other than as a mere return of capital.

3. Capital - resource of person which can be used in

producing goods and services.
Requisites for Income to be Taxable:
1. gain or profit
2. realized or received
3. not excluded by law or treaty
TESTS ON TAA!I"IT# O$ INCO%E
1. $lo& of 'ealt( Test - whether any gain or the
flow of wealth profit was derived from the
transaction.
2. Reali)ation Test - unless the income is deemed
"realized," there is no taxable income.
3. Economic-!enefit *rinciple - flow of wealth
realized is taxable only to the extent that the
taxpayer is economically benefited.
C"ASSI$ICATION O$ TA*A#ERS:
a. In+i,i+uals
1 citizens
1 1.1. resident citizens !"#
2 1.2. non-resident citizens !$"#
1.3 %#&'
2 aliens
(.1 resident aliens !")
(.2 non-resident aliens
2.2.1.engaged in trade or business
within the *hils. !$")+,-
3 2.2.2.$ot engaged in trade or business
within the *hilippines !$")$+,-
b. Corporations
1 .omestic !.#
2 /oreign
2.1 resident foreign corporation !"/#
2.2 non-resident foreign corporation !$"/#
c. Estates
d. Trusts
-n+er R.A. ./0/ or t(e CTR*:
). A non-resi+ent citi)en means1 a $ilipino
citi)en:
1. who establishes to the satisfaction of the
#ommissioner the fact of their physical presence
abroad with a definite intention to reside therein0
2. who leave the *hilippines during the taxable
year to reside abroad, either as an immigrant or
for employment on a permanent basis0
3. who wor1 and derive income from abroad and
whose employment thereat re2uires them to be
physically present abroad most of the time
during the taxable year0
3. who are previously considered as a non-resident
and who arrive in the *hilippines at anytime
during the taxable year to reside thereat
permanently shall be considered non-resident
for the taxable year in which he arrives in the
*hilippines with respect to his income derived
from sources abroad until the date of his arrival
2Sec.00e1 CTR*.3
-. ) resi+ent alien means an individual whose
residence is within the *hilippines and who is not
a citizen thereof. 4Sec.00f5
#. ) non-resi+ent alien means an individual whose
residence is not within the *hilippines and who is
not a citizen thereof. 4Sec.0045
.. ,he term tra+e or business includes the
performance of the functions of as a public office.
4Sec. 00S5
+. ,he term tra+e1 business or profession shall
not include performance of services by the
taxpayer as an employee. 4Sec. 00 CC5
/. ) non-resi+ent alien in+i,i+ual who shall come
to the *hilippines and stay therein for an
aggregate period of more than 167 days during
any calendar year shall be deemed a non-
resident alien doing business in the *hilippines
8ection 22!9 notwithstanding 5Sec. 062A32738
9. ,he term corporation shall include:
1. *artnerships, no matter how formed or created,
except !i general professional partnerships and
!ii a ;oint venture or consortium formed for the
purpose of underta1ing construction pro;ects or
engaging in petroleum, coal, geothermal and
other energy operations pursuant to an operating
or consortium agreement under a service
contract with the 9overnment0
2. ;oint-stoc1 companies0
3. ;oint accounts !cuentas en participacion
3. associations0 or
<. insurance companies 5Sec. 002!38.
=. ) 4eneral *rofessional *artners(ip means:
a a partnership formed by persons for
the sole purpose of exercising their common
profession0 and
b no part of the income of which is
derived from engaging in any trade or
business 48ec. 22!-5.
- if t(e requirements are met1 it is exempt from
income taxation.
(. 9omestic Corporation >created or organized in
the *hils. or under its law 4 8ec. 22!#5
?. $orei:n corporation > a corporation which is not
domestic 5Sec. 002938
@. Resi+ent $orei:n Corporation > engaged in
trade or business within the *hilippines 5Sec.
002;38
A. Non-resi+ent $orei:n Corp. > not engaged in
trade or business within the *hilippines 5Sec.
002I38
,he income of taxable estates and trusts shall be
taxed in the same manner as any other individual
taxpayer. 48ec. B7 !)5
ON"# RESI9ENT CITI<ENS an+ 9O%ESTIC
COR*ORATIONS are taxable for income +eri,e+
from sources &it(in an+ &it(out t(e *(ilippines.
All ot(er income taxpa=ers are taxable onl= for
income +eri,e+ from sources &it(in t(e
*(ilippines.
>IN9S O$ INCO%E TAES -N9ER
R.A. ./0/:
!1 $et (ncome ,ax
!2 9ross (ncome ,ax
!3 /inal (ncome ,ax
!3 *referential "ates or 8pecial "ates of
(ncome ,ax
!< (mproperly )ccumulated +arnings ,ax
!B Cinimum #orporate (ncome ,ax
!D %ptional corporate (ncome tax
NET INCO%E TA
9efinition: Ceans gross income less deductions
andEor personal and additional exemptions 2Sec. 371
RA ./0/3
NET INCOME TAX FORMULA
+ntire (ncome
Aess: +xclusions and (ncome sub;ect to /inal
,ax!e.g. *assive (ncome
9ross (ncome
Aess: .eductions !andEor addFl exemptions, if
applicable
$et ,axable (ncome
,ax "ates
$et (ncome ,ax .ue
Aess: ,ax #redit, if any
,ax 8till due, if any

4ROSS INCO%E
9efinition: (ncludes but not limited to the
following :
1. compensation0
2. business income0
3. gains form dealings in property0
3. interests0
<. rents0
B. royalties0
D. dividends0
6. annuities0
G. prizes and winnings0
17. pensions0
11. partnerFs share in the net income of
the general professional partnership
2Sec. 301 CTR*3
>E#: . -(9 #)"H*I
Exclusions from 4ross Income:
1. proceeds of life insurance
$%,+: if the proceeds are retained by the
insurer, the interest thereon is taxable0
2. "eturn of premium0
3. 9ift, be2uest or devise0
$%,+: income therefrom is taxable
3. #ompensation for in;uries or sic1ness0
<. (ncome exempt under ,reaty0
B. "etirement benefits, pension, gratuities, etc.
D. Ciscellaneous items
Retirement !enefits1 *ension1 4ratuities1 Etc.:
1. those derived under ".). DB31 !pertains to
private firms without retirement trust fund0
2. those received by officials and employees of
private employers in accordance with a
reasonable private benefit plan0
Requisites:
a in the service of the same employer
for at least 17 years0
b at least <7 years old0
c must be availed of only once
d plan approved by the -(" 2R.R. 0-
?.3@
3. separation pay because of death, sic1ness, or
other physical disability or for any cause beyond
the control of the official or employee0
3. social security benefits, retirement gratuities,
pensions and other similar benefits received by
citizens and aliens who come to reside
permanently here from foreign sources private or
public0
<. benefits due to residents under the laws of the
J.8. administered by the J.8. Keterans
)dministration
B. 888 benefits0 and
D. 98(8 benefits.
%iscellaneous Items
1. *assive income derived by foreign government in
the *hilippines0
2. (ncome derived from any public utility or from the
exercise of any governmental function0
3. *rizes and awards made primarily in recognition
of religious, charitable, scientific, educational,
artistic, literary, or civic achievement !#
2
A)"+8:
Requisites:
a. recipient selected without any action on his
part0
b. recipient not re2uired to render substantial
future services.
3. *rizes and awards granted to athletes in sports
competitions and sanctioned by their national
sports association 0
<. 13
th
month pay and other benefits up to
*37,777.770
B. 98(8,888, Cedicare and union dues of
individuals0
D. 9ains derived from debt securities with a maturity
of more than < years0
6. 9ains from redemption of shares in Cutual /und
9E9-CTIONS
9efinition: (tems or amounts which the law
allows to be deducted from gross income in order to
arrive at the taxable income.
>in+s of 9e+uctions:

2
1. Optional stan+ar+ +e+uctions >17L of the
gross income.
0. Itemi)e+ +e+uctions
!a ordinary AN9 necessary expenses
!b interests
!c taxes
!d losses
!e bad debts
!f depreciation of property0
!g depletion of oil and gas wells and
mines0
!h charitable and other contributions0
!i research and development0
!; pension trust contributions of
employees0 and
!1 premium payments on health andEor
hospitalization insurance
3. *ersonal an+ a++itional exemptions
3. Special +e+uctions A applicable only to
(nsurance companies, whether domestic or
foreign. 2Sec. 3B1 CTR*3.
a. OR9INAR# AN9 NECESSAR# E*ENSES:
Necessar= Expense - appropriate and helpful in
the development of taxpayerMs business.
Or+inar= Expense - normal or usual in the line
of business.
Requisites of !usiness Expense to be
9e+uctible:
1. ordinary and necessary0
2. paid or incurred wEin the taxable year0
3. paid or incurred in carrying on a trade or
business0
3. substantiated with official receipts or other
ade2uate records.
Capital Expen+iture:
)n expenditure that benefits not only the
current period but also future periods. (t is not
deductible but depreciable, ECE*T, if the taxpayer
is a non-profit proprietary educational institution
which may elect either to deduct the capital expense
or depreciate it.
b. INTEREST:
Requisites to be deductible:
1. debt belongs to the taxpayer0
2. debt must be related to the business or
profession of the taxpayer0
3. interest should be legally due0
3. interest paid or accrued during the taxable
year.
Interest *a=ments not 9e+uctible:
1. interest paid on indebtedness to finance
petroleum explorations0
2. interest on transactions by related parties
!transactions-at-arms-length:
3. interest to purchase or carry tax-exempt
obligations0
3. dividend payments cannot be deducted as
interest0 and
<. interest paid in advance thru discount or
otherwise, ECE*T that it is deductible in the
year indebtedness is paid.
c. TAES:
Requisites to be deductible:
1. must be in connection with taxpayerFs business0
2. tax must be imposed by law on , and payable by,
taxpayer0 and
3. paid or incurred during the taxable year.
Exceptions:
1. income tax0
2. estate and donorFs tax0
3. special assessments0
3. excess electric consumption tax0
<. foreign income tax, war profits and excess profits
tax, if the taxpayer ma1es use of tax credit0 and
B. final taxes, being in the nature of income tax.
- ,axes allowed as deductions, when refunded or
credited, shall be included as part of gross
income in the year of receipt to the extent of the
income tax benefit of said deduction !,ax -enefit
"ule.
- /or $")+,- and "/#, taxes paid or incurred are
allowed as deductions only if and to the extent
that they are connected from income within the
*hilippines.
+. "OSSES:

Requisites to be deductible:
1. actually sustained0
2. connected with the business, trade or profession0
and
3. not compensated by insurance or otherwise.
T(e follo&in: losses are subCect to special rules
un+er t(e CTR* 2taDe note of t(e pertinent
pro,isions3:
1. #apital losses
2. 8ecurities becoming worthless
3. &ash sales
3. &agering losses
<. )bandonment losses
B. Aosses of mines other than oil and gas
wells
e. !A9 9E!TS
Requisites to be deductible:
1. Kalid and subsisting debt0
2. .ebt must be actually ascertained to be
worthless and uncollectible0
3. %bligation is not between related parties
!8ec. 3B b #,"*0
3. .ebt is expensed within the year0 and
<. .ebt is connected with profession, trade or
business.
Equitable 9octrine of Tax !enefit
) recovery of bad debts previously deducted
from gross income constitutes taxable income if in
the year the account was written off, the deduction
resulted in a tax benefit.
3
f. 9E*RECIATION:

Requisites to be deductible:
1. Cust be reasonable0
2. Cust be on property used in the conduct of
the business0
3. Cust be expensed during the taxable year0
:. 9E*"ETION O$ OI" AN9 4AS 'E""S AN9
%INES
- same re2uisites as depreciation
(. C;ARITA!"E AN9 OT;ER CONTRI!-TIONS
*artial 9e+uction:
- not in excess of <L of taxable income in case of
a corporation
- not in excess of 17L of the taxable income in
case of an individual
9e+uctible in $ull:
1. .onations to the government
2. .onation to certain foreign institutions or
international organizations.
3. .onations to certain accredited $9%Fs .
*ERSONA" EE%*TIONS
Amounts of *ersonal Exemptions 2Sec. 36 of
CTR*3:
1. 8ingle individual or married individual ;udicially
decreed as legally separated with no 2ualified
dependents: *27,777
2. =ead of the family: *2<,777
3. +ach married person: *32,777
;ea+ of t(e $amil=:
1. Jnmarried or legally separated person with one
or both parents, or one or more brothers or
sisters, or one or more legitimate, recognized
natural or legally adopted children living with and
dependent upon the taxpayer for their chief
support0 and
2. &here such brother E sister or children are not
more than 21 years of age, unmarried and not
gainfully employed, or where such dependents
regardless of age, are incapable of self >
support because of mental or physical defect.
A++itional Exemption for 9epen+ents:
*6,777 for each dependent not to exceed 3.
Eualifications of a +epen+ent:
1. legitimate, illegitimate or legally adopted child of
the taxpayer
2. chiefly dependent upon and living with the
taxpayer
3. not more than 21 years old, unmarried )$. not
gainfully employed or where such dependents
regardless of age are incapable of self-support
because of mental of physical defect.
Clarificator= Illustrations:
1. (f only 1G years old but married, not 2ualified as
a dependent.
2. +ven if 2< years old but physically incapacitated,
2ualified as a dependent.
3. .ependent does not include the parents, brothers
and sisters of the taxpayer.
3. (f there is any change of status at any time during
the taxable year, the law expressly favors the
taxpayer.
<. /or a $")+,-, only to the extent allowed by his
country to /ilipinos not residing therein, but not to
exceed the above amounts. )dditionally, he
must file a true and accurate return of the total
income received by such $")+,- from all
sources within the *hilippines.
OT;ER INCO%E TAES AS 9E$INE9
7. $inal Income Tax > is derived by multiplying the
tax rate on the particular income sub;ect to a final
income tax. ,hus, the income sub;ect to final
income tax is no longer sub;ect to the net income
tax0 otherwise, there would be a violation of
prohibited double taxation. )pplicable to passive
income and from sources derived from within the
*hilippines as determined under Sec. /0 of t(e
CTR*. .eductions andEor personal and additional
exemptions are not allowed.
0. Income subCect to *referential or Special
Rates > here, the income derived by a particular
individual or corporation belonging to a class of
income taxpayer is sub;ect to either a preferential
or special rate.
3. Improperl= Accumulate+ Earnin:s Tax > a tax
e2uivalent to 17L of the improperly accumulated
taxable income of every corporation formed or
availed of for the purpose of avoiding the income
tax with respect to its shareholders or the
shareholders of any other corporation, by
permitting earnings and profits to accumulate
instead of being divided or distributed.
/. %inimum Corporate Income Tax > ) tax at the
rate of 2L based on gross income imposed on
domestic and resident foreign corporations not
covered by a special income tax system,
beginning the 3
th
taxable year in which such
corporation commenced its business operations.
It is impose+ &(ene,er suc( corporation (as
2a3 zero or negative net taxable income0 or 2b3 the
amount of minimum corporate income tax is
greater than the normal income tax due from
such corporation.
6. Optional Corporate Income Tax - ,he
*resident, upon recommendation of the
8ecretary of /inance may, effective ?an. 1, 2777,
allow corporations the option to be taxed at 1<L
of gross income sub;ect to the following
conditions:
1 ) tax effort ratio of 27L of 9$*0
2 ) ratio of 37L of income tax to total
tax revenue0
3 ) K), tax effort of 3L of 9$*
3 ) %.GL ratio of #onsolidated *ublic
8ector /inancial *osition to 9$*.
$.-.: )vailable only to firms whose ratio of
cost of sales to gross sales or receipts from
all sources does not exceed <<L.
3
INCO%E TA INCI9ENCE
ON SA"ES OR EC;AN4ES O$ *RO*ERT#
Sale on Exc(an:e of Or+inar= Assets
9eneral rules of income taxation apply to
both as to the gain and as to the loss.
Transaction Resultin: in Taxable 4ains but
Non-Reco:nition of "osses
a. 8ale or exchange between related parties0
b. &ash sales by non-dealers of securities and
when not sub;ect to the stoc1 transfer tax0
c. +xchanges not solely in 1ind in merger and
consolidation0 and
d. 8ales or exchanges that are not at arms length.
Sale or Exc(an:e of Real *ropert=1 an+
S(ares of StocDs of 9omestic Corporation ;el+
as Capital Assets SubCect to Capital 4ains Tax
As to individuals and domestic corporations
1. On real propert= > each independent
transaction is sub;ect to the final tax of BL on
the gross selling price or the fair mar1et value at
the time of sale, whichever is higher, regardless
of gain or loss
2. S(ares of stocD of domestic corporation not
traded thru a local exchange taxed at the rate of
<L for net capital gains not over *177,, and
17L in excess of *177,.
Tax Exempt Exc(an:es:
a. +xchange solely in 1ind in mergers and
consolidation0
b. +xchange of property for stoc1s resulting in a
change in corporate control
$I"IN4 O$ TA RET-RN AN9 *A#%ENT
O$ T;E TA
Tax Return > (t is the sole declaration of
taxpayer that incorporates all the dataEfacts
necessary for government to determine the amount
of tax. ,here is pain of per;ury if not correct.
*ersons Require+ to $ile Income Tax Return:
A. In+i,i+ual
1. "esident citizen0
2. $on-resident citizen on income from within
the *hil.0
3. "esident alien on income from within the
*hil.0
3. $")+,- on income from within the *hil.
<. )n individual !citizens E aliens engaged in
business or practice of a profession within
the *hil. regardless of the amount of gross
income0
B. (ndividual deriving compensation income
concurrently from two or more employers at
any time during the taxable year0
D. (ndividual whose pure compensation income
derived from sources within the *hil.
exceeds *B7,777.
!. Taxable Estate an+ Trust
C. 4eneral *rofessional *artners(ip
9. Corporation
1. $ot exempt from income tax0
2. +xempt from income tax under 8ec. 37 of
$("# but has not shown proof of exemption.
In+i,i+uals Exempt $rom $ilin: Income Tax
Return:
1. (ndividual whose gross income does not exceed
total personal and additional exemptions0
2. (ndividual with respect to pure compensation
income derived from sources within the *hils., the
income tax on which has been correctly withheld0
3. (ndividual whose sole income has been sub;ected
to final withholding income tax0
3. (ndividual who is exempt from income tax.
TRANS$ER TAES
TRANS$ER TA INCO%E TA
1. ,ax on transfer of
property.
1. ,ax on income
2. "ates are lower
--<L to 27L -
estate tax
-- 2L to 1< L -
donorFs tax
2. "ates are higher
-- <L to 32L
3. Aesser exemptions 3. Core exemptions
ESTATE TA
ESTATE TAX FORMULA
9ross +state !8ec. 6<
Aess: !1 .eductions !8ec. 6B
!2 $et share of the 88 in the #*
$et +state
Aess: +xemptions !first *277,777 exemption,
8ec. 63
$et ,axable +state
,ax rate !8ec. 63
+state ,ax due
Aess: ,ax #redit 4if any5 !8ec. 6B4+5 or 1174-5
+state ,ax .ue, if any

4ROSS ESTATE 2Sec. .61 CTR*3
A. As to resi+ent alien or $ilipino +ece+ent
- all real, tangible personal, intangible
personal property wherever situated.
A. As to non-resi+ent alien +ece+ent
- all real and tangible personal property
situated in the *hil.
- (ntangible personal property with a situs
in the *hil. Jnless exempted on the basis
of reciprocity.
Inclusions in t(e 4ross Estate 2Sec. .61 CTR*3:
a. .ecedentFs interest
b. ,ransfer in contemplation of death
c. "evocable transfer
d. ,ransfer under general power of
appointment
e. *roceeds of life insurance
f. ,ransfers for insufficient consideration
g. *rior interests
Exempt Transmissions 2Sec. .B1 CTR*3:
1. ,he merger of usufruct in the owner of the na1ed
title0
2. /ideicommisary substitution0
<
3. ,he transmission from the first heir, legatee or
donee in favor of another beneficiary, in
accordance with the will of the predecessor0 and
3. )ll be2uests, devices, legacies or transfers to
social welfare, cultural and charitable institutions
no part of the net income of which inures to the
benefit of any individual0 *rovided, that not more
than 37L of the said be2uests, legacies or
transfers shall be used by such institutions for
administration purposes.
Falue of 4ross Estate:
,he gross estate shall be valued at its fair
mar1et value at the time of death of the decedent.
9e+uctions from t(e 4ross Estate
). /or resident aliens and citizens !+A(,, ,K/8)C
1. +xpenses, losses, indebtedness,
taxes, etc. !+A(,-/?##JA,
a. funeral expenses
b. ;udicial expenses
c. claims against the estate
d. claims against insolvent person
e. unpaid mortgages
f. taxes
g. losses
2. ,ransfer for public use
3. Kanishing deduction
3. /amily home
<. 8tandard deduction
B. Cedical expenses
D. )mounts received by heirs under
") 3G1D !"etirement -enefits
-. /or non-resident aliens !+A(,-,K
1. +xpenses, losses, indebtedness, taxes,
etc. !/?##JA,
2. ,ransfer for public use
3. Kanishing deduction
9E9-CTIONS ON
ESTATE TA A**"ICA!"E TO
RESI9ENT A"IENS AN9 CITI<ENS:
$uneral Expenses:
,he amount deductible is the lowest among the
following:
1. actual funeral expenses
2. <L of the gross estate
3. *277,777
Claims a:ainst t(e Estate:
Requisites to be deductible:
1. ,he debt instrument must be notarized
2. (f loan was contracted within 3 years before the
death of the decedent, the administrator or
executor shall submit a statement showing the
disposition of the proceeds of the loan.
$.-.: ,hese re2uisites do not apply if the claim did
not arise from contractual obligations.
Taxes:
The following are not deductible:
1. income tax on income received after death
2. property taxes not accrued before death
3. estate tax
"osses:
Requisites to be deductible:
1. arising from fire, storm, shipwrec1, or other
casualty, robbery, theft or embezzlement0
2. $ot compensated by insurance or otherwise0
3. $ot claimed as deduction in an income tax return
of the taxable estate0
3. %ccurring during the settlement of the estate0 and
<. %ccurring before the last day for the payment of
the estate tax !last day to pay: six months after
the decedentFs death.
Transfer for *ublic -se:
Requisites to be deductible:
1. ,he disposition is in a last will and testament
2. ,o ta1e effect after death
3. (n favor of the government of the *hil., or any
political subdivision thereof
3. /or exclusive public purposes.
Fanis(in: 9e+uction:
Requisites to be deductible:
1. the present decedent died within < years from
transfer of the property from a prior decedent or
donor.
2. ,he property must be located in the *hils.
3. ,he property formed part of the taxable estate of
the prior decedent, or of the taxable gift of the
donor.
3. ,he estate tax or donorFs tax on the gift must
have been finally determined and paid.
<. ,he property must be identified as the one
received from the prior decedent, or something
ac2uired in exchange therefor.
B. $o vanishing deduction on the property was
allowable to the estate of the prior decedent.
$amil= ;ome:
Requisites to be deductible:
1. 8aid family home must have been the decedentFs
family home.
2. 8aid fact must be certified to by the barangay
captain of the locality where it is located.
3. Caximum of *1,777,777
%e+ical Expenses:
Requisites to be deductible:
1. incurred within one year prior to his death
2. 8ubstantiated with receipts
3. Caximum of *<77,777
9E9-CTIONS ON
ESTATE TA A**"ICA!"E TO
NON-RESI9ENT A"IENS
7. +xpenses, losses, indebtedness and taxes
!+A(,
$ormula:
*hil. 9ross +state N &orld +A(,
&orld 9ross +state
2. ,ransfer for public use.
3. Kanishing deduction on property in the
*hilippines.
Estate Tax Cre+it
FORMULA:
a. One forei:n countr= onl=:
B
3 - ,he tax credit is whichever is lower
between:
1. +state tax paid to the foreign country
2. $,+, foreign country N *hil. estate
tax
$,+, world
!$,+ - $et ,axable +state
b. %ore t(an one forei:n countr=
- ,he credit shall be that which is the lower
amount between Aimit ) and Aimit -
"imit A. &hichever is lower between:
1. +state tax paid to foreign country
2. $,+, foreign country N *hil. estate tax
$,+, world
"imit !. &hichever is lower between:
1. total of estate taxes paid to all foreign
countries
2. $,+ outside *hil. N *hil. estate tax
$,+, world
9ONORGS TA

