TAXATION I d.

Encourage Economic Growth – in the realm of tax
exemptions and tax reliefs, for instance, the purpose is to grant
GENERAL PRINCIPLES incentives or exemptions in order to encourage investments and
thereby promote the country’s economic growth.
I. Concepts, Nature and Characteristics of Taxation and Taxes.
e. Protectionism – in some important sectors of the economy, as
in the case of foreign importations, taxes sometimes provide
protection to local industries like protective tariffs and customs.
Taxation Defined:
Taxes Defined
As a process, it is a means by which the sovereign, through its
law-making body, raises revenue to defray the necessary expenses
Taxes are the enforced proportional contributions from persons
of the government. It is merely a way of apportioning the costs of
and property levied by the law-making body of the State by virtue of
government among those who in some measures are privileged to
its sovereignty for the support of government and for public needs.
enjoy its benefits and must bear its burdens.
Essential Characteristic of Taxes [ LEMP3S ]
As a power, taxation refers to the inherent power of the state to
demand enforced contributions for public purpose or purposes.
1. It is levied by the law-making body of the State
The power to tax is a legislative power which under the
Rationale of Taxation - The Supreme Court held:
Constitution only Congress can exercise through the enactment of
“It is said that taxes are what we pay for civilized society.
laws. Accordingly, the obligation to pay taxes is a statutory liability.
Without taxes, the government would be paralyzed for lack of the
motive power to activate and operate it. Hence, despite the natural
2. It is an enforced contribution
reluctance to surrender part of one’s hard-earned income to the
A tax is not a voluntary payment or donation. It is not
taxing authorities, every person who is able must contribute his share
dependent on the will or contractual assent, express or implied, of
in the running of the government. The government for its part is
the person taxed. Taxes are not contracts but positive acts of the
expected to respond in the form of tangible and intangible benefits
government.
intended to improve the lives of the people and enhance their moral
and material values. The symbiotic relationship is the rationale of
3. It is generally payable in money
taxation and should dispel the erroneous notion that it is an arbitrary
Tax is a pecuniary burden – an exaction to be discharged
method of exaction by those in the seat of power.
alone in the form of money which must be in legal tender, unless
Taxation is a symbiotic relationship, whereby in exchange
qualified by law, such as RA 304 which allows backpay certificates
for the protection that the citizens get from the government, taxes are
as payment of taxes.
paid.” (Commissioner of Internal Revenue vs Allegre, Inc.,et al., L-
28896, Feb. 17, 1988)
4. It is proportionate in character - It is ordinarily based on the
taxpayer’s ability to pay.
Purposes and Objectives of Taxation
5. It is levied on persons or property - A tax may also be imposed
1. Revenue – to provide funds or property with which the State
on acts, transactions, rights or privileges.
promotes the general welfare and protection of its citizens.
6. It is levied for public purpose or purposes - Taxation involves,
2. Non-Revenue [PR2EP]
and a tax constitutes, a burden to provide income for public
purposes.
a. Promotion of General Welfare – Taxation may be used as an
implement of police power in order to promote the general welfare of
7. It is levied by the State which has jurisdiction over the persons or
the people. [see Lutz vs Araneta (98 Phil 148) and Osmeňa vs Orbos
property. - The persons, property or service to be taxed must be
(G.R. No. 99886, Mar. 31, 1993)]
subject to the jurisdiction of the taxing state.
b. Regulation – As in the case of taxes levied on excises and
privileges like those imposed in tobacco or alcoholic products or
Theory and Basis of Taxation
amusement places like night clubs, cabarets, cockpits, etc.
In the case of Caltex Phils. Inc. vs COA (G.R. No. 92585,
1. Necessity Theory
May 8, 1992), it was held that taxes may also be imposed for a
Taxes proceed upon the theory that the existence of the
regulatory purpose as, for instance, in the rehabilitation and
government is a necessity; that it cannot continue without the means
stabilization of a threatened industry which is affected with public
to pay its expenses; and that for those means, it has the right to
industry like the oil industry.
compel all citizens and properties within its limits to contribute.
In a case, the Supreme Court held that:
c. Reduction of Social Inequality – this is made possible
Taxation is a power emanating from necessity. It is a
through the progressive system of taxation where the objective is to
necessary burden to preserve the State’s sovereignty and a means
prevent the under-concentration of wealth in the hands of few
to give the citizenry an army to resist aggression, a navy to defend its
individuals.
shores from invasion, a corps of civil servants to serve, public
improvements designed for the enjoyment of the citizenry and those
1

which come with the State’s territory and facilities, and protection therefrom while the rest are inherent and they are those which spring
which a government is supposed to provide. (Phil. Guaranty Co., Inc. from the nature of the taxing power itself although, they may or may
vs Commissioner of Internal Revenue, 13 SCRA 775). not be provided in the Constitution.

2. The Benefits-Protection Theory
The basis of taxation is the reciprocal duty of protection Scope of Legislative Taxing Power [S2 A P K A M]
between the state and its inhabitants. In return for the contributions,
the taxpayer receives the general advantages and protection which 1. subjects of Taxation (the persons, property or occupation etc.
the government affords the taxpayer and his property. to be taxed)
2. amount or rate of the tax
3. purposes for which taxes shall be levied provided they are
Qualifications of the Benefit-Protection Theory: public purposes
4. apportionment of the tax
a. It does not mean that only those who are able to pay and do 5. situs of taxation
pay taxes can enjoy the privileges and protection given to a citizen by 6. method of collection
the government.
b. From the contributions received, the government renders no Is the Power to Tax the Power to Destroy?
special or commensurate benefit to any particular property or person.
c. The only benefit to which the taxpayer is entitled is that derived In the case of Churchill, et al. vs Concepcion (34 Phil 969)
from his enjoyment of the privileges of living in an organized society it has been ruled that:
established and safeguarded by the devotion of taxes to public The power to impose taxes is one so unlimited in force and
purposes. (Gomez vs Palomar, 25 SCRA 829) so searching in extent so that the courts scarcely venture to declare
d. A taxpayer cannot object to or resist the payment of taxes that it is subject to any restriction whatever, except such as rest in
solely because no personal benefit to him can be pointed out as the discretion of the authority which exercise it. No attribute of
arising from the tax. (Lorenzo vs Posadas, 64 Phil 353) sovereignty is more pervading, and at no point does the power of
government affect more constantly and intimately all the relations of
3. Lifeblood Theory life than through the exaction made under it.
Taxes are the lifeblood of the government, being such, And in the notable case of McCulloch vs Maryland, Chief
their prompt and certain availability is an imperious need. (Collector Justice Marshall laid down the rule that the power to tax involves
of Internal Revenue vs. Goodrich International Rubber Co., Sept. 6, the power to destroy.
1965) Without taxes, the government would be paralyzed for lack of According to an authority, the above principle is pertinent
motive power to activate and operate it. only when there is no power to tax a particular subject and has no
relation to a case where such right to tax exists. This opt-quoted
maxim instead of being regarded as a blanket authorization of the
Nature of Taxing Power unrestrained use of the taxing power for any and all purposes,
irrespective of revenue, is more reasonably construed as an
1. Inherent in sovereignty – The power of taxation is inherent in epigrammatic statement of the political and economic axiom that
sovereignty as an incident or attribute thereof, being essential to the since the financial needs of a state or nation may outrun any human
existence of every government. It can be exercised by the calculation, so the power to meet those needs by taxation must not
government even if the Constitution is entirely silent on the subject. be limited even though the taxes become burdensome or
a. Constitutional provisions relating to the power of taxation do confiscatory. To say that “the power to tax is the power to destroy” is
not operate as grants of the power to the government. They merely to describe not the purposes for which the taxing power may be used
constitute limitations upon a power which would otherwise be but the degree of vigor with which the taxing power may be employed
practically without limit. in order to raise revenue (I Cooley 179-181)
b. While the power to tax is not expressly provided for in our
constitutions, its existence is recognized by the provisions relating to  Constitutional Restraints Re: Taxation is the Power to
taxation. Destroy
In the case of Mactan Cebu International Airport Authority While taxation is said to be the power to destroy, it is by no
vs Marcos, Sept. 11, 1996, as an incident of sovereignty, the power means unlimited. It is equally correct to postulate that the “power to
to tax has been described as “unlimited in its range, acknowledging tax is not the power to destroy while the Supreme Court sits,”
in its very nature no limits, so that security against its abuse is to be because of the constitutional restraints placed on a taxing power that
found only in the responsibility of the legislative which imposes the violated fundamental rights.
tax on the constituency who are to pay it.” In the case of Roxas, et al vs CTA (April 26, 1968), the SC
reminds us that although the power of taxation is sometimes called
2. Legislative in character – The power to tax is exclusively the power to destroy, in order to maintain the general public’s trust
legislative and cannot be exercised by the executive or judicial and confidence in the Government, this power must be used justly
branch of the government. and not treacherously. The Supreme Court held:
“The power of taxation is sometimes called also the power
3. Subject to constitutional and inherent limitations – Although to destroy. Therefore it should be exercised with caution to minimize
in one decided case the Supreme Court called it an awesome power, injury to the proprietary rights of a taxpayer. It must be exercised
the power of taxation is subject to certain limitations. Most of these fairly, equally and uniformly, lest the tax collector kill the ‘hen that
limitations are specifically provided in the Constitution or implied lays the golden egg’. And, in order to maintain the general public’
2

trust and confidence in the Government this power must be used
justly and not treacherously.” 2. Property Taxes – taxes on things or property of a certain class
The doctrine seeks to describe, in an extreme, the within the jurisdiction of the taxing power.
consequential nature of taxation and its resulting implications, to wit: example: real estate tax
a. The power to tax must be exercised with caution to minimize
injury to proprietary rights of a taxpayer; 3. Excise Taxes – charges imposed upon the performance of an
b. If the tax is lawful and not violative of any of the inherent and act, the enjoyment of a privilege, or the engaging in an occupation.
constitutional limitations, the fact alone that it may destroy an activity examples: income tax, value-added tax, estate tax or
or object of taxation will not entirely permit the courts to afford any donor’s tax
relief; and
c. A subject or object that may not be destroyed by the taxing
authority may not likewise be taxed. (e.g. exercise of a constitutional B. As to Burden
right)
1. Direct Taxes – taxes wherein both the “incidence” as well as the
Power of Judicial Review in Taxation “impact” or burden of the tax faces on one person.
The courts cannot review the wisdom or advisability or examples: income tax, community tax, donor’s tax, estate
expediency of a tax. The court’s power is limited only to the tax
application and interpretation of the law.
Judicial action is limited only to review where involves: 2. Indirect Taxes – taxes wherein the incidence of or the liability for
1. The determination of validity on the tax in relation to the payment of the tax falls on one person, but the burden thereof
constitutional precepts or provisions. can be shifted or passed to another person.
2. The determination, in an appropriate case, of the application of examples: VAT, percentage taxes, customs duties excise
the law. taxes on certain specific goods

Important Points to Consider regarding Indirect Taxes:
Aspects of Taxation 1. When the consumer or end-user of a manufacturer product is
1. Levy – determination of the persons, property or excises to be tax-exempt, such exemption covers only those taxes for which such
taxed, the sum or sums to be raised, the due date thereof and the consumer or end-user is directly liable. Indirect taxes are not
time and manner of levying and collecting taxes (strictly speaking, included. Hence, the manufacturer cannot claim exemption from the
such refers to taxation) payment of sales tax, neither can the consumer or buyer of the
product demand the refund of the tax that the manufacturer might
2. Collection – consists of the manner of enforcement of the have passed on to him. (Phil. Acetylene Co. inc. vs Commissioner of
obligation on the part of those who are taxed. (this includes payment Internal Revenue et. al., L-19707, Aug.17, 1987)
by the taxpayer and is referred to as tax administration)
The two processes together constitute the “taxation 2. When the transaction itself is the one that is tax-exempt but
system”. through error the seller pays the tax and shifts the same to the buyer,
the seller gets the refund, but must hold it in trust for buyer.
Basic Principles of a Sound Tax System [FAT] (American Rubber Co. case, L-10963, April 30, 1963)
1. Fiscal Adequacy – the sources of tax revenue should coincide
with, and approximate the needs of government expenditure. Neither 3. Where the exemption from indirect tax is given to the contractee,
an excess nor a deficiency of revenue vis-à-vis the needs of but the evident intention is to exempt the contractor so that such
government would be in keeping with the principle. contractor may no longer shift or pass on any tax to the contractee,
the contractor may claim tax exemption on the transaction
2. Administrative Feasibility – tax laws should be capable of (Commissioner of Internal Revenue vs John Gotamco and Sons,
convenient, just and effective administration. Inc., et.al., L-31092, Feb. 27, 1987)

3. Theoretical Justice – the tax burden should be in proportion to 4. When the law granting tax exemption specifically includes
the taxpayer’s ability to pay (ability-to-pay principle). The 1987 indirect taxes or when it is clearly manifest therein that legislative
Constitution requires taxation to be equitable and uniform. intention to exempt embraces indirect taxes, then the buyer of the
product or service sold has a right to be reimbursed the amount of
the taxes that the sellers passed on to him. (Maceda vs
II. Classifications and Distinction Macaraig,supra)

Classification of Taxes
C. As to Purpose
A. As to Subject matter
1. General/Fiscal/Revenue – tax imposed for the general purposes
1. Personal, capitation or poll taxes – taxes of fixed amount upon of the government, i.e., to raise revenues for governmental needs.
all persons of a certain class within the jurisdiction of the taxing Examples: income taxes, VAT, and almost all taxes
power without regard to the amount of their property or occupations
or businesses in which they may be engaged in. 2. Special/Regulatory – tax imposed for special purposes, i.e., to
example: community tax achieve some social or economic needs.
3

Examples: educational fund tax under Real Property 1. demand of sovereignty 1. demand of proprietorship
Taxation 2. paid for the support of the 2. paid for the use of another’s
government property
D. As to Measure of Application 3. generally, no limit as to 3. amount depends on the cost
amount imposed of construction or maintenance
1. Specific Tax – tax imposed per head, unit or number, or by of the public improvement used
some standard of weight or measurement and which requires no 4. imposed only by the 4. imposed by the government
assessment beyond a listing and classification of the subjects to be government or private individuals or entities
taxed.
Examples: taxes on distilled spirits, wines, and fermented b. Penalty vs Tax
liquors Penalty – any sanctions imposed as a punishment for
violations of law or acts deemed injurious.
2. Ad Valorem Tax – tax based on the value of the article or thing
subject to tax. Tax vs Penalty
example: real property taxes, customs duties 1. generally intended to raise 1. designed to regulate conduct
revenue
E. As to Date 2. imposed only by the 2. imposed by the government
government or private individuals or entities
1. Progressive Tax – the rate or the amount of the tax increases as
the amount of the income or earning (tax base) to be taxed c. Special Assessment vs Tax
increases. Special Assessment – an enforced proportional
examples: income tax, estate tax, donor’s tax contribution from owners of lands especially or peculiarly benefited
by public improvements.
2. Regressive Tax – the tax rate decreases as the amount of
income or earning (tax base) to be taxed increases.
Tax vs Special Assessment
Note: We have no regressive taxes (this is according to De
1. imposed on persons, 1. levied only on land
Leon)
property and excise
2. personal liability of the 2. not a personal liability of the
3. Mixed Tax – tax rates are partly progressive and partly
person assessed person assessed, i.e. his liability
regressive.
is limited only to the land
involved
4. Proportionate Tax – tax rates are fixed on a flat tax base.
3. based on necessity as well 3. based wholly on benefits
examples: real estate tax, VAT, and other percentage
as on benefits received
taxes
4. general application (see 4. exceptional both as time and
Apostolic Prefect vs Treas. Of place
F. As to Scope or authority imposing the tax Baguio, 71 Phil 547)

1. National Tax – tax imposed by the National Government. Important Points to Consider Regarding Special
examples: national internal revenue taxes, customs duties Assessments:
1. Since special assessments are not taxes within the constitutional
2. Municipal/Local Tax – tax imposed by Local Government units. or statutory provisions on tax exemptions, it follows that the
examples: real estate tax, professional tax exemption under Sec. 28(3), Art. VI of the Constitution does not
apply to special assessments.
 Regressive System of Taxation vis-à-vis Regressive Tax 2. However, in view of the exempting proviso in Sec. 234 of the
A regressive tax, must not be confused with regressive Local Government Code, properties which are actually, directly and
system of taxation. exclusively used for religious, charitable and educational purposes
Regressive Tax: tax the rate of which decreases as the are not exactly exempt from real property taxes but are exempt from
tax base increases. the imposition of special assessments as well.( see Aban)
Regressive System of Taxation: focuses on indirect 3 .The general rule is that an exemption from taxation does not
taxes, it exists when there are more indirect taxes imposed than include exemption from special assessment.
direct taxes.
d. License or Permit Fee vs Tax
Taxes distinguished from other Impositions License or Permit fee – is a charge imposed under the
police power for the purposes of regulation.
a. Toll vs Tax
Toll – sum of money for the use of something, generally Tax vs License/Permit Fee
applied to the consideration which is paid for the use of a road, 1. enforced contribution 1. legal compensation or
bridge of the like, of a public nature. assessed by sovereign authority reward of an officer for specific
to defray public expenses purposes
2. for revenue purposes 2. for regulation purposes
Tax vs Toll 3. an exercise of the taxing 3. an exercise of the police

4

a. vs CIR. based on contracts. taxation implies tribute from the for non-payment of tax except payment of debt governed to some form of sovereignty. (see Domingo vs Garlitos. cannot be 2. A person cannot refuse to pay a tax on the ground that the government owes him an amount Importance of the distinctions between tax and license equal to or greater than the tax being collected. Republic vs Mambulao Lumber Co. draws interest when so except only when delinquent stipulated. assignable 5. contracts. does not draw interest 7. Tax Distinguished from other Terms. may be paid in kind 6. e. Distinctions among the Three Powers 294 SCRA 687. express importation/exportation of goods. amount is limited to the Exception: Where both the claims of the government and the amount of tax to be paid necessary expenses of taxpayer against each other have already become due and inspection and regulation demandable as well as fully liquated. purpose is to generate revenue and regulation is merely incidental. imposed also on persons 5. No. The term taxes is broader in scope as it Progressive Development Corp. Customs Duties – taxes imposed on goods exported from or revenue is also obtained does not make the imposition of a tax. Power of Eminent Domain and debtors or each other. Aug. Licenses for revenue only that there can be no offsetting of taxes against the claims that the taxpayer may have against the government. imprisonment is a sanction 5. the fact that incidentally 3. based on law 1. imposed on the right to 18904. and that exemption from taxes may not include exemption from license fees. Internal Revenue – refers to taxes imposed by the legislative assigned other than duties or imports and exports. 1998 2. f. Tariff – it may be used in 3 senses: Debt is based upon juridical tie. however. But a tax may have only a regulatory purpose. maybe considered both a tax and a license fee. 2. Licenses for the regulation or restriction of non-useful occupations or enterprises The Supreme Court held that: “We have consistently ruled 3. tribute or duty. vs Quezon City. generally not subject to set. 230) Tax vs Debt c. The power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. it means a duty on imported goods and in the Tax Code merchandise. 4. 172 SCRA 629) includes customs duties. Tribute – synonymous with tax. non-payment does not 6. or implied 2. An extraction. May 31. 6 SCRA 622) 5 . Police Power compensation. The government and the taxpayer are not creditors 2. G. generally payable in money 3. vs Commissioner of Internal Revenue 1.R. but if regulation is the primary purpose. 3. 5. may be subject to set-off or off or compensation compensation currency.” 1. b. Revenue – refers to all the funds or income derived by the 4. governed by the ordinary 8. Some limitations apply only to one and not to the other. 2. As a book of rates drawn usually in alphabetical order delicts or quasi-delicts between parties for their private interest or containing the names of several kinds of merchandise with the resulting from their own acts or omissions. Licenses for the regulation of useful occupations. no imprisonment for non- 7. while taxes are due to the government in its sovereign capacity (Philex Mining Corp. Obligations in the nature of debts are due 3. (see imported into a country. June 29. 7. 1967 and an individual or private commercial enterprise deemed beneficial to related cases) the public. As the system or principle of imposing duties on the 1. L-12647. whether from tax or from whatever source and whatever 5. Debt vs Tax 4. 28.power power 4. governed by special 6.. it signifies any tax. or in case of default Inherent Powers of the State General Rule: Taxes are not subject to set-off or legal 1. (see 1. The general rule is that the imposition is a tax if its primary manner. government. The collection of a fee: tax cannot await the results of a lawsuit against the government. non-payment makes the act necessarily make the act or or business illegal business illegal Pertinent Case: Three kinds of licenses are recognized in the law: Philex Mining Corp. poll tax 6. Impost – in its general sense. generally no limit in the 4. prescriptive periods provided for periods of prescriptions In its limited sense. generally. Subsidy – a pecuniary aid directly granted by the government to American Mail Line vs City of Butuan. created by law. Margin Fee – a currency measure designed to stabilize the 4. 3. As duties payable on goods imported or exported (PD No. Power of Taxation to the government in its corporate capacity. 125704. 1963) and property exercise privilege 6. L- 5. corresponding duties to be paid for the same.

