) Sec( 37 pa)(
A s-+( Pa)( 4
Not a ta"a+le
inco*e
Ta" i*plication @ ,#et#e) can +e clai*e as e-ction $)o* ')oss
inco*e(
Ta" incience @ ,#et#e) it is pa)t o) not o$ ')oss inco*e(
1<<7 0a) 3;+= ;2(5F=
B-estionA
Ass-*in' t#e s#a)es o$ stoc/s ,e)e 'i%en to C)( G in
consie)ation o$ #is se)%ices to t#e co)po)ation, ,#at a)e
t#e ta" i*plicationsD E"plain(
Ans,e)A
C)( G ,ill +e lia+le $o) inco*e ta" on t#e se)%ices #e
)ene)e -sin' t#e $ai) *a)/et %al-e o$ t#e s#a)es )ecei%e
$o) %al-ation(
onvenience of the Employer R*le
Ine) t#is )-le, allo,ances $-)nis#e to t#e e*plo&ee $o), an as a
necessa)& incient to, t#e pe)$o)*ance o$ #is -ties a)e not ta"a+le(
T#-s, t#e %al-e o$ *eals an li%in' :-a)te)s 'i%en a )i%e) ,#o is
a%aila+le an& #o-) o$ t#e a& ,#en neee +& #is octo).e*plo&e) is
not consie)e inco*e o$ t#e sai )i%e)(
2HH1 0a) 7a ;5F=
B-estionA
X ,as #i)e +& G to ,atc# o%e) GEs fs#pons ,it# a sala)&
o$ P1H,HHH(HH( To ena+le #i* to pe)$o)* #is -ties ,ell, #e
,as also p)o%ie ,it# a s*all #-t, ,#ic# #e co-l -se as
#is )esience, in t#e *ile o$ t#e fs#pons( Is t#e $ai)
*a)/et %al-e o$ t#e -se o$ t#e s*all #-t +& U a >$)in'e
+eneft? t#at is s-+6ect to t#e 32F ta" i*pose +& Section
33 o$ t#e National Inte)nal Re%en-e CoeD E"plain &o-)
ans,e)(
Ans,e)A
No, t#e $ai) *a)/et %al-e o$ t#e -se o$ t#e s*all #-t is not
s-+6ect to t#e 32F ta" as a $)in'e +eneft( T#e -se o$ sai
#-t is not ta"a+le -ne) t#e E*plo&e) Con%enience R-le(
XEs -se o$ t#e #-t is $o) t#e con%enience o$ #is e*plo&e)
an int)insicall& $o) #is pe)sonal +eneft(
35
1<<7 0a) 7;a= ;5F=
B-estionA
X is e*plo&e as a )i%e) o$ a co)po)ate la,&e) an
)ecei%es a *ont#l& sala)& o$ P5,HHH(HH ,it# $)ee +oa) an
lo'in' ,it# an e:-i%alent %al-e o$ P1,5HH(HH( W#at ,ill
+e t#e +asis o$ XEs inco*e ta"D W#&D
Ans,e)A
XEs inco*e ta" ,ill +e +ase on t#e s-* o$ #is Sala)&
;P5,HHH(HH= an t#e e:-i%alent %al-e o$ #is $)ee +oa) an
lo'in' ;P1,5HH(HH=(
He oes not +eneft $)o* t#e E*plo&e) Con%enience R-le
+eca-se #is $)ee +oa) an lo'in' is not neee to
p)o%ie an& con%enience at all in t#e e"e)cise o$ #is
e*plo&e)Es occ-pation as a Co)po)ate La,&e)(
1<<7 0a) 7;+= ;5F=
B-estionA
Will &o-) ans,e) in :-estion +e t#e sa*e i$ XEs e*plo&e) is
an o+stet)icianD W#&D
Ans,e)A
No, *& ans,e) ,ill +e iJe)ent( XEs inco*e ta" ,ill +e
+ase solel& on #is sala)&(
T#e e:-i%alent a*o-nt o$ #is $)ee +oa) an lo'in' ,ill +e
ta" e"e*pt( He ,ill +eneft $)o* t#e E*plo&e)
Con%enience R-le +eca-se t#e occ-pation o$ e*plo&e), an
O+stet)ician, *a/es its necessa)& $o) #i* to +e a%aila+le
e%en +e&on t#e no)*al ,o)/in' #o-)s(
R*les on Un*sed Dacation -eaves converted to ash
0IR R-lin' No( H17.<7, Fe+( 2H, 1<<7
Vacation Lea%e C)eits, not e"ceein' ten ;1H= a&s pe) &ea), a)e
not s-+6ect to inco*e ta"es(
Ho,e%e), an& Coneti1e %acation lea%es in e"cess o$ ten ;1H= a&s
s#all +e s-+6ect to inco*e ta"es t#)o-'# t#e ,it##olin' ta"
*ec#anis*(
3(
R*les on cancellation+ for.iveness of indebtedness
3 possi+le )es-lts o$ cancellationA
1( It *a& a*o-nt to co*pensation inco*e8
2( It *a& 'i%e )ise to ta"a+le onation8
3( It *a& constit-te ta"a+le capital t)ansaction(
Sit-ation Pa)ties Consie)ation
C)eito) !e+to)
1( Cononatio
n ,as -e
to
e*plo&e).
e*plo&ee
)elations#i
p o) $o)
se)%ices
)ene)e(
E*plo&e) can
clai* it as a
e-ction(
E*plo&e).
e+to) s#o-l
)epo)t t#is as
pa)t o$ #is
')oss
co*pensation
inco*e
Se)%ices
)ene)e
2( T#e
cononatio
n ,as -e
to li+e)alit&
o$ t#e
c)eito)(
Pa&*ent in
!acion in
Pa'o ,#e)e
%al-e o$
p)ope)t& is
*-c#
lesse) t#an
t#e
lia+ilit&(
T#is ,ill +e
consie)e as
!onation
E*plo&e) o)
ot#e) pe)son
as c)eito) is
not
consie)e as
!ono) an is
not s-+6ect to
!ono)Es Ta"(
T#e e*plo&e)
o) ot#e)
pe)son is no,
consie)e as
a onee(
S-c#
a*o-ntP%al-e
cancelle is
e"cl-e $)o*
')oss inco*e
-ne) Sec( 32
pa)( G no( 3
No
consie)ation(
Li+e)alit& o$
c)eito)(
3( T#e
c)eito) is
a
co)po)ation
an t#e
e+to) is a
stoc/#ole)
(
T#e
co)po)ation
cannot clai*
t#is as a
e-ction
since it ,ill +e
consie)e as
ist)i+-tion o$
i%iens(
T#is ,ill +e
t)eate as
i%iens on
t#e pa)t o$
t#e
stoc/#ole)(
It ,ill +e
s-+6ect to
1HF fnal
,it##olin'
ta"(
Ini)ect
i%ien
ist)i+-tion
3)
2( Inco*e e)i%e $)o* t#e con-ct o$ t)ae o) +-siness o) t#e e"e)cise
o$ a p)o$ession
G)oss Inco*e *eans t#e total sales, less t#e cost o$ 'oos sol pl-s
an& inco*e $)o* in%est*ents an $)o* inciental o) o-tsie
ope)ations o) so-)ces(
"orm*la for ,ross %ncome derived from cond*ct of !rade or B*siness
(Sec3 ;5)
Sales( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( (P """""
LessA Cost o$ Sales ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( """""
G)oss p)oft ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( (P """""
AA Ot#e) inco*e ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( """""
G)oss inco*e ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( (P """""
TTTTTTT
In ete)*inin' t#e ')oss inco*e, s-+t)actions a)e not allo,e $o)
ep)eciation, epletion, sellin' e"penses o) losses, o) $o) ite*s not
o)ina)il& -se in co*p-tin' t#e cost o$ t#e 'oos sol(
-on./term contracts
Pe)sons ,#ose inco*e is e)i%e in ,#ole o) in pa)t $)o* s-c#
cont)acts *a&, as to s-c# inco*e, p)epa)e t#ei) )et-)ns -pon eit#e) o$
t#e $ollo,in'A
;1= Pe)centa'e o$ co*pletion +asis ;Sec( 44;a==
;2= Co*plete cont)act +asis ;Sec( 44;+==
Pe)centa'e o$ co*pletion +asis
G)oss inco*e al)ea& ea)ne t#o-'# not &et )ecei%e +ase on
esti*ates o$ a)c#itects o) en'inee)s -l& ce)tife +& t#e*, is )epo)te
in a ta"a+le &ea) an all e-ctions )elatin' to s-c# ')oss inco*e $o)
t#e ta"a+le &ea), e%en i$ not &et pai, a)e ta/en into acco-nt(
Co*plete cont)act +asis
T#e ta"pa&e) )epo)ts #is inco*e an e-ctions in t#e &ea) t#e
cont)act is fnall& co*plete, He acc-*-lates all t#e e"penit-)es
-)in' t#e &ea)s o$ const)-ction an e-cts t#e* $)o* t#e inco*e o$
t#e cont)act in t#e &ea) it is co*plete(
3( G)oss inco*e e)i%e $)o* ealin's in p)ope)t&
It incl-es all inco*e e)i%e $)o* t#e isposition o$ p)ope)t&, ,#et#e)
)eal, pe)sonal, o) *i"e, $o) *one& ;sale= o) $o) ot#e) p)ope)t&
;e"c#an'e= o) $o) a co*+ination o$ +ot#, ,#ic# )es-lts in 'ain ;o) loss=
+eca-se o$ t#e iJe)ence +et,een t#e ta"pa&e)Es in%est*ent in ,#at
#e ispose o$ an t#e %al-e in ,#at #e )ecei%e(
3*
Co*p-tation o$ 'ain o) lossA
Sellin' P)ice o$ t#e P)ope)t& ( ( ( ( ( ( ( ( ( ( ( P """""""
LessA 0asis ;o) a6-ste +asis= o$ t#e
P)ope)t& .. 0oo/ %al-e ( ( ( ( ( ( ( ( ( """"""
Gain ;loss $)o* sale= ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """"""
TTTTTTTTT
0asis o$ t#e P)ope)t&
Canne) o$ Ac:-isition 0asis
1( 0& p-)c#ase Its costs Sec(4H;0=;1=
Sec( 137 RR No(2
2( 0& in#e)itance FCV as o$ t#e ate o$ ac:-isition(
Sec( 4H;0=;2=
3( 0& 'i$t o) onation Cost o) FCV ,#ic#e%e) is lo,e)(
T#e sa*e as in t#e #an o$ t#e
ono) o) last p)ecein' o,ne)
,#o ac:-i)e it not +& 'i$t, +-t i$
s-c# +asis is ')eate) t#at t#e
FCV o$ t#e p)ope)t&, t#en $o) t#e
p-)pose o$ ete)*inin' loss, t#e
+asis s#all +e s-c# %al-e( Sec(
4H;0=;3=
4( Less t#an ae:-ate
consie)ation
A*o-nt pai +& t#e t)ans$e)ee
$o) t#e p)ope)t&( ;Cost=
5( In t)ansaction ,#e)e no 'ain
o) loss is not )eco'ni1e(
Ine) Sec( 4H;C=;2= t#e +asis as
efne in Sec( 4H;C=;5=,;0=;5=
7( Incl-e in t#e in%ento)& It latest in%ento)& %al-e(
Sec3 78/apital ,ains and -osses (Bar 6==7+ 6==5+ 6===)
Capital assets s#all incl-e p)ope)ties ,#et#e) o) not -se in t)ae o)
+-siness +& t#e ta"pa&e) e"cl-in' t#ose p)ope)ties consie)e +& la,
as o)ina)& assets(
T#e $ollo,in' constit-tes o)ina)& assetsA LSOIRM
1( Stoc/ in t)ae o$ t#e ta"pa&e) o) ot#e) p)ope)t& o$ a /in ,#ic#
,o-l p)ope)l& +e incl-e in t#e in%ento)& o$ t#e ta"pa&e) i$ on
#an at t#e close o$ t#e ta"a+le &ea)8
2( P)ope)t& #el p)i*a)il& $o) sale to c-sto*e)s in t#e o)ina)&
co-)se o$ +-siness8
3( P)ope)t& -se in t#e t)ae o) +-siness, o$ c#a)acte) ,#ic# is
s-+6ect to t#e allo,ance $o) ep)eciation as p)o%ie in Sec( 34;$=8
4( Real p)ope)t& -se in t)ae o) +-siness o$ t#e ta"pa&e)(
3+
4,
StocF transaction4transaction (here no .ain or loss is reco.niHed as
provided by Sec3 ;=()
1( E"c#an'e o$ p)ope) $o) s#a)es o$ stoc/
2( In%ol%es an e"c#an'e o$ stoc/ a'ainst stoc/
3( Sec-)ities $o) s#a)es o$ stoc/

4( E"c#an'e o$ p)ope)t& $o) s#a)es o$ stoc/ not *ae in acco)ance
,it# t#e plan o$ *e)'e) an consoliation p)o%ie t#at t#e
t)ans$e)o) o) t)ans$e)o)s +e not *o)e t#an f%e ;5= ini%i-als an
s-c# t)ans$e)o) o) t)ans$e)o)s ac:-i)es *a6o)it& o,ne)s#ip(
NoteA P-)c#ase o$ all o) s-+stantiall& all assets o$ anot#e) co)po)ation
is consie)e as *e)'e) an consoliation(
R*les on Reco.nition of apital ,ains and -osses
lassifcation Coldin. period Reportable ,ain
1( S#o)t.te)* capital
assets( 12 *ont#s o) less 1HHF
2( Lon'.te)* capital
assets( Co)e t#an 12 *ont#s 5HF
Capital losses s#all +e e-cte onl& to t#e e"tent o$ capital
'ains(
O)ina)& losses a)e e-cti+le $)o* capital 'ains(
Capital loss cannot +e e-cte $)o* o)ina)& 'ain o) inco*e(
>Net capital loss ca))&.o%e)? LNELCOM is allo,e( To +e ca))ie
o%e) $o) 1 &ea)(
41
&ade in accordance
'ith the #lan of
merger and
consolidation
E$changes 'ith cash consideration or
transaction not solely in (ind
Result to
)*IN
Result to
L+,,
T*-*.LE Not
Deducti/le
R*les on sale of shares of stocF
R*le on %nstallment Sales (Sale of Real Property) ISec3 ;8J
,eneral r*le0
T#e ,#ole p)oft acc)-in' $)o* t#e sale o$ p)ope)t& is ta"a+le as
inco*e in t#e &ea) t#e sale is *ae( Linstall*ent planM
E)ception0
Initial pa&*entA
E"cee 25F o$ t#e SP T#e p)oft s#o-l +e co*p-te on
t#e e$e))e.pa&*ent +asis not
on install*ent plan(
;Appl& t#e )-les on )eco'nition o$
inco*e on install*ent sales=
Wit#in 25F o$ t#e CP, e"cl-si%e
o$ t#e p)ocees o$ isco-nte
notes(
T#e sale :-alifes as an
install*ent sale, ot#e),ise, it is
a e$e))e sales(
;Appl& t#e 'ene)al )-le=
V0anas %s( CA, 325 SCRA 25<=
apital ,ains !a) on sale of Real Property lassifed as apital #sset
A fnal inco*e ta" o$ si" pe)cent ;7F= +ase on t#e ')oss sellin' p)ice
o) c-))ent $ai) *a)/et %al-e, ,#ic#e%e) is #i'#e), is i*pose -pon
capital 'ains p)es-*e to #a%e +een )eali1e $)o* t#e sale ;%ol-nta)&
o) in%ol-nta)&=, e"c#an'e, o) ot#e) isposition o$ )eal p)ope)t&(
Re1*isites0
1( T#e o+6ect sol is a )eal p)ope)t&8
2( It is locate in t#e P#ilippines8
3( It is a capital asset8 an
4( T#e selle) is eit#e) an ini%i-al, estate, t)-st o) co)po)ation
E)empt sale of real property to capital .ains
1( Sale to t#e 'o%e)n*ent8
42
Sale of
s'ares
of
stoc3
&rade
t'ru PS$
&rade
t'ru PS$
,u/0ect to #ercentage ta$
of 1 of 12 of the )ross
,elling 3rice 4),35
,u/0ect to FIN*L T*- of the
gain6
Not more than 3100!0007 %2
In e$cess of 3100!000 8 102
2( Sale o$ t#e o,ne) an t#e p)ocees is -se to ac:-i)e o) const)-ct
a ne, p)incipal )esience(
Re1*isites of sale of real property (hich is e)empt from A> capital .ains
1( T#e selle) is a )esient citi1en an a )esient alien8
2( T#e p)ocees o$ t#e sale *-st +e -se eit#e) to const)-ct o)
ac:-isition o$ ne, p)incipal )esience(
P)incipal )esience )e$e)s to ,ellin' an lan to ,#ic# t#e
)esience is c)eate(
3( T#e #olin' pe)io *-st not +e *o)e t#an 1K *ont#s o) t#e sale
*-st +e *ae ,it#in 1K *ont#s(
4( A 3H a& notice to CIR(
5( Can +e a%aile once e%e)& ten ;1H= &ea)s(
4( G)oss inco*e e)i%e $)o* inte)est
NoteA Ta"a+le inte)est inco*e is s-+6ect to fnal ,it##olin' ta"(
Inte)est inco*e is onl& s-c# inte)est as a)ises $)o* ine+teness, t#at
is, co*pensation $o) t#e loan o) $o)+ea)ance o$ *one&, 'oos, o)
c)eits(
Inless e"e*pte +& la,, inte)est )ecei%e +& a ta"pa&e), ,#et#e) o)
not -s-)io-s, is ta"a+le(
5( G)oss inco*e e)i%e $)o* )ents an )o&alties
Inco*e $)o* )o&alties is s-+6ect to fnal ,it##olin' ta"(
Rents *a& +e e)i%e not onl& $)o* )eal estate +-t also $)o* t#e -se
o$ pe)sonal p)ope)t&( Li/e )ents, )o&alties a)e pa&*ents $o) t#e -se o$
43
!nterest
4an3s or corporate
bonds
Subject to final
tax of 2,5
-$xcluded from
gross income.
6oernment bonds
$xempt
7t'er loans
&axable
-included in
gross income.
p)ope)t&( T#e& incl-e ea)nin's $)o* cop&)i'#ts, t)ae*a)/s, patents,
an nat-)al )eso-)ces -ne) lease(
B-estionA
S-ppose +-ilin's a)e e)ecte o) i*p)o%e*ents a)e *ae
+& a lessee in p-)s-ance o$ an a')ee*ent ,it# t#e lesso)
an s-c# +-ilin's o) i*p)o%e*ents a)e not s-+6ect to
)e*o%al, #o, *a& t#e lesso) )epo)t t#e inco*e t#e)e $)o*D
Ans,e)A
Ipon eit#e) o$ t#e $ollo,in' *et#osA
;1= He *a& )epo)t as inco*e at t#e ti*e ,#en s-c#
+-ilin's o) i*p)o%e*ents a)e co*plete, t#e $ai)
*a)/et %al-e o$ s-c# +-ilin's o) i*p)o%e*ents
s-+6ect to t#e lease8 o)
;2= He *a& sp)ea o%e) t#e li$e o$ t#e lease, t#e esti*ate
ep)eciate %al-e o$ s-c# +-ilin's o) i*p)o%e*ents
at t#e te)*ination o$ t#e lease an )epo)t as inco*e
$o) eac# &ea) o$ t#e lease an ali:-ot pa)t t#e)eo$(
Ill-st)ationA
R lease #is lot to E $o) a te)* o$ 1H &ea)s at an ann-al
)ental o$ P12H,HHH( A +-ilin' ,as e)ecte +& E on t#e lot
,it# a cost o$ P5,HHH,HHH an ,it# an esti*ate li$e o$ 25
&ea)s( As pe) cont)act, t#e +-ilin' ,ill +elon' to R a$te)
t#e te)* o$ t#e lease(
Ans,e)A
1( Ine) t#e f)st *et#o ;ass-*in' t#e cost o$
const)-ction is t#e sa*e as t#e $ai) *a)/et %al-e o$
t#e +-ilin'=, R s#o-l )epo)t #is inco*e as
$ollo,sA
FCV o$ +-ilin' in &ea)
Co*plete ( ( ( ( ( ( ( ( ( ( P5,HHH,HHH
AA Ann-al )ental ( ( ( ( ( ( ( 12H,HHH
Total inco*e to +e )epo)te ( ( ( P5,12H,HHH
TTTTTTTTTT

2( Ine) t#e secon *et#o, t#e ann-al inco*e o$ R
,ill +e co*p-te t#-sA
Cost o$ +-ilin' ( ( ( ( ( ( ( WWW P5,HHH,HHH
LessA Acc-*-late ep)eciation
At t#e en o$ lease
;5,HHH,HHHP25 " 1H &ea)s=( 2,HHH,HHH
0oo/ %al-e ;ep)eciate %al-e=
At t#e en o$ lease
;total inco*e o$ R on
+-ilin'= ( ( ( ( ( ( ( ( P3,HHH,HHH
44
TTTTTTTTTT
Ann-al inco*e on +-ilin'
;3,HHH,HHHP1H &ea)s= ( ( ( ( P 3HH,HHH
Pl-sA Ann-al )ental ( ( ( ( ( ( 12H,HHH
Total ann-al inco*e ( ( ( ( ( ( P 42H,HHH
TTTTTTTTTT
7( G)oss inco*e e)i%e $)o* !i%iens
Sin o$
!i%ien
Ta"a+ilit& Rate
Cas#
i%ien
Is ta"a+le pai to
s#a)e#ole)s o)
*e*+e)s(
S-+6ect to Final
Wit##olin' Ta"(
7F,KF an 1HF,
+e'innin' 1<<K
-p,a)s(
P)ope)t&
i%ien
FCV o$ p)ope)t&
)ecei%e( Is ta"a+le(
Sa*e as cas#
i%ien(
Stoc/
i%ien
Not ta"a+le(
Sc)ip
i%ien
Ta"a+le( Sa*e as cas#
i%ien(
Li:-iatin'
i%ien
I$ not 'ain @ not ta"a+le
I$ t#e)e is 'ain @ ta"a+le Sa*e as cas#
i%ien(
R*les on ash Dividends and StocF Dividends
Recipient of ash Dividends
Basis !a) rate
Resient alien an Resient
citi1en
Sec( 24;0=
;1=
1HF Final Ta"
Non.)esient alien en'a'e in
t)ae o) +-siness Sec( 25;0= 2HF Final Ta"
Non.)esient alien not en'a'e
in t)ae o) +-siness Sec( 25;0= 25F Final Ta"
!o*estic co)po)ation Sec( 29;!= E"e*pt
Resient $o)ei'n co)po)ation
Sec( 27;A= E"e*pt
Non.)esient $o)ei'n
co)po)ation Sec( 2K;0=
;5=
Wit# ta" c)eit
15F fnal ta"
Wit#o-t ta"
c)eit
32F Final ta"
!i%iens $)o* $o)ei'n
co)po)ations
45
a= Consie)e as so-)ce ,it#in
I$ P#ilippine inco*e is 5HF
o) *o)e o$ its total ;'lo+al=
inco*e in t#e last t#)ee ;3=
&ea)s
+= Consie)e as so-)ce
,it#o-t
I$ P#ilippine inco*e is less
t#an 5HF o$ 'lo+al inco*e
Sec( 42
Ise t#e )-les
*entione
a+o%e(
Rate ,ill
epen on
)ecipient(
Applies toA
1( Resient
citi1en @ 1HF
!o*estic
co)po)ation
.HF
Stoc/ i%iens Sec( 93 E"e*pt
Special r*les of stocF dividend
,eneral r*le0
Stoc/ i%iens a)e ta" e"e*pt +eca-se it is solel& a t)ans$e) o$
s-)pl-s, -n)est)icte )etaine ea)nin's to capital( T#e)e is no ,ealt#
Qo,in' in to t#e ta"pa&e) an t#e)e$o)e t#e)e is no p)oft(
E)ception
1( I$ it ,ill )es-lt to a c#an'e in t#e stoc/#ole)Es inte)est in t#e net
asset o$ t#e co)po)ation o) inc)ease #is pe)centa'e o$ o,ne)s#ip(
2( Stoc/ i%iens )ecei%e +& -s-$)-ct-a)&(
3( !i%ien in stoc/ o$ anot#e) co)po)ation ;P)ope)t& i%iens=(
4( !is'-ise i%ien( ;CIR %s( Cann&, 77 SCRA 14=
Inco*e s-+6ect to fnal ta" LRP.WI!SM
1( Ro&alties8
2( P)i1es *o)e t#an P1H,HHH
i$ less t#an 1H,HHH it is consie)e as o)ina)& inco*e an )epo)ta+le
in t#e ITR
3( Winnin's e"cept lotto o) PCSO ,innin's8
4( Inte)est inco*e $)o* +an/s8
5( !i%iens )ecei%e +&
;a= Resient citi1en an alien
;+= Non.)esient alien
;c= Non.)esient $o)ei'n co)po)ation
7( S#a)e o$ a pa)tne) $)o* net inco*e a$te) ta" o$ +-siness o) ta"a+le
pa)tne)s#ip(
Ceanin' o$ >Inco*e s-+6ect to fnal ta"?
