Professional Documents
Culture Documents
UP Bar Reviewer 2013 Taxation PDF
UP Bar Reviewer 2013 Taxation PDF
PENALTY ........................................................... 21
General Principles of
Taxation................................ 2
............................... 30
TAXATION 2
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TAXES
(3) Subject to constitutional and inherent limitations These limitations are those provided in the
fundamental law or implied therefrom, while the
rest spring from the nature of the taxing power
itself although they may or may not be provided
in the Constitution.
SCOPE OF TAXATION
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PURPOSE OF TAXATION
REVENUE-RAISING
NON-REVENUE/SPECIAL OR REGULATORY
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NECESSITY THEORY
Exceptions:
(1) Where the taxpayer deliberately misstates or
omits material facts from his return or any
document required of him by BIR;
(2) Where the facts subsequently gathered by the
BIR are materially different from the facts on
which the ruling is based; OR
(3) Where the taxpayer acted in bad faith. (Sec. 246,
NIRC)
IMPRESCRIPTIBILITY
DOCTRINES IN TAXATION
PROSPECTIVITY OF TAX LAWS
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DOUBLE TAXATION
Means taxing twice for the same tax period the same
thing or activity, when it should be taxed but once,
for the same purpose and with the same kind of
character of tax.
Strict sense (Direct duplicate Taxation)
(1) the same property must be taxed twice when it
should be taxed once;
(2) both taxes must be imposed on the same property
or subject matter;
(3) for the same purpose;
(4) by the same State, Government, or taxing
authority;
(5) within the same territory, jurisdiction or taxing
district;
(6) during the same taxing period; and
(7) of the same kind or character of tax.
Broad sense
There is double taxation in the broad sense or there
is indirect duplicate taxationif any of the elements for
direct duplicate taxation is absent.
It extends to all cases in which there is a burden of
two or more pecuniary impositions. For example, a
tax upon the same property imposed by two different
states.
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Tax evasion
TAX EVASION - is the use by the taxpayer of illegal or
fraudulent means to defeat or lessen the payment of
a tax. It is also known as tax dodging. It is
punishable by law.
Example: Deliberate failure to report a taxable
income or property; deliberate reduction of income
that has been received.
Elements of Tax Evasion
(1) The end to be achieved. Example: the payment of
less than that known by the taxpayer to be legally
due, or in paying no tax when such is due.
(2) An accompanying state of mind described as
being evil, in bad faith, willful or deliberate
and not accidental.
(3) A course of action (or failure of action) which is
unlawful.
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Tax laws
In case of doubt, such are to be construed strictly
against the government and liberally in favor of the
taxpayer.(Manila Railroad Co. v. Coll. of Customs, 52
Phil. 950 [1929]).No person or property is subject to
taxation unless within the terms or plain import of a
taxing statute. (see72 Am.Jur. 2d 44). Taxes, being
burdens, they are not to be presumed beyond what
the statute expressly and clearly declares. (Coll. v. La
Tondena, 5 SCRA 665 [1962]). Thus, a tax payable by
individuals does not apply to corporations.Tax
statutes offering rewards are liberally construed in
favor of informers. (Penid v. Virata, 121 SCRA 166
[1983]).
TAX AMNESTY
Exceptions:
(1) The rule of strict construction as against the
government is not applicable where the language
of the statute is plain and there is no doubt as to
the legislative intent. (see 51 Am.Jur.368). In such
case, the words employed are to be given their
ordinary meaning. Ex. Word individual was
changed by the law to person. This clearly
indicates that the tax applies to both natural and
juridical persons, unless otherwise expressly
provided.
(2) The rule does not apply where the taxpayer claims
exemption from the tax.
Definition
A tax amnesty partakes of an absolute forgiveness or
waiver by the Government of its right to collect what
otherwise would be due it, and in this sense,
prejudicial thereto, particularly to give tax evaders,
who wish to relent and are willing to reform a chance
to do so and become a part of the new society with a
clean slate.[Republic v. IAC (1991)]
A tax amnesty, much like a tax exemption, is never
favored nor presumed in law. If granted, the terms of
the amnesty, like that of a tax exemption, must be
construed strictly against the taxpayer and liberally
in favor of the taxing authority. For the right of
taxation is inherent in government. The State cannot
strip itself of the most essential power of taxation by
doubtful words. He who claims an exemption (or an
amnesty) from the common burden must justify his
claim by the clearest grant of organic or state law. It
cannot be allowed to exist upon a vague implication.
If a doubt arises as to the intent of the legislature,
that doubt must be resolved in favor of the state.
(CIR v. Marubeni Corp.,372 SCRA 576 [2001]).
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Exceptions:
(a) When the law itself expressly provides for a
liberal construction, that is, in case of doubt, it
shall be resolved in favor of exemption; and
(b) When the exemption is in favor of the
government itself or its agencies, or of religious,
charitable, and educational institutions because
the general rule is that they are exempt from tax.
(c) When the exemption is granted under special
circumstances to special classes of persons.
(d) If there is an express mention or if the taxpayer
falls within the purview of the exemption by clear
legislative intent, the rule on strict construction
does not apply. (Comm. V. Arnoldus Carpentry
Shop, Inc., 159 SCRA 19 [1988]).
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Public Purpose
The proceeds of the tax must be used (a) for the
support of the State or (b) for some recognized
objects of government or directly to promote the
welfare of the community.
Inherently Legislative
Stated in another way, taxation may exceptionally be
delegated, subject to such well-settled limitations as
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Territorial
Rule: A state may not tax property lying outside its
borders or lay an excise or privilege tax upon the
exercise or enjoyment of a right or privilege derived
from the laws of another state and therein exercise
and enjoyed. (51 Am.Jur. 87-88).
Reasons:
(1) Tax laws (and this is true of all laws) do not
operate beyond a countrys territorial limits.
(2) Property which is wholly and exclusively within
the jurisdiction of another state receives none of
the protection for which a tax is supposed to be a
compensation.
Note:Where privity of relationship exists. - It does not
mean, however, that a person outside of state is no
longer subject to its taxing powers. The fundamental
basis of the right to tax is the capacity of the
government to provide benefits and protection to the
object of the tax. A person may be taxed where there
is between him and the taxing state, a privity of the
relationship justifying the levy. Thus, the citizens
income may be taxed even if he resides abroad as
the personal (as distinguished from territorial)
jurisdiction of his government over him remains. In
this case, the basis of the power to tax is not
dependent on the source of the income nor upon the
location of the property nor upon the residence of
the taxpayer but upon his relation as a citizen to the
state. As such citizen, he is entitled, wherever he may
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International Comity
Comity - respect accorded by nations to each other
because they are sovereign equals. Thus, the
property or income of a foreign state or government
may not be the subject of taxation by another state.
Reasons:
(1) In par in parem non habet imperium. As between
equals there is no sovereign (Doctrine of
Sovereign
Equalityamong
states
under
international law). One state cannot exercise its
sovereign powers over another.)
(2) In international law, a foreign government may
not be sued without its consent useless to
impose a tax which could not be collected.
(3) Usage among states that when a foreign
sovereign enters the territorial jurisdiction of
another, there is an implied understanding that
the former does not intend to degrade its dignity
by placing itself under the jurisdiction of the
other.
(4) Rule in international law that a foreign
government may not be sued without its consent
so that it is useless to assess the tax anway since
it cannot be collected.
Situs
Property Tax
Where it is located (lexreisitae)
Where property is physically
located although the owner
resides in another jurisdiction.
Gen Rule: Domicile of the owner.
Mobiliasequunturpersonam
(movables follow the person)
Exceptions:
(1) When property has acquired a
business situs in another
jurisdiction; or
(2) When the law provides for the
situs of the subject of tax (e.g.,
Sec 104, NIRC)
Excise Tax
Source of the income, nationality
or residence of taxpayer (Sec. 23,
NIRC)
Location of property; nationality
or residence of taxpayer
Location of property; nationality
or residence of taxpayer
Where transaction is made
Others
Residence of taxpayer, regardless
of the source of income or
location of the property of the
taxpayer
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CONSTITUTIONAL LIMITATIONS
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Scope of
Exemption
xxx
(3) All revenues and assets of non-stock, non-profit
educational institutions used actually, directly,
and exclusively for educational purposes shall be
exempt from taxes and duties.
Proprietary educational institutions, including
those cooperatively owned, may likewise be
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xxx
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Equal protection
ART III, SEC 1, 1987 CONSTITUTION
Religious freedom
ART III, SEC 5, 1987 CONSTITUTION
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Taxes
Imposed only by the
government
LICENSE FEE
Taxes
Imposed under the
taxing power of the
state for purposes of
revenue.
Forced contributions for
the
purpose
of
maintaining
government functions.
Generally, unlimited as
to amount
TARIFF
Imposed on persons,
property and to exercise
a privilege.
Failure to pay does not
necessarily make the act
or business illegal.
Toll
Generally, no limit on
the amount collected as
long as it is not
excessive, unreasonable
or confiscatory
Penalty
for
nonpayment: surcharges or
imprisonment (except
poll tax).
TOLL
Taxes
used.
Imposed
by
the
government
or
by
private individuals or
entities.
Tariff
Toll
Taxes
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Special Assessment
Imposed regardless of
public improvements
Imposed because of an
increase in value of land
benefited by public
improvement.
Contribution of a person
for the construction of a
public improvement
Exceptional both as to
time and locality.
Taxes
Based on laws
Generally cannot be
assigned
Generally paid in money
Cannot be a subject of
set off or compensation
A person cannot be
imprisoned for nonpayment of debt (except
when it arises from a
crime),
Governed by the special
prescriptive
periods
provided for in the NIRC.
Does not draw interest
except
only
when
SPECIAL ASSESSMENT
Taxes
Contribution
of
a
taxpayer for the support
of the government.
It
has
general
application both as to
time and place.
Taxes
Special Assessment
Levied only on land.
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Debt
Generally based
contract, express
implied.
Assignable
on
or
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Taxes
Debt
delinquent
Imposed only by public
authority
there is default.
Can be imposed by
private individual
Taxes
Violation of tax laws
may give rise to
imposition of penalty.
Generally intended to
raise revenue
May be imposed only by
the government
Cannot be a subject of
set off or compensation
Penalty
Any sanction imposed as
a punishment for
violation of law or acts
deemed injurious
Designed to regulate
conduct
May be imposed by the
government or private
individuals or entities
Can be a subject of set
off or compensation (see
Art. 1279, Civil Code)
AS TO TAX RATES
KINDS OF TAXES
AS TO OBJECT
AS TO PURPOSES
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Income Taxation
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RESIDENCE PRINCIPLE
COMPREHENSIVE
The Philippines follows the semi-schedular or semiglobal system of income taxation, although certain
passive investment incomes and capital gains from
sale of capital assets, namely: (a) shares of stock of
domestic corporations and (b) real property are
subject to final taxes at preferential tax rates.
NATIONAL TAX
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TAXABLE PERIOD
The accounting periods used in determining the
taxable income of taxpayers are:
(a) Calendar Year - Accounting period of 12 months
ending on the last day of December
(b) Fiscal Year - Accounting period of 12 months
ending on the last day of any month other than
December (Sec. 22(Q), NIRC).
(c) Short Period- Accounting period which starts after
the first month of the tax year or ends before the
last month of the tax year (less than 12 months).
Classification
Citizens of
the
Philippines
Non-resident citizens
Residents
Individuals
Aliens
Corporations
Nonresident
s
Engaged in
Trade or
Business in
the
Philippines
Not
Engaged in
Trade or
Business in
the
Philippines
Minimum Wage
Earner
Domestic Corporations
Resident
Corporations
Foreign
Corporations
Non-resident
Corporations
Estates and
Trusts
Partnerships
Coownerships
Individual Taxpayers
Citizens
(1) Resident Citizens (RC)
(2) Non-resident Citizens (NRC)
(a) Citizen of the Philippines who establishes to
the satisfaction of the Commissioner the fact
of his physical presence abroad with a definite
intention to reside therein.
(b) Citizen who leaves the Philippines during the
taxable year to reside abroad, either as an
immigrant or for employment on a permanent
basis.
(c) Citizen of the Philippines who works and
derives income from abroad and whose
employment thereat requires him to be
physically present abroad most of the time
during the taxable year.
(d) Citizen previously considered as non-resident
citizen and who arrives in the Philippines at
any time during the taxable year to reside
permanently in the Philippines Treated as
NRC with respect to his income derived from
sources abroad until the date of his arrival in
the Philippines
KINDS OF TAXPAYERS
DEFINITION OF EACH KIND OF TAXPAYER
Primary
Residents citizens
Sub-Classification(s)
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Aliens
(1) Resident Alien
Corporations
Includesall types of corporations, partnerships (no
matter how created or organized), joint stock
companies, joint accounts, associations, or insurance
companies, whether or not registered with the SEC.
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Taxpayer
Resident Citizen
Non-resident Citizen and OCW
Resident and Non-resident
Alien
Domestic Corporation
Foreign Corporation
Within
Without
X
X
INCOME
DEFINITION
INCOME TAXATION
DEFINITION
NATURE
GENERAL PRINCIPLES
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Capital
Fund or property
existing at one distinct
point in time.
Wealth itself
Return of capital is not
subject to tax
Tree
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Personal Property
Real Property
Dealer
Dealer in personal Installment method;
property who regularly Provided,
initial
sells in installment payments do
not
plan:
Installment exceed 25% of selling
method
price
*held as ordinary
assetregardless
of
amount of percentage
of initial payments
Installment
Provided:
If exceeds 25%-Deferred
payment
method
*held as inventory
Casual Sale
method;
(1) Selling
price
exceeds php1,000
(2) Initial payments do
not exceed 25% of
selling price
If either of 2 or both
conditions not met
Deferred
payment
method
Deferred Payment
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GROSS INCOME
DEFINITION
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Compensation Income
Income arising from an employer-employee (ER-EE)
relationship. It means all remuneration for services
performed by an EE for his ER, including the cash
value of all remuneration paid in any medium other
than cash [Sec. 78(A)],unless specifically excluded by
the Tax Code.
