30262789 Memory Aid Taxation | Tax Deduction | Taxes

San Beda College of Law 2001 Centralized Bar Operations

Memory Aid
Taxation Law
TABLE OF CONTENTS
I. GENERAL PRINCIPLES .....................................................................2 A. Power of Taxation.............................................................................2 B. Situs of Taxation...............................................................................4 C. Limitations on the Power of Taxation...............................................4 D. Double Taxation...............................................................................6 E. Forms of Escape from Taxation.......................................................6 F. Tax Enforcement and Administration................................................7 II. NATIONAL TAXATION........................................................................9 A. Income Tax......................................................................................9 B. Transfer Taxes..............................................................................14 C. Expanded Value Added Tax..........................................................17 III. LOCAL TAXATION...........................................................................19 IV. REAL PROPERTY TAXATION........................................................19 V. TARIFF AND CUSTOMS LAWS.......................................................20 VI. TAX REMEDIES...............................................................................22 A. Under the National Internal Revenue Code..................................22 B. Under the Local Government Code..............................................29 C. Under the Tariff and Customs Code.............................................30 VII. COURT OF TAX APPEALS............................................................33 VIII. ANNEX A: COMPARATIVE TABLE OF TAX REMEDIES............A-1 IX. ANNEX B: INCOME TAX TABLES...............................................B-1

I.GENERAL PRINCIPLES 
THE POWER OF TAXATION  Definitions:
1. Taxation: Power by which the sovereign raises revenue to defray the necessary expenses of the government from among those who in some measure are privileged to enjoy its benefits and must bear its burden. 2. Taxes: Enforced proportional contribution from properties and persons levied by the State by virtue of its sovereignty for the support of government and for public needs.

limits except those expressly stated in the Constitution. Marshall and Holmes Dictums Reconciled: Although the power to tax is almost unlimited, it must not be exercised in an arbitrary manner. We have courts to which people may seek redress in case of irregularities. 3. Benefits-Protection Theory There exist reciprocal duties of protection and support between State and its inhabitants. Inhabitants pay taxes and in return receive benefits and protection from the State. 

Importance of Taxes
Taxes are the lifeblood of the government and so should be calculated without unnecessary hindrance; therefore, their prompt and imperious availability is an imperious need. 

Characteristics of Taxes:
1. 2. 3. 4. forced charge; generally payable in money; levied by the legislature; assessed with some reasonable rule of apportionment; 5. imposed by the State within its jurisdiction; 6. levied for public purpose. 

General Rule: Taxes are personal to the
taxpayer. Illustrations: 1. Corporation’s tax delinquency cannot be enforced against the stockholder (Corporate Entity Doctrine). Exception: Stockholders may be held liable for unpaid taxes of a dissolved corporation if the corporate assets have passed into their hands. 2. Transfer tax on the estate cannot be assessed against the heirs. Exception: Heirs may be held liable for the transfer tax on the estate, if prior to the payment of the same, the properties of the decedent have been distributed to the heirs. 

Theories or bases of taxation:
1. Lifeblood Theory Taxes are the lifeblood of the nation. Without revenue raised from taxation, the government will not survive, resulting in detriment to society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. (CIR vs Algue, Inc., et. al.) Illustrations of Lifeblood Theory: a. Collection of taxes may not be enjoined by injunction. b. Taxes could not be the subject of compensation and set-off. c. A valid tax may result in destruction of the taxpayer's property. 2. Necessity Theory Existence of a government is a necessity and cannot continue without any means to pay for expenses. a. Marshall Dictum “ Power to tax is the power to destroy” – describes the unlimitedness of the power and the degree of vigor with which the taxing power may be employed in order to raise revenue. b. Oliver Wendell Holmes Dictum “Power to tax is not the power to destroy while this court (US Supreme Court) sits” – power to tax knows no 

Nature of the Taxing Power
1. attribute of sovereignty and emanates from necessity, relinquishment of which is never presumed; 2. legislative in character; and 3. subject to inherent and constitutional limitations. 

Purpose and Objectives of Taxation:
1. Revenue 2. Non-Revenue (still a tax but imposed under its non-revenue objective) KEY: PR2EP a. Regulation; b. Promotion of general welfare; c. Reduction of social inequity; d. Encouragement of economic growth; and e. Protectionism. 

Scope of legislative taxing power (MS
SAPAK): 1. Subject to be taxed, provided it is within its jurisdiction; 2. Amount or rate of the tax; 3. Purposes for its levy, provided it be for public purpose; 4. Kind of tax to be collected; 5. Apportionment of the tax; 6. Situs of taxation; and 7. Method of collection.

 Aspects of Taxation:
1. Levy or imposition of the tax; and 2. Enforcement or tax administration

TAXATION 

Basic Principles of a sound tax system:
A sound tax system must be: 1. sufficient to meet governmental expenditures (fiscal adequacy); 2. capable of being effectively enforced (administrative feasibility); and 3. based on the taxpayer’s ability to pay (theoretical justice).

POLICE POWER to selfprotection and selfpreservation

EMINENT DOMAIN 

Impositions not strictly considered as
taxes: 1. Toll – amount charged for the cost and maintenance of property used; 2. Compromise penalty – amount collected in lieu of criminal prosecution in cases of tax violations; 3. Special assessment – levied only on land based wholly on the benefit accruing thereon as a result of improvements or public works undertaken by government within the vicinity; 4. License fee – regulatory imposition in the exercise of the police power of the State; 5. Margin fee – exaction designed to stabilize the currency; 6. Custom duties and fees – duties charged upon commodities on their being imported into or exported from a country; 7. Debt – a tax is not a debt but is an obligation imposed by law. 

TAXATION, POLICE POWER AND
EMINENT DOMAIN DISTINGUISHED TAXATION POLICE EMINENT POWER DOMAIN Purpose: To facilitate To raise To promote public welfare the State’s revenue through need of regulations property for public use Amount of exaction: Limited Not limited No exaction; just compensation is paid by the Government Benefits: Direct benefits No special or No direct result in the benefits are direct form of just benefits are received; compensation received by damnum the taxpayer absque injuria is attained Nonimpairment of contracts: Contracts may not be impaired Effect of transfer: Taxes paid become part of the public funds 

LICENSE FEE VS. TAX
LICENSE FEE Basis: Police power Purpose: To regulate Limitation: Limited to costs of (1) issuing the license; and (2) necessary inspection or police surveillance Effect of nonpayment: Makes the business illegal. TAX Power of taxation. To raise revenue. Inherent and constitutional limitations.

Contracts may be impaired

Contracts may be impaired

No transfer but only restrain on the exercise of property rights

Property is taken by the State upon payment of just compensation It affects only the particular property comprehended Necessity of the public for private property

Does not make the business illegal. 

Classification of Taxes:
As to subject matter 1. Personal tax – also known as capitalization or poll tax. 2. Property tax – assessed on property of a certain class. 3. Excise tax – imposed on the exercise of a privilege. 4. Custom duties – duties charged upon commodities on being imported into or exported from a country; 5. Local taxes – taxes levied by local government units pursuant to validly delegated power to tax; As to burden

Scope: It affects all persons, property, and excises Basis: Public necessity

It affects all persons, property, privileges, and even rights Public necessity and right of State and of public

2. As to rate: 1. 7. Consequently.an inherent mandate that taxation shall only be exercised on persons. to provide 2. Citizenship of the taxpayer. Business tax – where business is conducted. selection of property to be taxed. Nature of the tax. shares or rights in any partnership. 10. properties and excises within the territory of the taxing power. Special taxes – levied for a special purpose. as a government. (Sec. shares. 104 of CTRP and principle of mobilia sequuntur personam.A. 5. Privilege or occupation tax – where occupation is pursued. supra. Non-delegability of the taxing power. shares. 2. 1987 Constitution). obligations or bonds have acquired a business situs in the Philippines. Public Purpose of taxes. Specific tax. 1. 6.  Non-delegability of the taxing power: The power of taxation is peculiarly and exclusively legislative. 2. Tax exemption of government. 3. As to measure of application 1. Tax on corporations and other judicial entities – law of incorporation. Community tax – residence or domicile of the person taxed. 2. 11.  Situs of taxation as a limitation on the power to tax: (See the subheading on Situs of Taxation. 1987 Constitution). 2. whether the proceeds of the tax will directly promote the welfare of the community in equal measure. 2. 3. Real property tax – where property is located. 104. 3. franchise which must be exercised in the Philippines. determination of the purposes for which taxes shall be levied. Sales tax – where transaction takes place. 5. 9. 4.  Factors that determine the situs of taxation: 1. Residence of the taxpayer. 5. Indirect tax – incidence and liability for the tax fall to one person but the burden thereof can be passed on to another. Personal property tax – tangible.  Non-delegable Legislative Power: 1. 8. obligations or bonds issued by a corporation organized and constituted in the Philippines in accordance with its laws. obligations or bonds issued by a foreign corporation if such shares. Direct tax – incidence and impact of taxation fall to one person and cannot be shifted to another. 4. the taxing power as a general rule may not be delegated. Regressive taxes – rate increases as tax base decreases. Authority of the President to fix tariff rates. whether the thing to be furthered by the appropriation of public revenue is something which is the duty of the state. Ad valorem tax – tax imposed upon the value of the article. Power of local government units to tax subject to limitations as may be provided by Local Government Code (Art. Source of income  Test in Determining Public Purpose 1.)  Intangible properties deemed with a situs in the Philippines:  Exemption of the Government from Taxes . R. and 5. Territoriality or situs of taxation. 2. 8424 or the CTRP) LIMITATIONS ON THE POWER TO TAX A. X. 4. 2. 2.tax imposed by the head or number or by some standard of weight or measurement. International comity  SITUS OF TAXATION Situs of Taxation . Inherent Limitations  The following are the inherent limitations on the power to tax (SPINE): 1. 4. intangible: subject to Sec. Progressive taxes – rate increases as the tax base increases. rules of taxation in general  Delegable Legislative Power: 1. fixing of the rate of taxation. Tax on persons – residence of the taxpayer. business or industry established in the Philippines. obligations or bonds issued by a foreign corporation 85% of its business is located in the Philippines. Sec. where it is physically located. 4. Subject matter of the tax. 3. 2. Franchise tax – State which granted the franchise. import and export quotas (Art. and 5. As to purpose 1. Sec. General taxes – taxes levied for ordinary or general purpose of the government. Income – where income is earned or residence or citizenship of the taxpayer. 3.1. shares. Transfer tax – residence or citizenship of the taxpayer or location of the property. VI.  Application of Situs of Taxation: 1. 28[2].

