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Institute of Law
TRANSFER TAXES Transfer taxes are those taxes imposed upon the privilege granted by the state to the taxpayer so that he may transfer his property, either gratuitously or for a consideration, to another. Transfers for a valuable consideration may be subject to income tax, value-added tax and other business taxes, while those made gratuitously may be subject to estate tax and donor’s tax. Q. – Distinguish a donation mortis causa from a donation inter vivos. S. A. – While both are transfers without any onerous consideration, a donation mortis causa is a transfer that takes effect on the death of the transferor thru the execution of a last will and testament or by legal succession, whereas a donation inter vivos is a transfer that takes effect during the lifetime of the transferor thru the execution of a deed of donation. A donation mortis causa will be subject to estate tax, whereas a donation inter vivos will be subject to donor’s tax. ESTATE TAX: Q. – Define estate tax. S. A. – Estate tax is a graduated tax imposed on the privilege of the decedent to transmit property at death and is based on the entire net estate, regardless of the number of heirs and relations to the decedent. It is a transfer tax, not a property tax. • THE LAW THAT GOVERNS THE IMPOSITION OF ESTATE TAX: The statute in force at the time of death of the decedent shall govern estate taxation I. Nature of Estate Tax: III. Estate Tax Formula
1. Benefit-Received Theory -considers
the service rendered by the government in the distribution of the estate of the decedent, either by law or in accordance with his wishes. For the performance of these services and other benefits that accrue to the estate and the heirs, the State collects the tax.
2. Privilege Theory/State Partnership
Theory – inheritance is not a right but a privilege granted by the state, and large estate have been acquired only with the protection of the State. Consequently, the State as a passive and silent partner in the accumulation of property has the right to collect the share which is properly due to it.
3. Ability to Pay Theory – receipt of
inheritance which is in the nature of an unearned wealth or windfall, place assets into the hands of the heirs and beneficiaries hereby creating an ability to pay the tax and thus contributes to government income.
4. Redistribution of Wealth Theory - the
receipt of inheritance is a contributing factor to the inequalities in wealth and incomes. The imposition of death tax reduces the property received by the successor, thus helping bring about a more equitable distribution of wealth in society. The tax base is the value of the property and the progressive scheme of taxation is precisely motivated by the desire to mitigate the evils of inheritance in the present form.
1. tax on the right to transfer property at death and on certain transfers which are made by law equivalent to testamentary dispositions and is measured by the value of the property; 2. it is imposed on the basis of the net estate considered as a unit. The first Php200,000 of the net estate is exempt 3. estate tax is not a property tax but rather an excise tax. 4. it is an excise tax and its object is to the shifting of economic benefits and enjoyment of property from the dead to the living. II. Reasons justifying imposition of estate tax the
Gross Estate (Sec. 85) Less: Deductions (Sec. 86) Net share of the surviving spouse Net taxable Estate X Tax rate (Sec.84) Estate Tax Due Less: Tax credit, if any (Sec.86 [E] or 110 [B] Estate Tax Due Rate: first 200,000 pesos – exempt Over 200,000 – graduated rate of 5% 20% A. GROSS ESTATE (GE): 1
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1. Resident alien and Filipino decedent: All properties, real or personal, tangible or intangible, wherever situated. 2. Non-resident alien shall: Only properties situated in the Philippines With respect to intangible personal property, its inclusion is subject to the rule of reciprocity • No tax shall be collected in respect of intangible personal property: a. if the decedent at the time of his death was a citizen and resident of a foreign country which at the time of his death did not impose a transfer tax in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, OR b. if the laws of the foreign country of which the decedent was a citizen and resident at the time of is death allows a similar exemption from transfer taxes in respect of intangible personal property owned by Filipino citizens not residing in that foreign country. • Intangible personal property having situs in the Philippines: a. Franchise which must be exercised in the Philippines; b. Shares, obligations, or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; c. Shares, obligations, or bonds issued by any foreign corporation, 85% of the business is located in the Philippines; d. Shares, obligations, or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired business situs (i.e., they are used in furtherance of its business in the Philippines. 2
by any foreign corporation) in the Philippines. e. Shares or rights in any partnership, business or industry established within the Philippines. B. INCLUSIONS IN THE GROSS ESTATE Bar ’03 – On June 2000, X took out a life insurance policy on his own life in the amount of P2,000,000.00. He designated his wife, Y, as irrevocable beneficiary to P1,000,000.00 but, in the latter designation, reserving his right to substantiate him for another. On 01 September 2003, X died and his wife and son went to the insurer to collect the proceeds of X’s life insurance policy. Are the proceeds of the insurance to form part of the gross estate of X? Explain. S. A. – Only the proceeds of P1,000,000 given to the son, Z shall form part of the Gross Estate of X. Under the Tax Cod, proceeds of life insurance shall form part of the gross estate of the decedent to the extent of the amount receivable by the beneficiary designated in the policy of the insurance except when it is expressly stipulated that the designation of the beneficiary is irrevocable. As stated in the problem, only the designation of Y is irrevocable. As stated in the problem, only the designation of Y is irrevocable while the insured/decedent reserved the right to substitute Z as beneficiary for another person. Accordingly, the proceeds received by Y shall be excluded while the proceeds received by Z shall be included in the gross estate of X. (Sec. 85 (E), R.A 8424) Bar ’05 - Ralph Donald, an American citizen, was a top executive of a U.S. company in the Philippines until he retired in 1999. He came to like the Philippines so much that following his retirement, he decided to spend the rest of his life in the country. He applied for and was granted a permanent resident status the following year. In the spring of 2004, while vacationing in Orlando, Florida, USA, he suffered a heart attack and died. At the time of his death, he left the following properties: (a) bank deposits with Citibank Makati and Citibank Orlando, Florida; (a) a resthouse in Orlando, Florida; (b) a condominium unit in Makati; (c) shares of stock in the Philippine subsidiary of the U.S. Company where he worked;
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(d) shares of stock in San Miguel Corp. and PLDT; (e) shares of stock in Disney World in Florida; (f) U.S. treasury bonds; and (g) proceeds from a life insurance policy issued by a U.S. corporation. Which of the foregoing assets shall be included in the taxable gross estate in the Philippines? Explain. S. A. – All of Ralph Donald’s assets shall be included in his taxable gross estate because he was a permanent Philippine resident at the time of his death. (Sec. 104, RA 8424) Q. - Which of the foregoing assets shall be included in the taxable gross estate in the Philippines? Explain. 1. Decedent’s Interests 2. Transfer in Contemplation of Death 3. Revocable Transfer 4. Transfer under General Power of Appointment 5. Proceeds of life insurance 6. Transfer for Insufficient Consideration 7. Prior Interests Decedent’s Interests • To the extent of the interest in property of the decedent at the time of his death.
enjoy the property or the income there from. Exception: in case of bona fide sale for an adequate and full consideration in money or money's worth Amount included in the GE: interest therein Circumstances taken into account a. Age and state of health of the decedent at the time of gift, especially where he was aware of a serious illness; b. Length of time between the gift and the date of death; c. Concurrent making of a will or making a will within a short time after the transfer.
Bar ’01 – A, aged 90 years and suffering from incurable cancer, on August 1, 2001 wrote a will and, on the same day, made several inter-vivos gifts to his children. Ten days later, he died. In your opinion, are the intervivos gifts considered transfers in contemplation of death for purposes of determining properties to be included in his gross estate? Explain your answer. S. A. – Yes. When the donor makes his will within a short time of , or simultaneously with, the making of gifts, the gifts are considered as having been made in contemplation of death. (Roces v. Posadas, 58 Phil. 108) Obviously, the intention of the donor in making the inter-vivos gifts is to avoid the imposition of the estate tax and since the donees are likewise his forced heirs who are called upon to inherit, it will create a presumption juris tantum that said donations were made mortis causa, hence, the properties donated shall be included as part of A’s gross estate. Revocable Transfer
Transfer in Contemplation of Death • it is the thought of death as the controlling motive which induces the disposition of the property for the purpose of avoiding the tax. Includes: a. transfer by trust or otherwise, in contemplation of, or intended to take effect in possession or enjoyment at or after his death; or b. transfer by trust or otherwise, with retention or reservation of i. the possession or enjoyment of or the right to the income from the property, or ii. the right, either alone or in conjunction with any person, to designate the person who shall possess or 3
with reserved power to alter, amend, revoke or terminate - transfer, by trust or otherwise, where the enjoyment thereof was subject to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke or terminate;
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or where any such power is relinquished in contemplation of the decedent's death. • Except: in case of bona fide sale for an adequate and full consideration in money or money’s worth • Amount included in the GE: interest therein Transfer under General Power of Appointment • A power of appointment is the right to designate the person or persons who will succeed to the property of the prior decedent. It may be exercised by the decedent: a. by will; or b. by deed executed in contemplation of, or intended to take effect in possession or enjoyment at, or after his death; c. by deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death: i. the possession or enjoyment of, or the right to the income from, the property; or ii. the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income there from; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. • Exception: in case of bona fide sale for an adequate and full consideration in money and money’s worth • Amount included in the GE: interest therein • Kinds: a. General power of appointment – when it authorizes the donee to appoint any person he pleases, including himself, his spouse, his estate, his executor or administrator, and his creditor thus having full dominion over 4
the property as though he owned it. Special power of appointment – when the donee can appoint only among a restricted or designated class or persons other than himself.
Proceeds of Life Insurance • Beneficiary is the estate of the deceased, his executor or administrator, irrespective of whether or not the insured retained the power of revocation; or • Beneficiary is other than the decedent’s estate, executor or administration, when designation of beneficiary is revocable, that is, when the designation of the beneficiary is not expressly made irrevocable. • The proceeds of life insurance are NOT taxable in the following cases: a. Proceeds of a group insurance policy taken out by the company for its employees; b. Accident insurance proceeds; c. Amount receivable by any beneficiary irrevocably designated in the policy of insurance by the insured; d. Proceeds of insurance policies issued by the GSIS to the government official and employees; e. Benefits accruing under the SSS law; f. Proceeds of life insurance payable to heirs of deceased members of military personnel Transfer for Consideration • Insufficient
When the decedent’s property is transferred a. in contemplation of death, b. revocable transfers, or c. passed under a general power of appointment for a consideration in money or money's worth Exception: bona fide sale
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Amount to be included in the GE: the excess of the fair market value (FMV), at the time of death, of the property otherwise to be included on account of such transaction, over the value of the consideration received therefore by the decedent. death) less value
FMV(time of received Prior Interests •
All transfers, trusts, estates, interests, rights, powers and relinquishment of powers made, created, arising, existing, exercised or relinquished before or after the effectivity of the Tax Code. EXEMPT Acquisition and transmission: (Sec. 87) a. the merger of usufruct of the owner of the naked title; b. the transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee to the fideicommissary; c. the transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance with the will of the predecessor; d. all bequests, devises, legacies, or transfers to social welfare, cultural and charitable institutions no part of the net income of which inures to the benefit of any individual; provided that not more that 30% of said bequests, legacies or transfers shall be used by such institutions for administration purposes.
C. DEDUCTIONS: Bar ’00 – Discuss the rule on situs of taxation with respect to the imposition of the estate tax on property left behind by a non-resident decedent. For resident aliens and citizens:
Actual funeral expenses or 5% of the gross estate; or P200, 000, WHICHEVER IS LOWEST Must be duly supported by receipts or other evidence to show that they were actually incurred. Not confined to its ordinary or usual meaning. They include: a. mourning apparel of the surviving spouse and unmarried minor children of the deceases bought and used on the occasion of the burial; b. expenses for the deceased’s wake, including food and drinks; c. publication charges for death notices; d. telecommunicati on expenses incurred in informing relatives of the deceased; e. cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In case the deceased own a family estate or several burial lots, only the value corresponding to the plot where he is buried is deductible; f. interment and/or cremation fees and charges; and g. all other expenses incurred for the performance of the rites and ceremonies incident to interment. Expenses incurred after the interment, such as for prayers, masses, entertainment, or the like are not deductible. Any portion of the funeral and burial expenses borne or defrayed by relatives and friends of the deceased are not deductible. Judicial Expenses:
expenses, losses, indebtedness, taxes, etc. (E-L-I-T) i. Funeral Expenses:
Those incurred during the settlement of the estate but not beyond the last day prescribed by law, or the extension thereof,
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Brokerage fees for selling property of the estate. the distribution of the estate among the heirs. and h. b. the indebtedness must not have been condoned by the creditor or the action to 6 vi. Requisites for deductibility: a. e. Verification must be made as to who was the beneficiary of the loan proceeds. Any unpaid amount should be supported by a sworn statement of account issued and signed by the creditor. Costs of preserving and distributing the estate g. The value of the property mortgaged to the extent of the decedent’s interest therein. the value of the unpaid loan must be included as a receivable of the estate. their administration. f. Attorney’s fees c. Unpaid mortgages: a. The incapacity of the debtors to pay their obligations is proven. Accrued as of the death of the decedent b. The indebtedness must have been contracted bona fide and for an adequate and full consideration in money or money’s worth. iv. Claims insolvent persons: • • against The amount of said claims has been initially included as part of the GE. d. c. b. If found to be merely an accommodation loan. b. v. Court Fees d. d. c. Appraiser’s fee e. Taxes: a. the debt instrument must be notarized. c. Clerk hire f. is included in the GE.Far Eastern University Institute of Law • • • for the filing of the estate tax return (6 months after death) Those incurred in the: a. Costs of storing or maintaining property of the estate. e. undiminished by such mortgage or indebtedness. the claim must be valid in law and enforceable in court. Claims against the collect must not have been prescribed. inventory taking of assets comprising the GROSS ESTATE. Unpaid as of the time of death • The following not deductible: are Tax Law Study Guide Centralized Bar Operations 2007 . it was contracted in good faith and for adequate and full consideration in money or money’s worth. said unpaid mortgage shall not be allowed as a deduction. not merely alleged. the liability represents a personal obligation of the deceased existing at the time of his death except unpaid obligations incurred incident to his death. the administrator or executor shall submit a statement under oath showing the disposition of the proceeds of the loan. It may include the following a. estate: • • Debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime and could have been reduced to simple money judgments. If there is a legal impediment to recognize the same as receivable. the payment of debts of the estate d. iii. Fees of executor or administrator b. if the loan was contracted within three (3) years before the death of the decedent.
3.the estate tax or donor’s tax on the gift must have been finally determined and paid. by the present decedent on any mortgage or other lien on the property c. shipwreck or other casualty. 3. Losses: • Requisites for deductibility: 1.the present decedent died within five years 1. vii. No previous vanishing deduction on the property was allowed to the estate of the prior decedent. 3. WHICHEVER IS LOWER.P. Identity of the property . cultural and charitable institutions. the disposition is in a last will and testament. 4. robbery. Previous taxation of the property . estate tax. 3. Deduction for E-L-I-T and T. and 4. for exclusive public purpose. • Limitations as to amount of deduction allowable: a.U – the value as reduced in #2 above shall be further reduced by an amount which bears the ratio to the amounts allowed as deductions for E-L-I-T and T. storm. 2. theft or embezzlement.the property formed part of the GE located in the Philippines of the prior decedent. • This should also include bequests. not claimed as deduction in an income tax return of the taxable estate. income tax on income received after the death of the decedent. property taxes not accrued after death. devices. 2. incurred during the settlement of the estate 5.Far Eastern University Institute of Law 1. b. and 5. Use (TPU): • Transfer for Public Requisites 1. 2. Deduction for mortgage or other lien – the initial value in #1 above shall be reduced by the total amount paid. if any. or transfers to social welfare. 3. Inclusion of the property . Vanishing deductions/Property Previously taxed: (VD/PPT) • Operates to ease the harshness of successive taxation of the same property within a relatively short period of time (up to 5 years) occasioned by the untimely death of the transferee • Requisites (D-I-P-I-N) Death .P. d. Value of property – limited by the value of the property previously taxed as finally determined for the purpose of the prior transfer tax or the value of the property in the present decedent’s GE. Percentage of deductions – the vanishing deduction shall be the value in #3 multiplied by the following percentage of deduction: 2.the property must be identified as the one received from the prior decedent. in favor of the government of the Philippines or any political subdivision thereof. 2. 4. or of the taxable gift of the donor within 5 years prior to the present decedent’s death. to take effect after death. arising from fire. incurred before the last day for the payment of the estate tax (6 months after the decedent’s death) from transfer of the property from a prior decedent. or something acquired in exchange therefore. not compensated by insurance or otherwise.U as the amount otherwise deductible for property previously taxed bears to the value of the decedent’s GE. 7 Tax Law Study Guide Centralized Bar Operations 2007 .
4917 • Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent employee in accordance with R. 40% . said fact must be certified to by the barangay 8 Approval of the court where a probate/intestate proceeding is pending is not a mandatory requirement in the collection of estate taxes.more than 1 year but not more than 2 years.000 b. said family home must be the actual residential home of the decedent and his family at the time of his death. A. and d.Far Eastern University Institute of Law 100% . 60% . • One person may constitute only one family home • Requisites a. c. 8. • Medical Expenses: Requisites 1. Deduction: Standard • 1 million pesos • Without need substantiation of 6. On the contrary. the amount deductible is the current FMV but not to exceed 1 million pesos. the probate/intestate court is prohibited from delivering any distributive share to any party unless there is certification from the Commissioner that the estate taxes are already paid. 4917 is allowed as a deduction provided that the amount of the separation benefit is included as part of the gross estate of the decedent.more than 3 years but not more than 4 years. Family Home: • The dwelling house including the land on which it is situated. 7. or head of the family. if any Equals: Initial Basis captain of the locality where it is located. 5. and members of their family reside.more than 2 years but not more than 3 years. whichever is lower) Less: Mortgage debt paid. 20% . 80% . and 3.more than 4 years but not more than 5 years. substantiated with receipts. 2. Initial basis (ELIT+TPU) = 2nd deduction Gross Estate c. that is. Initial Basis Less: 2nd deduction Final Basis X Percentage Vanishing deduction x • 4. Value taken (value of property at the time of the first transfer or at the time of the present decedent’s death. the computation of vanishing deduction is: a. where the husband and wife. the total value of the family home must be included as part of the GE of the decedent. incurred within one year prior to his death. the place to which. b.if the 1st transfer is within 1 year prior to the death of the present decedent. Net Share of the Surviving Spouse in the Conjugal Partnership or Community Property • After deducting the allowable deductions appertaining to the conjugal or community Tax Law Study Guide Centralized Bar Operations 2007 . one still intends to return (Domicile). maximum of Php500. • Characterized by permanency. whenever absent for business or pleasure. Amount Received by Heirs Under R. • In outline form. as certified to by the Barangay Captain of the locality. No.A.