SOURCES OF INCOME
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Special Cases:
(a) For fringe benefits received by non-resident alien
not engaged in trade of business in the
Philippines (NRANETB), the tax rate is 25% of the
GMV. The GMV is determined by dividing the
actual monetary value of the fringe benefit by
75% [100% - 25%].
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Housing
Housing Privilege
(1) LEASE of residential
property
for
the
residential use
of
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Housing Privilege
employees
(2) Assignment
of
residential
property
owned by employer for
use of employees
(3) Purchase of residential
property in installment
basis for the use of the
employee
(4) Purchase of residential
property
and
ownership
is
transferred in the
name of the employee
TAXATION 1
of employees
Professional Income
Refers to fees received by a professional from the
practice of his profession, provided that there is NO
employer-employee relationship between him and
his clients.
Income from Business
(a) Any income derived from doing business
(b) Doing business: The term implies a continuity of
commercial dealings and arrangements, and
contemplates, to that extent, the performance of
acts or works or the exercise of some of the
functions normally incident to, and in progressive
prosecution of, the purpose and object of its
organization.
MV= 5% x acquisition
cost x 50%
MV= FMV or ZV,
whichever is higher
Taxable
Net
Income
Ordinary
Net Income
Ordinary Asset
Types of Properties
Capital v. Ordinary Asset
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Ordinary Assets
Capital Assets
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Ordinary Assets
Capital Assets
inventory
of
the
taxpayer if on hand at
the close of the
taxable year.
(2) Property held by the
taxpayer primarily for
sale to customers in
the ordinary course of
his trade or business.
(3) Property used in the
trade or business of a
character which is
subject
to
the
allowance
for
depreciation, or
(4) Real property used in
the trade or business
of
the
taxpayer,
including
property
held for rent.
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Cash dividend
Dividends are included in the gross income of the
stockholder, unless they are exempt from tax or
subject to tax at preferential rate under the NIRC.
Cash dividend is the most common form of
dividend, valued at the amount of money received
by the stockholder. Cash dividend and property
dividend are subject to income tax.
Stock dividend
Stock dividend is generally exempt from income
tax, EXCEPT:
(a) If a corporation cancels or redeems stock
issued as a dividend at such time and in such
manner as to make the distribution and
cancellation or redemption, in whole or in
part, essentially equivalent to the distribution
of a taxable dividend, the amount so
distributed in redemption or cancellation of
the stock shall be considered as taxable
income to the extent that it represents a
distribution of earnings or profits (Sec. 73(B),
NIRC); or
(b) Where there is an option that some
stockholders could take cash or property
dividends instead of stock dividends; some
stockholders exercised the option to take cash
of property dividends; and the exercise of
option resulted in a change of the
stockholders proportionate share in the
outstanding share of the corporation.
Passive Income
Under Sec 24(B), a final tax is imposed upon gross
passive income of citizen and resident aliens. An
income is considered passive if the taxpayer merely
waits for it to be realized.
Property dividend
Dividends are included in the gross income of the
stockholder, unless they are exempt from tax or
subject to tax at preferential rate under the NIRC.
Cash dividend and property dividend are subject to
income tax.
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Liquidating dividend
Represents distribution of all the property or
assets of a corporation in complete liquidation or
dissolution. It is strictly not dividend income, but
ratheris treated in effect, as a sale of shares of
stock resulting in capital gain or loss. The
difference between the cost or other basis of the
stock and the amount received in liquidation of
the stock is a capital gain or a capital loss. Where
property is distributed in liquidation, the amount
received is the FMV of such property. The income
is subject to ordinary income tax rates and NOT
to the FWT on dividends.
4.5%
7.5%
NonResident
Alien
25%
25%
30%
25%
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Tax Rate
Net taxable income
shall be subject to the
graduated income tax
rates
Rental income from real
property located in the
Philippines shall be
subject to 25% final
withholding tax unless a
lower rate is imposed
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Lessor
Non-resident
Corporation
Tax Rate
Domestic Corporation
Resident
Foreign
Corporation
Foreign
pursuant to an effective
tax treaty
Net taxable income
shall be subject to 30%
corporate income tax or
its gross income will be
subject to 2% MCIT
Gross rental income
from
real
property
located
in
the
Philippines shall be
subject
to
30%
corporate income tax,
such tax to be withheld
and remitted by the
lessee in the Philippines
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Case A
Other Income
Income from any source whatever
Inclusion of all income not expressly exempted
within the class of taxanle income under the laws
irrespective of the voluntary or involuntary action of
the taxpayer in producing the gains, and whether
derived from legal or illegal sources.
Case C
500,000
400,000
500,000
Less: Allowable
Deductions
(before write-off
of Uncollectible
Accounts/Debts)
(200,000)
(480,000)
(495,000)
300,000
(60,000)
5,000
(2,000)
(2,000)
(6,000)
298,000
(62,000)
(1,000)
2,000
2,000
6,000
Taxable Income
(Net Loss) before
write-off
Forgiveness of indebtedness
The cancellation or forgiveness of indebtedness may
have any of three possible consequences:
(a) It may amount to payment of income. If, for
example, an individual performs services to or for
a creditor, who, in consideration thereof, cancels
the debt, income in that amount is realized by the
debtor as compensation for personal services.
(b) It may amount to a gift. If a creditor wishes merely
to benefit the debtor, and without any
consideration therefore, cancels the debt, the
amount of the debt is a gift to the debtor and
need not be included in the latters report of
income.
(c) It may amount to a capital transaction. If a
corporation to which a stockholder is indebted
forgives the debt, the transaction has the effect of
a payment of dividend.
Case B
Year 1
Gross Income
Deduction for
Accounts
Receivable
written off
Taxable Income
(Net Loss) after
write-off
Year 2
Recovery of
Amounts Written
Off
Taxable Income
on the Recovery
2,000
5,000
Explanation:
(1) In Case A, the entire amount recovered (P2,000)
is included in the computation of gross income
in Year 2 because the taxpayer benefited by the
same extent. Prior to the write-off, the taxable
income was P300,000; after the write-off, the
taxable income was reduced to P298,000.
(2) In Case B, none of the P2,000 recovered would
be recognized as gross income in Year 2. Note
that even without the write-off, the taxpayer would
not have paid any income tax anyway. The
taxable income before the write-off was
actually a net loss.
(3) In Case C, only P5,000 of the P6,000 recovered
would be recognized as gross income in Year 2. It
was only to this extent that the taxpayer
benefited from the write-off. The taxpayer did not
benefit from the extra P1,000 because at this
point, the P1,000 was already a net loss.
Illustration:
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Income
Place of
PURCHASE
Philippines
Place of
SALE
Abroad
partly w/o
(3) Manufactured w/o and sold
w/in: Partly w/in and partly
w/o
Income from
Without
Abroad
Philippines
Income from
Within
** in other words, the situs of the income from the
sale of personal property is the place of sale.
(b) Intangible
General rule: Place of Sale
Exceptions:
(1) Gain from the sale of shares of stock in a domestic
corporation
Treated as derived entirely from sources within
the Philippines regardless of where the said shares
are sold.
Shares of
Stock of
Domestic
Corporation
Place of
SALE
Abroad
Abroad
Philippines
Treatment
Partly within,
partly without
Partly within,
partly without
Interest
Dividends
Services
Rentals
Royalties
Sale of Real
Property
Sale of
Personal
Income
Situs
Treatment**
Situs
Residence of the debtor
Residence of the corporation
Place of performance
Location of the property
Place of exercise
Location of realty
(a) Tangible
(1) Purchase and sale: Location
of Sale
(2) Manufactured w/in and
sold w/o: Partly w/in and
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Taxpayer
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Taxable compensation
for damages on account
of
(1) Actual damages for
loss of anticipated
profits
(2) .Moral
and
exemplary damages
awarded as a result
of break of contract
(3) Interest for nontaxable
damages
above
RA 7641
RPBP
Retiring
official
or
employee must have
been in the service of the
same employer forat
least ten (10) years.
Retiring
official
or
employee must be at
least fifty (50) years old
at the time of retirement
Retiring employee shall
not have previously
availed of the privilege
under
a
retirement
benefit plan of the same
or another employer
Plan
must
be
reasonable.
Its
implementation must be
fair and equitable for the
benefit of all employees
(e.g. from president to
laborer)
Plan must be approved
by BIR
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GSIS benefits
Benefits received from GSIS under the GSIS Act of
1937, as amended, and the retirement gratuity
received by government officials and employees are
not taxable. [Sec. 32B6., NIRC; Sec. B1, RR 2-98]
Winnings, prizes and award, including those in sports
competitions.
(a) All prizes and awards granted to athletes:
(1) in local and international sports competitions
and tournaments whether held in the
Philippines or abroad, AND
(2) sanctioned by their national sports
associations.
PAGE 49
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TAXATION 1
General rules
(a) Deductions must be paid or incurred in
connection with the taxpayers trade, business or
profession
(b) Deductions must be supported by adequate
receipts or invoices (except standard deduction)
(c) Additional requirement relating to withholding
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TAXATION 1
Expenses
Business expenses deductible from gross income
include the ordinary and necessary expenditures
directly connected with or pertaining to the
taxpayers trade or business. The cost of goods
purchased for resale, with proper adjustment for
opening and closing inventories, is deducted from
gross sales in computing gross income.
Includes:
(a) Salaries, wages, and other forms of
compensation for personal services actually
rendered, including the grossed-up monetary
value of fringe benefits furnished or granted by
the employer to the employee
(b) Travel expenses
(c) Rentals
(d) Entertainment, recreation and amusement
expenses
(e) Other expenses such as repairs or those incurred
by farmers and other persons in agribusiness
Substantiation requirement
Sec. 34(A)(1)(b), NIRC: No deduction from gross
income shall be allowed unless the taxpayer shall
substantiate with sufficient evidence, such as official
receipts or other adequate records: (1) the AMOUNT
of the expense being deducted, and (2) the DIRECT
CONNECTION or relation of the expense being
deducted to the development, management,
operation and/or conduct of the trade, business or
profession of the taxpayer.
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TAXATION 1
Cost of materials
Deductible only to the amount that they are actually
consumed and used in operation during the year for
which the return is made, provided that their cost has
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TAXATION 1
Advertising Expenses
The media advertising expenses which were found to
be inordinately large and thus, not ordinary, and
which were incurred in order to protect the taxpayers
brand franchise which is analogous to the
maintenance of goodwill or title to ones property,
are not ordinary and necessary expenses but are
capital expenditures, which should be spread out
over a reasonable period of time. (CIR v. General
Foods (Phils.)Inc, GR No. 143672, April 24, 2003)
rtens)
Interest
PAGE 53
UP COLLEGE OF LAW
TAXATION 1
Related Taxpayers
(a) Between members of the family, i.e. brothers and
sisters (whether by the whole or half-blood),
spouse, ancestor, and lineal descendants; or
(b) Except in case of distributions in liquidation,
between an individual and a corporation, where
the individual owns directly or indirectly more
than 50% of the outstanding stock of the
corporation
(c) Except in the case of distributions in liquidation,
between two corporations where:
(1) Either one is a personal holding company of a
foreign personal holding company with
respect to the taxable year preceding the date
of the sale of exchange; and
PAGE 54
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TAXATION 1
Taxes
Taxes Proper: Refers to national and local taxes;
Requisites for deductibility.
Such tax must be:
(a) Paid or incurred within the taxable year;
(b) Paid or incurred in connection with the taxpayers
trade, profession or business;
(c) Imposed directly on the taxpayer.
(d) Not specifically excluded by law from being
deducted from the taxpayers gross income.
Non-deductible taxes.
General Rule:All taxes, national or local, paid or
incurred during the taxable year in connection with
the taxpayer's profession, trade or business, are
deductible from gross income
Exceptions:
(1) Philippine income tax, except Fringe Benefit
Taxes;
(2) Income tax imposed by authority of any foreign
country, if taxpayer avails of the Foreign Tax
Credit (FTC)
(a) Exception to exception: When the taxpayer
does NOT signify his desire to avail of the tax
credit for taxes of foreign countries, the
amount may be allowed as a deductionfrom
gross income of citizens and domestic
corporationssubject to the limitations set forth
by law.
(3) Estate and donors taxes
(4) Percentage tax on stock transaction;
(5) Taxes assessed against local benefits of a kind
tending to increase the value of the property
assessed (Special Assessments)
(6) Value Added Tax
(7) Fines and penalties
(8) Final taxes
(9) Capital Gains Tax
(10) Import duties
(11) Business taxes
(12) Occupation taxes
(13) Privilege and license taxes
(14) Excise taxes
(15) Documentary stamp taxes
(16) Automobile registration fees
(17) Real property taxes
(18) Electric energy consumption tax under BP 36
Tax Credit
Tax Deduction
Effect:
Reduces
Philippine income tax
liability
Sources: Only foreign
income taxes may be
claimed
as
credits
against
Philippine
income tax.
Treatments
of
surcharges/interests/fines
for
delinquency.
The amount of deductible taxes is limited to the
basic tax and shall not include the amount for any
UP COLLEGE OF LAW
TAXATION 1
resident
Phil. Income
Tax
Phil. Income
Tax
Limit on
amount of
tax credit
(Per
Country
Limit)
Limit on
amount of
tax credit
(World
Wide Limit)
Losses
Requisites for deductibility.