Directly. Freedom of Speech and of the press cost of compensation paid by 4. Import and . not the immediate result of the expenditure but rather the ultimate. and Exclusively received but the healthy economic compensation used for Religious Charitable enjoyment of standard of 11. Subject and Title of Bills .only by the . a purpose affecting the inhabitants of the . Power of the President to Veto an items in an Appropriation. its political political companies. and A.affects all . Non-impairment of the Supreme Courts’ jurisdiction in Tax organized injuria” is Cases society attained 13. but the although they are not embodied in the Constitution [P N I T E] character of the purpose for which it is expended.limited to the .direct benefit results Export Quotas direct benefits benefits but a in the form of just 10. a. The test is not as to who receives the money.affects all . III. In the imposition of taxes. Non-impairment of contracts issuance of the 6.1) for the support of the state or necessity and the right of private property is a. Territoriality or the Situs of Taxation 6 . International Comity PURPOSE .no transfer but . Tax Exemption of Properties Actually. Origin of Appropriation. (taxation as an implement of police power) protection and self-preservation b. Inherent Limitations or those which restrict the power e. Non-imprisonment for debt or non-payment of poll tax license or 7. no exaction. Delegation of Legislative Authority to Fx Tariff Rates.the impairment .contracts may be rule subsist impaired impaired c.public necessity -public necessity. Non-delegability of the Taxing Power g.2) for some recognized objects of governments or the state and the taken for public use a. Limitations on the Power of Taxation d. Appropriation of Public Money exists 5. or public c. A tax levied for a private purpose constitutes a taking of subdivisions subdivisions utilities property without due process of law. public . Classified the tax would still be valid provided such benefit is only incidental.property is taken by 2. a. NON-IMPAIRMENT OF CONTRACTS Endowments. 3. Equitability and Progressitivity of Taxation BENEFITS RECEIVED 9.taking of property for b. The term “public purpose” is synonymous with AUTHORITY WHICH EXERCISES THE POWER “governmental purpose”. Taxes Levied for Special Purposes SCOPE 6. Limitations. Tax exemption of Revenues and Assets.3) directly to promote the welfare of the community public to self.only by the .no limit .contract may be .no special or . 3. Uniformity. Non-infringement of religious freedom regulations. government or government or its public service.exercised to . become part of only restraint on the gov’t upon Revenue or Tariff Bill public funds the exercise of payment of just 3. comprehended excise privileges. the tax must be used: . Exemption of the Government from taxes Taxation Police Power Eminent Domain 5. Due process of law AMOUNT OF EXACTION 2.may be granted to state or taxing district as a community and not merely as individuals. Revenue and Tariff Bills surveillance 8. If taxation is for a public purpose. no direct . persons. Voting requirements in connection with the Legislative Grant of the privileges of society or Tax Exemption living in an “damnum absque 12. the government 5. Public Purpose of Taxes 2. Important Points to Consider: BASIS a.affects only the persons. Public Purpose of Taxes even rights 1. 1. Donations or Contributions to Education Institutions . Constitutional Limitations or those expressly found in the purpose of promote public public use constitution or implied from its provision raising revenue welfare thru regulations 1. Although private individuals are directly benefited. Other Constitutional Provisions related to Taxation TRANSFER OF PROPERTY RIGHTS 1.levied for the . particular property Inherent Limitations property and property. Equal protection of law . The purposes to be accomplished by taxation need not be exclusively public. including Grants. Necessity of an Appropriation made before money property right compensation 4.taxes paid . 4. Allotment to LGC . public purpose is presumed.

Sec. b. Delegation to the President (Art. However. Territoriality or Situs of Taxation c.3) To reduce the amount of money that has to be handed by the government in the course of its operations. 28(2) 1987 capacity of the government to provide benefits and protection Constitution) to the object of the tax. 1992) d. Limitations on Delegation a. a privity of relationship justifying the levy. of Reasons for Exemptions: the Phil. and approximate the needs of government expenditure. b. the elements that enter into the imposition of the tax [S2 Basic Principles of a Sound Tax System (FAT) A P K A M]. No. Exceptions: c. the government would aspects of Taxation not legislative in character. 7 . Administrative Feasibility – tax laws should be capable of convenient. just and effective administration. Factors to Consider in determining Situs of Taxation revenue purposes only. the fundamental basis of the right to tax is the a. b. and 3. should only be in favor of the local legislative body of the local or municipal government b. a. where there is between him and the provision to authorize the President to fix within specified limits and taxing state. Duty Test – whether the thing to be threatened by the by validly enacted legislative measures or statute. vs City of Butuan. The theory of non-delegation of legislative powers 1. Important Points to Consider: the taxpayer’s ability to pay (ability-to-pay principle). example: assessment and collection a. 4. even if he is The power granted to Congress under this constitutional outside the taxing state. the delegation is an excess nor a deficiency of revenue vis-à-vis the needs of invalid. Exemption of the Government from Taxes namely. 2. Fiscal Adequacy – the sources of tax revenue should coincide administration with. that legislative power may be delegated to local governments. G. by an express provision of Constitution itself. Theoretical Justice – the tax burden should be in proportion to 1.2) Property which is wholly and exclusively within the Congress cannot delegate the power to jurisdiction of another state receives none of the protection others. Non-delegability of Taxing Power the taxing power because: b. and excise within the territory of B. The delegated levy power. C. al. Delegations to the Local Government (Art. source of income b. but if what is involved is only tax administration. b. place where the privilege. A person may be taxed. Powers. for which a tax is supposed to be compensation. be taxing itself to raise money to pay over to itself. citizenship of the person e. Promotion of General Welfare Test – whether the law providing concerned.. the tax directly promotes the welfare of the community in equal measure.VI. 5. The 1987 a. the non- government would be in keeping with the principle. properties. except when the delegation is State. Rationale: Doctrine of Separation of limit. or tax regulation. Customs duties which are assessed at the a. et.R.2) In order that the functions of the government shall not be unduly impede. Tax Legislation vis-à-vis Tax Administration . Important Points to Consider: does not apply in maters of local concern. 101273.Every system of taxation consists of two parts: a. 1968) a. tariff rates and other duties and imposts include tariffs rates even for 2. Taxation is purely legislative. the steps taken for its assessment and collection or tax a.1) To levy tax upon public property would render necessary new taxes on other public property for the c. subject to such limitations and restrictions as it may impose. It is an inherent mandate that taxation shall only be exercised on persons. The delegation is effected either by the Constitution or a. business or occupation is being 1987 Constitution) exercised It has been held that the general principle against the delegation of legislative powers as a consequence of the theory of separation of powers is subject to one well-established exception. Territoriality or Situs of Taxation means “place of taxation” Constitution requires taxation to be equitable and uniform. Aug. 28. location of the subject matter of the tax imposed for both revenue-raising and regulatory purposes (Garcia vs c. Delegation to Administrative Agencies with respect to payment of the tax so laid and thus. L-22814. al. f. It shall not contravene any Constitutional provisions or 2. delegability rule is not violated. and b. July 3. kind and Classification of the Tax prescribed tariff rates are very much like taxes which are frequently b. domicile or residence of the person Executive Secretary. Sec. Test in determining Public Purposes in tax inherent limitations of taxation. X. and appropriation of public revenue is something which is the duty of the c. Neither If what is delegated is tax legislation. Inc. as a government. D. depending on the nature of taxes being imposed.1) Tax laws do not operate beyond a country’s territorial 1. et .. (Pepsi-Cola Bottling Co.

because this is hardly attainable. shall be forever be allowed. The property of a foreign state or government may not be be taxed at the same rate. This doctrine prohibits class legislation which discriminates against some and favors others. Non-impairment of Contracts b. Equitable means fair. The free exercise and enjoyment of religious despotic. Equitability and Progressivity of Taxation performing proprietary functions are generally subject to tax in the absence of tax exemption provisions in their charters or a. there is an implied understanding that the power 4. the exemption applies 1. Uniformity (equality or equal protection of the laws) 1. 3. Important Points to Consider: 2. III. Non-infringement of Religious Freedom 4. b.2) usage among states that when one enter into the direct rather than indirect taxes. 54 Phil 866) 4. Must be germane to the purpose of law. Basis: Sec. thereof. License fees/taxes would constitute a restraint on the a. effect in every place where the subject of it is found. persons subject to the value-added tax does not constitute a restraint 2. The means employed must be reasonably on press freedom since it is not imposed for the exercise of a necessary to the accomplishment for the purpose and not unduly privilege but only for the purpose of defraying part of cost of oppressive. III. 6. 164 SCRA 27) b.1 Art. Must not be arbitrary only to government entities through which the government 2. The rule of uniformity does not call for perfect consent so that it is useless to assess the tax since it cannot be uniformity or perfect equality. the Supreme Court held that in establishment of religion or prohibiting the free exercise order that due process of law must not be done in an arbitrary. The deprivation was done under the authority of a valid law or of the constitution. and 3. The deprivation was done after compliance with fair and reasonable method of procedure prescribed by law. a. E. The rule of taxation shall be law creating them. of expression or of the pressx x x “ 1. when 3. 235 SCRA 630) 2. and 5. “No law shall be made respecting an In a string of cases. uniform and equitable.1) sovereign equality among states 3. Uniformity. Basis: Sec. The grounds for the above rule are: proportionate to one’s ability to pay. 1 Art. profession and worship. just. in the absence of any constitutional limitations. Must not be limited to exiting conditions only. Due Process of Law b. 2. (see Tolentino vs Secretary of Finance. (Infantry Post Exchange vs Posadas. 3 “No person shall be deprived of life. Important Points to Consider: 1. Basis: Sec. the government may tax itself 5. Notwithstanding the immunity. 3 “ xxx Nor shall any person be denied freedom of worship as they are actually in the nature of a condition or the equal protection of the laws. 2. No law shall be passed abridging the freedom of speech. VI. 28(1) Art. A tax is uniform when the same force and taxed by another.3) foreign government may not be sued without its 5. Important Points to Consider: means all taxable articles or kinds or property of the same class shall a. Must not be based upon substantial distinctions immediately and directly exercises its sovereign powers 3. reasonable and b. Important Points to Consider: 1. collected b. permit of the exercise of the right. A business license may not be required for the Requisites : sale or contribution of printed materials like newspaper for such 1. Freedom of Speech and of the Press Constitutional Limitations a.” right of the people under the Constitution. Inequality which results in singling out one particular does not intend to degrade its dignity by placing itself under the class for taxation or exemption infringes no constitutional limitation. or whimsical manner. International Comity b. Important Points to Consider: 1. Lingayen Gulf Electric. Progressive system of Taxation places stress on b. However. Equal Protection of the Law b. Unless otherwise provided by law. the Constitution or the Free Exercise of 1. Basis: Sec. Equal protection of the laws signifies that all Religion clause does not prohibit imposing a generally applicable persons subject to legislation shall be treated under circumstances sales and use tax on the sale of religious materials by a religious and conditions both in the privileges conferred and liabilities imposed organization. 5 Art. Must play equally to all members of a class. Requisites for a Valid Classification 8 . The interest of the public generally as would be imposing a prior restraint on press freedom distinguished from those of a particular class require the intervention 3. capricious. However. without discrimination or preference. Basis: Sec. jurisdiction of the latter (see Commissioner vs. There is curtailment of press freedom and a. Government-owned or controlled corporations. 4. or on the taxpayers’ ability to pay territory of another. 2.4) reciprocity among states 4. registration. The Congress shall evolve a progressive system of taxation. an annual registration fee on all of the state. x x x” 2. freedom of thought if a tax is levied in order to suppress the basic liberty or property without due process of law x x x. 4 Art.

III. does not apply to 6. mosques. ownership of the property 2. 16. “No person shall be imprisoned for a. The non-impairment rule. Voting Requirements in connection with the Legislative 7. tariff rates.” b. but the Senate may propose or courts in x x x all cases involving the legality of any tax.” assessment. Non-imprisonment for non-payment of poll tax Grant for tax exemption a. contract shall be passed. a. 28(2) Art. Directly and or donation must be used actually. Their religious. impost.” 6. and private bills shall originate exclusively in the on appeal or certiorari x x x final judgments and orders of lower House of Representatives. contributions used actually. prescribe. NIRC) 11. Tax Exemption of Properties Actually. 20 Art. A law which changes the terms of the contract by reasonably necessary for the accomplishment of said purposes. Lest of the tax exemption: the use and not tax. supra) grants. Department of Finance Order No.” exemption shall be passed without the concurrence of a b. Basis: Sec. however. 10 Art. In the case or religious and charitable entities and non-profit cemeteries. churches 4. endowments. exemption. property 10. The said constitutional provision granting tax exemption to and parsonages or convents appurtenant thereto. Delegation of Legislative Authority to Fix Tariff Rates. Important Points to Consider: indispensable but extends to facilities which are incidental to and 1. dated Dec. Non-impairment of the Supreme Courts’ jurisdiction in “non-payment of poll tax”. tonnage and wharfage dues. 2. donations or contributions to Educational Institutions 9. assets. the Senator’s power is not only to “only concur with amendments” but also “to propose 13. Basis: Sec. “Subject to the conditions prescribed by law. and donor’s taxes. and all lands. VI “x x x The Congress may. The prohibition is against “imprisonment” for 12. donations or a. 5 hereof. Basis: Sec. modify or affirm application. The exemption granted to non-stock. revenue or tariff Sec. Tax Exemptions of Revenues and Assets. To be tax-exempt. and apportion the jurisdiction of the 8. Appropriation and Tariff Bills various courts but may not deprive the Supreme Court of its jurisdiction over cases enumerated in Sec. Buildings. Thus. (Sec. The constitutional exemption applies only to dispenses with those expressed. Important Points to Consider: majority of all the members of the Congress. duties. 4(4) Art. Charitable and Educational educational purpose. VIII. Basis: Sec. VI. the exemption is limited to property tax. charitable or educational purposes shall be exempt tax exemption is not self-executing. property. non-stock. 2. and 5. directly. The only penalty for delinquency in payment is b. and subject educational purposes shall be exempt from tax. Under the above provision.” a. making new conditions. or toll or any penalty imposed in relation thereto. To be exempt from tax or duty. by law. Lands. whether the educational institution is proprietary or non-profit. The above provision requires the concurrence of a majority the payment of surcharge in the form of interest at the rate of 24% not of attendees constituting a quorum but of all members of per annum which shall be added to the unpaid amount from due date the Congress. b. III. of Finance. Basis: Sec. and improvements actually. “Charitable institutions. gifts made in favor or religious charitable and educational alteration or repeal by the Congress when the public interest so organizations would nevertheless qualify for donor’s gift tax requires. or 5. directly and exclusively used for the purposes mentioned. Basis: Sec. and custom development program of the government. 101(9)(3). of proprietary (for profit) improvements actually. from taxation. (Tolentino vs Sec. concur with amendments. “The Congress shall have the power to define. bills of local the following powers: x x x(2) Review. a. The exemption is not limited to property actually b. Origin or Revenue. directly and exclusively used for educational institutions require prior legislative implementation. and 1. building. 28(3) Art. all grants. Basis: Sec. Tax exemptions. directly and exclusively for authorize the President to fix within specified limits. Basis: Sec. or changing those in the contract.” 4. a person is subject to imprisonment Tax Cases for violation of the community tax law other than for non-payment of the tax and for non-payment of other taxes as prescribed by law. directly and exclusively for Exclusively used for Religious. The word “exclusively” means “primarily’. 24 Art. endowments. Important Points to Consider: import and export quotas. LGC) 2. until it is paid. non-profit educational other duties or imposts within the framework of the national institution covers income. VIII. “The Supreme Court shall have bills. non-profit educational institution is self-executing. 137-87. the revenue. XIV. 28(4) Art. property tax.” 1. Important Points to Consider: exclusively used for educational purposed are exempt from property 1. it would seem that under existing law. and b. “No law impairing the obligation of 3. 5 (2b) Art. bill authorizing increase of the public debt. including amendments”. 5 (2) Art. c. (Sec. a. public utility franchise since a franchise is subject to amendment. Imports and Export Quotas a. however. VI. impairs the obligation. 1987 9 . “All appropriation. 161. “No law granting any tax debt or non-payment of poll tax. non-profit cemeteries. VI. revise. the property must be actually.” to such limitations and restrictions as it may impose. Purposes 3. However.

any penal institution. Taxes levied for Special Purpose (Sec. It the purpose for which a special fund was created has etc.  Basis: Sec. purpose only. a “trust liability account. G. the E-vat.” policy covering property situated in the Phils. violated.” 2. Subject and Title of Bills (Sec. 6. The tax exemption is not only limited to revenues and “All money collected or any tax levied for a special assets derived from strictly school operations like income from tuition purpose shall be treated as a special fund and paid out for such and other miscellaneous feed such as matriculation. use must be school-related. this special fund is transferred from the general fund to from bank deposits.R. trust fund and similar arrangements. 29(2). Revenue or Tariff bill but In the case of Manila Electric Co. benefit. 29(3). are taxable in the Phils. or the state in which he corporation is preacher. case. on the ground that the constitutional requirement on the title of a 2. 6. the general funds of the government. 1956 to stabilize the prices of imported crude oil. and establishment of professional chairs. paid or employed. in 99886. supra. Basic Rule – state where the subject to be taxed has a situs bill was not followed.” 10 .” 2. the insurer is benefited thereby. VI of the person. or government orphanage or leprosarium. minister. and the insurance policy is delivered to the insured therein. if any. or Example: shares of stock may have situs for purposes of system of religion or of any priest. et al. Income which is unrelated to school operations like income President. 29(1). denomination. Necessity of an Appropriation made before money may Phils.” the constitutional mandate is not dividends and rental income are taxable. VI of the 1987 1. or other taxation in a state in which they are permanently kept regardless of religious teacher or dignitary as such except when such priest. in the national taxes which shall be Other Constitutional Provisions related to Taxation automatically released to them. and by reason of such protection. directly or indirectly for the use. VI of the 1987 This is because the Philippines Government must get something in Constitution) return for the protection it gives to the insured property in the Phils. Art. vs Yatco (69 Phil 89). like the grant of scholarships. The maxim of Mobilia Sequuntur Personam and Situs of Taxation 4. or the Expanded Value Added Tax Law (RA 7716) was also questioned 1. however. In a decide Canteens operated by mere concessionaires are taxable. 1993) short. be paid out of the Treasury (Sec. Art. bookstore and dormitory facilities.. shall be transferred to canteen. applied. support of any sect. The OPSF. 27(2). royalties. non-profit educational the 1987 Constitution) institutions: 1. preacher. as determined by law. minister or dignitary is assigned to the armed forces or to organized.D. Sect. library and school facilities. of incidental income. may rightfully levy and collect the tax 2.” Situs of Taxation  in the Tolentino E-VAT case. Art. VI of governing the tax exemption of non-stock.” 1.  Some Basic Considerations Affecting Situs of Taxation Revenue or Tariff Bill (Sec. Mar. it was held that where under an executive order of the 3. Art. P. The following are some of the highlights of the DOF order 5. Appropriation of Public Money for the benefit of any According to this maxim. Even though the fire insurance contract was executed outside the 3. the requisite legislative jurisdiction exists. the the veto shall not affect the item or items to which he does not Supreme Court ruled that insurance premium paid on a fire insurance object. the facilities mentioned must not only be owned and operated by the school itself  An example is the Oil Price Stabilization Fund created under but such facilities must be located inside the school campus. The use of the school’s income or assets must be in fund subject to COA audit (Osmeňa vs Orbos. Art. which means ”movable follow the Church. fees. Situs of Taxation and Double Taxation one subject which shall be expressed in the title thereof. but it also extends to incidental income derived from been fulfilled or abandoned the balance. Power of the President to Veto items in an Appropriation. “No money shall be paid out of the Treasury except in pursuance of an appropriation made by law. Allotment to Local Governments school building expansion. Protection Constitution) A legal situs cannot be given to property for the purpose of taxation where neither the property nor the person is within the “The President shall have the power to veto any protection of the taxing state particular item or items in an Appropriation. 26(1) 1987 Constitution) “Every Bill passed by Congress shall embrace only IV. church.” the situs of personal property is the domicile of the owner. faculty development. remains as a special 4. 1987 Constitution) This is merely a fiction of law and is not allowed to stand in the way of taxation of personalty in the place where it has its actual situs and ”No public money or property shall be appropriated. according to the court. Situs of Taxation literally means the Place of Taxation. No. the domicile of the owner. X of the 1987 Constitution “Local Government units shall have a just share. In the case. or System of Religion (Sec. ROTC. sectarian institution. library. 31. consonance with the purposes for which the school is created.

Persons – Poll tax may be levied upon persons who are Requisites: residents of the State. and Transaction – power to levy 6.In the objectionable or prohibited sense means that Criteria in Fixing Tax Situs of Subject of Taxation the same property is taxed twice when it should be taxed only once. 2. Although the owner resides in another jurisdiction. e. Real Property – is subject to taxation in the State in which it 2. Multiple distinct relationship that may arise with respect to  Constitutionality intangible personality. 5. or from a decedent to his heirs may be subject 2. Principle of Reciprocity a. The use to which the property may have been devoted. c. is 1. 11 . (see Wells Fargo Bank v. statute or when justice demands that it should be.  Means to Reduce the Harsh Effect of Taxation 1. Exemption or allowance of deductions or tax credit for property for purposes of the estate and gift taxes. Gratuitous Transfer of Property – transmission of property taxable income from donor to donee. said principle. and f. Double Taxation and the Situs Limitation (see later topic) 1. January. Tax Deduction – subtraction from gross income in arriving a g. Obnoxious or Direct Duplicate Taxation (Double taxation in its strict sense) . A tax upon the same property imposed by two different an excise tax depends upon the place where the business is done. 1. The absence of one or more of the foregoing requisites of the obnoxious direct tax makes it indirect. b. Within the same jurisdiction  Rule of Lex Rei Sitae 5. like income or intangible. Two (2) Kinds of Double Taxation 4. A tax upon a corporation for its capital stock as a whole and upon the shareholders for their shares. A tax upon a corporation for its capital stock as a whole and property has in fact a situs elsewhere. however. the power of the than the domicile of the owner legislative to fix situs is undoubted. upon the shareholders for their shares. all 3. and is 3. A tax upon depositions in the bank for their deposits and a or citizens in the taxing jurisdiction and even those who are neither tax upon the bank for their property in which such deposits are residents nor citizens provided the income is derived from sources invested within the taxing state. 4. d. as where the 2. Business. An excise tax upon certain use of property and a property tax upon the same property. Multiplicity of Situs reduces taxable income while credit reduces tax liability There is multiplicity of situs when the same subject of 3. 1961) 3. Tax Credit – an amount subtracted from an individual’s or to taxation in the state where the transferor was a citizen or resident. Same purpose is located whether the owner is a resident or non-resident. Exemptions taxation. Variance in the concept of “domicile” for tax purposes. Collector v. the occupation is engaged in of the transaction not place. entity’s tax liability to arrive at the total tax liability or where the property is located. of states. there is room for applying the Double Taxation mobilia rule. Income – properly exacted from persons who are residents 4. Permissive or Indirect Duplicate Taxation (Double taxation in its broad sense) – This is the opposite of direct double taxation  Rule of Lex Rei Sitae and is not legally objectionable. Treaties with other States taxing jurisdictions. is subject to taxation in several 4. Collector 70 PHIL 325. Occupation. and Double Taxation in its stricter sense is undoubtedly unconstitutional but that in the broader sense is not necessarily so. Legislative Power to Fix Situs of which may receive the protection of the laws of jurisdiction other If no constitutional provisions are violated. Enter into treaties with other states Note: In those cases where the situs for certain intangibles are not categorically spelled out. Same taxing authority taxable only there. (see Sec. in accordance with the principle  Instances of Double Taxation in its Broad Sense “MOBILIA SEQUUNTUR PERSONAM”. Fisher L-11622. A tax on the mortgage as personal property when the not controlling when it is inconsistent with express provisions of mortgaged property is also taxed at its full value as real estate. a.  A deduction differ from a tax credit in that a deduction V. Remedy – taxation jurisdiction may provide: Example: our law fixes the situs of intangible personal a. This happens due to: 5. Same kind or character of tax has actual situs – where it is physically located. foreign taxes 1997 NIRC) b. Same property is taxed twice b. Tangible Personal property – taxable in the state where it 6. 104. Intangible Personal Property – situs or personal property is the domicile of the owner. During the same taxing period c.