with the RDO having jurisdiction over the executor or administrator’s legal residence • if there is no executor or administrator. 3. or duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the time of his death or if there be no legal residence in the Philippines. regardless of the amount of the gross estate.000). • W hen the gross estate exceeds P2. vanishing deduction. etc. losses. administrator or any of the legal heirs. whether paid or still due and outstanding. or Revenue District Officer. 3. that part of his gross estate situated in the Philippines. taxes. 2. indebtedness. 000. or 3. with the Office of the Commissioner PAYMENT OF THE ESTATE TAX GEN RULE: at the time the return is filed. or within a like period after qualifying as such executor or administrator. shall give a written notice thereof to the Commissioner. • A n estate tax return is required to be filed: 1. When the estate is not subject to estate tax but the gross estate exceeds P200. the share of the surviving spouse must be removed to ensure that only the decedent’s interest in the estate is taxed. 2.P. Collection Officer.000. • W here to file: 1. with the Office of the Commissioner. or in the case of a non-resident. ESTATE TAX RETURN • f iled within six (6) months from the decedent's death. in meritorious cases. (E-L-I-T) 2. For non-resident alien-decedent: 1. The itemized deductions from the gross estate. a reasonable extension not exceeding thirty (30) days for filing the return. Tax Law Study Guide Centralized Bar Operations 2007 . transfers for public use (T. expenses. 2. The itemized assets of the decedent with its corresponding gross value at the time of his death. When the estate is subject to estate tax. within two (2) months after the decedent's death. where the gross estate consists of registered or registrable property such as motor vehicle or 9 shares of stock or other similar property for which clearance from the BIR is required as a condition precedent for the transfer of ownership thereof in the name of the transferee. 4. • E xtension of time to file: The Commissioner or any Revenue Officer shall have authority to grant.Far Eastern University Institute of Law properties included in the gross estate. SETTLEMENT OF THE ESTATE TAX NOTICE OF DEATH • f iled in all cases where the gross value of the estate exceeds twenty thousand pesos (P20.U). not citizen of the Philippines. Share of surviving spouse in conjugal or community property. non-resident decedent: • the Revenue District Office (RDO) where the executor or administrator is registered • if not registered. resident decedent: • accredited agent bank. 000 the estate tax return shall be accompanied by a statement which is CERTIFIED by an INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT stating: 1. the amount of tax due. • t he executor. as the case may be.
in case the estate is settled through the courts. Net estate outside the Philippines x Phil. capacity of the donor to make donation. whether actual or constructive. Requisites (C-I-D-A) 1. For estate taxes paid to two or more foreign countries The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken. sitting in probate or as a settlement tribunal over the property of the deceased is not a mandatory requirement in the collection of taxes. VCC filed a motion with the probate court to stop the enforcement and collection of the tax on the ground that the BIR should have secured first the approval of the probate court. which the decedent’s net estate situated within such country taxable under the NIRC bears his entire net estate. The Tax Code or any other pertinent law does not require the probate or estate settlement court’s approval of the State’s claim for the estate taxes before the same can be enforced and collected. Subsidiary liable: the heir or beneficiary to the extent of his share in the inheritance 3. donative intent or intent to make a gift on the part of the donor. But he ignored the notice. acceptance of the gift by the donee Donor’s Tax is a gift tax imposed upon a person to give his properties while he is still alive to whomever he wishes to extend his benevolent act of kindness or otherwise. or fraud on the part of the taxpayer. (Marcos v. =Tax credit Entire net estate estate tax limit DONOR’S TAX Donation is an act of liberality whereby a person disposed gratuitously of a thing or right in favor of another who accepts it. The liability of 2 or more executors of administrators shall be severally. Bar ’04 – VCC is the administrator of the estate of his father NGC. 1997) b. 3. June 5. CA. 2. intentional disregard of rules and regulations. the BIR effected a levy on the real properties of the estate to pay the delinquency tax. he received from the Commissioner of Internal Revenue a deficiency tax assessment for the estate in the amount of P1. Last year. Tax credit for estate taxes paid to a foreign country: General: the estate tax shall be credited with the amounts of any estate tax imposed by the foreign country Limitations a. – No. The approval of the court. before levying on its real properties.000. A. Foreign country x Philippine credit Entire net estate state tax limit = Tax Note: The CIR shall deny the application for extension where the request for extension is by reason of: negligence. Net estate. delivery. and 4. in the estate proceedings pending before the MM Regional Trial Court. or two (2) years in case the estate is settled extrajudicially. For estate taxes paid to one foreign country 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. Last month. Liability for payment 1.000. Is VCC’s contention correct? S. VCC’s contention is not correct. Primarily liable: executor or administrator before distributing the net estate to the heirs 2. 10 Tax Law Study Guide Centralized Bar Operations 2007 . which the decedent’s net estate situated outside the Philippines taxable under the NIRC bears to his entire net estate.Far Eastern University Institute of Law EXCEPT: When the Commissioner finds that the payment on the due date of the estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs he may extend the time for payment of such tax or any part thereof not to exceed five (5) years. which had jurisdiction over the estate.
CTA Case No. and not to employ or buy. donation to him shall not be considered as donation made to stranger. of the property by gift.00 for his campaign. unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of the other coheirs in the hereditary estate. • Whether the transfer is in trust or otherwise. Tax Law Study Guide Centralized Bar Operations 2007 . Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger. b) The answer will be the same because the purpose for giving is to bolster the morale. tangible or intangible. the winning chance of the candidate and/or his party.When the donee or beneficiary is a stranger. Knowing that Y needs funds for posters and streamers. 1994) 2. the creditor agreed to accept payment through dacion en pago a property which had a 11 • • • A person who is not a: 1. sister (whether by whole or half blood). 4296. He also has no intent to repay another what is his due. Bar ’97 – An insolent company had an outstanding obligation of P100. of his/her share in the hereditary estate is not subject to tax. CA-GR SP No. A. and therefore. For purposes of this tax. a. Transfers subject to donor’s tax: 1.00 from a creditor. the tax payable by the donor shall be 30% of the net gifts. Php100. Bar ’03 – X is a friend of Y. spouse. including the surviving spouse. Upon the transfer by any person. Abello. • Same in estate tax subject to the reciprocity rule. Transfer for insufficient consideration • Where property is transferred for less than an adequate and full consideration • Exception: transfer of real property classified as capital assets subjected to the capital gains tax • Amount included in the net gifts: the excess of the FMV of the property over the consideration received shall be deemed a gift. (CIR v. or 2. Since it could not pay the debt. the chairman of Political Party Z.Far Eastern University Institute of Law Aspects of Donor’s Tax • Not a property tax. a relative by consanguinity in the collateral within the 4th civil degree A legally adopted child is entitled to all the rights and obligations provided by law to legitimate children. resident or nonresident.in case of donation to a stranger Stranger Bar ’00 . and lineal descendant. • Whether the property is real or personal. April 20. brother.000. who is a stranger? Intangible Personal Properties with Situs in the Phil. Tax Rate: • General: 2-15%. – a) Y’s campaign donation is subject to Donor’s Tax because the giver did not intend his contribution to be a return of value. but is a tax imposed on the transfer of property by way of gift inter vivos • Does not apply unless and until there is a completed gift • The transfer is perfected from the moment the donor knows of the acceptance of the donee • It is completed by the delivery of the donated property. He asks you whether his intended donation to Y will be subject to the donor’s tax. X is thinking of donating to Y P150. Will your answer be the same if he were to donate to Political party Z instead of to Y directly? S. The main reason for the donation is personal affection or regard or philanthropy or charity. who wants to run for President in the 2004 elections. • Whether the gift is direct or indirect. either actual or constructive • Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage is subject to donor’s tax • General renunciation by an heir. Valuation of Gifts of Property The fair market value of the property given at the time of the gift shall be the value of the gift.000 is exempt • Special rate: 30% . 27134.000. ancestor. What would your answer be? b.
This tax is payable by either party to the said sale. non-profit educational institution where no part of the net income will inure to the benefit of any private individual. May the donor claim in full as deduction from its gross income for the taxable year 2001 the amount of the donated lot equivalent to its fair market value/zonal value at the time of the donation? Explain your answer. cultural or social welfare corporation. Title III. whether students’ fees or gifts. research institutions or organizations. A. or on its fair market value. (Sec. gifts in favor of educational. and (7) Devoting all its income. (4) Incorporated as a non-stock entity. Exemptions: 1. (2) Normal Corporate Tax for the gain on sale of a non-capital Asset representing the difference between the outstanding obligation settled thru Dacion en Pago minus the Net Book Value of the asset given up. accredited non-government organization. the donor may claim full deduction for having donated the lot to a nonstock. (2) Use not more than thirty percent (30%) of said gifts for administration purposes. how is he effected taxwise as a consequence of the transaction? S. LVN Corporation donated a piece of Vacant Lot situated in Mandaluyong City to an accredited and duly registered non-stock. which is the amount of obligation extinguished.00. RA 8424) b) For the Donor to be exempt from Donor’s tax. donations. illegitimate or adopted children • to the extent of the first Php10. a. accredited non-government organization. – a) The Insolvent Debtor Corporation will be liable for the following taxes: (1) Documentary Stamp Tax based on the consideration or value received or paid for the property. A. What is the tax effect on the discharge of the unpaid balance of the obligation on the debtor corporation? b. religious. Gifts made by a resident: a. or to any political subdivision of said government. Bar ’02 – On December 06. Chap. dowries • gifts on account of marriage • before its celebration or • within one year thereafter by parents to each of their legitimate. Chap. charitable. b) The creditor can recognize a tax deductible Bad Debts write-off equal to the difference between the outstanding obligation settled thru Dacion en Pago minus the market value of the asset received. c. trust or philanthropic organization or research institution or organization. Gifts made by a nonresident alien • only gifts mentioned in letters (b) and (c) are exempt Tax Credit: 12 Tax Law Study Guide Centralized Bar Operations 2007 . In order that donations to non-stock. (5) Paying no dividends. accredited NGO. – a) Yes. what conditions must be met by the donee? S. college or university and/or charitable corporation. In the dacion en pago document. institution. (Sec. RA 8424) 2. 34 (H). institution. whichever is higher. 101 (A)(3). trust or philanthropic organization. the Donee shall be: (1) An educational and/or charitable. religious. (3) A school.000. gifts made for the use of the national government or any entity created by any of its agencies which is not conducted for profit. (6) Governed by trustee who receive no compensation. provided that not more than 30% of said gift shall be used by such donee for administrative purposes. trust or philanthropic organization and/or research institution or organization. non-profit educational institution may be exempt from the donor’s gift tax. cultural or social welfare corporation. II. subsidies or other accomplishment and promotion of the purposes enumerated in its Articles of Incorporation. Insofar as the creditor is concerned. the balance of the debt was condoned. VII. b. 2001.000 b. foundations.Far Eastern University Institute of Law market value of P30. non-profit educational institution to be used by the latter in building a sports complex for students. a.
which the net gifts situated outside the Philippines taxable under the NIRC bears to this entire net gifts. and 3. • Relationship of the donor to the donee. realizing the system of taxing goods and services. or the sale or performance of services for a fee. Nature of VAT 1. and • Such further information as may be required by rules and regulations made pursuant to law. b. hence. unless the seller is exempt. or lease of goods. Non-resident donor • Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer. Net gifts in a foreign country x Phil. remuneration. Resident Donor • To an accredited agent bank. • The deductions claimed and allowable. RDO. Filed and paid: a. • The name of the donee. =Tax credit Entire net gifts Donor’s tax limit Donor’s Tax Return: • To be filed within thirty (30) days after the gift is made. A uniform tax computed at the rate of 0% or 12% of the gross selling price of goods or of gross receipts realized from the sale of services 4. exchange or lease of goods or properties. • The return shall be under oath in duplicate setting forth: • Each gift made during the calendar year which is to be included in computing net gifts. properties or services as such but on the sale. Net gifts outside the Philippines x Phil. simplifying tax administration. properties. barter. the tax is imposed not on the goods. or • Directly with the Office of the Commissioner. exchange (including transactions deemed by law as a sale). For donor’s taxes paid to two or more foreign countries • The total amount to the credit shall not exceed the same proportion of the tax against which such credit is taken. amount of the tax may be shifted or passed on to the buyer 2. A privilege tax. or on the importation of goods. • The tax is paid at the time the return is filed within said period. making the tax system more equitable. An indirect tax. • Any previous net gifts made during the same calendar year.Far Eastern University Institute of Law General: the donor’s tax imposed by the Tax Code upon a donor who was a citizen or a resident at the time of donation shall be credited with the amount of any donor’s taxes imposed by the foreign country Limitations a. Transactions subject to 12% VAT: (CR CB WILD FIRE FHM LS) b. —oOo— VALUE ADDED TAX (VAT) Value-Added Tax (VAT) is a percentage tax imposed at every stage of the distribution process on the sale. revenue Collection Officer or duly 13 Tax Law Study Guide Centralized Bar Operations 2007 . or services in the course of trade or business. or gross receipts derived from the transaction 5. barter. which the net gifts situated within such country taxable under the NIRC bears his entire net gift. A tax on the value added by every seller as the goods. to enable the country to attain economic recovery. properties or services pass along the distribution chain. hence. 2. =Tax credit Entire net gifts Donor’s tax limit authorized treasurer of the city or municipality where the donor is domiciled at the time the transfer. For donor’s tax paid to one foreign country • 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. with the Commissioner. or • if there can be no legal residence in the Philippines. Purposes of VAT system: 1. An ad valorem tax because it is based on the gross selling price or gross value in money. etc 3.
Export sales (GORANG) • Gold sold to BSP • Those under the Omnibus • • • • 2. including transactions incidental thereto. • The rule of regularity. by any person regardless of whether or not the person engaged therein is a nonstock. b. motels • Milling. be subject to percentage tax equivalent to 3% of their gross quarterly sales or receipts. investment code Raw material sold to export oriented enterprises Actual shipment of goods Sale of raw materials to Nonresident buyers Sale of Goods international buyers Foreign currency denominated sale • Sales to whom: non-resident • Of what: goods assembled or manufactured in the Philippines. services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business. 1. or government entity. services (EPOT IPIS) • Exempt under special law or agreements • Processing. nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests). to the contrary notwithstanding. however. manufacturing or repacking of goods * • Other transactions • Transport of passengers and cargo from the Philippines to a foreign country • Services to Persons engaged in Industrial shipping • Sale of Power generated through renewable sources of energy • Industrial air transport operation services rendered in connection with it • Subcontractors and other contractors in the manufacturing of goods 70% of its sale is for export Note: *Must be subsequently exported and paid for by acceptable foreign currency. Zero-rated transactions. 14 Tax Law Study Guide Centralized Bar Operations 2007 . 000 during any 12-month period shall be considered principally for subsistence or livelihood and not in the course of trade or business. Transfers deemed sale for VAT purposes 12% (PS DOG) • Transfer for Personal use or consumption • Distribution or transfer to Shareholders. goods • “in the ordinary course of trade or business” means the regular conduct or pursuit of a commercial or an economic activity. Transactions subject to 0% VAT: Actual Zero Rating a. They shall. provided that the business is not VAT-registered.Far Eastern University Institute of Law 1. 500. Sales / Services • Contractors • Restaurants • Common carriers by sea or air • Brokers • Warehousing services • Investors / lending • Lessors of properties • Dealers of securities • Film lessors or distributors • Non-life insurance companies • Royalty fees • Electric Companies • Franchise holders • Hotels. and shall be exempt from VAT. Zero-rated (EFP) transaction. it must be duly accounted for by the Central Bank. if actual sale is not made within sixty (60) days NOTE: • Businesses where the aggregate sales or receipts do not exceed Php1. investors or creditors • Dissolution and creation of a new partnership • Properties Originally intended for sale or for use in the course of business • Consigned Goods. processing or repacking services • Land transportation services • Similar services 2.
houses. It likewise includes apartment. Processing. but also the parts or units thereof used solely as dwelling places (e. houses. boarding houses and bed spaces. his non-zero-rated transactions 3. by subcontractors and/or contractors duly accredited by the Board of Investments or the Export Development Council in processing. buildings. Services rendered to persons engaged exclusively in international shipping/ international air transport operations. • Paid for in acceptable foreign currency duly accounted for in accordance with the BSP rules Persons or entity deemed exempt under international law ZERO-RATED f. hotel and hotel rooms. all VAT is removed 1. • Non-resident persons not engaged in business • When the services were rendered • Paid for in acceptable foreign currency • Duly accounted for in accordance with BSP rules c. dormitories. the taxpayer is not input taxes passed on entitled to credit or to him by the refund of the input tax supplier.) • To whom delivered: resident of the Philippines. Except: automobiles and nonessential goods (jewelries. and per room in case of room for rent. generally. parts or units thereof used fro home industries. ZERO-RATED EXEMPT 1. Tax Law Study Guide Centralized Bar Operations 2007 . rooms and bed spaces) except motels. The term unit shall mean an apartment unit in the case of apartments.g. e. 2. Zero-rated services: a. Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign country. converting or manufacturing goods. Services rendered to exempt entities under special laws and international agreements to which the Philippines is a signatory. g. Lease of property situated in the Philippine shall be subject to VAT irrespective of the place where the contract of lease or licensing agreement was executed if the property leased or used in the Philippines. etc. manufacturing or repacking of goods • For: persons doing business outside the Philippines • When: the goods are subsequently exported • Paid for in acceptable foreign currency • Duly accounted for in accordance with the BSP rules b. per person in the case of dormitories. the taxpayer can claim the refund or 2. it is not taken into sales are taken into account in account in determining turn-over determining turn-over or VAT registration sales or sale for VAT purposes registration purposes Rules in lease of residential units for VAT purposes: 1. perfumes. yachts. and/or lands on which another’s dwelling is located. Sale of power or fuel generated through renewable sources of energy. d. only at the exempt activity or transaction stage 2. used for residential purposes and shall include not only buildings. or credit passed on to him by such input taxes on the supplier. 15 Residential units shall refer to apartments. etc. taxable 3. Services other than those provided in #2a rendered to: • Persons engaged in business outside the Philippines or. Those performed for an enterprise whose export sales exceed 70% of the annual production.Far Eastern University Institute of Law • 3. motel rooms. retail stores or other business purposes if the tenant thereof and his family actually live therein and used them principally for dwelling purposes. house in case of residential houses. removes the VAT from the goods. etc. EFFECTIVELY TRANSACTIONS: Sales to whom: persons or entities exempted under special laws or international agreements to which the Philippines is a signatory 1.
and stripping (Code:FreDSBRoSS) b. Transactions exempt under special laws and International agreements to which the Philippines is a signatory except those under P. Services rendered pursuant to an Employer-employee relationship. Gross receipts from lending activities by Credit of multi-purpose cooperatives registered with the CDA. Sale of Real property utilized for low-cost and socialized housing. printing. Educational services rendered by government educational institutions and private educational institutions accredited by DepEd. TESDA. 12. 17. b. 529. Investments owned by foreigners 7. broiling. 2006) • gross selling price means the total amount in money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the transaction. 20. which appear at regular intervals with fixed price for subscription and which are not devoted principally for paid advertisements. molasses are always considered in their original state (Code: RiCo SuMo) 2.000. 13. 9. 6. sugar cane. Sales by Agricultural cooperatives registered with CDA. Export sales by persons who are not VAT-registered 15. excluding the VAT • such tax shall be paid by the seller or the transferor 2. S/I of Fertilizers. sugar cane). rice. Sale or lease of goods. 14. Services by agricultural contract Growers and milling for others of RiCo Su (rice. for the Sale of Goods or Properties • 12% of the gross selling price or gross value in money (effective February 1. 21.00. non-bank financial intermediaries performing quasibanking activities 8. livestock and poultry generally used for human consumption. Hospital and veterinary services except those rendered by professionals. Services subject to Percentage tax. seedlings and fingerlings. for the Importation of Goods • 12% of the total value used by the Bureau of Customs in determining tariff and customs duties. Five (5) percent VAT • Sale to the government Computation of the VAT: 1. corn grits. 3. fish. Importation of (GSEF) goods. properties or services where the gross annual sales and/or receipts is not Over P1. drying. prawn. Services of Banks. 500. Note: a. dental. magazine. 22. Medical. the effects are exempt under Tariff and Customs Code 11. • 12% of the landed cost plus excise taxes where the customs duties are determined on the basis of the quantity or volume of the goods 16 Tax Law Study Guide Centralized Bar Operations 2007 . equipment and fuel by persons engaged in international shipping and air Transport operations. 5.Far Eastern University Institute of Law Exempt Transactions: (AFP BRIBE VOTE HELOO GARCI) 1. 16. Importation of personal and household effects provided: a. 19. publication of Books and any newspaper. 4. S/I or lease of passenger or cargo Vessels and aircraft including engine. Sale/ importation of Agricultural and marine food products in their original state. 10. supplies. corn grits. CHED. seeds. products are considered in their original state even if they have undergone simple processes of preparation or preservation for the market freezing. smoking. S/I. review or bulletin. livestock and poultry feeds. salting. excise taxes and other charges or. roasting. equipment and spare parts thereof. 000. Lease of residential unit with a monthly rental less than P10. the effects belong to Overseas Filipino workers/or non-residents coming to resettle in the Philippines. Other cooperatives 18. Services Rendered by regional or area headquarters established by Multinational Corporations.D.