Must not be limited to existing conditions only. Origin of Appropriation. Tolentino vs. Must be based upon substantial distinctions. 24  American Bible Society vs. d. Congress can choose anyone who will be taxed. Sec. Equitability: Taxation is said to be equitable when its burden falls to those better able to pay. Non-impairment of Contracts (Art. 1. and Progressivity of Taxation (Art. Equal Protection of the Law (Sec. Non-impairment of the Supreme Court’s Jurisdiction in Tax Cases [Art. Lladoc vs. Must not be arbitrary. 28 (4) of the Constitution) 11. Sec. Charitable and Educational Purposes (See Art.As a matter of public policy. VI. VI. Sec. 4(3) and (4) of the Constitution) 13. III. Sec. Sec. 29 (1)) c. Educational Institutions (Art. 28(3) of the Constitution. With respect to revenue tax. Progressivity: Rate increases as the tax base increases. or System of religion. Tax Exemption of Properties Actually. VI. Import and Export Quotas (Art. Province of Abra vs. Sec. Its imposition is a political question. and Tariff Bills (Art. VI.(Art. Sec. 29(2) d. b. XIV. b. 10. Endowments. Must be germane to the purposes of law. B. Sec. including Grants. Revenue. 8. Sec. 2(1) and Art. The interests of the public generally as distinguished from those of a particular class require the intervention of the State. of Finance rulings reconciled: The imposition in the former is a license tax which is intended to regulate the exercise of freedom of religion while in the latter is a revenue tax. Necessity of an a Appropriation before Money may be paid out of the Public Treasury (Art. and b. property of the State or any of its political subdivisions devoted to government uses and purposes are generally exempt from taxation. Due Process of Law (Sec. Donations. or whimsical manner. Sec. Sect. Sec. This provision refers only to property taxes. Majority Vote of all Members of Congress Required in Case of a Legislative Grant of Tax Exemptions (Art. or Contributions to. Sec. Sec. Delegation of Legislative Authority to  Requisites: a. (Art. Power of the President to veto item or items in an Appropriation. and Exclusively Used for Religious. City of Manila and Tolentino vs. of Finance). VI. 6. the SC held that in order that due process of law will not be violated. Secs. Must apply equally to all members of a class.1. III. 28 (1) of the Constitution) 12. despotic. c. Sec. Non-appropriation of Public Money or Property for the benefit of any Church. The means employed must be reasonably necessary to the accomplishment of the purpose and not unduly oppressive. 27 (2)) b. Directly. Exemption of Revenues and Assets of. VI. Treatment of Taxes Levied for a Special Purpose. III of the Constitution) 9. VIII. Revenue. 10 of the Constitution) 5. III of the Constitution) 7. Sec. c.  In a string of cases. the imposition of the tax must not be done in an arbitrary. 28(2) of the Constitution) 2.5(b) of the Constitution] 3. VIII. A tax is uniform when it operates with the same force and effect in every place where the subject of it is found. 24 of the Constitution. or Tariff Bill (Art. 29 (3)) 4. Constitutional Limitations 1.VI. Non-infringement of the Constitution) of Religious Freedom and Worship (Art.  Requisites for a valid classification: a. Other Provisions of the Constitution Which are Related to Taxation a. the President to Fix Tariff Rates. Uniformity. Tax  Definitions: a. VI. VIII. Non-imprisonment for Non-payment of Poll Tax(Art. 20 of the Constitution) . Uniformity: All taxable articles or kinds of property of the same class shall be taxed at the same rate. Art. capricious. Sec. and e. Art. Hernando). III. Commissioner. Equitability.

2. Exemptions 4.  Is double taxation prohibited in the Philippines? No. Treaties with other states 5. 4. the same property is taxed twice when it should only be taxed once. Income tax. Tax credits An amount allowed as a reduction of the Phil. 6. fearing the loss of his market if he should add the tax to the price. Also known as duplicate taxation.  Indicia of Fraud in Tax Evasion: 1. within the same jurisdiction e. substantial underdeclaration of income tax returns of the taxpayer for four consecutive years coupled with intentional overstatement of deductions. c. This may be claimed by (1) citizens of the Philippines and (2) domestic corporations. REASON: This constitutes a violation of substantive due process. 1968). during the same taxing period. or 2. Transformation  Definition: The manufacturer or producer upon whom the tax has been imposed. Tax deductions Example: Vanishing deductions in transfer taxes.6)  DOUBLE TAXATION  Definition: Taxing the same subject twice when it should be taxed only once. Capitalization  Definition: Reduction in the price of the taxed object equal to the capitalized value of future taxes which the purchaser expects to be called upon to pay. failure to declare for taxation purposes true and actual income derived from business for two consecutive years. pays the tax and endeavors to recoup himself by improving his process of production. Indirect double taxation: Not legally objectionable. Direct duplicate taxation/obnoxious – DT in the objectionable or prohibited sense. Requisites: a. Shifting S  Kinds of Tax Exemptions As to basis: . v.  Reliefs from Effects of Double Taxation 1. Shifting  Definition: Process by which tax burden is transferred from statutory taxpayer to another without violating the law. Internal Revenue Allotments to Local Government Units. 3. express or implied.e. covering the same kind or character of tax. (Art. d. thereby turning out his units at a lower cost. tax burden finally rests or settles down. The same property is taxed twice when it should be taxed only once. City of Butuan. The absence of one or more of the foregoing requisites of obnoxious DT makes the DT indirect. Tax exemption  Definition: A grant of immunity. and f. Sec. 5. in order to avoid or reduce tax liability. b. There is no constitutional prohibition against double taxation in the Philippines. F. Tax Evasion  Definition: Used by the taxpayer through illegal or fraudulent means to defeat or lessen the payment of the tax. 2. C.X. 3. D.  Incidents of taxation – point on which the  Kinds of Double Taxation (DT) 1.  FORMS OF ESCAPE FROM TAXATION  The following are the forms of escape from taxation: 1. Principle of reciprocity E. It is something not favored but permissible (Pepsi Cola Bottling Co. B. to particular persons or corporations from the obligation to pay taxes. It is given to a taxpayer in order to provide a relief from too onerous a burden of taxation in case where the same income is subject to a foreign and Phil. 2. both taxes are imposed on the same property or subject matter for the same purpose. imposed by the same taxing authority. Tax Avoidance  Definition: exploitation by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income. Capitalization C Transformation T Avoidance A Exemption E evasion-unlawful E Key: ESCATE A.  Impact of taxation– point on which tax is originally imposed. Income tax on account of income tax(es) paid or incurred to foreign countries.

Termination of taxable period 5. or excises are deemed exempt as they fall outside the scope of the taxing provision itself. 5. Tax exemptions are not presumed. Court Decisions 6. Bureau of Customs 3. tax exemption is the exception. Reasonable Within the authority conferred Not contrary to law Must be published  Retroactivity of BIR Rulings: General Rule: Prospective. Examination of bank deposits to determine the correct amount of the gross estate 7. Use of the best evidence obtainable 3. Assessments are prima facie presumed correct and made in good faith 2. Provincial. Revenue Regulations 8. Execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts  Assessment Defined: It is a finding by the taxing agency that the taxpayer has not paid his correct taxes. As to extent: 1.  Powers and Duties of the BIR (Sec. Presidential Decrees 3. CTRP): (AGEE) 1. BIR Rulings 10. penalties and fines in connection therewith 4. 3. fees. Tax Codes 7. He who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. Constitutional grants of tax exemptions are self-executing. hence. Burden of proof in pre-assessment proceedings: There is a presumption of correctness on the part of the CIR. 4. and charges 2. CTRP): (BETI-PPEA) 1. Total: Connotes absolute immunity. Exceptions: . Statutes 2. and municipal assessors and treasurers  Principles Governing Tax Exemptions 1. Express: Expressly granted by organic or statute law 2.  Means Employed in the Assessment of Taxes (Sec. 2. He who claims exemption should convincingly prove that he is exempted. 2. BIR 2. thus the burden of proof is on the taxpayer. Tax exemptions are personal. Taxation is the rule. surveillance and use of presumptive gross sales and receipts 4.  TAX ENFORCEMENT AND ADMINISTRATION  Sources of Tax Laws (Key: SPEC2TRA BLT) 1. Assessment and collection of all national internal revenue taxes. Accreditation and registration of tax agents  Requisites of Tax Regulations 1. Local Tax Ordinances 11. Constitution 5. Deductions for income tax purposes partake of the nature of tax exemptions. city. and containing a demand for the payment thereof. Where the law allows retroactive application. Constitutional: Immunities from taxation which originate from the constitution 2. 2.1. they are also to be strictly construed against the taxpayer. properties. Where no vested right will be impaired. 3. 2. Prescription of real property values 6. Assessments must be directed to the right party. Examination of tax returns 2. 5. 1. Statutory: Those which emanate from legislation As to form: 1. Tax treaties and conventions with foreign countries  Principles Governing Tax Assessments: (PADDD) 1. He who claims an exemption must justify that the legislature intended to exempt him by words too plain to be mistaken. 7. 2. 8. 6. Otherwise.  Agencies Involved in Tax Administration: 1. Assessment is discretionary on the part of the Commissioner 4. 9. If ambiguous. Implied: When particular persons. Executive Orders 4. there is no tax exemption. Tax exemption must be strictly construed. It is also a written notice to a taxpayer to the effect that the amount stated therein is due as a tax. 4. the finding of the CIR will be conclusive and the CIR will assess the taxpayer. The authority vested in the Commissioner to assess taxes may be delegated. and 3. Inventory taking. If there is bad faith on the part of the taxpayer. Partial: One where a collection of a part of the tax is dispensed with. Assessments should be based on actual facts 3. Give effect to and administer the supervisory and police power conferred to it by the Tax Code or other laws 3. Such finding is conclusive even if CIR is wrong if the taxpayer does not controvert. Enforcement of all forfeitures. 6. Exemptions from taxation are highly disfavored in law. Administrative issuances 9.

realized or received 3.  Examination of Income Tax Returns: General Rule: Income tax returns are confidential. When determining the gross estate of a decedent. 2." there is no taxable income. to verify capital gains tax liabilities 5. he hides or conceals his property 4. whether gross or net.  Instances when the Commissioner may inquire into Bank Deposits: 1. Income Tax . he performs any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year or renders the same totally or partly ineffective unless such proceedings are began immediately. (NRAETB) 3 2. Income . Flow of Wealth Test . Exceptions: Inspection of the return may be authorized: 1. Where a taxpayer offers to compromise his tax liability on the ground of financial inability in which case he must submit a waiver. under Finance Regulations no. 2. in cases of fraud. Economic-Benefit Principle . gain or profit 2.2. Prescription of additional procedural or documentary requirements. the taxpayer is retiring from business subject to tax 2.resource of person which can be used in producing goods and services.unless the income is deemed "realized. When Made General Rule: Shall be made once in a taxable year. 3. NATIONAL TAXATION INCOME TAX  DEFINITIONS 1. when taxpayer requests a reinvestigation 3. a person fails to file a return or other document at the time prescribed by law 2.Not engaged in trade or business within the Philippines (NRANETB) b.whether any gain or the flow of wealth profit was derived from the transaction.2 non-resident aliens 2. by the taxpayer himself. resident citizens (RC) 2 1. or mistakes 2. he willfully or otherwise files a false or fraudulent return or other document  Grounds for Termination of Taxable Period: (CRIP) 1.  Cases when Commissioner may Assess Taxes on the Basis of the Best Evidence Obtainable: 1.1 resident aliens (RA) I. failure to pay the tax within the time prescribed for its payment 4. Jur.all wealth which flows into the taxpayer other than as a mere return of capital. 308) 2. irregularity. 4. filing a return with the wrong internal revenue officer . 3. 3. he intends to leave the Philippines or remove his property therefrom 3. Individuals 1) citizens 1 1. 3. upon written order of the President of the Philippines.2. Exceptions: 1.tax on income. (27 Am.1. Realization Test . when the production of the tax return is material evidence in a criminal case wherein the Government is interested in the result. Corporations  25% Surcharge on the Amount of the Tax Due is imposed in the Following Cases: 1. failure to pay the full amount of tax shown on any return required to be filed under the Tax Code or regulations or the full amount of tax due for which no return is required to be filed.2. upon order of the Commissioner  CLASSIFICATION OF TAXPAYERS: a.3 OCW* 2) aliens I. not excluded by law or treaty  TESTS ON TAXABILITY OF INCOME 1. 33 of the Secretary of Finance. non-resident citizens (NRC) 1.flow of wealth realized is taxable only to the extent that the taxpayer is economically benefited. to verify compliance with withholding tax laws and regulations 4. failure to file any return required under Tax Code or regulations on the date prescribed 2. on or before the date prescribed for its payment II.8.engaged in trade or business within the Phils. Capital .  Requisites for Income to be Taxable: 1.2.  Inspection and Examination of Books and Records.1. 2.