Requisites: 2A9IC3
1. capacity of the donor
2. donative intent
3. delivery, whether actual or constructive, of the
sub;ect gift
3. acceptance by the donee
Stran:er - a person who is not a brother, sister,
spouse, ancestor and lineal descendant, or of a
relative by consanguinity in the collateral within the
3
th
civil degree.
FORMULA:
a. %n the 1
st
donation of a year:
9ross gifts xxx
Aess: .eductions from gross gifts xxx
$et gifts
N ,ax "ate
xxx
xxx
.onorFs tax on the net gifts
b. %n donation of a subse2uent date during the
year:
9ross gifts made on this date xxx
Aess: .eductions from gross gifts xxx
$et gifts xxx
)dd: )ll prior net gifts within the year xxx
)ggregate net gifts
N ,ax "ate
xxx
xxx
.onorFs tax on aggregate net gifts xxx
Aess: .onorFs tax on all prior net gifts xxx
.onorFs tax on the net gifts on this date xxx
Exemption of certain :ifts:
1. 9ifts made by a resident
a. dowries or gifts made on account of
marriage and before its celebration or within
one year thereafter by parents to each of
their legitimate, illegitimate or adopted
children to the extent of the first *17,777.
b. 9ifts made to or for the use of the $ational
9overnment or any entity created by any of
its agencies which is not conducted for profit,
or to any political subdivision of the said
government.
c. 9ifts in favor of educational, charitable,
religious, cultural or social welfare corporation,
institutions, foundations, trust or philanthropic
organization, research institution or organization,
accredited non-government organization !$9%.
*rovided, that no more than 37L of said gifts shall be
used by such donee for administration purposes.
2. 9ifts made by a non-resident not a citizen of the
*hil.
a. same as !b
b. same as !c except accredited non-
government organization !$9%
Tax cre+it for +onorGs taxes pai+ to a forei:n
countr=:
7. .onor was a /ilipino citizen or resident
alien
2. )t time of foreign donation
3. .onorFs taxes of any character and
description
3. )re imposed and paid by the authority of
a foreign country.
"imitations on tax cre+it:
1. ,he amount of the credit in respect to the tax paid
to any country shall not exceed the same
proportion of the tax against which such credit is
ta1en, which the decedentFs net gifts situated
within such country taxable under the $("# bears
to his entire net gift0 and
0. ,he total amount of the credit shall not exceed
the same proportion of the tax against which such
credit is ta1en, which the decedentFs net gift
situated outside the *hilippines taxable under the
$("# bears to his entire net gift.
FORMULA:
a. /or donorFs taxes paid to one foreign country
$9 situated in a foreign country N *.,
+ntire net gifts
O ,ax credit limit
!$9 - $et 9ifts0 *., - *hil. .onorMs ,ax
b. /or donorFs taxes paid to two or more foreign
country
$9 outside the *hil. N *.,
+ntire net gifts
O,ax credit limit
,he allowable tax credit is the lower amount between
the tax credit limit under !a and !b.
E*AN9E9 FA"-E A99E9 TA
D
*ersons liable to *a= t(e FAT: 2 S ! E " S
I 3
1. )ny person whether natural of ;uridical who, in
the course of trade or business, sells, barters,
exchanges, or leases goods or properties, or
renders services0
2. )ny person who imports goods whether for
business or non-business purpose0 and
provided, gross receipts is more than
*<<7,777.77, otherwise,
more than *177, but less than *<<7, >3L
percentage tax
less than *177, > no business tax liability
Transactions SubCect to FAT: 2S I T S 3
1. every sale, barter, or exchange, leases goods
or properties made in the course of
trade or business0
0. transactions deemed sale for K), purposes0
3. importation of goods0 and
3. every sale of service made in the course of
trade or business other than services
rendered by persons sub;ect to Pother percentage
taxesQ.
Elements of FAT :
1. sale must be made in the *hilippines0
2. sale must be of taxable goods, properties or
services0 and
3. sale must be made by a taxable person in the
course or furtherance of his business.
Rate Structure un+er t(e FAT S=stem:
1 1. 0% rate for export sales and persons whose
sales are effectively zero-rated and zero-rated
sales of services0 and
2. 10% for all other articles and transactions
covered by the K),.
Input Tax tax on purchase price of goods
which is passed on or shifted to a buyer E
purchaser Elessee by the supplier E seller E lessor. (t
is the K), paid by a K),-registered person in the
course of his trade or business.
Output Tax-- K), due on the sale of taxable
goods or services by any person registered or
re2uired to register for K), purposes.
Transitional Input Tax Cre+it person who
becomes liable to K), or any person who elects to
be a K),-registered person shall, sub;ect to the
filing of an inventory of goods, material and supplies
e2uivalent to 6L of value of such inventory or the
actual K), paid on such goods, materials and
supplies, whichever is higher, which shall be
creditable against the output tax.
Export Sales sale and shipment or exportation
of goods from the *hilippines to a foreign #ountry
irrespective of any shipping arrangement that may
be agreed upon which may influence or determine
the transfer of ownership of the goods so exported,
or foreign-currency denominated sales.
$orei:n Currenc= 9enominate+ Sales > sales to
non-residents of goods assembled or manufactured
in the *hilippines for delivery to residents in the
*hilippines and paid for in convertible foreign
currency remitted through the ban1ing system in the
*hilippines.
ZERO-RATED VS EXEM!T TRANSACTIONS
R+"%-"),+. +N+C*,
,")$8)#,(%$8
Extent:
)ll value added tax is
removed
%nly removes the
value added tax at
the exempt stage
Claim for refund:
,axpayer can claim
the refund of input
taxes passed on to
him by the supplier,
etc. or credit such
input taxes against his
liabilities for output
taxes on his other non-
zero rated transactions

,axpayer is not
entitled to credit or
refund of the input tax
passed on to him by
the supplier, etc.
Scope:
9enerally, taxable
sales, and ta1en into
account in determining
turn-over or sales for
sales for K),-
registration purposes.

$ot taxable sales and
therefore not ta1en into
account in determining
turn-over or K),-
registration purposes
Registration
requirement:
Rero-rated person may
still register for K),.
+xempt person may
not register for K),.

Re:istration Requirements:
7. %an+ator= A every person who in the course of
trade or business, sells, barters, exchanges,
leases goods or services for others, if the
aggregate amount of actual or expected gross
sales and E or gross receipts exceeds *<<7, for
any 12-month period.
0. Optional -- any of the following persons may, at
their option, apply for K), registration:
a. seller of goods or services whose taxable
sale or gross receipts do not exceed
*66H, for any 12-month period0
b. seller of agricultural or marine food
products in their original state0
c. seller of fertilizer, seeds, seedlings and
fingerlings, fish live stoc1 and poultry
feeds,
including ingredients whether locally
produced or imported, used in the
manufacture
of finished foods0
d. seller of non-food agricultural, marine
and forest products in their original state0
6
e. seller of cotton and cotton seeds in the
original state, and copra.
" ##0 FANC $
N%: Ite&' ( t) e* re+er t) exp)rt 'a,e' )-,.
Transactions +eeme+ sales for FAT
purposes 2Sec. 7HI!3
1. ,ransfer, use or consumption not in the
course of trade or business of goods
originally intended for sale or for use in
the course of business0
2. .istribution or transfer to share-holders
or investors as share in the profits of the
K), -registered persons0
3. #onsignment of goods if actual sale is not made
within B7 days following the date of
consignment0
3. .istribution or transfer to creditors in payment of
debt0
<. "etirement from or cessation of business, with
respect to inventories of taxable goods existing
as of such retirement or cessation.
III. "OCA" TAATION
9efinition:
,he power of local government unit to !1
create its own sources of revenue and !2 to levy
taxes, fees, and charges. "See Sec #* Art X* 1/01
C)-'t2t3t2)- a-4 Sec 15/* L6C$
Nature of t(e Taxin: *o&er of "ocal
4o,ernments
1. $ot inherent0
2. +xercised only if delegated to them by law or
#onstitution.
3. $ot absolute0 sub;ect to limitations provided by
law.
Aspects of "ocal Taxin: *o&er
1. Aocal taxation, and
2. "eal property taxation
N!: !oth aspects are governed b" the #ocal
$overnment Code %#$C&
9octrine of preemption or exclusion
&here the $ational 9overnment elects to
tax a particular area, it impliedly withholds from the
local government the delegated power to tax the
same field. ,his doctrine principally rests upon the
intention of #ongress.
Exclu+e+ impositions 2pursuant to t(e
+octrine of preemption3:
1. ,axes which are levied under the $("#, unless
otherwise provided by A9# of 1GG10
2. ,axes, fees, etc. which are imposed under the
,ariffs and #ustoms #ode0
3. ,axes, fees, etc., the imposition of which
contravenes existing governmental policies or
which violates the fundamental principles of
taxation0 and
3. ,axes, fees and other charges imposed under
special law.
Situs of %unicipal Taxation 2Sec. 76H1
7??7 "4C3
1. *lace of sale! with branch or sales outlet therein:
Cunicipality or city where the branch or outlet is
located.
2. *lace of sale !no branch or sales outlet:
Cunicipality or city of principal office !not in the
place of sale.
3. (f manufacturer, assembler, contractor, producer
or exporter !C)#*+ with factory, pro;ect office,
plant or plantation !/***:
a. 37L of recorded sales in the principal office:
city or municipality where the principal office
is located0
b. D7L of recorded sales in the principal office:
city or municipality where the /*** is located
!pro rata if /*** are located in different
municipalities or cities.
c. (f plantation is located in some other place
than that where the factory is located, the
foregoing D7L shall be subdivided as follows:
- B7L to the city or municipality where the
factory is located,
- 37L to the city or municipality where the
plantation is located.
$un+amental *rinciples 4o,ernin: "ocal
Taxation:
1. 8hall be uniform in each local sub-unit
2. 8hall be e2uitable and based as much as
possible on the taxpayerFs ability to pay
3. Aevied for public purposes
3. 8hall not be un;ust, excessive, oppressive, or
confiscatory
<. 8hall not be contrary to law, public policy,
national economic policy, or in restraint of trade
B. #ollection of local taxes and other impositions
shall not be let to any person
D. ,he revenues collected under the #ode shall
inure solely to the benefit of, and sub;ect to
disposition by, the A9J levying the tax or other
imposition unless otherwise specifically provided
therein
6. +ach A9J shall, as far as practicable, evolve a
progressive system of taxation.
IF. REA" *RO*ERT#
TAATION
9efinitions:
7. Real *ropert= Taxation: ) direct tax on
ownership of lands and buildings or other
improvements thereon payable regardless of
whether the property is used or not.
2. Real propert= > sub;ect to the definition given by
Art '() of the Civil Code.
3. Impro,ement > valuable addition made to a
property or an amelioration in its condition
amounting to more than a mere replacement of
parts.