PAGE 56
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TAXATION 1
Wagering losses
Losses from wagering (gambling) are deductible
only to the extent of gains from such transactions. A
wager is made when the outcome depends upon
CHANCE.
Other Losses:
(1) Abandonment lossesin petroleum operation and
producing well.
(2) Losses
due
to
voluntary
removal
of
buildingincident to renewal or replacements are
deductible from gross income.
(3) Loss of useful value of capital assetsdue to charges
in business conditions is deductible only to the
extent of actual loss sustained (after adjustment
for improvement, depreciation and salvage value)
(4) Losses from sales or exchanges of property
between related taxpayersare not recognized, but
the gains are taxable.
Bad debts
Debts resulting from the worthlessness or
uncollectibility, in whole or in part, of amounts due
the taxpayer actually ascertained to be worthlessand
the corresponding receivable should have been
written off or charged off within the taxable year
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TAXATION 1
General rule:
Taxpayer must ascertain and
demonstrate with reasonable certainty the
uncollectibility of debt
Exceptions:
(1) Banks as creditors BSP Monetary Board shall
ascertain the worthlessness and uncollectibility of
the debt and shall approve the writing off
(2) Receivables from an insurance or surety company
(as debtor) may be written off as bad debts only
when such company is declared closed due to
insolvency or similar reason
property.
Methods of computing depreciation allowance.
(a) Straight-line
cost- salvage value
estimated life
(b) Declining balance
cost depreciation x
Rate
estimated life
(c) Sum-of-the-year-digit
nth period
x cost(SYD)
salvage
SYD
(d) Any other method
which
may
be
prescribed by the
Secretary of Finance
upon
the
recommendation
of
the CIR
UP COLLEGE OF LAW
TAXATION 1
th
Statutory Limit:
(a) 10% in the case of an individual (individual
donor), and
(b) 5% in the case of a corporation (corporate donor),
of the taxpayer's/donors income derived from
trade, business or profession computed before the
deduction for contributions and donations
The amount deductible is the actual contribution
or the statutory limit computed, whichever is lower
Contributions to pension trusts
Contribution to a pension trust may be claimed as
deduction as follows:
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TAXATION 1
(c) Partnerships
(1) General Co-Partnership
For purposes of taxation, the Code considers
general co-partnerships as corporations.
Hence, rules on OSD for corporations are
applicable to general co-partnerships.
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TAXATION 1
Note:
Only children (not parents) may be considered
dependent for purposes of additional
exemptions.
The definition of the term dependent under
Section 35(B) of the NIRC now includes a
Foster Child or a child placed under planned
temporary substitute parental care by a Foster
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TAXATION 1
Status-at-the-end-of-the-year rule
Change of Status[Sec 35(C), NIRC]
(1) If taxpayer marries during taxable year, taxpayer
may claim the corresponding BPE in full for such
year (i.e., no need to pro-rate the exemption).
(2) If taxpayer should have additional dependent(s)
during taxable year, taxpayer may claim
corresponding AE in full for such year.
(3) If taxpayer dies during taxable year, his estate
may claim BPE and AE as if he died at the close of
such year.
(4) If during the taxable year
(a) spouse dies or
(b) any of the dependents dies or marries, turns
21 years old or becomes gainfully employed,
taxpayer may still claim same exemptions as if
the spouse or any of the dependents died, or
married, turned 21 years old or became
gainfully employed at the close of such year.
Note: When it comes to change of status, the status
beneficial to the taxpayer is used for purposes of
claiming deductions as long as the taxpayer
achieved such status at any time during the taxable
period.
Exemptions claimed by non-resident aliens
Non-resident aliens engaged in trade or business are
entitled personal exemptions subject to reciprocity.
It means that NRAETB shall be allowed a personal
exemption only if the income tax law in his country
grants allowance for personal exemptions to the
citizens and residents of the Philippines as stipulated
in the reciprocity tax treaty with the Philippine
Government.
EXEMPT CORPORATIONS
These are:
(1) Proprietary Educational Institutions and hospitals
(2) Government owned and controlled corporations
(3) Others
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TAXATION 1
PAGE 63
Taxable
Income
Income
from
sources
within and
outside
the
Philippines
Basic
Personal
Exemption
Allowed
Additional
Personal
Exemption
Allowed
Tax
Rates
5%32%
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Classification
NonResident
Citizen
Resident
Alien
Nonresident
Alien
Engaged in
Trade or
Business
Nonresident
Alien Not
Engaged in
Trade or
Business
TAXATION 1
Taxable
Income
Income
from
sources
within the
Philippines
Income
from
sources
within the
Philippines
Income
from
sources
within the
Philippines
Income
from
sources
within the
Philippines
Basic
Personal
Exemption
Allowed
Additional
Personal
Exemption
Allowed
Tax
Rates
Allowed
Allowed
5%32%
Lower
amount
between
PE
allowed to
Filipinos in
the foreign
country
where he
resides vs.
PE in the
Philippines
Not
allowed
No
specific
provision
5%32%
Not
allowed
25%
5%32%
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TAXATION 1
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TAXATION 1
Deductions
(1) Personal exemptions and additional exemptions
(See the Chapter on Deductions for the full
discussion of Personal and
additional
exemptions)
(a) Basic Personal Exemptions
According to RA 9504 (effective July 6, 2008)
basic personal exemption is Fifty thousand
pesos (P50,000) for each individual taxpayer,
PAGE 66
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TAXATION 1
5%
12%
20%
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TAXATION 1
Citizens,
Residents
20%
20%
20%
NRAETB
NRANETB
20%
20%
20%
20%
20%
20%
20%
10%
20%
10%
20%
25%
20%
20%
20%
20%
25%
25%
7 1/2%
Note: NRC
Exempt
(RR 1-2011)
Exempt
Exempt
Exempt
Exempt
25%
5%
12%
5%
12%
25%
25%
20%
NRAETB
25%
NRANETB
10%
20%
25%
10%
20%
25%
20%
Citizens,
Residents
10%
20%
25%
(b) For interest from foreign currency loans granted
by OBUs to residents other than OBUs or local
commercial banks, including branches of foreign
banks that may be authorized by the BSP to
UP COLLEGE OF LAW
TAXATION 1
But should the holder of the certificate preterminate the deposit or investment before the
th
5 year, a final tax shall be imposed on the entire
income and shall be deducted and withheld by
the depository bank from the proceeds of the
long-term deposit or investment certificate based
on the remaining maturity thereof:
(a) Four (4) years to less than five (5) years - 5%;
(b) Three (3) years to less than four (4) years 12%; and
(c) Less than three (3) years - 20%.
(2) Any income of nonresidents, whether individuals
or corporations, from transactions with depository
banks under the expanded system shall be
exempt from income tax.
UP COLLEGE OF LAW
TAXATION 1
(
)]
XXX
XXX
XXX
XXX
(XXX)
XXX
Amount in
excess of
P100,000
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TAXATION 1
Resident
Category of Income
Non-Resident
CITIZEN
ALIEN
CITIZEN
NRAETB
NRANETB
All sources
Within the
Philippines
Within the
Philippines
Within the
Philippines
Within the
Philippines
GIW 25%
Not
Applicable
GIW 20%
EXEMPT
EXEMPT
Net Capital Gains within:
Not Over P100,000 5% Final Tax
Amount in Excess of P100,000 plus 10% Final Tax on the excess
Gross Selling Price or FMV, whichever is higher
6% Final Withholding Tax
of 1% of the Selling Price (Stock Transaction Tax)
Note: Stock Transaction Tax is not an income tax, but a business
(percentage) tax
Schedular Income Tax Rates (Sec. 24, NIRC)
(i.e, 5% to 32%)
PAGE 71
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TAXATION 1
Computations
Pure Compensation Income
Less:
x
Less:
xx
xx
xx
xx
xx
ADD:
Less:
x
Less:
Xx
Xx
Xx
Xx
Xx
Xx
Xx
Xx
Xx
Less:
x
Less:
Xx
xx
Except:
(1) The following Royalties shall be subject to a final
tax of ten percent (10%) on the total amount
thereof:
(a) On books as well as other literary works; and
(b) On musical compositions
(2) Cinematographic films and similar works shall be
subject to twenty-five percent (25%) of the gross
income
(3) Interest income from long-term deposit or
investment in the form of savings, common or
individual trust funds, deposit substitutes,
investment management accounts and other
xx
Xx
Xx
Xx
Xx
PAGE 72
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TAXATION 1
CAPITAL GAINS
EXEMPTIONS
GRANTED
AGREEMENTS (SEC. 32(B))
UNDER
INTERNATIONAL
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TAXATION 1
TAX PAYABLE
XXX
XXX
XXX
Pointers.
MCIT is in the nature of a tax credit, not an allowable
deduction. Its purpose is to prevent corporations
from escaping being taxed by including frivolous
expenses in their statement of income.
Imposition of MCIT
XXX
XXX
XXX
XXX
P xxx
xxx
P xxx
Gross receipts/revenue
Less: Direct cost of services
Gross income
Regular Tax
Normal Corporate Income Tax Rate: 30%of Taxable
Income (effective January 1, 2009)
Gross Income
Less: Allowable Deductions
Taxable Income
Service Concerns
XXX
XXX
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TAXATION 1
Illustration.
E Co., a domestic trading corporation, in its fourth
year of operations had a gross profit from sales of
P300,000 and net taxable income of P100,000.
How much was the income tax paid by the
corporation for the year?
MCIT (P300,000 x 2%)
Normal income tax
(P100,000 x 30%)
Income Tax to be paid for the year
(whichever is higher)
P6,000
P30,000
P30,000
Illustration.
A domestic corporation had the following data on
computations of the normal tax (NT) and the
minimum corporate income tax (MCIT) for five years.
UP COLLEGE OF LAW
MCIT
NT
Yr 4
80K
20K
MCIT
NT
NT is higher
Less: MCIT carryfwd
TAXATION 1
Yr 5
50K
30K
Year 4
80,000
20,000
n/a
Yr 6
30K
40K
Yr 7
Yr 8
40K
35K
20K
70K
Year 5
50,000
30,000
Year 6
30,000
40,000
40,000
n/a
Year 7
40,000
20,000
n/a
Year 8
35,000
70,000
70,000
>(20,000)
>(20,000)
>(40,000)*
From Year 4
From Year 5
From Year 7
Tax Due
80,000
50,000
40,000
30,000
20% of GNP
40%
Does not
exceed 55%
Gross Sales
Less: Sales Returns
SalesDiscounts& Allowances
Cost of Goods Sold
GI
XXX
XXX
XXX
4% of GNP
0.90%
XXX
XXX
XXX
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TAXATION 1
ALLOWABLE DEDUCTIONS
Itemized deductions
(1) Bad debts
(2) Expenses
(3) Losses
(4) Taxes
(5) Depreciation
(6) Interest
(7) Depletion of oil and gas wells and mines
(8) Charitable and other contributions
(9) Research and development
(10) Pension trusts
Inter-corporate dividends
Dividends received from
corporation - exempt
another
domestic
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TAXATION 1
For GOCCs:
General rule:GOCCs are taxable as any other
corporation engaged in similar business, industry or
activity, except:
(a) Government Service Insurance System (GSIS)
(b) Social Security System (SSS)
(c) Philippine Health Insurance Corporation (PHIC)
(d) Local water districts (LWDs)
(e) Philippine Charity Sweepstakes Office (PCSO)
(Sec. 27(C), NIRC)
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GENERAL RULE
PAGE 79
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Intercorporate dividends
Dividends received from a domestic corporation liable
to tax under the NIRC- exempt
Exclude:
(1) International carrier
(2) Offshore banking units
(3) Branch profits remittances
(4) Regional or area headquarters and regional
operating
headquarters
of
multination
companies
Tax Rate.
Exempt from all taxes, except net income from such
transactions as may be specified by the Secretary of
Finance, upon recommendation by the Monetary
Board to be subject to the regular income tax
payable by banks
What is GPB.
In the case of International Air Carriers, GPB refers to
the amount of:
(a) gross revenue derived from carriage of persons,
excess baggage, cargo and mail originating from
the Philippines in a continuous and uninterrupted
flight, irrespective of the place of sale or issue and
the place of payment of the ticket or passage
document
(b) gross revenue from tickets revalidated,
exchanged and/or indorsed to another
international airline if the passenger boards a
plane in a port or point in the Philippines
(c) for flights which originate from the Philippines,
but transshipment of passenger takes place at
any port outside the Philippines on another
airline, the gross revenue consisting of only the
aliquot
portion of the cost of the ticket
corresponding to the leg flown from the
UP COLLEGE OF LAW
TAXATION 1
GENERAL RULE
Notes:
(a) imposed whether the head office of the foreign
corporation is located in a tax treaty country, in a
tax haven or other non-treaty country.
(b) imposed only on the profits remitted by a
Philippine branch to the head office of a foreign
corporation.
Intercorporate dividends
(a) (Intercorporate Dividend) 15%, as long as the
country in which the nonresident foreign
corporation is domiciledallowsa tax credit for taxes
deemed paid in the Philippines equivalent to at
least15%
(b) 15% represents the difference between the
regular income tax of 30% on corporations and
the 15% tax on dividends (tax sparing credit)
(c) If the country within which the NRFC is domiciled
does NOT allow a tax credit, a final withholding
tax at the rate of30% is imposed on the dividends
received from a domestic corporation.
