NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN
surety bond for not more than double the amount with the Court. Exclusive Appellate Jurisdiction to Review by Appeal

COURT OF TAX APPEALS RA 9282 took effect on April 23, 2004. The role of the judiciary is to be sympathetic or be vigilant court which would check injustice or abuses of the legislative and administrative agents of the state in their exercise of power of taxation. The role of the courts is limited to the application and interpretation of tax laws. Rationale for the Creation of CTA 1. To prevent delay in the disposition of tax cases by the then CFI in view of the backlog of civil, criminal and cadastral cases accumulating in the dockets of such courts. 2. To have a body with specialized knowledge which ordinary judges are not likely to possess, thus providing for an adequate remedy for a speedy determination of tax cases. Nature of the CTA It is a court of special jurisdiction and can act only in matter where it has exclusive original jurisdiction as well as in aid of its appellate jurisdiction. CTA proceedings need not be governed strictly by technical rules of evidence. GR - SEC. 218 NIRC. Injunction not Available to Restrain Collection of Tax. No court shall have the authority to grant an

1.

2.

3.

4.

injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.
Exception Sec. 9 RA 9282. No appeal taken to the CTA from the decision of the CIR or the COC or the RTC, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a

5.

6.

7.

Decisions of the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the BIR. Division Inaction by the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the NIRC or other laws administered by the BIR where the NIRC provides a specific period of action, in which case the inaction shall be deemed a denial. Division Decisions, orders or resolutions of the RTC’s in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; If Original DIVISION; If Appellate EN BANC Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the BOC; Division Decisions of the CBAA in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals; En Banc Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the Government under Sec. 2315 of the TCC Division Decisions of the Secretary of DTI, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Sec 301 and 302, respectively, of the TCC, and safeguard measures under RA 8800, where either party may appeal the decision to impose or not to impose said duties. Division
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or refunds. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected [PHIL. JOURNALISTS, INC., v. CIR 447 SCRA 214]

Reference – Reviewer on Taxation Vol. 1 & 2 by Prof. A. Domondon, Reviewer on Taxation by Victorino Mamalateo, Tax Law and Jurisprudence by Justice Jose Vitug and Justice Ernesto Acosta, And Revenue Regulations 2-2003. “Unauthorized users shall be punished by the law of karma and they will not pass the examination they shall take or be unsuccessful and unhappy in life”… page ii

Jurisdiction over cases involving Criminal Offenses

1.

Exclusive original jurisdiction over all criminal offenses arising from violations of the NIRC or
1

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

TCC and other laws administered by the Bureau of Internal Revenue or the BOC: Provided, however, That offenses or felonies mentioned in this paragraph where the principal amount o taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos or where there is no specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil action separately from the criminal action will be recognized.
Exclusive appellate jurisdiction in criminal offenses:

a.

b.

Over appeals from the judgments, resolutions or orders of the RTC in tax collection cases originally decided by them, in their respective territorial jurisdiction. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the Exercise of their appellate jurisdiction over tax collection cases originally decided by the MeTC, MTC and MCTC, in their respective jurisdiction.

1.

2.

Over appeals from the judgments, resolutions or orders of the RTC’s in tax cases originally decided by them, in their respected territorial jurisdiction. Over petitions for review of the judgments, resolutions or orders of the RTC’s in the exercise of their appellate jurisdiction over tax cases originally decided by the MeTC, MTC and MCTC in their respective jurisdiction.
The civil case for the collection of unpaid customs duties and taxes cannot be simultaneously instituted and determined in the same proceedings as the criminal cases before the Sandiganbayan, as it cannot be made the civil aspect of the criminal cases filed before it. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged [PROTON PILIPINAS v. REPUBLIC 504 SCRA 528] The determination of the validity or invalidity of the Tax Credit Certificates cannot be regarded as a prejudicial issue that must first be resolved with finality in the Criminal Cases filed before the Sandiganbayan [supra]