Backward Shifting – effected when the burden of prejudicial thereto. Rationale of tax Exemption Public interest would be subserved by the exemption 2. Evasion but nevertheless do not 5. Transformation of the sponsors of the tax law 4. Shifting – Transfer of the burden of a tax by the original VI. The taxpayer may seek relief under the Uniformity Rule or the Equal Protection guarantee. c. property or income in order to avoid or reduce tax liability. Capitalization. express or implied. 1967.. aside from the tax. 31. Avoidance violate the letter of the law 6. permissible alternative tax rates or method of assessing taxable be avoided and prevented. Substantial underdeclaration of income tax returns of the different kinds of tax taxpayer for four consecutive years coupled with overstatement of c. b. a valid cause or a. Tax Exemption – is a grant of immunity. Distinction between Tax Evasion and Avoidance Forms of Escape from Taxation Tax Evasion vs Tax Avoidance  Six Basic Forms of Escape from Taxation accomplished by breaking accomplished by legal 1. Doubts as to whether double taxation has been imposed  Tax Avoidance is not punishable by law. and the property leased and the tax on the income desired as they are b. It is generally revocable by the government unless the Taxation – the impact is the initial phenomenon. impairment. Incidence of Taxation – is the point on which a tax burden B. Exemption 1. It is not necessarily discriminatory so long as the of distribution to the factor of production exemption has a reasonable foundation or rational basis. (CIR vs purchaser expects to be called upon to pay Bothelo Shipping Corp. imposed. and the incidence is the result. and in this sense is b. from a factor of production through the factors of distribution until it 3. the shifting is the exemption is founded on a contract which is protected from intermediate process. pays the tax and 12 . Transformation – The method whereby the manufacturer or producer upon whom the tax has been imposed. a taxpayer has the should be resolved in favor of the taxpayer. a license fee is imposed in the proceeds. CIR vs PAL. tax is transferred from the consumer or purchaser through the factors 4. Failure to declare for taxation purposes true and actual the business of leasing real estate in addition to Real Estate Tax on income derived from business for two consecutive years. 1. should. 1968) 3. Exemption from Taxation payer or the one on whom the tax was assessed or imposed to another or someone else A. fiscally speaking. to the exercise of police power. Nature of Tax Exemption finally rests or settles down. Shifting the letter of the law procedures or means which 2. L-21633. Impact and Incidence of 2. It implies a waiver on the part of the government of its right finally settles on the ultimate purchaser or consumer to collect what otherwise would be due to it. privilege of storing exportable copra in warehouses within a municipality are imposed as first tax is different from the second  Evasion of the tax takes place only when there are no d. fearing the loss of D. Tax Evasion – is the use of the taxpayer of illegal or another by the city for the exercise of occupation or business as the fraudulent means to defeat or lessen the payment of a tax. Grounds for Tax Exemptions his market if he should add the tax to the price. to Impact of taxation – is the point at which a tax is originally particular persons or corporations from the obligations to pay taxes. 1968)  Indicia of Fraud in Taxation b. laws. it may not be invoked as a defense against the validity of tax thereby turning out his units of products at a lower cost. Where a tax is imposed by the National Government and 4. It is merely a personal privilege of the grantee Relations among Shifting. Oct. Forward Shifting – the burden of tax is transferred consideration. taxes or altogether avoid by means which the law permits. Exception: Double Taxation while not forbidden. Such taxation. June 29. a. whenever possible. 31. Tax Avoidance – is the use by the taxpayer of legally favored. When a Real Estate dealer’s tax is imposed for engaging in a. endeavors to recoup himself by improving his process of production hence. Oct.General Rule: Our Constitution does not prohibit double taxation. Tax on manufacturer’s products and another tax on the deduction. Evasion of Taxation is tantamount. a. Onward Shifting – this occurs when the tax is shifted two or more times either forward or backward C. is something not 5. L-20960. it has been held. for example. Where. such as. Capitalization maybe contrary to the intent 3. taxes are not imposed by the same public authority (City of Baguio vs De Leon. defined – the reduction in the price of the allowed which the law-making body considers sufficient to offset taxed object equal to the capitalized value of future taxes which the monetary loss entailed in the grant of the exemption. absence of taxation. but the contract must contain the other essential Kinds of Shifting: elements of contracts. The reason is to avoid legal right to decrease the amount of what otherwise would be his injustice and unfairness.

May be based on some ground of public policy. 100 PHIL 288) 1. 1999) 10. May be based on a contract in which case. He who claims exemptions should convincingly proved that the taxpayer to delay and neglect their respective pursuits of legal he is exempt action within the period set by law. however. In order to declare a tax transgressing the due process clause but equity can be used as a basis for statutory exemption. Partial Exemption – One where collection of a part of the liberally construed to afford protection as a corollary. 1963) include legislative enactment. b. 2. 27. Principles Governing the Tax Exemption 1. Constitutional grants of tax exemptions are self-executing disbursement of public funds derived from taxation that the (Opinion No. May be created in a treaty on grounds of reciprocity or to lessen the rigors of international double or multiple taxation which Exception: The language of the statute clearly demands or express occur where there are many taxing jurisdictions. the rule in the a. charitable. L-16428. 8. Collector of Internal Revenue vs. On the interpretation and construction of tax statutes. for example. 30. 1987. and Doctrine of Equitable Recoupment he who claims an exemption must be able to justify by the clearest It provides that a claim for refund barred by prescription may grant of organic or statute of law. (Asiatic Petroleum vs Llanes. such as. retroactive application (Fernandez vs Fernandez. Sec. (CIR vs CA. Constitutional Exemptions – Immunities from taxation Constitution against the passage of the ex post facto laws cannot be which originate from the Constitution invoked. Total Exemption – Connotes absolute immunity 1. 98 taxes arising from the same transaction on which an overpayment is PHIL 670) made and underpayment is due. As to basis 3. or presumed by law (CIR vs CA. Deductions for income tax purposes partake of the nature of VIII. Of Justice) taxpayer’s suit may be allowed. As to extent a. L-19707. Acetylene 1062) vs CIR. In case of doubt. He who claims an exemption must justify that the legislative This doctrine. 9. 24. 1999) G. Apr. was rejected by the Supreme intended to exempt him by words too plain to be mistaken. 277. 1.R. Equity. 20. the exceptions tax is dispensed with to the law on prescription be strictly construed. 17. Express Exemption – Whenever expressly granted by organic or statute of law Exception: When provided otherwise by the tax law itself. and the government and liberally construed in favor of the taxpayer. being a remedial measure. to encourage new and necessary industries. Implied Exemption – Exist whenever particular persons. 7. The rule of strict construction of tax exemption should not be 2. Interpretation and Construction of Tax Statutes tax exemptions. Tax exemption are personal. and that it may work to tempt both the collecting agency and 3. hence. educational functions 13 . should be b. they are strictly construed against the tax Important Points to Consider: payer 1. No. 1965) thereof. b. Kinds of Tax Exemptions enemy. as in the taxation of that it shall have a retroactive effect. except for the penalty imposed. 130. 104171. No. G. which may CIR. (Collector vs UST. Tax exemptions must be strictly construed (Phil. Tax laws are neither political nor penal in nature they are deemed laws of the occupied territory rather than the occupying F. 99 PHIL934) (Sec 276. Exemptions from taxation are highly disfavored by law. A tax amnesty.It is only when an act complained of. vs Taxpayer’s Suit . income and intangible personal property E. much like a tax exemption is never favored legislative intention must be considered. Feb. 1. General Rule: Taxes must only be imposed prospectively 3. 104 PHIL 4. the public VII. Tax laws not being penal in character. Aug. Example: NIRC provides for statutes of limitation in the properties or excises are deemed exempt as they fall outside the assessment and collection of taxes therein imposed scope of the taxing provision itself Important Point to Consider 3. L-19530.R. Other Doctrines in Taxation represented by the Government is supposed to receive a full equivalent therefore Prospectivity of Tax Laws 2. (Hilado vs Collector. 49 be allowed to offset unsettled tax liabilities should be pertinent only to PHIL 466. 1967) 5. directly involves the illegal 6. Local Government Code) 2. Statutory Exemptions – Those which emanate from Legislation Imprescriptibility of Taxes 2. (Lealda Electric Co. 108576. not a ground for Tax Exemption Important Points to Consider There is no tax exemption solely on the ground of equity. (Visayan Court. saying that it was not convinced of the wisdom and proprietary Cebu Terminal vs CIR. tax statutes are construed strictly against applied to organizations performing strictly religious. G. At times of the Constitution it must be so harsh and oppressive in its the law authorizes condonation of taxes on equitable considerations. Jan. Tax Exemptions are not presumed. Feb. The law on prescription. As to form General Rule: Taxes are imprescriptible a. Manila Jockey Club.

d. Obtaining information.. taking testimony of persons for purposes of c. 6 Feb 1997 that like other principles of law. summoning. It is a settled rule of law that in the performance of its governmental functions. 1968). G. such as tax revenue taxes. 3. L-19627. acceding to the taxpayers request. and While the principle of estoppel may not be invoked against c. et. constituted as agents of the Commissioner: C. G. Inc. the non-application of estoppel to the government admits of a. the grantee in the following: e. the following are The Court ruled in Commissioner of Internal Revenue vs. postponed the collection of its liability. as where with respect to the collection of national internal injustice will result to the taxpayer. Secretary of Finance. July 31. Exemptions from certain taxes granted under special f. June 27. Bureau of Internal Revenue and the Bureau of The principle of tax law enforcement is: The Government Customs for internal revenue and customs law is not estopped by the mistakes or errors of its agents. 15 April 1988.R. powers conferred to it by the Tax Code or other laws. When the law so provides for such liberal construction. Suyac. The taxpayer cannot later on be permitted to raise the Bureau of Internal Revenue defense of prescription inasmuch as his previous requests for reinvestigation have the effect of placing him in estoppel. The tax laws are presumed valid. 1969. Enforcement of all forfeitures. for the reinvestigation of its tax liabilities such that the government. examining and circumstances to special classes of persons. al. The rule of strict construction against the government is not a.) 1. Exemptions in favor of the Government. subject to review by the doubt as to the legislative intent. the state cannot be estopped by the neglect TAX ADMINISTRATION AND ENFORCEMENT of its agents and officers.) Agents and Deputies for Collection of National Internal Revenue Taxes Exceptions: Under Sec. Banks duly accredited by the Commissioner with the government. 12 of the 1997 NIRC. such as. 66838. No. Directors and Revenue District Officers. revenue taxes on imported goods. b. vs. 104 Phil 819. determining the liability of any person for any internal d. the taxpayer made several requests taxes authorized to be made through banks. fees and charges. are construed liberally in favor of by the Court of Tax Appeals and the ordinary courts.) 2. The head of the appropriate government office and his Estoppel Against the Taxpayer subordinates with respect to the collection of energy tax. The power to tax is presumed to exist. estoppel does not apply to deprive the treasures for local and real property taxes. The exemptions (or equivalent provisions. enforcement duties are delegated to the Regional Rodriguez. its political ascertaining the correctness of any return or in subdivisions. Exemptions to traditional exemptees. respect to receipt of payments of internal revenue In CIR vs. b.  Powers and Duties 14 . Effecting and administering the supervisory and police a. b. The exemptions. penalties and fines are strictly construed against the grantee. Provincial. No.R. L-23041. Execution of judgment in all cases decided in its favor 5. The Commissioner of Customs and his subordinates exceptions in the interest of justice and fair play. 6. It is noteworthy to note that the BIR is erroneous application and enforcement of law by public officers largely decentralized in that a great extent of tax do not block the subsequent correct application of statutes (E. connected therewith. Abad. Assessment and Collection of all national internal 4. Rule of “ No Estoppel Against the Government” 7. Collector of Internal Revenue. or in collecting any such liability. al. et. government of its right to raise defenses even if those defenses are being raised only for the first time on appeal (CIR vs Procter & Gamble Phil. Nowhere is it more true than in the field of taxation (CIR vs. 117982. however. those in revenue tax. amnesty and tax condonation) are not presumed and when granted c. Estoppel does not apply to preclude the subsequent findings on taxability Agencies Involved in Tax Administration (Ibid.A. City and Municipal assessors and Similarly. favor of charitable institutions. enforcement. this is not necessarily true in case of the taxpayer. Exclusive and original power to interpret provisions of applicable where the language of the tax law is plain and there is no the NIRC and other tax laws..

71 of the 1997 NIRC provides that tax required to prove not only that the appraised value is returns shall constitute public records.R. Savellano. Examination of Returns: Confidentiality Rule 1. 10 July 1998) unauthorized cases under pain of penalty of law provided for in Sec 270 of the 1997 NIRC. therefore. However.R. Any return. assessments cannot be delegated. if assessment wherein the tax assessor has no power to for example. 2. G. (City Lumber vs. 23 Oct 1992). vs CIR. In the following cases. CTA. Mandamus will not lie to compel him to An assessment is the official action of an assess a tax after investigation if he finds no ground to administrative officer determining the amount of tax due from a assess. 1966). No amount is shown in the return or. L-24213. the taxpayer being assessed is an estate of a act at all (Victorias Milling vs. 8 June 1993). Erroneous Assessment – This is an assessment 21108. In order to stand The aforesaid rule. changed or amended.C. L-18611. (Sec 6[A]. Assessments should not be based on presumptions no matter how logical the presumption might be. inquiry into the income tax returns of taxpayers may be authorized: 15 . exceptions. The tax or the (Interprovincial Autobus vs. The amount ascertained exceeds that which is valid. 98 Phil 290) deficiency of the tax so assessed shall be paid upon notice and  In the absence of any proof of any irregularities in the demand from the Commissioner or from his duly authorized performance of official duties. tax or deficiency stated therein. No 81446. Assessments are prima facie presumed correct and made in good faith. (Bisaya Land Transportation Co. 13 Mar decedent. or it may be the notice to the effect that the amount will result in the encroachment on executive functions therein stated is due from the taxpayer that the payment of the (Meralco Secuirities Corp. is subject to certain the test of judicial scrutiny it must be based on actual facts. The liability is determined may be delegated. Mandamus to compel the Commissioner to assess taxpayer. L-36181 and L-36748.R. Illegal and Void Assessments. (CIR vs NIRC) C. G. Assessments must be directed to the right party. C. CIR. 1988) investigation of such return. The person to whom a 2. the same may be  All presumptions are in favor of tax assessments modified. Assessment is discretionary on the part of the Commissioner. No. The Tax Code requires that after the return is filed. (Sy Po. an assessment will not representative. 30 Jan 1964). The authority vested in the Commissioner to assess taxes investigation is conducted. another. (Sec. however. and not the heirs of the decedent wherein the assessor has the power to assess but errs in the exercise of that power (Ibid. 8 Aug authorized to receive the same shall not be withdrawn. 104781. Domingo.This is an assessment made by the tax assessor whereby the correct amount of the tax is determined after an examination or 4. No. Macaraig. 1997 justify judicial affirmation of said assessments. G. the administrator should be the party to whom 1968) the assessment should be sent (Republic vs. Vs.Nature and Kinds of Assessments 3. duty is delegated cannot lawfully delegate that duty to 3. Self-assessment. dela Rama. 56 [B] ]1] and [2] 1997 NIRC) c.Tax is assessed by the taxpayer mandamus if in the exercise of his discretion there is himself.This is an 5. his return. statement or declaration filed in any office be disturbed. L- d. The amount is reflected in the tax return that evidence of arbitrariness and grave abuse of discretion as is filed by him and the tax is paid at the time he files to go beyond statutory authority (Maceda vs. it is settled that the power to make final is shown as tax by the taxpayer in his return. b. Cruz. 26 Sept. vs. statement or declaration has in the  Failure to present proof of error in the assessment will meantime been actually served upon the taxpayer. the Commissioner or his duly authorized representative shall examine  The taxpayer has the duty of proving otherwise the same and assess the correct amount of tax. L-39910. The taxpayer did not file any return at all. 56 [A] {1]. 1988 within three (3) days from the date of such filing. provided that no notice for audit or (Dayrit vs. CTA. 10 Mar 1995)  A party challenging an appraiser’s finding of value is Although Sec. it is necessary to know that erroneous but also what the proper value is (Caltex these are confidential in nature and may not be inquired into in vs.R. (Sec. G.C. 29 Nov. Deficiency Assessment. However. 1997 NIRC) No. 8829.) Means Employed in the Assessment of Taxes Principles Governing Tax Assessments A. 105 Phil 1338) Classifications: Except: The BIR Commissioner may be compelled to assess by a. An assessment signed by an employee and is. assessed for the following reasons: for and in behalf of the Commissioner of Internal Revenue 1. 104151 and 105563. Hence.

year to order the inventory-taking of goods of any taxpayer as a 2. the Commissioner makes or proceedings for the collection of the tax for the past or amends the return from his knowledge and from such information as current quarter or year or to render the same totally or he can obtain through testimony or otherwise. That he performs any act tending to obstruct the When the method is used. and 16 . (Cu Unjieng. C. Regulation No. a decedent to determine his gross estate. Assessments made as partly ineffective unless such proceedings are begun such are deemed prima facie correct and sufficient for all legal immediately. accompanied with a request for the immediate payment of the tax for papers. Assessment Based on the Best Evidence Obtainable The Commissioner shall declare the tax period of a taxpayer terminated at any time when it shall come to his knowledge: The law authorizes the Commissioner to assess taxes on the basis of the best evidence obtainable in the following cases: a. record. 1405. if a person fails to file a return or other document at tax. corporations. vendees and from all be due and payable immediately and shall be subject to all the other sources. Inquiry into Bank Deposits corresponding deficiency income and specific taxes. his business operation may be placed under observation Posadas. he willfully or otherwise files a false or fraudulent property therefrom. the the taxpayer to submit to the BIR for examination the factory’s books value of the property shall be whichever is the higher of : (1) the fair of accounts and records. clients or patients.A. Inventory-Taking. or quarter. tenants. incomplete or erroneous. That the taxpayer is retiring from business subject to 1. al. (Sec. The Supreme Court. Fixing of Real Property Values Commissioner on the Silver Cup Wine Company owned by petitioner’s deceased husband Po Bien Seng. When inspection is authorized under the Finance basis for assessment. The demand was for For purposes of computing any internal revenue tax. Said taxes shall employers. return or other document. 29 June 1979). When the production of the tax return is material If there is reason to believe that a person is not declaring evidence in a criminal case wherein the Government his correct income. (Sec. However. market value as shown in the schedule of values of the Provincial and City Assessors for real tax purposes (Sec 6 [E]. When the production or inspection thereof is a basis for assessing the taxes for the other months or quarters of authorized by the taxpayer himself (Vera vs Cusi L- the same or different taxable years. bank deposits are confidential under R. The investigators. Surveillance and Presumptive Gross Sales the Commissioner is authorized to inquire into the bank deposits of. and Receipts 1. A case in point on the use of the best evidence obtainable is Sy Po vs CTA. etc. on appeal. lessees. D. there was a demand made by the E. documents. on the basis of the wines seized and the sworn statements of the factory’s employees on the quantity of raw materials consumed in the manufacture of liquor. 33 of the Secretary of Finance. 1997 NIRC) The written decision to terminate the tax period shall be Best Evidence Obtainable refers to any data. or any evidence gathered by internal revenue the period so declared terminated and the tax for the preceding year officers from government offices or agencies. or b. or such portion thereof as may be unpaid. 6 [B]. That he intends to leave the Philippines or remove his 2. after ascertaining that a report made by the Commissioner (Sec. 1405 and other general or special laws. vs. assessed the F. purposes. That the taxpayer hides or conceals his property. or (2) the fair seized different brands of alcoholic beverages.A. with whom the taxpayer had previous transactions or penalties prescribed unless paid within the time fixed in the demand from whom he received any income. 58 Phil 360) or surveillance. In that case. The finding made in the surveillance may be used as 4. 1997 NIRC) 33115. purposes. 1. Examination of bank deposits enables the Commissioner to assess the correct tax liabilities of taxpayers. the time prescribed by law. When the inspection of the return is authorized upon The Commissioner is authorized at any time during the taxable the written order of the President of the Philippines. 3. sales or receipts for internal revenue tax is interested in the result. Termination of Taxable Period B. so BIR investigators raided the factory and market value as determined by the Commissioner. c. 1997 NIRC). 6 [C]. 1997 NIRC) required by law as basis for the assessment of any internal revenue tax has not been filed or when there is reason to believe that any such report is false. upheld the legality of the assessment. 6 [d]. et. or d. Notwithstanding any contrary provisions of R.

principle: assets minus liabilities equals net worth. 43. prerequisite for a successful prosecution. The burden of proof is always with the Government. or the taxpayer has no just additions of personal expenses and other books. increase was derived from non-taxable sources. The courts have uniformly stressed the assessment of any national internal revenue tax shall not be that the validity of the result of any investigation forthcoming within the time fixed by law or regulation. or if he has books. The method is a practical necessity if some definiteness. fair and equitable credit adjustments were given by way of eliminating non-taxable items. Legal Source of authority for use of the Method The Commissioner’s authority to use the net worth method (c) That there is a fixed starting point or opening net and other indirect methods of establishing taxable income is found in worth. 1997 NIRC. rests on proof beyond reasonable doubt. as in any criminal case. for.e. any taxpayer who has filed an application for more would be tantamount to holding that skillful compromise of his tax liability under Sec. correct. (Proper adjustments to conform to the income tax The Government may be forced to laws) resort to the net worth method of proof where the few records of the taxpayer were destroyed. supra) worth is determined both at the beginning and at the end of the same taxable year. This authority has been upheld by the courts in prior to it. CTA. at which time the taxpayer’s financial a long line of cases. This is an essential condition. The taxpayer’s net (Perez vs. 103 Phil 1167. Code by reason of his financial incapacity to pay his tax liability. Net Worth Method in Investigation courts are unanimous in holding that when the tax case is civil in nature. The theory is that the unexplained increase in net evidence of a likely source of income becomes a worth of a taxpayer is presumed to be derived from taxable sources. to require 17 . incomplete or correct opening net worth. notable among which is the leading case of condition can be affirmatively established with Perez vs. considered to be the cornerstone of a net worth Moreover. the assessor need not prove the specific source of income. This method of required to negate all possible non-taxable sources of investigation. As stated by the Supreme Court. The increase or decrease in net worth is adjusted by However. This reasonable on the basic Basic Concept and Theory assumption that most assets are derived from a taxable source and that when this is not true. criminally prosecuted for tax evasion. or (b) That there is evidence of a possible source or under other general or special laws. 1997 NIRC). a fair and efficient system of collecting revenue is to be maintained. a date beginning with a taxable year or Sec. CTA. the The method is an extension of the basic accounting taxpayer is in a position to explain the discrepancy. 6[B]. he refuses to produce non-deductible expenditures were made and them (Inadequate Records). and such waiver shall constitute sources of income to account for the increase in the authority of the Commissioner to inquire into bank deposits of the net worth or the expenditures (Need for evidence taxpayer (Sec. 1405. In this case.A. 204 (A) (@) of the Tax concealment is an inevitable barrier to proof. The burden of proof verification” is a very effective method of determining taxable income is upon the taxpayer to show that his net worth and deficiency income tax due from a taxpayer. Conditions for the use of the method (d) That the circumstances are such that the method does not reflect the taxpayer’s income with (a) That the taxpayer's books of accounts do not reasonable accuracy and certainty and proper and clearly reflect his income. otherwise known as “inventory method of income tax the alleged net worth increases. or when there under this method will depend entirely upon a is reason to believe that any such report is false. the whole superstructure evidence obtainable whenever a report required by law as basis for usually fails. 1997 NIRC. Conviction in such cases. In all leading cases on this matter. the application for compromise shall not be considered unless and until he waives in writing his privilege under R. If the starting point or opening net worth is general investigatory power to assess the proper tax on the best proven to be wrong. 2. erroneous. 43-72. provides for a broad and case. when the taxpayer is adding all non-deductible items and subtracting therefrom non. 6[F]. i. of the sources of income). the need for taxable receipts. Sec.. in civil cases. direct proof of sources of The basis of using the Net Worth Method of investigation is income is not essential-that the government is not Revenue Memorandum Circular No.