Tax Credits: Output tax • the value-added tax due on the sale or lease of taxable goods or properties by any person required to register Input tax 17 Tax Law Study Guide Centralized Bar Operations 2007 .000. in case of purchase of services or lease or use of properties Rule on Input Tax on Capital Goods: 1. 1996 and distributed by the company to its shareholders shall be subject to VAT based on the zonal value or fair market value at the time of distribution whichever is applicable. Discounts • Must be determined and granted at the time of sale • Expressly indicated in the invoice • The amount thereof forms part of the gross sales duly recorded in the books of the seller • The grant of which does not depend upon the happening of a future event • the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services. royalty or fee. including lease or use of property. exceeds P1. for use in trade or business for which deduction for depreciation or amortization is allowed b. Purchase/Importation i. for the Sale of Services and Use or Lease of Properties • 12% of the gross receipts derived from the sale or exchange of services • gross receipts means the total amount in money or its equivalent representing the contract price. and 2. where such goods are purchased or imported in a calendar month for use in trade or business for deduction for depreciation is allowed. lessee or licensee upon payment of the compensation. the input tax shall be spread evenly over a period of 60 months. rental or royalty. however. service fee. then. Sales returns and allowances • A proper credit or refund was made • The sales previously recorded as taxable sales When may property dividends be subject to VAT? • Property dividends which constitute stocks in trade or properties primarily held for sale or lease declared as retained earnings on or after January 1. Purchase of services on which a VAT has actually been paid Creditable to: i. Creditable input tax: • • any input tax evidenced by VAT invoice or official receipt on the following transactions: a. the purchaser upon consummation of the sale and on importation of goods and properties ii. to the purchaser. that if the estimated useful life of such goods is less 2. commencing from the month the acquisition was made 4. the importer upon payment of the VAT prior to the release of the goods from Custom’s custody iii. for use as supplies in the course of business iv. compensation. 000. from a VAT-registered person. for sale ii. for conversion into or intended to form part of a finished product for sale including packaging materials iii. 3. provided. rental. excluding VAT Deductions or Exclusions from the gross sales/receipts: 1.Far Eastern University Institute of Law • such tax shall be paid by the importer prior to the release of the goods from Custom’s custody 3. for use as materials supplied in the sale of services v. including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person.00. if the aggregate acquisition cost of the capital goods. excluding VAT.
Presumptive Input tax credits – is the input tax credit allowed to persons liable for VAT where their purchases are not subject to input tax. b. at the option of the taxpayer. whichever is higher. amount of claim for refund or tax credit for VAT b. on his beginning inventory of goods. then. before making payment on account of purchase of goods and services deduct and withhold a final VAT at the rate of 5% of the gross payment thereof Tax Law Study Guide Centralized Bar Operations 2007 . materials and supplies. including GOCCs shall. 18 b. then. etc… f. such as purchase returns or allowances c. Public works contractors. the transactions are paid for in an acceptable foreign currency and duly accounted for in accordance with BSP rules. mackerel and milk. total input tax directly attributable to vatable transactions. the excess shall be carried over to the succeeding quarters or quarters. other adjustments. equivalent to four percent (4%) of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production. to the extent that the input tax has not been applied against output tax. c. or due to changes in or cessation of status. • A VAT-Registered person also engaged in non-vatable transactions shall be allowed tax credit as follows: a. instrumentalities or agencies. equivalent to one and one-half percent (1 1/2%) of the contract price with respect to government contracts only in lieu of actual input taxes there from. O > I . if. in case of a person making zero-rated and non zero-rated sales. and in manufacturing refined sugar. Refunds or Tax Credits for Zero-Rated or Effectively Zero-Rated Sales: a. if. b. Persons or firms engaged in the processing of sardines. e. the amount of the creditable input tax due or paid which cannot be directly and entirely attributed any one of the transactions shall be allocated proportionately on the basis of the volume of sales b. input tax attributable to exempt sales Transitional input tax credits – is the input tax allowed to be credited against the output tax of a person who becomes liable to value-added tax or any person who elects to be a VAT-registered person. A ratable portion of any input tax which cannot be directly attributed to either activity. equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods. the input tax shall be allocated ratably between his zero-rated and non zero-rated sales Withholding of VAT: • the Government or any of its political subdivisions. in other appropriate cases. I > O. d. provided: • the input tax carried over from the previous quarter shall not exceed 70% of the output VAT • the input tax attributable to zerorated sales may. materials and supplies. the transaction is exempt which does not entitle him to any refund or tax credit. The following persons are entitled to presumptive input tax credits: a. otherwise. in the case of a person whose registration is cancelled due to retirement from or cessation of business. the Commissioner shall grant refund or issue the tax credit certificate for creditable input taxes within 120 days from the date of submission of complete documents in support of the application Rule where the taxpayer is engaged in zerorated or effectively zero-rated transactions and also in taxable or exempt sales: a. cooking oil and packed noodle-based instant meals. the application may be made within 2 years from the date of cancellation.Far Eastern University Institute of Law than 5 years. taxpayer must be VAT-registered. the excess shall be paid by the VATregistered person b. then the input VAT shall be spread over such shorter period. be refunded or credited against other internal revenue taxes • The excess input tax to be carried over from the preceding month or quarter shall be reduced by: a. application for a tax credit certificate or refund must be made within 2 years after the close of the taxable quarter when the sales were made. • Excess Output or Input Tax a.
BIR 2. Prescription of real property values 6. NIRC) The revenue Regional Director shall approve and sign all LA’s for all audit cases within his regional jurisdiction. 18. and payment of the entire tax due shown on his return Means Employed in the Assessment of Taxes (Sec. 6. the commissioner or his duly authorized representative may authorize the examination of the books of any taxpayer and the assessment of the correct amount tax. Inventory taking. Accreditation and registration of tax agents. EXCEPT (1) cases involving civil or criminal tax fraud under the jurisdiction of the tax fraud division of the enforcement service. Prescription of additional procedural or documentary requirements.May the CTA issue an injunction to enjoin the collection of taxes by the BIR? Explain. Bar ’01 . (Sec. CTRP) (Key: AGEE) Starts with the self-assessment by the taxpayer of his tax liability. Who may issue letter of authority? After a return has been filed. Examination of tax returns 2. 6.Far Eastern University Institute of Law • the payment for lease or use of properties or property rights to nonresident owners shall be subject to 10% withholding tax at the time of payment —oOo— TAX REMEDIES Agencies Involved in Tax Administration 1. fees. surveillance and use of presumptive gross sales and receipts 4. POWER TO ASSESS: Tax Law Study Guide Centralized Bar Operations 2007 . fee or charge imposed by this Code. Execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts I.LOA) 1. 2. and charges 2. NIRC Bar ’96 . The role of the government in assessment process includes the following: i) Examination of books of accounts and other accounting records of taxpayers by revenue officer to determine his correct tax liability (Letter of Authority. Give effect to and administer the supervisory and police power conferred to it by the Tax Code or other laws 3. 8. and municipal assessors and treasurers Powers and Duties of the BIR (Sec. Bureau of Customs 3. Use of the best evidence obtainable 3.May the courts enjoin the collection of revenue taxes? Explain your answer. Revenue officer is allowed only 120 days from the date of receipt of a letter of authority by the taxpayer to conduct the audit and submit the required report of investigation. penalties and fines in connection therewith 4. city. CTRP) (Key: BETI-PPEA) 1. NIRC) Exception: An injunction that may be issued by the CTA in aid of its appellate jurisdiction under RA 1125 TAX REMEDIES UNDER THE Period: Letter of Authority must be served to the concerned taxpayer within thirty (30) days from its date of issuance otherwise it shall be null and void. Enforcement of all forfeitures. Examination of bank deposits to determine the correct amount of the gross estate 7. Assessment and collection of all national internal revenue taxes. 19 A. Termination of taxable period 5. Provincial. General Rule: Tax collection cannot be enjoined by court injunction. filing of the tax return. (Sec. Tax Code provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax.
or 2. the taxpayer shall be informed in writing by the Revenue District Officer of by the Chief of the Division of the discrepancies in the taxpayer’s liability for the purpose of informal conference. – No. taxpayer itself request for an examination of his accounts 3. ii) Preparation of tentative findings and holding of informal conference (Notice of Informal Conference-NIC) Soon after the completion of the tax audit. otherwise it’s fatal to BIR. there is reason to believe that any such report is i. when there is a need to verify the withholding taxes required by the BIR. A. he shall be considered in default In such a case. a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations. 8424 empowers the Commissioner to assess the proper tax and make or amend the return based on the best evidence obtainable (from his own knowledge and from such information as he can obtain through testimony or otherwise) when: 1. in order to afford the taxpayer with an opportunity to present his side of the case. the person may be required to testify or the document may be summoned and required to be presented to the BIR Q. or any other concerned BIR office. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the 20 Tax Law Study Guide Centralized Bar Operations 2007 . informing a taxpayer who has been audited of the findings of the BIR officer following the review of these findings. – Can the BIR issue LOA more than once within a taxable year? S. BIR officer are allowed to issue LOA only once. fals e ii. Power of the Commissioner to assess deficiency tax based on best evidence obtainable – Sec. if warranted. whether the taxpayer agrees with his findings If the taxpayer is not amenable. Instances wherein PAN is NO longer required: 1. he shall then have 15 days from his receipt of the PAN to file a written reply contesting the proposed assessment. The return made by the Commissioner. the factual and legal basis of his findings b.A. • • must show in detail the facts and law on which the proposed assessment is based. erro neous. in this instance. EXCEPT: 1.Far Eastern University Institute of Law (2) policy cases under audit by Special Teams in the National Office. shall be prima facie correct and sufficient for all legal purposes. If the taxpayer fails to respond within 15 days from date of receipt of the notice for informal conference. 6B of R. when capital gains tax must be verified. the Revenue District Officer of the Chief of the Division shall endorse the case to the Assessment Division for review and issuance of deficiency tax assessment. 4. iii) Issuance of Preliminary Assessment Notice (PAN) It is a communication issued by the Regional assessment Division. the revenue officer will render a written report stating: a. when BIR determines that there is fraud or irregularities was committed by taxpayer 2. (RAMO 36-99) • If the taxpayer do not submit the documents or information requested by the BIR. inco mplete iii. If the taxpayer disagrees with the findings stated in the PAN.
the BIR filed a criminal complaint with the Department of Justice against PRDC. giving notice to that effect to the taxpayer. [ Cyanamid Philippines. 1995. such as. or When an article locally purchased of imported by an exempt person. This was supported by an affidavit-report of the examiners detailing the computation of the alleged tax evasion. 1995.A pre-assessment notice is a letter sent by the Bureau of Internal Revenue to a taxpayer asking him to explain within a period of fifteen (15) days from receipt why he should not be the subject of an assessment notice. In a letter dated May 17. for the examination of the books of accounts and other accounting records of Pascor Realty and Development Corporation (PRDC). BIR examiners recommended the issuance of an assessment notice in the amounts of P7 million and P 3 million for the years 1986 and 1987 respectively. PRDC. 21 SCRA 17] Q. Inc. – On the basis of a Letter of Authority. PASCOR.Far Eastern University Institute of Law 2. the BIR could not issue an assessment notice without first issuing a pre-assessment notice because it is part of the due process rights of a taxpayer to be given notice in the form of a pre-assessment notice. he shall be considered in default • in such a case. its President and Treasurer filed an Urgent Request for Reconsideration/Reinvestigation disputing the tax assessment and tax liability. On March 23. On March 1. . – When is an assessment deemed made? S. • Assessment contains not only computation of tax liabilities but also a demand for payment within a prescribed period. has been sold. 1. 309 SCRA 402] • Notice of assessment is presumed valid. 322 SCRA 639] Q.It is the official action of an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer. A. If the taxpayer contested such a determination. together with the corresponding burden of first going forward with evidence. vs. As a general rule. PRDC and its President and Treasurer received a subpoena in connection with the criminal complaint filed by the BIR against them. .An assessment is deemed made only when the collector of internal revenue releases. mails. its President and Treasurer alleging evasion of taxes in the total amount of P10 million. When an excise tax due on excisable articles has not been paid. This action necessarily involves: 21 Tax Law Study Guide Centralized Bar Operations 2007 . inclusive of penalties. capital equipment. CA. and 3. but not limited to vehicles. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year. the burden of proving the determination wrong. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. the making. simultaneously with or sometime after the giving of notice. 4. Inc. 5. [CIR vs. vs. face of the tax return filed by the taxpayer. calling for payment of the deficiency tax liabilities. treated or transferred to non-exempt persons. is on the taxpayer. or sends such notice to the taxpayer regardless whether the taxpayer received the notice within the prescriptive period. of a demand upon him for the payment of the tax deficiency stated. [Basilan Estates. 2. • shall be sent personally or through registered mail TAX ASSESSMENT. and for him to explain why he should be the subject of an assessment notice. the computation of the sum due. 1995. the Commissioner denied the urgent request for reconsideration/reinvestigation filed by PRDC and its officers on the ground that Q. A. a formal letter of demand and FAN shall be issued. and spare parts. 3. machineries. iv) Issuance of Formal Assessment Notice (FAN) and letter of demand • if the taxpayer fails to respond within 15 days from date of receipt. What is a pre-assessment notice and what is its importance? S. CIR.
R. exemptions.Far Eastern University Institute of Law formal assessment has as yet not been issued by the Commissioner. Do you agree with the decision of the Commissioner ? Explain briefly S. February 25. – What assessment”? is meant by “jeopardy Q. 223. Its purpose was merely to support the criminal complaint for assessment. 1998. Ibid. it was not meant to be a notice of the tax due and a demand for the payment thereof. beginning or distraint or levy or proceeding in court. February 25. In October. beginning or distraint or levy or proceeding in court. – A delinquency tax assessment which was assessed without the benefit of complete or partial audit by an authorized revenue officer. CA. the commissioner instead opted to file a criminal complaint. 1995 for its income for the year 1994. . “X” disputed the assessment and requested a reinvestigation. Court of Appeals. NIRC of 1997 which provides: (1) When the Commissioner is prohibited from making the assessment. . what is required is the signatures of both the Commissioner and the taxpayer. . Pascor. 1998 and May. Clearly.The BIR’s authority to assess already prescribed.) Q. The three (3) waivers did not suspend the running of the prescriptive period. 1997. No. That the affidavit-report contained details of the tax liabilities does not ipso facto make the same an assessment. Regs. “X” appealed to the Court of Tax Appeals. et al. The fact that the complaint itself was specifically directed and sent to the Department of Justice and not to the taxpayer shows that the intent of the BIR was to file a criminal complaint for tax evasion. (CIR v. the affidavit-report of the examiners does not constitute an assessment that may be the subject of a motion for reconsideration/reinvestigation. In 1999. 115712. . 1999 (Carnation case) Q. The BIR Commissioner denied the protest. It did not state a demand or a period for payment. It was not addressed to the taxpayers but to the Department of Justice. “X” through it’s authorized representative signed three (3) separate waivers of the “Statute of Limitations under the NIRC. 115712. G. not to issue an assessment. Rev. (CIR v. March.The prescriptive periods for making assessments are three (3) years from the last day within which to file a return or when the return was actually filed and ten years from discovery of the failure to file the tax return or discovery of falsity or fraud in the return. S. S. or to substantiate all or any of the deductions. a unilateral waiver on the part of the taxpayer does not suspend the prescriptive period. . The affidavitreport merely contained a computation of the liabilities.Yes.R. accompanied by assessment notices asking the corporation to pay the deficiency internal revenue taxes for its income for the year 1994. What was received by the taxpayer was notice of the filing of the criminal case not a notice that the BIR had made an assessment. 22 Tax Law Study Guide Centralized Bar Operations 2007 . or levy or proceeding in court and for sixty (60) days thereafter. A.” The waivers were not signed by the BIR Commissioner or his agents. 6-2000) Q. or credits claimed in his return.Grounds for suspending statute of limitations or prescriptive periods for assessment. – What is the period for making an assessment? S.. No. No.“X” Corporation filed its income tax returns in January.1 (a). S. or beginning distraint. A. (2) When the taxpayer requests for and is granted a reinvestigation by the commissioner. Decide. A. The holding in Commissioner of Internal Revenue v. the BIR issued letters of demand. Although the revenue officers recommended the issuance of an assessment. A. Since. – What are the grounds for suspending statute of limitations or prescriptive periods for assessment. 1999 (Carnation case) that the waiver of the period for assessment must be in writing and have the written consent of the BIR Commissioner is still doctrinal because of the provisions of Sec. G. [Sec. The only agreement that could suspend the running of the prescriptive period for the collection of the tax in question is a written agreement between “X” corporation and the BIR entered into before the expiration of the three (3) year prescriptive period extending the said period. on the ground of prescription. 3. A. who has reason to believe that the assessment and collection of a deficiency tax will be jeopardized by delay because of the taxpayer’s failure to comply with the audit and investigation requirements to present his books of accounts and/or pertinent records.
1. – Distinguish the remedies in the collection of deficiency tax and delinquency tax. or jurisprudence in support of his protest against some of the several issues on which the assessment is based. Rev. POWER TO COLLECT: Delinquent Taxpayer When the self-assessed tax per return filed on the prescribed date was not paid at all or was only partially paid. Q.Far Eastern University Institute of Law (3) When the commissioner could not be located in the address given by him in the return filed upon which the tax is being assessed or collected. our tax law provides a statute of limitation on the collection of taxes. A. should be liberally construed in order to afford such protection. Deficiency tax The amount by which the income tax as determined by the BIR exceeds the amount shown as tax per return. executory and demandable 3. Submission of documentary evidence and argument • Within 60 days from date of filing of protest • Failure to submit would render the assessment final. Q. the assessment shall become final. the tax can immediately be collected administratively through the issuance of the warrant of distraint and levy. the taxpayer shall be required to pay the corresponding deficiency tax or taxes attributable thereto. in which case. 1299) Q. 3. A. on the other hand. 1999) B. Inaction of the CIR • Failure to act on the protest within 180 days from date of submission of the required documents would give rise to the right of the taxpayer to appeal • The appeal should be made within 20 days from the lapse of the said 180-day period • Otherwise. Feb 24. No. – What are the requirements for a valid taxpayer’s protest? S. the exceptions to the law on prescription should perforce be strictly construed. the applicable law. or a member of his household with sufficient discretion. (Sec. . rules and regulations. (4) When the warrant of distraint and levy is duly served upon the taxpayer. the same shall be considered undisputed issue or issues.The taxpayer shall state the facts. 2. If therer are several issues involved in the disputed assessment and the taxpayer fails to state the facts. executory and demandable • The prescriptive period for assessment or collection shall be suspended. B. Thus. or The deficiency tax assessed by the BIR became final and executory. his authorized representative. G. and no property could be located. – What is the rule in the construction of the period of prescription? S. For the purpose of safeguarding taxpayers from an unreasonable examination. the law on prescription. being a remedial measure. 104171. . the tax can be collected also through administrative and judicial remedies but has to 23 Tax Law Study Guide Centralized Bar Operations 2007 . and (5) When the taxpayer is out of the Philippines. or If no amount is shown or if no return is made. his protest shall be considered void and without force and effect. Regs. Filing of administrative protest by the taxpayer against the assessment • Within 30 days from receipt of the FAN • Failure to make such protest would render the assessment final.5. executory and demandable. otherwise.. Denial of protest • The taxpayer may appeal to the Court of Tax Appeals (CTA) within 30 days from date of receipt of the decision • Otherwise. in delinquency tax. then the amount by which the tax as determined by the BIR exceeds the amounts previously assessed (or collected without assessment) as a deficiency C. As a corollary. PROTEST 1. the applicable law. – In deficiency tax. the assessment shall become final. executory and demandable 4. S. investigation or assessment. and by judicial action and the filing of a civil action for its collection in the ordinary court is a proper remedy. A. or jurisprudence on which his protest is based.F. (CIR v.Law on prescription should be liberally construed in favor of the taxpayer. Goodrich Phil. rules and regulations.R.