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TAXATION 1
(3) Rentals, charter and other fees payable to nonresident owner or lessor of aircraft machineries
and other equipment
Final tax of 7.5% of gross rentals or fees
(2) Rental, lease and charter fees payable to nonresident owner or lessor of vessels chartered by
Philippine nationals
Final tax of 4.5% of gross rentals, lease or charter
fees from leases or charters to Filipino citizens or
corporations, as approved by the Maritime
Authority
Type of Corporation
Tax
Rate
Tax Base
Domestic Corporations
Proprietary Educational Institutions and Hospitals (NonTaxable Income from all sources
profit)
Depository Banks (Foreign Currency Deposit Units)
(1) With respect to income derived under the expanded Exempt (except that net income from
foreign currency deposit system from certain foreign such transactions is subject to the
currency transactions
regular income tax payable by banks)
(2) With respect to interest income from foreign currency
loans to residents other than offshore units in the
Amount of interest income
Philippines or other depository banks under the
expanded system
Resident Foreign Corporations
International Carriers
Gross Philippine Billings
Offshore Banking Units
(1) With respect to income derived by offshore banking Exempt (except that net income from
units from certain foreign currency transactions
such transactions is subject to the
(2) With respect to interest income derived from foreign regular income tax payable by banks)
currency loans granted to residents other than offshore
banking units or local commercial banks
Amount of interest income
Resident Depository Bank (Foreign Currency Deposit Units)
(1) With respect to income derived under the expanded Exempt (except that net income from
foreign currency deposit system from certain foreign such transactions is subject to the
currency transactions
regular income tax payable by banks)
(2) With respect to interest income from foreign currency
loans to residents other than offshore units in the
Amount of interest income
Philippines or other depository banks under the
expanded system
Regional or Area Headquarters
Exempt
Regional Operating Headquarters of Multinational
Taxable Income from within the
Companies
Philippines
Non-resident Foreign Corporations [EXCLUDED]
Non-resident cinematographic film owners, lessors or
Gross Income from the Philippines
distributors
Non-resident Owner or Lessor of Vessels Chartered by
Gross Rentals, Lease and Charter
Philippine Nationals
Fees from the Philippines
Non-resident Owner or Lessor of Aircraft, Machineries and
Gross Rentals, Charges and Fees from
Other Equipment
the Philippines
IMPROPERLY ACCUMULATED EARNINGS OF
CORPORATIONS
10%
-
10%
2.5%
-
10%
10%
10%
25%
4.5%
7.5%
UP COLLEGE OF LAW
TAXATION 1
COVERED CORPORATIONS
COMPOSITION
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TAXATION 1
Rules:
(1) The partnership is subject to the same rules on
corporations (capital gains tax, final tax on
passive income, normal tax, minimum corporate
income tax [MCIT] and gross income tax [GIT]),
but is not subject to the improperly accumulated
earnings tax [IAET]. The partnership must file
quarterly and year-end income tax returns.
(2) The taxable income of the partnership, less the
normal corporate income tax (30%) thereon, is the
distributable net income of the partnership.
CO-OWNERSHIP
There is co-ownership
(1) When two or more heirs inherit and undivided
property from a decedent.
(2) When a donor makes a gift of an undivided
property in favor of two or more donees.
When Co-ownership is not subject to tax
When the co-ownerships activities are limited
merely to the preservation of the co-owned property
and to the collection of the income from the
property. The income derived by a co-owner from the
property shall be reported in his individual tax return
regardless of whether such income is actually or
constructively received.
TAXATION OF PARTNERSHIPS
(1) General
Professional
Partnerships
(GPP)
partnerships formed by persons for the sole
purpose of exercising their common profession,
no part of the income of which is derived from
engaging in any trade or business. A GPP is
exempt from income tax. It is, however, required
to file a tax return for its income for the purpose
of furnishing information as to the share in the
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NOTES
GENERAL
PROFESSIONAL
WITHHOLDING TAX
RULES
CONCEPT
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TAXATION 1
KINDS
UP COLLEGE OF LAW
TAXATION 1
WITHHOLDING OF VAT
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(2)
(3)
(4)
(5)
(6)
(7)
TAXATION 1
PAGE 88
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TAXATION 1
(2)
(3)
(4)
(5)
(6)
(7)
(8)
UP COLLEGE OF LAW
TAXATION 1
UP COLLEGE OF LAW
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
TAXATION 1
PAGE 91
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TAXATION 2
PAGE 92
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TAXATION 2
Estate Tax
NATURE
It is in reality an excise or privilege tax imposed on
the right to succeed to, receive, or take property by or
under a will or the intestacy law, or deed, grant, or
gift to become operative at or after death. [Lorenzo v.
Posadas, 64 Phil 353]
PURPOSE OR OBJECT
TAXABLE TRANSFERS
CLASSIFICATION OF DECEDENT
The decedent may be classified into:
(1) Citizen,
(2) Resident alien; or
(3) Non-resident alien.
PAGE 93
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TAXATION 2
DEFINITION OF RESIDENCE
Included
Included
Included
Of the
excess
over
200,000 Exempt
200,000 500,000 0
5%
200,000
8%
500,000
2 million
5 million
10
million
10
million
465,000 15%
5 million
10
million
Non-resident Alien
Included
Not included
Included
Reciprocity Rule
There is reciprocity if the foreign country of which the
decedent was a citizenand resident at the time of his
death:
(a) Did not impose a transfer tax of any character, in
respect of intangible personal property of citizens
of the Philippines not residing in that foreign
country;
(b) Allowed a similar exemption from transfer tax in
respect of intangible personal property owned by
citizens of the Philippines not residing in that
country
NET ESTATE
Plus
Included,
unless
exempted on the basis
of the principle of
reciprocity
GROSS ESTATE
Tax is
Not included
But not
over
Non-resident Alien
Over
Included
PAGE 94
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TAXATION 2
Decedents Interest
Decedents interest refers to the extent of equity or
ownership participation of the decedent on any
property physical existing and present in the gross
estate, whether or not in his possession, control or
dominion; also refers to the value of any interest in
property owned or possessed by the decedent at the
time of his death (interest having value or capable of
being value or transferred. [cf. Sec. 85(A), NIRC]
Examples: dividends declared before his death but
received after death; partnership profits which have
accrued before his death.
Real Property
FMV as determined by the Commissioner OR FMV as
shown in the schedule of values fixed by the
provincial and city assessors, whichever is HIGHER.
Personal Property
FMV at the time of death.
Shares of Stock
[Sec. 5, RR 2-2003]
PAGE 95
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TAXATION 2
Revocable Transfers
[Sec. 85(C), NIRC]
Decedents transfer of any interest by trust or
otherwise, where the enjoyment thereof was subject
at the date of his death to any change through the
exercise of power by the decedent ALONE or by the
decedent IN CONJUNCTION WITH ANY OTHER
person, to alter, amend, revoke, or terminate such
transfer, OR where such power which would bring
the property in the taxable estate is relinquished in
contemplation of the decedents death [Sec. 85(C
)(1), NIRC].
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TAXATION 2
Over
Special
As to nature. DONEE
has power to appoint
any person he chooses
who shall possess or
enjoy the property
without restriction
Case
B
Case
C
FMV, transfer
FMV, death
Consideration received
2,000 800
1,200 2,000
Case
A
General
PAGE 97
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TAXATION 2
Resident or citizen
decedent
Non-resident alien
decedent
use
(4) Amounts received
under R.A. 4917
Special deductions
(a) Family home
(b) Standard deduction
(c) Medical expenses
Share in conjugal
property
Share in conjugal
property
No deduction shall be allowed in the case of a nonresident decedent not a citizen of the Philippines,
unless the executor, administrator, or anyone of the
heirs, as the case may be, includes in the return
required to be filed under Section 90 of the Code the
value at the time of the decedents death of that part
of his gross estate NOT situated in the Philippines.
[Sec. 86 (D), NIRC; Sec 7, RR 2-2003]
ORDINARY DEDUCTIONS
Gross Estate
Deductions
Ordinary deductions
(1) Expenses, losses,
indebtedness, taxes, etc.
(ELIT)
(a) Funeral expenses
(b) Judicial expenses
(c) Claims against the
estate
(d) Claims against
insolvent persons
(e) Unpaid mortgage
and debt
(f) Taxes
(g) Losses
(2) Vanishing deductions
(3) Transfers for public
use
Ordinary deductions
(1) Proportionate
deductions for expenses,
losses, indebtedness,
taxes, etc. (ELIT)
(a) Funeral expenses
(b) Judicial expenses
(c) Claims against the
estate
(d) Claims against
insolvent persons
(e) Unpaid mortgage
and debt
(f) Taxes
(g) Losses
(2) Vanishing deductions
(3) Transfers for public
PAGE 98
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TAXATION 2
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TAXATION 2
Unpaid Mortgages.
These are deductible from the gross estate, provided:
(a) That the gross estate must include the fair
market of the property encumbered by such
mortgage or indebtedness;
(b) That the deduction shall be limited to the extent
that they were contracted bona fide and for an
adequate and full consideration in money or
moneys worth, if such unpaid mortgages or
indebtedness were founded upon a promise or an
agreement. [Sec. 6-A5(a), RR 2-2003]
PAGE 100
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TAXATION 2
Rationale
As a previous transfer tax had already been imposed
on the property, either the estate tax (if property
inherited) or the donors tax (if property donated), to
minimize the effects of a double tax on the same
property within a short period of time, i.e. five (5)
years, the law allows a deduction to be claimed on
the said property.
Example: Mr. A died in December 2003. In March
2003, Mr. B (Mr. As father) died and left Mr. A some
properties as inheritance. May vanishing deductions
be claimed as deductions in computing Mr. As net
taxable estate?
YES, vanishing deductions shall be allowed if the
following conditions are met:
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TAXATION 2
100%
80%
60%
40%
20%
Formula
FORMULA:
(1) VALUE TAKEN FOR PPT (always the lower values)
ST
LESS: MORTGAGE (OR LIEN) PAID IF ANY(1
deduction)
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TAXATION 2
PAGE 103
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TAXATION 2
15,000
5,000
1,400
Net Estate in a
Particular
Country
Net
Estate
Worldwide
P1,050,000
Phil.
Estate
Tax
Tax
Credit
Amount
Allowed
(whichever
is lower)
Limitations
(a) The 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
taken, which the decedent's net estate situated
within such country taxable under the NIRC bears
to his entire net estate; (PER COUNTRY BASIS)
and
(b) The total amount of the credit shall not exceed
the same proportion of the tax against which
such credit is taken, which the decedent's net
estate situated outside the Philippines taxable
under the NIRC bears to his entire net estate.
(OVERALL BASIS)
300,000
Tax paid/incurred:
Philippines
Country G
Country H
Solution Limitation A
(c) To get tax credit per country under Limitation A,
this formula is followed:
150,000
TAX CREDIT
P1,050,000
Country G
(300/1500 x 15,000)
3,000
5,000
Country H
(150/1500 x 15,000)
1,500
1,400
3,000
1,400
P 4,400
Tax
Credit
PAGE 104
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TAXATION 2
CONTENTS
Amount
Allowed
(Lower)
450/1500 x 15,000
4,500
6,400
P 4,400
WHEN FILED
When paid
[Sec. 91(A), NIRC]
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TAXATION 2
Donors Tax
BASIC PRINCIPLES
The donors tax is imposed on donations inter vivos or
those made between living persons to take effect
during the lifetime of the donor. It supplements the
estate tax by preventing the avoidance of the latter
through the device of donating the property during
the lifetime of the deceased.
DEFINITION
A donors tax is levied, assessed, collected and paid
upon the transfer by any person, resident or
PAGE 106
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TAXATION 2
NATURE
Donors tax is not a property tax but a tax imposed
on the transfer of property by way of gift inter vivos.
[Sec 11, RR 2-2003 citing Lladoc v. CIR (1965)]
PURPOSE OR OBJECT
(a) To supplement estate tax;
(b) To prevent avoidance of income tax through the
device of splitting income among numerous
donees, who are usually members of a family or
into many trusts, with the donor thereby escaping
the effect of the progressive rates of income tax.
REQUISITES OF VALID DONATION
(a) A donation is an act of liberality whereby a person
(donor) disposes gratuitously of a thing or right in
favor of another (donee) who accepts it. [Art. 725,
NCC]
(b) In order that the donation of an immovable may
be valid, it must be made in a public document
specifying therein the property donated. The
acceptance may be made in the same Deed of
Donation or in a separate public document, but it
shall not take effect unless it is done during the
lifetime of the donor. If the acceptance is made in
a separate instrument, the donor shall be notified
thereof in an authentic form, and this step shall
be noted in both instruments. (Sec. 11, RR 22003)
CONDONATION/REMISSION OF DEBT
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PAGE 108
Over
But not
Over
0
100,000
200,000
500,000
1M
3M
5M
10M
100,000
200,000
500,000
1M
3M
5M
10M
Tax Is
Exempt
0
2,000
14,000
44,000
204,000
404,000
1,004,000
Plus
Of the
Excess
Over
2%
4%
6%
8%
10%
12%
15%
100,000
200,000
500,000
1M
3M
5M
10M
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TAXATION 2
(a) Yes. If both spouses made the gift, then the gift is
taxable one-half to each donor spouse.
(b) Separate donors tax returns must be filed;
husband and wife are considered as separate and
distinct taxpayers for purposes of donors tax.
[Sec. 12, RR 2-2003]
(c) However, where there is failure to prove that the
donation was actually made by both spouses, the
donation is taxable as an exclusive act of the
husband (Tang Ho v. BTA, 97 Phil 890), without
prejudice to the right of the wife to question the
validity of the donation without her consent
pursuant to the provisions of the Civil Code and
the Family Code. [Sec. 12, Supra]
PHIL
DONORS
TAX
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TAXATION 2
PERSONS LIABLE
Every person, whether natural or juridical, resident or
non-resident, who transfers or causes to transfer
property by gift, whether in trust or otherwise,
whether the gift is direct or indirect and whether the
property is real or personal, tangible or intangible.