(3) other civil penalties or administrative fines 6. the employee thereof responsible for the like withholding and remittance of the tax shall be personally liable for the additions to the tax prescribed (Sec. 1997 NIRC) 8. 1. premiums paid on any life insurance policy.. Posadas. Additions to the tax or deficiency tax apply to On the other hand.(Philippine Refining Company vs. as the (1) civil penalty. the taxpayer beyond the date when he is supposed to have paid them to the Government. CIR. delinquency as to payment. estate. sweepstakes winnings. any of its agencies. c. compensation for injuries or sickness. deducted therefrom. 248 and are shown not to be the result of unreported income 249 [C]. living or family expenses. supra). erroneously listed although already paid. must be added to the increase or which may either be 25% or 50 % of the tax depending decrease in the net worth: upon the nature of the violation. They are: b. election expenses and other expenses violations committed by withholding agents. 4. Additions to the tax consist of the: 18 .A. Additions to the Tax penalty (Lim Co Chui vs. losses from sales or exchanges of property between members of the family. non-taxable capital gains. 3. fees. personal. other non-deductible taxes. The amount so added to the tax shall be collected at the same time.R. and as part of the tax. the Supreme Court held that the fact that on account of riots directed against the Chinese on certain dates. The following non-deductibles. 3. If the withholding agent is the government or 4. 1188794. non-taxable items should be all taxes. 47 Phil 460) Additions to the tax are increments to the basic The Commissioner is not vested with any tax incident due to the taxpayer’s non-compliance with authority to waive or dispense with the collection therof. 30 Sept. 1969) Surcharge The payment of the surcharge is mandatory and the Commissioner of Internal Revenue is not vested with any authority to waive or dispense with the collection Enforcement of Forfeitures and Penalties thereof. proceeds of life insurance policies. (Fernandez Hermanos Inc. 1997 NIRC) such as the 25% surcharge and the 20% Increase in net worth are not taxable if they interest per annum on the delinquency (Secs. 247 to against public policy. like the taxpayer’s refusal or (CIR vs. certain legal requirements. 1997 NIRC) but to be the result of the correction of errors in the taxpayer’s entries in the books relating to indebtedness to certain creditors. in the same manner. such as for failure to file certain information returns and 7. case may be. gifts and bequests received. (Secs. they were prevented from paying their Statutory Offenses and Penalties internal revenue taxes on time. does not authorize the Commissioner to extend the time prescribed for the payment of taxes or to accept them without the additional 1. 9. interest on government securities and the corporation. 2. L-21551. No. non-deductible contributions. political subdivisions or 5. gifts to others. 10. income taxes paid. (2) interest either for a deficiency tax or 2. CA. and the like General Considerations on the Addition to tax a. The penalty and interest are not penal failure to pay taxes and/or other violations of taxing but compensatory for the concomitant use of the funds by provisions. These items are necessary adjustments to avoid the inclusion of what otherwise are non-taxable receipts. 252. and charges imposed in the Tax Code. 247[b]. instrumentalities. In one case. 5. vs. net capital loss. C. inheritance and gift taxes. G. 8 May 1996). or a government owned or controlled 6. 1. Proper adjustments for non-deductible items must be made. otherwise known as surcharge. inheritance.

the imposition of the surcharge may be dispensed with (Cagayan Electreic Power & Light Co. (Sec. Administrative Offenses 1985) 4. which shall be assessed and collected from the date prescribed for its payment until the full II. from the date prescribed for payment until  Enumeration of the Remedies the amount is fully paid. Cu Unjieng. 30. Failure to File Certain Information Returns within the time prescribed by law. Deficiency interest 3. Documentary stamp taxes Interest 7. Civil Action 2. Distraint of Personal Property Interest is classified into: 2. In the case of failure to make and file a return or list 1. 1. 249 [B]. Levy of Real Property 1. in order to avoid the imposition of the surcharge. 5431 abolished the income tax payment. Where a doubt existed on the part of the Bureau as to such amount or installment on or before the date prescribed for its whether or not R. or such higher rate as may be prescribed by rules 6. An extension of time to pay taxes granted by the This kind of interest is imposed in case of failure to Commissioner does not excuse payment of the surcharge pay: (CIR vs. Forfeiture annum. shall be subject to the interest of 20% per 5. Failure of a Withholding Agent to Refund Excess time was due to a reasonable cause. Criminal Action 2. Failure of a Withholding Agent to Collect and Remit neglect. Excise tax 6. show the return is required. no surcharge will Withholding Tax be added to the amount of tax due on the return.A. A Subsequent reversal by the BIR of a prior ruling relied upon by the taxpayer may also be a ground for Imposed when a person required to pay the tax is qualified dispensing with the 25% surcharge. Sec. but fails to pay the tax or any installment thereof. Other Administrative Remedies and regulations. 10 Aug. Compromise in this code. Tax Lien Any deficiency in the tax due. Co. vs CIR. In such case.. Income tax failure to file the return on time in the form of an 2. vs. 60126. as the term is defined 4. or where the Commissioner has authorized an extension of exemptions of corporations (including electric power time within which to pay a tax or a deficiency tax or any part thereof. which should be attached to the return. 26 Dec. however. 249 [A]. 1997 NIRC) I. Delinquency interest  Distraint of Personal Property 19 . or any surcharge or been waived: interest thereon on the due date appearing in the notice and demand of the Commissioner. the taxpayer must make a statement Sources of revenues: showing all the facts alleged as reasonable causes for 1. or (2) The amount of the tax due for which no The following cases. 25 Sept. Other percentage taxes 5. (Sec. (Connel Bros. L-35677. G. Administrative 1. where such return or list is voluntarily filed by Taxes the taxpayer without notice from the CIR or other officers. assessed at the rate of twenty percent (20%) per annum. CIR. or any part of 3. (CIR vs. 1997 NIRC) 1. Other as imposed and provided by BIR This is an increment on any unpaid amount of REMEDIES OF THE GOVERNMENT tax. 1975) (1) The amount of the tax due on any return required to be filed. L-15470. or instances when the imposition of the 25% surcharge had (3) A deficiency tax. Where the taxpayer in good faith made a mistake in the interpretation of the applicable regulations thereby resulting in delay in the payment of taxes. and it is shown that the failure to file it in due 3. Interest on Extended Payment 2. 1997 NIRC). Judicial payment thereof (Sec. 6 Aug. L-26869. Estate Tax and dono’r tax affidavit. 1983) Code. 1963) 3. franchise grantees) except those exempt under Sec. 3. Republic and elects to pay the tax on installment under the provisions of the Cement Corp. VAT 4. or such higher rate as may be prescribed y rules and regulations. 1997 NIRC) 27 (now. not due to willful 2. 249[d].R. No.

Subsequent demand for its payment. Leaving a copy of the warrant with the An immediate step for collection Such immediate step is not person owing the debts or having in his of taxes where amount due is necessary.000. to enforce the payment of faces. tax due may not be possession such credits or his agent. where property is located. Constructive – The owner is merely prohibited from person from whom property was taken. distraint property or by service or taxpayer to sign a receipt of the warrant of distraint or property or by leaving a list of b. Time and place of sale. or 3. left either with the owner or b. b. 2. or other responsible officer of the issuing Effected by having a list of the Effected by requiring the corporation. Taxpayer is delinquent in the payment of tax. Sale at public auction to highest bidder 1. Obligate him to preserve the same properties. dwelling or place of business and with someone of suitable age and discretion b. 205 disposing the property in any manner. 4. Officer shall prepare list of the property Procedure: distrained. Distraint. In keeping with the provision on the abatement of the collection of tax as the cost of same might even be more than P100. Bank shall turn over to CIR so much of the 2. Stocks and other securities delinquent or not Serving a copy of the warrant upon There is actual taking or Taxpayer is merely prohibited taxpayer and upon president.00 Note: 20 . diverted of the power of control over the property signed by the officer. Service of warrant of distraint upon taxpayer or upon and discretion.00 or tangible or intangible. Sign a receipt covering property distrained When remedy not available: b. Posting of notice is not less than two places in the municipality or city and notice to the taxpayer specifying Grounds of Constructive Distraint time and place of sale and the articles distrained. 2. Taxpayer is intending to leave the Philippines. 4. from disposing of his property. 1.000. Taxpayer hides or conceals his property. Where Taxpayer or person in possession refuses to sign: a. Bank Accounts – garnishment 1. definite or it is being 2.000. RDO P1. Serve warrant upon taxpayer and president. In case of intangible property. to be less followed by its public sale. Warrant shall be sufficient authority for such questioned. 1. Taxpayer is retiring from any business subject to tax. with out TC). requisite no. Disposition of proceeds of the sale. Actual vs. In case of Tangible Property: government. treasurer or responsible officer of the bank. KINDS How Actual Distraint Effected a. 2. bank accounts as may be sufficient. c. at the disposing of his personal property. company or association. Copy of an account of the property distrained. Actual – There is taking of possession of personal property out of the taxpayer into that of the 1. In case of intangible property: Made on the property only of a May be made on the property of delinquent taxpayer. Taxpayer acts tending to obstruct collection proceedings. person to pay CIR his credits or debts. same 1. 3. if the taxes are not voluntarily paid. Taxpayer is also a. 2. leave a copy in the premises person in possession of taxpayer’s personal property. Debts and credits garnishment. definite. To remove his property there from. Requisites: manager. In the presence of two witnesses of sufficient age 1.Seizure by the government of personal property. 206 TC) 1. 1 is not essential (see Sec. Prohibit him from disposing the property from Where amount involved does not exceed P100 (Sec. 4. any taxpayer whether a. Require taxpayer or person in possession to a. c. manager. 2. How constructive Distraint Effected  In case of constructive distraint. Who may effect distraint Amount Involved 5. Period with in to assess or collect has not yet prescribed.000. c. Constructive Distraint 2. 3. Taxpayer must fail to pay delinquent tax at time required. treasurer possession of the property. the authority of the CIR. commissioner or his due authorized In excess of representative P1. Statement of the sum demanded.

not provided confidential nature of bank accounts for no inquiry is made. 6. Under nos. the taxes are not voluntarily paid. and 4. The taxpayer. Prescription of the right of the government to assess or collect. 5.  The requisites are the same as that of distraint. The remedy of distraint or levy may be repeated if  Levy of Real Property necessary until the full amount. b. Procedure: established by law as a security in default of the payment of taxes. sold/forfeited to the government. Nature: 1. regardless of its owner. 3. from the time the tax was due and demandable. Tax Lien: A legal claim or charge on property. When the amount of the bid for the property under distraint Note: is not equal to the amount of the tax or is very much less 1. the taxpayer is still c. Register of Deeds concerned. Bank accounts may be distrained with out violating the 4. any part of it came from. It is the duty of the Register of Deeds concerned upon than the actual market value of articles. Sale at public auction to highest bidder. The property may be sold at public sale. If at any time prior to the consummation of the sale. Distraint date of delinquency to the date of sale together with A tax lien is distinguished from disttraint in that. Attaches not only from time the warrant was served but more than P100. 1 and 2. Destruction of the property subject to the lien.  In case Nos. the goods distrained shall be restored to the owner. all Levy – Taxpayer can redeem properties levied upon and proper charges are paid to the officer conducting the same. to transfer the deputy may purchase the distrained property on behalf of title to the property with out of an order from a competent the national government. Disposition of proceeds of sale. including all expenses. 3. Only when notice of such lien is filed by the CIR in the 4. Effectivity against third persons: b.Cannot be extended by the courts. 3 and 4. parties 2. Possession pending redemption – owner not deprived of liable. Distraint – forfeiture by government. court 2. penalties and interest thereon from Enforcement of Tax Lien vs. Levy – real property 1. is collected. 1. the CIR or his registration of the declaration of forfeiture. penalties and costs. Distraint – Taxpayer no given the right of redemption 2. Time to redeem: one year from date of sale or forfeiture Deeds. Extent: property upon which levy is made. Name of taxpayer demand. RD where property is located. liability. purchases or judgment creditor. Extinguishment of Tax Lien The excess shall be turned over to owner.enforceable through out the Philippines with interests. Both are summary remedies for collection of taxes. Penalty due. penalties and costs. . possession d. 1. International Revenue officer shall prepare a duly A lien in favor of the government of the Philippines when a authenticated certificate showing person liable to pay a tax neglects or fails to do so upon a. be the property in respect to the tax is assessed. Advertisement of the time and place of sale. declaration of forfeiture. in distraint interest on said purchase price at 15% per annum from the property seized must be that of the taxpayer. . Levy – forfeiture by government authorized where there is BIR simply seizes so much of the deposit with out having to no bidder or the highest bid is not sufficient to pay the know how much the deposits are or where the money or taxes. either real or personal. Tax lien is directed to the property subject to the tax. 2. Upon all property and rights to property belonging to the 3. Duration: c. Service of written notice to: taxpayer. Amount of tax and 2. Failure to file notice of such lien in the office of register of b. a. Distraint – personal property 21 . Price: Amount of taxes. Exists from time assessment is made by the CIR until paid. This is superior to judgment claim of private individuals or 1. Note: Distraint and Levy compared 1. Both cannot be availed of where amount involved is not 2. there is no more tax . a. Payment or remission of the tax Redemption of property sold or forfeited 2. 5. although it need not date of purchase to date of redemption.  Enforcement of Tax Lien if after seizure. Levy – Act of seizure of real property in order to enforce the payment of taxes. Officer shall write upon the certificate a description of the 3. Person entitled: Taxpayer or anyone for him 3.Begins from registration of the deed of sale or 4.

in imitation of or The CIR may either: purport to be lawful stamps. Amount to be paid – full amount of the taxes and  Enforcement of forfeiture penalties. a. There must be an offer by taxpayer or CIR. e. All apparatus used in or about the illicit b. of an amount to the taxes. Private sale: provided. To be destroyed – by order of the CIR when the b. prescribed minimum rates. as the case may inability to pay the assessed tax. a. 3. Subject to approval of Evaluation Board products of tobacco a. 3. 2. liquors financial incapacity. Effect: Transfer the title to the specific thing from the owner to the government. Personal entitled – taxpayer or anyone for him 3. To be sold or destroyed – depends upon the discretion of CIR Delegation of Power to Compromise 1. When forfeited property to be destroyed or sold: a. the same may be b. To whom paid – Commissioner or the Revenue Forfeiture: Implies a divestiture of property with out compensation. In case of personal property – by seizure and When taxes may be compromised: sale or destruction of the specific forfeited property. original claim. 1. No bidder for the real property exposed for sale. Right of Redemption: 2. the commissioner. 1. There must be acceptance of the offer in settlement of the is duly made. 1.With in two days thereafter. (wine. Compromise Includes the idea of not only losing but also having the property transferred to another with out the consent of the owner and Compromise: A contract whereby the parties. The financial position of the taxpayer demonstrates a clear proceeding. Regard it as rescinded and insists upon the original 5. In case of real property – by a judgment of the taxpayer exists. Remedy in case of failure to comply: labels and tags. automobile. . be paid by taxpayer. 40% of basic tax assessed – other cases. except: 4. distilled spirits a. a return of the proceeding 3. 22 . Time to redeem – with in one (1) year from collected only if the taxpayer is willing to pay them. plus interest and cost of the sale d. When basic tax involved exceeds P1. Those already filed in court a. Dies for printing or making IR stamps. A reasonable doubt as to the validity if the claim against b. by reciprocal wrongdoer. It is pain in lieu of a criminal prosecution. cigarettes. b. labels or 1. and other manufactured 2.00 5. non-essential E: The Regional Evaluation Board may compromise the assessment items a petroleum products) issued by the regional offices involving basic taxes of P 500 K or manufactured or removed in violation less. concessions. Criminal violations. Effect of failure to redeem – forfeiture shall become absolute. 3. penalties and costs. it is with the approval of 1. When available: a. Those involving fraud. How enforced: a. Requisites: 2. civil or criminal. forfeiture c. cigars b. It is a certain amount of money which the taxpayer pays to the Secretary of Finance. of the Tax Code. 4. 2. manufactured oils. Public sale: provided. there is notice of not less than 20 days. enforce the compromise. require. sale for consumption or use of the following would be injurious to the public health or Limitations: prejudicial to the enforcement of the law: (at least 20 days after seizure) 1. condemnation and sale in a legal action or 2. avoid litigation or put an end to one already commenced. compromise a tax violation. playing cards or 6. 6. Minimum compromise rate: 1. in Collection Officer consequence of a default or offense. Since it is voluntary in character. If highest bid is for an amount insufficient to pay 2. Compromise Penalty b.000. 10% of the basic tax assessed – in case of 2. mineral GR: The power to compromise or abate shall not be delegated by products. b. Taxpayer must have a tax liability. Where settlement offered is less than the production of such articles. All other articles subject to exercise tax. or tags. miscellaneous products.000. Where to be sole: demand.

in case of action. Note: 1. after decision on his tax liability shall have become final Will not operate to extinguish taxpayer’s criminal liability and executory.000. Dispute same by filing protest with CIR 2. Conducted by Legal Officer of BIR necessity of an order from a competent court. whichever is lower. Any taxpayer who filed application for Internal Revenue Taxes shall be assessed within compromise by reasons of financial three (3) years after the last day prescribed by law for incapacity his tax liability. Inquiring into bank deposit accounts of a. Willfully refuses to pay such tax and its Effect of Satisfaction of Tax Liability on Criminal Liability accessory penalties. Civil Action 1. b. Requiring proof of filing income tax returns b. does not arise from a criminal act. 10. Books of accounts and other accounting This is true in case the criminal action is based on the act records of taxpayer must be preserved. Does not exonerate taxpayer his civil liability to pay the tax 6. 13. Exporter’s bond executory for failure or taxpayer to: d. a. 8. in case it is filed beyond the period prescribed thereof. filed. Requiring filing of bonds – in the following Actions instituted by the government to collect instances: internal revenue taxes in regular courts (RTC or MTCs. penalty or forfeiture. the filing of the return or from the day the return was 14. Prescription of Government’s Right to Assess Taxes: estate A. A deceased person to determine gross I. Inventory – Taking of stock-in-trade and making surveillance. provided there is a prima facie showing of willful attempt to 5. Must be with the approval of the CIR. Deportation in case of aliens – on the following due. Giving reward to informers – Sum equivalent to of which shall not only impose the penalty but also order 10% of revenues. Estate and donor’s tax depending on the amount involved) b. Making arrest. a. 3. investigation of the taxing authority with respect to assessment and 12. Excise taxes When assessment made has become final and c. generally to taxpayer of filing a false and fraudulent tax return and failure to within three years after date the tax return was pay the tax. (Section 203 of the Tax Code)  Judicial Remedies Note: Civil and Criminal Actions: 23 . Prescribing presumptive gross sales or receipt: a. Brought in the name of the Government of the The Register of Deeds is duty bound to transfer Philippines. Person failed to issue receipts and Purpose: invoices For purposes of Taxation.00 per case. Limited to violations of any penal law or regulation administered by the BIR. Use of National Tax Register Note: 9. A. Prescribing real property values collection of Internal Revenue Taxes. committed Effect of Acquittal on Tax Liability: with in the view of the Internal Revenue Officer or EE. search and seizure evade. surcharges or fees recovered payment of taxes. 4. Inspection of books any attempt on past of taxpayers to evade payment. the title of property forfeited to the government with our 2. Knowingly and fraudulently evades Reason: Tax is an obligation. Manufacturer’s and importer’s bond a. Registration of Taxpayers. payment of IR taxes. due or was filed whichever is later. independent of 7. Criminal Action profession can be issued. statue of limitation is primarily b. necessary to a criminal prosecution for tax evasion. 7. Reason to believe that records do not designed to protect the rights of the taxpayer’s against unreasonable correctly reflect declaration in return. since the duty to pay the tax is imposed by statute. for recovery of taxes. 000. Imposition of surcharge and interest. Obtaining information on tax liability of any The satisfaction of civil liability is not one of the grounds for the person extinction of criminal action. or enforcement of a  Other Administrative Remedies fine.  PRESCRIPTIVE PERIODS/STATUTE OF LIMITATION 11. the government may still collect the tax in the same grounds action. and/or fine or penalty imposed and collected or An assessment of a tax deficiency is not P1. General Rule: b. the judgment 3. Appeal adverse decision of CIR to CTA Before a license to engage in trade. Thus. business or occupation or to practice a B. A direct mode of collection of taxes.

not required by law to be reported in a return such as excise (Aznar case. 29. before the expiration of the period previously agreed upon. Republic vs. 1965. Kei & Co. Recurrence of the foregoing circumstances. Pascoi Realty Corp. correct address of the taxpayer. When the Commissioner raised the question of not require that the demand/notice be received within the fraud only for the first time in his memorandum prescriptive period.  In computing the prescriptive period for assessment. fraudulent – within ten (10) years from the discovery of b. 222 ic) Note:  Limitations: 1. the law does c. the tax is imprescriptible. Prescription of Government’s Right to Collect Taxes for the collection thereof. May 20. A fraud assessment which has become final and 4. When the Commissioner fails impute fraud in the vs. Where there is a written waiver or renunciation of the False return original 3-year limitation signed by the taxpayer. fact whether intentional. 1980) c. Where the BIR itself appeared. before the computation and assessment of taxes (Sinforo Alca vs. Assessment of unpaid taxes. Where no return was filed . wrongdoing with the sole object of avoiding the 3. liabilities of a taxpayer and attached to a criminal complaint e. 1999) shaving fraudulent intent. 4. 222 paragraph (a)) A. Where a return was filed but the same was false or and the commissioner. The waiver to be valid must be executed by the correct tax due. ( CIR prove fraud. Intentional and substantial overstatement of filing thereof shall be considered as filed on such last day. Ayala Securities Corp. Collector. 4 SCRA 872) assessment notice/demand for payment. unless there is a sufficient evidence vs. The filing thereof is intended and It merely implies a Note: Deceitful with the aim of evading the  Limitations: deviation from truth of a. Intentional and substantial understatement of tax period of limitation may be collected by distraint liability of the taxpayer. General Rule:  Fraud may be established by the following : (Badges of 1.  A return filed before the last day prescribed by law for the b.) Exceptions: (Sec. which was filed the CTA after he had rested his Commissioner 21. or levy or by proceeding in court within 5 years following the date of assessment. because they do not contain information necessary and required to permit the 3. cannot be deemed an assessment. Nov. It must amount to intentional 2. Where no return is required by law. vs. Where the commissioner and the taxpayer. A mere understatement of income does not for tax evasion. Fraud is never presumed and the circumstances consisting it must be alleged and proved to exist C) Imprescriptible Assessments: by clear & convincing evidence (Republic vs. The commissioner can not valid agree to reduce the  Nature of Fraud: prescriptive period to less than that granted by law. where the bases of which is tax. 1964) agree in writing to the extension of said period. Inc. B. The fraud contemplated by law is actual and not imprescriptible. constructive. (Carmen vs. June 29. A mere mistake is not a fraudulent intent. “not sure” as to  An affidavit executed by a revenue office indicating the tax the real amount of the taxpayer’s net income. 1987) d. Dec. Phoenix. parties before the lapse of the prescriptive period. 23. Where the law does not provide for any particular period of Keir. the tax sought to be assessed becomes b. c. 30. a. expiration of the three (3) year period of limitation have Commissioner.. 1966) assessment. the fact of fraud shall be judicially taken cognizance of in the civil or criminal action II. Where an assessment was made – Any internal Fraud) revenue tax which has been assessed within the a. deductions of exemption  In case a return is substantially amended. A waiver is inefficient I it is executed beyond the original three year. should be in writing and duly signed by the taxpayer 2. 24 . a. The agreement extending the period of prescription date of discovery of the omission. Sept. the b. case.  A transcript sheets are not returns. SCRA 17. the government c. b. CA April 30. (Basilan Estates. Assessment of compensating and documentary stamp tax. Aug. Note:  Fraudulent return vs. (Sec. 21. 1974) taxes. mailed or sent by the Commissioner to the the case is appealed to the CTA. However. When the Commissioner failed to allege in his latter is deemed made when notice to this effect is answer to the taxpayer’s petition for review when released. 1.within ten (10) years after the a. executory. right to assess the tax shall commence from the filing of the  Instances/Circumstances negating fraud: amended return (CIR vs. The agreement to extend the same should be mode falsity or fraud.