who establishes to the satisfaction of the Commissioner the fact of their physical presence abroad with a definite intention to reside therein. Trusts 2.) B. The term corporation shall include: 1. joint accounts (cuentas en participacion) associations. Non-resident Foreign Corp. joint-stock companies.  Under R. coal.1) Domestic (DC) 2) Foreign 2. 4. The term trade or business includes the performance of the functions of as a public office. Domestic Corporation –created or organized in the Phils. – not engaged in trade or business within the Philippines [Sec. 22(I)]  The income of taxable estates and trusts shall be taxed in the same manner as any other individual taxpayer. A non-resident alien means an individual whose residence is not within the Philippines and who is not a citizen thereof.A. other energy operations pursuant to an operating or consortium agreement under a service contract with the Government.2 non-resident foreign corporation (NRFC) c. who leave the Philippines during the taxable year to reside abroad. 22(C)] Foreign corporation – a corporation which is not domestic [Sec. it is exempt from income taxation.22e. 3.if the requirements are met.22G] D. A non-resident citizen means. A resident alien means an individual whose residence is within the Philippines and who is not a citizen thereof. 5. and b) no part of the income of which is derived from engaging in any trade or business [Sec. 3. or under its law [ Sec. business or profession shall not include performance of services by the taxpayer as an employee. Partnerships. 2. Resident Foreign Corporation – engaged in trade or business within the Philippines [Sec.22f] C. 60 (A)] ONLY RESIDENT CITIZENS and DOMESTIC CORPORATIONS are taxable for income derived from sources within and without the Philippines. [Sec.A. 31. 22(B)]. except (i) general professional partnerships and (ii) a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum.1 resident foreign corporation (RFC) 2. who work and derive income from abroad and whose employment thereat requires them to be physically present abroad most of the time during the taxable year. . I. 22 CC] F. 8424 or the CTRP: A. either as an immigrant or for employment on a permanent basis. no matter how formed or created. RA 8424)  . 25(A)(1)] G. a Filipino citizen: 1. [Sec. who are previously considered as a nonresident and who arrive in the Philippines at anytime during the taxable year to reside thereat permanently shall be considered non-resident for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival (Sec. geothermal and H. All other income taxpayers are taxable only for income derived from sources within the Philippines. 22(B)]. A General Professional Partnership means: a) a partnership formed by persons for the sole purpose of exercising their common profession. 22(H)] L. Estates d. K. 22S] E. [Sec. [Sec. or insurance companies [Sec. 4.   KINDS OF INCOME TAXES UNDER R. 8424: (1) (2) (3) (4) Net Income Tax Gross Income Tax Final Income Tax Preferential Rates or Special Rates of Income Tax (5) Improperly Accumulated Earnings Tax (6) Minimum Corporate Income Tax (7) Optional corporate Income tax  NET INCOME TAX Definition: Means gross income less deductions and/or personal and additional exemptions (Sec. A non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a non-resident alien doing business in the Philippines Section 22(G) notwithstanding [Sec. CTRP. The term trade. [Sec. 22(D)] J.

13th month pay and other benefits up to P30. Income derived from any public utility or from the exercise of any governmental function. 7. 5. interests. Veterans Administration SSS benefits.A. 3. 5. 2. GSIS. separation pay because of death. 9. sickness. NET INCOME TAX FORMULA Entire Income Exclusions and Income subject to Final Tax(e. b) at least 50 years old. dividends. administered by the U. Prizes and awards made primarily in recognition of religious. Optional standard deductions –10% of the gross income. scientific. 6. Medicare and union dues of individuals. if applicable) Net Taxable Income X Tax Rates Net Income Tax Due Less: Tax Credit. 10. 2-98). (g) depletion of oil and gas wells and mines. 8. 11. pensions and other similar benefits received by citizens and aliens who come to reside permanently here from foreign sources private or public. prizes and winnings. 7. b. NOTE: income therefrom is taxable Compensation for injuries or sickness.000. 2.SSS. 5. Income exempt under Treaty. Passive Income) Gross Income Less: Deductions (and/or add’l exemptions. Return of premium.S. pensions. c) must be availed of only once d) plan approved by the BIR (R. 2. 6. proceeds of life insurance 2. Requisites: a) in the service of the same employer for at least 10 years. benefits due to residents under the laws of the U. gains form dealings in property. bequest or devise. 3. partner’s share in the net income of the general professional partnership (Sec. retirement gratuities. business income. 4. annuities. 3. royalties. Gains from redemption of shares in Mutual Fund KEY: D BIG CAR²P³  Exclusions from Gross Income: 1. Etc. 3. etc. gratuities. Passive income derived by foreign government in the Philippines. if any Tax Still due. CTRP) 1. those derived under R. beyond the control of the official or employee. pension. 4. NOTE: if the proceeds are retained by the insurer.  Retirement Benefits. and GSIS benefits.00. Prizes and awards granted to athletes in sports competitions and sanctioned by their national sports association . Gains derived from debt securities with a maturity of more than 5 years. 4.R. Pension. rents. .  Miscellaneous Items GROSS INCOME  Definition: Includes but not limited to the following : 1. Gift. Gratuities. 6. Miscellaneous items  DEDUCTIONS  Definition: Items or amounts which the law allows to be deducted from gross income in order to arrive at the taxable income. 5. 2. or civic achievement (C2LARES): Requisites: a. compensation. artistic. if any Less: 4. recipient selected without any action on his part. charitable. 6. Retirement benefits. Itemized deductions (a) ordinary AND necessary expenses (b) interests (c) taxes (d) losses (e) bad debts (f) depreciation of property. 7641 (pertains to private firms without retirement trust fund). the interest thereon is taxable.S. educational.g.: 1. 7. 7. social security benefits. 8. 32. recipient not required to render substantial future services. or other physical disability or for any cause  Kinds of Deductions: 1. those received by officials and employees of private employers in accordance with a reasonable private benefit plan. literary.

CTRP). dividend payments cannot be deducted as interest. Wash sales 4. The following losses are subject to special rules under the CTRP (take note of the pertinent provisions): 1. and (k) premium payments on health and/or hospitalization insurance 3. 4. Capital losses 2. 3. 37. EXCEPT. paid or incurred w/in the taxable year. whether domestic or foreign. income tax.  Interest Payments not Deductible: 1. (j) pension trust contributions of employees. 3. 4. war profits and excess profits tax. interest on transactions by related parties (transactions-at-arms-length): interest to purchase or carry tax-exempt obligations. and interest paid in advance thru discount or otherwise. interest should be legally due.  Exceptions: 4. LOSSES:  Necessary Expense . if the taxpayer makes use of tax credit. Valid and subsisting debt. and payable by. 2. . 2. 2. the AND NECESSARY 1. debt must be related to the business or profession of the taxpayer. connected with the business. and 3. paid or incurred in carrying on a trade or business.  Requisites of Business Expense to be Deductible: 1. Wagering losses 5. 3.  Capital Expenditure: An expenditure that benefits not only the current period but also future periods. TAXES:  Requisites to be deductible: 1. ordinary and necessary. Debt is expensed within the year. taxpayer. must be in connection with taxpayer’s business.For NRAETB and RFC. BAD DEBTS b. 4.Taxes allowed as deductions. paid or incurred during the taxable year. ORDINARY EXPENSES: helpful in business. shall be included as part of gross income in the year of receipt to the extent of the income tax benefit of said deduction (Tax Benefit Rule). if the taxpayer is a non-profit proprietary educational institution which may elect either to deduct the capital expense or depreciate it. 4. Debt must be actually ascertained to be worthless and uncollectible. 4. . (i) research and development. d. 3. excess electric consumption tax. and 3. Special deductions – applicable only to Insurance companies.normal or usual in the line of business. 2. 2. the deduction resulted in a tax benefit. interest paid on indebtedness to finance petroleum explorations. special assessments.  Requisites to be deductible: 1. estate and donor’s tax. 2. debt belongs to the taxpayer. a. and 5. (Sec. final taxes. tax must be imposed by law on . actually sustained. and 6. being in the nature of income tax. INTEREST:  Requisites to be deductible: 1.  Equitable Doctrine of Tax Benefit A recovery of bad debts previously deducted from gross income constitutes taxable income if in the year the account was written off. not compensated by insurance or otherwise. Abandonment losses 6. Securities becoming worthless 3. 5. . substantiated with official receipts or other adequate records. when refunded or credited. 5. 3. Losses of mines other than oil and gas wells e.(h) charitable and other contributions. trade or business.  Requisites to be deductible: 1. interest paid or accrued during the taxable year. EXCEPT that it is deductible in the year indebtedness is paid. taxes paid or incurred are allowed as deductions only if and to the extent that they are connected from income within the Philippines. foreign income tax.appropriate and development of taxpayer's  Ordinary Expense . 2. Personal and additional exemptions c. It is not deductible but depreciable. Obligation is not between related parties (Sec. Debt is connected with profession. trade or profession. 36 b CTRP).

by permitting earnings and profits to accumulate instead of being divided or distributed.000 3. or (b) the  PERSONAL EXEMPTIONS  Amounts of Personal Exemptions (Sec.000 2. brothers and sisters of the taxpayer.  Clarificatory Illustrations: 1.000  Head of the Family: 1.000 for each dependent not to exceed 4. Additionally. not qualified as a dependent. the income subject to final income tax is no longer subject to the net income tax. beginning the 4th taxable year in which such corporation commenced its business operations. otherwise. Must be expensed during the taxable year. not more than 21 years old. DEPRECIATION: 1. Even if 25 years old but physically incapacitated. Minimum Corporate Income Tax – A tax at the rate of 2% based on gross income imposed on domestic and resident foreign corporations not covered by a special income tax system. chiefly dependent upon and living with the taxpayer . and 2. only to the extent allowed by his country to Filipinos not residing therein. If there is any change of status at any time during the taxable year. Improperly Accumulated Earnings Tax – a tax equivalent to 10% of the improperly accumulated taxable income of every corporation formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation. Donations to certain accredited NGO’s . 4. Each married person: P32.  Requisites to be deductible: 3. 3. Must be on property used in the conduct of the business. Donation to certain foreign institutions or international organizations. CHARITABLE CONTRIBUTIONS AND OTHER  Partial Deduction: not in excess of 5% of taxable income in case of a corporation not in excess of 10% of the taxable income in case of an individual  Deductible in Full: 1. Where such brother / sister or children are not more than 21 years of age. 3. illegitimate or legally adopted child of the taxpayer 2. Income subject to Preferential or Special Rates – here. 2. DEPLETION OF OIL AND GAS WELLS AND MINES . or one or more legitimate. Single individual or married individual judicially decreed as legally separated with no qualified dependents: P20. unmarried and not gainfully employed. Unmarried or legally separated person with one or both parents. 3. legitimate. It is imposed whenever such corporation has (a) zero or negative net taxable income. 2. g. 3. Thus.  Qualifications of a dependent: 1. Must be reasonable. Dependent does not include the parents. For a NRAETB. 5. Head of the family: P25. the law expressly favors the taxpayer. there would be a violation of prohibited double taxation. If only 19 years old but married. the income derived by a particular individual or corporation belonging to a class of income taxpayer is subject to either a preferential or special rate. Final Income Tax – is derived by multiplying the tax rate on the particular income subject to a final income tax. 2. unmarried AND not gainfully employed or where such dependents regardless of age are incapable of self-support because of mental of physical defect. 35 of CTRP): 1. or where such dependents regardless of age. or one or more brothers or sisters. 42 of the CTRP. he must file a true and accurate return of the total income received by such NRAETB from all sources within the Philippines. but not to exceed the above amounts. Donations to the government 2. Applicable to passive income and from sources derived from within the Philippines as determined under Sec.same requisites as depreciation h. Deductions and/or personal and additional exemptions are not allowed. recognized natural or legally adopted children living with and dependent upon the taxpayer for their chief support.  OTHER INCOME TAXES AS DEFINED 1.  Additional Exemption for Dependents: P8. 4. are incapable of self – support because of mental or physical defect.f. qualified as a dependent.