T#e& a)e ite*s o$ ta"a+le inco*e ,#e)e ta" is collecte at so-)ce( T#e
ta" collecte )ep)esents t#e fnal settle*ent o$ t#e ta" -e( T#e
ta"pa&e) nee not incl-e t#e sai inco*e in t#e co*p-tation o$ #is
4(
')oss inco*e an no lon'e) )e:-i)e to fle a )et-)n on t#e sai
inco*e(
T#e +-)en o$ pa&in' an flin' o$ t#e )et-)n is s#i$te to t#e
,it##olin' a'ent o) a'ents(
Clai* o$ Ri'#t !oct)ine
T#e state o) ta"in' a-t#o)it& can clai* ta" on inco*e e)i%e $)o* ille'al
so-)ce(
E"a*ples o$ Inco*e !e)i%e $)o* W#ate%e) So-)ce
1( Gains a)isin' $)o* e"p)op)iation o$ p)ope)t& ,#ic# constit-te
inco*e $)o* ealin's in p)ope)t&8
2( Inco*e e)i%e $)o* ille'al so-)ces, s-c# as 'a*+lin', t#e$t,
e*+e11le*ent, an s*-''lin'8
3( Co*pensation $o) a*a'es i$ it )ep)esents pa&*ent $o) loss o$
e"pecte p)ofts ;0IR R-lin', Sept( K, 1<54=8
4( T#e a*o-nt o$ t#e e+t, ,#e)e t#e stoc/#ole) is ine+te to a
co)po)ation an t#e latte) $o)'i%es s-c# e+t, +eca-se t#e
t)ansaction #as t#e eJect o$ t#e pa&*ent o$ i%ien8
5( 0a e+ts p)e%io-sl& c#a)'e.oJ +-t a$te),a)s )eco%e)e8
7( Contest a,a)s an p)i1es $o) co**e)cial an non.co**e)cial
contests8 an
9( Ta"es pai an s-+se:-entl& )e$-ne(
Reason (hy bad debts and ta) ref*nd is ta)able
Ta" +eneft )-le(
Ta" +eneft )-le @ is a sit-ation ,#ic# 'i%es t#e ta"pa&e) a )i'#t o)
allo,s #i* to e-ct an a*o-nt t#e)e+& )e-cin' #is ta"a+le inco*e
in t#e p)ecein' pe)ios(
E)ceptions to Sec3 ;=(c) as provided in Sec3 ;=(d) e)chan.es (here no
.ain4no loss reco.niHed
1( E"c#an'es ,#e)e t#e)e cas# in%ol%e o) t)ansaction not solel& in /inA
Reali1e 'ain ( ( ( ( ( ( ( ( ( ( Ta"a+le inco*e
Inc-))e loss ( ( ( ( ( ( ( ( ( ( Not e-cti+le
2( Ille'al t)ansactionA
Reali1e 'ain ( ( ( ( ( ( ( ( ( ( Ta"a+le inco*e
Inc-))e loss ( ( ( ( ( ( ( ( ( ( Not e-cti+le
3( T)ansaction +et,een )elate pa)tiesA
Reali1e 'ain ( ( ( ( ( ( ( ( ( ( Ta"a+le inco*e
Inc-))e loss ( ( ( ( ( ( ( ( ( ( Not e-cti+le
4( Was# sales o) 71 a& sale
5( S#o)t sale
Related ta)payer (Sec3 7A par3b)
1( Ce*+e)s o$ t#e sa*e $a*il&8
2( 0et,een stoc/#ole)s an t#e co)po)ation8
4)
3( 0et,een t,o o) *o)e co)po)ations o,ne o) cont)olle +& t#e sa*e
stoc/#ole)s8
4( Pa)ties to a t)-st(
Kash sale (Sec3 79)
S-+6ect S#a)es o$ stoc/, sec-)ities an stoc/ option
Selle) Not a eale) o$ sec-)ities
Pe)io 3H a&s +e$o)e ate o$ sale
T#e)e is a sale o$ ientical o) s-+stantiall&
ientical stoc/, sec-)ities an stoc/ option(
3H a&s a$te) ate o$ sale
T#e)e is a p-)c#ase o$ ientical o) s-+stantiall&
ientical stoc/, sec-)ities an stoc/ option(
E"cl-sions $)o* Inco*e
E"cl-sion as -se in inco*e ta"ationA
E"cl-sion )e$e)s to inco*e )ecei%e o) ea)ne +-t is not ta"a+le as inco*e
+eca-se e"e*pte +& la, o) +& t)eat&( S-c# ta".$)ee inco*e is not to +e
incl-e in t#e inco*e ta" )et-)n -nless in$o)*ation )e'a)in' it is
specifcall& calle $o)(
Ite*s e"p)essl& e"cl-e $)o* t#e co*p-tation o$ ')oss inco*e an a)e
e"cl-e $)o* inco*e ta"ation(
LLAGCIRCM
;1= Li$e Ins-)ance p)ocees to #ei)s X +enefcia)ies
;2= A*o-nt )ecei%e as a )et-)n o$ P)e*i-*s to t#e Ins-)e
;3= Gi$ts, 0e:-ests X !e%ices ;S-+6ect to ono)Es ta"=
;4= Co*pensation $o) In6-)ies o) Sic/ness
;5= Inco*e e"e*pt $)o* T)eat&
;7= Reti)e*ent 0enefts, Pensions X G)at-ities
;9= Ciscellaneo-s ite*s
;a= Inco*e $)o* In%est*ent +& Fo)ei'n Go%e)n*ent
;+= Inco*e e)i%e +& t#e Go%e)n*ent o) its political s-+i%isions
;c= Inco*e $)o* P-+lic Itilities
;= Inco*e $)o* essential Go%e)n*ent F-nction
;e= P)i1es an A,a)s $o) ac#ie%e*ent in
;$= Reli'io-s
;'= C#a)ita+le
;#= Scientifc
;i= E-cational
;6= A)tistic
;/= Lite)a)&
;l= Ci%ic acti%ities
;*= P)i1es X A,a)s in Spo)ts Co*petition
;n= 13
t#
Cont# Pa& X Ot#e) 0enefts
4*
;o= GSIS, SSS, Ceica)e X La+o) Inion -es o$ Ini%i-al Ta"pa&e)s
;p= Gains $)o* Sale o$ 0ons, !e+ent-)es o) Ce)tifcates o$
Ine+teness *at-)in' in *o)e t#an f%e ;5= &ea)s
;:= Gains $)o* Ree*ption o$ In%est*ent in Stoc/s o) C-t-al F-ns
4+
!istinction +et,een E"cl-sions an !e-ctions
E"cl-sions !e-ctions
As to nat-)e It is an inQo, o$
,ealt# +-t a)e not
ta"a+le +eca-se it is
e"cl-e o)
e"e*pte +& t#e
constit-tion, t)eat&
o) stat-te(
It is an a*o-nt
e-cte $)o* ')oss
inco*e(
As to -se It pe)tains to
co*p-tation o$ ')oss
inco*e(
It is necessa)& to
ete)*ine t#e
ta"a+le inco*e(
As to p-)pose It is so*et#in' ,#ic#
oes not $o)* pa)t o$
')oss inco*e(
It is so*et#in' pai
o) spent in oin' a
t)ae o) +-siness o)
in t#e e"e)cise o$ a
p)o$ession(
1( P)ocees o$ Li$e Ins-)ance to #ei)s X +enefcia)ies
T#e p)ocees pai to +enefcia)ies -pon t#e eat# o$ t#e ins-)e,
,#et#e) in a sin'le s-* o) ot#e),ise(
I$ t#e a*o-nt a)e #el +& t#e ins-)e) -ne) an a')ee*ent to pa&
inte)est t#e)eon, the interest payment shall be incl*ded in .ross
income3
2( Ret-)n o$ P)e*i-*s to t#e Ins-)e
T#e a*o-nt )ecei%e +& t#e ins-)e, as a )et-)n o$ p)e*i-* o)
p)e*i-*s pai +& #i* -ne) li$e ins-)ance, eno,*ent, o) ann-it&
cont)acts, eit#e) -)in' t#e te)* o) at t#e *at-)it& o$ t#e te)*
*entione in t#e cont)act o) -pon s-))ene) o$ t#e cont)act8
3( Gi$ts, +e:-ests, an e%ises
T#e %al-e o$ p)ope)t& ac:-i)e +& 'i$t, +e:-est, e%ise, o) escent(
Inco*e $)o* s-c# p)ope)t& as ,ell as 'i$t, etc( o$ inco*e $)o* an&
p)ope)t&, in cases o$ t)ans$e) o$ i%ien inte)est, s#all +e incl-e in
')oss inco*e(
R*les on Donation
Sins o$ !onation I*plication
;!ono)=
Incience
;!onee=
1( Inte) %i%os S-+6ect to
!ono)Es ta"
Not s-+6ect to
ta"(
5,
E"cl-e $)o*
')oss inco*e(
2( Co)tis ca-se S-+6ect to estate
ta"
Not s-+6ect to
ta"(
E"cl-e $)o*
')oss inco*e(
4( Co*pensation $o) In6-)ies o) Sic/ness
A*o-nts )ecei%e, t#)o-'# accient o) #ealt# ins-)ance o) -ne)
Wo)/*enEs Co*pensation Act, as co*pensation $o) pe)sonal in6-)ies o)
sic/ness, pl-s t#e a*o-nt o$ an& a*a'es )ecei%e ,#et#e) +& s-it o)
a')ee*ent on acco-nt o$ s-c# in6-)ies o) sic/ness8
1<<7 0a) <;a= ;5F=
B-estionA
X, an e*plo&ee o$ A0C Co)po)ation, ie( A0C Co)po)ation
'a%e XEs ,io, an a*o-nt to XEs sala)& $o) one &ea)(
Is t#e a*o-nt consie)e ta"a+le inco*e to t#e ,io,D
W#&D
Ans,e)A
No, t#e one &ea) sala)& 'i%en to t#e Wio, on acco-nt o$
t#e e*plo&eeEs eat# is not ta"a+le inco*e to #e)(
A*o-nts )ecei%e +& t#e #ei) $)o* t#e e*plo&e), as a
conse:-ence o$ #e) #-s+anEs eat#, is not ta"a+le(
5( Inco*e e"e*pt -ne) T)eat&
Inco*e o$ an& /in, to t#e e"tent )e:-i)e +& an& t)eat& o+li'ation
+inin' -pon t#e 'o%e)n*ent o$ t#e P#ilippines(
7( Reti)e*ent 0enefts, Pensions X G)at-ities
;+= Reti)e*ent +enefts )ecei%e -ne) RA No( 9741 an t#ose +&
oOcials an e*plo&ees o$ p)i%ate f)*s, ,#et#e) ini%i-al o)
co)po)ate, in acco)ance ,it# a )easona+le p)i%ate +eneft plan
*aintaine +& t#e e*plo&e), s-+6ect to ce)tain conitions(
0a) B-estion
RSI )eti)e $)o* #is e*plo&*ent in 1<K3 an ,as pai
P1HH,HHH as )eti)e*ent ')at-it& ,it#o-t e-ction o$ an&
ta"( T#e co)po)ation s-+se:-entl& +eca*e insol%ent( Can
t#e 0IR e-ct $)o* t#e P1HH,HHH an& ta"D
51
Ans,e)A
No( t#e 0IR cannot e-ct an& a*o-nt $)o* t#e P1HH,HHH
as ta" +eca-se -ne) Sec( 32;+= pa)( ;$= states t#at
)eti)e*ent +enefts )ecei%e +& oOcials an e*plo&ees o$
p)i%ate f)*s, ,#et#e) ini%i-al o) co)po)ate, in
acco)ance ,it# a )easona+le p)i%ate +eneft plan
*aintaine +& t#e e*plo&e) a)e e"cl-e $)o* inco*e
ta"ation p)o%ie t#atA
;1= T#e )eti)in' oOcial o) e*plo&ee #as +een in se)%ice $o)
t#e sa*e e*plo&e) $o) at least ten ;1H= &ea)s an is
not less t#an f$t& ;5H= &ea)s o$ a'e at t#e ti*e o$
)eti)e*ent8
;2= T#e +eneft ')ante +& t#e oOcial o) e*plo&ee is
a%aile onl& once(
T#e *e)e $act t#at t#e co)po)ation ,#o pai t#e )eti)e*ent
pa& +eco*es insol%ent oes not *a/e it ta"a+le(
0AR B-estion
C)( Si)-s ,o)/e as c#ie$ acco-nt in a #ospital $o) 45 &ea)s(
W#en #e )eti)e at 75, #e )ecei%e )eti)e*ent pa&
e:-i%alent to 2 *ont#s sala)& as p)o%ie in #ospitalEs 0IR.
app)o%e )eti)e*ent plan( T#e 0oa) o$ !i)ecto)s o$ t#e
#ospital $elt t#at t#e& s#o-l p)o%ie *o)e in %ie, o$ C)(
Si)-s lo&alt&( Hence, #e ,as 'i%en a ')at-it& o$ P1 *illion
o%e) an a+o%e #is )eti)e*ent +eneft(
T#e 0IR Co**issione) ta"e t#e P1 *illion as pa& o$ C)(
Si)-sE inco*e(
a= He p)oteste t#at it is a )eti)e*ent +eneft, ,as #e
co))ectD
+= Was C)( Si)-s co))ect in #olin' t#e P1 *illion as a 'i$t,
t#e)e$o)e, not ta"a+leD
Ans,e)A
a= No, #e is not co))ect( T#e aitional P1 *illion ,as
'i%en as ')at-it& ,as not ta/en $)o* t#e 0IR.app)o%e
)eti)e*ent +eneft plan( T#e P1 *illion 'i%en o-t o$
t#e %otation *ae +& t#e 0oa) o$ !i)ecto)s o$ t#e
#ospital( His )eti)e*ent pa& #a al)ea& +een )ecei%e
+& #i*( To +e e"cl-e $)o* ')oss inco*e, t#e
)eti)e*ent pa& )ecei%e *-st co*e $)o* a )eti)e*ent
+eneft plan +& t#e co*pan&, app)o%e o$ t#e 0IR(
T#-s, t#e P1 *illion )ecei%e is not e"cl-e $)o*
')oss inco*e, #ence, ta"a+le(

+= T#e aitional P1 *illion ,as 'i%en +eca-se t#e 0oa)
o$ !i)ecto)s %ote $o) it in %ie, o$ C)( Si)-s lon' an
lo&al se)%ice to t#e co*pan&( It ,o-l see* t#an t#e
52
P1 *illion $alls ,it#in t#e classifcation o$ a 'i$t $o) #is
)eti)e*ent pa& #a lon' +een pai( Lo&alt& *a& +e a
consie)ation +-t it is not a %al-a+le one, #ence, t#e
P1 *illion is a 'i$t an is t#e)e$o)e e"cl-e $)o* ')oss
inco*e +-t s-+6ect to ono)Es ta"(
;c= An& a*o-nt )ecei%e +& an oOcial o) e*plo&ee o) +& #is #ei)s
$)o* t#e e*plo&e) as a conse:-ence o$ sepa)ation o$ s-c# oOcial
o) e*plo&ee $)o* t#e se)%ice o$ t#e e*plo&e) +eca-se o$ eat#,
sic/ness o) p#&sical isa+ilit& o) $o) an& ca-se +e&on t#e cont)ol
o$ sai oOcial o) e*plo&ee8
;= Social sec-)it& +enefts, )eti)e*ent ')at-ities, pensions an ot#e)
si*ila) +enefts )ecei%e +& )esient o) non.)esient Filipino
citi1ens o) aliens ,#o co*e to )esie pe)*anentl& in t#e
P#ilippines $)o* $o)ei'n 'o%e)n*ent a'encies an ot#e)
instit-tions, p)i%ate o) p-+lic8
;e= Pa&*ents o$ +enefts -e to o) to +eco*e -e to an& pe)sons
)esiin' in t#e P#ilippines -ne) t#e la,s o$ t#e Inite States
a*iniste)e +& t#e Inite State A*inist)ation8
;$= 0enefts )ecei%e $)o* o) en6o&e -ne) t#e social sec-)it& s&ste*
in acco)ance ,it# RA No( K2K28
;'= 0enefts )ecei%e $)o* t#e GSIS -ne) RA No( K2<1 incl-in' t#e
)eti)e*ent ')at-it& )ecei%e +& 'o%e)n*ent oOcials an
e*plo&ees(
1<<7 0a) <;a= ;5F=
B-estionA
A, an e*plo&ee o$ t#e Co-)t o$ Appeals, )eti)e -pon
)eac#in' t#e co*p-lso)& a'e o$ 75 &ea)s( Ipon co*p-lso)&
)eti)e*ent, A )ecei%e t#e *one& %al-e o$ #is acc-*-late
lea%e c)eits in t#e a*o-nt o$ P5HH,HHH(HH(
Is t#e sai a*o-nt s-+6ect to ta"D E"plain(
Ans,e)A
No, all t#e a*o-nts )ecei%e, on acco-nt o$ an e*plo&eeEs
sepa)ation $)o* e*plo&*ent ,it#o-t #is esi)e no)
consent to o so, a)e not s-+6ect to inco*e ta"es( S-+6ect
e*plo&ee is $o)ce to )eti)e at #is co*p-lso)& a'e(
9( Inco*e $)o* In%est*ent +& Fo)ei'n Go%e)n*ent
53
Inco*e e)i%e $)o* in%est*ent in t#e P#ilippines in loans, stoc/s,
+ons, o) ot#e) o*estic sec-)ities, o) $)o* inte)est on eposits in
+an/s in t#e P#ilippines +&A
1= Fo)ei'n 'o%e)n*ents8
2= Financin' instit-tions o,ne, cont)olle, o) en6o&in'
)efnancin' $)o* $o)ei'n 'o%e)n*ents, an
3= Inte)national o) )e'ional fnancin' instit-tions esta+lis#e
+& $o)ei'n 'o%e)n*ents(
K( Inco*e e)i%e +& Go%e)n*ent o) its political s-+i%isions
<( Inco*e $)o* P-+lic Itilities
1H( Inco*e $)o* essential Go%e)n*ent F-nction
Inco*e e)i%e $)o* an& p-+lic -tilit& o) $)o* t#e e"e)cise o$ an&
essential 'o%e)n*ental $-nction acc)-in' to t#e 'o%e)n*ent o$ t#e
P#ilippines o) to an& political s-+i%ision t#e)eo$ ;e('(, inco*e
)ecei%e +& a *-nicipalit& $)o* t#e ope)ation o$ a *a)/et o) an
elect)ic po,e) plant=(
11( P)i1es an A,a)s $o) Ac#ie%e*ent in ;a= Reli'io-s8 ;+= c#a)ita+le8 ;c=
scientifc8 ;= e-cational8 ;e= a)tistic8 ;$= lite)a)&8 ;'= ci%ic acti%ities(
P)i1es an a,a)s *ae p)i*a)il& in )eco'nition o$A
LSCRA.LECM
1( Scientifc8
2( C#a)ita+le
3( Reli'io-s8
4( A)tistic8
5( Lite)a)&8
7( E-cational8 an
9( Ci%ic ac#ie%e*ent +-t onl& i$A
Re:-isitesA
1( T#e )ecipient ,as selecte ,it#o-t an& action on #is pa)t
to ente) t#e contest o) p)oceein'8 an
2( T#e )ecipient is not )e:-i)e to )ene) s-+stanti%e $-t-)e
se)%ices as a conition to )ecei%in' t#e p)i1es o) a,a)8
12( P)i1es an A,a)s in Spo)ts Co*petition
P)i1es an a,a)s ')ante to at#letes in local an inte)national spo)ts
co*petitions an to-)na*ents(
13( 13
t#
*ont# pa& an ot#e) +enefts
G)oss +enefts )ecei%e +& oOcials an e*plo&ees o$ p-+lic an
p)i%ate entities, p)o%ie, t#at t#e total e"cl-sion s#all not e"cee
P3H,HHH(
1<<9 0a) < ;5F=
54
B-estionA
!-)in' t#e &ea), a o*estic co)po)ation e)i%e t#e
$ollo,in' ite*s o$ )e%en-eA ;a= ')oss )eceipts $)o* a
t)ain' +-siness8 ;+= inte)est $)o* *one& place*ents in
t#e +an/s8 ;c= i%iens $)o* it stoc/ in%est*ents in
o*estic co)po)ations8 ;= 'ains $)o* stoc/ t)ansactions
t#)o-'# t#e P#ilippine Stoc/ E"c#an'e8 ;e= p)ocees -ne)
an ins-)ance polic& on t#e loss o$ 'oos(
In p)epa)in' t#e co)po)ate inco*e ta" )et-)n, ,#at s#o-l
+e t#e ta" t)eat*ent on eac# o$ t#e a+o%e ite*sD
Ans,e)A
1( G)oss )eceipts $)o* a t)ain' +-sinessA Ta"a+le(
2( Inte)est $)o* *one& place*ents in t#e +an/sA E"cl-e
since inte)ests a)e s-+6ect to a fnal ,it##olin' ta" at
so-)ce(
3( !i%iens $)o* its stoc/ in%est*ents in o*estic
co)po)ationsA e"cl-e since i%iens a)e s-+6ect a
fnal ,it##olin' ta" at so-)ce(
4( Gains $)o* stoc/ t)ansactions t#)o-'# t#e P#ilippine
Stoc/ E"c#an'e8 E"cl-e since capital 'ains a)e s-+6ect
to a fnal ,it##olin' ta" at so-)ce(
5( P)ocees -ne) an ins-)ance polic& on t#e loss o$ 'oosA
E"cl-e +eca-se t#ese p)ocees a)e e"cl-sions -ne)
t#e la,(
Special T)eat*ent o$ F)in'e 0enefts
F)in'e 0eneft !efne
F)in'e 0eneft *eans an& 'oo, se)%ice, o) ot#e) +eneft $-)nis#e o)
')ante in cas# o) in /in +& an e*plo&e) ;ini%i-al, p)o$essional
pa)tne)s#ip, o) co)po)ation=, ,#et#e) ta"a+le o) not, o) t#e 'o%e)n*ent an
its inst)-*entalities to an ini%i-al e*plo&ee ;e"cept )an/.an.fle
e*plo&ees= s-c# as +-t not li*ite to, t#e $ollo,in'A
;1= Ho-sin'8
;2= E"pense acco-nt8
;3= Ve#icle o$ an& /in8
;4= Ho-se#ol pe)sonnel, s-c# as *ai, )i%e) an ot#e)s8
;5= Inte)est on loan at less t#an *a)/et )ate to t#e e"tent o$ t#e
iJe)ence +et,een t#e *a)/et )ate an act-al )ate ')ante8
;7= Ce*+e)s#ip $ees, -es an ot#e) e"penses +o)ne +& t#e e*plo&e) $o)
t#e e*plo&ee in social an at#letic cl-+s o) ot#e) si*ila)
o)'ani1ations8
;9= E"pense $o) $o)ei'n t)a%el8
;K= Holia& an %acation e"pense8
;<= E-cational assistance to t#e e*plo&ee o) #is epenents an
;1H= Li$e o) #ealt# ins-)ance an ot#e) non.li$e ins-)ance p)e*i-*s o)
si*ila) a*o-nts in e"cess o$ ,#at t#e la, allo,s(
55
F)in'e +enefts not s-+6ect to inco*e ta"
;1= F)in'e +enefts ,#ic# a)e a-t#o)i1e an e"e*pte $)o* ta" -ne)
special la,s8
;2= Cont)i+-tions o$ t#e e*plo&e) $o) t#e +eneft o$ t#e e*plo&ee to
)eti)e*ent, ins-)ance an #ospitali1ation +eneft plan8
;3= 0enefts 'i%en to t#e )an/.an.fle e*plo&ees, ,#et#e) ')ante -ne)
a collecti%e +a)'ainin' a')ee*ent o) not8
;4= De minimis +enefts ,#ic#, in 'ene)al, a)e li*ite to $acilities o)
p)i%ile'es $-)nis#e o) oJe)e +& t#e e*plo&e) t#at a)e )elati%el& o$
s*all %al-e an *e)el& as a *eans o$ p)o*otin' t#e #ealt#, 'oo,ill,
content*ent, o) eOcienc& o$ #is e*plo&ees s-c# as )ice s-+si&,
la-n)& allo,ance, an *eical cas# allo,ance8 +enefts, -ni$o)*s,
an *a6o) anni%e)sa)& cele+)ations $o) e*plo&ees an t#ei) '-ests(
;5= 0enefts )e:-i)e +& t#e nat-)e o$ o) necessa)& to t#e t)ae, +-siness
o) p)o$ession, o) $o) t#e con%enience o) a%anta'e o$ t#e e*plo&e)s(
!e *ini*is +enefts not s-+6ect to inco*e ta" as ,ell as ,it##olin'
1( Coneti1e -n-se %acation an sic/ lea%e o$ 'o%e)n*ent e*plo&ee8
2( Coneti1e -n-se %acation o$ p)i%ate e*plo&ees not e"ceein' 1H a&s8
3( Ceical cas# allo,ance to epenents o$ e*plo&ees not e"ceein'
P95H(HH pe) se*este) o) P125 pe) *ont#8
4( Rice s-+si& o$ P1,HHH(HH8
5( Act-al *eical +enefts not e"ceein' P3HH(HH pe) *ont#8
7( La-n)& allo,ance not e"ceein' P3HH(HH pe) *ont#8
9( Ini$o)* an clot#in' allo,ance not e"ceein' P3,HHH(HH8
K( E*plo&ees ac#ie%e*ent a,a)s ,it# ann-al *oneta)& %al-e not
e"ceein' P1H,HHH(HH8
<( Gi$t 'i%en -)in' C#)ist*as an *a6o) anni%e)sa)& cele+)ations not
e"ceein' P3,HHH(HH pe) e*plo&ee pe) ann-*8
1H( Flo,e)s, $)-its, +oo/s o) si*ila) ite*s 'i%en to e*plo&ees -ne) special
ci)c-*stances8
11( !ail& *eal allo,ance $o) o%e)ti*e ,o)/ not e"ceein' 25F o$ t#e +asic
*ini*-* ,a'es(
T)eat*ent o$ F)in'e +enefts
A fnal ta" o$ 32F, eJecti%e Nan-a)& 1, 2HHH, is i*pose on t#e ')osse.-p
*oneta)& %al-e o$ $)in'e +eneft $-)nis#e o) ')ante to t#e e*plo&ee +&
t#e e*plo&e)(

!e-ctions $)o* G)oss Inco*e
!e-ction !efne
!e-ctions a)e ite*s o) a*o-nts ,#ic# t#e la, allo,s to +e e-cte -ne)
ce)tain conitions $)o* ')oss inco*e in o)e) to a))i%e at ta"a+le inco*e(
!istinction +et,een e-ctions an pe)sonal e"e*ptions
!e-ctions Pe)sonal E"e*ption
As to A)e o$ t#e nat-)e o$ Pa)ta/e o$ t#e nat-)e o$
5(
nat-)e +-siness e"penses $a*il& li%in' an
pe)sonal e"penses
As to
p-)pose
To )eco-p t#e cost o$
oin' +-siness(
To )eco%e) t#e $a*il&
li%in' an pe)sonal
e"penses pai -)in' t#e
ta"a+le &ea)
As to
a*o-nt
Re$e) to act-al a*o-nt
pai o) inc-))e in t#e
con-ct o$ +-siness
In t#e nat-)e o$ a)+it)a)&
a*o-nt ,#ic# *a& not +e
eno-'# to co%e) t#e
$a*il& li%in' an
pe)sonal e"penses(
As to
clai*ant
Can +e clai*e +&
ini%i-al an co)po)ate
ta"pa&e) e"ceptA
12( Non.)esient alien
not en'a'e in t)ae
o) +-siness8
13( Non.)esient $o)ei'n
co)po)ation(
Can onl& a%aile +&
ini%i-al ta"pa&e)
e"cept +& non.)esient
alien not en'a'e in t)ae
o) +-siness(
As to /in Classife into t,oA
1( Ite*i1e
e-ctions8
2( Optional stana)
e-ction o$ 1HF
o$ ')oss inco*e(
Classife into t,oA
1( 0asic pe)sonal8
2( Aitional(
Re:-isites $o) !e-ctions
;1= T#e ta"pa&e) see/in' a e-ction *-st point to so*e specifc
p)o%isions o$ t#e stat-te a-t#o)i1in' t#e e-ction8 an
;2= He *-st +e a+le to p)o%e t#at #e is entitle to t#e e-ction
a-t#o)i1e o) allo,e(
;Atlas Consoliate Cinin' an !e%elop*ent Co)p( %s( Co**(, 1H2 SCRA
247, Nan( 29, 1<K1=
0asilan Estates, Inc( %s( Co**issione)
21 SCRA 19, Sept( 5, 1<79
B-estionA
Ca& e-ctions +e c)eate +& i*plicationD
Ans,e)A
!e-ctions #a%e 'ene)all& +een ee*e to +e a *atte) o$
le'islati%e ')ace( T#e& a)e allo,e onl& ,#e)e t#e)e is a
clea) p)o%ision in t#e stat-te $o) t#e e-ction clai*e8
an ,#e)e pa)tic-la) e-ctions a)e a-t#o)i1e +& t#e
stat-te, no ot#e) *a& +e *ae(
T#e ta"pa&e) #as t#e +-)en o$ 6-sti$&in' t#e allo,ance o$
an& e-ction clai*e +& #i*(
5)
Sins o$ !e-ctions $)o* G)oss Inco*e
;1= !e-ctions $)o* co*pensation inco*e
;2= !e-ctions $)o* +-siness anP o) p)o$essional inco*e
;3= !e-ctions $)o* co)po)ate inco*e
;4= Special e-ctions
1( !e-ctions $)o* co*pensation inco*e
T#e& )e$e) toA
;2= pe)sonal e"e*ptions8
;3= aitional e"e*ptions Sec( 35= an
;4= p)e*i-* pa&*ents on #ealt# anP o) #ospitali1ation ins-)ance
,#ic# a)e allo,e to +e allo,e to +e e-cte +& an ini%i-al
ta"pa&e) ,#o )ecei%es inco*e $o) pe)sonnel se)%ices )ene)e -ne)
an e*plo&e).e*plo&ee )elations#ip(
2( !e-ctions $)o* +-siness anP o) p)o$essional inco*e
T#e& )e$e) toA
;1=ite*i1e e-ctions en-*e)ate in Section 34 ;A to C= o$ t#e Ta"
Coe
;2=incl-in' t#ose e-cti+le $)o* co*pensation inco*e, ,#ic# sel$.