00 or less than Requisites of distraint: a. Judicial Remedies a. or judgment creditor until notice of such lien shall Tax Law Study Guide Centralized Bar Operations 2007 . and the filing of a civil action at the ordinary court for collection may be the subject of a motion to dismiss.000. the period within which to assess or collect the tax has not yet prescribed. tax lien b.00 b. credits and interest and rights to personal property. But effectivity against third persons-only when notice of such lien is filed by the Commissioner in the Register of Deeds in the province/city where the property is situated (Sec. • Extent-upon all property and rights to property belonging to the taxpayer attaches not only from the time the warrant was served BUT from the time tax was due and demandable. distraint (actual and constructive) c. and d. II. • • • Who may effect distraint? a.Far Eastern University Institute of Law go through the process of filing the protest against the assessment by the taxpayer and denial of such protest. • Accrues when the taxpayer neglects or refuses to pay his tax liability after demand with interests. c. a petition for review must be filed with the CTA within the 30 days to toll the running of the prescriptive period. criminal action have been filed in the register of deeds of the province or city where the property is located. forfeiture of property f. a person fails to pay his delinquent tax obligation. Tax lien • A legal claim or charge on property of the taxpayer as security for the payment of some debt or obligation. Kinds: a. levy d. including stocks and other securities. there must be a subsequent demand for its payment (assessment). b. 219) Note: Superior to judgment claim of private property. • The lien is not valid against any mortgagee. the taxpayer must be delinquent (except in constructive distraint) in the payment of tax. In addition. penalties and fines h. or b. 2. debts. purchaser. suspension of business operations. Note: Distraint or levy NOT availed of where the amount of tax involved is NOT MORE than P100 • Enforcement of administrative fine A. Distraint The collection of taxes is enforced on the goods. the taxpayer fails to pay the tax at the time required. compromise and abatement g. Commissioner or his duly authorized representative if the amount involved is more than P1. Revenue District Officer if the amount involved is P1. Actual distaint • there is taking of possession of the property from the taxpayer by the government • resorted to when at the time required for payment.000. civil action b. Administrative Remedies 1. chattels or effects and other personal property. leaving a list of the distrained property. by service of a warrant of distraint or garnishment • Procedure 24 Note: One or all of the remedies may be pursued simultaneously in the discretion of revenue authorities.000. penalties and costs that may accrue in addition thereto.000. sale of property of a delinquent taxpayer e. REMEDIES OF THE GOVERNEMNT FOR NON-PAYMENT OF TAXES Administrative remedies a. • Effected by: a.
Learning of X’s death from the newspapers. Stocks and other Securities i. May the bank holding the deposit refuse to comply on the ground of the secrecy of Bank deposit Law? S. A. 208 NIRC) Bar ’98 . – Yes. the bank cannot refuse to comply with the BIR Commissioner’s request. association c. chattels and other personal property i. the BIR Commissioner’s power is an exception to the Bank Secrecy Law. signed by the officer. (Sec. or c. warrant shall be sufficient authority to pay the Commissioner the amount of such debts or credits d. Goods. 6 (F). (Sec. RA 8424) Note: Report on the Distraint by the distraining officer must be submitted within 10 days from receipt of the warrant to the Revenue District Officer and to the Revenue Regional Director. remove his property therefrom. statement of the sum demanded iii.Far Eastern University Institute of Law a. b. The order of Distraint may be lifted by the Commissioner or his representative (Sec.Can the Commissioner of Internal Revenue inquire into the bank deposits of a taxpayer? If so. leave the Philippines. Bank accounts (garnishment) i. the BIR Commissioner can inquire into the deposits of a taxpayer under two (2) instances: (1) To determine the Gross Estate of a decedent. he performs any act tending to obstruct the proceedings for collecting the tax due • 25 Procedure Tax Law Study Guide Centralized Bar Operations 2007 . 6 (F). The NIRC gave the authority to the Commissioner to inquire into the bank deposit of any taxpayer to determine into the bank deposit of any taxpayer to determine the Gross Estate at the time of the death of said taxpayer. time and place of sale b. treasurer or other responsible officer of the issuing corporation. (2) When a taxpayer applies for a compromise of his tax liability by reason of financial incapacity. treasurer or other responsible officer of the bank ii. A. – No. manger. serving a copy of the warrant upon the taxpayer AND upon the president. intending to – i. No. manager.A. S. Constructive distraint • the owner is merely prohibited from disposing of this property • issued even when there is no actual tax delinquency • availed of when taxpayer is: a. retiring from any business subject to tax. 1405 (Secrecy of Bank Deposits Law). company. does his power of the Commissioner conflict with R. bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient (Sec. or iii. Debts and Credits i. shall be left either from the owner or the person from whom the property was taken or at the dwelling or place of business of such person and with someone of suitable age and discretion ii. This is an exception to the Secrecy Law. leaving a copy of the warrant with the person owing the debts or having in his possession such credits or his agent ii. serve a warrant of garnishment upon the taxpayer AND upon the president. hide or conceal his property. 207 A NIRC) b. the Commissioner of Internal revenue wrote to every bank in the country asking them to disclose to him the amount of deposits that might be outstanding in his name or jointly with others at the date of his death. a copy of an account of the property distrained. or ii. RA 8424) Bar ’03 – X dies in year 2000 leaving a bank deposit of P2 Million under joint account with his associates in a law office. effects.
– Lien is directed against the property subject to the tax. the property seized must be owned by the taxpayer. while contructive distraint may be 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. if he is absent from the Philippines. while constructive distraint is not necessarily so. distraint from purpose being to prevent the taxpayer from disposing of his property pending final determination of his tax liability. sign a receipt covering property distrained ii. while in constructive distraint. the name of the taxpayer. b. there is a taking of possession or transfer of control over the property distrained. leave a copy in the premises where the property is located (Sec. In lien. while in distraint. (5) In actual distraint.Far Eastern University Institute of Law a. Where taxpayer or person in possession refuses to sign: i. or after the distraint of personal property belonging to the delinquent. the Register of Deeds of the province or city where the property is located. simultaneously or after the distraint of personal property belonging to the taxpayer Effected by: a. writing upon an authenticated certificate showing: 1. and (7) Actual distraint is an immediate step for collection of delinquent taxes. A. is collected. while constructive distraint may be made on the property of any taxpayer. – (1) Both are summary remedies for the collection of taxes. 3. amounts of the tax and penalty due 3. The remedy by distraint and levy may be repeated if necessary until the full amount. (4) Actual distraint is made on the property only of delinquent taxpayer. while distraint need not be directed against the property subject to the tax. the taxpayer is merely prohibited from disposing of his property. without the authority of the Commissioner b. if there be none. simultaneously. (6) Actual distraint is effected by leaving a list of the property distrained or by service of a warrant of distraint or garnishment. the delinquent taxpayer 3. to the occupant of the property in question. Levy It refers to the act of seizure of real property in order to enforce the payment of taxes. whether delinquent or not. 2. (2) Both refer only to personal property. – Compare actual constructive distraint. obligate himself to preserve the same intact and unaltered iii. and 2. written notice of the levy shall be mailed to or served upon: 1. to his agent or the manager of the business in respect to which the liability arose 4. not to dispose of the property in any manner. Q. The requisites for the exercise of the remedy of levy: same as in the remedy of distraint When: before. S. 206 NIRC) Q. (3) Both cannot be availed of where the amount of the tax involved is not more than P100. Require the taxpayer or any person having control of the property to i. A. distraining officer shall prepare a list of the property distrained ii. Procedure: • • • • S. Distinguish lien from distraint. description of the property upon which levy is made. Real property may be levied upon before. the ownership of the property is not necessary of the taxpayer. in the presence of 2 witnesses. its 26 • • • Tax Law Study Guide Centralized Bar Operations 2007 . including all expenses.
and it shall cover a period of at least 30 days i. through duly licensed commodity or stock exchanges. with the approval of the CIR In case of distrained property: a. The time of sale shall not be less than 20 days 27 In case of levied Property: a. disposition of proceeds of sale i. In case the proceeds of the sale exceed the claim (taxes. the Register of Deeds where the property is located and ii.Far Eastern University Institute of Law (a) internal revenue officer shall prepare a duly authenticated certificate showing the name of taxpayer. at the main entrance of the municipal building or city hall. on the premises to be sols. as the officer conducting the proceedings shall determine and as the notice shall specify c. penalties. by publication once a week for 3 weeks in a newspaper of general circulation in the municipality or city where the property is located. notification specifying the time and place of sale and the articles distrained shall be exhibited i. or ii. in the municipality or city where the distraint is made b. Sale of property after notice to the owner or possessor of the property and the publication or posting of such notice c. Sale of the property at i. levy on real property shall proceed within 30 days after distraint (e) Report on levy i. 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 the levy. in not less than 2 public places (one place shall be at the office of the Mayor) ii. Enforceable throughout the Philippines (b) officer shall write upon the certificate a description of the property upon which levy is made (c) written notice of levy shall be mailed or served upon i. posting a notice at the main entrance of the municipal building or city hall and ii. the taxpayer or agent/manager of the business in respect to the tax liability or to the occupant of the property (d) If personal property of taxpayer is not sufficient to satisfy the tax due. or ii. Redemption by the taxpayer Tax Law Study Guide Centralized Bar Operations 2007 . by levying officer (1) submitted within 10 days from receipt of warrant (2) submitted to the Commissioner or his representative ii. by the Revenue Regional Director-consolidated report. public auction to the highest bidder for cash. and interest) and cost of the sale. in a public and conspicuous place in the barrio or district in which the real estate lies and iii. amounts of tax and penalty due. sale at public auction to the highest bidder i. the excess shall be turned over to the owner of the property. as may be required by the Commissioner (f) The warrant may be lifted by the Commissioner or his representative 4. b.
The 1 year period starts from the date of registration of the declaration of forfeiture Compromise and A. b. By the taxpayer or anyone for him by paying the full amount of: Taxes Penalties Interests. declaration for forfeiture. the taxpayer must have a tax liability. Upon registration of the ii. if the amount of the highest bid is insufficient to pay the taxes. and Costs of sale • Compromise – a contract whereby the parties by reciprocal concessions. as the case may require • Redemption by the taxpayer a. 6. When the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. Forfeiture Effected when: a. be entitled to the rents and other income thereof 5. Other cases: 40% of the basic assessed tax The approval of the Evaluation Board (composed of 28 Tax Law Study Guide Centralized Bar Operations 2007 . the owner shall: a. c. rejection of an offer of compromise: final and binding unless revoked or set aside by the Commissioner. avoid litigation or put an end to one already commenced. Commissioner of Internal Revenue is the only official vested with such power and discretion. penalties and costs The Register of Deeds concerned shall: a. b. or b. Without the necessity of an order from a competent court Enforced by: a. transfer the title of the property to the government b. Requisites: a. In case of financial incapacity: 10% of the basic assessed tax b. in case of personal property seizure and sale or destruction of the • • i. in case of real property judgment of condemnation and sale in a legal action or proceeding. there must be acceptance (by the Commissioner or taxpayer as the case may be) of the offer in the settlement of the original claim. ii. b. Abatement Limitation as to amount of: a. Same as that of redemption in case of sale b. Officers authorized to compromise: a. When a reasonable doubt as to the validity of the claim against the taxpayer exists. Compromise of civil cases: Grounds (civil cases) a. from the registration of the registration of the deed of sale. Subordinate officials may preliminarily enter into compromise. that is. there is no bidder for the real property in the public sale. there must be an offer (by the taxpayer of an amount to be paid him) • Pending redemption of the property sold.Far Eastern University Institute of Law Within 1 year from the date of sale. ii. not be deprived of the possession of the property b. b. The effects are: acceptance of an offer of compromise: not final and may be reviewed by the Commissioner. • • i. property i. civil or criminal.
02]) • Extent of discretion: a. 2002) The compromise offered also meets the minimum requirement of 10% of the assessment for cases involving financial incapacity. but attempts to execute the judgment award were futile. With respect to the liability of the taxpayer for surcharges as their imposition is mandatory b. – Yes. except: a. Dec 16. In cases finally decided by the courts Bar ’04 – After the tax assessment had become final and unappelable. Sec. 204 (A). The basic tax involved exceeds Php1. Only a criminal violation already filed in court or one involving criminal tax fraud cannot be compromised. the BIR filed with the RTC an action for collection of the deficiency withholding tax for 1997. the deficiency tax remained unpaid. Does the commissioner have the power to accept the compromise offer? Is it legal and ethical? Explain briefly. the BIR issued a deficiency withholding tax assessment in the amount of P150.000. 2 [Dec 16. S. because of financial difficulty. representing that this amount is all he could really afford. (Sec. after the information is filed with the court: the Commissioner is no longer permitted to compromise with or without the consent of the prosecutor. On May 17. after the complaint is filed with the prosecutor’s office but before the information is filed with the court: the Commissioner can still compromise provided the prosecutor consented. a decision was rendered by the court ordering NX to pay the tax due plus penalties and surcharges. 30-02.Far Eastern University Institute of Law the CIR and the Deputy Commissioners) is required when: a. Sec. c. RA 8424) B. A. May criminal violations of the Tax Code be compromised? If Minolta makes voluntary offer to compromise the criminal violations for non-filling and non-payment of taxes for the year 1998. (Minolta) is an EPZA-registered enterprise enjoying 29 • Remedies when taxpayer refuses or fails to abide by a tax compromise: Tax Law Study Guide Centralized Bar Operations 2007 . as a result of which the assessment became final and executory. Compromise in criminal violations: preferential tax treatment under a special law. S. Subsequently. After investigation of it’s withholding tax returns for the taxable year 1997. – Yes. 000. before the complaint is filed with the prosecutor’s office: the Commissioner has full discretion to compromise except those involving fraud. NX offered the Commissioner a compromise settlement of 50% of the judgment award. in violation of the provisions of the NIRC. (RR No. may the commissioner accept the offer? Explain. The judgment became final and executory. provided it is approved by the Evaluation Board Limitation as to coverage: a. those already filed in court b. 2002. the Commissioner has the power to accept the compromise offered provided the case does not involve (1) Estate taxes or (2) the doubtful validity of the tax assessment. those involving fraud. A. 3. 1999. Minolta did not file its final corporate income tax return fro the taxable year of 1998. or b. Inc. b. The settlement offered is less than the MCR Note: The MCR may be less than the prescribed rates of 10% or 40%.000. because it allegedly incurred net loss from its operations. as the case may be. After several years. The BIR also found that. the Commissioner of internal revenue initiated the filing of a civil action to collect the tax due from NX. Bar ’02 – Minolta Philippines. (RR No. On May 15. • All. the Commissioner may accept the offer to compromise the criminal violation for non-filing and nonpayment of taxes since the case has not been filed in court and no criminal tax fraud is involved. 30-02.
judicial compromise can be enforced by mere execution ii. • Penalty of 25% of the amount due for: a. which are still pending. NCC) • Compromise Penalty a. Paid in lieu of criminal prosecution c. Filing a return with the wrong agent of the BIR. surcharges b. b. – a) Delinquent account cases may be compromised based on the BIR’s revenue regulation on the matter. c) Criminal tax fraud cases. confirmed as such by the Commissioner of Internal Revenue or his duly authorized representative may not be compromised based on the BIR’s revenue regulation on the matter. Failure to file any return and pay the tax due thereon. 3. b) Pending cases under administrative protest. If he does not want to pay. or b. d) Criminal violation already filed in court may not be compromised based on the BIR’s revenue regulation on the matter. Dec 16. 2002) C. b. minor criminal violations. (RR No. after issuance of the final assessment notice to the taxpayer. A. Bar ’05 – State and discuss briefly whether the following cases may be compromised or may not be compromised: a. d. protect the State revenue. deficiency and delinquency interest c. regard it as rescinded and insists upon original demand (Art. e) Cases where final reports of reinvestigation or reconsideration have been issued. reimburse the government for the expenses in investigating and the loss resulting from the taxpayer’s fraud. unless otherwise authorized by the CIR Tax Law Study Guide Centralized Bar Operations 2007 . resulting in the reduction of the original assessment agreed to by the taxpayer when he 30 signed the required agreement form. An amount which the taxpayer pays to compromise a tax violation b. Criminal tax fraud cases. When the administration and collection costs involved do not justify the collection of the amount due GEN RULE: the power to compromise and abate cannot be delegated by the CIR EXCEPT: a. the CIR must institute a criminal action. assessments issued by regional offices involving basic taxes of Php500. compromise penalty A. and b. extrajudicial can only be enforced by court action b. Abatement cancellation of the tax liability – • Grounds: a. enforce the compromise i.Far Eastern University Institute of Law a. Sec. Penalties and fines Refer to: a. Criminal violations already filed in court. Cases under administrative protest. A taxpayer cannot be compelled to pay a compromise penalty d. 30-02. e. S. Surcharges: • Not really a penalty as used in criminal law but a civil administrative sanction designed primarily to: a. may not be compromised. c. 2041.000 or less. 7. Delinquent accounts. may be compromised based on the BIR’s revenue regulation on the matter. When the tax assessed or any portion thereof appears to be unjustly or excessively demanded. and b. Cases where final reports of reinvestigation or reconsideration have been issued resulting in the reduction of the original assessment agreed to by the taxpayer when he signed the required agreement form.
which may be the subject of criminal prosecution. – Yes. – Distinguish compromise penalty. the minimum amount depends on the legal grounds used by the taxpayer. S. In compromise. A fine of not less than PHP50. d. Q. Delinquency interest • Interest of 20% or the Manila Reference rate. A compromise penalty cannot be imposed in the absence of a showing that the taxpayer consented thereto. He did not willfully order the filing of a falsified return. Imprisonment of not less than two years but not more than four years.000 but not more than PHP100. failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment. the basis of amount paid is the basic tax assessed. it depends on the nature of the tax violation and 31 Tax Law Study Guide Centralized Bar Operations 2007 . A. who is engaged in the trading business. if any. and c. cannot be presumed but must be clearly established.000. – Compromise is defined as an amount of money paid by the taxpayer to settle his civil liability for tax assessed. and b. Imprisonment of not less than two years but not more than six years. Fraud. e. his CPA certificate shall be automatically revoked or cancelled upon conviction. (3) When the offender is a Certified Public Accountant. with the intent to evade tax payment. the deficiency tax or any surcharge or interest thereon. The CIR has no power to impose and collect the compromise penalties in the absence of a compromise agreement validly entered into between the taxpayer and the CIR compromise from Bar ’05 – Danilo.000 but not more than PHP100. They both imply mutual agreement. of the accountant? Discuss. A. required to be paid in case of failure to pay: c. while in compromise penalty. Is Danilo liable for the deficiency tax and the penalties thereon? What is the liability. the amount of the tax due on any return required to be filed.Far Eastern University Institute of Law c. (2) For willfully attempting to evade or defeat any tax: a. while in compromise penalty the basis is the gross sales or receipts during the year of the tax due. on the date appearing in the notice and demand of the CIR. The accountant can be held liable. b. In compromise. entrusted to his accountant the preparation of his income tax return and the payment of the tax due.000. Compromise: • Similarities of compromise and compromise penalty: a. Deficiency interest • 20% per annum from the date prescribed for its payment until the full payment thereof C. The accountant filed a falsified tax return by underdeclaring the sales and overstating the expense deductions by Danilo. as follows: (1) For willfully attempting to evade or defeat the payment of the tax: a. Failure to pay the full or part of the tax as shown on the return on or before the due date B. S. b. But he may be excused from paying the 50% penalty for the falsified tax return. while compromise penalty is defined as an amount of money paid to compromise a tax violation that he has committed. Danilo is liable for the deficiency tax. A fine of not less than PHP30. criminally and civilly. b. d. amount of the tax due for which return is required. whichever is higher. Interest: a. A civil suit to collect the tax.