(Sec. 98, NIRC)
Illustration
(1) P100,000 donation to son by parents on account
of marriage:
(a) Husband
(i) Net Taxable Gift:
P50,000 10,000 = P40,000
(ii) Tax Due:
None, since P40,000 is below P100,000
(b) Wife same as above
P 2,000,000
P 1,000,000
P 500,000
After the
After the third
second
donation
donation
Net Taxable Gift
2,000,000
January
January
Donation
- Donation
P2,000,000
P2,000,000
March
March Donation
Donation
- - 1,000,000
1,000,000
Total
August
P3,000,000
Donation
500,000
Total
P3,500,000
Corresponding Donors Tax (refer to schedule)
UP COLLEGE OF LAW
124,000
124,000
TAXATION 2
P 204,000
P254,000
Tax
Tax
paid
CONSTITUTIONALITY OF VAT
Due
VAT
CONCEPT
(a) VAT is a percentage tax imposed at every stage
of the distribution process on the sale, barter, or
exchange, or lease of goods or properties, and on
the performance of service in the course of trade
or business, or on the importation of goods,
whether for business or non-business purposes.
(CIR v. Benguet Corp., 2005)
(b) The taxpayer (seller) determines his tax liability
by computing the tax on the gross selling price
or gross receipt (output tax), and subtracting or
crediting the earlier VAT on the purchase or
importation of goods or on the purchase of
service (input tax) against the tax due on his own
sale.
(c) VAT is a percentage tax imposed by law directly
not on the thing or service but on the act (sale,
barter, exchange, lease, importation, rendering
service)
(d) It is also an excise tax, or a tax on the privilege of
engaging in the business of selling goods or
services, or in the importation of goods but
unlike excise, it not applied only to a few
selected goods
(e) It is an ad valorem tax the amount is based on
the gross selling price or gross value in money of
goods and services
CHARACTERISTICS/ELEMENTS OF A VATTAXABLE TRANSACTION
(a) It is a tax on consumption levied on the sale,
barter, exchange or lease of goods or properties
and services in the Philippines and on
importation of goods into the Philippines. [RR 162005]
(b) It is an indirect tax, the amount of which may be
shifted to or passed on the buyer, transferee, or
lessee of the goods, properties or services. [Sec.
105, NIRC]
Tolentino v. Guingona:
(a) Regressivity is not a negative standard for courts
to enforce.
What Congress is required by the Constitution to
do is to evolve a progressive system of taxation.
PAGE 111
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TAXATION 2
APPLICABILITY OF ECOZONES
INCIDENCE OF TAX
(a) The incidence of tax in on the one who bears the
burden of taxation.
(b) The incidence of VAT is on the final consumer.
TAX CREDIT METHOD
The tax credit method refers to the manner by which
the value added tax of a taxpayer is computed. The
input taxes shifted by the sellers to the buyer are
credited against the buyers output taxes when he in
turn sells the taxable goods, properties or services.
DESTINATION PRINCIPLE
(a) It is the basis for the jurisdictional reach of the
VAT.
(b) As a general rule, goods and services are taxed
only in the country where they are consumed.
(Deoferio Jr. and Mamalateo. The Value Added Tax
in the Philippines, p. 43; CIR v. American Express
International, 2005)
99]:
(a) Any sale of goods, property or services made by a
VAT registered supplier from the Customs
Territory* to any registered enterprise operating
in the ecozone, REGARDLESS of the class or type
of the latters PEZA registration, is actually
qualified and thus LEGALLY ENTITLED TO THE
0% VAT.
PAGE 112
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TAXATION 2
PERSONS LIABLE
Any person who, in the course of trade or business,
(1) sells, barters, exchanges goods or properties,
(2) leases goods or properties, and
(3) renders services. [Sec. 105, NIRC]
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TAXATION 2
Person
Liable:
gross
sales/receipts
>
P1,919,500/year (per RR 16-2011)
(1) Any person (natural or juridical) engaged in sale
or exchange of real properties
(2) Real estate lessors
(3) Non-resident lessors (property located in the
Philippines)
(4) Non-stock, Non-profit organizations
(5) Government agencies, instrumentalities, GOCCs
Taxable:
(1) On installment plan
(2) Pre-selling by real estate dealers
(3) Sale of residential lot >P1,919,500 ; or house and
lot/other residential dwelling>P3,199,200 (RR 162011)
(4) Lease of residential units (rental per unit
>12,800/month OR total rental from ALL
units>P1,919,500/year)
Not taxable:
(1) Not primarily held for sale
(2) Low cost or socialized housing
(3) Residential lot < P1,919,500
(4) house and lot/ other residential dwelling<
P3,199,200
(5) Lease (rental per unit < 12,800/month and total
rental from all units < P1,919,500/ year)
(6) Transmission to a trustee (Except: transmission is
deemed sale transaction)
PAGE 114
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TAXATION 2
Deferred Payment
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Examples:
(1) sales to enterprises duly registered & accredited
with the
(a) Subic Bay Metropolitan Authority,
(b) Philippine Economic Zone Authority (PEZA),
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Lease of Properties:
Subject to the tax imposed irrespective of the place
where the contract of lease or licensing agreement was
executed if the property is leased or used in the
Philippines.
107
(B), NIRC)
(a) If importer is tax-exempt, the subsequent
purchasers, transferees or recipients of such
imported goods shall be considered as importers
who shall be liable for the tax on importation.
(b) The tax due on such importation shall constitute
a lien on the goods superior to all charges or liens
on the goods, irrespective of the possessor
thereof. (as amended by RA 9337)
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TAXATION 2
Transporting
By land
Persons
Domestic
Goods/ cargo
Domestic
By sea/air
Kind of
carrier
Domestic
Whether
transporting
persons
or
goods/ cargo
International
Tax Liability
3%
percentage
tax (Sec. 117,
NIRC)
12%
VAT
(Sec.
108,
NIRC)
Domestic
trip - 12%
VAT
International
trip zerorated VAT
Doing
business in
the
Philippines 3%
percentage
tax (Sec. 118,
NIRC)
International
trip - zerorated VAT
(Sec.
108
(B)(6), NIRC)
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TAXATION 2
(18) The lease of the use of, or the right to use of any
industrial, commercial or scientific equipment
(19) The supply of scientific, technical, industrial or
commercial knowledge or information
The
services
referring
to
processing,
manufacturing, repacking and services other
than those in (1) both require (i) payment in
foreign currency; (ii) inward remittance; (iii)
accounted for by the BSP; AND (iv) that the
service recipient is doing business outside the
Philippines. If this is not the case, taxpayers can
circumvent just by stipulating payment in foreign
currency. (CIR v. Burmeister)
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TAXATION 2
Sale by agricultural cooperatives to nonmembers can only be exempted from VAT if the
producer of the agricultural products sold is the
cooperative itself. If the cooperative is not the
producer (e.g., trader), then only those sales to
its members shall be exempted from VAT. [RR
16-2005]
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INPUT TAX
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TAXATION 2
(Sec. 110 ,
NIRC)
(a) The sum of the excess input tax carried over from
the preceding month or quarter and the input tax
creditable to a VAT-registered person during the
taxable month or quarter shall be reduced by the
amount of claim for refund or tax credit for valueadded tax and other adjustments, such as
purchase returns or allowances and input tax
attributable to exempt sale.
(b) The claim for tax credit referred to includes not
only those filed with the BIR but also those filed
with other government agencies, such as the
Board of Investments the Bureau of Customs.
DETERMINATION OF INPUT TAX CREDITABLE
A
VAT-registered person who is also engaged in
transactions not subject to VAT shall be allowed to
recognize input tax credit on transactions subject to
VAT as follows:
ALLOCATION OF INPUT TAX ON MIXED TRANSACTIONS
Any person liable for VAT or who elects to be a VATregistered person shall be allowed INPUT TAX in his
beginning inventory of goods, materials and supplies
(a) equivalent to TWO PERCENT (2%) of the value of
such inventory; OR
(b) the actual VAT paid on such goods, materials and
supplies, whichever is HIGHER, which shall be
creditable against the OUTPUT TAX.
PAGE 125
100,000.00
100,000.00
100,000.00
UP COLLEGE OF LAW
TAXATION 2
w/holding
400,000.0
Total sales for the month
0
The following were its input taxes (or passed on by
its VAT suppliers):
Input tax on taxable goods (12%)
5,000.00
Input tax on zero-rated sales
3,000.00
Input tax on sale of exempt goods
2,000.00
Input tax on sale to government
4,000.00
Input tax on depreciable capital good
not attributable to any specific
activity
(monthly amortization for 60 months) 20,000.00
Step 1: The creditable input tax for the month shall
be computed as follows:
Input tax on sale subject to 12%
P5,000.00
Input tax on zero-rated sale
3,000.00
Ratable portion of the input tax not directly
attributable to any activity, computed below
Taxable sales
Amount of input tax
(0% and 12%)
x not directly
attributable
Total Sales
P200,000.00
P400,000.00
P20,000.00
=
P10,000.00
P100,000.00
x P20,000.00 = P5,000.00
P400,000.00
Total input tax attributable:P7,000.00
VAT-exempt sales (P2,000+ P5,000)
GROSS
SELLING
PRICE
REGULAR
RATE OF VAT
OUTPUT
TAX
REGULAR
RATE OF VAT
OUTPUT
TAX
P20,000.00
P100,000.00
P400,000.00
VAT-exempt sales
Total Sales
Taxable sales
Total Sales
Total Invoice
Amount
= P5,000.00
Rate of VAT
100% + rate
of VAT
Output
Tax
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TAXATION 2
(d) INPUT TAX FROM PAYMENTS MADE TO NONRESIDENTS (such as for services, rentals and
royalties) shall be supported by a copy of the
Monthly Remittance Return of Value Added Tax
Withheld (BIR Form 1600) filed by the resident
payor in behalf of the non-resident evidencing
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Transaction
Invoicing Requirement
Transfer,
use
or
consumption not in the
course of business of
goods
or
properties
originally intended for
sale or for use in the
course of business
Distribution or transfer to
shareholders/investors or
creditors
Memorandum entry in
the subsidiary sales
journal
to
record
withdrawal of goods for
personal use
Consignment of goods if
actual sale is not made
within 60 days
Retirement
from
or
cessation of business with
respect to all goods on
hand
Issuance of a VAT Invoice or VAT Receipt by a nonVAT person - If a person who is not a VAT-registered
person issues an invoice or receipt showing his
Taxpayer Identification Number (TIN), followed by
the word "VAT", the erroneous issuance shall result
to the ff:
(a) The non-VAT person shall be liable to:
(i) percentage taxes
applicable to his
transactions;
(ii) VAT due on transactions under Section 106 or
108 of the Code, without the benefit of any
input tax credit; and
(iii) a 50% surcharge under Section 248 (B) of the
code;
(b) The VAT shall, if the other requisite information
required is shown on the invoice/receipt, be
recognized as an input tax credit to the
purchaser.
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TAXATION 2
TAXPAYERS REMEDIES
ASSESSMENT
Concept of assessment
Assess means to impose a tax; to charge with a tax;
to declare a tax to be payable; to apportion a tax to
be paid or contributed, to fix a rate; to fix or settle a
sum to be paid by way of tax; to set, fix or charge a
certain sum to each taxpayer; to settle determine or
fix the amount of tax to be paid (84 C.J.S 74-750)
An assessment is the notice to the effect that the
amount therein stated is due from a taxpayer as a
tax with a demand for payment of the same within a
stated period of time. (Commissioner v. CTA, 27
SCRA 1159)
Requisites for valid assessment:
(a) The taxpayer shall be informed in writing of the
law and the facts on which the assessment is
made (Sec. 228, NIRC)
(b) An assessment contains not only a computation
of tax liabilities, but also a demand for payment
within a prescribed period (CIR v. PASCOR)
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TAXATION 2
Jeopardy Assessment
A tax assessment made by an authorized Revenue
Officer (RO) without the benefit of complete or
partial audit, in light of the ROs belief that the
assessment and collection of the deficiency tax will
be jeopardized by delay caused by the taxpayers
failure to: i) comply with audit and investigation
requirements to present his books of accounts
and/or pertinent records or ii.) substantiate all or any
of the deductions, exemptions or credits claimed in
his return.
It is usually issued when statutory prescriptive
periods for the assessment or collection of taxes are
about to lapse due principally to the taxpayers fault.
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Surcharge
A civil penalty imposed by law as an addition to the
basictax required to be paid. A surcharge added to
the main tax is subject to interest.
Rates of Surcharge:
There shall be imposed a penalty equivalent to
twenty-five percent (25%) of the amount due, in the
following cases:
(1) FAILURE TO FILE ANY RETURN and PAY THE
TAX DUE THEREON on the date prescribed; or
(2) Filing a return with an internal revenue officer
than those with whom the return is required to be
filed (except when authorized by the
Commissioner); or
(3) FAILURE TO PAY THE DEFICIENCY TAX within
the time prescribed for its payment
(4) FAILURE TO PAY THE FULL OR PART of the
amount of tax shown on any return required to be
filed, or the full amount of tax due for which no
return is required to be filed, on or before the date
prescribed for its payment.
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Exception:
When the all of the following conditions concur:
(1) It is an appeal to the CTA from a decision of the
CIR, or Commissioner of Customs or the RTC,
provincial, city or municipal treasurer or the
Secretary of Finance, the case may be, AND
(2) In the opinion of the Court of Tax Appeals, the
collection may jeopardize the interest of the
Government and/or the taxpayer. (Sec. 11, R.A.