e*plo&e ini%i-als an o) p)o$essional en'a'e in t#e p)actice
o$ a p)o$ession *a& e-ct(
NoteA In lie- o$ ite*i1e e-ctions ;a+o%e=, an ini%i-al s-+6ect to
inco*e ta" ,#o is en'a'e in t)ae o) +-siness o) in t#e e"e)cise o$ a
p)o$ession, ot#e) t#an a non.)esient alien ini%i-al, *a& elect t#e
1HF optional stana) e-ction ;Sec( 34;L==(
3( !e-ctions $)o* co)po)ate inco*e
T#e& )e$e) to t#e ite*i1e e-ctions en-*e)ate in Sec( 34 ;A to N= o$
t#e Ta" Coe ,#ic# co)po)ations ;incl-in' pa)tne)s#ips ot#e) t#an
'ene)al p)o$essional pa)tne)s#ips= en'a'e in t)ae o) +-siness a)e
a-t#o)i1e to clai* an t#e& a)eA
;1= O)ina)& an necessa)& e"penses8
;2= Inte)ests pai on ine+teness8
;3= Ta"es8
;4= Losses8
;5= 0a !e+ts8
;7= !ep)eciation8
;9= !epletion8
;K= C#a)ita+le an ot#e) cont)i+-tions8
;<= Resea)c# an e%elop*ent8
;1H= Pa&*ent to e*plo&eesE pension t)-st8 an
;11= Special e-ctions
Special e-ctions @ t#e& )e$e) to t#e e-ctions allo,e in aition to
t#e ite*i1e e-ctions allo,a+le to co)po)ations a+o%e ,#ic# *a& +e
5*
a%aile o$ +& ins-)ance co*panies an p)op)ieta)& e-cational
instit-tions an #ospitals ,#ic# a)e non.p)oft(
1( O)ina)& an Necessa)& E"penses
Re:-isites in o)e) t#at an e"pense *a& +e e-cti+le
1( T#e e"pense *-st +e o)ina)& an necessa)&
2( It *-st +e pai o) inc-))e -)in' t#e ta"a+le &ea)
3( It *-st +e pai o) inc-))e in ca))&in' on an& t)ae o) +-siness o)
p)o$ession8
4( It *-st +e )easona+le in a*o-nt8
5( It *-st +e s-+stantiate +& s-Ocient e%ience s-c# as oOcial )eceipts
an ot#e) oOcial )eco)s8 an
7( It *-st not +e a'ainst la,, *o)als, p-+lic polic& o) p-+lic o)e)(
'eanin. of @ordinaryG
O)ina)& *eans ,#en it is co**onl& inc-))e in t#e t)ae o) +-siness o$ t#e
ta"pa&e) as istin'-is#e $)o* capital e"penit-)es(
'eanin. of @necessaryG
Necessa)& @ i$ it is app)op)iate an #elp$-l to t#e ta"pa&e)Es +-siness o) i$ it
is intene to )eali1e p)oft o) to *ini*i1e a loss(
Determinative test for ordinary and necessary e)penses L!OCM
1( !e%elop*ent o$ +-siness, t)ae o) p)actice o$ p)o$ession8
2( Ope)ations8
3( Cana'e*ent(
<inds of Ordinary and &ecessary Ded*ctions LSOTERASM
1( Sala)ies8
2( O)ina)& )epai)s8
3( T)a%elin'8
4( Ente)tain*ent8
5( Rentals8
7( A%e)tisin'8
9( S-pplies an *ate)ials(
1<<3 0a) 1
B-estionA
X is t#e *ana'e) o$ Can' !o-'las Ha*+-)'e) Inc( X #a
inne) ,it# G, o,ne) o$ a c#ain o$ )esta-)ants to con%ince
t#e latte) to ca))& Can' !o-'las #a*+-)'e)s( A$te) G
a')ee +ot# ,ent t#ei) sepa)ate ,a&s( X cele+)ate +&
'oin' to a sin'leEs +a)( He pic/e -p a pa)tne) an
cons-*e a +ottle o$ +ee)( He )o%e #o*e at 3AHH a(*((
On #is ,a& #o*e, #e sies,ipe a peest)ian, ,#o ie as
a )es-lt o$ t#e accient( X a*ica+l& settle t#e case +&
pa&in' t#e #ei) o$ t#e peest)ian( T#e *one&, #o,e%e),
ca*e $)o* Can' !o-'las Ha*+-)'e) Inc(
5+
!isc-ss ,#et#e) t#e )e,a), 'i%en to t#e #ei), can +e
clai*e +& Can' !o-'las Ha*+-)'e) Inc( as an e"pense
e-cti+le in its inco*e ta" )et-)n(
Ans,e)A
T#e )e,a) 'i%en to t#e #ei) cannot +e an e"pense
e-cti+le $o) Can' !o-'las Ha*+-)'e) Inc( T#e a*a'e,
,#ic# X ca-se -pon t#e peest)ian, is not an o)ina)&,
necessa)& an no)*al e"pense in t#e con-ct o$ t#e
#a*+-)'e) +-siness( X ,as no lon'e) pe)$o)*in' #is
)e'-la) tas/ ,#en #e inQicte t#e a*a'e(
Re:-isites $o) e-cti+ilit& o$ co*pensation pa&*ents
4( T#e pa&*ents a)e )easona+le8 an
5( T#e& a)e, in $act, pa&*ents $o) pe)sonal se)%ices act-all& )ene)e
2( Inte)est pai $o) ine+teness
Re:-isites $o) e-cti+ilit& o$ inte)est LCISM
1( Connection ,it# t#e ta"pa&e)Es t)ae, +-siness, o) p)o$ession8
2( Inc-))e o) pai ,it#in t#e ta"a+le &ea)8 an
3( Stip-late in ,)itin'(
Co**( Vs( P)ieto
L.13<12, Sept( 3H, 1<7H
B-estionA
Is inte)est $o) ta" elin:-enc& e-cti+leD
Ans,e)A
Ges, an inte)est e"pense ;+-t not as ta"=( Alt#o-'# ta"es a)e
not consie)e e+ts, t#e& constit-te ine+teness ;in $a%o)
o$ t#e 'o%e)n*ent= $o) p-)poses o$ e-ction $)o* ')oss
inco*e o$ t#e inte)est pai( T#e ta" +ein' consie)e an
ine+teness, it is i**ate)ial ,#et#e) t#e sa*e is e-cti+le
o) not(
T#eo)etical Inte)est
T#eo)etical inte)est is one *e)el& co*p-te o) calc-late an is not pai( It
oes not a)ise $)o* inte)est +ea)in' note(
It is not e-cti+le sinceA
1( It oes not )ise $)o* t#e inte)est +ea)in' note8
2( It is not pai -)in' t#e &ea)(
Inte)est on capital is not e-cti+le( It is +ein' c#a)'e to s-)pl-s
o$ a co)po)ation(
R-le on inte)est )elati%e to p-)c#ase o$ PPE
(,
It *a& +e t)eate asA
1( Pa)t o$ cost o$ an asset an p)opo)tionatel& +e e-cte o) c#a)'e
as ep)eciation o%e) its -se$-l o) econo*ic li$e8 o)
2( C#a)'e it as inte)est(
R-le on loans -se to p-)c#ase 'o%e)n*ent sec-)ities
Inte)est on loans -se to p-)c#ase 'o%e)n*ent sec-)ities is not e-cti+le
since inte)est inco*e $)o* 'o%e)n*ent sec-)ities is not ta"a+le -ne) t#e
ne, ta" coe(
3( Ta"es
Ta"es e-cti+le $)o* ')oss inco*e
As a 'ene)al )-le, all ta"es, national o) local, pa o) inc-))e ,it#in t#e
ta"a+le &ea) in connection ,it# t#e ta"pa&e)Es t)ae, +-siness o) p)o$ession
a)e e-cti+le $)o* ')oss inco*e(
Ta"es not e-cti+le $)o* ')oss inco*e LPISTEM
1( P#ilippine inco*e ta"8
2( Inco*e ta"es i*pose +& t#e a-t#o)it& o$ an& $o)ei'n co-nt)&, +-t
e-ction is allo,e ;onl&= in t#e case o$ a ta"pa&e) ,#o is entitle to ta"
c)eit $o) ta"es o$ $o)ei'n co-nt)ies +-t oes not a%ail o$ t#e sa*e8
3( Estate an ono)Es ta"es8
4( Special assess*ents o) le%ies ;,#ic# a)e not )eall& ta"es= assesse
a'ainst local +enefts o$ a /in tenin' to inc)ease t#e %al-e o$ t#e
p)ope)t& assesse8 an
5( Ta"es ,#ic# a)e not connecte ,it# t#e t)ae, +-siness o) p)o$ession o$
t#e ta"pa&e)(
Ta" C)eit !efne
Ta" C)eit )e$e)s to t#e ta"pa&e) )i'#t to e-ct $)o* t#e inco*e ta" -e t#e
a*o-nt o$ ta" #ePit #as pai to a $o)ei'n co-nt)& s-+6ect to li*itations(
0a)
B-estionA
Gi%en t#e istinctions +et,een ta" e-ctions an ta"
c)eit(
Ans,e)A
;1= Ta" e-ctions a)e e-cte $)o* ')oss inco*e in
co*p-tin' t#e net inco*e, ,#ile ta" c)eit a)e
e-cte $)o* P#ilippine inco*e ta" itsel$8 an
;2= Ta" e-ctions, all ta"es, as a 'ene)al )-le, a)e allo,e
e-ctions ,it# t#e e"ceptions o$ t#e f%e /ins o$
ta"es e"p)essl& o) i*pliel& e"cl-e, ,#ile t#e latte),
(1
onl& $o)ei'n inco*e ta"es *a& +e clai*e as c)eits
a'ainst P#ilippine inco*e ta"(
W#o a)e allo,e to clai* a ta" c)eit
1( Resients citi1ens
2( !o*estic co)po)ations, incl-in' +-siness pa)tne)s#ips8
3( Ce*+e)s o$ 'ene)al p)o$essional pa)tne)s#ips8 an
4( 0enefcia)ies o$ estates an t)-sts(
W#o a)e not entitle to clai* ta" c)eit
1( Non.)esient citi1ens8
2( Alien ini%i-als, ,#et#e) )esient o) non.)esient8 an
3( Fo)ei'n co)po)ations, ,#et#e) )esient o) non.)esient(
4( Losses
Re:-isites $o) e-cti+ilit& o$ a loss
1( T#e loss *-st +e inc-))e in t)ae, +-siness, o) p)o$ession o$ t#e
ta"pa&e)8
2( It *-st +e act-all& s-staine ;an c#a)'e oJ= ,it#in t#e ta"a+le &ea)8
3( It *-st +e e%ience +& a close an co*plete t)ansaction8
4( It *-st not +e co*pensate $o) +& ins-)ance o) ot#e) $o)*s o$ ine*nit&8
an
5( T#e ta"pa&e) #as fle a s,o)n ecla)ation o$ loss8 ,it#in 45 a&s a$te)
t#e ate o$ isco%e)& o$ t#e cas-alt& o) )o++e)&, t#e$t, o) e*+e11le*ent(
W#at losses *a& a ta"pa&e) e-ct $)o* ')oss inco*e
T#e ta"pa&e) *a& e-ct all losses act-all& s-staine an c#a)'e oJ ,it#in
t#e ta"a+le &ea) an not co*pensate $o) +& ins-)ance o) ot#e) $o)*s o$
ine*nit&, as $ollo,sA
1( T#ose inc-))e in t)ae, +-siness, o) p)o$ession in t#e P#ilippines8 an
2( Cas-alt& losses o$ p)ope)t& connecte ,it# t)ae, +-siness, o)
p)o$ession in t#e P#ilippines(
Losses ,#ic# a)e not allo,e +& la, to +e e-cte $)o* ')oss inco*e
1( Loss on %ol-nta)& )e*o%al o$ +-ilin' on lan p-)c#ase ,it# a %ie, to
e)ectin' anot#e) +-ilin'(
2( Wa'e)in' losses not co%e)e +& ,a'e)in' 'ains8
3( Capital losses not co%e)e +& capital 'ains8
4( Losses $)o* e"c#an'es o$ p)ope)t& in co)po)ate )ea6-st*ents8
5( Losses ;'ene)all&= $)o* ,as# sales o$ stoc/ an sec-)ities8
7( Losses $)o* ille'al t)ansactions8
9( Losses $)o* sales o) e"c#an'es o$ p)ope)t& +et,een )elate
ta"pa&e)s8 an
K( Losses not inc-))e in t)ae, +-siness, o) p)o$ession(
Net Ope)atin' Loss Ca))ie O%e) ;NOLCO=
T#e net ope)atin' loss o$ a ta"a+le &ea) not e-cte $)o* G)oss Inco*e,
,#ic# can +e ca))ie o%e) as a e-ction $)o* G)oss Inco*e $o) ne"t t#)ee
;3= consec-ti%e &ea)s $ollo,in' t#e loss(
(2
-imitations
;1= Net loss inc-))e in a &ea) -)in' ,#ic# t#e ta"pa&e) ,as ta" e"e*pt
cannot +e clai*e as a ta" e-ction(
;2= Net ope)atin' loss ca))ie o%e) s#all +e allo,e onl& i$ t#e)e is no
s-+stantial c#an'e in t#e o,ne)s#ip o$ t#e +-siness(
5( 0a !e+ts
0a e+ts efne
0a e+ts a)e e+ts -e to t#e ta"pa&e) ,#ic# a)e act-all& asce)taine to
+e ,o)t#less an c#a)'e oJ ,it#in t#e ta"a+le &ea)(
Re:-isites $o) t#e e-cti+ilit& o$ +a e+ts LWNC.VCM
1( Wo)t#less an -ncollecti+le -)in' t#e ta"a+le &ea)
2( Not s-staine in a t)ansaction ente)e into +et,een )elate ta"pa&e)s
-ne) Sec( 37;+= o$ t#e Ta" Coe(
3( C#a)'e oJ -)in' t#e ta"a+le &ea)8 an
4( Vali an s-+sistin' e+t8
5( Connecte ,it# t#e t)ae, +-siness, o) p)o$ession o$ t#e ta"pa&e)(
7( !ep)eciation ;1<<K 0a) 7;a==
!ep)eciation !efne
!ep)eciation is t#e ')a-al i*in-tion in t#e -se$-l %al-e o$ tan'i+le
p)ope)t& -se in t)ae, +-siness, o) p)o$ession )es-ltin' $)o* e"#a-stion,
,ea) an tea), an o+solescence(
T#e te)* is also applie to a*o)ti1ation o$ t#e %al-e o$ intan'i+le assets,
t#e -se o$ ,#ic# in t)ae o) +-siness is efnitel& li*ite in -)ation(
Re:-isites t#at *-st conc-) $o) t#e e-ction o$ ep)eciation
1( T#e allo,ance $o) ep)eciation *-st +e )easona+le8
2( It *-st +e $o) p)ope)t& -se in t#e t)ae, +-siness, o) p)o$ession8
3( It *-st +e c#a)'e oJ -)in' t#e ta"a+le &ea)8 an
4( A state*ent on t#e allo,ance *-st +e attac#e to t#e )et-)n(
9( !epletion
W#at is epletion
!epletion is t#e e"#a-stion o$ nat-)al )eso-)ces li/e *ines an oil an
'as ,ells as a )es-lt o$ p)o-ction o) se%e)ance $)o* s-c# *ines o)
,ells(
K( C#a)ita+le an ot#e) Cont)i+-tions
Classifcation o$ C#a)ita+le Cont)i+-tions
(3
1( O)ina)& @ t#ose ,#ic# a)e s-+6ect to li*itation as to t#e a*o-nt
e-cti+le $)o* ')oss inco*e8 an
2( Special @ t#ose ,#ic# a)e e-cti+le in $-ll $)o* ')oss inco*e(
Re:-isites $o) c#a)ita+le cont)i+-tion
1( T#e cont)i+-tion *-st act-all& +e pai o) *ae to t#e P#ilippine
'o%e)n*ent o) an& political s-+i%ision t#e)eo$ o) to an& o$ t#e
o*estic co)po)ations o) associations specife +& t#e Ta" Coe8
2( It *-st +e *ae ,it#in t#e ta"a+le &ea)8
3( It *-st not e"ceeA
Ini%i-als @ 1HF
Co)po)ation @ 5F
O$ t#e ta"pa&e)Es ta"a+le inco*e ;e"cept ,#e)e t#e
onation is e-cti+le in $-ll= to +e ete)*ine ,it#o-t t#e
+eneft o$ t#e cont)i+-tion
4( It *-st +e e%ience +& ae:-ate )eco)s o) )eceipts(
T&pes o$ cont)i+-tions o) 'i$ts t#at a)e e-cti+le
1( To o) $o) t#e -se o$ t#e 'o%e)n*ent o$ t#e P#ilippines, o) an& o$ its
a'encies o) an& political s-+i%isions t#e)eo$ e"cl-si%el& $o) p-+lic
p-)poses ;$-ll e-ction=
2( To acc)eite o*estic co)po)ations o) associations o)'ani1e an
ope)ate e"cl-si%el& $o)A
;a= Reli'io-s8
;+= C#a)ita+le8
;c= Scientifc8
;= Go-t# an spo)ts e%elop*ent8
;e= C-lt-)al8 o)
;$= E-cational p-)poses8 o) $o) t#e
;'= Re#a+ilitation o$ %ete)ans
3( To social ,el$a)e instit-tions o) to non.'o%e)n*ent o)'ani1ations in
acco)ance ,it# t#e )-les an )e'-lations p)o*-l'ate +& t#e Sec( O$
Finance -pon )eco**enation o$ t#e CIR, p)o%ie no pa)t o$ t#e net
inco*e o$ ,#ic# in-)es to t#e +eneft o$ an& p)i%ate stoc/#ole) o)
ini%i-al(
<( Resea)c# an e%elop*ent
Nat-)e o$ Resea)c# an e%elop*ent
A ta"pa&e) *a& t)eat )esea)c# an e%elop*ent e"penit-)es ,#ic# a)e
pai o) inc-))e +& #i* -)in' t#e ta"a+le &ea) in connection ,it# #is t)ae,
+-siness o) p)o$ession as o)ina)& an necessa)& e"penses ,#ic# a)e not
c#a)'ea+le to capital acco-nt(
T#e e"penit-)es so t)eate s#all +e allo,e as e-ction -)in' t#e
ta"a+le &ea) ,#en pai o) inc-))e(
1H( Pension T)-sts
Re:-isites $o) pension t)-sts
(4
1( T#e e*plo&e) *-st #a%e esta+lis#e a pension o) )eti)e*ent plan to
p)o%ie $o) t#e pa&*ent o$ )easona+le pension to #is e*plo&ees8
2( t#e pension plan is )easona+le an act-a)iall& so-n8
3( it *-st +e $-ne +& t#e e*plo&e)8
4( t#e a*o-nt cont)i+-te *-st no lon'e) +e s-+6ect to #is cont)ol o)
isposition8 an
5( t#e pa&*ent #as not &et +een allo,e as a e-ction(
Re:-isites $o) a )easona+le )eti)e*ent +eneft plan
1( It *-st +e a efnite ,)itten p)o')a* settin' $o)t# al p)o%isions
essential $o) :-alifcation8
2( It *-st +e a pe)*anent an contin-in' p)o')a* -nless soone)
te)*inate +& %i)t-e o$ a %ali +-siness )eason8
3( It *-st co%e) at least 9HF o$ all oOcials an e*plo&ees(
4( it *-st p)o%ie $o) t#e non.i%e)sion o$ t#e co)p-s o) inco*e o$ t#e
t)-st $-n to an& p-)pose ot#e) t#an $o) t#e e"cl-si%e +eneft o$
oOcials an e*plo&ees8
5( it *-st not p)o%ie $o) isc)i*ination in cont)i+-tions o) +enefts in
$a%o) o$ oOcials an e*plo&ees ,#o a)e oOce)s, s#a)e#ole)s,
s-pe)%iso)s o) #i'#l& co*pensate oOce)s8
7( It *-st p)o%ie $o) t#e cont)i+-tion to t#e t)-st $-n +& t#e e*plo&e)
o$ oOcials an e*plo&ees o) +ot# t#e p-)pose o$ ist)i+-tin' to t#e
oOcials an e*plo&ees o) +enefcia)ies, t#e co)p-s an inco*e o$ t#e
$-n acc-*-late +& t#e t)-st in acco)ance ,it# t#e plan8 an
9( It *-st p)o%ie $o) non.$o)$eita+le )i'#ts, t#at is, -pon t#e te)*ination
o$ t#e plan o) -pon t#e co*plete iscontin-ance o$ cont)i+-tions
-ne) t#e plan, t#e )i'#ts o$ eac# oOcial o) e*plo&e) to +enefts
acc)-e to t#e ate o$ s-c# te)*ination, to t#e e"tent t#en $-ne, o)
t#e )i'#ts o$ eac# e*plo&e) to t#e a*o-nts c)eite to #is acco-nt at
s-c# ti*e a)e non.$o)$eita+le(
(5
Ta" on Ini%i-als
Pe)sonal E"e*ptions
Pe)sonal E"e*ptions efne
Pe)sonal E"e*ptions a)e a)+it)a)& a*o-nts allo,e, in t#e nat-)e o$ a
e-ctions $)o* ta"a+le inco*e, $o) pe)sonal, li%in' o) $a*il& e"penses o$
an ini%i-al ta"pa&e)(
T#e& a)e consie)e to +e t#e e:-i%alent o$ t#e *ini*-* s-+sistence o$ t#e
ta"pa&e)(
W#o a)e allo,e pe)sonal e"e*ptions -ne) t#e Ta" Coe
1( Citi1ens o$ t#e P#ilippines8
2( Resient aliens8
3( Non.)esient aliens en'a'e in t)ae o) +-siness in t#e P#ilippines
-ne) ce)tain conitions8
4( Estate an t)-sts, ,#ic# a)e t)eate $o) p-)poses o$ pe)sonal
e"e*ptions as a sin'le ini%i-al(
Pe)sonal e"e*ptions allo,e to citi1ens o$ t#e P#ilippines an )esient
aliens
1( P2H,HHH @ sin'le, *a))ie 6-iciall& ec)ee as le'all& sepa)ate ,it#
no :-alife epenents8 an
2( P25,HHH @ $o) #ea o$ a $a*il&8
3( P32,HHH @ *a))ie ini%i-als(
Aitional e"e*ptions is allo,e o$ PK,HHH $o) eac# epenent ;not pa)ents,
+)ot#e)s, o) siste)s=, not e"ceein' $o-) ;4=, $o) #ea o$ t#e $a*il& o)
*a))ie ini%i-als(
B-alifcation o$ >Hea o$ Fa*il&? 1<<K 0a) 4;a=
;1= An -n*a))ie ini%i-al o) a le'all& sepa)ate *an o) ,o*an8
;2= Wit# an& o$ t#e $ollo,in' li%in' ,it# an epenent -pon #i*P#e) $o)
c#ie$ s-ppo)tA
;+= Pa)ents, one o) +ot#8
;c= C#il)en @ le'iti*ate, )eco'ni1e nat-)al o) le'all& aopte(
Aitional )e:-i)es o$ 0)ot#e)s, siste)s o) c#il)en
;1= not *o)e t#an t,ent&.one ;21= &ea)s ol8
;2= -n*a))ie8
;3= not 'ain$-ll& e*plo&e8
;4= o%e) 21 &ea)s ol +-t incapa+le o$ sel$.s-ppo)t -e to *ental o) p#&sical
e$ect(
T#e p)esence o$ pa)ents, +)ot#e)s o) siste)s si*pl& allo,s t#e ta"pa&e) t#e
stat-s o$ >Hea o$ Fa*il&? $o) t#e +eneft o$ P25,HHH +asic pe)sonal
e"e*ption( Sai pa)ents, +)ot#e)s o) siste)s ,ill not allo, t#e ta"pa&e) to
clai* aitional e"e*ption +eca-se o$ t#e*(
((
Filin' o$ Ret-)ns an Pa&*ent o$ Ta"
Inco*e Ret-)n efne
Inco*e Ta" Ret-)n is a s,o)n inst)-*ent in ,#ic# t#e ta"pa&e) iscloses t#e
nat-)e an e"tent o$ #is ta" lia+ilit& +& $o)*all& *a/in' a )epo)t o$ #is
inco*e an allo,a+le e-ctions $o) t#e ta"a+le &ea) in t#e p)esc)i+e $o)*(
Classes o$ inco*e ta" )et-)ns )e:-i)e
1( Ini%i-al inco*e ta" )et-)ns8
2( Co)po)ation inco*e ta" )et-)ns8
3( Inco*e ta" )et-)ns o$ 'ene)al p)o$essional pa)tne)s#ips8
4( Fi-cia)& inco*e ta" )et-)ns8 an
5( Ciscellaneo-s )et-)ns(
Ini%i-als )e:-i)e to fle a )et-)n ;1<<9 0a) 9 ;5F==
1( Resient Filipino Citi1en
2( Non.)esient Filipino Citi1en on #is inco*e $)o* so-)ces ,it#in t#e
P#ilippines
3( Resient aliens on inco*e $)o* so-)ces ,it#in t#e P#ilippines8
4( Non.)esient alien en'a'e in t)ae o) +-siness o) in t#e e"e)cise o$
#is p)o$ession in t#e P#ilippines, on inco*e $)o* so-)ces ,it#in t#e
P#ilippines(
Ini%i-al not o+li'e to fle an inco*e ta" )et-)n ;Sec( 51=
1( Ini%i-al ,#ose ')oss inco*e oes not e"cee #is total pe)sonal an
aitional e"e*ption8
2( Ini%i-al ,#o )ecei%e p-)el& co*pensation inco*e, t#e inco*e ta"
on ,#ic# a)e co))ectl& ,it##el8
3( Ini%i-al ,#ose sole inco*e #as +een s-+6ect to fnal ,it##olin' ta"8
4( Ini%i-al ,#o is e"e*pt $)o* inco*e ta"(
1<<9 0a) 9 ;5F=
B-estionA
A +ac#elo) ,as e*plo&e +& Co)po)ation A on t#e f)st
,o)/in' a& o$ Nan-a)& 1<<7 on a pa)t.ti*e +asis ,it# a
sala)& o$ P3,5HH(HH a *ont#( He t#en )ecei%e t#e 13
t#
*ont# pa&( In Septe*+e) 1<<7, #e accepte anot#e) pa)t.