Instances where the CTA would have jurisdiction even if there is no decision yet by the CIR 1. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has period of 30 days from the expiration of the 180 day period within which to appeal to the CTA [Last par. Sec. 228] 2. Where the Commissioner has not acted on an application for refund or credit and the 2 year period from the time of payment is about to expire , the taxpayer has to file his appeal with the CTA before the expiration of the 2 years from the time the tax was paid. Instances where the CTA would have jurisdiction even if there is no decision of the Commissioner of Customs 1. Decision of the DTI Sec. or the Sec. of Agriculture in anti-dumping and countervailing duty cases are appeallable to the CTA within 30 days from receipt of such decision 2. In case of automatic review by the Sec. of Finance in seizure or forfeiture cases where the value of the importation exceeds P5 million or where the decision of the Collector of Customs which fully or partially releases the shipment seized is affirmed by the Comm. of Customs 3. In cases of automatic review by the Sec. of Finance of a decision of a Collector of Customs acting favorably upon a customs protest. The legal remedies under the NIRC available to the aggrieved taxpayer may be classified into the tax remedies with respect to 1. Assessment 2. Collection and 3. refund of internal revenue taxes The remedies may also be classified into the administrative or the judicial remedies. The legal remedy under the NIRC available to an aggrieved taxpayer at administrative level with respect to refund or recovery of tax erroneously or illegally collected is to file a claim for refund or credit with the CIR [1st Par. Sec. 229] The legal remedy under the NIRC available to an aggrieved taxpayer at judicial level with respect to refund or recovery of tax erroneously or illegally collected is the filing of a suit or proceeding with the CTA before the expiration of the 2 years from the date
2

Jurisdiction over Tax Collection Cases

1.

2.

Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos shall be tried by the proper MTC, MeTC and RTC. Exclusive appellate jurisdiction in tax collection cases:

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN
OUTLINE of TAX REMEDIES of a TAXPAYER & the Government relative to Assessment of Internal Revenue Taxes DISPUTED ASSESSMENT 1. 2. THE TAXPAYER FILES HIS TAX RETURN A LETTER OF AUTHORITY IS ISSUED BY THE BIR EXAMINER TO AUDIT OR EXAMINE THE TAX RETURN AND DETERMINE WHETHER THE FULL AND COMPLETES TAXES HAS BEEN PAID The Letter of Authority [LA] should indicate accurately the year or years to be examined and the name of the examiner authorized to examine. The LA must be served to the taxpayer within 30 days from its date of issue, otherwise it becomes null and void. An LA issued by an RDO which does not have jurisdiction over the taxpayer has no force and effect. Once an LA has been issued a tax return cannot be amended. 3. IF THE EXAMINER IS SATISFIED THAT THE TAX RETURN IS TRULY REFLECTIVE OF THE TAXABLE TRANSACTION AND ALL TAXES HAVE BEEN PAID THE PROCESS ENDS. HOWEVER IF THE EXAMINER IS NOT SATISFIED THAT THE TAX RETURN IS TRULY REFLECTIVE OF THE TAXABLE TRANSACTION AND THAT THE TAXES HAVE NOT BEEN FULLY PAID, A NOTICE OF INFORMAL CONFERENCE IS ISSUED INVITING THE TAXPAYER TO EXPLAIN WHY HE SHOULD NOT BE SUBJECT TO ADDITIONAL TAXES IF THE TAXPAYER ATTENDS THE INFORMAL CONFERENCE AND THE EXAMINER IS SATISFIED WITH THE EXPLANATION OF THE TAXPAYER, THE PROCESS IS AGAIN ENDED. If the taxpayer fails to respond within 15 days from date of receipt of the notice for informal conference, he shall be considered in default, in which case, the RDO or the Chief of the Special Investigation Division of the Revenue Regional Office, or the Chief of Division in the National Office, as the case may be, shall endorse the case with the least possible delay to the Assessment Division of the Revenue Regional Office or to the Commissioner or his duly authorized representative, as the case may be, for appropriate review and issuance of a deficiency tax assessment, if warranted [RR 12-99 Sec. 3 3.1.1] If after review and evaluation by the Assessment Division or by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to the taxpayer, at least by registered mail, a Preliminary Assessment Notice [PAN] for the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based [RR 12- 99 Sec. 3 3.1.2]

of payment of the tax regardless of any supervening cause that may arise after payment [2nd Par. Sec. 229] or within 30 days from receipt of the denial by the CIR of the application for refund or credit [Sec. 11 RA 1125] REMEDIES DISPUTED ASSESSMENT

SEC 228. Protesting of Assessment. When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a pre-assessment notice shall not be required in the following cases: a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; b. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or c. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or d. When the excise tax due on excisable articles has not been paid; or e. When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to nonexempt persons. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within 60 days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the CTA within 30 days from receipt of the said decision, or from the lapse of the 180-day period; otherwise, the decision shall become final, executory and demandable.

4.