delinq uent ii. • Defenses precluded by final and executory assessments: i.Far Eastern University Institute of Law the minimum amount is generally not less than PHP 1. Accordingly. 000. b. Invali dity or illegality of the assessment. However. Presc ription of the government’s right to assess. a discrepancy between the taxes withheld from its employees and the amounts actually remitted to the government was found. and ii. MTC or RTC). 1125 prosper? Discuss your answer. No. the action for prohibition before the CTA will not proper. B. – No. 2000. CIR. Counsel for Valera protested the assessment and requested a reinvestigation of the case. filing an answer to the petition for review filed by the taxpayer with the CTA The fact that no civil action was filed before the ordinary courts to collect the tax liability is no ground for claiming that the right to collect had already prescribed. Failur e to file a timely appeal to the CTA on the final decision of the CIR or his authorized representative on the disputed assessment. No appeal to the CTA from the Commissioner of Internal Revenue shall suspend the taxpayer’s payment of his tax liability. Counsel for AZ Medina protested the assessment for being null and void on the ground that no pre-assessment notice had been issued. As no additional evidence to dispute the assessment had 32 Tax Law Study Guide Centralized Bar Operations 2007 . Noncompliance with the condition laid in the approval of protest. • Enforced by: a. filing a civil case for the collection of a sum of money with the proper regular court (i.A. S. it was shown that Valera had been transferring its properties to other persons. or • Resorted to only when tax becomes: i. Final assessment is not protested administratively within 30 days from date of receipt.e. Will the special civil action for prohibition brought before the CTA under Sec.000. vs. (Hermanos. A. It includes filing by the government with the probate court claims against the deceased taxpayer. iii. before the period of prescription commenced to run the BIR issued an assessment and a demand letter calling for the immediate payment of the deficiency withholding taxes in the total amount of P250. RA 9282. ii. Counsel then filed a petition with the CTA to restrain the collection of the tax. collec tible • Collectibility arises when: i. the protest was denied. 11. Inc. Civil Actions – actions instituted by the government to collect internal revenue taxes. The answer filed by the government in the CTA is tantamount to the filing of a civil action for collection the regular court and has the effect of tolling the prescriptive period. Selfassessed tax shown in the return was not paid within the date prescribe by law. 11 of R. Judicial Remedies 1. 2004) Bar ’02 – On March 15. iv. 29 SCRA 552) Bar ’02 – In the investigation of the withholding tax returns of AZ Medina Security Agency (AZ Medina) for the taxable years 1997 and 1998. the BIR issued a deficiency income tax assessment for the taxable year 1997 against the Valera Group of Companies (Valera) in the amount of P10 Million. CTA will not suspend collection because that will jeopardize the interest of the government with no injury to the taxpayer. March 30. During the investigation. (Sec.
pending decision on the administrative protest? Explain. Attempt to evade or defeat a tax Any person who willfully attempts in any manner to evade or defeat any tax or the payment thereof shall. He also demanded the return of the garments and materials seized from his factory. S. 4832. Chan’s motion to dismiss his criminal case. 2000 warrants of distraint and levy on the properties and ordered the filling of an action in the RTC for the collection of the tax. therefore. Despite the subpoena duces tecum issued to him. Ungab v. 1997) 2. The conviction or acquittal shall not be a bar to the filing of a civil suit for the collection of taxes. inclusive of penalties incident to delinquency. Tax Law Study Guide Centralized Bar Operations 2007 . Chan’s motion? S. raided his factory and seized several bundies of manufactured garments. – I shall deny Mr. make a return iii. the BIR issued on June 10. at the BIR’s option. a petition for review with urgent petition for issuance of injunction to restrain tax collection pending appeal together with the filing of a surety bond for the total amount of assessment. Feb 6. (FEBTC v. A. supplies and unpaid 33 imported textile materials. Criminal Action 2 Common crimes punishable under the Tax Code: a. was investigated for failure to file tax returns and to pay taxes for the taxable year 1997. 1980]) b. he refused to present and submit his books of accounts and allied records. substantial underdeclaration of taxable sales. His failure to file his tax return is a criminal act in the Tax Code. Chan on April 15. How will you resolve Mr. to pay any tax ii.41919-24. Chan can be criminally prosecuted for such an offense. pay tax. within thirty (30) days from receipt of the copy of the BIR’s complaint filed before the RTC. a. who willfully violates these duties at the time or times required by law shall be punished upon conviction in addition to other penalties Prima facie evidence of a false or fraudulent return 1. the BIR can file the civil action for collection. Pascor. despite his complete payment of the taxes. CTA Case No. A. 2000. deficiency income and business taxes were assessed against Mr. upon conviction thereof. in addition to other penalties provided by law. a manufacturer of garments. Any tax payment resolves the civil but not the criminal aspect of the case. supply correct and accurate information. [May 30. Mr. withhold or remit taxes withheld vi. – a) Yes. CIR. CTA Case No. I shall file with the CTA. 1997) b) As Valera’s counsel. be punished. The criminal charge need only be supported by a prima facie showing of failure to file a required return. what action would you take in order to protect the interest of your client? Explain your answer. refund excess taxes withheld on compensation. Counsel for Valera filed an injunctive suit in the RTC to compel the BIR to hold the collection of the tax in abeyance until the decision on the protest was rendered. Failure to file return.Far Eastern University Institute of Law been presented. Bar ’02 – Mr. CIR. Chan moved to dismiss the criminal case on the ground that he had already paid the taxes assessed against him. Feb 6. CIR. Mr. (FEBTC v. supply correct and accurate information v. withhold and remit tax and refund excess taxes withheld on compensation Any person required under the Tax Code i. After his apprehension and based on the testimony of a former employee. keep any record iv. Can the BIR file the civil action for collection. As counsel for Valera. This fact need not be proven by an assessment. 4832. Chan. The BIR’s warrant of distraint and levy on the properties and the filing of an action in the RTC for collection of the tax is the denial of the taxpayer’s protest. Investigators. L. GR Nos. Criminal action was nonetheless instituted against him in the RTC for violation of the Tax Code. (CIR v. b. It was then that he paid the taxes.
action to contest forfeiture of chattel. How will you resolved the motion? Explain your answer. An assessment is not necessary before a criminal charge can be filed provided there is a prima facie showing of a willful attempt to evade taxes. 2. receipts or income in an amount exceeding 30% of actual deductions constitutes substantial overstatement of deductions. The company moved to dismiss the criminal complaint on the ground that an act 34 judicial – civil action appeal to CTA – within 30 days from receipt of decision on the protest or from the lapse of 180 days due to inaction of the Commissioner. S. – I shall deny the motion to dismiss because the BIR action to collect has not prescribed. a. as determined by the Commissioner pursuant to the rules an regulations promulgated by the Secretary of Finance. File a request for reinvestigation or reconsideration within 30 days from receipt of the assessment request for reinvestigation-a plea for reevaluation of an assessment on the Tax Law Study Guide Centralized Bar Operations 2007 . after payment – filing of claim for refund or tax credit within two years from date of payment regardless of any supervening cause. the tax assessment can no longer prescribe. it is still possible for such tax to be collected by criminal action inasmuch as actions of this kind prescribe only after the lapse of 5 years counted from the discovery of the crime.Far Eastern University Institute of Law receipts or income or a substantial overstatement of deduction. 2. i. 1997. and Injunction – when the CTA in its opinion the collection by the BIR may jeopardize taxpayer. 1994 showing a net loss from operations. entering into a compromise. A. b. On January 10. 1997. the period commence to run on March 30. ii. Bar ’02 – TY Corporation filed its final adjusted income tax return for 1993 on April 12. 1984) III. i. After investigation. personally delivered to and received by the company’s chief accountant. For willful refusal and failure of TY Corporation to pay the tax. The prescriptive period is three (3) years from the deadline of income tax filing or on April 16. REMEDIES OF TAXPAYER 1. in this case. 1996 when the pre-assessment was issued. penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner. a criminal charge for violation of the Tax Code was instituted in the RTC with the approval of the Commissioner. iii. ii. protest ii. Sept 5. Note: No civil or criminal action for the recovery of taxes or the enforcement of any fine. Protest of Assessment 1. lack of such approval merely affects the cause of action or capacity to sue. A final notice and demand letter dated 15 April 1997 was issued. and action for damages criminal action – Filing of criminal complaint against erring BIR official and employees. warrants of distraint and levy on its properties were issued and served upon it. the BIR issued a preassessment notice on March 30. With the BIR’s final notice and demand letter served on April 15. When the civil action arising out of a tax delinquency is extinguished by prescription. Republic. b. GR No. A. 2002. (Mambulao Lumber v. administrative – before payment – i. for violation of any provision of the Tax Code prescribes after five (5) years and. a. 1996. L37061. The approval of the Commissioner required for the judicial enforcement of tax liability is not jurisdictional. failure to report sales.
it must be filed with the Commissioner within two years (2) after the payment of the tax or penalty. Starting date for counting the 2-year period: GEN. all relevant supporting documents should have been submitted. request for reconsideration-a plea for reevaluation of the assessment on the basis of existing records without need of additional evidence. (Sec. tax is collected erroneously or illegally. claim must be in 2. Involves a question of fact or law or both. and Bar ’05 – a) State the conditions required by the Tax Code before the Commissioner of Internal Revenue could authorize the refund or credit of taxes erroneously or illegally received. 2. regardless of any supervening cause that may arise after payment: EXCEPTIONS: 1.Far Eastern University Institute of Law basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation.a claim for issuance of a tax credit certificate. the taxes are deemed paid. Involves a question of fact or law or both. 228 NIRC) Appeal of Protest to the CTA (Sec. Period to appeal: a) within 30 days from receipt of decision denying the protest or b) 30 days from the lapse of 180 day period B. Appellate Court: Court of Tax Appeals 3. penalty is collected without authority. otherwise. 2. Corporate Income tax Where a corporation paid quarterly income taxes in any of the first 3 quarters during the taxable year but incurs a net loss during the taxable year. 228 NIRC) 1. Grounds: a) if the protest is denied in whole or in part or b) is not acted upon within 180 days from submission of documents 2. Note: A return filed showing an overpayment shall be considered as a written claim for credit or refund. showing an amount owing from the government to the taxpayer which the latter is legally authorized to credit or offset against national internal taxes payable by him. RULE: from the date of payment. executory and demandable Tax Refund or Tax Credit Grounds: 1. Income tax paid in installments Where the tax paid had been paid in installment. sum collected is excessive Requisites: C. writing. for purposes of determining the commencement of the 2year period for filing a written claim for the refund or credit therefore on the date the last installment was paid. • • 1. (Revenue Regulation No. 3. proof of Tax credit . 3. • Show payment. 1285) 2. • • • • Effect of failure to appeal: the decision shall be final. except withholding taxes. 35 Tax Law Study Guide Centralized Bar Operations 2007 . the 2-year period for the filing of the claim for refund or credit shall be counted from the date of the filing of the annual corporate ITR. Within 60 days from filing of protest. the assessment shall become FINAL (cannot be appealed).
failure to file a return: ten (10) years from the date of the discovery of the omission to file the return. (CIR v. 2. The taxpayer cannot be entitled to refund and at the same time be liable for a deficiency assessment for the same year. They are also beneficial to the government because tax officers will be obliged to act promptly. 3. even without a written claim. having sufficient legal interest to bring a suit for refund of taxes illegally collected from him. 1992) Bar ’05 – Is a deficiency tax assessment a bar to a claim for tax refund or tax credit? Explain. while fraudulent return is intentional and deceitful with the aim of evading the correct tax due. RA 8424) b) Yes. 4. provisions on prescriptions. Prescriptive period ASSESSMENT of taxes: for the GENERAL RULE: three years after the date the return is due or filed. the withholding agent has the right to file for tax refund. 1994]) Bar ’02 – a) What must a taxpayer do in order to claim a refund of. Said return cannot be the basis of a refund. A. CTA Feb 11. when no return is required. tax is imprescriptible. – a) A taxpayer shall file a claim with the Commissioner of Internal Revenue for the refund or for tax credit for taxes and penalties erroneously or illegally assessed or collected within two (2) years from the time the final adjusted tax return is file. A refund assumes that the tax return is true and correct. (Sec. Oct 3. (CIR v. a deficiency tax assessment is a bar to a tax refund or tax credit. being remedial in nature should be liberally interpreted to carry out its intent. 2003) IV. – a) The BIR Commissioner can authorize a tax refund or credit when: 1) The taxpayer files a written claim for credit or refund with the BIR or shows in the tax return an overpayment. tax is imprescriptible. S. CA-GR SP No. Bar ‘96 – Distinguish a false return from a fraudulent return. A. waiver or renunciation of the original three (3) year limitation. signed by the taxpayer. S. 48907. and 4. Philam. 2) The claim is made within two (2) years after payment of the tax or penalty. whichever is later. illegally or excessive or collected? b) Can the Commissioner grant a refund or tax credit even without a written claim for it? S. (Anscor Hagedorn Securities v. such payment appears clearly to have been erroneously paid. S. 2. when the tax law itself is silent on prescription. He is a party in interest. A. – Yes. false or fraudulent return with intent to evade the tax: ten (10) years from the date of the discovery of the falsity or fraud. Citytrust & CTA [July 21. agreement in writing: to the extension (not reduction) of the period to assess between the Commissioner and the taxpayer before the expiration of the three year period. 3) The taxpayer did not avail of any incentives under special laws where no actual payment was made. defense of prescription is waivable. GR No. 105208. General Rules: 1. May 29. – False return merely implies a decision from the truth or fact whether intentional or not. EXCEPTIONS: 1. 1995) b) Yes. (CIR v. 204 (C). taxes and penalties which he alleges to have been erroneously. CA.Far Eastern University Institute of Law b) Does a withholding agent have the right to file an application for tax refund? Explain. PRESCRIPTION Purpose: Prescription periods are designed to secure the taxpayers against unreasonable investigation after the lapse of the period prescribed. 36 Tax Law Study Guide Centralized Bar Operations 2007 . 3. A deficiency assessment creates doubt to the truth and accuracy of the Return. CIR. or tax credit for. 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. where on the face of the return upon which payment was made. A. the Commissioner may refund or credit any tax.
2. offender is absent from the Philippines Retroactivity of BIR Rulings General Rule: Prospective.Far Eastern University Institute of Law Bar ’02 – What constitutes prima facie evidence of a false or fraudulent return to justify the imposition of a 50% surcharge on the deficiency tax due from a taxpayer? Explain. and if known. Receipts or Income in an amount exceeding thirty per cent (30%) of that declared per return. Note: A defective tax return is the same as if no return was filed at all.from assessment or within period for collection agreed upon in writing before expiration of the fiveyear period. 4. RA 8424) Prescriptive period for the COLLECTION of taxes: Five (5) years . where the amended return is substantially different from the original. b. However. 2. 1. S. Amended return 1.it has complied substantially with the requirements of the law. when the Commissioner is prohibited from making the assessment or beginning the distraint or levy or proceeding in court. and 5. and 2) A Claim of Deductions in an amount exceeding thirty per cent (30%) of actual deductions. when the warrant of distraint or levy is duly served. Allowed when: a. 3. when the taxpayer requests for a reconsideration which is granted by the Commissioner. A. or 2) Substantial overstatement of Deductions The indications of substantial underdeclaration of Sales. Receipts or Income. The prescriptive period starts to run from the filing of the original return. no notice of audit or investigation of such return has. the return is valid . Effect on prescription: a. and b. Receipts or Income or substantial overstatement of Deductions are: 1) Failure to report Sales. and for sixty days thereafter. 248 (B). from the discovery thereof and institution of judicial proceedings for investigation and punishment. in the meantime. the amendment is made within 3 years from the date of filing the original return. When proceedings are instituted against the guilty persons o Begin to run again if the proceedings are dismissed for reasons not constituting jeopardy 2. the right to assess is counted from the filing of the amended return. unless he informs the Commissioner of any change in his address. when the taxpayer cannot be located in the address given by him in the return. – The tax return is prima facie false or fraudulent when there is: 1) Substantial underdeclaration of taxable Sales. and no property is located. Prescriptive period for the filing of CRIMINAL ACTION: Five (5) years – from the day of commission of the violation.without assessment in case of false or fraudulent return with intern to evade or failure to file return. been actually served upon the taxpayer. Exceptions: 37 Requisites of a tax return for purposes of starting the limitation: running of the period of Tax Law Study Guide Centralized Bar Operations 2007 . (Sec. Grounds for interruption of the period: 1. when the taxpayer is out of the Philippines. the not the its Grounds for suspension of the running of prescriptive period for assessment and collection: 1. and 2. if the same is sufficiently complete to enable the CIR to intelligently determine the proper amount of tax to be assessed. the return is appropriate – it is a return for the particular tax is required by law. Ten (10) years .