ti*e 6o+ $)o* Co)po)ation 0 $)o* ,#ic# #e )ecei%e a total
co*pensation o$ P14,5HH(HH $o) t#e &ea) 1<<7( T#e co))ect
total ta"es ,e)e ,it##el $)o* +ot# ea)nin's(
Wit# t#e ,it##olin' ta"es al)ea& pai, ,o-l #e still +e
)e:-i)e to fle an inco*e ta" )et-)n $o) #is 1<<7 inco*eD
Ans,e)A
Ges, Ine) Sec( 51 ;A2+= o$ RA K424 #e is )e:-i)e to fle
an inco*e ta" )et-)n e%en ,#en #is total ann-al
co*pensation inco*e oes not e"cee P7H,HHH(HH( An
ini%i-al e)i%in' co*pensation conc-))entl& $)o* t,o o)
*o)e e*plo&e)s s#all fle an inco*e ta" )et-)n(
()
Ta" on Co)po)ations
!efnition o$ Co)po)ation ;Sec( 22;0==
T#e te)* Rco)po)ationE incl-es pa)tne)s#ips no *atte) #o, c)eate o)
o)'ani1e, 6oint.stoc/ co*panies, 6oint acco-nts, associations, o) ins-)ance
co*panies(
OYa %s CIR
45 SCRA 94
Co.o,ne)s#ip is con%e)te to -n)e'iste)e pa)tne)s#ip
,#en t#e co.o,ne)s, a$te) pa)tition, %est t#e
a*inist)ation to one o$ t#e #ei)s ,it# t#e intent to 'ain
p)oft an to i%ie t#e sa*e a*on' t#e*sel%es(
T#e)e a)e, t#e)e$o)e, lia+le $o) co)po)ate inco*e ta"(
O+illos, S)( %s( CIR
;1<K5=
T#e)e ,as no pa)tne)s#ip $o)*e o) c)eate( No intention
to ea)n p)oft an to i%ie a*on' t#e*sel%es(
Pasc-al X !)a'o %s( CIR
;1<KK=
No clea) intent to $o)* a pa)tne)s#ip( T#ese t)ansaction, 5
pa)cels o$ lan, a)e isolate t)ansactions( T#e pa)ties
s#a)e on ')oss inco*e(
-iability of Domestic and Resident "orei.n orporation for payment of !a)es
Sin o$ ta"es 0asis
Net inco*e ta" Sec( 29;A=,;0=,;C=
Sec( 2K;A=;1=
Final inco*e ta" Scatte)e -ne)
Sec( 29 an 2K(
1HF inco*e ta" on co)po)ations ,it#
i*p)ope)l& acc-*-late ea)nin's(
Sec( 2<
Cini*-* inco*e ta" o$ 2F +ase on ')oss
inco*e
Sec( 29;E=
Sec( 2K;A=;2=
Optional co)po)ate inco*e ta" o$ 15F o$ ')oss
inco*e
Sec( 29;A=,4.1H
pa)s(
Sec( 2K;A=;1=, 4
t#
o) last pa)a')ap#
E"e*pt Co)po)ation ;Sec( 3H= ;2HH2 0a)=
1( La+o), a')ic-lt-)al an #o)tic-lt-)al o)'ani1ation8
2( C-t-al sa%in's +an/ an coope)ati%e +an/8
3( 0enefcia)& societ& i$ e"e*pt $)o* ta" onl& i$ ope)ate $o) t#e
e"cl-si%e +eneft o$ t#e *e*+e)s s-c# as $)ate)nal o)'ani1ation
ope)atin' -ne) t#e lo'e s&ste*8
4( Non.p)oft Ce*ete)& co*pan&8
(*
5( Reli'io-s, c#a)ita+le, scientifc, at#letic o) c-lt-)al co)po)ation o)
co)po)ation $o) )e#a+ilitation o$ %ete)ans8
7( 0-siness lea'-e8
9( Ci%ic lea'-e8
K( Non.stoc/ an non.p)oft e-cational instit-tion8
<( Go%e)n*ent e-cational instit-tion8
1H( C-t-al ins-)ance co*panies an li/e o)'ani1ation8
11( Coope)ati%e associations actin' as sales a'ents $o) $a)*e)s o)
ot#e)s8
12( F)-it ')o,e)s(
3 ta" e"e*pt associations an pa)tne)s#ips
1( Gene)al p)o$essional pa)tne)s#ip8
2( Noint %ent-)es $o) t#e p-)pose o$ const)-ction8
3( Conso)ti-* $o) p-)pose o$ en'a'in' in pet)ole-*(
Ta" e"e*pt )esient $o)ei'n co)po)ation
1( Re'ional #ea:-a)te)s o$ *-lti.national co)po)ation8
2( T#ose en'a'e in oJs#o)e +an/in' acti%ities8
3( Inte)national ca))ie)(
(+
Cini*-* Co)po)ate Inco*e Ta"
A *ini*-* co)po)ate inco*e ta" o$ t,o pe)cent ;2F= o$ t#e ')oss inco*e is
i*pose on co)po)ations(
W#en CCIT co**ences
CCIT +e'ins onl& on t#e $o-)t# ta"a+le &ea) $)o* t#e ti*e t#e co)po)ation
sta)te its +-siness ope)ations, an onl& ,#en t#e net inco*e ta" -e is
less t#an t,o ;2F= pe)cent o$ its ')oss inco*e(
R-le on lia+ilit&
T#e co)po)ate inco*e ta"pa&e) is lia+le $o) t#e pa&*ent o$ eit#e) t#e )e'-la)
net inco*e ta" o) t#e *ini*-* co)po)ate inco*e ta" o$ t,o pe)cent ;2F=,
,#ic#e%e) is #i'#e)(
Entities e"e*pt $)o* CCIT
1( P)i%ate p)op)ieta)& e-cational instit-tion8
2( Non.p)oft, non.stoc/ #ospitals8
3( !eposito)& +an/ t#at ope)ates in an e"pane $o)ei'n c-))enc&
eposits8
4( Ente)p)ises )e'iste)e ,it# P#ilippine Econo*ic Uone A-t#o)it& an
0ases Con%e)tion an !e%elop*ent A-t#o)it& ;0C!A=(
R-le on e"e*ption $)o* CCIT
Entities e"e*pt in CCIT is not e"e*pt a-to*aticall& $o) pa&*ent o$ no)*al
co)po)ate inco*e ta"(
Rationale o$ CCIT ;0a) 2HH1=
To $o)estall t#e p)e%ailin' p)actice o$ o%e)clai*in' e-ctions to )e-ce
inco*e ta" pa&*ents(
E:-ita+le p)o%ision )elati%e to CCIT ;Sec( 29;e=
T#e e"cess o$ 2F CCIT o%e) act-al co)po)ate inco*e ta" *a& +e ca))ie o%e)
as a c)eit $o) t#)ee ;3= consec-ti%e &ea)s(
Instances ,#e)e CCIT is s-spene
1( P)olon' la+o) isp-te(
P)olon' la+o) isp-te is one ,#ic# laste $o) *o)e t#an si" ;7= *ont#s
an *-st )es-lt to te*po)a)& s#-t o,n o$ ope)ations8
2( Fo)ce *a6e-)e ,#ic# incl-es t#e $ollo,in'A LFILESM
;a= Floo an f)e8
;+= Ins-)'enc& an ,a)8
;c= Li'#tin'8
;= Ea)t#:-a/e8
;e= Sto)*(
3( 0-siness )e%e)ses -e to FERT
;a= Fi)e8
;+= E*+e11le*ent8
;c= Ro++e)&8
;= T#e$t(
),
Inco*e Ta" on Co)po)ation ,it# I*p)ope)l& Acc-*-late Ea)nin's
An i*p)ope)l& acc-*-late ea)nin's ta" o$ 1HF is i*pose on i*p)ope)l&
acc-*-late ta"a+le inco*e o$ o*estic an )esient $o)ei'n co)po)ations(
Rationale $o) i*p)ope)l& #el ea)nin's ta" -ne) RR 2.2HH1
0& %i)t-e o$ ,it##olin' o$ p)ofts anPo) ea)nin's, t#e 'o%e)n*ent is
ep)i%e o$ ta"es on i%iens an t#e)e$o)e t#e sai ta" is i*pose +& ,as
o$ penalt& to t#e co)po)ation $o) s-c# -n)easona+le ,it##olin' o$ ea)nin's(
Ceanin' o$ i*p)ope) ,it##olin'
I*p)ope) ,it##olin' is -n)easona+le ,it##olin' o$ p)ofts o) ea)nin's o)
,it##olin' not p)ope) to t#e +-siness o$ t#e co)po)ation(
Co)po)ations co%e)e +& IHET
Closel& #el co)po)ations ,#ic# incl-es #olin' co*panies an in%est*ent
co*panies(
E"e*pt co)po)ations L0PIM
1( P-+licl& #el co)po)ations8
2( 0an/s an ot#e) non+lan/ fnancial inte)*eia)ies
3( Ins-)ance co*panies(
Aitional e"e*pt co)po)ation -ne) RR 2.2HH1
1( Ta"a+le pa)tne)s#ip
2( Gene)al p)o$essional pa)tne)s#ip
3( Ta"a+le 6oint %ent-)e
4( Fi)*s an ente)p)ises )e'iste)e ,it# EPUA(
5( Fi)*s an ente)p)ises )e'iste)e ,it# 0C!A(
W#en ta" is applie
T#e i*p)ope)l& acc-*-late inco*e ta" is i*pose onl& ,#en t#e
acc-*-lation o$ t#e ea)nin's an p)ofts is +e&on t#e )easona+le nees o$
t#e +-siness(
T#e)e is p)i*a $acie p)es-*ption o$ IHE
1( S-+stantial po)tion o$ ea)nin's is in%este in -n)elate %ent-)e o)
+-siness8
2( In%est*ent in +ons an ot#e) lon'.te)* sec-)ities8
3( Acc-*-lation in e"cess o$ t#e 1HHF o$ pai.-p capital o$ t#e
co)po)ation(
)1
TRANSFER TAXES
Sins o$ T)ans$e) Ta"es
1( Estate ta" ;Sec( K4.<4=
2( !ono)Es ta" ;Sec( <K.1H4=8 an
3( T)ans$e) ta" on )eal p)ope)t& Lcapital 'ains ta"M ;Sec( 135, Local
Go%e)n*ent Coe=
Estate Ta"
T)ans$e) Ta" !efne
T)ans$e) Ta" a)e ta"es i*pose -pon t#e ')at-ito-s isposition o$ p)i%ate
p)ope)t&( T#e& a)e not ta"es on p)ope)t& as s-c# +eca-se t#ei) i*position
oes not )est -pon 'ene)al o,ne)s#ip +-t on t#e passin' o$ t#e p)ope)t&(
Fo)*-la o$ Estate Ta"
G)oss Estate ;Sec( K5= ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """""""
LessA !e-ctions ;Sec( K7= ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( """""""
Net estate ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """""""
LessA E"e*ptions ;Sec( K4=( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( """""""
Ta"a+le estate ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """""""
C-ltipl& +&A Ta" Rate ;Sec( K4= ( ( ( ( ( ( ( ( ( ( ( ( ( ( """""""
Estate ta" -e ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """""""
LessA Ta" c)eit, i$ an& ;Sec( K7;E=, Sec( 11H;0==( ( ( ( ( """""""
Estate ta" -e ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P """""""
TTTTTTTTT

Co%e)e ta"pa&e)s
Estate ta" applies to t#e $ollo,in' ta"pa&e)sA LReN.ReNM
1( Resient citi1en8
2( Non.)esient citi1en8
3( Resient alien8 an
4( Non.)esient alien
G)oss Estate o$ t#e !eceent
omposition of ,ross Estate (Sec3 9?)
19 !eceentEs inte)est ;RTI=
2. T)ans$e) in conte*plation o$ eat#
3. Re%oca+le t)ans$e)
4. P)ope)t& passin' -ne) 'ene)al po,e) o$ appoint*ent
5. P)ocees o$ li$e ins-)ance
6. T)ans$e) $o) ins-Ocient consie)ation
Resident or "ilipino Decedent %nterest
T#e ')oss estate s#all incl-e, to t#e e"tent o$ #is inte)est, t#e %al-e at t#e
ti*e o$ #is eat# o$ allA
;a= Real o) i**o%a+le p)ope)t& ,#e)e%e) sit-ate8
)2
;+= Tan'i+le pe)sonal p)ope)t& ,#e)e%e) sit-ate8 an
;c= Intan'i+le pe)sonal p)ope)t& ,#e)e%e) sit-ate(
&on/resident alien decedent %nterest
It s#all incl-e, to t#e e"tent o$ #is inte)est, t#e %al-e at t#e ti*e o$ #is
eat# o$ allA
;a= Real p)ope)t& sit-ate in t#e P#ilippines8
;+= Tan'i+le pe)sonal p)ope)t& sit-ate in t#e P#ilippines8 an
;c= Intan'i+le pe)sonal p)ope)t& ,it# a sit-s in t#e P#ilippines
-nless e"e*pte on t#e +asis o$ )ecip)ocit&(
T)ans$e) in conte*plation o$ !eat#
It conte*plates a sit-ation ,#e)e t#e t)ans$e)o), -)in' #is li$eti*e,
t)ans$e)s p)ope)t& in conte*plation o$ o) intene to ta/e eJect in
possession o) en6o&*ent at o) a$te) #is eat#8 o), ,#e)e t#e t)ans$e)o)
)etains t#e inco*e $)o* t#e p)ope)t&, o) t#e )i'#t to esi'nate t#e pe)son
,#o s#all passes o) en6o& t#e p)ope)t& o) t#e inco*e t#e)e$)o*(
Ceanin' o$ >t)ans$e) in conte*plation o$ eat#?
T#e ,o)s *ean t#at it is t#e t#o-'# o$ eat#, as a cont)ollin' *oti%e,
,#ic# in-ces t#e isposition o$ t#e p)ope)t& $o) t#e p-)pose o$ a%oiin' t#e
ta"(
2HH1 0a) 15
B-estionA
A, a'e <H &ea)s an s-Je)in' $)o* inc-)a+le cance), on
A-'-st 1, 2HH1 ,)ote a ,ill an, on t#e sa*e a&, *ae
se%e)al inte).%i%os 'i$ts to #is c#il)en( Ten a&s late), #e
ie( In &o-) opinion, a)e t#e inte).%i%os 'i$ts consie)e
t)ans$e)s in conte*plation o$ eat# $o) p-)poses o$
ete)*inin' p)ope)ties to +e incl-e in #is ')oss estate(
E"plain &o-) ans,e)(
Ans,e)A
Ges, s-c# onation inte).%i%os is ,it#in t#e concept o$ t)ans$e) in
conte*plation o$ eat#( S-c# t)ans$e) is efne +& t#e la, as a
'i$t in conte*plation o$ eat#, as a cont)ollin' *oti%e, ,#ic#
in-ces t#e isposition o$ t#e p)ope)t& $o) t#e p-)pose o$ a%oiin'
t#e ta"(
Vial e Roces %s( Posaas
59 P#il( 475
I$ onation is *ae si*-ltaneo-sl& ,it# t#e e"ec-tion o$
t#e ,ill8 s-c# onation is ee*e a t)ans$e) in
conte*plation o$ eat#( Hence, estate ta".not ono)Es ta"
@ s#o-l appl&(
I$, in t#e *eanti*e, t#e ono)Es ta" #a +een pai is si*pl&
c)eite to t#e estate ta" -e( T#e)e is no p)o+le* #e)e
+eca-se estate ta" is -s-all& +i''e) t#an ono)Es ta"(
)3
EJect o$ t)ans$e)s o$ p)ope)t& *ae +& t#e eceent -)in' #is li$eti*e,
,#e)e s-c# t)ans$e) pa)ta/e o$ t#e nat-)e o$ testa*enta)& ispositions
S-c# t)ans$e) ;,#ic# a)e inte) %i%os in $o)* +-t *o)tis ca-se in s-+stance=
a)e t)eate +& la, as $a)ce an a)e, t#e)e$o)e, is)e'a)e( T#e
conse:-ence is t#at t#e& a)e incl-i+le in t#e ta"a+le ')oss estate(
Inte) %i%os t)ans$e) ,#ic# a)e t)eate as s-+stit-tes $o) testa*enta)&
ispositions
;1= T)ans$e) in conte*plation o$ eat#8
;2= T)ans$e) ,it# )etention o) )ese)%ation o$ ce)tain )i'#ts8
;3= Re%oca+le t)ans$e)s8
;4= T)ans$e) o$ p)ope)t& a)isin' -ne) a 'ene)al po,e) o$ appoint*ent8 an
T)ans$e) $o) ins-Ocient consie)ation(
P)ope)t& passin' -ne) 'ene)al po,e) o$ appoint*ent
T#e)e a)e t#)ee ;3= pe)sons incl-e #e)eA
1( T)ans$e)o)8
2( 1
st
t)ans$e)ee ;!eceent=8
3( 2
n
t)ans$e)ee(
)4
&ransferor
1
st
&ransferee
-Decedent.