C(aracteristics:
1. .irect on ownership0 %
2. ad valorem tax )
3. proportionate *
3. creates a single indivisible obligation 8
6. local tax A
>e=: SA*O"
G
Taxin: Aut(orities:
1. *rovince, at the rate of not S 1L of assessed
value0
2. #ity at the rate of not S 2L0 and
3. Cunicipality within Cetro Canila at the rate of
not S 2L.
Extent of t(e po&er to le,=:
1. -asic real property tax0
2. 1L additional real estate tax to finance the
8pecial +ducation /und0
3. <L additional tax on idle lands0 and
3. 8pecial levy or special assessments !may be
imposed even by municipalities outside Cetro
Canila.
$un+amental *rinciples 4o,ernin: Real
*ropert= Taxation
$ 1. "eal property shall be appraised at its
current and fair mar1et value0
- 2. "eal property shall be classified for
assessment purposes on the basis of actual use.
- 3. "eal property shall be assessed on the
basis of uniform classification
within each A9J
* 3. ,he appraisal, assessment, levy and
collection of "*,ax shall not be let
to any private person.
E <. ,he appraisal and assessment of real
property shall be e2uitable.
>e=: $E---*
*roperties Exempt from Real *ropert=
Tax 2Sec. 7?31 7??7 "4C3:
1. "eal property owned by the government except
when the beneficial use thereof has been
granted to a taxable person0
2. charitable institutions, churches, personages or
convents appurtenant thereto, mos2ues, non-
profit or religious cemeteries and all lands,
buildings and improvements actually, directly
and exclusively used for religious, charitable or
educational purposes !)rt. K(, 8ec. 26,
#onstitution0
3. machineries and e2uipment that are actually,
directly and exclusively used by local water
utilities and 9%##Fs engaged in the supply and
distribution of water andEor electric power0
3. real property owned by duly registered
cooperatives as provided for in ") BG360 and
<. machinery and e2uipment used for pollution
control and environmental protection.
9ut= of Real *ropert= O&ners be:innin:
7??7:
"eal property owner must file with
)ssessorFs %ffice a sworn statement of real property
value whether exempt or non-exempt.
+very buyer of real property must ma1e a
new declaration thereof. !/ailure to do so shall ma1e
the assessment in the name of the previous owner
binding.
IF. TARI$$ AN9
C-STO%S CO9E
9E$INITIONS:
1. Tariff: #ustoms duties, toll or tribute payable
upon merchandise to the 9ovFt.
2. Custom 9uties: ,ax assessed upon
merchandise from or exported to, a foreign
country. "6arc2a 7 Exec3t27e Sec* 511 SCRA
551 81//59$
N!: Customs and tariffs are s"non"mous with one
another The" both refer to the taxes imposed on
imported or exported wares* articles* or merchandise
T;E !-REA- O$ C-STO%S 2!OC3
$unctions of t(e !ureau of Customs 2ACE
0
S
3
3:
a. Assessment and collection of revenues from
imported articles and all other impositions
under the tariff and customs laws0
b. Control smuggling and related frauds0
c. Supervision and control over the entrance
and clearance of vessels and aircraft
engaged in foreign commerce0
d. Enforcement of ,## and related laws0
e. Supervision and control over the handling of
foreign mails arriving in the *hilippines0
f. Supervise and control all import and export
cargoes for the protection of government
revenue0
g. Exclusive original ;urisdiction over seizure
and forfeiture cases under the tariff and
customs laws.
Juris+iction of Collector of Customs o,er
importation of articles
1. #ause all articles for importation to be entered in
the customhouse,
2. #ause all such articles to be appraised and
classified,
3. )ssess and collect the duties, taxes and other
charges thereon, and
3. =old possession of all imported articles until the
duties, taxes and other charges are paid thereon.
2Sec. 70HI1 TCC3
Territorial Curis+iction of t(e !OC:
1. )ll seas within the ;urisdiction of the *hilippines
2. )ll coasts, ports, airports, harbors, bays, rivers
and inland waters whether navigable or not from
the sea. 27
st
par1 Sec. IH31 TCC3
'(en tariff an+ customs applie+:

%nly after importation has begun but before
importation is terminated.
+mportation begins:
a. when the conveying vessel or aircraft
b. enters the ;urisdiction of the *hil.
c. with intention to unload therein
+mportation is deemed terminated:
a. !i upon payment of the duties, taxes and
other charges due upon the articles. !ii
17
and legal permit for withdrawal shall
have been granted.
b. (n case the articles are free of duties,
taxes and other charges, until they have
legally left the ;urisdiction of the customs
2Sec. 70H01 TCC3
ARTIC"ES -N9ER TCC
%A# EIT;ER !E:
a. 8ub;ect to duty
b. *rohibited from being imported !*rohibited
importation
c. #onditionally-free from tariff and customs
duties !conditionally-free importation
d. /ree from ,# duties !duty-free
(mported goods must be entered in a
customhouse at their port of entry otherwise they
shall be considered as contraband and the importer
is liable for smuggling !8ee 8ec. 171, ,##.
"IA!I"IT# $OR C-STO%S 9-TIES
$eneral Rule: )ll importations E exportations of
goods are sub;ect to customs duties 2Sec. 7H61
TCC3.
Exceptions:
a. +xemptions under the ,##0
b. +xemptions granted to govFt agencies,
instrumentalities or 9%##s with existing
contracts, commitments, agreements, or
obligations with foreign countries0
c. +xemptions of international organizations
pursuant to agreements or special laws0 and
d. +xemptions granted by the *res. of the *hil.
upon recommendation of $+.) 2Sec. 7H61
TCC3.
"iabilit= of importer for custom +uties:
a. A personal +ebt which can be discharged
only by payment in full thereof0
b. A lien upon the imported articles while they
are in custody or sub;ect to the control of the
govFt 2Sec. 70H/1 TCC3.
9ra&bacD
) device resorted to for enabling a
commodity affected by taxes to be exported and sold
in foreign mar1ets upon the same terms as if it had
not been taxed at all "U. C:2ac) S)-' 7'
C),,ect)r )+ C3't)&'* 5; !:2, #<5$
Import Entr=
(t is a declaration to the -%# showing
particulars of the imported article that will enable the
customs authorities to determine the correct duties.
)n importer is re2uired to file an import entry. (t must
be accomplished from disembar1ing of last cargo
from vessel.
Transaction ,alue un+er RA .7.7
(t is the invoice value of the goods plus
freight, insurance, costs, expenses and other
necessary expenses. ,his replaces the =ome
#onsumption Kalue as basis of valuation of goods.
C"ASSI$ICATION O$ C-STO% 9-TIES:
Re:ular 9uties:
1. A+ ,alorem +ut=: ,his is a duty based on the
value of the imported article.
2. Specific +ut=: ,his is a duty based on the
dutiable weight of goods !either the gross weight,
legal weight, or net weight.
3. Alternatin: +uties: ,his is a duty which
alternates ad valorem and specific.
3. Compoun+ 9ut=: ,his is a duty consisting of ad
valorem and specific duties.
Special +uties
a. .umping duty
b. #ountervailing duty
c. Car1ing duty
d. .iscriminatory duty
Nature of special customs +uties:
8pecial customs duties are additional import
duties imposed on specific 1inds of imported articles
under certain conditions.
*urpose of special customs +uties:
,he special customs duties are imposed for
the protection of consumers and manufacturers, as
well as *hil. products from undue competition posed
by foreign-made products.
11
S!ECIAL DUTIES COM!ARED
.JC*($9 .J,T #%J$,+"K)(A($9
.J,T
C)"@($9 .J,T .(8#"(C($),%"T
.J,T
$),J"+
(mposed upon
foreign products with
value lower than
their fair mar1et
value to the
detriment of local
products.
(mposed upon
foreign goods
en;oying subsidy
thus allowing them
to sell at lower
prices to the
detriment of local
products similarly
situated.
(mposed upon
those not properly
mar1ed as to place
of origin of the
goods.
(mposed upon
goods coming from
countries that
discriminates
against *hilippine
products.
)C%J$,E
"),+
.ifference
between the actual
price and the normal
value of the article.
+2uivalent to the
bounty, subsidy, or
subvention.
<L ad valorem
of articles
)ny amount not
exceeding 177L ad
valorem of the
sub;ect articles
(C*%8-
($9
)J,=%-
"(,T
8pecial
#ommittee on )nti-
.umping !composed
of the 8ec. of
/inance as
#hairman0
Cembers: the 8ec.
of .,(0 and either
the 8ec. of
)griculture if article
in 2uestion is agri.
product or the 8ec.
of Aabor if non-agri.
8ec. of /inance #ommissioner
of #ustoms
*resident of the
*hilippines
$lexible Tariff Clause
,he *resident may fix tariff rates, import
and export 2uotas, etc. under ,## 2See Sec.
0.1 Art. FI1 Constitution an+ Sec. /H71 TCC3
F. TA RE%E9IES
TA RE%E9IES
-N9ER T;E NATIONA" INTERNA"
REFEN-E CO9E
I TAX REMEDIES OF T=E
6OVERNMENT
Importance
1. ,hey enhance and support the
governmentFs tax collection.
2. ,hey are safeguards of taxpayerFs
rights against arbitrary action.
Tax collection cannot be restraine+
b= court inCunction 2Sec. 07?1 CTR*3
,ustification: Aifeblood ,heory.
Exception: (n;unction may be issued by the
#,) in aid of its appellate ;urisdiction under ")
112< !see re2uisites thereof, under the
subheading P#ourt of ,ax )ppeals,Q infra..
T(e follo&in: are :enerall= t(e tax
reme+ies of t(e :o,ernment to effect
collection of taxes:
). ,ax Aien !8ec. 21G
-. #ompromise !8ec. 273
#. .istraint !)ctual and #onstructive
!8ecs. 27<-276
.. Aevy !8ec. 27D-
+. /orfeiture of *roperty !8ec. 21<
/. #ivil )ction !8ec. 227
9. #riminal )ction !8ecs. 227, 221, and
22G
=. 8uspension of business operations in
violation of K), !8ec. 11<
(. +nforcement of )dministrative /ine
A. Tax "ien
9efinition: (t is a legal claim or charge on
property, either real or personal, established by
law as a securit= in default of the payment of
taxes !<1 )m?ur 661. 9enerally, it attaches to
the property irrespective of ownership or transfer
thereof.
Extent an+ nature:
12
,he tax, together with interests, penalties,
and costs that may accrue in addition thereto is
a lien upon all propert= an+ ri:(ts to
propert= belon:in: to t(e taxpa=er.
,he lien shall not be valid against any
mortgagee, purchaser, or ;udgment creditor
until notice of such lien shall be filed by the
#ommissioner of (nternal "evenue in the %ffice
of the "egister of .eeds of the province or city
where the property of the taxpayer is situated or
located !Sec. 07?1 CTR*3.
!. Compromise
9efinition: ) contract whereby the parties,
by reciprocal concessions, avoid a litigation or
put an end to one already commenced !Art.
0H0., Ne& Ci,il Co+e.
Requisites 2TAO3:
7. ,he taxpayer must have a tax liabilit=.
0. ,here must be an offer !by the taxpayer of
an amount to be paid by the taxpayer
3. ,here must be an acceptance !by the
#ommissioner or taxpayer as the case may
be of the offer in the settlement of the
original claim.
Officers aut(ori)e+ to compromise:
7. ,he Commissioner of Internal Re,enue
!#(" is the only official vested with power
and discretion to compromise criminal and
civil cases arising from violations of the ,ax
#ode !8ecs. D# and 273, #,"*.
0. Subor+inate officials may preliminarily
enter into a compromise. ,he effects are:
i. Acceptance of an offer of
compromise: not final and may be
reviewed by the #ommissioner.
ii. ReCection of an offer of
compromise: final and binding
unless revo1ed or set aside by the
#ommissioner. !9ibbs vs. #ollector,
1D *hil. 232
Commissioner ma= compromise an=
internal re,enue tax &(en A
1. ) reasonable +oubt as to the validity of the
claim against the taxpayer exists0 or
2. ,he financial position of the taxpayer
demonstrates a clear inabilit= to pa= the
assessed tax 48ec. 273!), #,"*5. (n such
case, the taxpayer should waive the
confidentiality privilege on ban1 deposits
under ") 137< !8ee 8ec. B/2, #,"*.
%inimum compromise rates 2%CR3 of an=
tax liabilities:
7. +n case of financial incapacit": C#" O 17L
of the basic assessed tax
2. -ther cases: C#" O 37L of the basic
assessed tax 48ec. 273!), #,"*5
Appro,al of t(e compromise b= t(e
E,aluation !oar+ is require+ &(en:
1. the basic tax involved exceeds
*1,777,777.77, or
2. the settlement offered is less than the
minimum compromise rates !C#".
N!: ,he C#" may be less than the prescribed
rates of 17L or 37L, as the case may be,
provided it is approved by the +valuation -oard.
Compromise of Criminal Fiolations
$eneral Rule: #riminal violations may be
compromised.
Exceptions:
1. ,hose already filed in court
2. ,hose involving fraud 48ec. 273!), #,"*5.
Extent of t(e CommissionerGs +iscretion
to compromise criminal ,iolations:
7. !efore the complaint is filed with the
.rosecutor/s -ffice: ,he #(" has full
discretion to compromise except those
involving fraud.
0. After the complaint is filed with the
.rosecutor/s -ffice but before the
information is filed with the court: ,he #("
can still compromise provided the
prosecutor must give consent.
3. After information is filed with the court: ,he
#(" is no longer permitted to compromise
with or without the consent of the *rosecutor
!*eople vs. Cagdaluyo, )pril 27, 1GB1.
Reme+= in case t(e taxpa=er refuses or
fails to abi+e t(e tax compromise:
7. Enforce the compromise
a. (f it is a Cu+icial compromise, it can be
enforced b= mere execution. ) ;udicial
compromise is one where a decision
based on the compromise agreement is
rendered by the court on re2uest of the
parties.
b. )ny other compromise is extraCu+icial
and li1e any other contract can only be
enforced b= court action.
0. "egard it as rescin+e+ and insist upon
original demand !)rt. 2731, #ivil #ode.
Compromise *enalt=
(t is an amount of money which the
taxpayer pays to compromise a tax violation.
,his is paid in lieu of criminal prosecution. )
taxpayer cannot be compelled to pay a
compromise penalty. (f he does not want to pay,
the #(" must institute a criminal action.
C. 9istraint
9efinition: (t is the seizure by the
government of personal property, tangible or
intangible, to enforce the payment of taxes. ,he
property may be offered in a public sale, if taxes
are not voluntarily paid. (t is a summary remedy.
T&o t=pes of +istraint:
13
7. Actual: there is ta1ing of possession of the
personal property from the taxpayer by the
government. *hysical transfer of possession
is not always re2uired. ,his is true in the
case of intangible property such as stoc1s
and credits.
0. Constructi,e: the owner is merely
prohibited from disposing of his property.
Requisites for t(e exercise of t(e reme+=
of +istraint:
7. ,he taxpayer must be +elinquent !except in
constructive distraint in the payment of tax0
0. ,here must be a subse2uent +eman+ for its
payment !assessment0
3. ,he taxpayer must fail to pa= the tax at the
time re2uired0 and
3. ,he period within which to assess or collect
the tax has not =et prescribe+.
Nature of t(e &arrant of +istraint or le,=
,he warrant is a summary procedure
PforcingQ the taxpayer to pay. ,he receipt of a
warrant may or may not parta1e the character of
a final decision. (f it is an indication of a final
decision, the taxpayer may appeal to the #,)
within 37 days from service of the warrant.
9uties of t(e officer ser,in: t(e &arrant of
+istraint:
7. Ca1e an account of the personal properties
distrained0
0. Si:n the list of personal properties
distrained to which shall be added, a
statement of the sum demanded and note of
the time and place of sale0
3. "ea,e either with the owner or person from
whose possession such personal properties
were ta1en, or at the dwelling or place of
business of such person with someone of
suitable age and discretion !8ec. 276,
#,"*
*roce+ures for t(e actual +istraint or
:arnis(ment:
1. *ersonal *ropert=
I
Ser,ice of t(e &arrant of
+istraint upon the person in
possession of the taxpayerFs
property !8ec. 276, #,"*.
II
*ostin: of notice in not less
than two !2 public places in the
municipality or city !8ec. 27G,
#,"*
III
$otice to the taxpayer
specifying the time an+ place
of sale and the articles
distrained.
IF
9isposition of procee+s of
sale !8ec. 27G, #,"*.
3. StocDs an+ ot(er securities: -y serving a
copy of the warrant of distraint upon the
a. taxpayer an+
b. upon the president, manager, treasurer
or other responsible officer of the
corporation, company or association
which issued the said stoc1 and
securities !8ec. 276, #,"*.
/. !anD accounts: ,hey shall be garnished by
serving a warrant of distraint upon the
a. taxpayer an+
b. upon the president, manager, treasurer,
or other responsible officer of the ban1.
$-: Jpon receipt of the warrant of distraint,
the ban1 shall turn over to the
#ommissioner so much of the ban1
accounts as may be sufficient to satisfy the
claim of the government !8ec. 276, #,"*.
6. 9ebts an+ cre+its: -y serving a copy of the
warrant of distraint upon the
a. person owing the debts or
b. having in his possession or under his
control such credits or
c. upon his agent.
$-: ,he warrant of distraint shall be
sufficient authority to the person owing the
debts or having in his possession or under
his control any credits belonging to the
taxpayer to pay to the #ommissioner the
amount of such debts or credits !8ec. 276,
#,"*.
T(e taxpa=erGs propert= ma= be place+
un+er constructi,e +istraint &(en (e:
7. is retirin: from any business
sub;ect to tax0 or
2. is intending to >
a. lea,e the *hilippines, or
b. remo,e his property therefrom,
or
c. (i+e or conceal his property, or
3. is performing any act tending to
obstruct the proceeding for
collecting the tax due or which may
be due from him !8ec. 27B, $("#.
*roce+ure for t(e constructi,e +istraint of
personal propert=:
#(" shall re2uire the taxpayer or
any person having possession
or control of such property to !a
si:n a receipt covering the
property distrained an+
!b obligate himself to
7. preser,e the same intact
and unaltered and
8ervice of
&arrant of
.istraint
*osting of
$otice
$otice of
,ime and
*lace of
8ale
.isposition
,axpayer
must sign
receipt
,axpayerFs
oblig. to
preserve
13
0. not to +ispose of the same
in any manner whatsoever
without the express
authority of the
#ommissioner of (nternal
"evenue.
(f the taxpayer or person in
possession of the property
refuses or fails to si:n t(e
receipt referred to, the revenue
officer effecting the constructive
distraint shall !a proceed to
prepare a list of such property
and !b in the presence of two
!2 witnesses lea,e a cop=
thereof in the premises where
the property distrained is
located, after whGch the said
property shall be deemed to
have been placed under
constructive distraint.
ACTUAL VS CONSTRUCTIVE
DISTRAINT
)#,J)A .(8,")($, #%$8,"J#,(K+
.(8,")($,
Cade only on the
property of a
delin2uent taxpayer
Cade on the
property of any
taxpayer, whether
delin2uent or not
,here is ta1ing of
possession
,he taxpayer is
merely prohibited
from disposing of his
property
+ffected by leaving
a list of distrained
property or by service
of a warrant of distraint
or garnishment
+ffected by
re2uiring the taxpayer
to sign a receipt of the
property or by the
revenue officer
preparing and leaving
a list of such property
)n immediate step
for collection of taxes
$ot necessarily so
-oth
)re summary remedies for the collection of
taxes0
"efer only to personal property0 and
#annot be availed of where the amount of the
tax involved is not more than *177
9. "e,=
9efinition: (t refers to the act of seizure of
real propert= in order to enforce the payment of
taxes. ,he property may be offered in a public
sale, if after seizure, the taxes are not voluntarily
paid.
Requisites for t(e exercise of t(e reme+=
of le,=: 8ame as in the remedy of distraint.
'(en ma= le,= be effecte+K
"eal property may be levied upon
before1 simultaneousl=1 or after t(e +istraint
of personal property belonging to the delin2uent
!8ec. 27D-, #,"*0 and the remedy by distraint
and levy may be repeated if necessary until the
full amount, including all expenses, is collected
!8ec. 21D, #,"*.
*roce+ure of le,= on real propert=:

I
*reparation of a duly
authenticated certificate
containing: !a +escription of
t(e propert= levied !b name of
t(e taxpa=er, and !c the
amounts of tax an+ penalt=
+ue from him. ,his certificate
shall operate with the force of a
legal execution throughout the
*hilippines !8ec. 27D-, #,"*.