allow corporations the option to be taxed at 15% of gross income subject to the following conditions: 1) A tax effort ratio of 20% of GNP. Resident alien on income from within the Phil. Sale or exchange between related parties. Resident citizen. whichever is higher. Taxable Estate and Trust C. Individual with respect to pure compensation income derived from sources within the Phils. b.  Sale or Exchange of Real Property.  Persons Required to File Income Tax Return: A. Optional Corporate Income Tax . Tax on income 2. Individual whose pure compensation income derived from sources within the Phil. Individual whose sole income has been subjected to final withholding income tax.5% to 32%  Tax Exempt Exchanges: a. Individual deriving compensation income concurrently from two or more employers at any time during the taxable year. b. 2000. Not exempt from income tax. 2. c.B. Lesser exemptions INCOME TAX 1. An individual (citizens / aliens) engaged in business or practice of a profession within the Phil. exceeds P60. N..  Transaction Resulting in Taxable Gains but Non-Recognition of Losses a. Wash sales by non-dealers of securities and when not subject to the stock transfer tax. On real property – each independent transaction is subject to the final tax of 6% on the gross selling price or the fair market value at the time of sale. Non-resident citizen on income from within the Phil.9% ratio of Consolidated Public Sector Financial Position to GNP. 3) A VAT tax effort of 4% of GNP 4) A O. More exemptions  FILING OF TAX RETURN AND PAYMENT OF THE TAX  ESTATE TAX  ESTATE TAX FORMULA . regardless of gain or loss 2. Rates are lower --5% to 20% estate tax -.amount of minimum corporate income tax is greater than the normal income tax due from such corporation. effective Jan. and d. Shares of stock of domestic corporation not traded thru a local exchange taxed at the rate of 5% for net capital gains not over P100T. 2.  Individuals Exempt From Filing Income Tax Return: 1.  INCOME TAX INCIDENCE ON SALES OR EXCHANGES OF PROPERTY  Sale on Exchange of Ordinary Assets General rules of income taxation apply to both as to the gain and as to the loss. 4.2% to 15 % donor’s tax 3. General Professional Partnership D. There is pain of perjury if not correct.  Tax Return – It is the sole declaration of taxpayer that incorporates all the data/facts necessary for government to determine the amount of tax. and 10% in excess of P100T. B. upon recommendation of the Secretary of Finance may. 7. 4. 3. NRAETB on income from within the Phil.The President.000. Sales or exchanges that are not at arms length. and Shares of Stocks of Domestic Corporation Held as Capital Assets Subject to Capital Gains Tax As to individuals and domestic corporations 1. Corporation 1. 6. Tax on transfer of property. 2. Exempt from income tax under Sec. 2. 2) A ratio of 40% of income tax to total tax revenue. 1. Individual who is exempt from income tax. 30 of NIRC but has not shown proof of exemption. Individual whose gross income does not exceed total personal and additional exemptions. Exchange of property for stocks resulting in a change in corporate control 3. TRANSFER TAXES TRANSFER TAX 1. regardless of the amount of gross income.: Available only to firms whose ratio of cost of sales to gross sales or receipts from all sources does not exceed 55%. Exchange solely in kind in mergers and consolidation. 5. the income tax on which has been correctly withheld.. Exchanges not solely in kind in merger and consolidation.. Rates are higher -. Individual 1. 5. 3.

taxes. losses 2. tangible personal. Occurring before the last day for the payment of the estate tax (last day to pay: six months after the decedent’s death). actual funeral expenses 2. If loan was contracted within 3 years before the death of the decedent. Amounts received by heirs under RA 4917 (Retirement Benefits) B. robbery. storm.Intangible personal property with a situs in the Phil.Gross Estate (Sec. judicial expenses c. taxes g.  Inclusions in the Gross Estate (Sec. Standard deduction 6. funeral expenses b. Provided. 3. if any Less:  GROSS ESTATE (Sec. the administrator or executor shall submit a statement showing the disposition of the proceeds of the loan. 3. Expenses. 87. Transfer in contemplation of death c. legatee or donee in favor of another beneficiary. shipwreck.  Taxes: The following are not deductible: 1. Revocable transfer d. (ELITFJCCULT)  Transfer for Public Use: Requisites to be deductible: 1. Fideicommisary substitution. Prior interests a. For resident aliens and citizens (ELIT. 84) Estate Tax due Less: Tax Credit [if any] (Sec. losses. N. Occurring during the settlement of the estate. Vanishing deduction 4. Not claimed as deduction in an income tax return of the taxable estate. Expenses. unpaid mortgages f. taxes. Family home 5. indebtedness. The disposition is in a last will and testament . losses. Vanishing deduction DEDUCTIONS ON ESTATE TAX APPLICABLE TO RESIDENT ALIENS AND CITIZENS:  Funeral Expenses: The amount deductible is the lowest among the following: 1. cultural and charitable institutions no part of the net income of which inures to the benefit of any individual. Transfer for public use 3. 84) Net Taxable Estate X Tax rate (Sec. CTRP) A. Decedent’s interest b. indebtedness. 86[E] or 110[B] Estate Tax Due. Unless exempted on the basis of reciprocity. 86) (2) Net share of the SS in the CP Net Estate Less: Exemptions (first P200.  Value of Gross Estate: The gross estate shall be valued at its fair market value at the time of death of the decedent. etc. claims against the estate d.B. income tax on income received after death 2. in accordance with the will of the predecessor. CTRP): a.000 exemption. For non-resident aliens (ELIT-TV) 1. legacies or transfers shall be used by such institutions for administration purposes. 5% of the gross estate 3. property taxes not accrued before death 3. and 4. theft or embezzlement. Transfers for insufficient consideration g. All bequests. 2.: These requisites do not apply if the claim did not arise from contractual obligations. (FJCCULT) 2. 85. P200. devices. . The merger of usufruct in the owner of the naked title. The debt instrument must be notarized 2.all real. CTRP): 1. Transfer for public use 3.all real and tangible personal property situated in the Phil. or other casualty. 4.  Deductions from the Gross Estate A. TVFSAM) 1. claims against insolvent person e.000  Claims against the Estate: Requisites to be deductible: 1. intangible personal property wherever situated. Not compensated by insurance or otherwise. that not more than 30% of the said bequests.  Exempt Transmissions (Sec. arising from fire. legacies or transfers to social welfare. Proceeds of life insurance f. A. Medical expenses 7. 85. As to non-resident alien decedent . estate tax  Losses: Requisites to be deductible: 1. Sec. 2. and 5. 85) (1) Deductions (Sec. etc. Transfer under general power of appointment e. The transmission from the first heir. As to resident alien or Filipino decedent .

Maximum of P1. Expenses. No vanishing deduction on the property was allowable to the estate of the prior decedent. world (NTE . 4.2. world Limit B. indebtedness and  FORMULA: a. of the subject gift 4. total of estate taxes paid to all foreign countries 2. The property formed part of the taxable estate of the prior decedent. or any political subdivision thereof 4. donative intent 3. capacity of the donor 2. X Phil. Gross Estate World Gross Estate X World ELIT b. To take effect after death 3.000  Stranger . illegitimate or adopted children to the extent of the first P10.  DONOR’S TAX  Requisites: (ADIC) 1. acceptance by the donee  Family Home: Requisites to be deductible: 1.  Medical Expenses: Requisites to be deductible: 1. b. or of the taxable gift of the donor. whether actual or constructive. estate tax NTE. 6. Substantiated with receipts 3. For exclusive public purposes. Vanishing deduction on property in the Philippines.000. 2.  Estate Tax Credit FORMULA: a. Estate tax paid to foreign country 2. NTE outside Phil. One foreign country only: 4 . 3. sister. ancestor and lineal descendant. Whichever is lower between: 1. More than one foreign country . The property must be located in the Phils. Said family home must have been the decedent’s family home. delivery. or something acquired in exchange therefor. 2.. estate tax NTE. 3. Gifts made by a resident a. The property must be identified as the one received from the prior decedent. losses. On donation of a subsequent date during the year: Gross gifts made on this date Less: Deductions from gross gifts Net gifts Add: All prior net gifts within the year Aggregate net gifts X Tax Rate Donor’s tax on aggregate net gifts Less: Donor’s tax on all prior net gifts Donor’s tax on the net gifts on this date xxx xxx xxx xxx xxx xxx xxx xxx xxx 2. In favor of the government of the Phil. 5. NTE. Whichever is lower between: 1. . Said fact must be certified to by the barangay captain of the locality where it is located.000. Transfer for public use. estate tax NTE. spouse.The tax credit is whichever is lower between: 1. world  Vanishing Deduction: Requisites to be deductible: 1. foreign country X Phil. Maximum of P500. The estate tax or donor’s tax on the gift must have been finally determined and paid. the present decedent died within 5 years from transfer of the property from a prior decedent or donor. dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate. Estate tax paid to the foreign country 2.Net Taxable Estate)  Exemption of certain gifts: 1. 3. foreign country X Phil.000 DEDUCTIONS ON ESTATE TAX APPLICABLE TO NON-RESIDENT ALIENS 1.The credit shall be that which is the lower amount between Limit A and Limit B Limit A. or of a relative by consanguinity in the collateral within the 4th civil degree. On the 1st donation of a year: Gross gifts Less: Deductions from gross gifts Net gifts X Tax Rate Donor’s tax on the net gifts xxx xxx xxx xxx taxes (ELIT) Formula: Phil. incurred within one year prior to his death 2. NTE.a person who is not a brother.

charitable. 0% rate for export sales and persons whose sales are effectively zero-rated and zero-rated sales of services. and 4. sale must be made in the Philippines.  Elements of VAT : 1.Phil. sells. Donor's Tax)  Rate Structure under the VAT System: 1 1.  Tax credit for donor’s taxes paid to a foreign country: 1. same as (c) except accredited nongovernment organization (NGO) The allowable tax credit is the lower amount between the tax credit limit under (a) and (b). foundations. Donor was a Filipino citizen or resident alien 2. sale must be made by a taxable person in the course or furtherance of his business. which the decedent’s net gift situated outside the Philippines taxable under the NIRC bears to his entire net gift. Entire net gifts =Tax credit limit X PDT  Output Tax-- VAT due on the sale of taxable goods or services by any person registered or required to register for VAT purposes. in the course of trade or business. b. sale must be of taxable goods. accredited non-government organization (NGO).00. 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. and 3. EXPANDED VALUE ADDED TAX  Persons liable to Pay the VAT: ( S B E LSI) 1. or to any political subdivision of the said government. For donor’s taxes paid to two or more foreign country NG outside the Phil. and provided. It is the VAT paid by a VAT-registered person in the course of his trade or business.  more than P100T but less than P550T –3% percentage tax  less than P100T – no business tax liability  Transactions Subject to VAT: (S I T S ) 1. every sale.  FORMULA: a. Gifts made by a non-resident not a citizen of the Phil. b. research institution or organization. Gifts in favor of educational. that no more than 30% of said gifts shall be used by such donee for administration purposes. religious. gross receipts is more than P550. Any person whether natural of juridical who. trust or philanthropic organization. properties or services. leases goods or properties made in the course of trade or business. For donor’s taxes paid to one foreign country NG situated in a foreign country X PDT Entire net gifts = Tax credit limit (NG . barter. every sale of service made in the course of trade or business other than services rendered by persons subject to “other percentage taxes”. 10% for all other articles and transactions covered by the VAT. 3.c. transactions deemed sale for VAT purposes. or leases goods or properties.  Input Tax – tax on purchase price of goods which is passed on or shifted to a buyer / purchaser /lessee by the supplier / seller / lessor. same as (b) b. At time of foreign donation 3.Net Gifts. and 2. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit. importation of goods. or renders services. cultural or social welfare corporation. PDT . 2. 2. The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken. institutions. which the decedent’s net gifts situated within such country taxable under the NIRC bears to his entire net gift. 2. Are imposed and paid by the authority of a foreign country.000.  Limitations on tax credit: 1. or exchange. and 2. . barters. 2. exchanges. Donor’s taxes of any character and description 4. Provided. a. otherwise. Any person who imports goods whether for business or non-business purpose.