8as authority to
determine t'e person %'o,
upon t'e latter9s deat',
%ould next passes or
enjoy t'e property
transferred/
8as no authority to
determine t'e person %'o,
upon t'e latter9s deat',
%ould next passes or
enjoy t'e property
transferred/
"ut'ority emanates from
6$:$;"L P7<$; 70
"PP77!:&=$:&
"ut'ority emanates from
SP$#!"L P7<$; 70
"PP77!:&=$:&
2
nd
&ransferee
3art of gross estate
of decedent9 4* /adge
of o'nershi#5
Not #art of gross
estate of decedent9
W#en p)ocees o$ a li$e ins-)ance polic& >ta/en o-t +& t#e eceent -pon
#is o,n li$e? incl-i+le in t#e ')oss estate
1( I$ t#e +enefcia)& is t#e estate o$ ecease, #is e"ec-to) o)
a*inist)ato)8
2( I$ t#e +enefcia)& is ot#e) t#an t#e eceent, ,#e)e t#e ins-)e
)ese)%e to #i*sel$ t#e po,e) to c#an'e o) )e%o/e t#e na*e o$ t#e
+enefcia)& -)in' #is li$eti*e(
W#en applica+leA T#e pe)son ins-)es #is o,n li$e(
R*les observed
T)ans$e) $o) ins-Ocient consie)ation
Khen transfer is considered @ins*Lcient considerationG
W#en t#e consie)ation )ecei%e is lo,e) t#an t#e $ai) *a)/et %al-e o$ t#e
p)ope)t&(
Khen applicable
)5
Proceeds of Life !nsurance
4eneficiary
:is estate Third #ersons
Re#resented /y
the6
19 *dministrator;
<9 E$ecutor; or
39 :eir
Regardless 'hether
the designation of
said /eneficiary
is irre"oca/le or
re"oca/le9
Part of Gross
Estate
>ind of designation
;eocable
!rreocable
Part of Gross
Estate
Not part of
Gross Estate
Section K5;G= )e$e)s to all p)ope)t& ,it#o-t istinction s-+6ect *atte) o$
t)ans$e) in
1( Conte*plation o$ eat#8
2( Re%oca+le t)ans$e)8
3( Gene)al po,e) o$ appoint*ent(
Iss-e to +e )esol%e
W#et#e) estate ta" o) ono)Es ta" s#o-l +e applie(
E"cl-sions $)o* Estate
1( Sepa)ate p)ope)t& o$ s-)%i%in' spo-se8
2( S#a)e o$ s-)%i%in' spo-se in con6-'al p)ope)t&(
Net estate s-+6ect to ta"
T#e ta" coe i*pose an estate ta" on net estates ,it# %al-e e"ceein'
P2HH,HHH( 0& i*plication, net estates ,#ic# a)e not in e"cess o$ P2HH,HHH
a)e e"e*pt $)o* t#e estate ta"(
P)ope)ties o) t)ans$e)s ,#ic# a)e e"e*pt $)o* estate ta" -ne) special la,s(
1( 0enefts )ecei%e +& *e*+e)s o$ t#e GSIS an t#e SSS +& )eason o$
eat#8
2( A*o-nts )ecei%e $)o* t#e P#ilippines an Inite States 'o%e)n*ents
$o) a*a'es s-Je)e -)in' t#e last ,a)(
3( 0enefts )ecei%e +& +enefcia)ies )esiin' in t#e P#ilippines -ne)
la,s a*iniste)e +& t#e I(S( Vete)ans A*inist)ation8 an
4( 0e:-ests to social ,el$a)e, c-lt-)al, an c#a)ita+le ;not incl-in'
e-cational an )eli'io-s= instit-tions no pa)t o$ t#e net inco*e o$
)(
.alance
4Difference
/et'een F&=8
>onsideration5
It 'ill de#end
u#on the moti"e
of the
transferor
If due to his
IMPENDING DEATH
If merely out of
kindness and
generosity
Su!e"t to ESTATE
TA#
Su!e"t to D$N$%&S
TA#
,#ic# in-)es to t#e +eneft, o$ an& ini%i-al, p)o%ie t#at not *o)e
t#an 3HF o$ sai +e:-ests s#all +e -se +& t#e onee $o)
a*inist)ation p-)poses(
!e-ctions $)o* G)oss estate
1( O)ina)& e-ctions
;a= F-ne)al e"penses
;+= N-icial e"penses o$ p)oceein's
;c= Clai*s a'ainst t#e estate
;= Clai*s a'ainst insol%ent pe)sons
;e= Inpai *o)t'a'es
;$= Inpai ta"es
;'= Cas-alt& losses
2( Vanis#in' e-ctions
3( T)ans$e) $o) e"cl-si%el& p-+lic -se
4( T#e %al-e o$ t#e ecenentEs $a*il& #o*e not e"ceein' P1 *illion
pesos
5( Stana) e-ction e:-i%alent to P1 *illion8
7( Ceical e"penses -ne) ce)tain conitions8
9( Reti)e*ent +enefts )ecei%e +& t#e #ei)s -ne) RA 4<19
K( S#a)e o$ s-)%i%in' spo-se in t#e con6-'al o) co**-nit& p)ope)t&(
Re:-isites $o) e-cti+ilit& o$ $-ne)al e"penses
1( F-ne)al e"penses *-st +e act-all& pai an inc-))e +& t#e estate8
2( T#e a*o-nt t#e)eo$ is li*ite to 5F o$ t#e ')oss estate, ,#ic#e%e) is
lo,e), +-t in no case to e"cee P2HH,HHH(
E"penses inc-))e a$te) t#e inte)*ent, e('( p)a&e)s, *asses, etc(, o)
t#ose +o)ne +& )elati%es anPo) $)iens a)e not e-cti+le(
2HH1 0a) 17
B-estionA
On t#e f)st anni%e)sa)& o$ t#e eat# o$ G, #is #ei)s #oste a
s-*pt-o-s inne) $o) #is octo)s, n-)ses an ot#e)s ,#o
attene to G -)in' #is last illness( T#e cost o$ t#e inne)
a*o-nte to P5H,HHH(HH( Co*pa)e to #is ')oss estate, t#e
P5H,HHH i not e"cee f%e pe)cent o$ t#e estate( Is t#e
sai cost o$ t#e inne) to co**e*o)ate #is one.&ea) eat#
anni%e)sa)& e-cti+le $)o* #is ')oss estateD E"plain &o-)
ans,e)(
Ans,e)A
No, s-c# is not e-cti+le e"pense(
E"penses inc-))e a$te) t#e inte)*ent, e('( p)a&e)s,
*asses, etc(, o) t#ose +o)ne +& )elati%es anPo) $)iens a)e
not e-cti+le(
N-icial e"penses
))
T#ese e"penses incl-e >a*inist)ation e"penses? o) t#ose act-all& an
necessa)il& inc-))e in t#e a*inist)ation o$ t#e estate, t#at is, in t#e
collection o$ assets, pa&*ents o$ e+ts, an ist)i+-tion a*on' pe)sons
entitle to t#e estate(
Re:-isites $o) clai*s a'ainst eceentEs estate to +e e-cti+le
1( T#e& ,e)e cont)i+-te in 'oo $ait# an $o) an ae:-ate an $-ll
consie)ation in *one& o) *one&Es ,o)t#8
2( T#e& *-st +e e"istin' a'ainst t#e estate8
3( T#e& *-st +e le'all& en$o)cea+le o+li'ations o$ t#e eceent an
o-'#t to +e en$o)ce +& t#e clai*ants8 an
4( T#e& *-st +e )easona+l& ce)tain in a*o-nt(
Re:-isites t#at *-st conc-) in o)e) t#at t#e clai*s o$ t#e ecease a'ainst
insol%ent pe)sons *a& +e e-cti+le $)o* t#e eceentEs ')oss estate
1( T#e a*o-nt o$ sai clai*s #as +een initiall& incl-e as pa)t o$ #is
')oss estate8 an
2( T#e incapacit& o$ t#e e+to)s to pa& t#ei) o+li'ations is p)o%en, not
*e)el& alle'e(
Re:-isites $o) -npai *o)t'a'e ine+teness +e e-cti+le $)o* ')oss
estate
1( T#e $ai) %al-e o$ t#e p)ope)t& *o)t'a'e ,it#o-t e-ctin' t#e
*o)t'a'e ine+teness #as +een initiall& incl-e as pa)t o$ #is ')oss
estate8 an
2( T#e *o)t'a'e ine+teness ,as cont)acte in 'oo $ait# an $o) an
ae:-ate an $-ll consie)ation in *one& o) *one&Es ,o)t#(
Inpai ta"es to +e e-cti+le
Ta"es o,e +& t#e eceent an -npai, +ein' e+ts in $a%o) o$ t#e
'o%e)n*ent, a)e also e-cti+le as a clai* a'ainst t#e estate +-t inco*e
ta"es -pon inco*e )ecei%e a$te) eat# o$ t#e eceent, o) p)ope)t& ta"es
not acc)-e +e$o)e #is eat#, o) an& estate ta" a)e not, +eca-se t#e& a)e
c#a)'ea+le to t#e inco*e o$ t#e estate(
Cas-alt& losses
Cas-alt& losses incl-e all losses inc-))e -)in' t#e settle*ent o$ t#e
estate a)isin' $)o* f)es, sto)*s, s#ip,)ec/ o) ot#e) cas-alties, o) $)o*
)o++e)&, t#e$t, o) e*+e11le*ent(
Re1*isites of cas*alty losses
1( T#e)e *-st +e a loss a)isin' $)o* an& ca-ses 'i%en a+o%e8
2( S-c# loss is not co*pensate $o) +& ins-)ance o) ot#e),ise8
3( S-c# loss #as not +een clai*e as a e-ction $o) inco*e ta"
p-)poses8 an
4( S-c# loss ,as inc-))e not late) t#an t#e last a& o$ t#e pa&*ent o$
t#e estate ta"(
T)ans$e) $o) p-+ic -se
)*
T#e Ta" Coe allo,s t#e e-ction $)o* t#e ')oss estate t#e a*o-nt o$ all
+e:-ests, le'acies, o) t)ans$e)s, to o) $o) t#e -se o$ t#e 'o%e)n*ent o) an&
political s-+i%ision t#e)eo$ $o) e"cl-si%el& p-+lic p-)poses(
R-le ,it# )espect to t#e e-ction $)o* t#e ')oss estate o$ t#e %al-e o$ t#e
eceentEs $a*il& #o*e
An a*o-nt e:-i%alent to t#e c-))ent o) $ai) *a)/et %al-e o) 1onal %al-e o$
t#e eceentEs $a*il& #o*e, ,#ic#e%e) is #i'#e)(
I$ t#e sai c-))ent o) $ai) %al-e o) 1onal %al-e e"cees P1 *illion, t#e e"cess
s#all +e s-+6ect to estate ta"(
As a sine :-o non conition $o) t#e e"e*ption o) e-ction, sai $a*il&
#o*e *-st #a%e +een t#e eceentEs $a*il& #o*e as ce)tife +& t#e
0a)an'a& captain o$ t#e localit&(
Vanis#in' e-ction ;p)ope)t& p)e%io-sl& ta"e= LPPTM
T#e e-ction, ,#ic# is co**onl& )e$e))e to as %anis#in' e-ction, is an
a*o-nt allo,e to )e-ce t#e ta"a+le estate o$ eceent ,#e)e p)ope)t&
;1= )ecei%e +& #i* $)o* a p)io) eceent +& 'i$t, +e:-est, e%ise o)
in#e)itance, o)
;2= t)ans$e))e to #i* +& 'i$t, #as +een t#e o+6ect o$ p)e%io-s t)ans$e)
ta"ation(
T#e )ate +& 'i$t, #as +een t#e o+6ect o$ p)e%io-s t)ans$e) ta"ation( T#e )ate
o$ e-ction ')a-all& i*inis#es an enti)el& %anis#es epenin' -pon t#e
ti*e inte)%al +et,een t#e t,o s-ccessi%e t)ans$e)s(
Ceical e"penses e-ctions $)o* ')oss estate
Ceical e"penses ;e%ience +& )eceipts= inc-))e +& t#e eceent ,it#in
one ;1= &ea) p)io) to #is eat#, not to e"cee Fi%e H-n)e T#o-san Pesos
;P5HH,HHH=(
!e-ctions allo,e to Non.)esient.Estates
T#e e-ctions $)o* section K7;A=;1= to ;3= a)e also a%aila+le to non.
)esient estates na*el&A
1( O)ina)& e-ctions
;a= F-ne)al e"penses
;+= N-icial e"penses o$ p)oceein's
;c= Clai*s a'ainst t#e estate
;= Clai*s a'ainst insol%ent pe)sons
;e= Inpai *o)t'a'es
;$= Inpai ta"es
;'= Cas-alt& losses
2( Vanis#in' e-ctions
3( T)ans$e) $o) e"cl-si%el& p-+lic -se
Ho,e%e), e-ctions -ne) ;4= to ;9= a)e not a%aila+le to sai non.)esient
estates(
)+
Note
T#e s#a)e o$ t#e s-)%i%in' spo-se in t#e con6-'al pa)tne)s#ip ;no, a+sol-te
co**-nit& p)ope)t&= is incl-e in co*p-tin' t#e ')oss estate o$ t#e
eceent, +-t onl& $o) t#e p-)poses o$ ete)*inin' t#e f)st P2HH,HHH
e"e*ption ;Sec( K4= an also t#e f%e pe)cent ;5F= -ne) $-ne)al e"penses
;Sec( K7;A=;1=;a==
FILING OF ESTATE TAXES
W#en an ,it# ,#o* *-st t#e )et-)n +e fle $o) p-)poses o$ estate ta"
!ime
Wit#in si" ;7= *ont#s $)o* t#e eceentEs eat#(
A ce)tife cop& o$ t#e sc#e-le o$ pa)tition an t#e o)e) o$ t#e co-)t
app)o%in' t#e sa*e s#all +e $-)nis#e t#e Co**issione) ,it#in 3H a&s
a$te) t#e p)o*-l'ation o$ t#e o)e)(
Place
E"cept in cases ,#e)e t#e Co**issione) o$ Inte)nal Re%en-e ot#e),ise
pe)*its, ,it# an a-t#o)i1e a'ent +an/ o) t#e )e%en-e ist)ict oOce),
)e%en-e collection oOce) o) -l& a-t#o)i1e t)eas-)e) o$ t#e cit& o)
*-nicipalit& ,#e)e t#e eceent o*icile at t#e ti*e o$ #is eat#, o) i$
t#e)e +e no le'al )esience in t#e P#ilippines, ,it# t#e OOce o$ t#e
Co**issione) o$ Inte)nal Re%en-e(
W#en an ,#e)e is t#e estate ta" -e an pa&a+le
,eneral r*le
It s#all +e -e an pa&a+le at t#e ti*e t#e )et-)n is fle +& t#e e"ec-to),
a*inist)ato) o) t#e #ei)s(
It s#all +e pai at t#e place ,#e)e t#e )et-)n is fle(
E)ception
T#e Co**issione) o$ Inte)nal Re%en-e *a& ')ant e"tension ,#en #e fns
t#at t#e pa&*ent on t#e -e ate o$ t#e estate ta" o) o$ an& pa)t t#e)eo$
,o-l i*pose -n-e #a)s#ip -pon t#e estate o) an& o$ t#e #ei)s(
T#e e"tension cannot e"cee f%e ;5= &ea)s in case t#e estate is settle
t#)o-'# t#e co-)ts, o) t,o ;2= &ea)s in case it is settle e"t)a.6-iciall&(
T#e )-nnin' o$ t#e stat-te o$ li*itations $o) assess*ent as p)o%ie in
Section 2H3 is s-spene $o) t#e pe)io o$ an& s-c# e"tension(
onditions for the .rant of the %R of e)tension to pay the estate ta)es
1( T#e ta"pa&e) is not '-ilt& o$ ne'li'ence, intentional is)e'a) o$ )-les
an )e'-lations, o) $)a-8 ot#e),ise, no e"tension *a& +e ')ante an
*,
2( T#e e"ec-to), a*inist)ato), o) +enefcia)&, *a& +e )e:-i)e to $-)nis#
a pe)$o)*ance +on in an a*o-nt not e"ceein' o-+le t#e a*o-nt o$
t#e ta" -e conitione -pon t#e pa&*ent o$ sai ta" in acco)ance
,it# t#e te)*s o$ t#e e"tension(
*1
!ono)Es Ta"
Gi$t ta" efne
Gi$t ta" is t#e ta" i*pose on t#e t)ans$e) ,it#o-t consie)ation o$ p)ope)t&
+et,een t,o o) *o)e pe)sons ,#o a)e li%in' at t#e ti*e o$ t#e t)ans$e) is
*ae8 o) t#e ta" i*pose on t#e t)ans$e) o$ p)ope)t& +& 'i$t inte) %i%os
,it#o-t )elation to t#e eat# o$ t#e ono)(
Fo)*-laA
G)oss onation ;Sec( <K;0= ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P"""""""
LessA !e-ctions ;Sec( 1H1 ;A=;0=( ( ( ( ( ( ( ( ( ( ( ( ( """""""
Net 'i$t ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P"""""""
LessA E"e*ptions ;Fi)st P1HH,HHH=( ( ( ( ( ( ( ( ( ( ( ( ( 1HH,HHH
Ta"a+le net 'i$t ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P"""""""
C-ltipl& +&A Ta" )ate ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ""F
!ono)Es ta" -e ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P"""""""
LessA Ta" c)eit ;i$ an&= Sec( 1H1 last pa)a')ap#( ( ( ( ( """""""
!ono)Es ta" pa&a+le( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P"""""""
TTTTTTTTT
P)ope)t& incl-e in >'i$t?
1( Real an pe)sonal p)ope)t&, ,#et#e) tan'i+le o) intan'i+le, o) *i"e,
,#e)e%e) sit-ate, ,#e)e t#e ono) is a )esient o) citi1en o$ t#e
P#ilippines at t#e ti*e o$ t#e onation8 an
2( Real an pe)sonal p)ope)t& sit-ate in t#e P#ilippines ,#e)e t#e
ono) is a non.)esient alien at t#e ti*e o$ t#e onation(
P)ope)t& e"cl-e in >'i$t?
Real an pe)sonal p)ope)t& sit-ate o-tsie t#e P#ilippines ,#e)e t#e ono)
is a non.)esient alien at t#e ti*e o$ onation8
Gi$ts ,#ic# a)e e"e*pt $)o* ono)Es ta"
1( Gi$ts *ae +& a )esientA
;1= !o,)ies o) 'i$ts *ae on acco-nt o$ *a))ia'e an +e$o)e its
cele+)ation o) ,it#in one ;1= &ea) t#e)ea$te) o$ pa)ents to eac#
o$ t#ei) le'iti*ate, )eco'ni1e o) aopte c#il)en to t#e e"tent
o$ t#e f)st P1H,HHH(
;2= Gi$ts *ae to o) $o) t#e -se o$ t#e National Go%e)n*ent o) an&
entit& c)eate +& an& o$ its a'encies ,#ic# is not con-cte $o)
p)oft8 o) to an& political s-+i%ision o$ t#e sai Go%e)n*ent8
an
;3= Gi$ts in $a%o) o$ an e-cational anP o) c#a)ita+le o) )eli'io-s
co)po)ation, instit-tion, acc)eite non.'o%e)n*ent
o)'ani1ation s-+6ect to t#e conition t#at not *o)e t#an 3HF o$
sai 'i$ts s#all +e -se +& t#e onee $o) a*inist)ation
p-)poses(
2( Gi$ts *ae +& a non.)esient alien
*2
In t#e case o$ non.)esient alien, onl& 'i$ts *entione in lette)s ;+=
an ;c= a)e e"e*pt $)o* t#e ono)Es ta"(
3( Specifc e"e*ption o$ P1HH,HHH( T#e Ta" Coe i*poses a ono)Es ta"
on net 'i$ts e"ceein' P1HH,HHH( T#e conse:-ence is t#at net 'i$ts o$
a*o-nt o$ P1HH,HHH o) less a)e e"e*pt $)o* t#e ta"(
2HHH 0a) 12 ;+=
B-estionA
W#at conitions *-st occ-) in o)e) t#at all ')ants,
onations an cont)i+-tions to non.stoc/, non p)oft
p)i%ate e-cational instit-tions *a& +e e"e*pt $)o*
ono)Es ta" -ne) Section 1H1 ;a= o$ t#e Ta" Coe(
Ans,e)A
Ine) t#e NIRC t#e $ollo,in' conitions *-st +e p)esent in
o)e) t#at onations an cont)i+-tions to non.stoc/, non
p)oft p)i%ate e-cation instit-tions *a& +e e"e*pt $)o*
ono)Es ta"A
1( T#e ono) is a )esient Filipino Citi1en8
2( T#e onee is a non.stoc/, non p)oft p)i%ate
e-cational instit-tion8
3( Not *o)e t#an 3HF o$ sai 'i$ts s#all +e -se +& t#e
onee $o) a*inist)ation p-)poses(
Ipon ,#ic# is t#e ono)Es ta" i*pose an co*p-te
It is i*pose an co*p-te -pon t#e +asis o$ t#e total net 'i$ts *ae -)in'
t#e calena) &ea)(
2HH1 0a) 19
B-estionA
Go-) +ac#elo) client, a Filipino )esiin' in B-e1on Cit&,
,ants to 'i%e #is siste) a 'i$t o$ P2HH,HHH(HH( He see/s
&o-) a%ice, $o) p-)poses o$ )e-cin' i$ not eli*inatin' t#e
ono)Es ta" on t#e 'i$t, on ,#et#e) it is +ette) $o) #i* to
'i%e all o$ t#e P2HH,HHH on C#)ist*as 2HH1 o) to 'i%e
P1HH,HHH(HH on C#)ist*as 2HH1 an t#e ot#e) P1HH,HHH(HH
on Nan-a)& 1, 2HH2( Please e"plain &o-) a%ice( ;5F=
Ans,e)A
I ,ill a%ice #i* to 'i%e) #e) siste) P1HH,HHH(HH on
C#)ist*as 2HH1 an t#e ot#e) P1HH,HHH(HH on Nan-a)& 1,
2HH2 on t#e $ollo,in' )easonsA
1( !ono)Es is i*pose an co*p-te on t#e total net 'i$ts
*ae -)in' t#e calena) &ea)(
2( A calena) &ea) *eans a pe)io ,#ic# sta)ts on Nan-a)&
1 an ens on !ece*+e) 31(
3( Nets 'i$ts *ae -)in' t#e calena) o$ not o%e)
P1HH,HHH(HH is e"e*pt $)o* ono)Es ta"(
*3
W#at is a st)an'e) $o) p-)poses o$ ono)Es ta"
A st)an'e) is a pe)son ,#o is notA
1( a +)ot#e), siste) ;,#et#e) +& ,#ole o) #al$ +loo=, spo-se, ancesto),
an lineal escenant8 o)
2( a )elati%e +& consan'-init& in t#e collate)al line ,it#in t#e $o)t#
e')ee o$ )elations#ip(
2HHH 0a) 12 ;a=
B-estionA
W#en t#e onee o) +enefcia)& is a st)an'e), t#e ta"
pa&a+le +& t#e ono) s#all +e 3HF o$ t#e net 'i$ts( Fo)
p-)poses o$ t#is ta", ,#o is a st)an'e)(
Ans,e)A
A st)an'e) is a pe)son ,#o is notA
1( a +)ot#e), siste) ;,#et#e) +& ,#ole o) #al$ +loo=, spo-se,
ancesto), an lineal escenant8 o)
2( a )elati%e +& consan'-init& in t#e collate)al line ,it#in t#e $o)t#
e')ee o$ )elations#ip(
R-le o$ political cont)i+-tions
An& cont)i+-tion in cas# o) in /in to an& caniate, political pa)t& o)
coalition o$ pa)ties $o) ca*pai'n p-)poses, s#all +e 'o%e)ne +& t#e Election
Coe(
B%R R*lin. on political contrib*tions
!onations to an& caniate, political pa)t& o) coalition o$ pa)ties is s-+6ect
to ono)Es ta" consie)in' t#at t#e)e is no p)o%ision in t#e election coe
e"p)essl& e"e*ptin' s-c# onations $)o* ta"(
W#o is )e:-i)e to fle t#e ono)Es )et-)n
An& ini%i-al ,#o *a/es an& t)ans$e) +& 'i$t, e"cept t#at ,#ic# -ne) t#e
Ta" Coe a)e e"e*pt $)o* ta", s#all, $o) t#e p-)pose o$ t#e ono)Es ta",
*ae a )et-)n -ne) oat# in -plicate(
Ti*e an place o$ t#e flin' o$ t#e ono)Es )et-)n an pa&*ent o$ ta"
T#e )et-)n o$ t#e ono) s#all fle ,it#in 3H a&s a$te) t#e 'i$t is *ae an
t#e ta" t#e)eon s#all +e pai at t#e ti*e o$ flin'(
E"cept in cases ,#e)e t#e Co**issione) ot#e),ise pe)*its, t#e )et-)n s#all
+e fle ,it# an t#e ta" pai to an a-t#o)i1e a'ent +an/, o) t#e R!O,
)e%en-e collection oOce), o) -l& a-t#o)i1e t)eas-)e) o$ t#e cit& o)
*-nicipalit& ,#e)e t#e ono) is o*icile at t#e ti*e o$ t)ans$e) o) i$ t#e)e
+e no le'al )esience in t#e P#ilippines, ,it# t#e OOce o$ t#e CIR(
*4
In t#e case o$ 'i$ts *ae +& a non.)esient, t#e )et-)n *a& +e fle ,it# t#e
P#ilippine E*+ass& o) Cons-late in t#e co-nt)& ,#e)e #e is o*icile at t#e
ti*e o$ t)ans$e) o) i)ectl& ,it# t#e OOce o$ t#e Co**issione)(
*5
PART 3
TAX RECE!IES
*(
I( RECE!IES OF THE GOVERNCENT
ASSESSCENT AN! COLLLECTION
Gene)al R-leA
Assess*ent p)ecees collection(
E"ceptionsA
W#en t#e -npai ta" is a ta" -e pe) )et-)n as in t#e case o$ a sel$.assesse
inco*e ta" -ne) t#e pa&.as.&o-.fle s&ste* in ,#ic# case collection *a& +e
instit-te ,it#o-t nee o$ assess*ent p-)s-ant to Sec( 57 o$ t#e NIRC(
<inds of #ssessment
1( P)e.assess*ent8 an
2( Final assess*ent(
Khen pre/assessment is re1*ired
1( Fail-)e to fle a )et-)n8
2( Fail-)e to pa& t#e ta"8
3( Fail-)e to pa& t#e co))ect ta" o) pa&*ent o$ ins-Ocient a*o-nt(
Period of assessment
Sin 0asis Pe)io
O)ina)& pe)io 1( Fail-)e to fle a
)et-)n8
2( Fail-)e to pa& t#e
ta"8
3( Ins-Ocient
pa&*ent
;no intent to
e%ae=
3 &ea)s $)o*
1( File on o) +e$o)e
ealine
Last a& o$ flin'(
2( File a$te)
ealine
Act-al flin'(
E"t)a.o)ina)& pe)io 1( False )et-)n8
2( F)a--lent )et-)n
,it# intent to
e%ae ta"8
3( Fail-)e to fle a
)et-)n ,it# intent
to e%ae ta"
1H &ea)s $)o*
isco%e)& o$
$alsit&, $)a- o)
o*ission(
;Sec( 222;a==
R-les on flin' o$ A*ene Ret-)n ;S-p)e*e Co-)t R-lin'=
A*en*ent is not SI0STANTIAL T#e pe)io s#all )-n $)o* ate o$
flin' o$ o)i'inal )et-)n(
A*en*ent is SI0STANTIAL T#e pe)io s#all )-n $)o* ate o$
a*ene )et-)n(
*)
SIN!S OF COLLECTION ;Sec( 2H5=
1( A*inist)ati%e collection
2( N-icial collection
lasses of #dministrative ollection
1( !ist)aint
2( Le%&
3( Ta" Lien
lasses of J*dicial ollection
1( C)i*inal action
2( Ci%il action
A*inist)ati%e an 6-icial action can +e p-)s-e si*-ltaneo-sl& o)
alte)nati%el&(
A*inist)ati%e action Al,a&s )e:-i)e assess*ent
N-icial action !oes not )e:-i)e assess*ent
Pa&*ent o$ Ta"
In 'ene)alA T#e total a*o-nt o$ ta" i*pose s#all +e pai +& t#e pe)son
s-+6ect t#e)eto at t#e ti*e t#e )et-)n is fle(
Install*ent Pa&*entA W#en t#e ta" -e is in e"cess o$ T,o t#o-san Pesos
;P2,HHH(HH=, t#e ta"pa&e) ot#e) t#an a co)po)ation *a& elect to
pa& t#e ta" in t,o ;2= e:-al install*ents in ,#ic# case, t#e f)st
install*ent s#all +e pai at t#e ti*e t#e )et-)n is fle an
secon install*ent, on o) +e$o)e N-l& 15 $ollo,in' t#e close o$
t#e calena) &ea)(
CIR %s( PASCOR
3H< SCRA 4H2
An assess*ent contains not onl& a co*p-tation o$ ta"
lia+ilities +-t also e*an $o) pa&*ent ,it#in a p)esc)i+e
pe)io( It also si'nals t#e ti*e ,#en t#e penalties an
inte)ests +e'in to acc)-e a'ainst t#e ta"pa&e)( To ena+le
t#e ta"pa&e) to ete)*ine #is )e*eies t#e)eon, -e
p)ocess )e:-i)es t#at it *-st +e se)%e on an )ecei%e +&
ta"pa&e)(
**
PROCE!IRES FLOWCHART
*+
,elf8*ssessment In"estigation
Re#ort of informer
3ayment collection
4!; "?D!&
&ax Deficiency
"dministratie #ollection @udicial #ollection
Notice of
3re8
conference
>ases 'here no
#re8assessment
is re?uired
>ases 'here
#re8assessment
is re?uired
3re8
*ssessment
*ssessment
*ssessment /ecomes
final and
e$ecutory
Distraint Le"y Lien >i"il
*ction
>riminal
*ction
:as 1% days to
re#ly
:as 1% days to
#ay or a##eal
:as 1% days to #ay or
file an
administrati"e
#rotest and if denied
a##eal to >T*! >*! to
,> other'ise the
assessment /ecomes
final and e$ecutory
O-tline o$ P)oce-)als in P)otestin' an Assess*ent
+,
4!;
"ud
it
PreAassessment
notice
Service
to
taxpaye
r
Ta$#ayer is gi"en
fifteen 41%5 days
from recei#t of the
#re8assessment
notice! e$tendi/le
for not more than ten
4105 days
%epl
y

Bes
:o
"ssessment of
tax deficiency
Service
to
taxpaye
r
Ta$#ayer is gi"en
thirty 4305 days from
recei#t of the
assessment to file
administrati"e
#rotest9
Within @0 days from
filing of
administrati"e
#rotest! all rele"ant
documents should /e
su/mitted other'ise!