II
Ser,ice of &ritten notice to the
delin2uent taxpayer or occupant
of the property. ,he proper
"egister of .eeds shall also be
notified of the levy !8ec. 27D-,
#,"*.
III
A+,ertisement of t(e time an+
place of sale of the taxpayerFs
property or so much thereof as
may be necessary to satisfy the
claim within 27 days after levy,
and it shall cover a period of at
least 37 days !8ec. 213,
#,"*.
IF
Sale at public auction to the
highest bidder !8ec. 213,
#,"*.
F
9isposition of procee+s of
sale. (n case the proceeds of
the sale exceed the claim
!taxes, penalties and interest
and cost of the sale, the excess
shall be turned over to the
owner of the property !8ec. 213,
#,"*.
DISTRAINT VS LEV>
.(8,")($, A+KT
"efers to personal
property
"efers to real
property
/orfeiture by the
government is not
provided
/orfeiture is
authorized
,he taxpayer is not
given the right of
,he right of
redemption is granted
*repare
#ertificate
of Aevy
8ervice of
$otice
,ime and
*lace of
8ale
8ale
.isposition
"emedy
when
taxpayer
didnFt sign
receipt
1<
redemption with
respect to distrained
personal property.
in case of real property
levied upon and sold,
or forfeited to the
government.
-oth
)re summary remedies for the collection of
taxes0 and
#annot be availed of where the amount of the
tax involved is not more than *177
E. $orfeiture
9efinition: divestiture of property without
compensation, in conse2uence of a default or
offense.
Enforcement of t(e reme+= of forfeiture:
7. In case of personal propert= A ,he
forfeiture of chattels and removable fixtures
of any sort is enforced b= sei)ure an+ sale
or +estruction of the specific forfeited
property.
0. In case of real propert= A ,he forfeiture of
real property is enforced by a Cu+:ment of
con+emnation an+ sale in a legal action or
proceeding, civil or criminal, as the case
may re2uire.
Effect of t(e forfeiture of propert= &it(
respect to title t(ereto: ,he effect is to transfer
the title to the specific thing from the owner to
the government.
$. Ci,il Actions
9efinition: /or tax remedy purposes, these
are actions instituted by the government to
collect internal revenue taxes. (t includes filing
by the government with the probate court claims
against the deceased taxpayer.
'(en resorte+ toK
1. &hen a tax is assessed but the assessment
becomes final and unappealable because
t(e taxpa=er fails to file an a+ministrati,e
protest &it( t(e CIR &it(in 3H +a=s from
receipt0 or
2. &hen a protest against assessment is filed
and a decision of the #(" was rendered but
the said decision becomes final, executory,
and demandable for failure of t(e taxpa=er
to appeal t(e +ecision to t(e CTA &it(in
3H +a=s from receipt of t(e +ecision.
'(ere to file: #ivil actions for the collection
of delin2uent taxes are filed in the regular courts
and not before the #,).
9efenses &(ic( are preclu+e+ b= final
an+ executor= assessments:
1. (nvalidity or illegality of the assessment0 and
2. *rescription of the governmentFs right to
assess.
Abatement
T(e Commissioner ma= abate or cancel a
tax liabilit= &(en:
1. ,he tax or any portion thereof appears to be
unCustl= or excessi,el= assesse+0 or
2. ,he administration and collection costs
involved +o not Custif= t(e collection of the
amount due 48ec. 273!), #,"*5.
*rescripti,e *erio+s
for t(e Assessment an+
Collection of Taxes
Rationale of (erein prescripti,e perio+s:
8uch periods are designated to secure
the taxpayers against unreasonable
investigation after the lapse of the period
prescribed. ,hey are also beneficial to the
government because tax officers will be obliged
to act promptly.
Rules on *rescription:
1. &hen the tax law itself is silent on
prescription, the tax is imprescriptible0
2. &hen no return is re2uired, tax is
imprescriptible0 $-: "emedy of taxpayer is
to file a return.
3. .efense of prescription is waivable0
3. *rovisions on prescription, being remedial in
nature, should be liberally interpreted to
carry out its intent.

*rescripti,e *erio+ for t(e assessment of
taxes:
$eneral Rule:
,="++ !3 T+)"8 after the date the
return is due or filed, whichever is later !8ec.
273, #,"*.
Exceptions:
1. /)(AJ"+ ,% /(A+ ) "+,J"$: ,+$ !17
T+)"8 from the date of the discovery of the
omission to file the return !8ec.2224a50
2. /)A8+ %" /").JA+$, "+,J"$ with
($,+$,(%$ ,% +K).+ ,=+ ,)N: ,+$
!17 T+)"8 from the date of the discovery
of the falsity or fraud !8ec.2220
3. )9"++C+$, ($ &"(,($9 to the extension
!not reduction of the period to assess
between the #(" and the taxpayer before
the expiration of the 3-year period. $-: ,he
extended period agreed upon can further be
extended by a subse2uent written
agreement made before the expiration of the
extended period previously agreed upon
!8ec. 2224b5.
3. &"(,,+$ &)(K+" or "+$J$#(),(%$ of
the original three !3 year limitation, signed
by the taxpayer !8ambrano vs. #,) 171
*hil. 1.
1B
*rescripti,e *erio+ for t(e Collection of
Taxes:
$eneral .eriods for the Collection of Taxes:
< years > from assessment or within
period for collection agreed upon in writing
before expiration of the <-year period !8ec. 222,
#,"*.
17 years > without assessment in case
of false or fraudulent return with intent to evade
or failure to file return !8ec. 222, #,"*.
4roun+s for suspension of t(e runnin: of
t(e statute of limitations:
7. &hen the CIR is pro(ibite+ from ma1ing
the assessment or beginning the distraint or
levy or a proceeding in court, and for sixty
!B7 days thereafter0
0. &hen the taxpa=er requests for a
reconsi+eration which is granted by the
#("0
3. &hen the taxpa=er cannot be locate+ in
the address given by him in the return,
unless he informs the #(" of any change in
his address.
/. &hen the warrant of distraint or levy is duly
served, an+ no propert= is locate+0 and
6. &hen the taxpa=er is out of t(e
*(ilippines !8ec. 223, #,"*.
A tax return is consi+ere+ $I"E9 for
purposes of startin: t(e runnin: of t(e
perio+ of limitations if:
7. ,he return is ,ali+ > it has complied
substantially with the re2uirements of the
law0 and
2. ,he return is appropriate > it is a
return for the particular tax re2uired by law.
A +efecti,e tax return is t(e same as if no
return &as file+ at all.
II TAX REMEDIES OF T=E TAX!A>ER
4eneral Reme+ies of a Taxpa=er
A+ministrati,e
7. !efore *a=ment A
a. *rotest > filing a petition for
reconsideration or reinvestigation within
37 days from receipt of assessment
!8ec. 226, #,"*0 ) protest is a vital
document which is a formal declaration
of resistance of the taxpayer. (t is a
repository of all arguments. (t can be
used in court in case administrative
remedies have been exhausted. (t is
also the formal act of the taxpayer
2uestioning the official actuation of the
#(". ,his is e2uivalent to a pleading.
b. Enterin: into a compromise !8ec.
273, #,"*.
0. After *a=ment A
/iling of claim for refun+ or tax cre+it
within 2 years from date of payment
regardless of any supervening cause !8ec.
22G, #,"*.
Ju+icial
7. Ci,il Action A
a. Appeal to t(e Court of Tax Appeals >
within 37 days from receipt of decision
on the protest or from the lapse of 167
days due to inaction of the
#ommissioner !8ec. 226, #,"*.
b. )ction to contest forfeiture of chattel
!8ec. 231, #,"*0 and
c. )ction for +ama:es !8ec. 22D, #,"*.
0. Criminal Action A
a. /iling of criminal complaint a:ainst
errin: !IR officials an+ emplo=ees.
b. InCunction > when the #,) in its
opinion the collection by the -(" may
;eopardize taxpayer.
$ilin: of claim for
Tax Refun+ or Tax Cre+it
4roun+s for filin: a claim for tax refun+ or
tax cre+it:
7. ,ax is collected erroneousl= or ille:all=.
0. *enalty is collected &it(out aut(orit=.
3. 8um collected is excessi,e.
TAX REFUND VS TAX CREDIT
,)N "+/J$. ,)N #"+.(,
,he taxpayer as1s
for restitution of the
money paid as tax
,he taxpayer as1s
that the money so paid
be applied to his
existing tax liability
,wo-year period to
file claim with the #("
starts after the
payment of the tax or
penalty
,wo-year period
starts from the date
such credit was
allowed !in case credit
is wrongly made.
Requisites of Tax Refun+ or Tax Cre+it
7. #laim must be in &ritin:0
0. (t must be filed with the #(" within T'O 203
#EARS after the payment of the tax or
penalty. &here the payment was made by
wrongly crediting a prior over payment, the
two year period should start from the date
such credit was allowed.
3. 8how proof of pa=ment.
Suspension of t(e T&o-=ear *rescripti,e
*erio+:
1. ,here is a pending litigation between the
9overnment and the taxpayer0 and
0. #(" in that litigated case agreed to abide by
the decision of the 8# as to the collection of
taxes relative thereto "!a-a. E,ectr2c C)
7' C),,ect)r* Ma. 50* 1/#0$
1D
Re:lementar= *erio+s in Income Tax
Impose+ b= "a& upon t(e Taxpa=er
2pursuant to Re,. Re:. No. 70-??1 Sec.
00. of t(e CTR*1 an+ Rules of Court3
-(" ma1es a tax assessment

(f taxpayer is not satisfied with the assessment

file a protest within 37 days from receipt thereof

Submit supportin: +ocuments within B7 days
from date of the filing of the protest

(f protest is denied, ele,ate the matter to the

#ommissioner of (nternal "evenue !#(" within
37 days from receipt of the decision of the #("Fs
duly authorized representative officer

Appeal to t(e Court of Tax Appeals 2CTA3

within 37 days from receipt of final decision of
#(" or his duly authorized representative !the
taxpayer has the option to appeal straight to the
#,) upon receipt of the decision of the #("Fs
duly authorized representative