5. exchanges. etc. X. including ingredients whether locally produced or imported. Art. Transitional Input Tax Credit – person who becomes liable to VAT or any person who elects to be a VAT-registered person shall. apply for VAT registration: a. LGC) Exempt person may not register for VAT. Taxpayer is not entitled to credit or refund of the input tax passed on to him by the supplier. Not inherent. marine and forest products in their original state. 5. taxable sales. 2. seller of non-food agricultural. 1987 Constitution and Sec. LOCAL TAXATION  Definition: The power of local government unit to (1) create its own sources of revenue and (2) to levy taxes. Exercised only if delegated to them by law or Constitution. at their option. leases goods or services for others. seller of cotton and cotton seeds in the original state. fees. 4. ZERO-RATED TRANSACTIONS ZERO-RATED  VS. 3. . seedlings and fingerlings. Retirement from or cessation of business. Claim for refund: Taxpayer can claim the refund of input taxes passed on to him by the supplier. use or consumption not in the course of trade or business of goods originally intended for sale or for use in the course of business. Transfer. c.  Registration Requirements:  Nature of the Taxing Power of Local Governments 1. d. and charges. and taken into account in determining turn-over or sales for sales for VATregistration purposes. materials and supplies. or credit such input taxes against his liabilities for output taxes on his other nonzero rated transactions Scope: Generally. barters. 129. seller of goods or services whose taxable sale or gross receipts do not exceed P550T for any 12-month period. EXEMPT EXEMPT TRANSACTIONS Only removes the value added tax at the exempt stage Extent: All value added tax is removed  Transactions deemed sales for VAT purposes (Sec. etc.any of the following persons may. refer to export sales only  Export Sales – sale and shipment or exportation of goods from the Philippines to a foreign Country irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported. whichever is higher. sells. material and supplies equivalent to 8% of value of such inventory or the actual VAT paid on such goods. Not taxable sales and therefore not taken into account in determining turn-over or VATregistration purposes III.B.: Items b to e. ( 550 FANC ) N. Optional -. (See Sec. Registration requirement: Zero-rated person may still register for VAT. Distribution or transfer to shareholders or investors as share in the profits of the VAT -registered persons. with respect to inventories of taxable goods existing as of such retirement or cessation. seller of fertilizer. 106B) 1. fish live stock and poultry feeds. which shall be creditable against the output tax. b. Consignment of goods if actual sale is not made within 60 days following the date of consignment. seller of agricultural or marine food products in their original state. Mandatory – every person who in the course of trade or business. 2. Distribution or transfer to creditors in payment of debt. subject to the filing of an inventory of goods. e. or foreigncurrency denominated sales. 2. seeds. 1. if the aggregate amount of actual or expected gross sales and / or gross receipts exceeds P550T for any 12-month period. and copra.  Foreign Currency Denominated Sales – sales to non-residents of goods assembled or manufactured in the Philippines for delivery to residents in the Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines. used in the manufacture of finished foods.

Basic real property tax. Collection of local taxes and other impositions shall not be let to any person 7. The revenues collected under the Code shall inure solely to the benefit of. Real property shall be appraised at its current and fair market value. REAL PROPERTY TAXATION  Definitions: 1. 2. Real property taxation N. Shall be uniform in each local sub-unit 2. 4. This doctrine principally rests upon the intention of Congress. City at the rate of not > 2%. Municipality within Metro Manila at the rate of not > 2%. and 4. 2. or in restraint of trade 6. assembler. U 3. 5. as far as practicable.: Both aspects are governed by the Local Government Code (LGC). Taxes. etc. excessive. 70% of recorded sales in the principal office: city or municipality where the FPPP is located (pro rata if FPPP are located in different municipalities or cities). 3. Each LGU shall.  Excluded impositions (pursuant to the doctrine of preemption): 1. . Levied for public purposes 4. b. at the rate of not > 1% of assessed value. Place of sale( with branch or sales outlet therein): Municipality or city where the branch or outlet is located. 2. Place of sale (no branch or sales outlet): Municipality or city of principal office (not in the place of sale). 2. 3. fees. IV. which are imposed under the Tariffs and Customs Code. If plantation is located in some other place than that where the factory is located. the foregoing 70% shall be subdivided as follows: . Real property shall be classified for assessment purposes on the basis of actual use.  Situs of Municipal Taxation (Sec. c. Shall not be unjust. fees and other charges imposed under special law. 1991 LGC) 1. and 4. subject to limitations provided by law. and 3. fees. public policy. etc. Special levy or special assessments (may be imposed even by municipalities outside Metro Manila). Real property shall be assessed on the basis of uniform classification within each LGU  Fundamental Principles Governing Local Taxation: 1..60% to the city or municipality where the factory is located. Local taxation. Not absolute. the imposition of which contravenes existing governmental policies or which violates the fundamental principles of taxation. 3. Real property – subject to the definition given by Art. 5% additional tax on idle lands. Taxes. evolve a progressive system of taxation.40% to the city or municipality where the plantation is located. Improvement – valuable addition made to a property or an amelioration in its condition amounting to more than a mere replacement of parts. Province. plant or plantation (FPPP): a. 3.  Fundamental Principles Governing Real Property Taxation F 1.3. local tax Key: SAPOL O A P S L  Taxing Authorities: 1. and subject to disposition by. 2. oppressive. 415 of the Civil Code. Direct on ownership.  Characteristics: 1. and 2.B. Taxes which are levied under the NIRC. If manufacturer. Real Property Taxation: A direct tax on ownership of lands and buildings or other improvements thereon payable regardless of whether the property is used or not. Shall not be contrary to law. Taxes. 3. producer or exporter (MACPE) with factory. or confiscatory .  Aspects of Local Taxing Power 1.  Extent of the power to levy: 1. Shall be equitable and based as much as possible on the taxpayer’s ability to pay 3. contractor. 150. project office. the LGU levying the tax or other imposition unless otherwise specifically provided therein 8. it impliedly withholds from the local government the delegated power to tax the same field. 1% additional real estate tax to finance the Special Education Fund. national economic policy. unless otherwise provided by LGC of 1991. ad valorem tax proportionate creates a single indivisible obligation 5. 30% of recorded sales in the principal office: city or municipality where the principal office is located.  Doctrine of preemption or exclusion Where the National Government elects to tax a particular area. 2. U 2.

b.B. buildings and improvements actually. TCC)  Duty of Real beginning 1991: Property Owners Real property owner must file with Assessor’s Office a sworn statement of real property value whether exempt or non-exempt. (Failure to do so shall make the assessment in the name of the previous owner binding). personages or convents appurtenant thereto. real property owned by duly registered cooperatives as provided for in RA 6938. taxes and other charges. E 5. In case the articles are free of duties. c. 4. VI. Supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce. g. 211 SCRA 227 [1992]) N. a foreign country. levy and collection of RPTax shall not be let to any private person. mosques. or merchandise. when the conveying vessel or aircraft b. assessment. ports. (Garcia v. 2.: Customs and tariffs are synonymous with one another.  Properties Exempt from Real Property Tax (Sec.. 1206. Sec. taxes and other charges are paid thereon. 193. Enforcement of TCC and related laws. airports. churches. d. They both refer to the taxes imposed on imported or exported wares. and 4. articles. TCC)  THE BUREAU OF CUSTOMS (BOC)  ARTICLES UNDER TCC MAY EITHER BE: a. Constitution).  Jurisdiction of Collector of Customs over importation of articles 1. harbors. Key: FEU-UP  Functions of the Bureau of Customs (ACE2S3): a. 2. Assess and collect the duties. toll or tribute payable upon merchandise to the Gov’t. with intention to unload therein Importation is deemed terminated: a. Assessment and collection of revenues from imported articles and all other impositions under the tariff and customs laws. Custom Duties: Tax assessed upon merchandise from or exported to. 3. and 5. TCC)  When tariff and customs applied: IV. (ii) and legal permit for withdrawal shall have been granted.P 4. 603. Cause all such articles to be appraised and classified. Control smuggling and related frauds. (1st par. taxes and other charges due upon the articles. Every buyer of real property must make a new declaration thereof.  Only after importation has begun but before importation is terminated. Supervise and control all import and export cargoes for the protection of government revenue. All seas within the jurisdiction of the Philippines 2. enters the jurisdiction of the Phil. until they have legally left the jurisdiction of the customs (Sec. f. Prohibited from being (Prohibited importation) imported .  Territorial jurisdiction of the BOC: 1. Real property owned by the government except when the beneficial use thereof has been granted to a taxable person. taxes and other charges thereon. Sec. directly and exclusively used by local water utilities and GOCC’s engaged in the supply and distribution of water and/or electric power. non-profit or religious cemeteries and all lands. rivers and inland waters whether navigable or not from the sea. charitable or educational purposes (Art. bays. e. Tariff: Customs duties. 2. The appraisal and assessment of real property shall be equitable. Hold possession of all imported articles until the duties. b. The appraisal. 28. Importation begins: a. All coasts. charitable institutions. c. Supervision and control over the handling of foreign mails arriving in the Philippines. (i) upon payment of the duties. TARIFF AND CUSTOMS CODE  DEFINITIONS: 1. machinery and equipment used for pollution control and environmental protection. Cause all articles for importation to be entered in the customhouse. 3. Exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws. 1202. 1991 LGC): 1. (Sec. machineries and equipment that are actually. Subject to duty b. directly and exclusively used for religious. Executive Sec.

a. costs. expenses and other necessary expenses.  Transaction value under RA 8181 It is the invoice value of the goods plus freight. b. Collector of Customs. 3. A lien upon the imported articles while they are in custody or subject to the control of the gov’t (Sec. Free from TC duties (duty-free)  Imported goods must be entered in a customhouse at their port of entry otherwise they shall be considered as contraband and the importer is liable for smuggling (See Sec. 101. or obligations with foreign countries. d. upon recommendation of NEDA (Sec. Exemptions of international organizations pursuant to agreements or special laws. products from undue competition posed by foreign-made products. the value of the imported article. TCC). c. legal weight. 1204. instrumentalities or GOCCs with existing contracts. TCC).c.  Drawback A device resorted to for enabling a commodity affected by taxes to be exported and sold in foreign markets upon the same terms as if it had not been taxed at all (Uy Chiaco Sons vs. A personal debt which can be discharged only by payment in full thereof. DISCRIMINATORY DUTY Imposed upon goods coming from countries that discriminates against Philippine products.  Nature of special customs duties: Special customs duties are additional import duties imposed on specific kinds of imported articles under certain conditions. Compound Duty: This is a duty consisting of ad valorem and specific duties. TCC). It is a declaration to the BOC showing particulars of the imported article that will enable the customs authorities to determine the correct duties. Exceptions: a. subsidy. 105.  CLASSIFICATION OF CUSTOM DUTIES:  Regular Duties: 1. NATURE AMOUNT/ RATE Difference between the actual price and the normal value of the article. TCC). b. insurance. COUNTERVAILING DUTY Imposed upon foreign goods enjoying subsidy thus allowing them to sell at lower prices to the detriment of local products similarly situated.  LIABILITY FOR CUSTOMS DUTIES  General Rule: All importations / exportations of goods are subject to customs duties (Sec. Alternating duties: This is a duty which alternates ad valorem and specific. 105. 5% ad valorem of articles Any amount not exceeding 100% ad valorem of the subject articles .  Import Entry  SPECIAL DUTIES COMPARED DUMPING DUTY Imposed upon foreign products with value lower than their fair market value to the detriment of local products. Specific duty: This is a duty based on the dutiable weight of goods (either the gross weight. Ad valorem duty: This is a duty based on 2. agreements. and d. b. commitments. Dumping duty Countervailing duty Marking duty Discriminatory duty  Special duties  Liability of importer for custom duties: a. Conditionally-free from tariff and customs duties (conditionally-free importation) d. Exemptions granted by the Pres. 24 Phil 562)  Purpose of special customs duties: The special customs duties are imposed for the protection of consumers and manufacturers. Equivalent to the bounty. MARKING DUTY Imposed upon those not properly marked as to place of origin of the goods. It must be accomplished from disembarking of last cargo from vessel. or subvention. Exemptions granted to gov’t agencies. 4. c. This replaces the Home Consumption Value as basis of valuation of goods. as well as Phil. An importer is required to file an import entry. of the Phil. Exemptions under the TCC. or net weight).