the assessment shall
/ecome final and
una##eala/le9
"dministratie
Protest
Prote
st

:7
Bes
"ssessment
s'all become
final and
unappealable
"ppea
l to
#!; 0"C7;"4L$ &7
&axpayerD
?nfaorable
Service
to
taxpaye
r
*##eal to
>T*
Des#ite the res#onse!
the .IR still o#ines
that the ta$#ayer to
/e assessed for
deficiency ta$es
#&"
-1. 0rom receipt of
aderse decision of
#!; or
-2. 1*, days from
submission of t'e
documents,
t'e &axpayer may appeal
to t'e #&" %it'in t'irty
-3,. days, ot'er%ise, t'e
decision or assessment
s'all become final/
Ho, a*inist)ati%e p)otest is fle
1( 0& flin' a )e:-est $o) )econsie)ation8
2( +& flin' a )e:-est $o) )ein%esti'ation(
S-spension o$ t#e )-nnin' o$ t#e )-nnin' o$ t#e pe)io $o) assess*ent ;Sec(
223=
T#e )-nnin' o$ t#e pe)io $o) assess*ent is s-spene ,#en t#e ta"pa&e) is
li%in' a+)oa(
1( !ist)aint an Le%&
!ist)aint an Le%& !efne
!ist)aint is a )e*e& ,#e)e+& t#e collection o$ t#e ta" is en$o)ce on t#e
'oos, c#attels, o) eJects o$ t#e ta"pa&e) incl-in' ot#e) pe)sonal p)ope)t&
o$ ,#ate%e) c#a)acte) as ,ell as stoc/s an ot#e) sec-)ities, e+ts, c)eits,
+an/ acco-nts, an inte)est in an )i'#ts to pe)sonal p)ope)t&(
Le%& )e$e)s to t#e sei1-)e o$ )eal p)ope)ties an inte)est in o) )i'#ts to s-c#
p)ope)ties $o) t#e satis$action o$ ta"es -e $)o* t#e elin:-ent ta"pa&e)(
NoteA Le%& can +e *ae +e$o)e, si*-ltaneo-sl&, o) a$te) t#e ist)ain' o$
pe)sonal p)ope)t&(
0ot# )e*eies a)e s-**a)& in nat-)e an eit#e) *a& +e p-)s-e in t#e
isc)etion o$ t#e a-t#o)ities c#a)'e ,it# t#e collection o$ ta"
inepenentl&, o) si*-ltaneo-sl ,it# ci%il an c)i*inal action once t#e
assess*ent +eco*es fnal an e*ana+le(
Sins o$ ist)aint
1( Const)-cti%e
2( Act-al
onstr*ctive distraint s#all +e eJecte +& )e:-i)in' t#e ta"pa&e) o) an&
pe)son #a%in' possession o) cont)ol o$ s-c# p)ope)t& to si'n a )eceipt
co%e)in' t#e p)ope)t& ist)aine an o+li'ate #i*sel$ to p)ese)%e t#e sa*e
intact an -nalte)e an not to ispose o$ t#e sa*e in an& *anne) ,#ate%e)
,it#o-t t#e e"p)ess a-t#o)it& o$ t#e co**issione)(
#ct*al distraint consist o$ t#e sei1-)e o$ t#e 'oos, c#attels, o) eJects, an
t#e pe)sonal p)ope)t&, incl-in' stoc/s an ot#e) sec-)ities, e+ts, c)eits,
+an/ acco-nts, an inte)ests in an )i'#ts to pe)sonal p)ope)t& o$ s-c#
pe)son in s-Ocient :-antit& to satis$& t#e ta", o) c#a)'e, to'et#e) ,it# an&
inc)e*ent t#e)eto incient to elin:-enc&, an t#e e"penses o$ t#e ist)aint
an t#e cost o$ t#e s-+se:-ent sale(
+1
W#o s#all e"e)cise t#e ist)aint
A-t#o)i1e pe)sonnel Scope
Co**issione)
o) -l& a-t#o)i1e
)ep)esentati%e
A*o-nt in%ol%e is in e"cess o$
one *illion pesos
;P1,HHH,HHH(HH=
Re%en-e !ist)ict OOce) A*o-nt in%ol%e is one *illion
pesos ;P1,HHH,HHH(HH= o) less(
W#en const)-cti%e ist)aint *a& +e a%aile
W#en t#e ta"pa&e) is
1( Reti)in' $)o* an& +-siness s-+6ect to t#e ta"8
2( intenin' to lea%e t#e P#ilippines o) to )e*o%e #is p)ope)t& t#e)e$)o*
o) to #ie o) conceal #is p)ope)t&8
3( intenin' to pe)$o)* an& act tenin' to o+st)-ct t#e p)oceein's $o)
collectin' t#e ta" -e o) ,#ic# *a& +e -e $)o* #i*(
W#en act-al ist)aint *a& +e a%aile
Fail-)e o$ t#e pe)son o,in' an& elin:-ent ta" o) elin:-ent )e%en-e to pa&
t#e sa*e at t#e ti*e )e:-i)e(
Flo,c#a)t o$ Act-al !ist)aint
+2
Distraint
Public "uction
<it' 4idder <it'out 4idder
<ill be purc'ased by
t'e 6oernment
Sc'edule anot'er
bidding
Deliery to t'e
%inning bidder
Ta$#ayerAs remedy
Right of #re8
em#tion e$ercised
/efore the #u/lic
auction9
Ta$#ayer has no
right of
redem#tion
3u/lication9
The #u/lication
and notice is
im#ortant to
esta/lish the
#eriod of #re8
em#tion
Ho, )i'#t o$ p)e.e*ption is e"e)cise
Ri'#t o$ p)e.e*ption is e"e)cise +& pa&*ent o$ t#e ta" -e, penalties,
inte)est an ot#e) cost(
Ho, Le%& is a%aile
Le%& is eJecte +& ,)itin' -pon sai ce)tifcate ;TCT= a esc)iption o$ t#e
p)ope)t& -pon ,#ic# le%& is *ae( At t#e sa*e ti*e, ,)itten notice o$ t#e
le%& s#all +e *aile to o) se)%e -pon t#e Re'iste) o$ !ees o$ t#e p)o%ince
o) t#e cit& ,#e)e t#e p)ope)t& is locate an -pon t#e elin:-ent ta"pa&e),
o) i$ #e +e a+sent $)o* t#e P#ilippines, to #is a'ent o) t#e *ana'e) o$ t#e
+-siness in )espect to ,#ic# t#e lia+ilit& a)ose, o) i$ t#e)e +e none, to t#e
occ-pant o$ t#e p)ope)t& in :-estion(
Le%& on Real P)ope)t&
T,o ,a&s o$ isposal a$te) $o)$eit-)e ;Sec( 217=
1( P-+lic a-ction8
+3
Warrant of Le"y
Register of Deeds
*nnotation on T>T
Public "uction
<it' 4idder
<it'out 4idder
<ill be purc'ased by
t'e 6oernment
Sc'edule anot'er
bidding
Ta$#ayerAs remedy
Right of #re8
em#tion e$ercised
/efore the #u/lic
auction9
Ta$#ayer has no
right of
redem#tion
3u/lication9
The #u/lication
and notice is
im#ortant to
esta/lish the
#eriod of #re8
em#tion
3roceeds is
in e$cess of
ta$
lia/ility
3roceeds is
insufficient
of ta$
lia/ility
Ta$#ayer is
entitled for
the e$cess
Further le"y
or distraint
Delinguent
amount is
deemed
satisfied
2( P)i%ate sale(
In p)i%ate sale, t#e)e *-st +e an app)o%al o$ t#e Sec)eta)& o$ Finance(
2( Ci%il Action
A ci%il action is )eso)te to ,#en a ta" lia+ilit& +eco*es collecti+le, t#at is,
;1= t#e assess*ent +eco*es fnal an -nappeala+le, o)
;2= t#e ecision o$ t#e Co**issione) #as +eco*e fnal, e"ec-to)&, an
e*ana+le(
W#en assess*ent +eco*es fnal an -nappeala+le
A ta" is assesse an t#e ta"pa&e) $ails to fle an a*inist)ati%e p)otest +&
flin' a )e:-est $o) )econsie)ation o) )ein%esti'ation ,it#in t#i)t& ;3H= a&s
$)o* )eceipt o$ assess*ent(
W#en is ecision o$ t#e Co**issione) +eco*es fnal, e"ec-to) an
e*ana+le
A p)otest a'ainst t#e assess*ent is fle +& t#e ta"pa&e) +-t t#e
Co**issione)Es ecision en&in' in ,#ole o) in pa)t t#e sai p)otest, ,as
not appeale to t#e Co-)t o$ Ta" Appeals ;CTA= ,it#in t#i)t& ;3H= a&s $)o*
)eceipt o$ s-c# ecision(
Sec( 22H, NIRC
A ci%il action $o) ta" collection fle ,it# t#e )e'-la) co-)ts cannot +e
instit-te ,it#o-t t#e app)o%al o$ t#e Co**issione)(
NoteA T#e app)o%al +& t#e Co**issione) o$ Inte)nal Re%en-e o$ a ci%il
action $o) t#e collection o$ ta"es is not 6-)isictional, +-t one )elatin' to
capacit& to s-e o) aJectin' t#e ca-se o$ action onl&(
RA K424 Sec( 9 o$ t#e p)esent coe a-t#o)i1es t#e 0IR Co**issione) to
ele'ate t#e po,e)s %este in #i* -ne) t#e pe)tinent p)o%isions o$ t#e
Coe to an& s-+o)inate oOcial ,it# t#e )an/ e:-i%alent to a i%ision c#ie$
o) #i'#e), s-+6ect to se%e)al e"ceptions(
1<<< 0a) 4
Ga+es %s( Flo6o, 15 SCRA 29K
B-estionA
A Co(, a P#ilippine co)po)ation, )ecei%e an inco*e ta"
efcienc& assess*ent $)o* t#e 0IR on Ca& 5, 1<<5( On
Ca& 31, 1<<5, A Co( fle its p)otest ,it# t#e 0IR( On N-l&
3H, 1<<5, A Co( s-+*itte to t#e 0IR all )ele%ant s-ppo)tin'
oc-*ents( T#e CIR i not $o)*all& )-le on t#e p)otest
+-t on Nan-a)& 25, 1<<7, A Co( ,as se)%e a s-**ons an
a cop& o$ t#e co*plaint $o) collection o$ t#e ta" efcienc&
fle +& t#e 0IR ,it# t#e RTC( On Fe+)-a)& 2H, 1<<7, A Co(
+)o-'#t a Petition $o) Re%ie, +e$o)e t#e CTA( T#e 0IR
contene t#at t#e Petition is p)e*at-)e since t#e)e ,as
no $o)*al enial o$ t#e p)otest o$ A Co( an s#o-l
t#e)e$o)e +e is*isse(
+4
1( Has t#e CTA 6-)isiction o%e) t#e caseD
2( Has t#e RTC 6-)isiction o%e) t#e collection case fle
+& t#e 0IRD E"plain(
Ans,e)A
1( Ges, t#e CTA #as 6-)isiction o%e) t#e case( T#e
S-p)e*e R-le in Ga+es %s( Flo6o, 15 SCRA 29K, t#at t#e
flin' o$ a ci%il action in co-)t to collect a ta" ,#ic# ,as
t#e s-+6ect o$ a penin' p)otest in t#e 0IR ,as a
6-stifa+le +asis $o) t#e ta"pa&e) to appeal to t#e Co-)t
o$ Ta" Appeals an to *o%e $o) t#e is*issal in t#e t)ial
co-)t o$ t#e Go%e)n*entEs action to collection t#e ta"
-ne) isp-te(
2( No, t#e RTC #as no 6-)isiction o%e) t#e collection case
not &et e*ana+le( T#e action o$ t#e 0IR is still
p)e*at-)e an t#e RTC s#o-l ta/e co'ni1ance o$ t#e
action ,#en t#e a*o-nt -e +eco*es e*ana+le(
3( C)i*inal Action
A c)i*inal action cannot +e instit-te ,it#o-t t#e app)o%al o$ t#e
Co**issione) o$ Inte)nal Re%en-e(
Sec( 221, NIRC
T#e )e*e& o$ c)i*inal action is )eso)te to not onl& $o) collection o$ ta"es
+-t also $o) en$o)ce*ent o$ stat-to)& penalties o$ all so)ts(
4( Co*p)o*ise
A co*p)o*ise is an a')ee*ent +et,een t,o o) *o)e pe)sons ,#o, to a%oi
a la,s-it, a*ica+l& settle t#ei) iJe)ences on s-c# te)*s as t#e& can a')ee
on(
Co*p)o*ise penalt& is a ce)tain a*o-nt o$ *one& ,#ic# t#e ta"pa&e) pa&s
to co*p)o*ise a ta" %iolation(
Co*p)o*ise penalties a)e pai in lie- o$ c)i*inal p)osec-tion, an cannot +e
i*pose in t#e a+sence o$ a s#o,in' t#at t#e ta"pa&e) consente t#e)eto(
I$ an oJe) o$ co*p)o*ise is )e6ecte +& t#e ta"pa&e), t#e co*p)o*ise
penalt& cannot +e en$o)ce t#)- an action in co-)t o) +& ist)aint an le%&(
T#e CIR s#o-l fle a c)i*inal action i$ #e +elie%es t#at t#e ta"pa&e) is
c)i*inall& lia+le $o) %iolation o$ t#e ta" la, as t#e onl& ,a& to en$o)ce
penalt&(
Cases ,#ic# *a& +e co*p)o*ise
1( !elin:-ent acco-nts8
2( Cases -ne) a*inist)ati%e p)otest a$te) iss-ance o$ t#e fnal
assess*ent notice to t#e ta"pa&e) ,#ic# a)e still penin' in t#e
+5
Re'ional OOce)s, Re%en-e !ist)ict OOces, Le'al Se)%ice, La)'e
Ta"pa&e) Se)%ice ;LTS=, Collection Se)%ice, En$o)ce*ent Se)%ice an
ot#e) oOces in t#e National OOce8
3( Ci%il ta" cases +ein' isp-te +e$o)e t#e co-)ts ;CTC to SC=8
4( Collection cases fle in co-)ts8
5( C)i*inal %iolations ot#e) t#an t#ose al)ea& fle in co-)t o) t#ose
in%ol%in' c)i*inal ta" $)a-8 an
7( Cases co%e)e +& p)e.assess*ent notices +-t ta"pa&e) is not
a')eea+le to t#e fnin's o$ t#e a-it oOce as conf)*e +& t#e )e%ie,
oOce(
Sec( 2H4, NIRC
T#e Co**issione) *a& co*p)o*ise an& inte)nal )e%en-e ta" ,#enA
1( A )easona+le o-+t as to t#e %aliit& o$ t#e clai* a'ainst t#e ta"pa&e)
e"ists8 o)
2( T#e fnancial position o$ t#e ta"pa&e) e*onst)ates a clea) ina+ilit& to
pa& t#e assesse ta"(
2HHH 0a) 17 ;a=
B-estionA
Ine) ,#at conitions *a& t#e Co**issione) o$ Inte)nal
Re%en-e +e a-t#o)i1e to Co*p)o*ise t#e pa&*ent o$ an&
inte)nal )e%en-e ta"D
Ans,e)A
T#e Co**issione) *a& co*p)o*ise an& inte)nal )e%en-e
ta" ,#enA
1( A )easona+le o-+t as to t#e %aliit& o$ t#e clai*
a'ainst t#e ta"pa&e) e"ists8 o)
2( T#e fnancial position o$ t#e ta"pa&e) e*onst)ates a
clea) ina+ilit& to pa& t#e assesse ta"(
Instances ,#en t#e CIR *a& cancel a Ta" Lia+ilit&
1( T#e ta" appea)s -n6-stl& o) e"cessi%el& assesse8 o)
2( T#e a*inist)ation an collection costs o not 6-sti$& t#e collection(
Cases ,#ic# cannot +e co*p)o*ise
1( Wit##olin' ta" cases
2( C)i*inal ta" $)a- cases
3( C)i*inal %iolation al)ea& fle in co-)t
4( !elin:-ent acco-nts ,it# -l& app)o%e sc#e-le o$ install*ent
pa&*ents
5( Cases ,#e)e fnal )epo)ts o$ )ein%esti'ation o) )econsie)ations #a%e
+een iss-e )es-ltin' to )e-ction in t#e o)i'inal assess*ent an t#e
ta"pa&e) is a')eea+le to s-c# ecision +& si'nin' t#e )e:-i)e
a')ee*ent $o)* $o) t#e p-)pose(
7( Cases ,#ic# +eco*e fnal an e"ec-to)& a$te) fnal 6-'*ent o$ a
co-)t, ,#e)e co*p)o*ise is )e:-este on t#e ')o-n o$ o-+t$-l
%aliit& o$ t#e assesse*ent
9( Estate ta" cases ,#e)e co*p)o*ise is )e:-este on t#e ')o-n o$
fnancial incapacit& o$ t#e ta"pa&e)(
+(
Ta" Lien
A ta" lien is a le'al clai* o) c#a)'e on p)ope)t& ;,#et#e) )eal o) pe)sonal=
esta+lis#e +& la, as a so)t o$ sec-)it& $o) t#e pa&*ent o$ ta" o+li'ations(
An -npai inte)nal )e%en-e ta", to'et#e) ,it# )elate inte)est, penalties an
costs, constit-tes a lien in $a%o) o$ t#e 'o%e)n*ent $)o* t#e ti*e an
assess*ent t#e)e$o)e is *ae an -ntil pai, -pon all p)ope)t& an )i'#ts to
p)ope)t& +elon'in' to t#e ta"pa&e)(
A ta" lien c)eate in $a%o) o$ t#e 'o%e)n*ent is s-pe)io) to all ot#e) clai*s
o) p)e$e)ences(
Sec( 21<, NIRC
T#e lien is not %ali a'ainst an& *o)t'a'ee, p-)c#ase), o) 6-'*ent c)eito)
-ntil notice o$ s-c# lien s#all #a%e +een fle in t#e )e'iste) o$ ees o$ t#e
p)o%ince o) cit& ,#e)e t#e p)ope)t& o$ t#e ta"pa&e) is locate(
1<<5 0a) 5
It is settle t#at t#e clai* o$ t#e 'o%e)n*ent p)eicate on
a ta" lien is s-pe)io) to t#e clai* o$ a p)i%ate liti'ant
p)eicate on a 6-'*ent( T#e ta" lien attac#es not onl&
$)o* t#e se)%ice o$ t#e ,a))ant o$ ist)aint o$ pe)sonal
p)ope)t& +-t $)o* t#e ti*e t#e ta" +eca*e -e an
pa&a+le(
7( Fo)$eit-)e
T#e $o)$eit-)e o$ c#attels an )e*o%a+le f"t-)es o$ an& so)t s#all +e
en$o)ce +& t#e sei1-)e an sale, o) est)-ction, o$ t#e specifc $o)$eite
p)ope)t&( T#e $o)$eit-)e o$ )eal p)ope)t& s#all +e en$o)ce +& a 6-'*ent o$
cone*nation an sale in t#e le'al action o) p)oceein', ci%il o) c)i*inal, as
t#e case *a& )e:-i)e(
Fo)$eit-)e an sei1-)e istin'-is#e ;1<7K 0a)=
Fo)$eit-)e Sei1-)e
Fo) t#e en$o)ce*ent o$ ta" lien,
t#e )esi-e, a$te) e-ctin' t#e
ta" lia+ilit& an e"penses, ,ill 'o
to t#e ta"pa&e)(
All p)ocees o$ t#e sale ,ill 'o to
t#e coJe)s o$ t#e 'o%e)n*ent(
A ta"pa&e) in $o)$eit-)e o) sei1-)e cases to en$o)ce ta" lien *a& still +e
s-+6ect to c)i*inal action e%en i$ #is p)ope)t& #as +een $o)$eite(
9( Ci%il Penalties
Sec( 24K( Co%e)in' ci%il penalties( S-)c#a)'es i*pose )an'in' $)o* 25F to
5HF o$ t#e total ta" -e(
+)
NO INNINCTION TO RESTRAIN TAX COLLECTION
21K, NIRC
An in6-nction is not a%aila+le to )est)ain collection o$ ta"( No co-)t s#all
#a%e t#e a-t#o)it& to ')ant an in6-nction to )est)ain t#e collection o$ an&
national inte)nal )e%en-e ta", $ee, o) c#a)'e i*pose +& t#e NIRC(
2HH1 0a) 3;+=
B-estionA
Ca& t#e co-)ts en6oin t#e collection o$ )e%en-e ta"esD
E"plain &o-) ans,e)(
Ans,e)A
No, as a 'ene)al )-le, collection o$ )e%en-e ta"es cannot +e
en6oine(
T#e NIRC p)o%ies t#at in6-nction is not not a%aila+le to
)est)ain collection o$ ta"( No co-)t s#all #a%e t#e a-t#o)it&
to ')ant an in6-nction to )est)ain t#e collection o$ an&
national inte)nal )e%en-e ta", $ee, o) c#a)'e i*pose(
E"ceptions to t#e 'ene)al )-le ;1<<7 0a) 12=A
W#en t#e ecision o$ t#e Co**issione) is penin' appeal +e$o)e t#e Co-)t
o$ Ta" Appeals, t#e sai co-)t *a& en6oin t#e collection o$ ta"es i$ s-c#
collection ,ill 6eopa)i1e t#e inte)est o$ t#e 'o%e)n*ent anPo) t#e ta"pa&e)(
In s-c# case, t#e Co-)t at an& sta'e o$ t#e p)oceein' *a& s-spen t#e
collection o$ t#e ta" an )e:-i)e t#e ta"pa&e) eit#e) to eposit t#e a*o-nt
clai*e o) to fle a s-)et& +on $o) not *o)e t#an o-+le t#e a*o-nt ,it#
t#e co-)t( T#e postin' o$ t#e +on is not an a+sol-te )e:-i)e*ent, its
i*position lies ,it#in t#e so-n isc)etion o$ t#e Ta" Co-)t(