(f the #(" or his duly authorized representative

fails to act on t(e protest &it(in 7.H +a=s
from date of submission by taxpayer, the latter
may appeal within 37 days from lapse of the
167 day period

Appeal to t(e Court of Appeals !#) within 1<

days from receipt of the #,)Fs decision

Appeal to t(e Supreme Court within 1< days

from receipt of the #)Fs decision
As a :eneral rule1 pa=ment un+er protest
is not require+ un+er t(e NIRC1 except &(en
partial pa=ment of uncontro,erte+ taxes is
require+ as pro,i+e+ un+er RR 70-??.
TA RE%E9IES
-N9ER T;E "OCA" 4OFERN%ENT
CO9E 2"4C3
"OCA" TAATION RE%E9IES
I TAX REMEDIES OF T=E LOCAL
6OVERNMENT UNITS
T(e follo&in: are t(e Ci,il Reme+ies
of t(e "ocal 4o,ernment -nits 2"4-3 to
effect collection of taxes:
1. ,ax Aien !8ec. 1D3, A9#
2. .istraint !8ec. 1D<, A9#
3. Aevy !8ec. 1D<, A9#
3. #ivil )ction !8ec. 163, A9#
<. *urchase of property by A9Js for want of
bidder !8ec. 161, A9#0 *roperty distrained
not disposed within 127 days from date of
distraint > considered sold to the A9J !8ec.
1D<, A9#.
Juris+iction of courts o,er local
taxation cases:
1. ,he #ourt of ,ax )ppeals has no ;urisdiction
over local taxation cases.
2. "egular ;udicial courts are not prohibited
from en;oining the collection of local taxes,
sub;ect to "ule <6 !*reliminary (n;unction of
the "ules of #ourt.
*rescripti,e *erio+s in t(e
Assessment an+ Collection of
"ocal Taxes
*rescripti,e *erio+s of Assessment
1. Aocal taxes, fees, or charges > /(K+ !<
T+)"8 from the date they became due.
!8ec. 1G3, A9#.
2. &hen there is fraud or intent to evade the
payment of taxes, fees or charges > ,+$
!17 T+)"8 from discovery of the fraud or
intent to evade the payment !8ec. 1G3,
A9#.
*rescripti,e *erio+ of Collection
Aocal taxes, fees, or charges may be
collected &(,=($ /(K+ !< T+)"8 from the
date of assessment by administrative or ;udicial
action. $o such action shall be instituted after
the expiration of such period !8ec. 1G3, A9#.
4roun+s for t(e Suspension of t(e
Runnin: of t(e *rescripti,e *erio+s:
1. ,he treasurer is legally prevented from the
assessment or collection of the tax0
2. ,he taxpayer re2uests for a reinvestigation
and executes a waiver in writing before the
expiration of the period within which to
assess or collect0 and
3. ,he taxpayer is out of the country or
otherwise cannot be located !8ec. 1G3,
A9#.
II TAX REMEDIES OF T=E
TAX!A>ER
T(e follo&in: are t(e reme+ies of t(e
taxpa=er in local taxation:
(. )dministrative
). *rotest > within B7 days from receipt of
assessment !8ec. 1G< A9#. *ayment
under protest not necessary
-. *a=ment L subsequent refun+ or tax
cre+it > within 2 yrs. from payment of tax
to local treasurer !8ec. 1GB A9# (t is to
be noted that, unli1e in internal revenue
taxes, the super,enin: cause applies in
local taxation because the period for the
filing of claims for refund or credit of local
taxes is counted not necessarily from the
date of payment but from the date the
taxpayer is entitled to a refund or credit.
16
#. Ri:(t of re+emption > 1 yr. /rom the date
of sale or from the date of forfeiture !8ec.
161 A9#
((. ?udicial
). Appeal > any 2uestion on constitutionality
or legality of tax ordinance within 37 days
from effectivity thereof to 8ecretary of
?ustice !8ec. 16D A9#
-. Court action > within 37 days after receipt
of decision or lapse of B7 days of
8ecretary of ?usticeFs inaction !8ec. 16D
A9#
- within 37 days from receipt when
protest of assessment is denied !8ec.
1G< A9#
- if no action is ta1en by the treasurer
in refund cases and the two year period
is about to lapse !8ec. 1G< A9#
- if remedies available does not provide
plain, speedy and ade2uate remedy.
C. Action for +eclarator= relief
.. InCunction > if irreparable damage would
be caused to the taxpayer and no
ade2uate remedy is available.
REA" *RO*ERT# TA RE%E9IES
I TAX REMEDIES OF T=E LOCAL
6OVERNMENT TO EFFECT
COLLECTION OF TAXES
1. "eal *roperty tax lien !8ecs. 23B and 2<1,
A9#0
2. .istraint !8ec. 2<3, A9#0
3. Aevy !8ec. 2<3, A9#0
3. #ivil )ction > formal demand not re2uired
!8ec. 2BB, A9#0
<. *urchase of property by local treasurer for
want of bidder !8ec. 2B3, A9#.
M*ropert= 9isco,ere+ for t(e $irst TimeN
*roperty that for so many years had not
been declared and when discovered owner must
pay bac1 taxes plus incremental penalties.
)ssessed taxes shall cover not more than ten
!17 years prior to the date of the initial
assessment.
II TAX REMEDIES OF T=E TAX!A>ER
(. )dministrative
). *rotest > payment under protest is re2uired
within 37 days to provincial, city, or municipal
treasurer
-. "efund or tax credit > within 2 years from
the date the tax payer is entitled thereto !8ec.
2<3 A9#
#. "edemption of real property !8ec. 2B1
A9#
((. ?udicial
). )ppeal > within B7 days from assessment
of provincial, city or municipal assessor to
A-)) !8ec. 22B A9#
- within 37 days from receipt of
decision of A-)) to #-)) !8ec. 237
A9#
- in case of denial of refund or
credit, appeal to -)) as in protest case
!8ec. 2<3 A9#
-. #ourt )ction > appeal of #-))Fs decision
to 8upreme #ourt by certiorari.
#. 8uit assailing validity of tax0 recovery of
refund of taxes paid !8ec. B3 *. 3B3.
.. 8uit to declare invalidity of tax due to
irregularity in assessment and collection
!8ec. B3 *. 3B3.
+. 8uit assailing the validity of tax sale !8ec.
63 *. 3B3
Con+onation of Real *ropert= Taxes
a. "eal property taxes may be condoned
wholly or partially in a given local
government unit when
i. ,here is general failure of crops0
ii. ,here is substantial decrease in
the price of agricultural or
agribased products0 or
iii. ,here is calamity.
b. -y the *resident of the *hilippines when
public interest so re2uires.
TA RE%E9IES
-N9ER T;E TARI$$ AN9 C-STO%S
CO9E 2TCC3
Reme+ies of t(e 4o,ernment to effect
collection of taxes:
1. ,ax Aien !8ec. 1273 ,##
2. "eduction of customs
dutiesEcompromise > sub;ect to
approval of 8ec. of /inance !8ec.
D7G, 231B ,##
3. #ivil )ction !8ec. 1273 ,##
3. #riminal )ction
<. 8eizure, 8earch, )rrest !8ec. 227<,
2217, 2211 ,##E forfeiture !8ec.
2<37 ,##
Reme+ies of t(e taxpa=er:
(. )dministrative
). *rotest
a. )ny importer or interested party if
dissatisfied with published value within
1< days from date of publication
b. ,axpayer > within 1< days from
assessment. *ayment under protest is
necessary !8ec. 2376, 2217 ,##
-. "efund > abatement or drawbac1 !8ec.
1D71-1D76 ,##
#. 8ettlement of any seizure by payment
of fine or redemption > -J, this shall
1G
not be allowed in any case where
importation is absolutely prohibited or
the release would be contrary to law
!8ec. 237D ,##
((. ?udicial
2 ). )ppeal > within 1< days to #ommissioner
3 after notification by collector of his
decision !8ec. 2313 ,## within 37 days
from receipt of decision of the
#ommissioner or 8ecretary of /inance to
the #,) !8ec. 2373 ,##, 8ec. D ")
112<
-. )ction to 2uestion the legality of seizure
#. )bandonment !8ec. 1671 ,##
T&o Din+s of procee+in:s in t(e
!ureau of Customs 2!OC3:
1. Customs protest cases
2. Customs sei)ure an+ forfeiture cases
A. Customs *rotest Cases
9efinition: ,hese are cases which deal
solely with liability for customs duties, fees, and
other charges.
'(en customs protest applicable:
,he customs protest is re2uired to be
filed only in case the liability of the taxpayer for
duties, taxes, fees and other charges is
determined and the taxpayer disputes said
liability.
'(en Customs protest NOT require+
&here there is no dispute, but the claim for
refund arises by reason of the happening of
supervening events such as when the raw
material imported is utilized in the production of
finished products subse2uently exported and a
duty drawbac1 is claimed.
Requirements for maDin: a protest:
a. must be in &ritin:
b. must point out the particular +ecision or
rulin: of t(e Collector of Customs to
which exception is ta1en or ob;ection
made0
c. must state the :roun+s relied upon for
relief0
d. must be limite+ to the sub;ect matter of
a sin:le a+Custment0
e. must be file+ when the amount claimed
is paid or &it(in 76 +a=s after the
payment0
f. protestant must furnis( samples of
:oo+s under protest when re2uired.
*roce+ure on Customs *rotest Cases:
,he #ollector acting within his ;urisdiction shall
cause the imported goods to be entered at the
customhouse

,he #ollector shall assess, li2uidate, and collect

the duties thereon, or detain the said goods if
the party liable does not pay the same

,he party adversely affected !the protestant

may file a written protest on his foregoing liability
with the #ollector within 1< days after paying the
li2uidated amount !the payment under protest
rule applies

=earing within 1< days from receipt of the duly

presented protest. Jpon termination of the
hearing, the #ollector shall decide on the same
within 37 days

(f decision is adverse (f decision is adverse
to the protestant to the 9overnment