3

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN
registered mail or by personal delivery [RR 12-99 SEC 3. 3.1.4] Rationale – to give the taxpayer the opportunity to refute the findings of the examiner and give a more accurate and detailed explanation regarding assessments.

The PAN requires the taxpayer to explain within 15 days from receipt why no notice of assessment and letter of demand for additional taxes should be directed to him If the taxpayer fails to respond within 15 days from date of receipt of the PAN, he shall be considered in default, in which case, a formal letter of demand and assessment notice shall be caused to be issued by the said Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties [RR 12- 99 Sec. 3 3.1.2] GR - Notice of informal conference is required before the issuance of a PAN and a PAN is required before the issuance of assessment notice. Exceptions - The notice for informal conference and the preliminary assessment notice shall not be required in any of the following cases, in which case, issuance of the formal assessment notice for the payment of the taxpayer's deficiency tax liability shall be sufficient: 1. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return filed by the taxpayer; or 2. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or 3. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or 4. When the excise tax due on excisable articles has not been paid; or 5. When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons [RR 12-99 SEC 3. 3.1.3] Requirements of Due Process for Validity of Assessment Notice 1. The issuance of a notice for informal conference 2. A pre-assessment notice must be furnished the taxpayer advising him that proper taxes should be assessed. 5. IF THE CIR IS SATISFIED WITH THE EXPLANATION OF THE TAXPAYER THEN THE PROCESS IS AGAIN ENDED. IF THE TAXPAYER IGNORES THE PAN BY NOT RESPONDING OR HIS EXPLANATION IS NOT ACCEPTED BY THE CIR THEN A NOTICE OF ASSESSMENT AND A LETTER OF DEMAND IS ISSUED BY THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE. The letter of demand calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and assessment notice shall be void. The same shall be sent to the taxpayer only by

SEC. 203. Period of Limitation upon Assessment and Collection. Except as provided in Sec. 222, internal revenue taxes shall be assessed within 3 years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the 3-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
The notice of assessment must be issued by the CIR within a period of 3 years from the time the tax return was filed or should have been filed whichever is the latter of the two events. Where the taxpayer did not file a tax return or where the tax return filed is false or fraudulent, then the CIR has a period of 10 years from discovery of the failure to file a tax return or from discovery of the fraud within which to issue an assessment notice. The running of the above prescriptive periods may however be suspended under certain circumstances. Requisites of a Valid Assessment 1. It must be issued within the prescribed period 2. As a GR it may be issued only after a pre-assessment notice has been served upon the taxpayer 3. It must conform to the formal requisites for the validity of a formal letter of demand and assessment notice. GR – Prescriptive periods for making assessments - at any time within 3 years EXCEPTIONS: 1. After the last day prescribed by law for the filing of the return 2. Where a return is filed beyond the period prescribed by law, the 3-year period shall be counted from the day the return was filed 3. Where the return was filed before the last day prescribed by law for the filing thereof, it shall be considered as filed on such last day [Sec. 203] Exceptions - Instances where the 3 year period does not apply 1. In case of false or fraudulent return to evade the payment of tax – At anytime within 10 years after the discovery of the falsity or fraud 2. In case of failure to file a return – At anytime within 10 years after the discovery of the omission to file a return 3. If before the expiration of the 3 year period for the assessment of the tax, there is an agreement in writing between the taxpayer and the BIR Commissioner – the period agreed upon which may be extended by subsequent written agreements made before the period previously agreed upon.
4