II( STATITE OF LICITATIONS
2HH1 0a) 3;+=, 1<<7 0a) 12, 1<<9 0a) 4, 0a)( 1<<< 1
Re*e& Pe)io Re:-i)e
Assess*ent o$
Inte)nal Re%en-e
Ta"es
3 Gea)s a$te) t#e last a& o$ flin' o$ t#e
)et-)n(
%f the ret*rn is fled beyond the period
prescribed0
T#e t#)ee ;3= &ea) pe)io s#all +e co-nte
$)o* t#e a& t#e )et-)n is fle(
%n case of a false or fra*d*lent ret*rn (ith
intent to evade ta) or fail*re to fle a
ret*rn3
An& ti*e ,it#in ten ;1H= &ea)s a$te) t#e
isco%e)& o$ t#e $alsit&, $)a- o) o*ission
+*
Collection 5 &ea)s $ollo,in' t#e assess*ent o$ t#e
ta", *a& +e collecte +& ist)aint o) le%&
o) p)oceein' in co-)t(
1H &ea)s @ ,it#o-t assess*ent, an in
case o$ $alse o) $)a--lent )et-)ns ,it#
intent to e%ae t#e ta" o) $ail-)e to fle a
)et-)n(
C)i*inal lia+ilit& 5 &ea)s @ $)o* co**ission o) isco%e)& o$
t#e %iolation, ,#ic#e%e) is late)(
F)a--lent o) False Ret-)n ;1<<7 0a) 9=
F)a--lent Ret-)n False Ret-)n
F)a--lent )et-)n is intentional
an eceit$-l ,it# t#e ai* o$
e%ain' co))ect ta" -e(
False )et-)n *e)el& i*plies a
e%iation $)o* t#e t)-t# o) $act
,#et#e) intentional o) not(
III( RECE!IES OF TAXPAGER
Sins o$ Re*eies $o) t#e Ta"pa&e)
19 A*inist)ati%e p)otest @ ,#ic# is a p)otest a'ainst t#e assess*ent an is
fle +e$o)e pa&*ent(
<9 Clai* $o) Re$-n @ fle ,it# t#e Co**issione) o$ Inte)nal Re%en-e a$te)
pa&*ent(
1( A*inist)ati%e P)otest
Sec( 22K, NIRC
W#en t#e CIR o) #is -l& a-t#o)i1e )ep)esentati%e fns t#at p)ope) ta"es
s#o-l +e assesse, #e s#all f)st noti$& t#e ta"pa&e) o$ #is fnin's(
E"ceptionsA No p)e.assess*ent notice s#all +e )e:-i)eA
1( W#en t#e fnin' $o) an& efcienc& ta" is t#e )es-lt o$ *at#e*atical
e))o) in t#e co*p-tation o$ t#e ta" as appea)in' on t#e $ace o$ t#e
)et-)n8 o)
2( W#en t#e isc)epanc& #as +een ete)*ine +et,een t#e ta" ,it##el
an t#e a*o-nt act-all& )e*itte +& t#e ,it##olin' a'ent8 o)
++
3( W#en t#e ta"pa&e) ,#o opte to clai* a )e$-n o) ta" c)eit o$
e"cess c)eita+le ,it##olin' ta" $o) a ta"a+le pe)io ,as
ete)*ine to #a%e ca))ie o%e) an a-to*aticall& applie t#e sa*e
a*o-nt clai*e a'ainst t#e esti*ate ta" lia+ilit& $o) t#e ta"a+le
:-a)te) o) :-a)te)s o$ t#e s-cceein' ta"a+le &ea)8 o)
4( W#en t#e e"cise ta" -e on e"cisa+le a)ticles #as not +een pai8 o)
5( ,#en an a)ticle locall& p-)c#ase o) i*po)te +& an e"e*pt pe)son,
s-c# as, +-t not li*ite to, %e#icles, capital e:-ip*ent, *ac#ine)ies
an spa)e pa)ts, #as +een sol, t)ae o) t)ans$e))e to non.e"e*pt
pe)son(
Ce)alco Sec-)ities Co)po)ation %s( Sa%ellano
119 SCRA KH5
Cana*-s oes not lie to co*pel t#e Co**issione) o$
Inte)nal Re%en-e to i*pose a ta" assess*ent not $o-n +&
#i* to +e p)ope)( A 6-'e o$ a )e'-la) co-)t #as no
6-)isiction to ta/e co'ni1ance o$ a *ana*-s case )aisin'
t#e :-estion o$ ,#et#e) o) not to i*pose a efcienc& ta"
assess*ent( T#is -no-+tel& co*es ,it#in t#e p-)%ie, o$
t#e ,o)s >isp-te assess*ent? o) >o$ ot#e) *atte)s
a)isin' -ne) t#e National Inte)nal Re%en-e coe?, t#-s
+elon'in' to t#e 6-)isiction o$ t#e CTA(
2( Clai* $o) Re$-n
Sec( 22<, NIRC
No s-it o) p)oceein' s#all +e *aintaine in an& co-)t $o) t#e )eco%e)& o$
an& national )e%en-e ta" #e)ea$te) alle'e to #a%e +een e))oneo-sl& o)
ille'all& assesse o) collecte, o) o$ a penalt& clai*e to #a%e +een
collecte ,it#o-t a-t#o)it& o) o$ s-* alle'e to #a%e +een e"cessi%el& o) in
an& *anne) ,)on'$-ll& collecte, -ntil a clai* $o) )e$-n o) c)eit #as +een
-l& fle ,it# t#e Co**issione)8 +-t s-c# s-it o) p)oceein' *a& +e
*aintaine, ,#et#e) o) not s-c# ta", penalt&, o) s-* #as +een pai -ne)
p)otest o) -)ess(
In an& case, no s-it o) p)oceein' s#all +e fle a$te) t#e e"pi)ation o$ t,o
;2= &ea)s $)o* t#e ate o$ pa&*ent o$ t#e ta" o) penalt&, )e'a)less o$ an
s-pe)%enin' ca-se t#at *a& a)ise a$te) pa&*ent(
T#e Co**issione) *a&, e%en ,it#o-t ,)itten clai* t#e)e$o)e, )e$-n o)
c)eit a ta", ,#e)e on t#e $ace o$ t#e )et-)n -pon ,#ic# pa&*ent ,as *ae,
s-c# pa&*ent appea)s clea)l& to #a%e +een e))oneo-sl& pai(
Ta" )e$-n an Ta" C)eit istin'-is#e
Ta" )e$-n t#e)e is act-al )ei*+-)se*ent o$ t#e ta"(
Ta" c)eit, t#e )ei*+-)sa+le a*o-nt is applie a'ainst t#e s-* t#at *a& +e
-e o) collecti+le $)o* t#e ta"pa&e)(
1,,
W#at co%e)s ta" )e$-n
1( E))oneo-s o) ille'all& assesse o) collecte inte)nal )e%en-e ta"es8
2( Penalties i*pose ,it#o-t a-t#o)it&8
3( An& s-* alle'e to #a%e +een e"cessi%e o) in an& *anne) ,)on'$-ll&
collecte(
Re:-i)e*ents $o) Ta" Re$-n
1( T#e)e *-st +e a ,)itten clai* $o) )e$-n fle +& t#e ta"pa&e) ,it#
t#e Co**issione)8
2( T#e clai* $o) )e$-n *-st +e a cate'o)ical e*an $o) )ei*+-)se*ent8
3( T#e clai* $o) )e$-n *-st +e fle ,it#in t,o ;2= &ea)s $)o* ate o$
pa&*ent o$ t#e ta" o) penalt& )e'a)less o$ an& s-pe)%enin' ca-se(
1,1
IV( COIRT OF TAX APPEALS
Co-)t o$ Ta" Appeals
T#e Co-)t o$ Ta" Appeals is a #i'#l& speciali1e +o& ,#ic# )e%ie,s ta"
cases( T#e p)oceein's t#e)ein a)e 6-icial in nat-)e alt#o-'# it is not
+o-n +& t#e tec#nical )-les o$ e%ience(
B-o)-*
Consistin' o$ a P)esiin' N-'e an t,o Associate N-'es, t#e p)esence o$
an& t,o o$ t#e* s#all constit-te a :-o)-*, an t#e conc-))ence o$ t,o
6-'es s#all +e necessa)& to p)o*-l'ate an& ecision t#e)eo$(
Po,e)s o$ t#e CTA
1( To a*iniste) oat#s( ;Sec( 1H=
2( To )ecei%e e%ience ;Sec( 12=
3( To s-**on ,itnesses +& s-+poena an )e:-i)e t#e p)o-ction o$
oc-*ents +& s-+poena -ces tec-* ;Sec( 1H=
4( To p-nis# $o) conte*pt $o) t#e sa*e cases -ne) t#e sa*e p)oce-)e
an ,it# t#e sa*e penalties p)o%ie $o) in t#e R-les o$ Co-)t ;Sec(
1H=
5( To p)esc)i+e t#e $o)* o$ ,)its an ot#e) p)ocesses ;Sec( K=
7( To p)o*-l'ate )-les an )e'-lations $o) t#e con-ct o$ its +-siness
;Sec( K=
N-)isiction o$ t#e CTA
T#e Co-)t o$ Ta" Appeals s#all e"e)cise e"cl-si%e appellate 6-)isiction to
)e%ie, +& appeal t#e $ollo,in'A
1( !ecision o$ t#e Co**issione) o$ Inte)nal Re%en-e ;CIR= in cases in%ol%in'
isp-te
;a= Assess*ent,
;+= Re$-n o$ inte)nal )e%en-e ta"es, $ees, o) ot#e) c#a)'es
;c= Penalties i*pose in )elation t#e)eto, o)
;= Ot#e) *atte)s a)isin' -ne) t#e NIRC o)
;e= Ot#e) la,s o) pa)t o$ la, a*iniste)e +& t#e 0IR
2( !ecision o$ t#e Co**issione) o$ C-sto*s in cases in%ol%in' lia+ilit& $o)
;a= c-sto*s -ties, $ees o) ot#e) *one& c#a)'es8
;+= sei1-)e, etention o) )elease o$ p)ope)t& aJecte8
;c= fnes, $o)$eit-)es o) ot#e) penalties i*pose in )elation t#e)eto8
;= ot#e) *atte)s a)isin' -ne) t#e C-sto*s La, o) ot#e) la, o)
pa)t o$ la, a*iniste)e +& t#e 0-)ea- o$ C-sto*s
3( !ecision o$ t#e Sec)eta)& o$ Finances, s-c# as t#e i*position o$ -*pin'
o) co-nte)%ailin' -t&8
4( !ecision o$ t#e Sec)eta)& o$ Finance in a-to*atic )e%ie, cases ,#e)e
s-c# ecision o$ t#e Sec)eta)& o$ Finance is a%e)se to t#e ta"pa&e)(
A-to*atic Re%ie, Cases
In a case in%ol%in' t#e assess*ent o$ c-sto*s -ties, t#e ecision o$ t#e
Co**issione) is a-to*aticall& ele%ate to, an )e%ie,e +&, t#e Sec)eta)&
o$ Finance( It is t#e ecision o$ t#e Sec)eta)& o$ Finance a%e)se to t#e
ta"pa&e) ,#ic# is appeala+le to t#e CTA ,it#in t#i)t& ;3H= a&s $)o* )eceipt
1,2
t#e)eo$( A ecision o$ t#e Sec)eta)& ,#ic# is $a%o)a+le to t#e ta"pa&e) is no
lon'e) appeala+le(
PART 4
TARIFF AN! CISTOCS LAWS
An
LOCAL TAXATION
1,3
C-sto*s La,s
I*po)te a)ticles s-+6ect to c-sto*s -t&
All i*po)te a)ticles, ,#en i*po)te $)o* an& $o)ei'n co-nt)& into t#e
P#ilippines, a)e s-+6ect to -t& -pon eac# i*po)tation, e%en t#o-'#
p)e%io-sl& e"po)te $)o* t#e P#ilippines, e"cept as ot#e),ise p)o%ie in
t#e Ta)iJ an C-sto*s Coe o) in ot#e) la,s(
Lia+ilit& o$ I*po)te) $o) -ties
Inless ot#e),ise )elie%e +& la,s o) )e'-lations, t#e lia+ilit& o$ -ties,
ta"es, $ees an ot#e) c#a)'es attac#in' on i*po)tation constit-tes a
pe)sonal e+t -e $)o* t#e i*po)te) to t#e 'o%e)n*ent ,#ic# can +e
isc#a)'e onl& +& pa&*ent in $-ll o$ sai -ties an c#a)'es( It also
constit-te a lien -pon t#e a)ticles i*po)te ,#ic# *a& +e en$o)ce ,#ile
s-c# a)ticles a)e in c-sto& o) s-+6ect to t#e cont)ol o$ t#e 'o%e)n*ent(
!-ties, po,e)s an 6-)isiction o$ t#e 0-)ea- o$ C-sto*s
1( T#e assess*ent an collection o$ t#e la,$-l )e%en-es $)o* i*po)te
a)ticles an all ot#e) -es, $ees, c#a)'es, fnes an penalties acc)-in'
-ne) t#e ta)iJ an c-sto*s la,s8
2( t#e p)e%ention an s-pp)ession o$ s*-''lin' an ot#e) $)a-s -pon
t#e c-sto*s8
3( t#e s-pe)%ision an cont)ol o%e) t#e ent)ance an clea)ance o$ %essels
an ai)c)a$t en'a'e in $o)ei'n co**e)ce8
4( t#e en$o)ce*ent o$ ta)iJ an c-sto*s la,s an all ot#e) la,s, )-les
an )e'-lations )elatin' to ta)iJ an c-sto*s a*inist)ation8
5( t#e s-pe)%ision an cont)ol o%e) t#e #anlin' o$ $o)ei'n *ails a))i%in'
in t#e P#ilippines, $o) t#e p-)pose o$ t#e collection o$ t#e la,$-l -t&
on t#e -tia+le a)ticles t#-s i*po)te an t#e p)e%ention o$
s*-''lin' t#)o-'# t#e *ei-* o$ s-c# *ails8
7( s-pe)%ision an cont)ol o%e) all i*po)t an e"po)t ca)'oes, lane o)
sto)e in pie)s, ai)po)ts, te)*inal $acilities, incl-in' containe) &a)s
an $)ei'#t stations, $o) t#e p)otection o$ 'o%e)n*ent )e%en-e8 an
9( E"cl-si%e o)i'inal 6-)isiction on sei1-)e an $o)$eit-)e cases -ne)
t#e ta)iJ an c-sto*s la,s(
Pasc-al %s( Co**( O$ C-sto*s
L.1221<, Ap)il 25, 1<72
P)oceein's in sei1-)e cases a)e actions in )e* i)ecte
a'ainst t#e p)ope)t& sei1e, not a'ainst t#e o,ne) t#e)eo$(
T#e $o)$eit-)e *a& +e en$o)ce a'ainst t#e 'oos
inepenentl& o$ t#e c)i*inal p)osec-tion a'ainst t#e
oJene)(
In a sei1-)e case, t#e 'o%e)n*ent see/s t#e t)ans$e) o$ t#e
title to t#e p)ope)t& $)o* t#e o,ne) to t#e state as a
p-nis#*ent to t#e p)ope)t& itsel$(
1,4
N-)isiction o$ Sei1-)e an Fo)$eit-)e Cases
It is ,ell.settle t#at t#e e"cl-si%e 6-)isiction o%e) sei1-)e an $o)$eit-)e
cases %este in t#e Collecto) o$ C-sto*s p)ecl-es a Co-)t o$ Fi)st Instance
$)o* ass-*in' co'ni1ance o%e) s-c# cases(
A-&on' Hian %s( CTA, et(al(
1< SCRA 1H
T#e Collecto) o$ C-sto*s ,#en sittin' in $o)$eit-)e
p)oceein's constit-tes a t)i+-nal e"p)essl& %este +& la,
,it# 6-)isiction to #ea) an ete)*ine t#e s-+6ect *atte)
o$ s-c# p)oceein's ,it#o-t inte)$e)ence $)o* t#e Co-)t o$
Fi)st Instance(
S-pe)%iso)& a-t#o)it& o$ Co**issione) o$ C-sto*s an Sec)eta)& o$ Finance
;1= In cases in%ol%in' assess*ent o$ -ties(
I$ in an& case in%ol%in' t#e assess*ent o$ -ties, t#e Collecto) )ene)s
a ecision a%e)se to t#e 'o%e)n*ent, s-c# ecision s#all
a-to*aticall& +e ele%ate to, an )e%ie,e +& t#e Co**issione)8 an
i$ t#e Collecto)Es ecision ,o-l +e aO)*e +& t#e Co**issione), s-c#
ecision s#all +e a-to*aticall& ele%ate to, an fnall& )e%ie,e +& t#e
Sec)eta)& o$ Finance(
Ho,e%e), i$ ,it#in t#i)t& ;3H= a&s $)o* )eceipt o$ t#e )eco) o$ t#e
case +& t#e Co**issione) o) +& t#e Sec)eta)& o$ Finance, as t#e case
*a& +e, no ecision is )ene)e +& eit#e) o$ t#e*, t#e ecision -ne)
)e%ie, s#all +eco*e fnal an e"ec-to)&(
An& pa)t& a'')ie%e +& eit#e) ecision o$ t#e Co**issione) o) o$ t#e
Sec)eta)& o$ Finance *a& appeal to t#e Co-)t o$ Ta" Appeals ,it#in
t#i)t& ;3H= a&s $)o* )eceipt o$ a cop& o$ s-c# ecision(
E"cept as p)o%ie a+o%e, t#e s-pe)%iso)& a-t#o)it& o$ t#e Sec)eta)&
o$ Finance o%e) t#e 0-)ea- o$ C-sto*s oes not e"ten to t#e
a*inist)ati%e )e%ie, o$ t#e )-lin' o$ t#e Co**issione) in *atte)s
appeale to t#e Co-)t o$ Ta" Appeals(
;2= In sei1-)e cases
S-pe)%iso)& a-t#o)it& e"e)cise +& t#e Co**issione) ,#ile t#e case is
penin' in t#e OOce o$ t#e Collecto) o$ C-sto*s an +e$o)e t#e
ecision o$ t#e Collecto) +eco*es fnal(
2HHH 0a) 2H
B-estionA
On t#e +asis o$ a ,a))ant o$ sei1-)e an etention iss-e
+& t#e Collecto) o$ C-sto*s $o) t#e p-)poses o$ en$o)cin'
Ta)iJ an C-sto*s La,s, asso)te +)ans o$ ci'a)ettes sai
to #a%e +een ille'all& i*po)te into t#e P#ilippines ,e)e
1,5
sei1e $)o* a sto)e ,#e)e t#e& ,e)e openl& oJe)e $o)
sale( !issatisfe ,it# t#e ecision )ene)e a$te) #ea)in'
+& t#e Collecto) o$ C-sto*s on t#e confscation o$ t#e
a)ticles, t#e i*po)te) fle a petition $o) )e%ie, ,it# t#e
Co-)t o$ Ta" Appeals( T#e Collecto) *o%e to is*iss t#e
petition $o) lac/ o$ 6-)isiction( R-le on t#e *otionD
Ans,e)A
T#e *otion s#o-l +e ')ante( T#e a'')ie%e pa)t& s#o-l
#a%e ele%ate t#is *atte) to t#e co**issione) o$ c-sto*s(
T#e C-sto*s coe p)o%ies t#at s-pe)%iso)& a-t#o)it&
e"e)cise +& t#e Co**issione) ,#ile t#e case is penin' in
t#e OOce o$ t#e Collecto) o$ C-sto*s an +e$o)e t#e
ecision o$ t#e Collecto) +eco*es fnal(
2HH2 0a) 14
B-estionA
T#e Collecto) o$ C-sto*s o$ t#e Po)t o$ Ce+- iss-e
,a))ants o$ sei1-)e an etention a'ainst t#e i*po)tation
o$ *ac#ine)ies an e:-ip*ent +& LL! I*po)t an E"po)t
Co(, ;LL!= $o) alle'e non.pa&*ent o$ ta" an c-sto*s
-ties in %iolation o$ c-sto*s la,s( LL! ,as notife o$ t#e
sei1-)e +-t +e$o)e it co-l +e #ea), t#e Collecto) o$
C-sto*s iss-e a notice o$ sale o$ t#e a)ticles( In o)e) to
)est)ain t#e Collecto) $)o* ca))&in' o-t t#e o)e) to sell,
LL! fle ,it# t#e Co-)t o$ Ta" Appeals a petition $o) )e%ie,
,it# t#e application $o) t#e iss-ance o$ a ,)it o$
p)o#i+ition( It also fle ,it# t#e CTA an appeal $o) )e$-n
o$ o%e)pai ta"es on its ot#e) i*po)tations o$ )a, *ate)ials
,#ic# #as +een penin' ,it# t#e Collecto) o$ C-sto*s( T#e
0-)ea- o$ C-sto*s *o%e to is*iss t#e case $o) lac/ o$
6-)isiction o$ t#e Co-)t o$ Ta" Appeals(
A( !oes t#e Co-)t o$ Ta" Appeals #a%e 6-)isiction o%e)
t#e petition $o) )e%ie, an ,)it o$ p)o#i+itionD E"plain(
0( Will an appeal to t#e CTA $o) ta" )e$-n +e possi+leD
E"plain(
Ans,e)A
A( No, t#e Co-)t o$ Ta" Appeals #a%e no 6-)isiction o%e)
t#e petition $o) )e%ie, an ,)it o$ p)o#i+ition( T#e
a'')ie%e pa)t& s#o-l #a%e ele%ate t#e case to t#e
Co**issione) o$ c-sto*s(
0( No, t#e appeal to t#e CTA $o) ta" )e$-n is not
possi+le( T#e a'')ie%e pa)t& s#o-l #a%e *ae a
)e:-est $o) a ta" )e$-n $)o* t#e Co**issione) o$
C-sto*s( An& a%e)se ecision o$ t#e Co**issione)
*a& +e appeale to t#e Sec)eta)& o$ Finance o) Co-)t
o$ Ta" Appeals(
1,(
Local Ta"ation
Nat-)e o$ Ta"in' Po,e) o$ Local Go%e)n*ents
1( Not in#e)ent @ -nli/e a so%e)ei'n state, *-nicipal co)po)ations #a%e no
in#e)ent po,e) to ta"( 0ein' *e)e c)eat-)es o$ la,, t#e&
*a& e"e)cise t#e po,e) onl& i$ ele'ate to t#e* +& t#e
national le'islat-)e o) con$e))e +& t#e Constit-tion itsel$(
2( Li*ite @ t#e ne, Constit-tion ecla)es t#at >eac# local 'o%e)n*ent s#all
#a%e t#e po,e) to c)eate its o,n so-)ces o$ )e%en-e an to
le%& ta"es, $ees, an c#a)'es, s-+6ect to s-c# li*itations
an '-ielines as t#e Con')ess *a& p)o%ie(?