TAX REMEDIES GOVERNMENT OF THE  Definition: It is a legal claim or charge on property. CTRP). The lien shall not be valid against any mortgagee. of Finance as Chairman. of Agriculture if article in question is agri. 215) F. 220.  Officers authorized to compromise: 1.). under the subheading “Court of Tax Appeals. Compromise (Sec. Forfeiture of Property (Sec. etc. TCC) G. established by law as a security in default of the payment of taxes (51 AmJur 881). purchaser. 221. New Civil Code). and 229) H. 2.  Tax collection cannot be restrained by court injunction (Sec. TAX REMEDIES TAX REMEDIES UNDER THE NATIONAL INTERNAL REVENUE CODE I. Levy (Sec. an amount to be paid by the taxpayer) There must be an acceptance (by the Commissioner or taxpayer as the case may be) of the offer in the settlement of the original claim. 401. Tax Lien V. either real or personal. 2. Civil Action (Sec. 219) B. Members: the Sec. Tax Lien (Sec. There must be an offer (by the taxpayer of 3. 28. Art. Constitution and Sec.” infra. product or the Sec. import and export quotas.  Importance 1. 205-208) D. by reciprocal concessions.) Sec. CTRP)  Justification: Lifeblood Theory.  Extent and nature: The tax. and either the Sec. Generally. 204) C. 220) 1. of DTI.  Requisites (TAO):  The following are generally the tax remedies of the government to effect collection of taxes: A. 2028. Distraint (Actual and Constructive) (Secs. Compromise  Definition: A contract whereby the parties. avoid a litigation or put an end to one already commenced (Art. They enhance and support the government’s tax collection. The Commissioner of Internal Revenue (CIR) is the only official vested with power and discretion to compromise criminal and .IMPOSING AUTHORITY Special Committee on AntiDumping (composed of the Sec. 219. together with interests. penalties. or judgment creditor until notice of such lien shall be filed by the Commissioner of Internal Revenue in the Office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located (Sec. They are safeguards of taxpayer’s rights against arbitrary action. 207B) E. 115) I. VI. of Finance Commissioner of Customs President of the Philippines  Flexible Tariff Clause The President may fix tariff rates. 219. Enforcement of Administrative Fine A. it attaches to the property irrespective of ownership or transfer thereof. of Labor if non-agri. The taxpayer must have a tax liability.  Exception: Injunction may be issued by the CTA in aid of its appellate jurisdiction under RA 1125 (see requisites thereof. B. Suspension of business operations in violation of VAT (Sec. under TCC (See Sec. and costs that may accrue in addition thereto is a lien upon all property and rights to property belonging to the taxpayer. Criminal Action (Secs.

to enforce the payment of taxes. and 4. Magdaluyo. the basic tax involved exceeds P1. (Gibbs vs. Those already filed in court 2. 17 Phil. the taxpayer may appeal to the CTA within 30 days from service of the warrant. 3. the taxpayer should waive the confidentiality privilege on bank deposits under RA 1405 (See Sec. 204(A). This is true in the case of intangible property such as stocks and credits. CTRP]. Collector. 2. as the case may be. if taxes are not voluntarily paid. Distraint  Definition: It is the seizure by the government of personal property. The period within which to assess or collect the tax has not yet prescribed. 2.  Compromise Penalty It is an amount of money which the taxpayer pays to compromise a tax violation. The effects are: i. Other cases: MCR = 40% of the basic assessed tax [Sec. 2. A judicial compromise is one where a decision based on the compromise agreement is rendered by the court on request of the parties. If it is an indication of a final decision.2. A reasonable doubt as to the validity of the claim against the taxpayer exists. Those involving fraud [Sec.  Compromise of Criminal Violations General Rule: Criminal violations may be compromised. it can be enforced by mere execution. Any other compromise is extrajudicial and like any other contract can only be enforced by court action. Subordinate officials may preliminarily enter into a compromise.  Duties of the officer serving the warrant of distraint: .  Nature of the warrant of distraint or levy The warrant is a summary procedure “forcing” the taxpayer to pay. Regard it as rescinded and insist upon original demand (Art. CTRP). In such case.: The MCR may be less than the prescribed rates of 10% or 40%. Enforce the compromise a. civil cases arising from violations of the Tax Code (Secs. A taxpayer cannot be compelled to pay a compromise penalty. 7C and 204. CTRP] C. April 20.  Two types of distraint: 1. Before the complaint is filed with the Prosecutor’s Office: The CIR has full discretion to compromise except those involving fraud. After the complaint is filed with the Prosecutor’s Office but before the information is filed with the court: The CIR can still compromise provided the prosecutor must give consent. 2041. b.000.  Commissioner may compromise any internal revenue tax when – 1. or 2. 204(A). In case of financial incapacity: MCR = 10% of the basic assessed tax 2.  Minimum compromise rates (MCR) of any tax liabilities: 1. 3. It is a summary remedy. Rejection of an offer of compromise: final and binding unless revoked or set aside by the Commissioner. the settlement offered is less than the minimum compromise rates (MCR). Acceptance of an offer of compromise: not final and may be reviewed by the Commissioner. The receipt of a warrant may or may not partake the character of a final decision. or 2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax [Sec. Constructive: the owner is merely prohibited from disposing of his property. Actual: there is taking of possession of the personal property from the taxpayer by the government. CTRP]. provided it is approved by the Evaluation Board.000.B. After information is filed with the court: The CIR is no longer permitted to compromise with or without the consent of the Prosecutor (People vs. If he does not want to pay. 232)  Remedy in case the taxpayer refuses or fails to abide the tax compromise: 1.  Requisites for the exercise of the remedy of distraint: 1. Exceptions: 1. 204(A). CTRP). Physical transfer of possession is not always required. If it is a judicial compromise.00. N. This is paid in lieu of criminal prosecution. 1961). the CIR must institute a criminal action. 2. There must be a subsequent demand for its payment (assessment). ii. The taxpayer must be delinquent (except in constructive distraint) in the payment of tax.  Extent of the Commissioner’s discretion to compromise criminal violations: 1.  Approval of the compromise by the Evaluation Board is required when: 1. tangible or intangible. The taxpayer must fail to pay the tax at the time required. The property may be offered in a public sale. Civil Code). 6F2.

Make an account of the personal properties 2. the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the government (Sec. DISTRAINT ACTUAL DISTRAINT  5. CTRP). 209. is performing any act tending to obstruct the proceeding for collecting the tax due or which may be due from him (Sec.  The taxpayer’s property may be placed under constructive distraint when he: 1. company or association which issued the said stock and securities (Sec. leave the Philippines. If the taxpayer or person in possession of the property refuses or fails to sign the receipt referred to.1. hide or conceal his property. upon the president. treasurer. CTRP). taxpayer and b. 208. after wh9ch the said property shall be deemed to have been placed under constructive distraint. 3. having in his possession or under his control such credits or c. 208. Debts and credits: By serving a copy of the warrant of distraint upon the Made only on the . remove his property therefrom. manager. II Posting of notice in not less than two (2) public places in the municipality or city (Sec. CTRP) III Notice to the taxpayer specifying the time and place of sale and the articles distrained. Remedy when taxpayer didn’t sign receipt 4. CTRP) a. or 2. distrained. Sign the list of personal properties distrained to which shall be added. Leave either with the owner or person from whose possession such personal properties were taken. manager. Bank accounts: They shall be garnished by serving a warrant of distraint upon the a. or 3. NIRC). NB: Upon receipt of the warrant of distraint. 208. person owing the debts or b. Personal Property Service of Warrant of Distraint I Service of the warrant of distraint upon the person in possession of the taxpayer’s property (Sec. preserve the same intact and unaltered and 2. ACTUAL VS. CTRP). 208. upon the president. NB: The warrant of distraint shall be sufficient authority to the person owing the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits (Sec. CTRP).  Procedures for the actual distraint or garnishment: 1. 206. taxpayer and b. 209. is retiring from any business subject to tax. to preserve (b) obligate himself to 1. a statement of the sum demanded and note of the time and place of sale. or b. CONSTRUCTIVE CONSTRUCTIVE DISTRAINT Made on the Notice of Time and Place of Sale Disposition 3. the revenue officer effecting the constructive distraint shall (a) proceed to prepare a list of such property and (b) in the presence of two (2) witnesses leave a copy thereof in the premises where the property distrained is located. or other responsible officer of the bank. 208. not to dispose of the same in any manner whatsoever without the express authority of the Commissioner of Internal Revenue. IV Disposition of proceeds of sale (Sec. is intending to – a. treasurer or other responsible officer of the corporation. CTRP). or c. or at the dwelling or place of business of such person with someone of suitable age and discretion (Sec. Stocks and other securities: By serving a copy of the warrant of distraint upon the a. upon his agent. Posting of Notice  Procedure for the constructive distraint of personal property: CIR shall require the taxpayer or Taxpayer any person having possession must sign or control of such property to (a) receipt sign a receipt covering the property distrained and Taxpayer’s oblig.

Both Are summary remedies for the collection of taxes. CTRP). Service of Notice .  DISTRAINT VS. 207B. CTRP). Forfeiture  Definition: divestiture of property without compensation. 217. or forfeited to the government. 207B. 213. LEVY DISTRAINT Refers to personal property Forfeiture by the government is not provided The taxpayer is not given the right of redemption with respect to distrained personal property. CTRP). 213. Time and Place of Sale III Advertisement of the time and place of sale of the taxpayer’s property or so much thereof as may be necessary to satisfy the claim within 20 days after levy. and Cannot be availed of where the amount of the tax involved is not more than P100 E. 207B. and the remedy by distraint and levy may be repeated if necessary until the full amount. if after seizure.  Procedure of levy on real property: Prepare Certificate of Levy I Preparation of a duly authenticated certificate containing: (a) description of the property levied (b) name of the taxpayer. whether delinquent or not The taxpayer is merely prohibited from disposing of his property Effected by requiring the taxpayer to sign a receipt of the property or by the revenue officer preparing and leaving a list of such property Not necessarily so notified of the levy (Sec. Sale Disposition D. In case the proceeds of the sale exceed the claim (taxes.  When may levy be effected? Real property may be levied upon before. V Disposition of proceeds of sale. and (c) the amounts of tax and penalty due from him. The property may be offered in a public sale. and it shall cover a period of at least 30 days (Sec.property of a delinquent taxpayer There is taking of possession Effected by leaving a list of distrained property or by service of a warrant of distraint or garnishment An immediate step for collection of taxes Both Are summary remedies for the collection of taxes. the excess shall be turned over to the owner of the property (Sec. CTRP). IV Sale at public auction to the highest bidder (Sec.  Enforcement of the remedy of forfeiture: 1. in consequence of a default or offense. II Service of written notice to the delinquent taxpayer or occupant of the property. is collected (Sec. the taxes are not voluntarily paid. The proper Register of Deeds shall also be The right of redemption is granted in case of real property levied upon and sold. CTRP). penalties and interest) and cost of the sale. Levy  Definition: It refers to the act of seizure of real property in order to enforce the payment of taxes. simultaneously. CTRP). 213. and Cannot be availed of where the amount of the tax involved is not more than P100 property of any taxpayer. or after the distraint of personal property belonging to the delinquent (Sec. In case of personal property – The forfeiture of chattels and removable fixtures of any sort is enforced by seizure and sale or destruction of the specific forfeited property. Refer only to personal property. CTRP). This certificate shall operate with the force of a legal execution throughout the Philippines (Sec. LEVY Refers to property Forfeiture authorized real is  Requisites for the exercise of the remedy of levy: Same as in the remedy of distraint. including all expenses.