Enforcement of customs laws and regulation 3. money orders and dollar bills properly within the concept of merchandise as used in Revised Administrative Code. 2. Bargaining tariffs – those whose schedules include rates designed primarily for bargaining purposes or which contain some general provision for the imposition of higher duties upon products of countries whose tariff policies are considered unsatisfactory or unfair. Conditionally-free importation (Exempt importation) FREELY IMPORTABLE / DUTIABLE GOODS (Code: AFP VFA SMITH RAPE SOB MWAH) 1. toll of tribute payable upon merchandise to the government. or merchandise. Prevention and suppression of smuggling 2. Assess and collect customs duties 5. Revenue tariffs – those whose rates are relatively low so that goods may be readily imported and duties may be easily collected. articles. when used with reference to importation or exportation. As to the scope. Absolutely Prohibited importation 3. general anything that nay be the subject or exportation. BUREAU OF CUSTOMS (BOC) DUTIES. CUSTOM DUTIES –which are assessed at the at the prescribed tariff rates which are likely imposed for both revenue raising and for regulatory purposes.the Revised Administrative Code defines merchandise. to include goods.[ Garcia vs. July 3. 3. TOC] MERCHANDISE. 2. [Bastida vs. no. [SEC.Far Eastern University Institute of Law 1. Freely importable / Articles subject to duty (Dutiable Goods) 2. the tariff or tax assessed upon merchandise imported from. Purposes of tariffs: thereto. a foreign country. 100. G.B: Customs duties and tariffs are synonymous with one another. wares and in. are merchandise. Seizure and forfeiture ARTICLES SUBJECT TO CUSTOM DUTIES Articles. 101273. Scope of Tariff and Custom Laws Include not only the provisions of the Tariff and Custom Code (TCC) and regulations pursuant 38 1. EXCEPT as otherwise specifically provided for in this Code or in other laws. Tariff and Custom laws extend not only to the provisions of the TCC but to all other laws as well the enforcement of which is entrusted to the BOC. or exported to. Executive Sec. CIR] Kinds of Goods/Merchandise (FACC) 1.R. shall be subject to duty upon each importation. and 3. —oOo— TARIFF & CUSTOMS CODE TARIFF – custom duties. Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the BIR. Protective tariffs – those whose rates are relatively high to keep certain imports out of the domestic market or to raise domestic price on certain imports so that they may be manufactured profitably at domestically. Conditionally prohibited (Regulated articles) 4. when imported from any foreign country into the Philippines. even though previously exported from the Philippines. Where the facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based. Where the taxpayer acted in bad faith. 1992] N. POWERS AND JURISDICTION OF THE BOC (PERAS) 1. but all other laws and regulations that are subject to the Bureau of Customs (BOC) or otherwise within its jurisdiction. Recommend needful rules and regulations to the Secretary of Finance 4. Checks. Animals and animals product Tax Law Study Guide Centralized Bar Operations 2007 . It is the name given to taxes on the importation and exportation of commodities.. They both refer to the taxes imposed on imported or exported wares.
spirits and vinegar. rebellion materials. 2. 102. prices 15. Substitute for tobacco and manufactured tobacco 8. [SEC. 6. Vegetable products 5. Mineral products 9. Prepared Foodstuffs. Trailer chassis by a shipping company 5. equiptments Animals and animal products Lottery and Sweeptakes Arms and ammunitions Regulated drugs Motorclycles and cars (used) 3. Goods. Wood and related articles 21. articles in violation of copyright laws. Experimental and scientific research of plants and animals 4. etc. Salvaged vessels and aircrafts 12. 5. vessels. 6. Arms and ammunitions 7. Products of Chemical or allied Industries 10. Base metals 19. 5. cements and other related articles 17. Public entertainment or public display articles 11. vehicles and all other mode of transportation 22. Tourist and embassy personnel’s effect 18. Plastic and Rubber articles 13. tools and other supplies for aircraft including the aircraft itself 20. containers and other receptacles for export 8. Heroine. 4. 2. 4. Donated articles (ex. leather) 12. Pearls other precious stones 15. 4. Pulp or wood. Manufactured/miscellaneous articles 20. Returned articles without substantial increase in value 14. Stone. Aircraft. Headgear. Gambling Devices Adulterated or misbranded drug in violation of the Food and Drugs Act. antique 14. Cost of repair of vessels and aircrafts (increase in value) 13. plaster. Parts.Far Eastern University Institute of Law 2. fur. Holders. Footwear. Repacked or reconditioned articles 10. Textile and textile products 11. Artworks. Mining equipment (because mining industry is protected) 16. Urns and coffins containing human remains 19. 3. beverarages. 2.TCC) Pornographic and obscene materials Written or printed materials containing any matter advocating of Inciting Treason. Electrical and mechanical machineries 16. relief goods) Note: These articles which are exempt from import duties upon compliance with the formalities prescribed in or with regulations promulgated by the Commissioner of Customs Classification of Custom Duties Note: All the above merchandise/goods cannot be brought in or out of the Philippines. Narcotics and pharmaceutical products EXCEPT when made by the government designed for medical purpose. historical books Technical. All other articles Strictly prohibited by law Equipment used in salvaging vessels 3. marijuana and other dangerous drugs. medical and surgical products 18. TCC] ABSOLUTELY PROHIBITED IMPORATTIONS [Code: GAPINGS] 1. Optical products. Animal or vegetable Fats. Title 1.(SEC. 1. Hides ( skin. 7. sedition. Instruments and implements used by professionals in film production 21. oil and their cleavage products 3. vocational. Sea store supplies to the vessel or aircraft 7. CONDITIONALLY PROHIBITED REGULATED ARTICLES (ALARM) OR 39 Tax Law Study Guide Centralized Bar Operations 2007 . 104. Aquatic products 9. Awards. Sample items 17. CONDITIONALLY-FREE IMPORTATION (TEETH SHARP SCRAM STUPID) 1. Household effects 6.
4) Computed Value. dumping duties b. discriminatory duties? Bar ’97 . components. 2) Transaction Value of Similar Goods. 4. Specific. b. Dumping Duty – imposed upon foreign products with value lower than their fair market value to the detriment of local products. – The dutiable value of an imported article for an ad valorem tax is its Transaction Value or the price actually paid or payable for the goods PLUS all other landing and incidental charges paid or incurred to bring the goods to a Philippine port of entry. members: Sec. 5. Of Finance 3. TRANSACTION VALUE. Sequence in Determination of Value 1. of DTI.Far Eastern University Institute of Law 1. Imposing authority: Special Committee on Anti-Dumping composed of the Sec. Rate: difference between the actual price and the normal value of the article. gross weight 2. legal weight 3.imposed upon those not properly marked as to place of origin of the goods. parts and items incorporated in the imported goods. 5) Fallback Value. Rate: equivalent to the bounty. 2. of Agriculture if the article in question is agricultural product or the Sec. S. In case the transaction value cannot be determined or used. of Labor if nonagricultural product. countervailing duties c. amount of royalties and license fees.State and explain the basis of dutiable value of an imported article subject to an ad valorem tax under the Tariff and Customs Code. transaction value of identical goods transaction value of similar goods deductive value computed value other reasonable means or fallback value Basis for dutiable weight for specific custom duties 1. Countervailing Duty – imposed upon foreign goods enjoying subsidy thus allowing them to sell at lower prices to the detriment of local products similarly situated. and the cost of the insurance. Rate: 5% ad valorem of articles Imposing authority: Commissioner of Custom Tax Law Study Guide Centralized Bar Operations 2007 . to include: 1) Transaction Value of Identical Goods. Special Custom duties. 6. A.Under the Tariff and Customs Code. marking duties d. 2. Ad Valorem. transaction value 40 2. Basis of Dutiable Value The dutiable value of the imported article subject to an ad valorem of duty shall be transaction value. then the other methods can be used in succession. of Finance as chairman. loading.is the price actually paid or payable for the goods when sold for export to the Philippines. Ordinary or Regular Custom dutyimposed and collected merely as a source of revenue . the value of the materials. 1. a. unloading and handling charges.imposed and collected in addition to ordinary customs duties usually to protect local industries against foreign competition. Bar ‘05 . and either the Sec. • It is adjusted by adding certain expenses to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods. 3. what are a. cost of transport. Marking Duty. subsidy or subvention Imposing authority: Sec.the duty is based on the weight or volume of the imported article.the duty is based on the market value or price of the imported article.Explain briefly each of the special customs duties authorized under the Tariff and Customs Code. net weight KINDS OF SPECIAL CUSTOM DUTIES Bar ’95 . 3) Deductive Value.
Discriminatory Duty. along a coast. fees and charges provided in the Tariff and Customs Code. 6. Liability of importers for duties The Code provides that all articles imported into the Philippines shall be held to be the property of the person to whom the same are consigned: and the holder of the bill of lading duly endorse by the consignee thereof therein named. Harbor Fees. Arrastre dues. operator or master of a vessel engaged in foreign trade based on the net tonnage of the vessel or weight of the articles discharged or laden.are imposed on all imported and exported articles and baggage of passenger for their handling. 2. Government importations DRAWBACK It is 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 not been taxed at all.are imposed on vessels entering into or departing from a port of entry of the Philippines. IMPORTATION UNDER TCC Who are authorized to make import entry? 1. agreements. It may be full or partial. Tariff and Customs Code] Tax Law Study Guide Centralized Bar Operations 2007 . 105.imposed upon goods coming from countries that discriminate against Philippine products. DUES. International organization pursuant to agreement and special law 4. Other fees. Storage dues. Tariff and Custom Code] Unless otherwise relieved by laws or regulation. Exemption under the TCC 2. 3. based on the quantity weight or measure received and/or discharged by such vessel. 3. The importer being holder of the bill of lading. TCC) EXCEPTIONS: 1.[Section 1205. 4. Wharfage duesare assessed against the cargo of a vessel engaged in foreign or coastwise trade. taxes . Exemption granted by the President of the Philippines upon recommendation of NEDA.are assessed on articles for storage in customs premises.Far Eastern University Institute of Law 4. agencies or instrumentalities owned or controlled by the government shall be subject to the duties. and other charges attaching on importation constitutes a personal debt due to the importer of the government which can be discharged only by payment of said duties and charge. fees. (Sec. agent. and custody. or in any area of the Philippines. 5. or river at any port in the Philippines. Berthing duesare assessed against a vessel for mooring or berthing at a pier. taxes. RULE: All importations exportations of goods are subject to custom duties. 7. 2. or obligations with foreign countries. OTHER CUSTOMS CHARGES PAYABLE FEES. or if consigned to order by the consignor. 41 All importations by the government for its own use or that of its own subordinates branches or instrumentalities or corporations. Tonnage dues. It also constitutes a lien upon the articles imported which maybe enforced while such articles are in custody or subject to the control of the government.are paid by the owner. receiving. OR 1.charged and collected for services rendered and documents issued by the BOC. maybe regarded as the consignees [ Section 1203. or A person duly empowered to act as agent or attorneyin-fact. the liability for duties. wharf. Exemptions granted government agencies or GOCCs with existing contracts. Rate: any amount not exceeding 100% ad valorem of the subject articles Imposing authority: president of the Philippines Liability for Custom Duties GEN. The under writers of abandoned articles and the salvors of articles saved from a wreck at sea. A customs broker acting under authority of the holder of the bill. shall be deemed the consignee thereof. commitments. cargo shed.
sell. buy. the President upon recommendation of the NEDA. 2. to increase.When does importation begin and when does it end? S. Constitution) Sec. authorize the President to fix within specified limits and subject to such limitations and restrictions as it may impose: a. and b. contrary to law. he must be: 1. BALIKBAYAN For the purpose of tax-free purchase at Philippine Duty-free shops. The Congress may. FLEXIBLE TARIFF CLAUSE Authority of the President to adjust the tariff rates prescribed under the Tariff and Customs Code. import and export quotas. – Importation begins when carrying vessel or aircraft enters the jurisdiction of the Philippines with an intent to unload. or shall receive. Filipino overseas worker. 3601 TCC) Fraudulent Practices (Criminal Offense) against Custom Revenues under Sec. 3. tonnage and wharfage dues. 3602 1. or in any manner facilitate the transportation. which is the enabling law that made effective the delegation of the taxing power to the President under the Constitution. value. other duties or imports within the framework of the national development program of the government (Art. (sec. tariff classification and other particulars of the imported article to enable the customs authorities to determine the correct customs duties and internal revenue taxes due on the importation. 401. taxes and other charges. is empowered: 1. or secured to be paid. general welfare and/or national security. conceal. Filipino citizen who has been continuously out of the Philippines for a period of at least one (1) year. tariff rates. they are nationals who have stayed in a foreign country for a period of at least six (6) months. 42 Tax Law Study Guide Centralized Bar Operations 2007 . to impose additional duty on all imports not exceeding 10% ad valorem. or sale of such article after importations. former Filipino citizen and his family who had been naturalized in a foreign country and comes or returns to the Philippines Bar ‘95 . Smuggling or Unlawful Importation Any person who shall fraudulently import or bring into the Philippines.Far Eastern University Institute of Law Returning residents When importation terminated begins and deemed For the purpose of conditionally free importation of personal and household effects. In the case of articles that are free of duties. importation is deemed terminated from the time they have-legally left the jurisdiction of the customs. provided that the increase should not be higher than 100% ad valorem. Entry of goods at less than the true weight or measure. Filling of any false or fraudulent entry for the payment of drawbacks or refund of duties. A. or 2. Import Entry A declaration to the BOC showing the description. to establish import quota or to ban imports of any commodity. knowing the same to have been imported contrary to law. Importation terminates upon payment of the duties and other charges due upon the articles. It may be express or implied. shall be guilty of smuggling. The term family shall mean the spouse and children of the balikbayan who are not balikbayan in their own right traveling with the latter to the Philippines. or assist In doing so. any article. Sec. 1. reduce. 28(2). or 3. Entry of imported articles by means of any false or fraudulent invoice. VI. concealment. by law. TCC: In the interest of national economy. or remove existing protective rates of import duty. 2. Abandonment It is the renunciation by an importer of all his interest in the property rights in the imported article. and 3. at the port of entry ant the legal permit for withdrawal shall have been granted.
in the interest of national economy. 2. 2. In such case the corresponding ad valorem or specific equivalents of the duty with respect to the imports from the principal competing foreign country for the most recent representative period shall be used as bases. The power of the President to increase or decrease the rates of import duty within the abovementioned limits fixed in the Code shall include the modification in the form of duty. Commissioner of Customs. Arrangements and classification of tariffs 3. TCC in order to warrant forfeiture. BOI. A. Industrial impact of tariff and customs code – in coordination with NEDA 5.R. 709. TCC) THE TARIFF COMMISIONS (TC) POWERS OF THE TARIFF COMMISSION: (TARIFF) 4. (Sec. general welfare and/or national security upon recommendation of the NEDA to increase. attaches on the goods. it is not necessary that the vessel or aircraft must itself carry the contraband. (sec.Far Eastern University Institute of Law Bar ’01 . 2210. Furnish report on subjects under investigation and results thereof 6. The commission shall submit their findings and recommendations to the NEDA within 30 days after the termination of the public hearing. the increase should not be higher than 100% ad valorem. The NEDA thereafter submits the recommendation to the President. 2531 and 2530 TCC) Under Sec. Conduct by the Tariff Commission of an investigation in a public hearing. search. to establish import quota or to ban imports of any commodity. Central Bank TAX REMEDIES UNDER THE TARIFF AND CUSTOMS CODE (TCC) TAX REMEDIES OF THE GOVERNMENT A. The commission shall also hear the views and recommendations of any government office. Of Finance. no. TARIFF RELATIONS OF THE Philippines with other counties 2. Seizure. 401. Reduction Custom Duties/ Compromise Subject to approval of Sec. may 16. 2530 (a). [Llamado vs. G. Administrative Fines and Forfeitures applied when the importation is unlawful and it may be exercised even where the articles are not or no longer in custom’s custody . ADMINISTRATIVE 1. 2205. 1983] of 1.UNLESS the importation is merely attempted in which case it may be effected only while the goods are still within the Customs jurisdiction or in the hands of a person who is aware thereof. Furnish report needed by NEDA. L-28809. PROVIDED THAT. 2316 TCC) 4. which implements the constitutionally delegated power of the President of the Philippines. 1204 TCC) Tax Lien (sec. reduce or remove existing protective rates of import duty. to impose additional duty on all imports not exceeding 10% ad valorem. The complementary if collateral use of there Cessna plane for smuggling operation is sufficient for it to be deemed to have been used in smuggling. LIMITATIONS TO FLEXIBLE TARIFF CLAUSE 1. – This is a provision in the Tariff and Customs Code. arrest (sec. of Finance (sec. regardless of ownership. 2211 TCC) 43 Tax Law Study Guide Centralized Bar Operations 2007 . Rates of duties (recommends only changes) 3. Sec. agency or instrumentality concerned.What do you understand by the term “flexible tariff clause” as used in the Tariff and Customs Code? S. while still in the custody or control of the Government Availed of when the importation is neither prohibited nor improperly made.
Note: Before filing a protest. protest must furnish samples of goods under protest when required. Bar ’02 . dead or injured animals. 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 contrary to law. Taxpayer within 15 days from assessment. 9 RA 9282) The CTA empowers to issue injunction. ADMINISTRATIVE 1. it would appear that an importer may appeal without first paying the duties. must be limited to the subject matter of a single adjustment 5. (sec. must state the grounds relied upon for relief 4. there must first be a payment under protest. deficiencies in the contents of packages or shortages before arrival of the goods in the Philippines. 2307 TCC).Far Eastern University Institute of Law B. – procedure The Customs’ is intended automatic review to protect the 3. must be in writing 2. must be filed when the amount claimed is paid or within 15 days after the payment 6. 1204 TCC) Criminal Action TAX REMEDIES OF THE TAXPAYER A. (sec. Refund A written claim for refund may be submitted by the importer in abatement cases on missing packages. the legality of seizure 3. What is the basis of the automatic review procedure in the Bureau of Customs? Explain your answer. or when there is an actual and intentional fraud (sec. Protest Any importer or interested party if dissatisfied with published value within 15 days from date of publication or within 5 days from the date of importer is entitled to refund if payment is rendered erroneous or illegal by events occurring after the payment. 1701-1708 TCC) REMEDIES IN THE BUREAU OF CUSTOMS (BOC) A. as amended by sec. and Drawback cases where the goods are re-exported (sec. but not in protest cases.2210 TCC) Within 30 days from receipt of decision of the Commissioner or Secretary of Finance to the division of the CTA (sec. 2403 TCC. fees. Civil action (se. and for manifest clerical errors. JUDICIAL 4. Action to question Abandonment 2. articles. sec. 2313 TCC). failure to file an import entry within 30 days from the discharge of goods or having filed an entry fails to claim within 15 days but it shall not be so effective until so declared by the collector. JUDICIAL This remedy is normally availed of when the tax lien is lost by the release of the goods. and other charges. must point out the particular decision or ruling of the Collector of Customs to which exception is taken or objection made 3. B. 2. it is automatically elevated to the Secretary of Finance for review.Whenever the decision of the Collector of Customs is adverse to the government. lost or destroyed after such arrival. CUSTOM PROTEST CASES These are cases which deal solely with liability for custom duties. S. Requirements for making a Protest 1. if it is affirmed by him. 7 RA 1125. Appeal 44 Tax Law Study Guide Centralized Bar Operations 2007 . Appeal Within 15 days to the Commissioner after notification by Collector of his decision (sec. it is automatically elevated to the commissioner fro review and. 2308. 1801 as amended by RA 7651) Note: Payment under protest is necessary. such as in seizure. 1.
contrary to law. [Rodriguez vs. [Lladoc vs. if the conveyance has been used for smuggling at least twice before. conceal. 3514. May 16.R. [ Rodriguez vs. Unlading of cargo before arrival on port of entry 4. shall be guilty of smuggling (sec. Boxes. A Customs Collector would have absolute discretion to determine whether or not the goods seized are subject to payment of customs duties and taxes. L-28809. TCC). Offered articles or money to bribe customs officers Article NOT subject to Forfeiture or Seizure The forfeiture of vessel or aircraft or seizure of articles shall not be effected if it is established that the owner thereof or his agent in charge of the means of conveyance used as aforesaid has no knowledge of a participation in the unlawful act. vehicle or aircraft under any of the following circumstances: 1. concealment. Unauthorized or fraudulent removal of cargo 6. SEIZURE AND FORFEITURE CASES These refer to the matters involving smuggling. buy. procedure of passing the goods through the custom house. May exercise only in conformity with the laws and TCC. or sale of such article after importations. Note: Mere possession of the article in question is liable UNLESS defendant could explain that his possession is lawful to the satisfaction of the court (sec. Three meanings of term “ENTRY” 45 False declaration on articles Entry of vessel in a port other than the port of entry allowed 3.(sec. Prohibited importation or exportation 9. R. sell. Tax Law Study Guide Centralized Bar Operations 2007 . 3601. or assist In doing so. 1995] Port of Entry A domestic port open to both foreign and coastwise trade including airport of entry (sec. 115218. HOWEVER. May seize any vessel. 115218. no. 1983] EXCEPT Common carriers that are not privately chartered cannot be confiscated. article. CA. no. aircraft. Com of Custom. Note: These are action in rem. Unmanifested articles 8. All articles imported into the Philippines whether subject to duty or not shall be entered through a customhouse at a port of entry. Dec 22. 84111. containers and receptacles used to conceal articles that are contrary to law 10. Without said automatic review. Smuggling or Unlawful Importation Any person who shall fraudulently import or bring into the Philippines. Misdeclared articles 12. COC. GR No. animal or other movable property when the same is subject to forfeiture or liable for any time as imposed under TCC. the Commissioner of Customs or the Secretary of Finance would not know about any seizure or protest cases.Far Eastern University Institute of Law Government’s interest in collecting customs duties in seizure and protest cases. no forfeiture or seizure in the absence of prima facie evidence. that a prima facie presumption shall exist against the vessel. 2205 TCC) Articles subject to Seizures and Forfeitures (Code: FEU UE UP BIMBO) 1. Note: anything that was used for smuggling is subject to confiscation. rules and regulation. or in any manner facilitate the transportation. 3601 TCC). CA. 2.TCC) Note: Payment of the tax due after apprehension is not a valid defences. G. or shall receive. any article. September 18. 1. (Yaokasin v. knowing the same to have been imported contrary to law. cargo. documents filed at the custom house 2. 1995] Right of Custom Officers to Effect Seizure and Arrest 1. In other words. Illegally unladed cargo at port of destination 11.R. Beast 13. 2.R. It is administrative and civil in nature and is directed against the res or imported articles and entails a determination of the legality of importation. G. Excessive sea stores 7. September 18. 1989) B. submission and acceptance of the documents 3.