1125 as amended by R.A. 9282)
Requisite before availing of injunction
(1) Taxpayer has to deposit the amount claimed; OR
(2) File an injunction bond with the Court for not
more double the amount (R.A. 1125)
Prescriptive periods
Collection with
prior
assessment
Collection
without prior
assessment
COLLECTION
Requisites
When the government may avail of the remedies of
collection:
General Rule: When the assessment shall have
become final, executory and demandable.
Exception: In case of false or fraudulent return with
intent to evade tax or of failure to file a return, a
proceeding in court for collection may be filed
without assessment within 10 years from discovery of
falsity, fraud or omission. (Sec. 222(a), NIRC)
Where return
filed was NOT
false or
fraudulent:
should
be
made within 5
years from the
date
of
assessment of
the tax. (Sec.
203 in relation
to Sec. 222,
NIRC)
by distraint or
levy, or by
judicial
proceedings
should
be
made within 3
years from the
date of filing of
return or date
return is due,
whichever
is
LATER (based
on Sec. 203,
NIRC)
by
judicial
proceedings
PAGE 136
Where no return
filed, or the
return was false
or fraudulent:
should be made
within 5 years
from the date of
assessment
(based on Sec.
222(c), NIRC)
by distraint or
levy,
or
by
judicial
proceedings
should be made
within ten years
after
the
discovery of the
falsity, fraud or
omission to file
a return.
by
judicial
proceedings
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TAXATION 2
Judicial
(1) Civil
(2) Criminal
Kinds of Distraint:
(1) Constructive Distraint
(2) Actual Distraint
Constructive Distraint may be placed by the
Commissioner on any taxpayer to safeguard the
interest of the Government (Sec. 206, NIRC).
Delinquency of the taxpayer is not necessary.
Grounds for Constructive Distraint:
When in the opinion of the Commissioner,
(1) the taxpayer is retiring from any business subject
to tax; or
(2) the taxpayer is intending to leave the Philippines;
or
(3) the taxpayer is intending to remove his property
from the Philippines or to hide or conceal his
property; or
(4) the taxpayer is planning to perform any act
tending to obstruct the proceedings for collecting
the tax due or which may be due from him (Sec.
206, NIRC)
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TAXATION 2
(D) Sale
The sale shall be held either at the main entrance of
the municipal or city hall or on the premises to be
sold. Property will be awarded to the highest bidder.
In case the proceeds of the sale exceeds the claim
and costs of sale, the excess shall be turned over to
the owner of the property. (Sec. 213, NIRC)
(E) Forfeiture in Favor of the Government
If there is no bidder for the real property OR if the
highest bid is not sufficient to pay the taxes,
penalties and costs, the IR Officer conducting the
sale shall declare the property FORFEITED to the
GOVERNMENT in satisfaction of the claim. (Sec.
215, NIRC)
UP COLLEGE OF LAW
TAXATION 2
(8)
(9)
(10)
(11)
(12)
(13)
UP COLLEGE OF LAW
TAXATION 2
Compromise
Authority of the Commissioner to compromise and
abate taxes
Compromise- to reduce the amount of tax payable
REFUND
UP COLLEGE OF LAW
TAXATION 2
Note: Under Sec. 229, there is no exception to the 2year prescriptive period.
Legal Basis of Tax Refunds
(a) Tax refunds are based on the principle of quasicontract or solutioindebeti and the pertinent laws
governing this principle are found in Art. 2142
and Art. 2154 of the NCC. When money is paid to
another under the influence of a mistake of fact,
on the mistaken supposition of the existence of a
specific fact, where it would not have been known
that the fact was otherwise, it may be recovered.
The ground upon which the right of recovery rests
is that money paid through misapprehension of
facts belongs in equity and in good conscience to
the person who paid it.
(b) The government comes within the scope of
solution indebeti principle, where that:
enshrined in the basic legal principles is the time
honoured doctrine that no person shall unjustly
enrich himself at the expense of another. It goes
without saying that the Government is not
exempt from the application of this doctrine.
PAGE 142
UP COLLEGE OF LAW
TAXATION 2
GOVERNMENT REMEDIES
ADMINISTRATIVE REMEDIES
The
Commissioner
or
his
authorized
representative is empowered to suspend the
business operations and temporarily close the
business establishment of any person for any of
the following violations:
(a) In the case of a VAT-registered Person. (1) Failure to issue receipts or invoices; or
(2) Failure to file a value-added tax return as
required under Section 114; or
(3) Understatement of taxable sales or receipts by
thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable
quarter.
(b) Failure of any Person to Register as Required
under Section 236.
The temporary closure of the establishment
shall be for the duration of not less than five
(5) days and shall be lifted only upon
compliance with whatever requirements
prescribed by the Commissioner in the closure
order. (Sec. 115, NIRC)
PAGE 143
UP COLLEGE OF LAW
TAXATION 2
Offender
Penalty
he shall be deported
immediately after serving
the sentence
the
maximum
penalty
prescribed for the offense
shall be imposed on him
shall be dismissed from
public
office,
and
perpetually
disqualified
from holding any public
office, to vote, and to
participate in any election
his
license
shall
be
automatically revoked or
cancelled once he is
convicted
imposed on the partner,
president, general manager,
branch manager, treasurer,
officer-in-charge
and
employees responsible for
the violation (Sec. 253,
NIRC)
JUDICIAL REMEDIES
A public officer or
employee
CPA
Criminal Action
Any person convicted of a crime under the Code
shall:
(1) be liable for the payment of the tax, and
(2) be subject to the penalties imposed under the
Code. (Sec. 253(A), NIRC)
Corporations,
associations,
partnerships etc.
Criminal Offenses
Offense
Who is liable
Failure to File Return, Supply Any person required to pay any tax,
Correct and Accurate Information, make a return, keep any record, or
Pay Tax, Withhold and Remit Tax supply correct and accurate
and Refund Excess Taxes Withheld information
on Compensation (Sec. 255)
Any person who attempts to make it
PAGE 144
Penalty
Fine: P30,000 - P100,000
AND
Imprisonment: 2-4 years
Plus other penalties
Fine: P10,000 or more
AND
Imprisonment:1-10 years
Plus other penalties
Fine - P10,000 - P20,000
UP COLLEGE OF LAW
TAXATION 2
Offense
Who is liable
Penalty
AND
Imprisonment: 1-3 years
Plus other penalties
P100,000;
years 1 day
P100,000;
years 1 day
UP COLLEGE OF LAW
TAXATION 2
Offense
Articles Subject to Excise Tax W/o
Payment of the Tax (Sec. 263)
Who is liable
possession of these articles
Where:
(1) Value of goods < P1,000
Penalty
Fine: P10,000-P20,000
AND
Imprisonment: 2-4 years
Penalty
for
Second
and
Subsequent Offenses (Sec. 274)
Violation of Other Provisions of the
Tax Code or Rules or Regulations
Summary cancellation or
withdrawal of the permit to
engage in business as a
manufacturer of articles
subject to excise tax
Forfeiture of property used
Forfeiture of goods
UP COLLEGE OF LAW
TAXATION 2
Offense
Who is liable
Penalty
Imprisonment: 6 months or
less
OR Both
Fine: at least P5,000 AND
at least twice the value of the
property
OR
Imprisonment: 2 years 1 day 4 years
OR Both
Fine: P 5,000 or more
OR
Imprisonment: 6 months 1
day - 2 years,
OR Both
UP COLLEGE OF LAW
TAXATION 2
Amount of reward:
10% of the revenues, surcharges or fees recovered
and/or fine/penalty imposed, or P1,000,000,
whichever is LOWER.
(a) The same amount shall be given if the offender
offered to compromise and such offer has been
accepted and collected by the Commissioner.
(b) If no revenue, surcharge or fees be actually
collected, such person is not entitled to a reward
(c) For discovery and seizure of SMUGGLED GOODS:
The cash reward is 10% of the FMV of the
smuggled and confiscated goods, or P1,000,000,
whichever is LOWER.
Interest
In General
20% per annum on the unpaid amount of tax,
interest at the rate of twenty percent (20%) per
annum from the date prescribed for payment until
the amount is fully paid. (Sec. 249(A), NIRC)
Deficiency Interest
20% per annum on any deficiency in the tax due
from the date prescribed for its payment until the full
payment thereof. (Sec. 249(B), NIRC)
Delinquency interest
20% per annum on the unpaid amount in case of
failure to pay:
(a) The amount of the tax due on any return required
to be filed; or
(b) The amount of the tax due for which no return is
required; or
(c) A deficiency tax, or any surcharge or interest
thereon on the due date appearing in the letter of
demand and assessment notice (Sec. 249(C),
NIRC)
(1) Surcharge
(2) Interest
Surcharge
Surcharge - penalty imposed in addition to the tax
required to be paid (Sec. 248(A), NIRC)
Rates of Surcharge (25% or 50%)
(1) 25% of the amount due in the following cases:
(a) Failure to file any return and pay the tax due
on the date prescribed; or
(b) Filing a return with an internal revenue officer
other than those with whom the return is
required to be filed unless the Commissioner
authorizes otherwise; or
(c) Failure to pay the deficiency tax within the
time prescribed for its payment in the notice
of assessment; or
(d) Failure to pay the full or part of the amount of
tax due on or before the date prescribed for its
payment (Sec. 246 (A), NIRC)
UP COLLEGE OF LAW
TAXATION 2
(Sec. 2, R.R.
30-2002)
(1) Withholding tax cases, unless the applicanttaxpayer invokes provisions of law that cast doubt
on the taxpayer's obligation to withhold
(2) Criminal tax fraud cases confirmed as such by the
CIR or his duly authorized representative
(3) Criminal violations already filed in court
(4) Delinquent accounts with duly approved
schedule of installment payments
(5) Cases where final reports of reinvestigation ore
reconsideration have been issued resulting to
reduction in the original assessment and the
taxpayer is agreeable to such decision by signing
PAGE 149
UP COLLEGE OF LAW
TAXATION 2
Commissioner or
Regional Director
Issues Letter of
Authority (LA)
Is response w/n
15 days? Is it
meritorious?
NO to
either
Yes to
both
Assessment becomes
Final, Warrant of Distraint
& Levy Issued
RO sends notice
of informal
conference
Taxpayer
responds w/in
15 days
Taxpayer
responds w/in 15
days
Regional
Assessment
Division issues a
Preliminary
Assessment Notice
(PAN)
ASSESSMENT
ENDS
YES to
both
Commissioner decides on
protest within 180 days
NO to
either
Decision
favorable to
taxpayer?
YES
ASSESSMENT
ENDS
YES
Commissioner
decides w/n
180 days?
NO
NO
If MR is denied, appeal to
the CTA within remainder
of the 30 days
CTA decides on
the appeal
YES
Appeal made
on time?
NO
Appeal to
Supreme Court
PAGE 150
Assessment
becomes Final,
Warrant of Distraint
& Levy Issued
END
UP COLLEGE OF LAW
TAXATION 2
START
Delinquent tax
more than 1M?
No
RDO posts notice in at least 2 public
places in the municipality/city where
the distraint is made. One place of
posting must be at the mayors office.
Time of sale shall not be less than 20
days after the notice (Sec. 209)
Commissioner seizes
sufficient
personal property to satisfy the
tax, charge & expenses of seizure
(Sec. 207 (A))
Yes
RDO seizes
sufficient
personal property to satisfy
the tax, charges & expenses
of seizure (Sec. 207 (A))
Officer
conducts
public auction
Yes
Internal
revenue
officer,
designated by the Commissioner,
shall prepare a certificate with the
force of a nationwide legal
execution (Sec. 207 B)
Yes
No bidder or
highest bid
insufficient?
No, bid ok
The Commissioner may,
after 20 days notice, sell
property at public auction
or at private sale with
approval of the SoF.
Proceeds
shall
be
deposited with the National
Treasury (Sec. 216)
PAGE 151
Excess of proceeds
of the sale over claim
and cost of sale shall
be turned over to the
owner (Sec. 213)
UP COLLEGE OF LAW
TAXATION 2
PAGE 152
UP COLLEGE OF LAW
TAXATION 2
(a) IN THE CASE OF A VAT-REGISTERED PERSON. (1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as
required under Section 114; or
(3) Understatement of taxable sales or receipts by
thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable
quarter.
(b) FAILURE OF ANY PERSON TO REGISTER AS REQUIRED
UNDER SECTION 236. The temporary closure of the establishment shall
be for the duration of not less than five (5) days
and shall be lifted only upon compliance with
whatever requirements prescribed by the
Commissioner in the closure order.
LOCAL GOVERNMENT CODE OF 1991, AS
AMENDED
UP COLLEGE OF LAW
TAXATION 2
Required:
Not otherwise specifically enumerated in the LGC
or taxed under NIRC or other applicable laws
(1) Not unjust, excessive, oppressive, confiscatory
or contrary to declared national policy
(2) Pursuant to an ordinance enacted with public
hearing conducted for the purpose. (Sec. 186,
LGC)
PAGE 154
LGU
Provinces
(Sec.
134,
LGC)
UP COLLEGE OF LAW
TAXATION 2
LGU
Municipalities
Quarry Resources
(5) Professional Tax
(6) Amusement Tax
(7) Annual Fixed Tax for every
delivery truck or van
May levy taxes, fees and charges not
otherwise levied by provinces (Sec.