F-na*ental P)inciples 'o%e)nin' local ta"ation
;a= Ta"ation s#all +e -ni$o)* in eac# local 'o%e)n*ent -nit8
;+= Ta"es, $ees, c#a)'es an ot#e) i*positions s#allA
;2= +e e:-ita+le an +ase as $a) as p)actica+le on t#e ta"pa&e)Zs
a+ilit& to pa&8
;3= +e le%ie an collecte onl& $o) p-+lic p-)poses8
;4= not +e -n6-st, e"cessi%e, opp)essi%e, o) confscato)&8
;5= not +e cont)a)& to la,, p-+lic polic&, national econo*ic polic&,
o) in t#e )est)aint o$ t)ae8
;c= T#e collection o$ local ta"es, $ees, c#a)'es an ot#e) i*positions s#all in
no case +e let to an& p)i%ate pe)son8
;= T#e )e%en-e collecte p-)s-ant to t#e p)o%isions o$ t#is Coe s#all in-)e
solel& to t#e +eneft o$, an +e s-+6ect to t#e isposition +&, t#e local
'o%e)n*ent -nit le%&in' t#e ta", $ee, c#a)'e o) ot#e) i*position -nless
ot#e),ise specifcall& p)o%ie #e)ein8 an,
;e= Eac# local 'o%e)n*ent -nit s#all, as $a) as p)actica+le, e%ol%e a
p)o')essi%e s&ste* o$ ta"ation(
Co**on li*itations on t#e ta"in' po,e)s o$ local 'o%e)n*ents
;a= Inco*e ta", e"cept ,#en le%ie on +an/s an ot#e) fnancial
instit-tions8
;+= !oc-*enta)& sta*p ta"8
;c= Ta"es on estates, in#e)itance, 'i$ts, le'acies an ot#e) ac:-isitions
*o)tis ca-sa, e"cept as ot#e),ise p)o%ie #e)ein8
;= C-sto*s -ties, )e'ist)ation $ees o$ %essel an ,#a)$a'e on ,#a)%es,
tonna'e -es, an all ot#e) /ins o$ c-sto*s $ees, c#a)'es an -es
e"cept ,#a)$a'e on ,#a)%es const)-cte an *aintaine +& t#e local
'o%e)n*ent -nit conce)ne8
;e= Ta"es, $ees, an c#a)'es an ot#e) i*positions -pon 'oos ca))ie into
o) o-t o$, o) passin' t#)o-'#, t#e te))ito)ial 6-)isictions o$ local
'o%e)n*ent -nits in t#e '-ise o$ c#a)'es $o) ,#a)$a'e, tolls $o) +)i'es
o) ot#e),ise, o) ot#e) ta"es, $ees, o) c#a)'es in an& $o)* ,#atsoe%e)
-pon s-c# 'oos o) *e)c#anise8
1,)
;$= Ta"es, $ees o) c#a)'es on a')ic-lt-)al an a:-atic p)o-cts ,#en sol
+& *a)'inal $a)*e)s o) fs#e)*en8
;'= Ta"es on +-siness ente)p)ises ce)tife to +& t#e 0oa) o$ In%est*ents
as pionee) o) non.pionee) $o) a pe)io o$ si" ;7= an $o-) ;4= &ea)s,
)especti%el& $)o* t#e ate o$ )e'ist)ation8
;#= E"cise ta"es on a)ticles en-*e)ate -ne) t#e national Inte)nal
Re%en-e Coe, as a*ene, an ta"es, $ees o) c#a)'es on pet)ole-*
p)o-cts8
;i= Pe)centa'e o) %al-e.ae ta" ;VAT= on sales, +a)te)s o) e"c#an'es o)
si*ila) t)ansactions on 'oos o) se)%ices e"cept as ot#e),ise p)o%ie
#e)ein8
;6= Ta"es on t#e ')oss )eceipts o$ t)anspo)tation cont)acto)s an pe)sons
en'a'e in t#e t)anspo)tation o$ passen'e)s o) $)ei'#t +& #i)e an
co**on ca))ie)s +& ai), lan o) ,ate), e"cept as p)o%ie in t#is Coe8
;/= Ta"es on p)e*i-*s pai +& ,a& o) )eins-)ance o) )et)ocession8
;l= Ta"es, $ees o) c#a)'es $o) t#e )e'ist)ation o$ *oto) %e#icles an $o) t#e
iss-ance o$ all /ins o$ licenses o) pe)*its $o) t#e )i%in' t#e)eo$,
e"cept t)ic&cles8
;*= Ta"es, $ees, o) ot#e) c#a)'es on P#ilippine p)o-cts act-all& e"po)te,
e"cept as ot#e),ise p)o%ie #e)ein8
;n= Ta"es, $ees, o) c#a)'es, on Co-nt)&sie an 0a)an'a& 0-siness
Ente)p)ises an coope)ati%es -l& )e'iste)e -ne) R(A( No( 7K1H an
Rep-+lic Act N-*+e)e Si"t&.nine #-n)e t#i)t&.ei'#t ;R(A( No( 7<3K=
ot#e),ise /no,n as t#e [Coope)ati%e Coe o$ t#e P#ilippines[
)especti%el&8 an
;o= Ta"es, $ees o) c#a)'es o$ an& /in on t#e National Go%e)n*ent, its
a'encies an inst)-*entalities, an local 'o%e)n*ent -nits(
Local a-t#o)it& t#at s#all e"e)cise ta"in' po,e)
T#e po,e) s#all +e e"e)cise +& t#e san''-nian' panlala,i'an in t#e case
o$ p)o%inces, t#e san''-nian' panl-n'so in t#e case o$ cities, t#e
san''-nian' +a&an in t#e case o$ *-nicipalities, o) t#e san''-nian'
0a)an'a& in t#e case o$ +a)an'a&s t#)o-'# an app)op)iate o)inance(
T#e e"e)cise o$ t#e po,e) to ta" +& t#e local le'islati%e asse*+l& is s-+6ect
to t#e %eto po,e) o$ t#e local c#ie$ e"ec-ti%e(
Ta"in' an ot#e) )e%en-e )aisin' po,e)s
1( Ta" on t#e t)ans$e) o$ )eal p)ope)t& o,ne)s#ip8
2( Ta" on t#e +-siness o$ p)intin' an p-+lication8
3( F)anc#ise ta"8
4( Ta" on san, ')a%el an ot#e) :-a))& )eso-)ces8
5( P)o$essional ta"8
7( A*-se*ent ta"8 an
9( Ann-al f"e ta" pe) eli%e)& t)-c/ o) %an o$ *an-$act-)e)s o)
p)o-ce)s an ,#olesale)s o$, o) eale)s in, ce)tain p)o-cts(
Co**on )e%en-e.)aisin' po,e)s
1( Se)%ices $ees an c#a)'es
2( P-+lic -tilit& c#a)'es
3( Toll $ees o) c#a)'es
1,*
P)oce-)e $o) App)o%al an EJecti%it& o$ Ta", O)inances an Re%en-e
Ceas-)es8 Canato)& P-+lic Hea)in's(
1( T#e p)oce-)e $o) app)o%al o$ local ta" o)inances an )e%en-e *eas-)es
s#all +e in acco)ance ,it# t#e p)o%isions o$ t#is Coe(
2( P-+lic #ea)in's s#all +e con-cte $o) t#e p-)pose p)io) to t#e enact*ent
t#e)eo$(
3( An& :-estion on t#e constit-tionalit& o) le'alit& o$ ta" o)inances o)
)e%en-e *eas-)es *a& +e )aise on appeal ,it#in t#i)t& ;3H= a&s $)o*
t#e eJecti%it& t#e)eo$ to t#e Sec)eta)& o$ N-stice ,#o s#all )ene) a
ecision ,it#in si"t& ;7H= a&s $)o* t#e ate o$ )eceipt o$ t#e appeal(
4( Appeal s#all not #a%e t#e eJect o$ s-spenin' t#e eJecti%it& o$ t#e
o)inance an t#e acc)-al an pa&*ent o$ t#e ta", $ee, o) c#a)'e le%ie
t#e)ein(
5( Wit#in t#i)t& ;3H= a&s a$te) )eceipt o$ t#e ecision o) t#e lapse o$ t#e
si"t&.a& pe)io ,it#o-t t#e Sec)eta)& o$ N-stice actin' -pon t#e appeal,
t#e a'')ie%e pa)t& *a& fle app)op)iate p)oceein's ,it# a co-)t o$
co*petent 6-)isiction(
2HH2 0a) <;+=
B-estionA
An o)inance ,as passe +& t#e P)o%incial 0oa) o$ a
P)o%ince in t#e No)t#, inc)easin' t#e )ate o$ +asic )eal
p)ope)t& ta" $)o* H(HH7F to 1F o$ t#e assesse %al-e o$
t#e )eal p)ope)t& eJecti%e Nan-a)& 1, 2HHH( Resients o$
t#e *-nicipalities o$ t#e sai p)o%ience p)oteste t#e
O)inance on t#e ')o-n t#at no p-+lic #ea)in' ,as
con-cte, t#e)e$o)e, an& inc)ease in t#e )ate o$ )eal
p)ope)t& ta" is %oi( Is t#e)e *e)it in t#e p)otestD E"plain
&o-) ans,e)(
Ans,e)A
Ges, t#e)e is *e)it in t#e sai p)otest(
T#e local 'o%e)n*ent coe p)o%ie t#at p-+lic #ea)in's
s#all +e con-cte $o) t#e p-)pose p)io) to t#e enact*ent
o$ local ta"es( T#is )e:-i)e*ent is *anato)&(
Co**-nit& Ta"es
Ini%i-als Lia+le to Co**-nit& Ta"(
E%e)& in#a+itant o$ t#e P#ilippines
;1= ei'#teen ;1K= &ea)s o$ a'e o) o%e)
;2= ,#o #as +een )e'-la)l& e*plo&e on a ,a'e o) sala)& +asis $o) at least
t#i)t& ;3H= consec-ti%e ,o)/in' a&s -)in' an& calena) &ea), o) ,#o is
en'a'e in +-siness o) occ-pation, o) ,#o o,ns )eal p)ope)t& ,it# an
a'')e'ate assesse %al-e o$ One t#o-san pesos ;P1,HHH(HH= o) *o)e,
o) ,#o is )e:-i)e +& la, to fle an inco*e ta" )et-)n s#all pa& an
ann-al aitional ta" o$ Fi%e pesos ;P5(HH= an an ann-al aitional ta"
1,+
o$ One peso ;P1(HH= $o) e%e)& One t#o-san pesos ;P1,HHH(HH= o$ inco*e
)e'a)less o$ ,#et#e) $)o* +-siness, e"e)cise o$ p)o$ession o) $)o*
p)ope)t& ,#ic# in no case s#all e"cee Fi%e t#o-san pesos ;P5,HHH(HH=(
In t#e case o$ #-s+an an ,i$e, t#e aitional ta" #e)ein i*pose s#all +e
+ase -pon t#e total p)ope)t& o,ne +& t#e* an t#e total ')oss )eceipts o)
ea)nin's e)i%e +& t#e*(
N-)iical Pe)sons Lia+le to Co**-nit& Ta"(
E%e)& co)po)ation no *atte) #o, c)eate o) o)'ani1e, ,#et#e) o*estic o)
)esient $o)ei'n, en'a'e in o) oin' +-siness in t#e P#ilippines s#all pa&
an ann-al co**-nit& ta" o$ Fi%e #-n)e pesos ;P5HH(HH= an an ann-al
aitional ta", ,#ic#, in no case, s#all e"cee Ten t#o-san pesos
;P1H,HHH(HH= in acco)ance ,it# t#e $ollo,in' sc#e-leA
;2= Fo) e%e)& Fi%e t#o-san pesos ;P5,HHH(HH= ,o)t# o$ )eal p)ope)t& in t#e
P#ilippines o,ne +& it -)in' t#e p)ecein' &ea) +ase on t#e
%al-ation -se $o) t#e pa&*ent o$ )eal p)ope)t& ta" -ne) e"istin' la,s,
$o-n in t#e assess*ent )olls o$ t#e cit& o) *-nicipalit& ,#e)e t#e )eal
p)ope)t& is sit-ate . T,o pesos ;P2(HH=8 an
;3= Fo) e%e)& Fi%e t#o-san pesos ;P5,HHH(HH= o$ ')oss )eceipts o) ea)nin's
e)i%e +& it $)o* its +-siness in t#e P#ilippines -)in' t#e p)ecein'
&ea) . T,o pesos ;P2(HH=(
T#e i%iens )ecei%e +& a co)po)ation $)o* anot#e) co)po)ation #o,e%e)
s#all, $o) t#e p-)pose o$ t#e aitional ta", +e consie)e as pa)t o$ t#e
')oss )eceipts o) ea)nin's o$ sai co)po)ation(
E"e*ptions(
T#e $ollo,in' a)e e"e*pt $)o* t#e co**-nit& ta"A
;1= !iplo*atic an cons-la) )ep)esentati%es8 an
;2= T)ansient %isito)s ,#en t#ei) sta& in t#e P#ilippines oes not e"cee
t#)ee ;3= *ont#s(
Real P)ope)t& Ta"es
F-na*ental P)inciples 'o%e)nin' app)aisal an assess*ent o$ )eal p)ope)t&
T#e app)aisal an assess*ent o$ )eal p)ope)t& $o) ta"ation p-)poses s#all +e
'-ie +& t#e $ollo,in' $-na*ental p)inciplesA
1( Real p)ope)t& s#all +e app)aise at its c-))ent an $ai) %al-e8
2( Real p)ope)t& s#all +e classife $o) assess*ent p-)poses on t#e +asis
o$ its act-al -se8
3( Real p)ope)t& s#all +e assesse on t#e +asis o$ a -ni$o)* stana) o$
%al-e ,it#in eac# local 'o%e)n*ent -nit8
4( T#e app)aisal, assess*ent, le%el an collection o$ )eal p)ope)t& ta"
s#all not +e le$t to an& p)i%ate pe)son8 an
5( T#e app)aisal an assess*ent o$ )eal p)ope)t& s#all +e e:-ita+le(
2HHH 0a) 1<;a=
B-estionA
Gi%e at least t,o ;2= $-na*ental p)inciples 'o%e)nin' )eal
p)ope)t& ta"ation, ,#ic# a)e li*itations on t#e ta"in'
11,
po,e) o$ local 'o%e)n*ents inso$a) as t#e le%&in' o$ t#e
)ealt& ta" is conce)ne(
Ans,e)A
1( Real p)ope)t& s#all +e app)aise at its c-))ent an $ai) %al-e8
2( Real p)ope)t& s#all +e classife $o) assess*ent p-)poses on t#e
+asis o$ its act-al -se8
3( Real p)ope)t& s#all +e assesse on t#e +asis o$ a -ni$o)*
stana) o$ %al-e ,it#in eac# local 'o%e)n*ent -nit8
4( T#e app)aisal, assess*ent, le%el an collection o$ )eal p)ope)t&
ta" s#all not +e le$t to an& p)i%ate pe)son8 an
5( T#e app)aisal an assess*ent o$ )eal p)ope)t& s#all +e e:-ita+le(
Classes o$ )eal p)ope)t& $o) assess*ent p-)poses
Fo) p-)poses o$ assess*ent, )eal p)ope)t& s#all +e classife as
1( )esiential
2( a')ic-lt-)al
3( co**e)cial
4( in-st)ial
5( *ine)al,
7( ti*+e)lan, o)
9( special
T#e cit& o) *-nicipalit& ,it#in t#e Cet)opolitan Canila A)ea t#)o-'# t#ei)
)especti%e San''-nian, s#all #a%e t#e po,e) to classi$& lans, as )esiential,
a')ic-lt-)al, co**e)cial, in-st)ial, *ine)al, ti*+e)lan, o) special, in
acco)ance ,it# t#ei) 1onin' o)inances(
Special classes o$ )eal p)ope)t&
All lans, +-ilin's, an ot#e) i*p)o%e*ents t#e)eon act-all&, i)ectl& an
e"cl-si%el& -se $o)
;7= #ospitals,
;9= c-lt-)al, o) scientifc p-)poses, an
;K= t#ose o,ne an -se +& local ,ate) ist)icts, an 'o%e)n*ent.
o,ne o) cont)olle co)po)ations )ene)in' essential p-+lic
se)%ices in t#e s-ppl& an ist)i+-tion o$ ,ate) an o)
'ene)ation an t)ans*ission o$ elect)ic po,e)(
E"e*ptions $)o* Real P)ope)t& Ta"
T#e $ollo,in' a)e e"e*pte $)o* pa&*ent o$ t#e )eal p)ope)t& ta"A
;a= Real p)ope)t& o,ne +& t#e Rep-+lic o$ t#e P#ilippines o) an& o$ its
political s-+i%isions e"cept ,#en t#e +enefcial -se t#e)eo$ #as +een
')ante, $o) consie)ation o) ot#e),ise, to a ta"a+le pe)son8
;+= C#a)ita+le instit-tions, c#-)c#es, pa)sona'es o) con%ents app-)tenant
t#e)eto, *os:-es, non.p)oft o) )eli'io-s ce*ete)ies an all lans,
+-ilin's, an i*p)o%e*ents act-all&, i)ectl&, an e"cl-si%el& -se $o)
)eli'io-s, c#a)ita+le o) e-cational p-)poses8
;c= All *ac#ine)ies an e:-ip*ent t#at a)e act-all&, i)ectl& an e"cl-si%el&
-se +& local ,ate) ist)icts an 'o%e)n*ent o,ne o) cont)olle
co)po)ations en'a'e in t#e s-ppl& an ist)i+-tion o$ ,ate) anPo)
'ene)ation an t)ans*ission o$ elect)ic po,e)8
111
;= All )eal p)ope)t& o,ne +& -l& )e'iste)e coope)ati%es as p)o%ie $o)
-ne) R(A( No( 7<3K8 an
;e= Cac#ine)& an e:-ip*ent -se $o) poll-tion cont)ol an en%i)on*ental
p)otection(
2HH2 0a) 1H
B-estionA
Ine) t#e Local Go%e)n*ent Coe ,#at p)ope)ties a)e
e"e*pt $)o* )eal p)ope)t& ta"esD
Ans,e)A
;a= Real p)ope)t& o,ne +& t#e Rep-+lic o$ t#e P#ilippines
o) an& o$ its political s-+i%isions e"cept ,#en t#e
+enefcial -se t#e)eo$ #as +een ')ante, $o)
consie)ation o) ot#e),ise, to a ta"a+le pe)son8
;+= C#a)ita+le instit-tions, c#-)c#es, pa)sona'es o)
con%ents app-)tenant t#e)eto, *os:-es, non.p)oft o)
)eli'io-s ce*ete)ies an all lans, +-ilin's, an
i*p)o%e*ents act-all&, i)ectl&, an e"cl-si%el& -se
$o) )eli'io-s, c#a)ita+le o) e-cational p-)poses8
;c= All *ac#ine)ies an e:-ip*ent t#at a)e act-all&,
i)ectl& an e"cl-si%el& -se +& local ,ate) ist)icts
an 'o%e)n*ent o,ne o) cont)olle co)po)ations
en'a'e in t#e s-ppl& an ist)i+-tion o$ ,ate) anPo)
'ene)ation an t)ans*ission o$ elect)ic po,e)8
;= All )eal p)ope)t& o,ne +& -l& )e'iste)e
coope)ati%es as p)o%ie $o) -ne) R(A( No( 7<3K8 an
;e= Cac#ine)& an e:-ip*ent -se $o) poll-tion cont)ol
an en%i)on*ental p)otection(
Act-al Ise o$ Real P)ope)t& as 0asis $o) Assess*ent(
Real p)ope)t& s#all +e classife, %al-e an assesse on t#e +asis o$ its
act-al -se )e'a)less o$ ,#e)e locate, ,#oe%e) o,ns it, an ,#oe%e) -ses
it(
2HH2 0a) 11
B-estionA
T#e )eal p)ope)t& o$ C)( An C)s( An'eles, sit-ate in a
co**e)cial a)ea in $)ont o$ t#e p-+lic *a)/et, ,as ecla)e
in t#ei) Ta" !ecla)ation as )esiential +eca-se it #a +een
-se +& t#e* as t#ei) $a*il& )esience $)o* t#e ti*e o$ its
const)-ction in 1<<H( Ho,e%e), since Nan-a)& 1<<9, ,#en
t#e spo-ses le$t $o) t#e Inite States to sta& t#e)e
112
pe)*anentl& ,it# t#ei) c#il)en, t#e p)ope)t& #as +een
)ente to a sin'le p)op)ieto) en'a'e in t#e sale o$
appliances an a')i.p)o-cts(
T#e P)o%incial Assesso) )eclassife t#e p)ope)t& as
co**e)cial $o) ta" p-)poses sta)tin' Nan-a)& 1<<K( C)(
C)s( An'eles appeal to t#e Local 0oa) o$ Assess*ent
Appeals, contenin' t#at t#e Ta" !ecla)ation p)e%io-sl&
classi$&in' t#ei) p)ope)t& as )esiential is +inin'(
Ho, s#o-l +e t#e appeal +e ecieD
Ans,e)A
T#e appeal ,ill +e ecie in $a%o) o$ t#e 'o%e)n*ent $o)
t#e Local Go%e)n*ent Coe p)o%ies t#at Real p)ope)t&
s#all +e classife, %al-e an assesse on t#e +asis o$ its
act-al -se )e'a)less o$ ,#e)e locate, ,#oe%e) o,ns it,
an ,#oe%e) -ses it(
2HH1 0a) 2H
B-estionA
Ine) A)ticle 415 o$ t#e Ci%il Coe, in o)e) $o) *ac#ine)&
an e:-ip*ent to +e consie)e )eal p)ope)t&, t#e& *-st
+e place +& t#e o,ne) o$ t#e lan an, in aition, *-st
ten to i)ectl& *eet t#e nees o$ t#e in-st)& o) ,o)/s
ca))ie on +& t#e o,ne)( Oil Co*panies, s-c# as Calte" an
S#ell, install -ne)')o-n tan/s in t#e 'asoline stations
locate on lan lease +& t#e oil co*panies $)o* ot#e)s(
A)e t#ose -ne)')o-n tan/s, ,#ic# ,e)e not place t#e)e
+& t#e o,ne) o$ t#e lan +-t ,#ic# ,e)e instea place
t#e)e +& t#e lessee o$ t#e lan, consie)e )eal p)ope)t&
$o) p-)poses o$ )eal p)ope)t& ta"ation -ne) t#e Local
Go%e)n*ent CoeD E"plain &o-) ans,e)(
Ans,e)A
Ges, t#e -ne)')o-n tan/s o$ t#e oil co*panies constit-te
R*ac#ine)&E $o) Real P)ope)t& Ta" p-)poses( It is t#e
>+enefcial -se? o$ t#e tan/s t#at *a/e it pa)t o$ t#e
ta"a+le )eal p)ope)t&( In aition, sai tan/s a)e -se
act-all& an i)ectl& in t#e +-siness o$ pet)ole-* )etailin'(
Gene)al Re%ision o$ Assess*ent an P)ope)t& Classifcation(
;Sec( 21< o$ t#e Local Go%e)n*ent Coe\
T#e p)o%incial, cit& o) *-nicipal assesso) s#all -ne)ta/e a 'ene)al )e%ision
o$ )eal p)ope)t& assess*ents ,it#in t,o ;2= &ea)s a$te) t#e eJecti%it& o$ t#is
Coe an e%e)& t#)ee ;3= &ea)s t#e)ea$te)(
Local 0oa) o$ Assess*ent Appeals(
An& o,ne) o) pe)son #a%in' le'al inte)est in t#e p)ope)t& ,#o is not
satisfe ,it# t#e action o$ t#e p)o%incial, cit& o) *-nicipal assesso) in t#e
assess*ent o$ #is p)ope)t& *a&, ,it#in si"t& ;7H= a&s $)o* t#e ate o$
113
)eceipt o$ t#e ,)itten notice o$ assess*ent, appeal to t#e 0oa) o$
Assess*ent Appeals o$ t#e p)o%incial o) cit& +& flin' a petition -ne) oat#
in t#e $o)* p)esc)i+e $o) t#e p-)pose, to'et#e) ,it# copies o$ t#e ta"
ecla)ations an s-c# aOa%its o) oc-*ents s-+*itte in s-ppo)t o$ t#e
appeal(
Aitional Le%& on Real P)ope)t& $o) t#e Special E-cation F-n(
A p)o%ince o) cit&, o) a *-nicipalit& ,it#in t#e Cet)opolitan Canila A)ea,
*a& le%& an collect an ann-al ta" o$ one pe)cent ;1F= on t#e assesse
%al-e o$ )eal p)ope)t& ,#ic# s#all +e in aition to t#e +asic )eal p)ope)t&
ta"( T#e p)ocees t#e)eo$ s#all e"cl-si%el& acc)-e to t#e Special E-cation
F-n ;SEF=(
Aitional A Valo)e* Ta" on Ile Lans(
A p)o%ince o) cit&, o) a *-nicipalit& ,it#in t#e Cet)opolitan Canila A)ea,
*a& le%& an ann-al ta" on ile lans at t#e )ate not e"ceein' f%e pe)cent
;5F= o$ t#e assesse %al-e o$ t#e p)ope)t& ,#ic# s#all +e in aition to t#e
+asic )eal p)ope)t& ta"(
2HHH 0a) 1<+
B-estionA
Ca& local 'o%e)n*ents i*pose an ann-al )ealt& ta" in
aition to t#e +asic )eal p)ope)t& ta" on ile o) %acant lots
locate in )esiential s-+i%isions ,it#in t#ei) )especti%e
te))ito)ial 6-)isictionD
Ans,e)A
Ges, A p)o%ince o) cit&, o) a *-nicipalit& ,it#in t#e
Cet)opolitan Canila A)ea, *a& le%& an ann-al ta" on ile
lans at t#e )ate not e"ceein' f%e pe)cent ;5F= o$ t#e
assesse %al-e o$ t#e p)ope)t& ,#ic# s#all +e in aition to
t#e +asic )eal p)ope)t& ta"(
114