The power to secure itself from injury may certainly be exercised beyond the limits of its territory. 138081. Right to search vehicles. even if no warrant of seizure or detention had previously been issued by the Collector of Custom in connection with seizure and forfeiture proceedings. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari. rivers and inland waters whether navigable from the sea or not. (The Bureau of Customs. Jurisdiction of the BOC The BOC has the right of supervision and police authority over all seas within the jurisdiction of the Philippines and over all coasts. G. G.Far Eastern University Institute of Law 2. 2. Milled in Palawan. There is no question that RTC’s are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. 27SCRA312. 104604. form the moment the goods actually in its possession or control.No. bays. saying that 46 Tax Law Study Guide Centralized Bar Operations 2007 . The consignee then filed a civil suit for injunction before the Cebu City RTC. A. The warrant was issued on the basis of a report that the rice had been illegally imported as it was landed in Palawan by a foreign vessel and then placed in sacks marked “SNOWMAN. 603. It is the settled rule that the BOC acquires exclusive jurisdiction over imported goods. for the purpose of enforcement of the customs laws. Was the issuance of the injunction proper? S. an act is done in Philippine water which constitutes a violation of the TCC b. 1995] DOCTRINE OF HOT PURSUIT Requisites: 1. Right of police officer to entered enclosure WITHOUT a warrant. Over Vessels a. Milled in Palawan” shipped on board the M/V “Alberto” which was then docked at Pier 6 at Cebu City. there is a violation of TCC b. the RTC do not have jurisdiction over seizure and forfeiture proceedings conducted by the BOC. Even if a Custom seizure is illegal. Over Imported Articles a. if the owner is financially not in a position to own such conveyance. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. EXCEPT a dwelling house 2.TCC). right to search vehicles or aircrafts and person or articles conveyed therein 4. et al.” Forfeiture proceedings were then started in the Cebu City customs office. (sec. ports. harbours. et al. they may be pursued in the Philippines c.R. if the owner is not in the business for which the conveyance is generally used. beast and person 5.October 6. Note: In Assali vs. [Jao vs. the authority of a nation within its territory is absolute and exclusive.. SETTLEMENT OF FORFEITURE CASES Thus. the SC held as a valid the interception and seizure of a vessel on the high seas.TCC). March 20. DOCTRINE OF PRIMARY JURISDICTION OVER SEIZURE AND FORFEITURE CASES The prevailing doctrine is that the exclusive jurisdiction in seizure and forfeiture cases vested in the collector of customs precludes a regular court from assuming cognizance of such matter. exclusive jurisdiction still belongs to the BOC. Q .The Collector of Customs issued a Warrant of Seizure and Detention of 25. Sec. with the jurisdiction over them at any place therein for the enforcement of the law.. Commissioner. (2nd par.R.” It was then shipped to Cebu City on board the M/V “Alberto. Search with dwelling house must be with proper warrant 3. v. which issued the injunction because there was alleged lack of probable cause for customs to effect the seizure. bearing the name of “SNOWMAN. and 3. CA. Search of person arriving from foreign countries. prohibition or mandamus. prom. No. no.000 baga of rice. 2000) Places where searches and seizures may be conducted 1. . 603. a pursuit of such vessel began within the jurisdictional waters which may continue beyond the maritime zone and the vessel may be seized on the high seas. Ogario.
Unlawful navigation without license 7. Unlading at an improper place after arrival 14. Vessel departing before entry is made 12. Taxes should not be unjust. Taxes should be levied and collected only for public purpose 4. excessive. Disappearance of manifested articles 15. False statement of destination 6. Vessels navigating without compliment officer/ failure to produce manifest crew 10.906. Miscellaneous offenses —oOo— LOCAL TAXATION Local Taxation • The power of a local government unit to create its own sources of revenue and levy taxes. Failure to submit or supply invoice (sec. Taxes should not be contrary to law. 1. Bringing of unmanifested war equipment 4. Injury to voys 11. unmanifested cargo is subject to forfeiture.TCC) C. Obstruction to boarding officials 16. TCC) MANIFEST Manifest in coastwise trade for cargo and passengers transported from one place to another are required when one or both of such places are a port of entry (sec. incentives or reliefs as it may be necessary. and charges subject with the basic policy of local autonomy Fundamental Principles of Taxation 1. Taxes should be progressive. public policy or national economic policy 6. (sec. oppressive or confiscatory 5. Whether the act of smuggling is established or not under the principle of res ipsa loquitur. Unlawful departure 9. not regressive Local Taxing Authority • The power to tax is exercised by the LGU concerned through an appropriate ordinance. Misclassification. LGU may grant tax exemptions.Far Eastern University Institute of Law GEN. Unlading of cargo before arrival at port of destination 5. Manifest is not only required to imported goods. EXCEPTIONS: 1. fees. Failure or refusal of a party to submit evidence (sec. Articles Subject to Surcharge [Code: DEMI] 1. Taxes should be uniform and equitable 2. the surrender of the property to the person offering to redeem would be contrary to law or 3. 2501.TCC) 2. the importation is absolutely prohibited or 2. Thus.2502. Taxes should be based on the taxpayer’s ability to pay 3. Note: Burden of proof in seizure or forfeiture case is on the claimant.TCC). FINES Subject to Fines (Code: FUBU FUBU VIVU DOM) 47 Tax Law Study Guide Centralized Bar Operations 2007 . B. 2. 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. 2535. Since criminal proceeding are actions in personam while the latter is action in rem. 2504. It is also required for articles found on vessels or aircraft engaged in coastwise trade. (sec. misdeclaration or under evaluation of article 4.TCC) 3. vessels Failure to exhibit documents Unlawful navigation of unregistered 3. Breaking of placed by customs officials 8. when there is fraud. 2307. Failure to pay Duties (sec. SURCHARGE To overcharge or to charge again as in an accounting between parties. RULE: Settlement of cases by payment of fine or redemption of forfeited property is allowed.TCC) Note: Acquittal in criminal charged is not a res judicata in seizure or forfeiture proceedings.
although a fixed amount is not imposed for the Excluded Imposition 1. Except newly started business. Principle of Preemption Principle of Preemption or Exclusionary Doctrine • When the national government elects to tax a particular area. Taxes which contravenes existing governmental policies or which violates the fundamental principles of taxation 4. 133 LGC 3. Limitations to the Residual Power in Local Taxation 1.00 on non-VAT enterprises which includes among others. Documentary stamp tax 48 Tax Law Study Guide Centralized Bar Operations 2007 . A.00 VAT registration fee. fees or charges for the registration of motor vehicles and for the issuance of licenses or driving permits 2. legacies and other acquisitions mortis causa 11. Is this violative of religious freedom ? S.Far Eastern University Institute of Law Residual Power in Local Taxation • LGU may levy taxes. Taxes. fees or charges on countryside and barangay business enterprises 4. A license fee “restrains in advance those constitutional liberties of press and religion and inevitably tends to suppress their exercise.000. A. barters or exchanges or similar transaction of goods 13. land or water 7. Taxes under special laws Limitations on the Local Taxing Power 1. Excise taxes on articles enumerated under the NIRC Taxes Imposed by Provinces 1. Tax on the business of printing or publication – not exceeding 50% of the 1% of the gross annual receipts for the preceding calendar year. Taxes. unless provided by LGC 2. fees or charges of goods carried into or out of the territorial jurisdictions of the LGU 12. Percentage or Vat on sales. Taxes under the Tariff and Customs Code 3. The P1. Constitutional limitations 2. gifts. Is this valid? S. Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of 6 and 4 years respectively from the date of registration 15. inheritance. and of religion.. Taxes. Taxes. – No. 10. because it violates the constitutionally guaranteed freedom of the press. Taxes levied under NIRC. registration of vessel. Limitations prescribed in Sec. it impliedly withholds from the local government the delegated power to tax the same field. Income tax except on banks and other financial institutions 14. donation. or charges on any subject not specifically enumerated in the LGC. tonnage dues 8.” Q: The EVAT Law imposes a VAT registration fee of P1. fees or charges on the national government or its agencies 3.000. when applied to a religious sect is actually imposed as a condition for the free exercise of religion. But tax rate should not be more than 50% of the 1% of the total consideration or the fair market value. Taxes. – No. barter or any mode of transferring ownership. Ordinance levying such residual taxes shall not be enacted without any prior public hearing conducted for that purpose 4. whichever is higher 2. Tax on transfer of real property – like sale. fees. Taxes on the gross receipts of transportation contractors or persons engaged in the transportation of passengers by air. As a license fee is fixed in amount and unrelated to the receipts of the taxpayer. Estate tax. fees or charges on agricultural and aquatic products 9. fees or charges on Philippine products exported 5. such a license fee. religious sects which sells and distributes religious literature. Taxes. Customs duties. Taxes on premiums 6. taxed under the provisions of the NIRC or other applicable laws. the rate of which shall not exceed 1/20 of the 1% of the capital investment Q: A fixed annual license fee on those engaged in the business of general enterprise was also imposed on the sale of bibles by a religious sect.
Province of Laguna. to take effect on July 1. Secretary of Finance.R. which levies a tax of 10% of the fair market value in the locality per cubic meter of ordinary stones. Under the now prevailing Constitution. receipts. v. the tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons are withdrawn with the effectivity of the Local Government Code except with respect to those expressly enumerated. 49 In addition. While the Tax Tax Law Study Guide Centralized Bar Operations 2007 . The Local Government Code explicitly authorizes provinces and cities. the Local Government Code prohibits local government units from collecting excise taxes on articles enumerated under the NIRC. Indicative of the legislative intent to carry out the constitutional mandate of vesting broad tax powers to local government units. It is designed to provide a record of tax credits because any person who is subject to the payment of the VAT pays an input tax. 1999) The Local Government Code provisions on withdrawal of tax exemptions prescribes the general rule. Laguna. 1992. much less a constitutional right. The Court has viewed its previous rulings as laying stress on the legislative intent of the amendatory law whether the tax exemption privilege is to be withdrawn or not rather than on whether the law can or cannot withdraw the tax exemption.. sand. and taxes. (Sec. without violating the constitution. 3. 134 in relation to Sec. the Local Government Code contains a general repealing clause. notwithstanding “any exemption granted by any law or other special law” to impose a tax on businesses enjoying a franchise. Local Government Code) Furthermore. Rule on the validity of the tax ordinance. March 25. The phrase in “lieu of all taxes” has to give way to the peremptory language of the Local Government Code which specifically provides for the withdrawal of all exemptions. May 5. No. Laguna sometime in 1983 under P. one not imposed on the exercise of a privilege.. No. the Local Government Code has withdrawn tax exemptions or incentives theretofore enjoyed by certain entities. No. – No. (Sec. G. carrying on. et al. 133 [h]. It now collects the said tax upon quarry resources extracted from private lands by Republic Cement. Under the franchise Meralco pays 2% franchise tax on of its gross receipts and “any law to the contrary notwithstanding be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority or earnings. et al. G. 235 SCRA 630) 3. (City Government of San Pablo. A. Local Government Code in relation to the Tax Code) The tax imposed is an excise tax upon the performance.R. the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. within its territorial jurisdiction. and companion cases. S. 1999) 4.” Pursuant to the Local Government Code. Is the collection correct ? S. The registration requirement is a central feature of the VAT system. viz. Q: Meralco was granted a franchise to operate an electric light and power service in Calamba. the province of Laguna enacted an ordinance imposing a franchise of 50% of 1% of the gross annual receipts of business enjoying a franchise realized during the preceding calendar year within the province including cities located therein.Far Eastern University Institute of Law exercise of a privilege but only for the purpose of defraying part of the cost of registration. gravel. A. (Manila Electric Company v. 131359.. distribution and sale of electric current. 551.. Newly started business shall not exceed 1/20 of the 1% of the capital investment. the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The registration fee is thus more of an administrative fee. 1992. (Tolentino v. fees or charges on petroleum products.D. even as he collects an output tax on sales made or services rendered. because the authority under the Local Government Code to collect taxes on quarry resources applies only to those extracted from public lands. or the exercise of an activity. The basic rationale for the current rule is to safeguard the viability and selfsufficiency of local government units by directly granting them general and broad tax powers. Tax on sand gravel and other quarry resources extracted from public land – not more than 10% of the fair market value in the locality Q: On June 26. et al. earth and other quarry resources extracted from areas of public land within its territorial jurisdiction. where there is neither a grant nor prohibition by statute. et al. Franchise tax – not exceeding 50% of the 1% of the gross annual receipts for the preceding year. 127708. 138. – The tax ordinance is valid. Reyes. It claims authority to do so under the provisions of the Local Government Code as well as under the Regalian theory of State ownership over all natural resources. income and privilege of generation.
Peddlers engaged in the sale of any merchandise or article of commerce 7.R. 50 however. professional basketball games.000 or less (barangays in the municipalities) Tax Law Study Guide Centralized Bar Operations 2007 . Annual fixed tax for every delivery truck or Manufacturers. Court of Appeals. It is thus. Wholesalers.000 or less (barangays in the cities) or P 30. 299 SCRA 442) 5. No. the term “gross receipts embraces all the receipts of the proprietor. 119122.. v. Thus. retailers of essential commodities 4. manufacturers. The second to the last paragraph of Sec. refers to “an amusement tax to be collected from proprietors. G.00 6. a) Should the amusement taxes be paid to the local government instead of the BIR ? b) Is the cession of advertising and streamer spaces to Vintage Enterprises.. Professional basketball games should pay the amusement taxes collected by the BIR and not the amusement taxes collected by the local governments. Taxes on stores or retailers with the fixed business establishments with the gross sales for the preceding calendar year of P 50. Exporters. Taxes Imposed by Municipalities 1. or operators of theaters. are not to be presumed beyond what the applicable statute expressly and clearly declares. a national tax not a local tax. (Philippine Basketball Association v. concert halls. being burdens. Banks or other financial institutions 6. et al. The amusement tax which provinces and cities are allowed to collect under Sec. the Local Government Code authorizes the local government unit to impose such taxes on those taken from public lands. lessees. boxing exhibitions. and other places of amusement. etc. The Court of Appeals. 971: Provided. a tax equivalent to: xxxx (d) Fifteen percent (15%) in the case of professional basketball games envisioned in Presidential Decree No. repackers and compounders of liquor. Manufacturers. JaiAlai and racetracks. lessee or operator of the amusement place. The recognition by the BIR of such income from cession as a local tax is of no moment because the Government is never estopped by the mistake or error on the part of its agents. et al. tax statutes being construed stricitssimi juris against the government. 125 of the 1997 Tax Code which provides that. It may exceed the maximum rates allowed but not more than 50% except rates of professional and amusement taxes. circuses. “There shall be collected from the proprietor. xxx” b) Yes. those extracted from private lands are taxable under the NIRC and not by local government units. Contractors and Independent Contractors 5. (The Province of Bulacan. Retailers of certain products. The Regalian doctrine may not be applied because taxes. 125 of the 1997 Tax Code provides that. Inc. lessee or operator of cockpits. 140 of the Local Government Code. wholesalers. Inc. subject to the payment of amusement taxes ? S. Professional tax – reasonable rate determined by the LGU but shall not exceed P 300.” The authority to tax professional basketball games is not included therein because it is a national tax provided for under Sec. Amusement tax – not more 30% of the gross receipts from admission fees Q: Philippine Basketball Association contested the deficiency amusement tax assessed against it by the BIR for conducting the professional basketball games and for the cession of advertising and streamer spaces to Vintage Enterprises. et al. specially on the matter of taxes.Far Eastern University Institute of Law Code levies a tax on all quarry resources. regardless of origin. night or day clubs. Business which the LGU may deem proper tax. lessee or operator of the amusement place. That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description. Taxes Imposed by Barangays 1. 2000) 7. cinemas. – a) No. A.. distilled spirits and wines 2. whether extracted from public or private lands.. cabarets. August 8. prom. This term is broad enough to embrace the cession of advertising and streamer spaces as the same embraces all the receipts of the proprietor. boxing stadia. Wholesalers. rate shall not exceed 2% of the gross sales of the preceding calendar year Taxes Imposed by Cities • Cities may levy taxes and other charges which the province or municipalities may impose.. distributors or dealers of any article of whatever kind 3. Businesses subject to VAT and excise tax.
The city or municipal treasurer deputizes the barangay treasurer to collect the community tax in their respective jurisdictions. Individual a. Book 2 of LGC (sec. Inhabitants of the Philippines 2.40% to the city or municipality where the plantation is located 5. or f. transacts other official business.70% shall be taxed by the city or municipality where the factory. title 1.30% shall be taxed by the city or municipality where the principal office is located . Businesses maintaining or operating a branch or sales oulet – shall record the sale in the branch or outlet making the sale or transaction 2. takes the oath of office upon election or appointment to any position in the government service. pays any tax or fee. No branch or sales outlet in the city or municipality where the sale is made – sale shall be recorded in the sales office 3. b. plants or project offices are located in proportion to their respective volumes of production 1.Far Eastern University Institute of Law 2.00 and an annual tax of P 1. c. pays any tax or fee. b. Sales recorded in the principal office . Regularly employed on a wage or salary basis 4.60% to the city or municipality where the factory is located . receives money from public funds. receives any license. receives any money from any public fund. the 70% shall be divided as follows: . Barangay clearance Situs of Local Taxation 1. When an individual subject to the community tax acknowledges any document before a notary public. Community Tax • Cities or municipalities may levy a community tax in accordance with the provisions of Art.000 Exemption from Community Tax Tax Law Study Guide Centralized Bar Operations 2007 . Services or charges 3. 2 or more factories. One engaged in business or occupation 5. or permit from any public authority. receives any salary or wage from any person or corporation. One who owns real property with an assessed value of P 1. project office or plant is located 4. plants or project offices located in different localities – the 70% shall be prorated among the localities where the factories. certificate or permit from any public authority. Proceeds of the community tax collected through 51 Individuals Liable for Community Tax 1. certificate. c. The proceeds of the community tax actually and directly collected by the city or municipal treasurer shall accrue entirely to the general fund of the city or municipality concerned. Plantation located at a place other than the place where the factory is located.000 or more 6. e. • The community tax certificate shall not be required in the registration of a voter. Transient visitors when their stay does not exceed 3 months Place of payment – residence of the individual or where the principal office of the juridical entity is located Time of payment – on the 1st day of January of each year but not later than 1st day of February of each year Penalties for delinquencies – 24% interest per annum from the due date until it shall be added on the amount due. Presentation of Community Tax Certificate on Certain Occasions 1. or d. Corporation a. transacts other official business. 6 chapter 2. 156 LGC) 2. 000 of income regardless of whether from business. d. receives any license. Diplomatic and consular representatives 2.oo foe every P 1. 18 years old and above 3. exercise of profession or from property which shall not exceed P 1. One who is required by law to file an income tax return RATE: P 5.