142, LGC)
May levy taxes, fees and charges
which the province or municipality
may impose (Sec. 151, LGC)
Cities
LGU
Barangays
Power
Tax on Transfer of Real Property
Tax on Business of Printing and
Publication
Franchise tax
Tax on sand, gravel and other quarry
resources
Professional tax
Amusement tax
Annual Fixed Tax For Every Delivery Truck
or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in,
Certain Products
Tax on Business
Fees and charges on regulation/licensing
of business and occupation
Fees for Sealing and Licensing of Weights
and Measures
Fishery Rentals, Fees and Charges
Community Tax
Tax on Gross Sales or Receipts of SmallScale Stores/Retailers
Service Fees on the use of Barangayowned properties
Barangay Clearance
Other Fees and Charges (on commercial
breeding of fighting cocks, cockfights,
cockpits; places of recreation which charge
admission fees; outside ads)
Service Fees and Charges (153)
Public Utility Charges (154)
Toll Fees or Charges (155)
Real Property Tax
Province
Municipality
City
(135)
(151)
(136)
(137)
(138)
(139)
(140)
(141)
(143)
(147)
(148)
(149)
Barangay
(152a)
(152b)
(152c)
(152d)
PAGE 155
UP COLLEGE OF LAW
TAXATION 2
Rate/Amount
Base
Exemptions
Others
Total
acquisition
price or fair market
value, whichever is
higher
Gross
annual
receipts for the
preceding calendar
year
Not
more
than 1/20 of
1%
Capital investment
Gross
annual
receipts for the
preceding calendar
year based on the
incoming receipt, or
realized, within its
territorial
jurisdiction
Capital investment
PAGE 156
UP COLLEGE OF LAW
Tax Imposed
TAXATION 2
Rate/Amount
Base
Exemptions
Others
where
resources
were
extracted - 30%
(c) Barangay where resources
were extracted - 40%
Such amount
as
the
Sangguniang
Panlalawigan
may
determine, in
no case to
exceed
P300.00
Such
reasonable Professionals
To be paid to the province where
classification by the exclusively employed by the profession is practiced, or
Sangguniang
the government
where a principal office is
Panlalawigan
maintained.
A person who pays for
professional tax may practice his
profession anywhere in the
country without being subjected
to similar taxes.
Employers shall require payment
of professional tax as a condition
for employment.
(6) Amusement
Tax.
Collected
from
proprietors, lessees, or
operators of theaters,
cinemas, concert halls,
circuses, boxing stadia,
and other places of
amusement (Sec 140,
LGC)
Not
more Gross receipts from Holding of operas,
than
10% admission fees
concerts,
dramas,
(amended by
recitals, painting, and
RA
9640,
art exhibitions, flower
2009)
shows,
musical
programs, literary and
oratorical presentations Proceeds to be shared equally by
the province and municipality
Exception to exemption: where amusement places are
Pop, rock, or similar located.
concerts
van,
Manufacturers,
producers,
wholesalers, dealers and retailers
referred to in column 1 shall be
exempt from tax on peddlers
PAGE 157
UP COLLEGE OF LAW
TAXATION 2
PAGE 158
UP COLLEGE OF LAW
TAXATION 2
assemblers,
repackers,
processors,
brewers,
distillers, rectifiers, and compounders
of liquors, distilled spirits, and wines
or manufacturers of any article of
commerce of whatever kind or nature
(2) Wholesalers, distributors, or dealers
in any article of commerce of
whatever kind or nature
(3) Exporters and on manufacturers,
millers, producers, wholesalers,
distributor, dealers or retailers of
essential commodities enumerated
below: (RWC- CLAPS)
(a) Rice and corn
(b) Wheat and or cassava flour, meat,
dairy
products,
locally
manufactured,
processed
or
preserved food, sugar, salt, and
other agricultural, marine, and
fresh water products, whether in
original state or not
(c) Cooking oil and cooking gas
(d) Cement
(e) Laundry soap, detergents, and
medicine
(f) Agricultural
implements.
equipment and post-harvest
facilities, fertilizers, pesticides,
insecticides, herbicides and other
farm inputs;
(g) Poultry feeds and other animal
feeds;
(h) School supplies
(4) Retailers
(5) Contractors and other independent In accordance with the schedule in Sec.
contractors
Other Information
143 (e)
(6) Banks and other financial institutions Not exceeding fifty percent 50% of 1% on
UP COLLEGE OF LAW
TAXATION 2
Other Information
annually.
Catch-all provision.
Specific:
(1) Municipality has power to impose reasonable
rates for sealing and licensing of weights and
measures (Sec. 148, LGC)
(2) The Municipality has exclusive authority to grant
fishery privileges in municipal waters. The
sangguniang bayan may:
(a) Grant fishery privileges to erect fish corrals,
oysters, mussels or other aquatic beds or
bangus fry areas, within a definite zone of the
municipal waters, as
(b) Grant marginal fishermen the privilege to
gather, take or catch bangus fry, prawn fry or
kawag-kawag or fry of other species and fish
from the municipal waters by nets, traps or
other fishing gears free of rental, fee, charge
or imposition.
(c) Issue licenses for the operation of fishing
vessels of three (3) tons or less
(3) The Sanggunian may penalize the use of
explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious
methods of fishing and prescribe a criminal
penalty therefor (Sec. 149, LGC)
PAGE 160
UP COLLEGE OF LAW
TAXATION 2
Illustration of Rules 1 to 3:
A company has a principal office in Mandaluyong,
while its sales office and factory are in Sta Rosa:
(a) sales made in Sta Rosa, will be recorded in Sta
Rosa
(b) sales made in Los Baos, Calamba or Cabuyao
(i.e. delivered to customers located in those
places), will be recorded in Mandaluyong
(c) aside from sales made in Sta Rosa, Sta Rosa also
gets 70% of sales recorded in Mandaluyong,
pursuant to Rule 3
RULE 4: In case the plantation is located in a place
other than the place where the factory is located, the
70% in Rule 3 will be divided as follows:
(a) 60% to the city/municipality where the factory is
located
(b) 40% to the city/municipality where the plantation
is located
RULE 5: In case of 2 or more factories, plantations,
etc. in different localities, the 70% shall be prorated
among the localities where the factories, plantations,
etc. are located in proportion to their respective
volume of production.
Illustration:
A company has a principal office in Valenzuela and
has its factory in Bulacan. It also has branches
selling merchandise in Muntinlupa, Bacolod, Cebu.
PAGE 161
UP COLLEGE OF LAW
TAXATION 2
Rates
(Sec. 157
&158,
LGC)
Community tax
Who may Cities or municipalities
levy (Sec.
156, LGC)
(1)Individuals who are:
(a) Inhabitants of the Philippines
(b) Eighteen years of age or over
(c) Either:
(i) Regularly employed on a wage
or salary basis for at least 30
consecutive working days during
any calendar year
(ii) Engaged
in
business
or
Persons
occupation
Liable
(iii) Owns real property with an
(Sec. 157
aggregate assessed value of
&158,
P1,000 or more
LGC)
(iv) Is required by law to file an
income tax return
(2) Juridical Persons
(a) Every corporation no matter how
created or organized,
(b) Whether domestic or resident
foreign,
(c) Engaged in or doing business in
the Philippines
(1) Individuals
(a) Annual community tax of P5.00
Persons
Exempt
(Sec. 159,
LGC)
Place of
Payment
(Sec. 160,
LGC)
Time of
Payment
(Sec 161,
LGC)
Penalty
PAGE 162
UP COLLEGE OF LAW
TAXATION 2
PAGE 163
UP COLLEGE OF LAW
TAXATION 2
Taxpayers remedies
(a) Periods of assessment and collection of local taxes,
fees or charges
(a) Assessment: Within 5 years from the date they
become due
(b) In case of Fraud or Intent to Evade Tax: Within
10 years from discovery of fraud or intent to
evade payment. (Sec. 194, LGC)
(c) Collection: 5 years from the date of
assessment by administrative or judicial
action.
PAGE 164
UP COLLEGE OF LAW
TAXATION 2
Fundamental Principles
(CAPUE)
(1) Current fair market value is the basis for
assessment
All real property, whether taxable or exempt,
shall be appraised at the CURRENT AND FAIR
PAGE 165
UP COLLEGE OF LAW
TAXATION 2
GOCCs
Philippine Ports Authority vs. City of Iloilo (G.R. No.
109791, July 14, 2003):GOCCs are NOT covered by the
exemption since the exemption only refers to
instrumentalities without personalities distinct from
the government.
Mactan Airport v. MIAA cases
Provision
involved
Mactan
Sec 133 (o),
Airport
LGC. LGUs not
Authority
allowed
to
vs. Marcos levy
(o)
(1996)
taxes/fees/char
ges of any kind
on the national
govt,
its
agencies,
instrumentalitie
s and LGUs.
SC Ruling
Airport
Authority is a
GOCC,
not
exempt
from
RPT.
Legislature in
amending the
law specifically
deleted GOCCS
from
the
enumeration in
Sec 234(a).
UP COLLEGE OF LAW
Manila
Airport
Authority
vs.
CA
(2006)
TAXATION 2
Provision
involved
Sec 133 (o), LGC
Sec 234
LGC)
(a),
SC Ruling
MIAA
falls
under
the
term
instrumentali
ty outside the
scope of LGSs
local
taxing
powers under
Sec 133(o).
Charitable Institutions
LUNG CENTER of the PHILS vs. QUEZON CITY (G.R.
No. 144104, June 29, 2004): A charitable institution
doesn't lose its character and its exemption simply
because it derives income from paying patients so
long as the money received is devoted to the
charitable object it was intended to achieve, and no
money inures to the benefit of persons managing the
institution.
UP COLLEGE OF LAW
TAXATION 2
Depreciation
Allowance
UP COLLEGE OF LAW
TAXATION 2
Instances for
Suspension of
Prescriptive
Period
Collecting
Authority
PAGE 169
UP COLLEGE OF LAW
TAXATION 2
Duty of the
Local
Treasurer
Redemption
Period
Judicial
The LGU may enforce the collection by civil action in
any court of competent jurisdiction.
PAGE 170
UP COLLEGE OF LAW
TAXATION 2
Judicial
(1) Question on the legality of a tax ordinance
(a) Any question on the constitutionality or
legality of a tax ordinance may be raised on
appeal within thirty (30) days from effectivity
to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of
receipt of the appeal.
(b) The appeal shall not have the effect of
suspending the effectivity of the tax ordinance
and the accrual and payment of the tax.
(c) Within thirty (30) days after receipt of the
decision or the lapse of the sixty-day period
without the Secretary of Justice acting upon
the appeal, the aggrieved party may file
appropriate proceedings with a court of
competent jurisdiction. (Sec. 187, LGC)
PAGE 171
UP COLLEGE OF LAW
TAXATION 2
Flowchart V: Procedure for Assessment of Land Value for Real Property Tax
Purposes-Local Govt Code
For purposes of this flowchart owner means owner or administrator of real property or any person having legal interest thereto
Owner declares real
property once every 3
years (sec. 202) w/n
Jan 1 to June 30
START
Submit documents
supporting exemption w/
in 30 days from
declaration (sec. 206)
Required
Documents
submitted w/in
30 days?
Property
proven as tax
exempt?
Yes
No
Property shall be
listed as taxable in
the assessment
roll (sec. 206)
Assessor prepares
assessment rolls
wherein real property
shall be listed, valued
and assessed (sec. 205)
Assessor declares
real property if owner/
administrator fails to
do so (sec. 204)
Yes
Yes
Is real property
tax exempt?
Property shall be
dropped from
assessment roll
(sec. 206)
No
END
No
END
Appeal to the
Supreme Court w/
in 15 days
PAGE 172
UP COLLEGE OF LAW
TAXATION 2
START
Assessor submits
assessment roll to
local
treasurer
(sec. 248)
Amount of tax
protested shall be
refunded or
applied as tax
credit (Sec. 252)
Yes
LT grants
protest?
Yes
LT decides w/in
60 days?
LT must decide w/
in 60 days from
receipt of protest
(sec. 252)
No
Refund or tax credit must
be claimed with the local
treasurer w/in 2 years from
the date taxpayer is entitled
to such (sec. 253)
LT acts on claim
for refund/tax
credit w/in 60
days?
No
Yes
LT grants
refund/tax
credit?
Yes
Taxpayer happy.
END
No
No
END
Appeal to the
Supreme Court w/
in 15 days
PAGE 173
UP COLLEGE OF LAW
TAXATION 2
Sale is held:
1. at the main entrance
of the LGU building, OR
2. on the property to be
sold, OR at
3. any other place
specified in the notice
Is there a
bidder?
Yes
Bidder pays & 30 days
after the sale, the LT
shall report the sale to
the sanggunian
LT shall deliver to
purchaser certificate
of sale
Proceeds of sale in
excess of delinquent
tax,
interest
&
expenses of sale
remitted to the owner
(sec. 260)
For purposes of this flowchart owner means owner or administrator of real property or any
person having legal interest thereto
Warrant of Levy issued
by the Local Treasurer
(LT), which has the force
of legal execution in the
LGU concerned. (sec.
258)
Warrant is mailed
to or served upon
the delinquent
owner (sec. 258)
No
LT returns to the
purchaser/bidder the
price paid + interest
of 2% per month
(sec. 261)
If property is not
redeemed, the local
treasurer
shall
execute a deed of
conveyance to the
purchaser (sec. 262)
Sanggunian
concerned
may, by ordinance sell
and dispose of the real
property acquired under
the preceding section at
public auction. (sec. 264)
END
PAGE 174
UP COLLEGE OF LAW
TAXATION 2
Tariff
(a) Taxes or list of articles liable to duties
(b) A list or schedule of articles on which a duty is
imposed upon the importation into the country,
with the rates at which they are severally taxed.
And derivatively, the system of imposing duties or
taxes on the importation of foreign merchandise
Custom duties
(a) Taxes on the importation or exportation of
commodities
(b) Tariff or tax assessed upon the merchandise
imported from or exported to a foreign country
Procedure:
(1) Tariff Commission shall conduct an investigation
and hold public hearings wherein interested
parties shall be afforded reasonable opportunity
to be present, produce evidence, and be heard. It
shall also hear the views and recommendations
of any government office, agency or
instrumentality concerned.