 When does the defense of prescription may be raised: Taxpayer although made beyond such a. IV. . (RTC)  The 10-year prescriptive period for collector thru action 3. Where a tax obligation is secured by a surety assessment and the beginning of distraint/levy or a bond – the government may proceed thru a court proceeding in court for collection shall be action to forfeit a bond and enforce such suspended for the period. revenue tax. the ordinary 5-year period (now 3 years) government file its answer to taxpayer’s petition for would apply (Rep. it is prescriptive period. period is ten years. Where the government makes another b. the tax amended return – the period for collection is may be assessed prior to the expiration of the counted from the last revised assessment. Where no assessment was made and a return was filed and the same is not fraudulent or false. 2. Agreement to extend period of vs. 1962) review. 4. The running of statute of limitations on making an 6. When the taxpayer omits to file a return – a court proceeding for the collection of such tax may be III. Lopez. 2. b. 25 . which has been assessed within the period agreed upon. Where a fraudulent/false return with intent to prescriptive period. Agreement renouncing a. both the commissioner and the taxpayer have consented in 5. whichever is commission and the taxpayer – the prescriptive later. distraint and levy procedure. a. In criminal case – It can be raised even if the case has assessment on the basis of reinvestigation been decided by the lower court but pending decision requested by the taxpayer – the prescriptive on appeal. vs. 7. When a proceeding is instituted against the guilty Prescription. Rules of Prescription In Criminal Cases filed without assessment. Day of the commission of the violation. Where before the expiration of the time prescribed for the assessment of the tax. B. Where the assessment is revised because of an writing to its assessment after such time. (Rep. & appealed to the CTA – the collection begin when the In such case.. Collection by judicial action – The collection begins by Note: filing the complaint with the proper court. March 31. Expiration of the period agreed upon to an  When it should run again : When the proceeding is agreement waiving the defense of dismissed for reason not be valid. Interruption of the Prescriptive Period 1963) 1. It must be made before the person period of prescription b. 2. may be collected be distinct Note: or levy of by a proceeding in court within the  When it should commence? : The five (5) year prescriptive period agreed upon in writing before the period shall begin to run from the expiration of 5-year period. period for collection should be counted from the last assessment. from the time of discovery and the Note: institution of judicial proceeding for its investigation  Distinction and punishment. Where the action is brought to enforce a the tax should be collected within 3 years after compromise entered into between the the return was due or was filed. Constituting Prescription is till binding to the jeopardy. if know. If not known. period agreed upon. bailed permanently.  When it is interrupted: b. March 30. 2. Waiver of statute of limitations – any internal prescribe after five (5) years. Where assessment of the commissioner is protected does not apply if it appears that there was an assessment. Collection by summary remedies – It is effected by assessment. When tax is deemed collected for purposes of the 1. In civil case – If not raised in the lower court. at anytime within ten years after the summary methods when the government avail of discovery of the falsity or fraud. contractual obligation within a period of ten years. Rule: All violations of any provision of the tax code shall 3. Ret.If can not be raised for the first time on appeal. vs. A. evade taxes was filed a proceeding in court for the collection of the tax may be filed without 1. When the offender is absent from the Philippines. at anytime within 10 years after the discovery of the omission. Exceptions: C. a.

off the prescribed tax tax. Issuance of Assessment Nota Bene: 1. without any action or the part of the b. The question of prescription is not jurisdictional. When the warrant of distraint or levy is c. his authorized representative a. and d. from the Philippines. Filing of claim for tax refund. Substantial issues must be raised.  Reason: No requirement for assessment of the tax before the criminal action may be instituted.g. b. The defense of prescription must be raised by the taxpayer on time. In criminal cases for violation of tax code – the assessment on the basis of existing records without need of period shall not run when the offender is absent additional evidence. from the decision of the Commissioner. 4. Administrative b. Action for Damages duly served upon any of the following person: (2) Criminal Action 1. Entering into compromise Commissioner does not interrupt the running of the prescriptive period. taxpayer 2. When the taxpayer cannot be located in the address given by him in the return. statute of non-claims in the settlement of the deceased’s  Filing a petition for review in the CTA estate. When the taxpayer is out of the Philippines. Filing of complaint against erring Bureau of 3. In the event that the collection of the tax has already The commissioner is prevented from prescribed. otherwise it is deemed waived. a. Procedure 2.a plea for reinvestigation of an Note: assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. ADMINISTRATIVE PROTEST e. the government cannot invoke the principle of filing an ordinary action to collect the Equitable recumbent by setting.a plea for the re-evaluation of an 3. The prescriptive provided in the tax code over ride the e. It may involve a question of fact or law or both. 5. a. Member of his household with Internal Revenue officials and employees. (2) After Payment The request must not be a mere pro. Action to contest forfeiture of chattel. and as prohibited from making the assessment or defense it must be raised reasonably otherwise it is beginning distraint/levy or a proceeding in deemed waived. Appeal to the Court of Tax Appeals statute will not be suspended. a. Filing of a petition or request for Note: reconsideration or reinvestigation A mere request for reinvestigation (Administrative Protest). During which the Commissioner is 3.  When CTA suspends the collection of tax liability of the taxpayer pursuant to Section 11 of RA 1125 upon proof that TAXPAYER’S REMEDIES its collection may jeopardizes the government and /or the taxpayer. When the taxpayer requests for reinvestigation which is granted by (1) Before Payment commissioner. suspend the criminal action. It may also  A petition for reconsideration of a tax assessment does not involve question of fact or law or both. Request for reconsideration. Request for reinvestigation. 26 . and former. court and for 60 days thereafter. The law on prescription remedial measure should be interpreted liberally in order to protect the taxpayer. against a tax refused to which the taxpayer is entitled. b. Judicial Note: (1) Civil action If the taxpayer informs the Commissioner of any change in address the a. Filing of claim for tax credit c. sufficient discretion and no property could be located.

Taxable periods covered by the assessment. c.1. (c) designation and authority to act for and in behalf of the and taxpayer. Revenue relevant to support its protest to be submitted within Regulations No. rules and regulations. or jurisprudence on which his protest is based shall been sold. including applicable surcharge and/or taxable period was determined to have carried over interest. 1985. copy of the letter of demand showing the following: (a) his name. When the excise tax due on excisable articles has not disputed issues shall be suspended. or Several issues in the assessment notice but taxpayer only b. signature. if acknowledged or received by a person other than the i. demand and assessment notice shall be void. be. the decision shall become final and executory a. Name of the taxpayer and address for the immediate inclusive of the applicable penalties (3. Issuance of written a Preliminary Assessment Notice (PAN) Taxpayer or his duly authorized representative may after review and evaluation by the Assessment Division or by the administratively protest against a Formal Letter of Demand and Commissioner or his duly authorized representative. sixty (60) days from the filing of the protest. if any. 27. as the case may Assessment notice within thirty (30) days from date of receipt thereof. When an article locally purchased or imported by an exempt person. 228 of the 1997 NIRC) If the protest is denied in whole or part. d. otherwise. When a discrepancy has been determined between disputes/protests validity of some of the issues the tax withheld and the amount actually remitted by  Taxpayer required to pay the deficiency tax or taxes the withholding agent. b. or attributable to the undisputed issues. past three taxable years. such as. the applicable law. f. Amounts and kind/s of tax involved. or from lapse of the one hundred (180)-day period: otherwise. a. rules and capital equipment. he shall be considered in default. 1999). 1999). calling for payment of the taxpayer’s tax liability. Itemized schedule of the adjustments with which the representative shall acknowledge receipt thereof in the duplicate taxpayer does not agree. Itemized statement of the findings to which the taxpayer agrees. the protest shall not be deemed validly filed unless payment of the agreed portion of the tax is paid first. Statement of facts and/or law in support of the protest.1. Nature of request whether reinvestigation or reconsideration specifying newly discovered evidence that he intends to present it it is a request for Issuance of a Formal Letter of Demand and Assessment Notice reinvestigation. and spare parts. If the taxpayer fails to comply with this requirement. or  Prescriptive period for assessment or collection of taxes on d. issued by the Commissioner or his duly authorized representative. dated Nov. c. 12-99 dated Sept. 12-85. When a taxpayer who opted to claim a refund or tax  Collection letter to be issued calling for the payment of credit of excess creditable withholding tax for a deficiency tax. or is not acted upon within one hundred eighty (180) days from submission of documents. upon the filing of the protest. Under Sec. (Sec. If sent by personal delivery. a formal letter of demand and assessment notice shall be caused to be issued. (3. or e. the taxpayer or his duly authorized g. If the taxpayer fails to respond within fifteen (15) days from the Contents: date of receipt of the PAN. Documentary evidence as it may deem necessary and taxpayer himself. For this purpose.) 27 . persons. When the finding for the deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. (b) h. vehicles. which amount should be paid immediately to the taxpayer only by registered mail or personal delivery. and (d) date of receipt thereof. the formal letter of Notice Number. Date of receipt of assessment notice or letter of demand. traded or transferred to non-exempt render his protest void and without force and effect. or jurisprudence on which the assessment is based. 12-99 dated Sept. e. has regulations.4. as a basis for computing the Formal Letter of Demand and Assessment Notice shall be sent tax due. the laws. but not limited to. been paid. and automatically applied the same amount claimed  No action shall be taken on the disputed issues until against the estimated tax liabilities for the taxable payment of deficiency taxes on undisputed issues quarter or quarters of the succeeding taxable year. the assessment shall become final (Revenue Regulation Disputed Assessment No. machineries.2. A valid PAN shall be in writing stating the law and facts on which the assessment is made. 228 of the 1997 NIRC a Pre-Assessment Notice the taxpayer adversely affected by the decision or inaction may shall not be required in the following cases: appeal to the CTA within 30 days from receipt of the said decision. 6. and Assessment Shall state the facts. Failure of taxpayer to state the facts. 6. Revenue Regulations No. in which case.

if the taxpayer reimbursement of the tax credit memo covering the fails to file an administrative protest within the reglementary amount determined to be 30-day from receipt of the assessment notice. manner wrongfully collected Commissioner. the assessment can verification. L-  Refund claim partakes of the nature of an exemption which 16626.. 229. as for c. therefore. with the BIR. assessment reimbursable which can be becomes final. (CIR vs.  Except: Tax credit or tax refund where on the face of the return upon which payment is made. CIR 87 Phil 96). 28. 228 of the Tax Code. 7. Collector of Internal Revenue. Nov.. 2142 & 2154 of the Civil Code). cannot be allowed unless granted in the most explicit and  Suspension of the 2-yaer prescriptive period may be had categorical language. CTA Case No. become part of the state moneys subject to Limitations in favor of the Government.  Refers not only to the “administrative” claim that the The value of internal revenue stamps when they are taxpayer should file within 2 years from date of payments returned in good condition by the purchaser may also be redeemed. A request for reconsideration or reinvestigation of an collectible and accepted by the government. 28 . vs. 204 and 209 of the 1997 NIRC the appears clearly to have been erroneous. Fireman’s Fund correct the action of subordinate officer and (b) to notify the Insurance Co) government that the taxes sought to be refunded are under  question and that. such notice should then be borne in mind in estimating the revenue available for Scope of Claims expenditure (Bermejo vs. such payment Under Sec. (b) Penalties imposed without authority  Requirement a condition precedent and non-compliance (c) Any sum alleged to have been excessive or in any therewith bars recovery (Phil. Acetylene Co. against any sum no longer be disputed either administratively or judicially that may be due and through an appeal in the CTA. L-11875. and which assessment shall be accompanied by a waiver of the Statute of therefore. Dec. but also the judicial claim or the action for refund the taxpayer should commence with the CTA (see Gibbs vs. 1966). collectible form the taxpayer  Assessed already tax collectible. expenditure and perhaps already spent or appropriated (CIR vs. 1997 Commissioner may credit or refund taxes: NIRC). Written claim for refund or tax credit filed by the taxpayer with the Commissioner Legal Principle of quasi-contracts or solutio indebiti (see  This requirement is mandatory. 1321. Art. Claim for refund or tax credit must be filed or the suit instance in a case where he is not aware of the existing exemption in proceeding thereof must be commenced in court within two (2) his favor at the time payments were made years from date of payment of tax or penalty regardless of any A tax is illegally collected if payments are made supervening event. (a) Erroneously or illegally assessed or collected internal b. (Sec. 107 Phil 232). Effect of taxpayer’s failure to file an administrative protest or to appeal BIR’s decision to the CTA TAX REFUND TAX CREDIT There is actually a The government issues a tax  As provided in Sec. The Government is within the  Reasons: (a) to afford the commissioner an opportunity to scope of the principle of solutio indebiti (CIR vs. Categorical demand for reimbursement revenue taxes Taxpayer pays under the mistake of fact. Oct. 1963). 29. Necessity of Proof for Refund Claims  Taxpayer may file an action for refund in the CTA even before the Commissioner decides his pending claim in the BIR (Commissioner of Internal Revenue vs. applied after proper  After the lapse of the 30-day period. (Sec. 1962). Johnson and Sons when:  Failure to discharge burden of giving proof is fatal to claim (1) there is a pending litigation between the two  It must be shown that payment was an independent single parties (government and taxpayer) as to the proper act of voluntary payment of a tax believed to be due. 204 (c) & 229 1997 NIRC) under duress. Inc. Palanca Jr. Li Yao. Statutory Requirements for Refund Claims Legal Basis a.

Co. from using defense of excessive (A) 1997 NIRC). (Sec. May 29. 1992). it 2-year prescriptive period for overpaid quarterly could not become final and executory. or illegal assessment. Final decision or ruling has been rendered on such is withheld and remitted to the BIR. b. 229 1997 NIRC). 15. employees.. taxable year (Gibbs vs. but from the date the  Motion for reconsideration suspends the running of the 30 final adjusted return is filed after the taxable year –day period of perfecting an appeal. the same prescriptive period of two years from the date of payment regardless of any supervening cause.. American of Internal Revenue in disputed assessment or claim for tax Life Ins. Inc.. it would be merely pro forma. 1962). Hence. 18 SCRA 861) files its quarterly income tax return. 105208. 31. Assessment is considered correct. The Commissioner acted with patent arbitrariness refund or tax credit within 2 years from payment of the Arbitrariness presupposes inexcusable or obstinate tax or penalty. Taxpayer has filed with the CIR a written claim for 1. tax to be paid and of the proper interpretation of the interest at the rate of 6% per annum. but from the end of the petition. vs. Jr.. No. he could not appeal the Corporations same to the CTA within 30 days from notice. Jan. and month period to the date the reund or credit is made ( Sec 79 (c) (2) 1997 NIRC) (2) the commissioner in that litigated case agreed to abide by the decision of the Supreme Court as to the collection of taxes relative thereto (Panay Electric Co. 11. b. Taxpayer has filed with the Commissioner of Internal Withholding Taxes Revenue a petition for the reconsideration or cancellation of the assessment. G. 112 by the government. 819)  Even if the 2-year period has lapsed the same is not jurisdictional and may be suspended for reasons of equity  Adverse decision or ruling rendered by the Commissioner and other special circumstances. period. 1995). Collector of Internal Revenue 103 Phil. Any excess of the taxes withheld over the tax due from the ACTION CONTESTING FORFEITURE OF CHATTEL taxpayer shall be returned or credited within 3 months from the fifteenth (15th) day of April. 29.R. In case of Income Tax withheld on the wages of (see Secs. grounds not previously alleged to toll the reglementary G. APPEAL to the CTA Inc. the decision becomes final and executory. Commissioner of Internal Revenue. Taxes payable in installment Requirements for Appeal in Disputed Assessment 2-year period is counted form the payment of the last installment (CIR vs Palanca. 204. b. Jan. in an action for collection of the tax quarter when the sales transactions were made (Sec. starting after the lapse of the 3- taxpayer’s charter in relation to the disputed tax. supra) a. De la income tax is counted not from the date the corporation Rama. But where the taxpayer adversely affected has not received the decision or ruling. (CIR vs. Phil. refund or credit. d. Tax assessed has not been paid. and disregard of legal provisions (CIR vs. No.R. No. otherwise.. Interest on Tax Refund Requirements for Appeal in Refund and Tax Credit The Government cannot be required to pay interest on taxes refunded to the taxpayer unless: a. taxpayer may appeal the same within thirty  2-year prescriptive period for filing of tax refund or credit (30) days after receipt. Must advance new (Commissioner of Internal Revenue vs. R. Prescriptive period counted not from the date the tax c. (Republic vs. 2. Refund or credit after such time earn 29 . Nov. 1125) claim computed from date of payment of tax of penalty  Appeal equivalent to a judicial action except in the following:  In the absence of appeal. L-16683. Victorias Milling Corp. c. TMX Sales. (Roman Catholic Archbishop vs. Taxpayer barred. Coll. Tax has been paid. Suit or proceeding in the CTA is made within 30 days supra) from receipt of the decision VAT Registered Person whose sales are zero-rated or effectively Effect of Failure to Appeal Assessment zero-rated 2-year period computed from the end of the taxable a. Suit or proceeding is instituted in the CTA also within 19607. Inc. 83736.A. 1966). L..

ND property from the person seizing the property or in 10) Without the authority of law. a. settlement of any charge or complaint for any violation of b. 1997 NIRC) proceeds realized at the sale (see. 1) Extortion or willful oppression through the use of his office. Sec. or conspiring or colluding sale under the following conditions. A. statement after the same has been officially received by the owner desiring to contest the validity of the forfeiture may bring the BIR. Revenue officer acting negligently or in bad faith or with willful respectively of the taxpayer oppression would be personally liable. jurisdiction. In the case of attempted importation. or 3. In case of seizure of personal property under claim for forfeiture. 6) Neglecting or by design permitting the violation of the law or any false certificate or return. Before sale or destruction of the property to recover the their superior officer. 3) Knowingly demanding or receiving sums or compensation a. In case of willful neglect of duty. 2) Willful oppression and harassment of a taxpayer who administrative fine or forfeiture may be affected refused. failure to report such knowledge or information to a. unless the importation is merely attempted. or as otherwise required by law. of the government taxpayer’s recourse is under Art 27 of the Civil Code. Sec. mentioned in no. an action: 9) Having knowledge or information of any violation of the Tax Code. Any deficiency or excess is for the account or credit. forfeiture which is imposed when the importation agent or employee of the BIR or any other agency charged with the is unlawful and it may be exercised even where enforcement of the provisions of the Tax Code who commits any of the articles are not or no longer in Customs the following offenses: Custody. TCC. b. while the goods are still within the customs not authorized or prescribed by law. Seizures Generally applied when the penalty is fine or A taxpayer may file a criminal complaint against any official. This is availed of when the importation is neither nor improperly made FILING OF CRIMINAL COMPLAINT AGAINST REVENUE OFFICERS 2. Enforcement or tax lien Taxpayer may file an action for damages against any internal A tax lien attaches on the goods. unauthorized withdrawal or recall of any return or 30 . b. articles entered under warehousing entry 7) Making or signing any false entry or entries in any book. 1997 NIRC) Remedies under the Action is partakes of the nature of an ordinary civil action for Tariff and Customs Code recovery of personal property or the net proceeds of its sale which must be brought in the ordinary courts and not the CTA. regardless of revenue officer by reason of any act done in the performance of the ownership while still in the custody or control official duty or neglect of duty. file or submit a importer or person who is aware thereof. Sale of Property offering or undertaking to submit a report or assessment less than the amount due the government for any Property in the customs custody shall be subject to consideration or compensation. paid thereon within the period provided 8) allowing or conspiring or colluding with another to allow the under Section 1908. declined. After the sale and within 6 months to recover the net the Tax Code. in the hands or under the control of the 5) Offering or undertaking to accomplish. demanding or accepting possession thereof upon filing of the proper bond to enjoin money or other things of value fore the compromise or the sale. report or assessment on a txpayer without the appropriate examination of the books of account or tax liability. turned down or rejected any of his offers only. or 4) Willfully neglecting to give receipts as by law required or to perform any other duties enjoined by law. Extrajudicial ACTION FOR DAMAGES AGAINST REVENUE OFFICIALS 1. Proceeds of sale are applied to the tax due. He ceases to be an officer of the law and becomes a private wrongdoer. abandoned articles. 269. or not withdrawn nor the duties and taxes nay false certificate or return. 231. Government Remedies: a. 5. with another or others to defraud the revenues or otherwise violate the provisions of the tax code. (see.