. 4. The CTA has co jurisdiction over the tax collection cases of the LGU Prescriptive Periods under the LGC: 1. Avail local government’s liens. Exception: When there is fraud or intent to evade the payment of taxes. Remedies Taxpayer under the LGC 1. B. Civil remedies for collection 1.Local taxes constitute a lien. 164) 1. Collection of Local taxes: Five (5) years from the date of assessment by administrative or judicial action. The taxpayer is out of the country or otherwise cannot be located. and 2. fees. chattels and other personal property. TAX REMEDIES UNDER THE LOCAL GOVERNMENT CODE A. The taxpayer requests for a reinvestigation and executes a waiver in writing before the expiration of the period within which to assess or collect. enforceable by appropriate administrative of judicial action. Administrative action through distraint of goods. 2. Impose penalties (surcharges and penalty interest) in case of delinquency. charges or encumbrances in favor of any person. ADMINISTRATIVE a) Prior to assessment: i) Administrative appeal to the Secretary of Justice. or ii) Action for refund within 2 years from payment of tax to local revenue taxes the 52 of the civil action only. or charges – ten (10) years from discovery of the fraud or intent to evade the payment. property distrained not disposed within 120 days from date of distraint – considered sold to the LGU. occupation. and c. Tax Local Government Units Remedies of The treasurer of the concerned Local Government Unit shall file the collection case.Far Eastern University Institute of Law the barangay treasurers shall be apportioned as follows: (Sec. civil action. levy. practice of profession or calling. Interruption of the period of prescription: a. Tax Law Study Guide Centralized Bar Operations 2007 . Note: Either of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local government unit concerned. 2. and ii) Action for declaratory relief b) After an assessment: i) Protest of the assessment within 60 days from receipt of assessment. or exercise of privilege with respect to which the lien is imposed Judicial action Assessment of Local Taxes General rule – five years (5) from the date they became due. By judicial action. and 4. distraint. purchase of property by LGUs for want of bidder. it precludes a criminal case as a proper remedy for collection of delinquent local taxes. Tax lien. not only upon any property or rights therein which may be the subject of the lien but also upon property used in business. 3. 5. superior to all liens. tax lien. 50% accrues to the general fund of the city or municipality concerned. 3. b. 50% accrues to the barangay where the tax is collected. The treasurer is legally prevented from making the assessment or collection of the tax. 1. 2. Payment under protest is not necessary.
appeal to the Board of Assessment Appeals as in a protest case b) court action – appeal of CBAAs decision to the Supreme Court by certiorari. Special Special Classes of Real Property (sec 216. LGC) 53 Tax Law Study Guide Centralized Bar Operations 2007 . Residential 4. Right of redemption – one (1) year from the date of sale or from the date of forfeiture. Payment and subsequent refund or tax credit – within two (2) years from payment of tax to local treasurer. 10 SCRA 68 seem to suggest that Art 415 of the Civil Code could also be controlling. LGC) Note: Although the term real property has not been expressly defined in the LGC. • within 30 days from receipt of decision of LBAA to Central Board of Assessment Appeals. as well as the accrual and payment of the tax • In case of adverse decision or inaction by the Secretary of Justice. Land. The value is based on the tax base 3.the tax is calculated on the basis of a certain percentage of the value assessed 4. city or municipal assessor to Local Board of Assessment Appeals. Commercial 2. Ad Valorem tax. Manila Electric Co. (SEC. v Board of Assessment Appeals. Action for declaratory relief injunction – if irreparable damage would be caused to the taxpayer and no adequate remedy is available. 6 SCRA `97. • in case of denial of refund or credit. 119 PHIL 328. Direct tax on the ownership of real property 2. Payment under protest not necessary. Agricultural 3. Proporti on . c) suit assailing validity of tax. Classification of Lands for purposes of assessment [Sec 218 (a)] 1. Mineral 5. Machinery and 4. 2. REAL PROPERTY TAXATION Characteristic of Real Property Tax 1.1 year from the date of sale or forfeiture. Indivisib le single obligation 5. Protest – within 60 days from receipt of assessment. 179. early decisions of the Supreme Court in Mindanao Bus Co.Far Eastern University Institute of Law supervening cause applies in local taxation because the period for the filling of claims for refund is counted not necessarily from the date of payment but from the date the taxpayer is entitled to a refund or credit. Timberland 7. Local Tax Properties Liable Under Real Property Tax According to the Local Government Code. JUDICIAL a) appeal • within 60 days from assessment of provincial. Industrial 6. d) suit to declare invalidity of tax due to irregularity in assessment and collection. v City Assessor of Cagayan de Oro. Buildings 3. Real Property liable for Real Prop tax is: 1. the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. LGC) 2. iii) Right of redemption. Board of Assessment Appeals v Meralco. recovery or refund of taxes paid. Other improvements not otherwise exempted under said code (Sec 232. e) suit assailing the validity of tax sale Appeal to the Secretary of Justice: • Any question on the constitutionality or legality of tax ordinances may be raised on appeal within 30 days from the effectivity thereof • To the Secretary of Justice • Who shall render a decision within 60 days from date of receipt of appeal • Such appeal shall not suspend the effectivity of the ordinance.
Cultural and scientific purposes 3. property will be dropped from the roll Note: IF PROPERTY DECLARED FOR THE FIRST TIME (Sec. mosques. buildings and improvements actually directly and exclusively used for religious. Machinery and Equipment actually. owned and used by local water districts 4. equitable appraisal and assessment PROCEDURE: STEP 1 PROPERTY DECLARATION OF REAL assessor within 60 DAYS from date of transfer a SWORN statement containing FMV and description of property If improvement on real property • file w/in 60 DAYS upon completion or occupation (whichever is earlier) • SWORN statement containing FMV and description of property 2. charitable or educational purposes. GOCCs rendering essential public services in the supply and distribution of water and/or generation or transmission of electric power. Current and fair market value is the basis of appraisal 2. real property shall be assessed for back taxes for not more than 10 yrs prior to the date of initial assessment taxes shall be computed on the basis of applicable schedule of values in force during the corresponding periods STEP 2: LISTING OF REAL PROPERTY IN THE ASSESSMENTROLLS (Sec 205. appraisal. and municipalities gives summons to owners of affected properties 54 1. Assessor of the province. 224-225) Determining Fair Market Value A. Actual use of the property should be the basis of classification 4. assessment. non-profit or religious cemeteries. • If proven to be tax-exempt. Owned by the Republic of the Philippines or its political subdivisions Except: when beneficial use has been granted to a taxable person 2. directly. Uniformity in classification in each local gov’t unit should be observed 3. 5. Charitable institutions. 207) • All declaration shall be kept and filed under a uniform classification system to be established by the provincial. Declared by Owner or Administrator (Sec 202-203) If newly acquired property • files with Tax Law Study Guide Centralized Bar Operations 2007 . Hospitals 2. Fundamental Principles in Assessment Real Property Taxes (Art 198) 1. (not falling within the above enumeration) are withdrawn. Properties Exempt from Taxes (Sec. the property will be listed as taxable in the roll. and convents thereto. 222) • If declared for 1st time.Far Eastern University Institute of Law 1. levy and collection should not be let to any private person. city. Machinery & equipment for pollution control and Environment protection • Exemptions previously granted. 3. Land 1. STEP 3: APPRAISAL AND VALUATION OF REAL PROPERY (Sec 212-214. Real property owned by duly registered Cooperatives under RA 6938 5. parsonages. and exclusively used by local Water districts and GOCCs engaged in the supply and distribution of water and/or generation and transmission of electric power 4. churches. city or municipal assessor. 234) 1. Declared by Provincial / City / Municipal Assessor (Sec 204) • only when the person under Sec 202 refuses or fails to make the declaration within the prescribed time • No oath is required IF FILING FOR EXEMPTION (Sec 206) • person claiming exemptions must file with assessor sufficient documentary evidence to support claim within 30 days from the date of DECLARATION of property • If required evidence is not submitted within 30 days.
the schedule of FMV is published or posted B. treasurer concerned • indicate amount contested • annotate on tax receipt “paid under protest” • Within 30 days. Use or non55 STEP 4: DETERMINE ASSESSED VALUE (Sec 218) Procedure 1. city. from discovery of fraud. city. Machinery 1. LGC) a. In all other cases: FMV = Remaining eco.Sept. the owner of the prop is out of the country or cannot be located REMEDIES IN REAL PROPERTY TAXATION A. provided in no case shall the total interest exceed thirty-six (36) months Note: FOR ADVANCE and PROMPT PAYMENT a) advance payment -discount not exceeding 20% of annual tax (Sec 251. amount may either be a. Assessed value = FMV X Assessment level 3. refunded or b.local treasurer is legally prevented to collect tax b. Life X Replacement Estimated Eco. applied as tax credit IF DENIED or NOT DECIDED WITHIN 60 DAYS BY TREASURER. 30.the owner of prop requests for reinvestigation and writes a waiver before expiration of period to collect c. confirm protest in writing stating grounds therefor • treasurer shall decide protest within 60 days Note: No protest shall be entertained unless THE TAX IS FIRST PAID. until the delinquent amt is paid.within five (5) yrs from the date they become due b. REFUND IN CASE OF EXCESSIVE COLLECTION (Sec 253) • File a written claim for refund within two (2) years from date taxpayer is entitled thereto Remedies of Government Remedies may be enforced either through administrative or judicial action or both.governed by ordinance Note: INTEREST for LATE PAYMENT two percent (2%) each month on unpaid amt. Remedies of Taxpayer 1. or mun. Assessor prepares a schedule of FMV for different classes of properties 3. PAYMENT UNDER PROTEST (Sec 252) • file protest with prov. 31) b. Tax Law Study Guide Centralized Bar Operations 2007 . (Sec 270). Life Cost Period: a. LGC) b) prompt payment -discount not exceeding 10% of annual tax due (Art 342 IRR) Who Collects? The provincial.within ten (10) yrs. municipal or barangay treasurer within which to collect. take the schedule of FMV 2. Sanggunian enacts an ordinance 4. For Brand New machinery: FMV is acquisition cost 2. basic real prop tax in 4 equal installments (Mar 31. special levy . Tax = Assessed value X Tax rate STEP 5: PAYMENT AND COLLECTION OF TAX • • Period: January 1 of every year (Sec 246) tax shall constitute as superior lien (Sec 246) HOW? a. taxpayer may appeal to board of assessment appeal or b. a. avail of remedies under Ch 3 title 2 Book II (Local Board of Assessment Appeals and Central Board of Assessment Appeals) 2. June 30. alternative or simultaneously. Dec. IF PROTEST DECIDED IN FAVOR of taxpayer.Far Eastern University Institute of Law 2. in case there is fraud or intent to evade Prescription shall be suspended when: (Sec 270.
order or decision by the CTA favorable to the national government. JUDICIAL (Sec 266)-civil action filed by the local treasurer within 5 yrs. to issue order authorizing distrait of personal property and levy of real personal property. 3. Written Petition under Oath 2. chattels.passed before Jan 1 of any year and upon recommendation of the Local Disaster Coordinating Council APPEALS IN REAL PROPERTY TAXATION OWNER OR INTEREST PERSON WITH LEGAL 1.Far Eastern University Institute of Law use of one remedy shall not be a bar against the other (Sec 258) 1. DISTRAINT OF PERSONAL PROPERTY AND LEVY OF REAL PROPERTY Upon the issuance of any ruling. With Supporting Documents Within 60 days LOCAL BOARD OF ASSESSMENT APPEALS (LBAA should decide win 120 DAYS from receipt of petition) Within 30 days CENTRAL APPEALS BOARD OF ASSESSMENT to administer oaths. municipalities if he deems that PUBLIC INTEREST so requires (Sec 277) THE SANGGUNIAN concerned may CONDONE or REDUCE the tax in cases where a. to assess damage against appellant if appeal to CTA is found to be frivolous or dilatory. calamit y (Sec 276) by an ordinance . 5. 4. credits. bank accounts. from due date Condonation and Remission The PRESIDENT may remit or reduce real prop tax in any province. to inquire production of papers or documents by subpoena duces tecum. city. or effects and personal property. there is a general failure of crops b. debts. to suspend the collection of tax pending appeal. and interest in and rights to personal property and/or 56 Tax Law Study Guide Centralized Bar Operations 2007 . to punish contempt. 10. each division consisting of 3 justices. including stocks and other securities. 8. substan tial decrease in the price of products c. He presiding justice and the most senior associate justice shall serve as chairmen of the two divisions. 7. ADMINISTRATIVE a) Levy on Real property (Sec 258 and 259) b) Sale of Real Property (Sec 260) c) Local Government’s Lien (Sec 256) d) Further Distraint or Levy (Sec 265) Within 30 days COURT OF TAX APPEALS Within 15 days SUPREME COURT —oOo— COURT OF TAX APPEALS COMPOSITION Presiding Justice and 5 Associate Justices May sit en banc or in two divisions. 6. and 9. through the commissioner: 1. to seize and distrait any goods. to promulgate rules and regulations for the conduct of its business. to receive evidence. to summon witness by subpoena. Files within 60 days 1. the CTA shall issue an order authorizing the BIR. POWERS of the Court of Tax Appeal 2. 2. to render decisions on case brought before it.
and no right to reserve the filing of such civil action separately from the criminal action shall be recognized. 3.HOWEVER. or b) where there is no specified amount claimed shall be tried by the regular courts and the jurisdiction of the CTA shall be appellate. Decisions of Commissioner of Customs in a. and the Secretary of Agriculture in the case of agricultural products. decisions of the CBAA in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the LBAA. fees and other money charges. detention or release of property affected. decisions of the Secretary of Trade and Industry. C. other matters arising under the Customs Law or other laws or part of laws administered by the BOC. charges and penalties. The remedy shall no be exclusive and shall not preclude the court from availing of other means under the Rules of Court. 4. resolutions or orders of the RTC in tax cases originally decided by them. in the case of non-agricultural products. refunds of internal revenue taxes. levy the real property of such persons in sufficient quantity to satisfy the tax or charge together with any increment thereto incident to delinquency. claimed is less than 1 million pesos. order or resolution of the RTCs in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. a) disputed assessment. Collection where the principal amount of taxes and fees. resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax cases originally decided by the MTC. forfeitures and other penalties imposed in relation thereto. fees. JURISDICTION OVER TAX COLLECTION CASES 1. fees and other charges. decision or inaction of the CIR in2. decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the government. cases involving liability from customs duties. JURISDICTION OF THE CTA A. B. Exclusive original jurisdiction over all criminal offenses arising from violations of the NIRC or tariff and Customs Code and other laws administered by the BIR and BOC. b) 6. or other law or part of law administered by BIR. penalties imposed in relation thereto. Decisions.Far Eastern University Institute of Law 2. 7. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes. seizures. fines. involving dumping ad countervailing duties over petitions for review of the judgments. 5. exclusive of charges and penalties. EXCLUSIVE APPELATE JURISDICTION TO REVIEW BY APPEAL 1. and jointly determined in the same proceeding by the CTA. The criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with. JURISDICTION CRIMINAL CASES OVER 1. claimed is less than 1 million pesos 57 Tax Law Study Guide Centralized Bar Operations 2007 . the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action. and b. appellate offenses: Exclusive jurisdiction in criminal a) over appeals from the judgments. offenses a) where the principal amount of taxes and fees. 2. exclusive of charges and penalties. and b) other matters arising under the NIRC.
and/or sale of any property of the taxpayer. Commissioner of Customs. A party adversely affected by a ruling.R. b) over petitions for review of the judgments. 1991 Resolution. the government must follow the same rules of procedure which bind private parties. ruling or inaction of the CIR.A. levy or distrait. After the expiration of the period fixed by law for action referred to in Section 7(a) R. defense of prescription REASON: this is a statutory right (Visayan Land Transport vs. held that “in the absence of explicit statutory provisions to the contrary. ruling or inaction of the CIR. Commissioner of Customs. Manufacturing Corp. Sec. deposit of the amount claimed or file a surety bond for not more that double the amount of tax with the Court when required. of Agriculture or the RTC. this was reversed by the SC in the case of Commissioner vs. EXCEPTIONS: 1. errors of administrative officials REASON: State can never be in estoppel and Lifeblood Theory (CIR vs. in case of inaction. Exclusive appellate jurisdiction in tax collection cases -a) over appeals from the judgments. Procter and Gamble Philippines. order of a division of the CTA may file a motion for reconsideration or new trial before the same Division.Far Eastern University Institute of Law shall be tried by the proper MTC and RTC. within 30 days after receipt of such decisions or 2. RULE: No appeal taken to the CTA shall suspend the payment. CAN THE CTA ENJOIN COLLECTION OF TAXES? 1. through a verified petition before the Supreme Court. may file an appeal with the CTA: 1. and 3. of Trade and Industry or Sec. Sec. APPEAL WHO MAY APPEAL? Any party adversely affected by a decision. of Agriculture or the RTC this appeal shall be heard by a DIVISION of the CTA. 9282. 3. 2. no. RULE: New issues cannot be raised for the first time on appeal. Procter and Gamble.” Collection of taxes may be SUSPENDED pending appeal to the CTA GEN. in which case the inaction shall be deemed a denial. resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax collection cases originally decided by the MTC. of Trade and Industry or Sec. ruling or inaction of the Central Board of Assessment and the RTC in the exercise of its appellate 58 Tax Law Study Guide Centralized Bar Operations 2007 . Within 30 days from the receipt of the decision or ruling from the expiration of the period fixed by law for the official concerned to act. showing by taxpayer that appeal is not frivolous or dilatory. may file a petition for review with the CTA En Banc. G. 2. MODES OF APPEAL jurisdiction this appeal shall be heard by a CTA EN BANC. of Finance. By filling a petition for review under a procedure analogous to that provided for under Rule 42 of Rules on Civil Procedure Decision. Collector) 2. Sec. GEN. of Finance. resolutions or orders of the RTC in tax collection cases originally decided by them. there must be a showing that collection of the tax may jeopardize the interest of the government and/or taxpayer. Sec. pursuant to Rule 45 of the Rules on Civil Procedure. By filling a petition for review under a procedure analogous to that provided for under Rule 43 of Rules on Civil Procedure Decision. Dec. EXCEPTIONS: 1. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial. Petition for Review on Certiorari may be filled by a party adverse affected by a decision or ruling of the CTA En Banc.) NOTE: However. 66838. 2. 2.
9282 grants CTA power to suspend collection of tax if such collection works to serious prejudice of either taxpayer or government.A. Sec.A.R. 1958] Note: Appeal to the CTA does not automatically suspend collection UNLESS CTA issues suspension order at any stage of proceedings. March 29. fee. HOWEVER. G. Note: The provision in Tax Code refers to courts OTHER THAN the CTA. 11 of R. L-11295. no. 218 of NIRC provides no court any grant injunction to restrain collection of any tax. —oOo— 59 Tax Law Study Guide Centralized Bar Operations 2007 . [Blaquera vs.Far Eastern University Institute of Law Sec. charge imposed by the Tax code. 9 of R. 1125 as amended by Sec. Rodriguez.
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