whichever is later (Sec. 4. When the tax law itself is silent on prescription. When a tax is assessed but the assessment becomes final and unappealable because the taxpayer fails to file an administrative protest with the CIR within 30 days from receipt.  Rules on Prescription: 1. or 2. 2. Defense of prescription is waivable. CTRP). 2. and 2. 1). The tax or any portion thereof appears to be unjustly or excessively assessed. Provisions on prescription. In case of real property – The forfeiture of real property is enforced by a judgment of condemnation and sale in a legal action or proceeding. 222[b]). CTRP).  Defenses which are precluded by final and executory assessments: 1. 3. the tax is imprescriptible. being remedial in nature. civil or criminal. NB: Remedy of taxpayer is to file a return. NB: The extended period agreed upon can further be extended by a subsequent written agreement made before the expiration of the extended period previously agreed upon (Sec.  Abatement  The Commissioner may abate or cancel a tax liability when: 1.  Prescriptive Period for the assessment of taxes: General Rule: THREE (3) YEARS after the date the return is due or filed. Invalidity or illegality of the assessment. When the CIR is prohibited from making the assessment or beginning the distraint or levy or a proceeding in court. 222. 203.2. The administration and collection costs involved do not justify the collection of the amount due [Sec. 2. FAILURE TO FILE A RETURN: TEN (10) YEARS from the date of the discovery of the omission to file the return (Sec. F. CTA 101 Phil.  Effect of the forfeiture of property with respect to title thereto: The effect is to transfer the title to the specific thing from the owner to the government. Exceptions: 1. executory.  Prescriptive Periods for the Assessment and Collection of Taxes  Rationale of herein prescriptive periods: Such periods are designated to secure the taxpayers against unreasonable investigation after the lapse of the period prescribed. or When a protest against assessment is filed and a decision of the CIR was rendered but the said decision becomes final. as the case may require. 222. . CTRP). When no return is required.  Prescriptive Period for the Collection of Taxes: General Periods for the Collection of Taxes: 5 years – from assessment or within period for collection agreed upon in writing before expiration of the 5-year period (Sec. tax is imprescriptible.  Where to file: Civil actions for the collection of delinquent taxes are filed in the regular courts and not before the CTA. When the taxpayer requests for a reconsideration which is granted by the CIR. and demandable for failure of the taxpayer to appeal the decision to the CTA within 30 days from receipt of the decision. government because tax officers will be obliged to act promptly. should be liberally interpreted to carry out its intent. WRITTEN WAIVER or RENUNCIATION of the original three (3) year limitation. AGREEMENT IN WRITING to the extension (not reduction) of the period to assess between the CIR and the taxpayer before the expiration of the 3-year period.222). CTRP]. these are actions instituted by the government to collect internal revenue taxes. They are also beneficial to the  Grounds for suspension of the running of the statute of limitations: 1. It includes filing by the government with the probate court claims against the deceased taxpayer. 10 years – without assessment in case of false or fraudulent return with intent to evade or failure to file return (Sec. 204(A). 3. 4. Prescription of the government’s right to assess.222[a]). signed by the taxpayer (Sambrano vs.  When resorted to? 1. and for sixty (60) days thereafter. FALSE OR FRADULENT RETURN with INTENTION TO EVADE THE TAX: TEN (10) YEARS from the date of the discovery of the falsity or fraud (Sec. Civil Actions  Definition: For tax remedy purposes. 2.

12-99. vs. There is a pending litigation between the Government and the taxpayer. Entering into a compromise (Sec.  Judicial 1. and c. It must be filed with the CIR within TWO (2) YEARS after the payment of the tax or penalty. Reglementary Periods in Income Tax Imposed by Law upon the Taxpayer (pursuant to Rev. A protest is a vital document which is a formal declaration of resistance of the taxpayer. and Rules of Court) BIR makes a tax assessment  If taxpayer is not satisfied with the assessment file a protest within 30 days from receipt thereof  Submit supporting documents within 60 days from date of the filing of the protest  If protest is denied. CIR in that litigated case agreed to abide by the decision of the SC as to the collection of taxes relative thereto (Panay Electric Co. CTRP). 2. Protest – filing a petition for reconsideration or reinvestigation within 30 days from receipt of assessment (Sec.  Filing of claim for Tax Refund or Tax Credit  Grounds for filing a claim for tax refund or tax credit: 1. Filing of criminal complaint against erring BIR officials and employees. Reg. Sum collected is excessive. Criminal Action – a. CTRP). TAX CREDIT TAX REFUND The taxpayer asks for restitution of the money paid as tax Two-year period to file claim with the CIR starts after the payment of the tax or penalty TAX CREDIT The taxpayer asks that the money so paid be applied to his existing tax liability Two-year period starts from the date such credit was allowed (in case credit is wrongly made). b.  Suspension of the Two-year Prescriptive Period: 1. 223. This is equivalent to a pleading. The return is appropriate – it is a return for the particular tax required by law. Sec. 228. 227. CTRP). The return is valid – it has complied substantially with the requirements of the law. A defective tax return is the same as if no return was filed at all. b. CTRP). elevate the matter to the Commissioner of Internal Revenue (CIR) within . 2. 2. unless he informs the CIR of any change in his address. TAX REMEDIES OF THE TAXPAYER  General Remedies of a Taxpayer  Administrative 1. CTRP). 2.3. Action for damages (Sec. 228. Where the payment was made by wrongly crediting a prior over payment.  A tax return is considered FILED for purposes of starting the running of the period of limitations if: 1. Appeal to the Court of Tax Appeals – within 30 days from receipt of decision on the protest or from the lapse of 180 days due to inaction of the Commissioner (Sec. Action to contest forfeiture of chattel (Sec. After Payment – Filing of claim for refund or tax credit within 2 years from date of payment regardless of any supervening cause (Sec. Tax is collected erroneously or illegally. Before Payment – a. and When the taxpayer is out of the Philippines (Sec. 229. CTRP). 3. When the warrant of distraint or levy is duly served. CTRP). It can be used in court in case administrative remedies have been exhausted. Injunction – when the CTA in its opinion the collection by the BIR may jeopardize taxpayer. No. and 2. 4. Collector. Penalty is collected without authority. the two year period should start from the date such credit was allowed. II. Civil Action – a. 1958). and 2. 3. 204. Show proof of payment. b. 228 of the CTRP.  Requisites of Tax Refund or Tax Credit 1. May 28. 231.  TAX REFUND VS. 5. It is also the formal act of the taxpayer questioning the official actuation of the CIR. It is a repository of all arguments. and no property is located. Claim must be in writing. When the taxpayer cannot be located in the address given by him in the return.

payment under protest is not required under the NIRC. LGC). 194. 196 LGC) It is to be noted that. 175. Protest – within 60 days from receipt of assessment (Sec. 2. Court action – within 30 days after receipt of decision or lapse of 60 days of Secretary of Justice’s inaction (Sec. The taxpayer requests for a reinvestigation and executes a waiver in writing before the expiration of the period within which to assess or collect. fees. 195 LGC). (Sec. Right of redemption – 1 yr.30 days from receipt of the decision of the CIR’s duly authorized representative officer  Prescriptive Periods of Assessment 1. except when partial payment of uncontroverted taxes is required as provided under RR 12-99. The Court of Tax Appeals has no jurisdiction over local taxation cases. Administrative A. LGC). TAX REMEDIES OF THE LOCAL GOVERNMENT UNITS  The following are the Civil Remedies of the Local Government Units (LGU) to effect collection of taxes: 1. TAX TAXPAYER REMEDIES OF THE  The following are the remedies of the taxpayer in local taxation: I. LGC) Purchase of property by LGUs for want of bidder (Sec. 175. Judicial A. 183. 194. fees. 187 LGC)  Jurisdiction of courts over local taxation cases: 1. 175. unlike in internal revenue taxes. the latter may appeal within 30 days from lapse of the 180 day period  Prescriptive Period of Collection Local taxes. Payment under protest not necessary B. C. Tax Lien (Sec. TAX REMEDIES UNDER THE LOCAL GOVERNMENT CODE (LGC) LOCAL TAXATION REMEDIES I. LGC) Levy (Sec. subject to Rule 58 (Preliminary Injunction) of the Rules of Court. From the date of sale or from the date of forfeiture (Sec. or charges – FIVE (5) YEARS from the date they became due. The taxpayer is out of the country or otherwise cannot be located (Sec. LGC) Distraint (Sec. 181 LGC) II. The treasurer is legally prevented from the assessment or collection of the tax. LGC). 5. LGC). 181. 2. 2. LGC). 173. 187 LGC) B. II. 2. from payment of tax to local treasurer (Sec. and 3. 4.  Appeal to the Court of Tax Appeals (CTA) within 30 days from receipt of final decision of CIR or his duly authorized representative (the taxpayer has the option to appeal straight to the CTA upon receipt of the decision of the CIR’s duly authorized representative)  If the CIR or his duly authorized representative fails to act on the protest within 180 days from date of submission by taxpayer. LGC) Civil Action (Sec.  Prescriptive Periods in the Assessment and Collection of Local Taxes . Payment & subsequent refund or tax credit – within 2 yrs. LGC).  Appeal to the Supreme Court within 15 days from receipt of the CA’s decision  As a general rule. Regular judicial courts are not prohibited from enjoining the collection of local taxes. the supervening cause applies in local taxation because the period for the filing of claims for refund or credit of local taxes is counted not necessarily from the date of payment but from the date the taxpayer is entitled to a refund or credit. No such action shall be instituted after the expiration of such period (Sec. or charges may be collected WITHIN FIVE (5) YEARS from the date of assessment by administrative or judicial action. fees or charges – TEN (10) YEARS from discovery of the fraud or intent to evade the payment (Sec. 194. When there is fraud or intent to evade the payment of taxes. Appeal – any question on constitutionality or legality of tax ordinance within 30 days from effectivity thereof to Secretary of Justice (Sec. 3. 194.  Appeal to the Court of Appeals (CA) within 15 days from receipt of the CTA’s decision  Grounds for the Suspension of the Running of the Prescriptive Periods: 1. Local taxes. Property distrained not disposed within 120 days from date of distraint – considered sold to the LGU (Sec.

Judicial A. LGC). 1701-1708 TCC) C. 4. city or municipal assessor to LBAA (Sec. Refund or tax credit – within 2 years from the date the tax payer is entitled thereto (Sec. Protest a. Redemption of real property (Sec. Levy (Sec. Judicial 2 A. 709. Suit to declare invalidity of tax due to irregularity in assessment and collection (Sec. Action for declaratory relief D. II. Refund – abatement or drawback (Sec. Criminal Action 5. 253 LGC) B. 230 LGC) in case of denial of refund or credit. LGC). 263. 253 LGC) C. 2316 TCC) 3. 2210 TCC) B.if remedies available does not provide plain. Reduction of customs duties/compromise – subject to approval of Sec.. 2205. Injunction – if irreparable damage would be caused to the taxpayer and no adequate remedy is available. Appeal – within 15 days to Commissioner 3 after notification by collector of his decision (Sec. E.  Remedies of the taxpayer: I. 266. 246 and 251. 1204 TCC) 4.within 30 days from receipt when protest of assessment is denied (Sec. 195 LGC) . C. 2530 TCC)  “Property Discovered for the First Time” Property that for so many years had not been declared and when discovered owner must pay back taxes plus incremental penalties. Suit assailing validity of tax. TAX REMEDIES OF THE TAXPAYER I. 2210. Appeal – within 60 days from assessment of provincial. 83 PD 464)  Condonation of Real Property Taxes a. Settlement of any seizure by payment of fine or redemption – BUT this shall not be allowed in any case where importation is absolutely prohibited or the release would be contrary to law (Sec. Protest – payment under protest is required within 30 days to provincial. Real Property tax lien (Secs. speedy and adequate remedy. Suit assailing the validity of tax sale (Sec. 226 LGC) within 30 days from receipt of decision of LBAA to CBAA (Sec. LGC). 64 PD 464). LGC). 261 LGC) II. Civil Action – formal demand not required (Sec. C. LGC). 2313 TCC) within 30 days from receipt of decision of the . b.if no action is taken by the treasurer in refund cases and the two year period is about to lapse (Sec. Real property taxes may be condoned wholly or partially in a given local government unit when i. or iii. Court Action – appeal of CBAA’s decision to Supreme Court by certiorari. D. Tax Lien (Sec. By the President of the Philippines when public interest so requires. 5. city. Search. TAX REMEDIES OF THE LOCAL GOVERNMENT TO EFFECT COLLECTION OF TAXES 1. Distraint (Sec. 2308. Assessed taxes shall cover not more than ten (10) years prior to the date of the initial assessment. 2. 3. Purchase of property by local treasurer for want of bidder (Sec. REAL PROPERTY TAX REMEDIES I. 2307 TCC) II. Any importer or interested party if dissatisfied with published value within 15 days from date of publication b. of Finance (Sec. Arrest (Sec. appeal to BAA as in protest case (Sec. Seizure. There is substantial decrease in the price of agricultural or agribased products. Administrative A. Civil Action (Sec. TAX REMEDIES UNDER THE TARIFF AND CUSTOMS CODE (TCC)  Remedies of the Government to effect collection of taxes: 1. 2211 TCC)/ forfeiture (Sec. 254. Payment under protest is necessary (Sec. 64 PD 464). Administrative A. 195 LGC) . There is calamity. 1204 TCC) 2. recovery of refund of taxes paid (Sec. Taxpayer – within 15 days from assessment. 254. or municipal treasurer B. There is general failure of crops. ii.