In seizure cases intangible property. The taxpayer may appeal to the Court of Appeals Note: Goods in the collector’s possession or of which has exclusive jurisdiction to review decisions of Customs authorities pending payment of customs the Commissioner of Custom in cases involving: duties are beyond the reach of attachment. after liability to sale shall have been established c. and Judicial f.Seizure by the government of personal property. dead or injured animals. Levy of Real Property b. Tax Lien shortage before arrival of the goods in the Philippines. Compromise c. to be followed by its public sale. Actual – There is taking of possession of personal property out of the taxpayer into that of the government. Taxpayer’s Remedies Customs. on missing packages. Criminal Action 2. to enforce the payment of faces. 2. after Government thus relieving himself of the tax liability the expiration of the period allowed for the but not from the possible criminal liability. other than contraband. see the earlier discussions on “Customs Protest Cases” c. 1204. 4. deficiencies in the contents of packages or 3. Distraint of Personal Property a. Taxpayer is also diverted of the power of control over the property. Judicial Action charges. d) other matters arising under the customs Law or other laws administered by the Revenue of B. detention or release of property The tax liability of the importer constitutes a personal debt affected. a) liability for customs duties. and the goods. Administrative Recourse Remedies of the Government Claim for refund—a written claim for refund may be Enumeration of the Remedies submitted by the importer: Administrative 1. Settlement of case by the payment of fine or by proper administrative or judicial redemption of forfeited property proceedings in conformity with the provision of this code: and see earlier discussions on the subject d. c. b) seizures. seized property. Other Administrative Remedies e. Civil Action 1708. Any articles subject to a valid lien for Note: The owner or importer may abandon either customs duties. a. taxes or other charges expressly or By importation in favor of the collectible by the Bureau of Customs. 5. fees or other money b. articles lost or destroyed after such arrival. TCC) c) fines forfeitures or other penalties imposed in This is availed of when the tax lien is lost by the release of relation thereto. see earlier discussion on the subject 31 . articles lost or destroyed 6. enforceable by action (Sec. 7. Judicial relief Distraint of Personal Property In drawback cases where the goods are re-exported Distraint. if the taxes are not voluntarily paid. for manifest classical errors. In abatement uses such as: 1. satisfaction of the same. In case of b. (see section 1701. to the government. Forfeiture d. Protest tangible or intangible. TCC) 8.

206 TC) person to pay CIR his credits or debts. a. c. Disposition of proceeds of the sale.000. Grounds of Constructive Distraint How Actual Distraint Effected 32 . TC). Warrant shall be sufficient authority for such essential (see Sec. person owing the debts or having in his possession such credits or his agent. 8. Taxpayer is delinquent in the payment of tax.000. treasurer or responsible officer of of tax as the cost of same might even be more than P100. 3. Statement of the sum demanded. Service of warrant of distraint upon taxpayer or upon person in possession of taxpayer’s personal property. Require taxpayer or person in possession to municipality or city and notice to the taxpayer specifying time and place of sale and the articles distrained. 205 3. manager. Posting of notice is not less than two places in the 3. requisite no.00 P1.00 or b. Time and place of sale. How constructive Distraint Effected 6. Leaving a copy of the warrant with the 7.000. representative P1. In the presence of two witnesses of sufficient age and 4. the bank. Constructive – The owner is merely prohibited from disposing of his personal property. In keeping with the provision on the abatement of the collection manager. When remedy not available: c. d. Prohibit him from disposing the property from disposing the property in any manner. dwelling or place of business and with someone delinquent or not There is actual taking or Taxpayer is merely prohibited of suitable age and discretion possession of the property. Bank shall turn over to CIR so much of the bank accounts as may be sufficient. 5.000. 5. Constructive Distraint a. Period with in to assess or collect has not yet prescribed. Debts and credits 6. same Such immediate step is not 4. Where Taxpayer or person in possession refuses to sign: Who may effect distraint Amount Involved 3. Sale at public auction to highest bidder b. tax due may not be of taxes where amount due is a. 3. Subsequent demand for its payment. Copy of an account of the property distrained. garnishment. In case of constructive distraint. Sign a receipt covering property distrained 7. Officer shall prepare list of the property distrained. questioned. Serving a copy of the warrant upon taxpayer and upon president. RDO less discretion. commissioner or his due authorized In excess of a. at the any taxpayer whether delinquent taxpayer. from disposing of his property. Bank Accounts – garnishment Where amount involved does not exceed P100 (Sec. 1 is not 4. Serve warrant upon taxpayer and president. Obligate him to preserve the same properties. May be made on the property of signed by the officer. distraint property or by service or taxpayer to sign a receipt of the warrant of distraint or property or by leaving a list of c. Effected by having a list of the Effected by requiring the b. left either with the owner or Made on the property only of a person from whom property was taken. 4. treasurer or other Requisites: responsible officer of the issuing corporation. with out the authority of the CIR. company or association. Procedure: 4. Stocks and other securities definite or it is being definite. b. leave a copy in the premises where property is located. Taxpayer must fail to pay delinquent tax at time required. 8. In case of Tangible Property: Actual Distraint. In case of intangible property: An immediate step for collection necessary.

either real or personal. When the amount of the bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of articles. Tax Lien—a legal claim or charge on property. The remedy of distraint or levy may be repeated if necessary until the full amount. If at any time prior to the consummation of the sale. Taxpayer hides or conceals his property. Enforcement of Tax Lien 10. International Revenue officer shall prepare a duly Levy – forfeiture by government authorized where there is authenticated certificate showing no bidder or the highest bid is not sufficient to pay the taxes. Taxpayer is intending to leave the Philippines. d. title to the property with out of an order from a competent court 9. 6. RD where property is located. 12. Levy – real property Procedure: 9. penalties and costs. Levy – Act of seizure of real property in order to enforce the payment of taxes. It is the duty of the Register of Deeds concerned upon 8. Person entitled: Taxpayer or anyone for him 10. Levy of Real Property 7. e. date of delinquency to the date of sale together with the goods distrained shall be restored to the owner. f. Redemption of property sold or forfeited 9. including all expenses. 4. 33 . to transfer the property upon which levy is made. Officer shall write upon the certificate a description of the registration of the declaration of forfeiture. Bank accounts may be distrained with out violating the confidential nature of bank accounts for no inquiry is made. Price: Amount of taxes. Service of written notice to: 6. Disposition of proceeds of sale. possession 5. 6. and collected. The taxpayer. all h. established by law as a security in default of the payment 11. Both cannot be availed of where amount involved is not more than P100. To remove his property there from. Distraint – Taxpayer no given the right of redemption b. Advertisement of the time and place of sale. a. Both are summary remedies for collection of taxes. sold/forfeited to the government. not provided 7. 7. Amount of tax and Levy – Taxpayer can redeem properties levied upon and c. Possession pending redemption – owner not deprived of any part of it came from. The requisites are the same as that of distraint. Note: . Taxpayer is retiring from any business subject to tax. Taxpayer acts tending to obstruct collection proceedings. The property may be sold at public sale. . if 8. Penalty due. 6. or The excess shall be turned over to owner. Distraint – forfeiture by government. Begins from registration of the deed of sale or declaration of forfeiture. the CIR or his Distraint and Levy compared deputy may purchase the distrained property on behalf of the national government. penalties and interest thereon from proper charges are paid to the officer conducting the same. Distraint – personal property after seizure. the taxes are not voluntarily paid. Sale at public auction to highest bidder. is c. Time to redeem: one year from date of sale or forfeiture Note: . 8. enforceable through out the Philippines 5. BIR simply seizes so much of the deposit with out having to know how much the deposits are or where the money or g. Name of taxpayer 10. of taxes. interest on said purchase price at 15% per annum from date of purchase to date of redemption. Cannot be extended by the courts.

When basic tax involved exceeds P1. Criminal violations. Attaches not only from time the warrant was served but The CIR may either: from the time the tax was due and demandable.\ When taxes may be compromised: 3.000. This is superior to judgment claim of private individuals or parties Remedy in case of failure to comply: 4. 10% of the basic tax assessed – in case of financial incapacity. 5. to the property subject to the tax. Tax lien is directed be delegated by the commissioner. Prescription of the right of the government to assess or collect. Exists from time assessment is made by the CIR until paid. d. 3 and 4. Extent: 6. Payment or remission of the tax a. Enforcement of Tax Lien vs. It is pain in lieu of a criminal prosecution. Regard it as rescinded and insists upon the original Compromise—a contract whereby the parties. There must be acceptance of the offer in settlement of the A lien in favor of the government of the Philippines when a original claim. Taxpayer must have a tax liability. Limitations: Extinguishment of Tax Lien 3. There must be an offer by taxpayer or CIR. Exception: The Regional Evaluation Board may Note: compromise the assessment issued by the regional offices involving basic taxes of P 500 K or less. 5. in distraint the property seized must be that of the taxpayer. avoid litigation or put an end to one already commenced. Minimum compromise rate: 5. concessions.00 or In case Nos. person liable to pay a tax neglects or fails to do so upon demand. 40% of basic tax assessed – other cases. Compromise Penalty Requisites: 4. 34 . the taxpayer is still liable. 2. 1 and 2. Failure to file notice of such lien in the office of register of Deeds. 7. Under nos. enforce the compromise. with interests. b. penalties and costs. Where settlement offered is less than the prescribed minimum rates. except: Upon all property and rights to property belonging to the taxpayer. 3.000. 5. Nature: 6. by reciprocal demand. 7. Duration: 4. Those already filed in court 8. 4. A reasonable doubt as to the validity if the claim against the taxpayer exists. Destruction of the property subject to the lien. Effectivity against third persons: b. of an amount to be paid by taxpayer. regardless of its owner. 3. Those involving fraud. a. or Compromise 4. 6. 4. c. Only when notice of such lien is filed by the CIR in the Register of Deeds concerned. It is a certain amount of money which the taxpayer pays to compromise a tax violation. Distraint Delegation of Power to Compromise A tax lien is distinguished from disttraint in that. purchases or judgment creditor. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. there is no more tax liability. although it need not General Rule: The power to compromise or abate shall not be the property in respect to the tax is assessed. Subject to approval of Evaluation Board 8.

000. To be destroyed – by order of the CIR when the from a competent court. Private sale: provided. plus interest and cost of the sale property. Manufacturer’s and importer’s bond of tobacco 5.00 per case. 13. Requiring filing of bonds – in the following instances: 1. No bidder for the real property exposed for sale. as the case may j. Excise taxes 3. Since it is voluntary in character. distilled spirits a. business or occupation 6. automobile. Amount to be paid – full amount of the taxes and sale or destruction of the specific forfeited penalties. in imitation of or purport to be compensation. cigars c. Right of Redemption: . 6. In case of personal property – by seizure and h. labels or tags. 000. in consequence of a default or offense. 4. a return of the proceeding f. Estate and donor’s tax 2. Effect: Transfer the title to the specific thing from the owner to the government. d. playing cards Before a license to engage in trade. it is with the approval of the Secretary of Finance. Requiring proof of filing income tax returns 5. discretion of CIR whichever is lower. c. Imposition of surcharge and interest. When forfeited property to be destroyed or sold: Note: The Register of Deeds is duty bound to transfer the title of property forfeited to the government with our necessity of an order c. 6. To whom paid – Commissioner or the Revenue d. the same may be manufactured oils. sale for consumption or use of the following would be injurious to the public health or Other Administrative Remedies prejudicial to the enforcement of the law: (at least 20 days after seizure) 4. With in two days thereafter. 3. penalties and costs. production of such articles. All other articles subject to exercise tax. 12. 11. idea of not only losing but also having the property transferred to another with out the consent of the owner and wrongdoer. become absolute. (wine. How enforced: forfeiture c. and other manufactured products d. Where to be sold: 8. b. Time to redeem – with in one (1) year from 10. It includes the lawful stamps. All apparatus used in or about the illicit or to practice a profession can be issued. If highest bid is for an amount insufficient to pay the taxes. 35 . mineral products. To be sold or destroyed – depends upon the penalty imposed and collected or P1. g. Public sale: provided. non-essential items a petroleum products) manufactured or removed in violation of the Enforcement of forfeiture Tax Code. labels Forfeiture—implies a divestiture of property with out and tags. collected only if the taxpayer is willing to pay them. Personal entitled – taxpayer or anyone for him is duly made. cigarettes. In case of real property – by a judgment of Collection Officer condemnation and sale in a legal action or proceeding. surcharges or fees recovered and/or fine or d. Effect of failure to redeem – forfeiture shall require. 9. Giving reward to informers – Sum equivalent to 10% of revenues. 7. When available: a. civil or criminal. liquors b. miscellaneous products. Exporter’s bond 4. i. Dies for printing or making IR stamps. there is notice of not less than 20 days.

D. c. search and seizure C. generally within three years after date the tax return was due or was filed whichever is An assessment of a tax deficiency is not necessary to a later. Obtaining information on tax liability of any person Does not exonerate taxpayer his civil liability to pay the tax due.\ This is true in case the criminal action is based on the act to taxpayer of filing a false and fraudulent tax return and failure to 15. Criminal Action 10. 3. Deportation in case of aliens – on the following grounds When assessment made has become final and executory for failure or taxpayer to: c. 8. Inventory – Taking of stock-in-trade and making action. Brought in the name of the Government of the Philippines. statue of limitation is primarily 1. Reason: Tax is an obligation. designed to protect the rights of the taxpayer’s against unreasonable investigation of the taxing authority with respect to assessment and 2. 14. the judgment of which shall not only impose the penalty but also order payment Books of accounts and other accounting records of of taxes. after decision on his tax liability shall have become final and executory. 17. Willfully refuses to pay such tax and its accessory d. Prescribing real property values pay the tax. Inspection of books A direct mode of collection of taxes. Dispute same by filing protest with CIR d. Thus. independent of any attempt on past of taxpayers to evade payment. the government may still collect the tax in the same 13. Reason to believe that records do not correctly reflect declaration in return. Use of National Tax Register Effect of Acquittal on Tax Liability: 12. does not arise from a criminal act. provided there is a prima facie showing of willful attempt to evade. committed with in the view of the revenue taxes in regular courts (RTC or MTCs. Making arrest. Inquiring into bank deposit accounts of Note: The satisfaction of civil liability is not one of the grounds for the extinction of criminal action. depending Internal Revenue Officer or EE. Prescriptive Periods / Statute Of Limitation Judicial Remedies Purpose: Civil and Criminal Actions: For purposes of Taxation. taxpayer must be preserved. General Rule: Internal Revenue Taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the 36 . 16. for Prescription of Government’s Right to Assess Taxes: recovery of taxes. Appeal adverse decision of CIR to CTA penalties. criminal prosecution for tax evasion. A deceased person to determine gross estate d. 11. Any taxpayer who filed application for compromise by reasons of financial incapacity his tax liability. Knowingly and fraudulently evades payment of IR taxes. in case of action. Conducted by Legal Officer of BIR collection of Internal Revenue Taxes. Registration of Taxpayers. Civil Action Limited to violations of any penal law or regulation Actions instituted by the government to collect internal administered by the BIR. surveillance. or enforcement of a fine. c. on the amount involved) 9. Prescribing presumptive gross sales or receipt: Effect of Satisfaction of Tax Liability on Criminal Liability Will not operate to extinguish taxpayer’s criminal liability c. penalty or forfeiture. Must be with the approval of the CIR. d. Person failed to issue receipts and invoices since the duty to pay the tax is imposed by statute.

liabilities of a taxpayer and attached to a criminal complaint for tax evasion. released. Fraud is never presumed and the circumstances 8. 1987) c. e. the law does b.within ten (10) years after the date of discovery of the omission. June 29. 1964) 7. vs. “not sure” as to the vs. Sept. Inc. The waiver to be valid must be executed by the constructive. c. d.return or from the day the return was filed. A mere mistake is not a fraudulent intent. An affidavit executed by a revenue office indicating the tax filed the CTA after he had rested his case. ( CIR d. 30. the government right to assess the tax shall commence from the filing of the f. The commissioner can not valid agree to reduce the executory. Where the BIR itself appeared. The agreement extending the period of prescription should be in writing and duly signed by the taxpayer 6. In case a return is substantially amended. the fact of fraud shall be judicially taken prescriptive period to less than that granted by law. CA April 30. 29. Dec. 4 SCRA 872) Instances/Circumstances negating fraud: 3. fraudulent – within ten (10) years from the discovery of falsity or fraud. Phoenix. Commissioner 21. In computing the prescriptive period for assessment. A fraud assessment which has become final and f. cognizance of in the civil or criminal action for the collection thereof. Collector. c. the a. Exceptions: (Sec. Recurrence of the foregoing circumstances. A return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. (Section 203 of the Tax Code) Fraud) Note: d. vs. A mere understatement of income does not prove contain information necessary and required to permit the fraud. because they do not e. The agreement to extend the same should be mode before the expiration of the period previously agreed Nature of Fraud: upon. When the Commissioner raised the question of fraud only for the first time in his memorandum which was 4. SCRA 17. clear & convincing evidence (Republic vs. Where no return was filed . in case it is filed beyond Fraud may be established by the following : (Badges of the period prescribed thereof. Intentional and substantial overstatement of deductions of exemption 2. Keir. 5. 23. 1965. before the expiration of the three (3) year period of limitation have agreed in writing to the extension of said period. amended return (CIR vs. 222 ic) Note: Limitations: 5. appealed to the CTA. (Basilan Estates. Republic vs. wrongdoing with the sole object of avoiding the tax. When the Commissioner fails impute fraud in the latter is deemed made when notice to this effect is assessment notice/demand for payment. Pascoi Realty Corp. A transcript sheets are not returns. Where the commissioner and the taxpayer. 1. It must amount to intentional parties before the lapse of the prescriptive period. unless there is a sufficient evidence shaving computation and assessment of taxes (Sinforo Alca vs. 1999) real amount of the taxpayer’s net income. (Sec. Intentional and substantial understatement of tax liability of the taxpayer. A waiver is inefficient I it is executed beyond the Aug. 1974) original three year. 222 paragraph (a)) Imprescriptible Assessments: 37 . cannot be deemed an assessment. a. mailed or sent by the Commissioner to the correct address of the taxpayer. Where a return was filed but the same was false or and the commissioner. Commissioner. However. May 20. Kei & Co. 1966) Note: Limitations: b. Where there is a written waiver or renunciation of the consisting it must be alleged and proved to exist by original 3-year limitation signed by the taxpayer. e. The fraud contemplated by law is actual and not d. fraudulent intent. When the Commissioner failed to allege in his answer not require that the demand/notice be received within the to the taxpayer’s petition for review when the case is prescriptive period. (Aznar case.

amended return – the period for collection is counted from the last revised assessment. which has been assessed within the period d. the tax sought to be assessed becomes counted from the last assessment. Lopez. Prescription of Government’s Right to Collect Taxes 4. Nov. filed and the same is not fraudulent or false. agreed upon. the ordinary 5-year period (now 3 years) would apply (Rep. Collection by judicial action – The collection begins by revenue tax which has been assessed within the filing the complaint with the proper court.. General Rule: distraint and levy procedure. When a proceeding is instituted against the guilty person 10. c. When it should commence? Note: The 10-year prescriptive period for collector thru The five (5) year prescriptive period shall begin to run from action does not apply if it appears that there was an the: assessment. 1963) 2. Where the government makes another assessment on When the proceeding is dismissed for reason not the basis of reinvestigation requested by the taxpayer Constituting jeopardy. Rules of Prescription in Criminal Cases E. Ayala Securities Corp. 38 . Where an assessment was made – Any internal 5. whichever is later. & appealed to the CTA – the collection begin when the government file its answer to taxpayer’s petition for 2. When tax is deemed collected for purposes of the prescriptive period. Where a tax obligation is secured by a surety bond – not required by law to be reported in a return such as the government may proceed thru a court action to excise taxes. March 31. imprescriptible. vs. Assessment of unpaid taxes. if know. Exceptions: Rule: All violations of any provision of the tax code shall 8.the tax should be collected within 3 years after the return was due or was filed. at anytime Note: within ten years after the discovery of the falsity or fraud. 21. c. (RTC) period of limitation may be collected by distraint or levy or by proceeding in court within 5 years following 6. Collection by summary remedies – It is effected by summary methods when the government avail of D. Where the assessment is revised because of an imprescriptible. Where no assessment was made and a return was review. Where the action is brought to enforce a compromise entered into between the commission and the taxpayer – the prescriptive period is ten years. at anytime within 10 years after When it is interrupted: the discovery of the omission. Where assessment of the commissioner is protected the date of assessment. When the taxpayer omits to file a return – a court of judicial proceeding for its investigation and punishment. may be collected be distinct or levy of by a proceeding in court within the period agreed upon in writing before the expiration of 5-year period. 3. the tax is 12. vs. taxes was filed a proceeding in court for the collection of the tax may be filed without assessment. 1962) d. forfeit a bond and enforce such contractual obligation 1980) within a period of ten years. Day of the commission of the violation. Where a fraudulent/false return with intent to evade prescribe after five (5) years. In such case. Where the law does not provide for any particular period of – the prescriptive period for collection should be assessment. where the bases of which is 13. 14. When it should run again: 11. (Rep. Where no return is required by law. (Carmen vs. 1. from the time of discovery and the institution 9.. If not known. March 30. F. When the offender is absent from the Philippines. Ret. proceeding for the collection of such tax may be filed without assessment.1. Assessment of compensating and documentary stamp tax. Waiver of statute of limitations – any internal revenue tax. 4.