(2) Commission shall be submit their findings and
recommendations to the NEDA within 30 days
after the termination of the public hearings
(3) NEDA recommends the same to the President
(4) Order issued by the President shall take effect 30
days after promulgation
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EXCEPT:
(1) amendment by the master, consignee or
agent
(2) attached to the original manifest
CANNOT amend the manifest after the
invoice and/or entry covering the
importation have been received and
recorded in the office of the appraiser
EXCEPT:
(1) Obvious clerical error or any other
discrepancy is committed in the
preparation
(2) Without fraudulent intent
(3) Discovery would not have been made
until after examination of the
importation is completed
Translated into the official language, if
written in another language
Master shall deliver and mail the cargo
manifest to: (endorsed by boarding officer)
(a) Chairman
(b) COA
(c) Collector (Present original)
Form:
(a) signed by the importer, consignee or
holder of the bill, by or for whom the entry
is effected (Sec. 1305)
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Entry(Sec.
1302,
as
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Other Notes:
Readjustment of Appraisal, Classification or
Return (Sec. 1407, TCC)
Prescriptive
Period
Classification or Return
for
Appraisal,
Exceptions:
(1) Fraud
(2) Protest
(3) Compliance audit pursuant to the
provisions of the Code
Note: Exception dies not apply in case of
TENTATIVE LIQUIDATION
Fractions in the Liquidation. A fraction of
a peso less than fifty centavos shall be
disregarded, and a fraction of a peso
amounting to fifty centavos or more shall be
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Smuggling
In order to prevent smuggling and to secure the
collection of the legal duties, taxes and other
charges, the customs service shall exercise
surveillance over the coast, beginning when a vessel
or aircraft enters Philippine territory and concluding
when the article imported therein has been legally
passed through the customhouse. (Sec. 2202)
SMUGGLING: Any person who shall fraudulently
import or bring into the Philippines, or assist in so
doing, any article, contrary to law, or shall receive,
conceal, buy, sell, or in any manner facilitate the
transportation, concealment, or sale of such article
after importation, knowing the same to have been
imported contrary to law; includes the exportation of
articles in a manner contrary to law. (Sec. 3519, TCC)
Penalties for Unlawful Importation:
Person found guilty of smuggling shall be punished
by a fine of not less than six hundred pesos nor more
than five thousand pesos and imprisonment for not
less than six months nor more than two years and, if
the offender is an alien, he shall be deported after
serving the sentence.
When the defendant is shown to have or to have had
possession of the article in question, such possession
shall be deemed sufficient evidence to authorize
conviction, unless the defendant shall explain the
possession to the satisfaction of the court. (Sec.
3601, TCC)
Other fraudulent practices
(1) Various Practices against Customs Revenue: Any
person who makes or attempts to make any entry
of imported or exported article by means of any
false or fraudulent invoice, declaration, affidavit,
letter, paper, or by means of any false statement,
written or verbal, or by means of any false or
fraudulent practice whatsoever, or shall be guilty
CLASSIFICATION OF GOODS
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Note:
General Rule: The following methods are
sequentially applied
Exception: (CAO 4-2004) Methods 4 and 5 may
be reversed at the request of the importer,
subject to the approval of the Commissioner.
(1)Ordinary/Regular duties
Ordinary or regular duties refer to those that, as a
matter of course, are imposed on dutiable articles
(Sec. 104, TCC)
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Identical goods
(a) Same in all respects (physical characteristics,
quality and reputation)
(b) Produced in the same country as the goods being
valued
(c) Produced by producer of the goods being valued
Excludes: imported goods for which engineering,
development, artwork, design work, plans and
sketches is undertaken in the Phil and provided by
the buyer to the producer free of charge or at a
reduced rate
When no identical goods produced by the same
person:
Identical goods produced by different producer in the
same country
Similar goods
(a) like characteristics and like component materials
(b) capable of performing same functions
(c) commercially interchangeable
(d) produced in same country
(e) produced by same producer
Excludes: imported goods for which engineering,
development, artwork, design work, plans and
sketches is undertaken in the Phil and provided by
the buyer to the producer free of charge or at a
reduced rate
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PRICE
COMMISSIONS/ADDITIONS
COSTS
DUTIES and TAXES
DEDUCTIVE VALUE
Kinds of weight:
(a) Gross Weight - weight of same, together
with the weight of all containers,
packages, holders and packings, of any
kind, in which said articles are contained,
held or packed at the time of importation
(b) Legal Weight weight at the time of their
sale to the public in usual retail quantities
(c) Net Weight only the actual weight at
the time of importation excluding the
weight of the immediate and all other
containers
REMEDIES
Government
Administrative/Extrajudicial
Search, seizure, forfeiture, arrest
(1) Enforcement of Tax Lien
Tax Lien attaches upon the articles imported
which may be enforced while such are in custody
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Sec. 1508
(a) When an importer has an outstanding and
demandable account with the Bureau of
Customs,
(1) Collector shall hold the delivery of the
article.
(2) Upon notice, he may sell such importation
or a portion of it to satisfy the obligation.
(b) Importer may settle his obligation anytime
before the sale.
Cash bond
(a) if importer wishes to secure release of article for
legitimate use
(b) amount fixed by Collector
(c) appraised value of article and/or fine, expenses,
costs
Note: Article will NOT be released if:
(1) prima facie evidence of fraud in the importation
(2) article is prohibited by law
What:
to make seizure of any vessel, aircraft, cargo, animal
or any movable property when the same is subject to
forfeiture or liable for any fine under the tariff and
customs law
Settlement(Sec. 2307)
While case is pending, Collector may accept
settlement of any seizure case
(a) Upon approval of Commissioner
(b) Payment of fine ( 25% - 80% of the landed cost
of the article)
(c) In case of forfeiture, should pay the domestic
market value of the seized article
When Settlement NOT allowed:
(a) Fraud in importation
(b) Importation prohibited by law
(c) Release would be contrary to law
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Judicial
Requisites for filing of criminal/civil case(Sec, 2401,
TCC):
(1) Brought in the name of the government of the
Phil
(2) Conducted by Customs officers
(3) With approval from the Commissioner
Automatic Review:
Happens in case a decision is made adverse to the
Government
Abandonment
Article is deemed abandoned when (Sec. 1801, TCC):
(1) owner, importer or consignee expressly signifies
in writing to Collector his intention to abandon
(2) after due notice, fails to file an entry within 30
days from date of discharge of last package from
vessel or aircraft
(3) after filing entry, fails to claim his importation 15
days from date of posting of the notice to claim
such importation
Protest
When made:at the time payment of the amount
claimed to be due is made within 15 days thereafter
(Sec. 2308)
Form:
(a) Must be in writing
(b) Must point out the particular decision or ruling of
the Collector of Customs to which exception is
taken or objection made
(c) Must state the grounds relied upon for relief (Sec.
2310, TCC)
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Collector determines
probable cause
(illegal importation)
Collectors
decision favorable
to taxpayer/
adverse to govt?
Yes
Amount
involved less
than 5M?
Yes
Collector conducts
hearing
Does
commissioner
decide w/in 30
days?
No
Taxpayer appeals
to Customs
Commissioner 15
days from receipt
of notice
Is
Commissioners
decision favorable
to taxpayer/
adverse to govt?
Yes
No
Inaction construed as affirmation
of Collectors decision
Does
Commissioner
decide w/n 30
days?
No
Yes
Yes
Automatic Review* by
the Secretary of
Finance (SOF) (Sec.
2313, CMO 3-2002)
Is SOFs
decision
favorable to
taxpayer/adverse
to govt?
No
No
Does SOF
decide within
30 days?
Yes
No
Yes
Decision becomes
final &
unappealable
END
Inaction construed
as affirmation of
Collectors
decision
Appeal to the
Court of Tax
Appeals within 30
days from notice
of decision
MR within 15 days
from receipt of
decision
Appeal to CTA en
banc 15 days from
receipt of decision
denying MR
Inaction construed as
affirmation of
commissioners decision
(or of collectors decision
in case of inaction by
commissioner)
Appeal to the
Supreme Court
No
Appeal
to CTA
END
*Automatic review is intended to protect the interest of the Government. W/o auto review, the Commissioner and SoF would not know
about the decision laid down by the Collector favoring the taxpayer. Automatic review is necessary because nobody is expected to appeal
the decision of the Collector which is favorable to the taxpayer & adverse to the Government. (Yaokasin v. Commissioner 180 SCTA 591
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Countervailing
(Sec. 302 as
amended by RA
8751)
Whenever any
product,
commodity
or
article
of
commerce
is
granted directly
or indirectly by
the government
in the country of
origin
or
exportation, any
kind or form of
specific subsidy
upon
the
production,
manufacture or
exportation
of
such
product,
commodity
or
article, and the
importation of
such subsidized
product,
has
caused
or
threatens
to
cause material
injury
to
a
domestic
industry or has
materially
retarded
the
growth
or
prevents
the
establishment of
a
domestic
industry
Marking
(Sec. 303)
Discriminatory
(Sec. 304)
If at the time of
importation any
article (or its
container if the
article cannot
be marked), is
not marked in
in any official
language of the
Philippines and
in
a
conspicuous
place as legibly,
indelibly
and
permanently as
the nature of
the article (or
container).
This is used to
prevent
deception
of
consumers.
Whenever
the
President finds
that the public
interest will be
served thereby,
additional
customs
duty
shall be imposed
upon
articles
wholly or in part
the growth or
product of, or
imported in a
vessel of, any
foreign country
whenever
he
shall find as a
fact that such
country
(1)
Imposes,
directly
or
indirectly, upon
any Phil product
unreasonable
charge, exaction,
regulation
or
limitation which
is not equally
enforced upon
the like articles
of other foreign
countries;
or
(2) Discriminates
in fact against
the commerce of
the Philippines,
as to place the
commerce of the
Philippines at a
disadvantage
compared with
the commerce of
any
foreign
country.
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(Sec 5) General
Safeguard
Measure:
Whenever there
is a positive final
determination of
the Commission
that a product is
being imported
into the country
in
increased
quantities,
whether
absolute
or
relative to the
domestic
production, as to
be a substantial
cause of serious
injury or threat
thereof to the
domestic
industry;
however, in the
case of nonagricultural
products,
the
Secretary
of
Agriculture shall
first
establish
that
the
application
of
such safeguard
measures will be
in the public
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Anti-Dumping
Duty = Normal
Value - Export
Price
Equivalent to the
subsidy
Marking
(Sec. 303)
Commissioner
Customs
Discriminatory
(Sec. 304)
of
President (through
a proclamation)
For
nonagricultural
products:
Secretary of Trade
and Industry
For agricultural
products:
Secretary
of
Agriculture
Secretary
Agriculture
5% ad valorem of
the articles
Not
exceeding
100% ad valorem
upon the articles
tariff
increase,
either ad valorem
or specific, or
both, to be paid
through a cash
bond set at a level
sufficient
to
redress or prevent
injury
to
the
domestic industry
(Sec. 8, RA 8800)
For a):
of
appropriately set
to a level not
exceeding
onethird
of
the
applicable
outquota
customs
duty
on
the
agricultural
product
under
consideration
in
the year when it is
imposed
For b), compute as
follows:
(a) 0 - if price
difference is at
most 10% of
the
trigger
price
(b) 30% of the
amount
by
which
the
price
difference
exceeds 10%
of the trigger
price
(c) 50% - if it
exceeds 40%
but less than
60%
(d) 70% - if it
exceeds
60
but at most
75%
(e) 90% - if it
exceeds 75%
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Notes:
Exceptions to the Marking of Articles:[In the following
situations, the containers shall be the one subject to
marking.]
(a) Article is incapable of being marked
(b) Article cannot be marked prior to shipment to the
Philippines without injury
(c) Article cannot be marked prior to shipment to the
Philippines, except at an expense economically
prohibitive of its importation
(d) Marking of a container of such article will
reasonably indicate the origin of such article
(e) Article is a crude substance
(f) Article is imported for use by the importer and not
intended for sale in its imported or any other form
(g) Article is to be processed in the Philippines by the
importer or for his account otherwise than for the
purpose of concealing the origin of such article
and in such manner that any mark contemplated
by this section would necessarily be obliterated,
destroyed or permanently concealed
(h) An ultimate purchaser, by reason of the character
of such article or by reason of the circumstance of
its importation, must necessarily know the
country of origin of such article even though it is
not marked to indicate its origin
(i) Article was produced more than twenty years prior
to its importation into the Philippines
(j) Article cannot be marked after importation except
at an expense which is economically prohibitive,
and the failure to mark the article before
importation was not due to any purpose of the
importer, producer, seller or shipper to avoid
compliance with this section
JUDICIAL REMEDIES
JURISDICTION OF THE COURT OF TAX APPEALS
CTA en Banc
(1) Decisions or resolutions on motions for
reconsideration or new trial of the Court in
Divisions in the exercise of its exclusive appellate
jurisdiction over:
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JUDICIAL PROCEDURES
Local taxes
The LGU concerned may enforce the collection of
delinquent taxes, fees, charges or other revenues by
civil action in any court of competent jurisdiction. The
civil action shall be filed by the local treasurer. (Sec.
183, LGC)
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Civil cases
Who may appeal, mode of appeal, effect of appeal
Appeal to CTA Division
A party aggrieved or adversely affected by the
decision or ruling or inaction of
(1) The Commissioner of Internal Revenue;
(2) The Commissioner of Customs;
(3) The Secretary of Finance;
(4) The Secretary of Trade and Industry;
(5) The Secretary of Agriculture; or
(6) The RTC exercising original jurisdiction
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