of Finance  Appeal with the Court of Tax Appeals within 30 days from notice  When customs protest applicable: The customs protest is required to be filed only in case the liability of the taxpayer for duties. must state the grounds relied upon for relief. liquidate. 7 RA 1125) B.  CTA. the Collector shall decide on the same within 30 days  Two kinds of proceedings in the Bureau of Customs (BOC): 1. must be limited to the subject matter of a single adjustment. 10 TCC) 4. 3514. conceal or sell such article 9 knowing its illegal importation (Sec. Customs seizure and forfeiture cases  If decision is adverse to the protestant  If decision is adverse to the Government  Appeal with the Commissioner within 15 days from notice  Automatic review by Commissioner A. Customs protest cases 2. Receive. fees and other charges is determined and the taxpayer disputes said liability. 8 transport. e. or 7 3. To protect the interest of the Government 2. he may appeal to the CA.Commissioner or Secretary of Finance to the CTA (Sec. Fraudulently import any article contrary to 5 law. but the claim for refund arises by reason of the happening of supervening events such as when the raw material imported is utilized in the production of finished products subsequently exported and a duty drawback is claimed. protestant must furnish samples of goods under protest when required. d. 3601.  The Collector shall assess.  If decision of Commissioner or Sec. Lifeblood Theory B. and other charges. must be in writing b. and SC under the same procedure on the left  Appeal with the Court of Appeals within 15 days from notice  When Customs protest NOT required Where there is no dispute. c. will be SMUGGLING. f. facilitate. and collect the duties thereon. buy. Sec. must be filed when the amount claimed is paid or within 15 days after the payment. 3. The Philippines is divided into various ports of entry – entry other than port of entry. 1801 TCC) Hearing within 15 days from receipt of the duly presented protest. It is administrative and civil in nature and is directed against the res or imported articles and entails a determination of the legality of their importation.  Procedure on Customs Protest Cases: The Collector acting within his jurisdiction shall cause the imported goods to be entered at the customhouse  Smuggling A. by  Automatic review the Sec. Assist in so doing. conceal. 2403 TCC. TCC) B. Action to question the legality of seizure C. Export contrary to law. must point out the particular decision or ruling of the Collector of Customs to which exception is taken or objection made. sell. fees. Upon termination of the hearing. A favorable decision will not be appealed by the taxpayer and certainly a Collector will not appeal his own decision. An act of any person who shall: 4 1. taxes. Abandonment (Sec. (Sec. or 6 2. Seizure and Forfeiture Cases  Definition: These refer to matters involving smuggling. Customs Protest Cases  Definition: These are cases which deal solely with liability for customs duties. of Finance is adverse to the protestant. These are actions in rem. Appeal by certiorari with the Supreme Court within 15 days from notice  Requirements for making a protest: a.  Reasons for the automatic review of decisions adverse to the Government 1. or detain the said goods if the party liable does not pay the same  The party adversely affected (the protestant) may file a written protest on his foregoing liability with the Collector within 15 days after paying the liquidated amount (the payment under protest rule applies)  .

importer. (Farolan. may continue beyond the maritime zone. 3514. Waters which constitutes a violation of the tariff and customs laws b. 603. affidavit. officers generally empowered by law to effect arrests and execute processes of courts.. No petitions for certiorari. when the payment of internal taxes are involved. cargo. 2203. Over Imported Articles a. of Customs. Neither replevin filed with the RTC will issue. 2205) relative to Customs Seizures and Forfeitures Determination of probable cause and issuance of warrant  Actual seizure of the articles  Listing of description. CTA. b. district collectors. officials of the BIR on all cases falling within the regular performances of their duties. CA. Payment of the tax due after apprehension is not a valid defense (Rodriguez v. Over Vessels a. exporter or consignee of any declaration or affidavit. BOC The RTCs do not have jurisdiction over seizure and forfeiture proceedings conducted by the BOC and to interfere with these proceedings. 2. c. EXCEPTION: Common carriers that are not privately chartered cannot be confiscated. Rationale: Doctrine of Primary Jurisdiction. Sec. inspectors. The Collector of Customs has exclusive jurisdiction over all questions touching on the seizure and forfeiture of dutiable goods. There is a violation of the tariff and customs laws b. aircraft. the vessel may be seized on the high seas. letter or paper is false. police officers. and That such declaration. and guests of the BOC. May exercise such powers only in conformity with the laws and provisions of the TCC (Sec. article. prohibition or mandamus filed with the RTC will lie because these are in reality attempts to review the Commissioner's actuations. and ii.  Requirements for customs forfeiture 1. Jr. 3601. Navy and other members of the AFP and national law enforcement agencies when authorized by the Commissioner of Customs c. TCC)   Things subject to confiscation in smuggling cases: Anything that was used for smuggling is subject to confiscation. letter or paper . v. 217 SCRA 298) 2. a pursuit of such vessel began within the jurisdictional waters which i. when acting under the direction of the Collector. d. officers of the Phil. TCC)  Issuance by the Collector of a warrant of detention  Notification to owner or importer  Formal hearing  District collector renders his decisions  If decision is not favorable to the aggrieved owner or importer  If decision is not favorable to the Government  Automatic review by the Commissioner  Appeal by the aggrieved owner or importer  RTC vs. TCC)   Administrative and Judicial Procedures  Right of customs officers to effect seizure & arrest a. Persons having police authority to enforce the Tariff & Customs Laws and effect searches. seizures and arrests: a. invoice. of Customs and the Chairman. . etc. 248 SCRA 288) Contraband: Articles of prohibited importations or exportations. (Sec. May seize any vessel. plane. The wrongful making by the owner. (Llamado vs. With jurisdiction over them at any place therein for the enforcement of the law. or the wrongful making or delivery by the same persons of any invoice. rules & regulations b. agents. appraisal and classification of seized property  Report of seizure to the Comm. 1983). (Sec. like the vessel. on Audit  Doctrine of Hot Pursuit Requisites: 1. ( 2nd par. An act is done in Phil. Comm. TCC). Mere possession of the article in question UNLESS defendant could explain that his possession is lawful to the satisfaction of the court (Sec. As a consequence they may be pursued in the Phils. Evidence for conviction in smuggling cases. animal or other movable property when the same is subject to forfeiture or liable for any time as imposed under tariff and customs laws. officials of the BOC.all touching on the importation or exportation of merchandise. Comm.

to administer oaths. (Sec. affidavit. the delinquent importer may settle his obligations with the Bureau of Customs. b. Criminal proceedings are actions in personam while seizure or forfeiture proceedings are actions in rem. or f. TCC). TCC) VI. sea store. 2307. (Sec. certificate or other document to secure to himself or others the payment of any drawback. TCC)  Burden of proof in seizure or forfeiture: claimant (Sec. 3. c. Customs compromise does not extinguish criminal liability (People vs. beasts and persons e. . Filing any affidavit. 2. to summon witnesses by subpoena. Provisions: Those necessary for the subsistence of the crew. 2. allowance or refund of duties on the exportation of mdse. 2. Cargo: Article of value (including foreign currencies). other than those as part of sea stores or provisions. Rosales. 3602. vehicles. Nov.  At any time prior to the sale. dwelling house (there must be search warrant issued by a judge) c. 5. It is not governed by technical rules of evidence. invoice. Deficiency in contents packages 3. e. and provisions distinguished: 1.  Cargo.   Settlement of Forfeiture Cases General Rule: Settlement of cases by payment of fine or redemption of forfeited property is allowed. Entry of goods at less than their true weights or measures or upon a classification as to quality or value. 1005.  Powers of the CTA:  The following are the powers of the CTA: 1. It is a court of special jurisdiction. Places where searches & seizures may be conducted: a. TCC). Unlawful importation. to require production or papers or documents by subpoena duces tecum. the importation is absolutely prohibited or 2. 906. Damage incurred during voyage. COURT OF TAX APPEALS (RA 1125)  Salient features of the CTA: 1.  Acquittal in Criminal Charge NOT Res Judicata in Seizure or Forfeiture Proceedings Reasons: 1. It is a judicial body. or 3. 2535. Entry of imported or exported article by means of any false or fraudulent practices. TCC). Articles subject to seizure do not have to be imported goods. Manifests are also required for articles found on vessels or aircraft engaged in coastwise trade (Rigor vs. Sea Store: It is where the passengers can buy their necessities. persons arriving from foreign countries. d. to receive evidence. 3. 1965). usually movables. declaration. vessels or aircrafts and persons or articles conveyed therein d. enclosures b. 2. Exceptions: 1. in which case the aforesaid articles may be delivered upon payment of the corresponding duties and taxes and compliance with all other legal requirements (Sec. Filing any false or fraudulent claim for the payment of drawback or refund of duties upon the exportation of merchandise. 2. or other documents. Loss or destruction of articles after arrival 4. Payment of less than the amount due. 26. It is enough that the cargo was unmanifested and that there was no showing that payment of duties thereon had been made for it to be subject to forfeiture. Manifests are also required of vessel from a foreign port (Sec. when there is fraud. Death or injury of animals Fraudulent Practices considered as Criminal Offenses against Customs Revenue Laws: a. the surrender of the property to the person offering to redeem would be contrary to law. Desiderio. 4. to punish contempt. Unmanifested Cargo is subject to Forfeiture whether the act of smuggling is established or not under the principle of res ipsa loquitur. greater than that legally due thereon. 117 SCRA 780). 1508.   Query: Is manifest required only for imported goods? No.  Abatement The reduction or non-imposition of customs duties on certain imported materials as a result of: 1. TCC)  Requirements for manifest A manifest in coastwise trade for cargo and passengers transported from one place or port in the Philippines to another is required when one or both of such places is a port of entry (Sec. 3.

to suspend the collection of the tax pending appeal. or other law or part of law administered by the BIR. Deposit of the amount claimed or file a surety bond for not more than double the amount of tax with the Court when required. Showing that collection of the tax may jeopardize the interest of the government and / or the taxpayer. 2. fees or other money charges. penalties imposed in relation thereto. 7. Mfg. Errors of administrative officials REASON: State can never be in estoppel and lifeblood theory. collection of compromise penalties). fees or other charges. (CIR vs Procter and Gamble Phils. to render decisions on cases brought before it. other matters arising under the Customs Law. Defense of prescription REASON: This is a statutory right (Visayan Land Transportation vs Collector) 2. cases involving liability from custom duties. disputed assessments. or from the approval of the application for credit. fines. decision of Commissioner of Customs in – a. or b. Showing by taxpayer that appeal is not frivolous nor dilatory.  General Rule: New issues cannot be raised for the first time on appeal. 2.) . refunds of internal revenue taxes. and the latter failed to render a decision within the 2year period. decisions of CIR in – a. and 3. Corp. and 9. forfeitures or other penalties imposed in relation thereto. questioning the propriety of the assessment. Exceptions: 1.6. Observation: If we are not going to allow the taxpayer to file a refund before the CTA and let him wait for the CIR’s decision. or other law or part of law administered by the Bureau of Customs  “Other matters” Those controversies which can be considered within the scope of the function of the BIR / BOC under ejusdem generis rule (e.g. or b.  Requisites for a Valid Suspension of Collection of the Tax pending Appeal: There must be a 1. detention or release of property affected. the said taxpayer can no longer file a refund before the CTA because his right to appeal has prescribed. 8. seizure. The two-year period for both starts from the date after the payment of the tax or penalty. to promulgate rules and regulations for the conduct of its business.  Jurisdiction of the CTA:  Exclusive appellate jurisdiction to review on appeal: 1.  Simultaneous filing of an application for refund or credit and institution of a case before the CTA allowed The law fixes the same period of two (2) years for filing a claim for refund with the Commissioner and for filing a case with the CTA. action for the nullity of distraint and levy. to assess damage against appellant if appeal to CTA is found to be frivolous or dilatory. other matters arising under the NIRC.

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