permanently. The prescriptive provided in the tax code over ride the the assessment or beginning distraint/levy or a proceeding statute of non-claims in the settlement of the deceased’s in court and for 60 days thereafter. In criminal case – It can be raised even if the case has from the Philippines. b. c. The law on prescription remedial measure should be such time. The request must not be a mere pro. its favor by the Court of Tax Appeals and the ordinary courts. or other laws. fees. The Bureau shall give effect to and administer the d. Powers and Duties of the Bureau of Internal c. The commissioner is prescribed.g. of the period agreed upon. When the warrant of distraint or levy is duly SEC. the tax may be assessed prior to the expiration interpreted liberally in order to protect the taxpayer. Filing a petition for review in the CTA from the 10.The Bureau of Internal Revenue shall have a of any change in address the statute will not be chief to be known as Commissioner of Internal Revenue. both the commissioner and the taxpayer have consented in writing to its assessment after 6. SEC. 2. SEC. it is bailed f. . 6. 7. been decided by the lower court but pending decision on appeal. and as proceeding in court for collection shall be suspended for defense it must be raised reasonably otherwise it is the period. Reason: No requirement for assessment of the tax before the Interruption of the Prescriptive Period criminal action may be instituted. In criminal cases for violation of tax code – the period shall not run when the offender is absent d. 3. if can not be raised for the first time on appeal. assessment and the beginning of distraint/levy or a 8. the supervision and control of the Department of Finance and its powers and duties shall comprehend the Note: A mere request for reinvestigation without assessment and collection of all national internal revenue any action or the part of the Commissioner does taxes. 4. a. Chief Officials of the Bureau of Internal Note: If the taxpayer informs the Commissioner Revenue. taxpayer under the exclusive and original jurisdiction of the Commissioner. In civil case – If not raised in the lower court. Where before the expiration of the time prescribed for the Nota Bene: assessment of the tax. 39 . and fines connected therewith. hereinafter referred to as the Commissioner and four (4) assistant chiefs to be known as Deputy Commissioners. and charges. Note: A petition for reconsideration of a tax assessment does not suspend the criminal action. the government cannot invoke the principle of prevented from filing an ordinary action to collect the Equitable recumbent by setting. against a tax refused to which the taxpayer is entitled. In the event that the collection of the tax has already decision of the Commissioner. his authorized representative Finance. . deemed waived. and the enforcement of all not interrupt the running of the prescriptive forfeitures. When the taxpayer is out of the Philippines. g. The running of statute of limitations on making an on time. suspended. e. Substantial issues must be raised. period.off the prescribed tax tax. When CTA suspends the collection of tax liability of _______________________________________________________ the taxpayer pursuant to Section 11 of RA 1125 upon SOME IMPORTANT PROVISIONS ON THE TAX REFORM ACT OF proof that its collection may jeopardizes the 1997 government and /or the taxpayer. The defense of prescription must be raised by the taxpayer 5.The power to interpret the provisions of this Code and other tax laws shall be 4. . estate. otherwise it is deemed waived. e. Power of the Commissioner to Interpret Tax served upon any of the following person: Laws and to Decide Tax Cases. subject to review by the Secretary of 5. The question of prescription is not jurisdictional. penalties. including the execution of judgments in all cases decided in former. 4. During which the Commissioner is prohibited from making 9. When the taxpayer cannot be located in the supervisory and police powers conferred to it by this Code address given by him in the return.The Bureau of Internal Revenue shall be under which is granted by commissioner. When the taxpayer requests for reinvestigation Revenue. Member of his household with sufficient When does the defense of prescription may be raised: discretion and no property could be located.

further. the Commissioner shall person liable for tax. and (B) Failure to Submit Required Returns. or any other person. addresses. to make or amend the return from his own knowledge appear before the Commissioner or his duly and from such information as he can obtain authorized representative at a time and place through testimony or otherwise. record. 6. changed. Power of the Commissioner to Obtain Information. statement of declaration filed in any any office or officer of the national and local office authorized to receive the same shall not be governments. insurance companies.After a return has been filed as evaluating tax compliance. testimony. fees or other charges. or in Tax Due. nothing in this Section shall be Commissioner. authority to inquire into bank deposits other than as provided for in Section 6(F) of this Code.The Commissioner may. but not That no notice for audit or investigation of such limited to. or accounts and other accounting records willfully or otherwise files a false or fraudulent containing entries relating to the business of the return or other document. or care of the books of other document at the time prescribed by law. refunds of any object with respect to which a tax is imposed. order inventory- material to such inquiry. or any person having In case a person fails to file a required return or possession. papers. incomplete or erroneous. or from Any return. corporations. costs and volume of production. penalties imposed in relation thereto. Power of the Commissioner to Make Testimony of Persons. mutual fund Statements. and to give purposes. financial statements of corporations. Examine. and taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities. the authorized: Commissioner or his duly authorized (A) To examine any book. sales internal revenue tax. or (E) To cause revenue officers and employees to may place the business operations of any person. taxpayers. however. internal revenue taxes. SEC.The power to decide disputed assessments. liability is subject to audit or investigation. That failure to file a return shall not prevent the Commissioner (B) To obtain on a regular basis from any person from authorizing the examination of any other than the person whose internal revenue tax taxpayer. and all persons owning or or receipts for internal revenue tax purposes. or any officer or obtainable. statement or declaration has in the receipts or sales and gross incomes of meantime been actually served upon the taxpayer. Reports and other Documents. custody. the Commissioner is required under the provisions of this Code. - companies. associations. regional When a report required by law as a basis for the operating headquarters of multinational assessment of any national internal revenue tax companies. surveillance and to Prescribe Presumptive Gross (D) To take such testimony of the person Sales and Receipts. . or in determining the liability of any person for any (A) Examination of Returns and Determination of internal revenue tax. or in collecting any such liability. employee of such person. including the Bangko Sentral ng from the date of such filing.In ascertaining the correctness assessments and Prescribe additional Requirements of any return. management or possession of findings may be used as the basis for assessing 40 . return. or other matters arising under this Code or other laws or portions thereof administered by The provisions of the foregoing paragraphs the Bureau of Internal Revenue is vested in the notwithstanding. and Take SEC. reason to believe that any such report is false. any information such as. . government agencies and withdrawn: Provided. at concerned. or in making a return when none has been for Tax Administration and Enforcement. records. and the names. - made. 5. . joint shall not be forthcoming within the time fixed by ventures of consortia and registered laws or rules and regulations or when there is partnerships. make a canvass from time to time of any revenue natural or juridical. subject to the exclusive appellate construed as granting the Commissioner the jurisdiction of the Court of Tax Appeals. the Commissioner shall (C) To summon the person liable for tax or assess the proper tax on the best evidence required to file a return. and their members. joint accounts. or amended: Provided. under oath. That within three (3) years instrumentalities. as may be relevant or any time during the taxable year. (C) Authority to Conduct Inventory-taking. the same may be Pilipinas and government-owned or -controlled modified. under observation or district or region and inquire after and concerning surveillance if there is reason to believe that such all persons therein who may be liable to pay any person is not declaring his correct income. and to Summon. amount of tax: Provided. The having the care. or other representative may authorize the examination of data which may be relevant or material to such any taxpayer and the assessment of the correct inquiry. which shall be specified in the summons and to produce such prima facie correct and sufficient for all legal books. paper. or other data.

The Commissioner is from receipt of such appeal. or is intending to leave the integrity and moral fitness. the Commissioner shall declare the create national and regional accreditation boards. circumstances or after considering other relevant In case a taxpayer files an application to compromise the payment of information may prescribe a minimum amount of his tax liabilities on his claim that his financial position demonstrates such gross receipts. tax period of such taxpayer terminated at any time the members of which shall serve for three (3) and shall send the taxpayer a notice of such years. and shall designate from among the senior decision. subject to such terminated and the tax for the preceding year or rules and regulations as the Secretary of Finance quarter. national and regional accreditation boards may appeal such denial to the Secretary of Finance. any or such subordinate officials with the rank equivalent to a division chief or higher. one (1) chairman and two payment of the tax for the period so declared (2) members for each board. by the Commissioner. based on their professional competence. For purposes of computing any Additional Procedural or Documentary internal revenue tax. Within one hundred twenty (120) days ineffective unless such proceedings are begun from January 1. the Commissioner. determine the fair market value of real properties located in each (H) Authority of the Commissioner to Prescribe zone or area. 1998. or such portion thereof as may be unpaid. shall promulgate upon the recommendation of and said taxes shall be due and payable the Commissioner. 1405 or under other general or special laws. contrary provision of Republic Act No. reports. (E) Authority of the Commissioner to Prescribe who shall rule on the appeal within sixty (60) days Real Property Values. individuals and Philippines or to remove his property therefrom or general professional partnerships and their to hide or conceal his property. upon the prescribed period shall be deemed as approval consultation with competent appraisers both from of the application for accreditation of the appellant. immediately and shall be subject to all the Individuals and general professional partnerships penalties hereafter prescribed. and a clear inability to pay the tax assessed.The Commissioner may prescribe be. the private and public sectors. business subject to tax. . 1405 and When it is found that a person has failed to issue other general or special laws. such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer. the value of the property shall Requirements. (D) Authority to Terminate Taxable Period.The Commissioner shall accredit and Commissioner that a taxpayer is retiring from register. subject to such limitations and 41 . Authority of the Commissioner to Delegate (2) the fair market value as shown in Power. the Commissioner shall immediately. 204 (A) (2) of this taxable base of other persons engaged in similar Code by reason of financial incapacity businesses under similar situations or to pay his tax liability.Notwithstanding any assessment shall be deemed prima facie correct.The Commissioner may delegate the powers the schedule of values of the Provincial vested in him under the pertinent provisions of this Code to and City Assessors. whichever is the higher of: the manner of compliance with any documentary or procedural requirement in connection with the submission or preparation of financial statements (1) the fair market value as determined accompanying the tax returns. . or SEC. and return required to be filed under the provisions of (2) any taxpayer who has filed an this Code. receipts. . protests. . or when there is reason to believe that the books of accounts or other records do not correctly (1) a decedent to determine his gross reflect the declarations made or to be made in a estate.When (G) Authority to Accredit and Register Tax it shall come to the knowledge of the Agents. 7. income or other liability under Sec. or is performing representatives who prepare and file tax returns. and revenue tax liabilities of such person. sales and taxable base.the taxes for the other months or quarters of the (F) Authority of the Commissioner to inquire into same or different taxable years and such Bank Deposit Accounts. his application shall not be such amount so prescribed shall be prima facie considered unless and until he waives in writing his privilege under correct for purposes of determining the internal Republic Act No. and other papers collection of the tax for the past or current quarter with or who appear before. Failure of the hereby authorized to divide the Philippines into Secretary of Finance to rule on the Appeal within different zones or areas and shall. after taking into application for compromise of his tax account the sales. . the Commissioner receipts and invoices in violation of the is hereby authorized to inquire into the bank requirements of Sections 113 and 237 of this deposits of: Code. together with a request for the immediate officials of the Bureau. the Bureau for or year or to render the same totally or partly taxpayers. unless paid within and their representatives who are denied the time fixed in the demand made by the accreditation by the Commissioner and/or the Commissioner. . any act tending to obstruct the proceedings for the statements.

however. a report on the exercise of his powers under this Section. as proof of destruction. however. restrictions as may be imposed under rules and regulations For other cases.Except as provided in Section 222. That the original copy of the Tax Credit Certificate showing shall be counted from the day the return was filed. upon equivalent to forty percent (40%) of the basic recommendation of the Commissioner: Provided. . the heads of the Legal. That a return filed showing an subject to excise tax are produced or kept. excluding for the filing of the return. 204 (A) and (B) of this Code. Period of Limitation Upon Assessment and Collection. and allowed unless the taxpayer files in writing with the Commissioner a (d) The power to assign or reassign internal claim for credit or refund within two (2) years after the payment of the revenue officers to establishments where articles tax or penalty: Provided. That in a case where a return is allowed.The Commissioner may - The Commissioner shall submit to the Chairmen of the Committee on (A) Compromise the Payment of any Internal Revenue Tax. (P500. the three (3)-year period Provided. overpayment shall be considered as a written claim for credit or refund. refund the value of internal Director as Chairman. (b) The power to issue rulings of first impression or to reverse. assessed tax. and Refund or Credit Taxes. however. and minor criminal violations. those already filed in court. the compromise shall be subject to the rules and regulations by the Secretary of approval of the Evaluation Board which shall be composed of the Finance.000. - The civil remedies for the collection of internal revenue taxes. revoke or modify any existing ruling (B) Abate or Cancel a Tax Liability. 204. That the said report shall be presented to the Oversight Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the The compromise settlement of any tax liability shall be government is not unduly deprived of revenues. For purposes of a creditable balance is surrendered to the appropriate revenue officer this Section. and no proceeding in court without withholding taxes. upon All criminal violations may be compromised except: (a) recommendation of the Commissioner. SEC. as may be determined by rules and regulations to be promulgated by the Secretary of finance. a minimum compromise rate to be promulgated by the Secretary of finance. in his discretion. and SEC. and reasons for the clear inability to pay the assessed tax. stating therein the following facts and information. (1) A reasonable doubt as to the validity of the claim among others: names and addresses of taxpayers whose cases against the taxpayer exists. Remedies for the Collection of Delinquent Taxes. Assessment and purchaser. or have been the subject of abatement or compromise. a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax. That in no case the filing thereof shall be considered as filed on such last day. may be compromised by a regional evaluation board (C) Credit or refund taxes erroneously or illegally received or which shall be composed of the Regional penalties imposed without authority. redeem or change unused stamps Collection Divisions and the Revenue District that have been rendered unfit for use and refund their value upon Officer having jurisdiction over the taxpayer. amount compromised or abated. fees or 42 . when: every six (6) months. Ways and Means of both the Senate and House of Representatives. any tax excessively assessed.000) or less. .000) or where the settlement offered is less than the (a) The power to recommend the promulgation of prescribed minimum rates. or liability: Provided. and. Authority of the Commissioner to Compromise. No credit or refund of taxes or penalties shall be members. Abate made. That assessments (2) The administration and collection costs involved do not issued by the regional offices involving basic justify the collection of the deficiency taxes of Five hundred thousand pesos amount due. subject to the provisions of Section 230 of this Code: filed beyond the period prescribed by law. amount (2) The financial position of the taxpayer demonstrates a involved. a return filed before the last day prescribed by law for for verification and cancellation: Provided. subject to the following minimum amounts: CHAPTER II CIVIL REMEDIES FOR COLLECTION OF TAXES For cases of financial incapacity. 203. 205. (c) The power to compromise or abate. That the following powers of the Commissioner shall not be Where the basic tax involved exceeds One million pesos delegated: (P1. further. shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was SEC. exercise of power: Provided. Any assessment for the collection of such taxes shall be begun after the request for conversion into refund of unutilized tax credits may be expiration of such period: Provided. Commissioner and the four (4) Deputy Commissioners. internal revenue taxes shall be A Tax Credit Certificate validly issued under the provisions of this assessed within three (3) years after the last day prescribed by law Code may be applied against any internal revenue tax. discovered by regional and district officials. or (b) those involving fraud. the Assistant Regional revenue stamps when they are returned in good condition by the Director. for which the taxpayer is directly liable. when: of the Bureau. under (1) The tax or any portion thereof appears to be unjustly or Sec.

charges. . as well as of real property certificate shall operate with the force of a legal execution throughout and improvements thereon. chattels. before simultaneously or after the distraint of personal property belonging to The Bureau of Internal Revenue shall advance the the delinquent. without the express with the levy on the taxpayer's real property. if the amount be: involved is One million pesos (P1. the Commissioner or his duly authorized representative obligate himself to preserve the same intact and unaltered and not to shall. a copy thereof in the premises where the property distrained is subject to rules and regulations promulgated by the Secretary of located. 207. real property may be levied upon. 206. chattels or effects.000). list of such property and. A report on the distraint shall. including stocks and interests in and rights to personal property of such persons . personal property of whatever character. a copy of which. signed by himself. To this end. debts.After the expiration of the time penalty but shall also order payment of the taxes subject of required to pay the delinquent tax or delinquent revenue as the criminal case as finally decided by the Commissioner. authority of the Commissioner. or effects. and any increment thereto resulting from delinquency shall pesos (P1. Levy shall be affected by writing upon said certificate a description of To safeguard the interest of the Government.The officer (A) Distraint of Personal Property. That the Commissioner or his duly authorized representative. within thirty (30) days after execution of the distraint. and the personal property. prescribed in this Section. effects or other personal property the time required. bank accounts. to his remove his property therefrom or to hide or conceal his property or to agent or the manager of the business in respect to which the liability perform any act tending to obstruct the proceedings for collecting the arose. 208.in and other securities. be submitted by the distraining officer to the Revenue District Officer.in any manner whatever. shall seize and distraint any goods. Constructive Distraint of the Property of a Taxpayer.Upon the failure of the person serving the warrant of distraint shall make or cause to be made an owing any delinquent tax or delinquent revenue to pay the same at account of the goods. chattels. SEC. the Commissioner may the property upon which levy is made. The judgment in the criminal case shall not only impose the (B) Levy on Real Property. however. the Philippines. debts. SEC. or charge. credits. a report on any levy In case the taxpayer or the person having the possession and control shall be submitted by the levying officer to the Commissioner or his of the property sought to be placed under constructive distraint duly authorized representative: Provided. . or is intending to leave the Philippines or to the delinquent taxpayer. shall be left either with representative. any internal revenue officer designated amounts needed to defray costs of collection by means of by the Commissioner or his duly authorized representative shall civil or criminal action. bank accounts and sufficient quantity to satisfy the tax. in the presence of two (2) witnessed.000) or less. is retiring from any Deeds for the province or city where the property is located and upon business subject to tax. or if there be none. tax due or which may be due from him. shall have the placed under constructive distraint. together with any interest in and rights to personal property. including the preservation or prepare a duly authenticated certificate showing the name of the transportation of personal property distrained and the taxpayer and the amounts of the tax and penalty due from him. Within ten (10) days after receipt of the warrant. and other including stocks and other securities. and to the Revenue Regional Director: Provided. have the power to lift remedies of distraint and levy shall not be availed of where such order of distraint: Provided. written place under constructive distraint the property of a delinquent notice of the levy shall be mailed to or served upon the Register of taxpayer or any taxpayer who. in his opinion. At the same time. the revenue consolidated report by the Revenue Regional Director may be officer effecting the constructive distraint shall proceed to prepare a required by the Commissioner as often as necessary: Provided.000. chattels. or 43 .000. That Either of these remedies or both simultaneously may be the Commissioner or his duly authorized representative shall. proceed dispose of the same . (a) By distraint of goods. . further. collection of such taxes: Provided. or if he be absent from the Philippines. (b) By civil or criminal action. after which the said property shall be deemed to have been Finance. That the upon recommendation of the Commissioner. upon recommendation of the Commissioner. authority to lift warrants of levy issued in accordance with the provisions hereof. That a refuses or fails to sign the receipt herein referred to. the Commissioner or his duly authorized distrained. subject pursued in the discretion of the authorities charged with the to rules and regulations promulgated by the Secretary of Finance. - SEC. and distraint and the cost of the subsequent sale. however. or the Revenue District Officer. Summary Remedies. to the occupant of the property in question. if the amount involved is in excess of One million the owner or person from whose possession such goods. Commissioner as often as necessary. . In case the warrant of levy on real property is not issued before or The constructive distraint of personal property shall be affected by simultaneously with the warrant of distraint on personal property. within ten (10) days from receipt of the warrant. leave further. and requiring the taxpayer or any person having possession or control of the personal property of the taxpayer is not sufficient to satisfy his tax such property to sign a receipt covering the property distrained and delinquency. credits. Said advertisement and sale thereof. and by levy upon increment thereto incident to delinquency. Procedure for Distraint and Garnishment. That a consolidated report the amount of tax involve is not more than One hundred by the Revenue Regional Director may be required by the pesos (P100). and the expenses of the real property and interest in rights to real property.

the name of the public places in the municipality or city where the distraint is made. through duly licensed commodity or stock exchanges. the said revenue officer conducting the proceedings shall determine and as the notice of sale shall sell the goods. or with his agent. or at the dwelling or charges are paid to the officer conducting the sale. deputy. upon approval by the Revenue including expenses. subject to the rules and regulations prescribed by the Secretary of Finance. out of his collection. penalties and costs due thereon. Release of Distrained Property Upon Payment Prior to reports. other than the officer referred to in Section 208 of this once a week for three (3) weeks in a newspaper of general Code shall. Upon receipt of the levy. warrant of distraint shall be sufficient authority to the person owning the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of Property so purchased may be resold by the Commissioner or his such debts or credits. and no charge shall be imposed for the transportation in case of personal property. or with the approval of the Within five (5) days after the sale. both in cases of personal and real property including improvements found on the latter.Within twenty (20) days after treasurer or other responsible officer of the bank. and a short description of specifying. the bank shall tun over to the Commissioner advertise the property or a usable portion thereof as may be so much of the bank accounts as may be sufficient to satisfy the claim of the Government. to which list shall be added a statement of the sum demanded and note of the time and place of sale. place for the posting of such notice shall be at the Office of the Mayor penalties and interest. the officer making the same shall make a Stocks and other securities shall be distrained by serving a copy of report of his proceedings in writing to the Commissioner and shall the warrant of distraint upon the taxpayer and upon the president. Purchase by Government at Sale Upon Distraint.by publication representative. The the property to be sold. according to rules and regulations prescribed by the circulation in the municipality or city where the property is located. shall specify. shall then make out copy thereof furnished the corporation. or other personal property. time of sale shall not be less than twenty (20) days after notice. - When the amount bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market Debts and credits shall be distrained by leaving with the person value of the articles offered for sale. 213. 211. the excess shall be so.The Revenue District Officer or his duly authorized municipal building or city hall and in public and conspicuous place in the barrio or district in which the real estate lies and . if required to do of the sale exceeds the claim and cost of sale. however. showing which issued the stocks or other securities. treasurer or other responsible officer of the corporation. The amount of taxes. . The Revenue Collection Officer. SEC. levying officer of the proceedings shall be entered upon the records of the Revenue Collection Officer. and discretion. transfer the stocks or other penalties and interest: Provided. Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president. The Revenue Collection Officer. Sale. manager. the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue. the sale shall proceed of the city or municipality in which the property is distrained. Report of Sale to Bureau of Internal Revenue. . SEC. including stocks and other securities so distrained. Upon receipt of the copy the proceedings of the sale. a copy of the warrant of distraint. company or association and deliver to the purchaser a certificate from his records. In his monthly collection SEC. the Revenue District officer and In the case of Stocks and other securities. necessary to satisfy the claim and cost of sale. and such advertisement shall cover a period of a least thirty (30) days. The expenses chargeable upon each seizure and sale shall sufficient to defray the costs of collection by means of the summary embrace only the actual expenses of seizure and preservation of the remedies provided for in this Code. at public auction. the corresponding entry in its books. or effects. company or association shall make name of the purchaser and setting out the exact amount of all taxes. shall be returned to the owner of the property District Officer may. the Commissioner or his deputy owing the debts or having in his possession or under his control such may purchase the same in behalf of the national Government for the credits. the corporation.Within two (2) days after the sale. manager. Advertisement and Sale.the preservation or property pending . The advertisement shall contain a statement of the amount of taxes forthwith cause a notification to be exhibited in not less than two (2) and penalties so due and the time and place of sale.effects or other personal property were taken. If he does not do so. the corresponding certificates of stock or other securities. to the highest bidder for cash. including . the goods or place of business of such person and with someone of suitable age effects distrained shall be restored to the owner. as the officer At the time and place fixed in such notice. and subsequent sale. a return by the distraining or Commissioner. such advances shall be reflected and supported by receipts. turned over to the owner of the property. 212.If at any time prior to the consummation of the sale all proper 44 . 209. describing the property sold stating the of the bill of sale. chattels. taxpayer against whom taxes are levied. That in case the proceeds securities sold in the name of the buyer. in shall execute a bill of sale which he shall deliver to the buyer. which issued the said stocks or securities. advance an amount sold. upon recommendation of the Commissioner. .the sale. the time and place of sale and the articles distrained. and shall be held either at the main entrance of the municipal building or city hall. 210. and a consultation with the Revenue district Officer. the officer making the sale the Revenue Regional Director. . the officer conducting the proceedings shall proceed to warrant of garnishment. himself preserve a copy of such report as an official record. Sale of Property Distrained and Disposition of Proceeds. and the advertisement services of the local internal revenue officer or his deputy. One the taxpayer may discontinue all proceedings by paying the taxes. SEC. or on the premises to be sold. It shall be effectuated by posting a notice at the main entrance of the SEC. Any residue over and above what is required to pay the entire claim. company or association. and issue. Secretary of Finance. At any time before the day fixed for the sale.