)ppeal with the )utomatic review by
#ommissioner within #ommissioner
1< days from notice
)utomatic review
by
)ppeal with the the 8ec. of /inance
#ourt of ,ax )ppeals
within 37 days from notice (f decision of
#ommissioner or
)ppeal with the #ourt of 8ec. of /inance is
)ppeals within 1< days adverse to the
from notice protestant, he may
appeal to the
#,),
)ppeal by certiorari with #), and 8# under
the 8upreme #ourt within the same procedure
1< days from notice on the left
Reasons for t(e automatic re,ie& of
+ecisions a+,erse to t(e 4o,ernment
1. ,o protect the interest of the 9overnment
2. ) favorable decision will not be appealed by
the taxpayer and certainly a #ollector will
not appeal his own decision.
3. Aifeblood ,heory
!. Sei)ure an+ $orfeiture Cases
9efinition: ,hese refer to matters involving
smuggling. (t is administrative and civil in nature
and is directed against the res or imported
articles and entails a determination of the
legality of their importation. ,hese are actions in
rem.
Smu::lin:
). )n act of any person who shall:
4 1. /raudulently import any article contrary to
5 law, or
6 2. )ssist in so doing, or
7 3. "eceive, conceal, buy, sell, facilitate,
8 transport, conceal or sell such article
9 1nowing its illegal importation 2Sec. 3IH71
10 TCC3
3. +xport contrary to law. !Sec. 367/1 TCC3
27
-. ,he *hilippines is divided into various
ports
of entry > entry other than port of entry,
will
be 8CJ99A($9.
E,i+ence for con,iction in smu::lin:
cases.
Cere possession of the article in 2uestion -
J$A+88 defendant could explain that his
possession is lawful to the satisfaction of the
court 2Sec. 3IH71 TCC3. *ayment of the tax due
after apprehension is not a valid defense
"R)4r2?3e@ 7 CA* 5;0 SCRA 500$
Contraban+: )rticles of prohibited
importations or exportations. 2Sec. 367/1 TCC3
T(in:s subCect to confiscation in
smu::lin: cases:
)nything that was used for smuggling is
sub;ect to confiscation, li1e the vessel, plane,
etc. "L,a&a4) 7' C)&& )+ C3't)&'* 1/0A$
+N#+*,(%$: #ommon carriers that are not
privately chartered cannot be confiscated.
Ri:(t of customs officers to effect sei)ure
L arrest
a. Cay seize any vessel, aircraft, cargo,
article, animal or other movable property
when the same is sub;ect to forfeiture or
liable for any time as imposed under
tariff and customs laws, rules U
regulations
b. Cay exercise such powers only in
conformity with the laws and provisions
of the ,## 2Sec. 00H63
9octrine of ;ot *ursuit
Requisites:
7. O,er Fessels
a. )n act is done in *hil. &aters which
constitutes a violation of the tariff
and customs laws
b. a pursuit of such vessel began
within the ;urisdictional waters which
i. may continue beyond the
maritime zone, and
ii. the vessel may be seized on the
high seas.
0. O,er Importe+ Articles
a. ,here is a violation of the tariff and
customs laws
b. )s a conse2uence they may be
pursued in the *hils.
c. &ith ;urisdiction over them at any
place therein for the enforcement of
the law. 2 0
n+
par. Sec. IH31 TCC3
RTC ,s. !OC
,he ",#s do not have ;urisdiction over
seizure and forfeiture proceedings conducted by
the -%# and to interfere with these
proceedings. ,he #ollector of #ustoms has
exclusive ;urisdiction over all 2uestions touching
on the seizure and forfeiture of dutiable goods.
$o petitions for certiorari, prohibition or
mandamus filed with the ",# will lie because
these are in reality attempts to review the
#ommissionerMs actuations. $either replevin filed
with the ",# will issue. Rationale: .octrine of
*rimary ?urisdiction.
*ersons (a,in: police aut(orit= to
enforce t(e Tariff L Customs "a&s an+ effect
searc(es1 sei)ures an+ arrests:
a. officials of the -%#, district collectors,
police officers, agents, inspectors, and
guests of the -%#0
b. officers of the *hil. $avy and other
members of the )/* and national law
enforcement agencies when authorized
by the #ommissioner of #ustoms
c. officials of the -(" on all cases falling
within the regular performances of their
duties, when the payment of internal
taxes are involved0
d. officers generally empowered by law to
effect arrests and execute processes of
courts, when acting under the direction
of the #ollector. 2Sec. 00H31 TCC3
A+ministrati,e an+ Ju+icial *roce+ures
relati,e to Customs Sei)ures an+ $orfeitures
.etermination of probable cause and
issuance of warrant

)ctual seizure of the articles

Aisting of description, appraisal and

classification of seized property

"eport of seizure to the #omm. of #ustoms

and the #hairman, #omm. on )udit

(ssuance by the #ollector of a warrant of

detention

$otification to owner or importer

/ormal hearing

.istrict collector renders his decisions

(f decision is not (f decision is not
favorable to the favorable to the
aggrieved owner 9overnment
or importer
)utomatic review by
)ppeal by the aggrieved the #ommissioner
owner or importer
Requirements for customs forfeiture
7. ,he &ron:ful maDin: by the owner,
importer, exporter or consignee of any
declaration or affidavit, or the wrongful
ma1ing or delivery by the same persons of
any invoice, letter or paper - all touching on
the importation or exportation of
merchandise.0 and
21
0. ,hat such declaration, affidavit, invoice,
letter or paper is false. "Far),a-* Br 7
CTA* 511 SCRA 5/0$
*laces &(ere searc(es L sei)ures ma= be
con+ucte+:
a. enclosures
b. dwelling house !there must be search
warrant issued by a ;udge
c. vessels or aircrafts and persons or
articles conveyed therein
+. vehicles, beasts and persons
e. persons arriving from foreign countries.

!ur+en of proof in sei)ure or forfeiture:
claimant !8ec. 2<3<, ,##.
Requirements for manifest
) manifest in coastwise trade for cargo
and passengers transported from one place or
port in the *hilippines to another is re2uired
when one or both of such places is a port of
entry !8ec. G7B, ,##. Canifests are also
re2uired of vessel from a foreign port !8ec.
177<, ,##.
Euer=: Is manifest require+ onl= for
importe+ :oo+sK
$o. )rticles sub;ect to seizure do not
have to be imported goods. Canifests are also
re2uired for articles found on vessels or aircraft
engaged in coastwise trade "R2?)r 7' R)'a,e'*
111 SCRA 100$.
-nmanifeste+ Car:o is subCect to
$orfeiture whether the act of smuggling is
established or not under the principle of res ipsa
lo2uitur. (t is enough that the cargo was
unmanifested and that there was no showing
that payment of duties thereon had been made
for it to be sub;ect to forfeiture.

Car:o1 sea store1 an+ pro,isions
+istin:uis(e+:
1. Car:o: )rticle of value !including foreign
currencies, usually movables, other than
those as part of sea stores or provisions.
2. Sea Store: (t is where the passengers can
buy their necessities.
3. *ro,isions: ,hose necessary for the
subsistence of the crew.
Settlement of $orfeiture Cases
$eneral Rule: 8ettlement of cases by payment
of fine or redemption of forfeited property is
allo&e+.
Exceptions:
1. the importation is absolutel= pro(ibite+ or
2. the surrender of the property to the person
offering to redeem would be contrar= to
la&, or
3. when there is frau+. 2Sec. 03HB1 TCC3
Acquittal in Criminal C(ar:e NOT Res
Ju+icata in Sei)ure or $orfeiture *rocee+in:s
Reasons:
1. #riminal proceedings are actions in
personam while seizure or forfeiture
proceedings are actions in rem.
2. #ustoms compromise does not extinguish
criminal liability !*eople vs. .esiderio, $ov.
2B, 1GB<.
)t any time prior to the sale, the delin2uent
importer ma= settle (is obli:ations with the
-ureau of #ustoms, in which case the aforesaid
articles may be delivered upon payment of the
corresponding duties and taxes and compliance
with all other legal re2uirements 2Sec. 76H.1
TCC3
Abatement
,he reduction or non-imposition of
customs duties on certain imported materials as
a result of:
1. .amage incurred during voyage0
2. .eficiency in contents pac1ages
3. Aoss or destruction of articles after arrival
3. .eath or in;ury of animals
$rau+ulent *ractices consi+ere+ as
Criminal Offenses a:ainst Customs Re,enue
"a&s:
a. Jnlawful importation0
b. +ntry of imported or exported article by
means of any false or fraudulent
practices, invoice, declaration, affidavit,
or other documents0
c. +ntry of goods at less than their true
weights or measures or upon a
classification as to 2uality or value0
d. *ayment of less than the amount due0
e. /iling any false or fraudulent claim for
the payment of drawbac1 or refund of
duties upon the exportation of
merchandise0 or
f. /iling any affidavit, certificate or other
document to secure to himself or others
the payment of any drawbac1,
allowance or refund of duties on the
exportation of mdse. greater than that
legally due thereon. 2Sec. 3IH01 TCC3
FI. CO-RT O$ TA
A**EA"S 2RA 77063
Salient features of t(e CTA:
1. (t is a ;udicial body0
2. (t is a court of special ;urisdiction0
3. (t is not governed by technical rules of
evidence.
*o&ers of t(e CTA:
T(e follo&in: are t(e po&ers of t(e CTA:
1. to administer oat(s0
2. to recei,e e,i+ence0
3. to summon witnesses by subpoena0
3. to re2uire production or papers or
documents by subpoena +uces tecum@
22
<. to punish contempt0
B. to promul:ate rules an+ re:ulations for
the conduct of its business0
D. to assess +ama:e against appellant if
appeal to #,) is found to be frivolous or
dilatory0
6. to suspen+ t(e collection of t(e tax
pen+in: appeal0 and
G. to ren+er +ecisions on cases brought
before it.
Requisites for a Fali+ Suspension of
Collection of t(e Tax pen+in: Appeal:
There must be a
1. 8howing that collection of the tax may
Ceopar+i)e t(e interest of the government
and E or the taxpayer0
2. 9eposit of the amount claimed or file a
surety bond for not more than double the
amount of tax with the #ourt when re2uired0
and
3. 8howing by taxpayer that appeal is not
fri,olous nor +ilator=.
Juris+iction of t(e CTA:
Exclusi,e appellate Curis+iction to re,ie&
on appeal:
1. decisions of #(" in >
a. disputed assessments, refunds of internal
revenue taxes, fees or other charges0
penalties imposed in relation thereto0 or
b. other matters arising under the $("#, or
other law or part of law administered by
the -(".
2. decision of #ommissioner of #ustoms in >
a. cases involving liability from custom
duties, fees or other money charges0
seizure, detention or release of property
affected0 fines, forfeitures or other
penalties imposed in relation thereto0 or
b. other matters arising under the #ustoms
Aaw, or other law or part of law
administered by the -ureau of #ustoms
MOt(er mattersN
,hose controversies which can be
considered within the scope of the
function of the -(" E -%# under
e;usdem generis rule !e.g. action for the
nullity of distraint and levy0 2uestioning
the propriety of the assessment0
collection of compromise penalties.
4eneral Rule: $ew issues cannot be raised
for the first time on appeal.
Exceptions:
1. .efense of prescription
"+)8%$: ,his is a statutory right "V2'a.a-
La-4 Tra-'p)rtat2)- 7' C),,ect)r$
2. +rrors of administrative officials
"+)8%$: 8tate can never be in estoppel
and lifeblood theory. "CIR 7' !r)cter a-4
6a&(,e !:2,' M+? C)rp$
Simultaneous filin: of an application for
refun+ or cre+it an+ institution of a case
before t(e CTA allo&e+
,he law fixes the same period of two !2
years for filing a claim for refund with the
#ommissioner and for filing a case with the
#,). ,he two-year period for both starts from
the date after the payment of the tax or penalty,
or from the approval of the application for credit.
Obser,ation: (f we are not going to
allow the taxpayer to file a refund before the
#,) and let him wait for the #("Fs decision, and
the latter failed to render a decision within the 2-
year period, the said taxpayer can no longer file
a refund before the #,) because his right to
appeal has prescribed.
23
23