but if the property be not thus redeemed. In either (c) Any internal revenue tax which has been assessed case. joint-account (cuentas en participacion). partnership. authorize the examination and investigation or inquiry into association or insurance company liable to pay an internal revenue 45 . the has become final and executory. (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return. fee or charge agreements made before the expiration of the period imposed by this Code. upon registration with his SEC. 216. shall be conducted by legal officers of the Bureau of Internal Revenue but no civil or criminal action for the recovery of taxes or the SEC. . That in a fraud assessment which the costs of sale. the fact of fraud shall be forfeiture shall become absolute. proceeding in court within five (5) years following the assessment of the tax. penalties.No court shall have the authority to grant an injunction to restrain so agreed upon may be extended by subsequent written the collection of any national internal revenue tax. including all expenses. under this Code. Further Distraint or Levy. Injunction not Available to Restrain Collection of Tax. which has been assessed personal property and levy on realty may be repeated if necessary within the period agreed upon as provided in paragraph (b) until the full amount due. Secretary of Finance.Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this The owner shall not. and the Revenue situated or located.Within one (1) year from tax. agreed upon. dispose of the same at private sale. Resale of Real Estate Taken for Taxes. as the particular situation thereafter. Form and Mode of Proceeding in Actions Arising thereafter shall be free form the lien of such taxes and penalties. . the tax may be assessed within the period adjustment of any claim therefore. SEC.SEC. shall shall be a lien in favor of the Government of the Philippines from the have the right of paying to the Revenue District Officer the amount of time when the assessment was made by the Commissioner until the public taxes.The remedy for enforcement of statutory penalties of satisfaction of the claim in question and within two (2) days all sorts shall be by criminal or civil action. The period so agreed upon may be extended upon the giving of not less than twenty (20) days notice. the delinquent taxpayer. 215. however. subject to the approval of the Commissioner. 219. neglects or refuses to pay the same after demand. both the Commissioner Government of the Philippines in payment or satisfaction of taxes. That nothing in the immediately SEC. the proceeds of the sale shall be deposited with the National within the period of limitation as prescribed in paragraph (a) Treasury. 214. before the expiration of the five (5) -year period. together with interest thereon and or omission: Provided. and said Commissioner may. and interest thereon from the date of paid. or assessed. Redemption of Property Sold. provided or if the highest bid is for an amount insufficient to pay the taxes. and an accounting of the same shall rendered to the hereof may be collected by distraint or levy or by a Chairman of the Commission on Audit. fraud amount of the taxes and penalties. is collected. the amount the date of sale. SEC. 217. Forfeiture to Government for Want of Bidder. penalties and costs. 222.The (b) If before the expiration of the time prescribed in Section Commissioner shall have charge of any real estate obtained by the 203 for the assessment of the tax. District Officer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed. . or any one for him. and the taxpayer have agreed in writing to its assessment penalties or costs arising under this Code or in compromise or after such time. That this lien shall not be valid against any the date of purchase to the date of redemption. 221. with interests. . previously agreed upon. 218. may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing SEC. judicially taken cognizance of in the civil or criminal action for the collection thereof. - property forfeited to the Government without the necessity of an order from a competent court. Nature and Extent of Tax Lien.The remedy by distraint of (d) Any internal revenue tax. Exceptions as to Period of Limitation of Assessment office of any such declaration of forfeiture. shall make a return of his proceedings and the forfeiture may require. (e) Provided. the tax may be Within one (1) year from the date of such forfeiture. or a proceeding in court for the collection of any one for him may redeem said property by paying to the such tax may be filed without assessment. .If any person. penalties. . Remedy for Enforcement of Statutory Penal the sale shall declare the property forfeited to the Government in Provisions. hereinabove. however. The period . penalty or forfeiture under this Code shall be there is no bidder for real property exposed for sale as herein above filed in court without the approval of the Commissioner. preceding and paragraph (a) hereof shall be construed to corporation. and costs that may accrue in addition delinquency to the date of sale. and such payment mortgagee purchaser or judgment creditor until notice of such lien shall entitle the person paying to the delivery of the certificate issued shall be filed by the Commissioner in the office of the Register of to the purchaser and a certificate from the said Revenue District Deeds of the province or city where the property of the taxpayer is Officer that he has thus redeemed the property. It shall be the duty of the Register of Deeds concerned. together with interest on said thereto upon all property and rights to property belonging to the purchase price at the rate of fifteen percent (15%) per annum from taxpayer: Provided. and said property SEC. the Internal Revenue Officer conducting SEC. sell and by subsequent written agreement made before the dispose of the same of public auction or with prior approval of the expiration of the period previously agreed upon. .In case enforcement of any fine. which shall be spread upon the records of his office. to transfer the title of the and Collection of Taxes. the taxpayer. 220. be deprived of the possession of the Code or other law enforced by the Bureau of Internal Revenue shall said property and shall be entitled to the rents and other income be brought in the name of the Government of the Philippines and thereof until the expiration of the time allowed for its redemption. at any time Commissioner or the latter's Revenue Collection Officer the full within ten (10) years after the discovery of the falsity.

. . and all apparatus used I or about the illicit SEC. his authorized representative. other manufactured respect of which the violation occurs. which have been Code or rules and regulations on the date manufactured or removed in violation of this Code. the running of the Statute of Limitations will CHAPTER I not be suspended. the employee practicable. upon forfeiture. any judgment. 248. and no property could be located. That a substantial 46 . this Chapter shall apply to all taxes.Sales of agencies. as the case may require. time prescribed for its payment in the notice of assessment. SEC. (1) Failure to file any return and pay the tax due thereon as required under the provisions of this All other articles subject to excise tax. any tax return filed in accordance with the provisions of any through the Solicitor General. in addition to the tax required order of the Commissioner. The Amount so added to the tax condemnation and sale in a legal action or proceeding. No such judgment.The forfeiture of chattels and removable fixtures of any sort shall be enforced by (a) The additions to the tax or deficiency tax prescribed in the seizure and sale. 224. or Forfeited property shall not be destroyed until at least twenty (20) (3) Failure to pay the deficiency tax within the days after seizure. and when the taxpayer is out of the Philippines. on or as specially provided. fees and charges The forfeiture of real property shall be enforced by a judgment of imposed in this Code.When an action is brought against any penalty to be imposed shall be fifty percent (50%) of the tax Internal Revenue officer to recover damages by reason of any act or of the deficiency tax. in the same manner criminal. in the following cases: to the enforcement of the law. damages. as used in this Chapter. . as well as dies for prescribed. the Internal Revenue Officer. or costs shall be paid or reimbursed in shall be suspended for the period during which the Commissioner is behalf of a person who has acted negligently or in bad faith.all judgments and monies tax shown on any return required to be filed recovered and received for taxes. a penalty equivalent to twenty-five percent consumption or use would be injurious to public health or prejudicial (25%) of the amount due. (b) If the withholding agent is the Government or any of its SEC. Satisfaction of Judgment Recovered Against any or in case a false or fraudulent return is willfully made. be destroyed by (A) There shall be imposed. taxes. products of tobacco. cigars. liquors. the falsity or fraud: Provided. be sold or destroyed in the discretion of the Commissioner. costs. when the sale of the same for to be paid. any payment has been done in the performance of official duty. in the same manner and under the same conditions as thereof responsible for the withholding and remittance of the public notice and the time and manner of sale as are prescribed the tax shall be personally liable for the additions to the tax for sales of personal property distrained for the non-payment of prescribed herein. or a forfeited chattels and removable fixtures shall be effected. civil or shall be collected at the same time. 226. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. damages or costs tax amnesty law or decree. . Disposition of funds Recovered in Legal Proceedings (4) Failure to pay the full or part of the amount of or Obtained from Forfeitures. or labels may.The upon approval of the Secretary of Finance. or SEC. When Property to be Sold or Destroyed. of the specific forfeited property. and as part of the tax. or a member of his household with sufficient discretion. 225. (c) the term "person". if the taxpayer informs the Commissioner of any change in address. or with prohibited from making the assessment or beginning distraint or levy willful oppression. or if the same be paid by running of the Statute of Limitations provided in Sections 203 and the person used shall be repaid or reimbursed to him. SEC. 223. or the printing or making of internal revenue stamps and labels which (2) Unless otherwise authorized by the are in imitation of or purport to be lawful stamps. or the full amount of tax due for deputies as the taxes themselves are required to be paid. Remedy for Enforcement of Forfeitures. fines and under the provisions of this Code or rules and penalties shall be paid to the Commissioner or his authorized regulations. . shall be accounted for and dealt with the same before the date prescribed for its payment. and the Commissioner is made on the basis of such return before the discovery of notified of such action in time to make defense against the same. way. revenue officer other than those with whom the return is required to be filed. when the taxpayer cannot be located in the address TITLE X given by him in the return filed upon which a tax is being assessed or STATUTORY OFFENSES AND PENALTIES collected: Provided. filing a return with an internal forfeiture. employee or member is under a duty to perform the act in Distilled spirits. cigarettes. in case. 247. so far as government-owned or controlled corporation. in respect of any deficiency. 227. (B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and regulations. - production of such articles may. Suspension of Running of Statute of Limitations. forfeitures. - SEC. that. or a proceeding in court and for sixty (60) days thereafter. SEC. political subdivisions or instrumentalities. Civil Penalties. and except which no return is required to be filed. upon Commissioner. includes an officer or employee of a corporation who as such officer. 222 on the making of assessment and the beginning of distraint or levy a proceeding in court for collection. General Provisions. or destruction. when the warrant of distraint or levy is duly served ADDITIONS TO TAX upon the taxpayer. recovered in such action shall be satisfied by the Commissioner.

249. or a Tax. there shall. from the date prescribed for payment until the amount is fully paid.000) for each failure: Provided. however.” (C) Delinquency Interest. as the term prosecution and attainment. . impair the by the Commissioner on the date prescribed therefor. or not receipts or income in an amount exceeding thirty percent accounted for and remitted. or any part of such amount or installment on or before the share in the running of the government.Any deficiency in the tax due. specifically the right to disseminate religious shown that such failure is due to reasonable cause and not to willful information. despite the natural the tax is qualified and elects to pay the tax on installment under the reluctance to surrender part of one's hard earned income to the provisions of this Code. or therefore redound greatly to the general welfare. . the (2) The amount of the tax due for which no return is contention of plaintiff that the Act was promulgated not for public required. That the (Lladoc vs. . as mentioned herein.000). One thousand pesos (1. a penalty equal to the total amount of the tax not withheld. neglect. in addition to other constitute prima facie evidence of a false or fraudulent penalties provided for under this Chapter. and remit any tax substantial overstatement of deductions. interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid. unless it is free exercise of religion. 252. As between taxation and religion. there shall be assessed and collected on (CIR vs Algue 158 SCRA 9) the unpaid amount. or aids or abets in any manner to be promulgated by the Secretary of Finance. there shall be assessed and and material values. date prescribed for its payment. every person who is able to must contribute his hereof. The government for its part. appurtenant thereto and all lands. buildings and SEC. (30%) of that declared per return. or such higher rate as may be prescribed by rules and CASES and DOCTRINES regulations. amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on (A) In General. . be liable upon conviction to return: Provided. Thus. shall evade any such tax or the payment thereof.If any person required to pay motive power to activate and operate it.Any person required to withhold. These taxes are property taxes as contra-distinguished from excise taxes. but fails to pay the tax or any installment taxing authorities. 250. City of Manila 101 PHIL 386) SEC. interest at the rate of twenty percent (20%) per annum. or the Commissioner pursuant to the rules and regulations to account for and remit such tax. which It is said that taxes are what we pay for civilized society. as determined by imposed by this Code or who willfully fails to withhold such tax. or purpose cannot be upheld. statement or list. underdeclaration of taxable sales. Hence. (Lutz vs Araneta 98 Phil 148) If objective and methods are alike constitutionally valid. particular class for taxation or exemption infringe no Constitutional limitation. Commissioner of Internal Revenue 14 SCRA 292) aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos The exemption under Sec. in addition to the overstatement of deductions. (American Bible Society vs. receipts or income. churches. VI of the Constitution only (P25. This symbiotic relationship is the rationale of collected interest at the rate hereinabove prescribed on the tax or taxation and should dispel the erroneous notion that it is an arbitrary deficiency tax or any part thereof unpaid from the date of notice and method of exaction by those in the seat of power. That failure to report sales. the government would be paralyzed for lack of the (D) Interest on Extended Payment. interest shall form part of the tax.There shall be assessed and collected on any their return unpaid amount of tax. keep or supply the same. It is inherent in the power to tax that a State Subsection (A) hereof. be paid by the person failing to file. Failure of a Withholding Agent to refund Excess deductions. shall render the taxpayer liable for substantial Withholding Tax. be liable to a penalty to the total SEC. or It was contended that said ordinances imposing license fee on the keep any record. 251. Failure to File Certain Information Returns. further. . . covers taxes assessed on cemeteries.In case of failure to pay: The sugar industry’s promotion. Taxation may be made the implement of is defined in this Code. demand until it is paid. account for. upon notice and demand by the Commissioner. or supply any information required by this Code or distribution and sale of bibles and other religious literature. protection and advancement (1) The amount of the tax due on any return to be filed. Without taxes. no reason is seen why the state may not levy taxes to raise funds for their (B) Deficiency Interest. the latter prevails. penalties provided in this Title. and a claim of deductions in an amount exceeding (30%) of actual SEC. . Failure of a Withholding Agent to Collect and Remit improvements used exclusively for religious purposes. receipts or income or for refuses to refund excess withholding tax shall.Any employer/withholding agent who fails or underdeclaration of sales. In the 47 . (3) A deficiency tax. Interest. or where the Commissioner has is expected to respond in the form of tangible and intangible benefits authorized an extension of time within which to pay a tax or a intended to improve the lives of the people and enhance their moral deficiency tax or any part thereof. 22(3) Art. shall be subject to the interest prescribed in the state's police power. and parsonages or convents.In the case of each failure to file an information return. shall. which interest shall be assessed and be free to select the subjects of taxation and it has been repeatedly collected from the date prescribed for its payment until the full held that “irregularities which result from a singling out of one payment thereof. or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner. .

The revenue officer’s affidavit merely contained a computation of respondent’s tax liability. 1995. An assessment must be sent to and received by the (San Miguel Brewery. what’s being assessed was a donee’s gift tax not on the On March 23. the criminal complaint for tax evasion. June 4. The gift tax was an excise tax upon the use subpoena from the DOJ in connection with the criminal complaint.236. revenue measure.015. grave abuse of discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the (Abra Valley College vs. It was addressed to the Secretary of Constitution. Memo Circ. and not to constitutes a regulatory measure in the exercise of police power. No. upon the exercise of the privilege of receiving a letter dated. Whether or not the criminal complaint for tax evasion can be construed as an assessment. 2. Whether or not an assessment is necessary before criminal (Bishop of Nueva Segovia vs. On August 3. and must demand payment of the taxes described therein Cement Co. On July respectively. City of Cebu/Cebu Portland taxpayer. the annual business tax is a license tax to engage in of tax due and a demand to private respondents for the payment the business of wholesale liquor in Cebu City. 1. An assessment is not necessary before criminal charges can be filed. private respondents received a properties themselves. 48 . CIR V PASCOR REALTY & DEV’T CORP et. in such tax evasion cases. 37-93 which On March 1. Fortune questioned reconsideration on reinvestigation disputing the tax assessment and the validity of said reclassification as being violative of the right to tax liability.case at bar. They joint affidavit was meant to support same person is taxed by the same jurisdiction for the same purpose. It did not state a This is because double taxation is not prohibited by the demand or period for payment. al. The Facts: examination resulted in recommendation for the issuance of an A task force was created on June 1. 22(3) Art. (Fortune) as foreign brands DOJ. not to issue an assessment. Commissioner filed a criminal complaint reclassified certain cigarette brands manufactured by private for tax evasion against PRDC. elevated to the CTA on a petition for review. VI of the Constitution only inasmuch as no formal assessment was issued against private covers property taxes assessed on cemeteries. 1995. In made of the properties. 1996 books of accounts and other accounting records of Pascor Realty and Development Corp. Tax Assessment assessment. 1995. the Commissioner denied private the properties. to property actually indispensable therefor but extends to facilities.498. Neither the Tax Code nor the the lot actually occupied by the church but also the adjacent ground revenue regulations governing the protest assessments provide a destined to meet the ordinary incidental uses of man. Inc. or to file a criminal case against the taxpayer. The Commissioner’s motion to dismiss on the ground of the CTA’s lack of jurisdiction The exemption under Sec. due process and equal protection of laws. 119322. appurtenant thereto and all lands. the CIR issued Rev. there is double taxation only when the Justice not to the taxpayer. which refers to lots used as The filing of the criminal complaint with the DOJ cannot be home of the priest who preside over the church must include not only construed as a formal assessment. liabilities of manufacturers engaged in tax evasion schemes. 1973) within a specific period. churches. The CIR had. Such license tax thereof. buildings an answer but did not instead filed a petition with the CA alleging and improvements used exclusively for religious purposes. specific definition or form of an assessment. 1993 to investigate tax assessment of P7. Subject Matter: Criminal Action (GR No. which are incidental to and reasonably necessary to the Issues: accomplishment of said purposes 1. 1987 and 1988. Private respondents filed immediately an urgent request for subject to a higher tax rate. 1999) Facts: CIR V CA The CIR authorized certain BIR officers to examine the G. Aquino 162 SCRA 106) endorsement of said report as assessment which may be appealed to he CTA. its president and treasurer before the respondent Fortune Tobacco Corp. shows that commissioner intended to file a whereas that which is imposed by the ordinance is a typical tax or criminal complaint for tax evasion. 1993. Cebu February 20. discretion on whether to issue an Subject Matter: Criminal Action. on September 8. vs. and respondent was denied by CTA and ordered the Commissioner to file parsonages or convents. 128315. The CTA. May 17. 1993.434. A criminal charge need not only be supported by a prima facie showing of failure to file a required return. (PRDC) for 1986. Therefore. private respondent. vs.65 and P3. the petitioner as substituted by the ground that no formal assessment has been issued which the latter Head of the Diocese. Furthermore. This kind of tax is not within the exempting provision respondent’s request for reconsideration (reinvestigation on the of the constitution. 352 Held: Exemption from payment of land tax.R.35 for 1986 and 1987. Province of Ilocos Norte 51 PHIL charges for tax evasion may be instituted. The CA sustained the CTA decision and dismissed the The phrase “used exclusively for educational purposes” is not limited petition. June 29. Naga. is liable to pay the said gift tax. No. it was not meant to be a notice In the first case. or to do both. The fact that the complaint was sent to the DOJ.

On September 12. much less evidence. private respondents filed a petition for declaration of income constituted a deviation from the truth. In the meantime. Fortune was On February 20. there is the presumption that BIR personnel performed their duties in the regular course in ensuring that the correct taxes were paid by Fortune. ruling that the tax liability of private respondents first be settled before any complaint for fraudulent tax evasion can be initiated. But it filed a Held: verified motion to dismiss or alternatively. 1952. On November 28. the filed thereafter were denied. reinvestigation. The certiorari and prohibition with prayer for preliminary injunction praying court stated that the ordinary prescriptive period of 5 years (now 3 the CIR’s complaint and prosecutor’s orders be dismissed/set aside years) would apply under normal circumstances but whenever the or alternatively. Held: Fraud cannot be presumed. AZNAR CASE (August 23. the Commissioner filed a for 1946 by 227%. 1997 NIRC. 490% 1951. tax evasion pending before the DOJ. 1958. Before the tax liabilities of Fortune are finally determined. corporate officers and 9 other corporations and their respective corporate officers for alleged fraudulent tax evasion for non-payment Issues: of the correct income. If there was fraud on willful attempt to evade payment of ad valorem taxes by private respondent through the manipulation of the registered wholesale price of the cigarettes. All motions prescriptive period and ruled that prescription had not set in. The CTA found that AZNAR made substantial under- private respondent moved for reconsideration of said assessment. ad valorem and VAT for 1992 with under distraint and levy. CTA. AZNAR appealed to the payment due within 30 days from receipt. court opined that AZNAR’s returns were false because the under- January 4. the Commissioner ordered the investigation of the case on the basis of the net worth method. 1993. On April 1. fraud or omission even seems to be injunction to enjoin the preliminary investigation on the complaint for inadequate and should be the one enforced. declarations of his income as follows: he under-declared his income Meanwhile on September 7. a motion to suspend but On the issue of prescription the count applied the 10-year was denied and thus treated as their counter-affidavit.66 which was later reduced to P381. 1993. its 946% 1950. 254 and 256. 564% for 1947. The complaint Whether or not the right of the Commissioner to assess was referred to the DOJ Task Force on revenue cases which found AZNAR’s deficiency income taxes for 1946. 95% for 1948. 1993. But there is no allegation. of BIR personnel’s malfeasance at the very least. 1955. ad valorem and VAT for 1992.096. it must have been with the connivance of cooperation of certain BIR officials and employees who supervised and monitored Fortune’s production activities to see to it that the correct taxes were paid. 1993 directing private respondent to submit their counter-affidavits.032. the BIR notified AZNAR of a tax delinquency of 49 . His income tax returns from 1945 to 1951 were examined by the BIR. on August 3.1993 resolved that said reclassification was of doubtful legality and P723. 1947 and 1948 had sufficient basis to further investigate the charges against Fortune. the fact that a tax is due must first be proved. 1993 assessment of fraudulent returns intended to evade payment of taxes or failure to taxes due. A subpoena was issued on September 8. the returns.07 upon enjoined its enforcement. Doubting the truth of the income that he had reported. AZNAR’s properties were placed assessed deficiency income. that the preliminary investigation be suspended government is placed at a disadvantage as to prevent its lawful agent pending determination by CIR of Fortune’s motion for from making a proper assessment of tax liabilities due to false or reconsideration/reinvestigation of the August 13. prescribed at the time the assessment was made. 486% for 1949. the period of 10 years provided for in the law from the The trial court granted the petition for a writ of preliminary discovery of the falsity. 1953. complaint with the DOJ against private respondent Fortune. 1974) Facts: Matias Aznar died on May 15. Substantial under-declarations of income were discovered. Issue: Whether the basis of private respondent’s tax liability first be settled before any complaint for fraudulent tax evasion can be initiated. 1994. it cannot be correctly asserted that private respondents have willfully attempted to evade or defeat any tax under Secs.

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.