Mere notations made without the taxpayer’s intervention. CIR CTA CASE July 18. DE GABRIEL v. therefore. without adequate supporting evidence. 2002] Effect of amended return . 17. The purpose of which is to ascertain the amount that a taxpayer should pay. it principally intends to afford protection to the taxpayer against unreasonable investigation. Rationale for the prescriptive period or statute of limitations for assessment . It also signals the time when penalties and interests begin to accrue against the taxpayer. without adequate protection or defense [supra] The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the conclusion that no assessment was issued. An assessment is deemed made only when the collector of internal revenue releases. the government’s right to issue an assessment for the said period has already prescribed [supra] The 3 year prescriptive period has a total of 1095 days [BPI v. CA GR 119322. and said notice could not produce any effect [VDA. 1996] CRIMINAL CHARGE FOR VIOLATION OF THE NIRC Should be supported by a prima facie showing of failure to file a required return Such is not so with a criminal charge ASSESSMENT The fact of failure to file a return need not proven in an assessment Before an assessment is issued the is by practice required the issuance of a pre-assessment notice to the taxpayer The purpose of the issuance of an assessment is to collect the tax Under Section 203 CIR had 3 years from the last day for the filing of the return to send an assessment notice to petitioner. An assessment is made within the prescriptive period if notice to this effect is released. mails or sends such notice to the taxpayer [CIR v.The prescriptive period within which to assess is counted from the date of filing the amended return and not the date when the original return was filed. mailed or sent by the CIR to the taxpayer within said period. The indefinite extension of the period for assessment is unreasonable because it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. or control. who has the legal obligation to pay and discharge all debts of the estate and to perform all orders of the court [supra] Initiation by BIR of criminal prosecution is not an assessment notice because this was not sent to the taxpayer and does not demand payment of the tax within a certain period of time. even beyond the prescriptive period. The notice was not sent to the taxpayer for the purpose of giving effect to the assessment. the taxpayer would be at the mercy of the revenue offices. CIR Oct. OLIVER R. INC. A crime is complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat the tax [UNGAB v. It must be sent to and received by a taxpayer. June 29.Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer. PASCOR REALTY & DEVT. 1999] Internal revenue taxes are self-assessing. ROXAS SECURITIES. approved by the BIR. v. CIR 421 SCRA 266] When an estate is under administration. June 4. GATCHALIAN Assessment **It is a finding by the taxing agency that the taxpayer has not paid his correct taxes. v. our tax laws provide a statute of limitations on the collection of taxes. A self– assessed tax a tax that the taxpayer himself assesses or computes and pays to the taxing authority. notice. since it is the said administrator. not fraudulent and unless and until the BIR had made a final determination of what is supposed to be the correct taxes. the assessment notice [BARCELON. the taxpayer should not be placed in the crucible of criminal prosecution [CIR v. notice must be sent to the administrator of the estate. Reason – for the purpose of safeguarding taxpayers from an unreasonable examination. CUSI] Since the registered wholesale price of the goods. such that it or he was able to intelligently 5 . investigation or assessment. is presumed to be the actual wholesale price. Laws on prescription should be liberally construed in favor of the taxpayer. CIR 498 SCRA 126] The release. and must demand payment of the taxes described therein within a specific period. or sending of the notice be clearly and satisfactorily proved. Instituted to penalize the taxpayer for violation of the Tax Code A taxpayer’s actual knowledge of the basis of the assessment. otherwise. Receipt thereof by the taxpayer within the prescriptive period is not necessary but this rule does not dispense with the requirement that the taxpayer should actually receive. CORP. mailing.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. GR 128315. 2005] The 3 year prescriptive period within which the CIR may assess a taxpayer of expanded withholding tax shall be counted from the last day required by law for filing a monthly remittance return which is 10 days after the end of each calendar month [save December] and 25 days after the end of December for taxes withheld from the last compensation/income payment for the said month [HPCO AGRIDEV CORP. **An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. as representative of the estate. cannot suffice. Consequently.

Signed both by the taxpayer and the BIR Commissioner 4. Failure to report sales. Assessments are prima facie correct and made in good faith. receipts or income. The period agreed upon can still be extended by a subsequent written agreement. the tax may be assessed. of Finance 2. Requisites for agreement waiving the 3 year period 1. A claim of deductions in an amount exceeding 30% of actual deductions constitutes overstatement of deductions [Sec. receipts or income in an amount exceeding 30% of that declared per return. Fraud must be proved to exist by clear and convincing evidence amounting to more than mere preponderance. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon. SEC 222. fraud or omission: Provided. A waiver of the statute of limitations under the NIRC. the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. 203 for the assessment of the tax. Waiver is defective if signed only by the Revenue District Officer and not by the Commissioner 3. is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. The waiver must be for a definite period beyond the ordinary prescriptive period for assessment and collection. 228. A taxpayer is stopped from questioning the validity of a waiver extending the period to assess by his act of paying the assess taxes covered by the same waiver.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. In writing 3. JOURNALISTS v. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. Waiver is not complete if copies were not furnished to the taxpayer FRAUDULENT RETURN implies intentional or deceitful entry with intent to evade the taxes due subject to the 50% fraud penalty may subject the taxpayer to criminal penalties protest the assessments is sufficient compliance with the requirement under Sec. CIR 447 SCRA 214] Characteristics of an Invalid Waiver 1. Fraud 6 . or a proceeding in court for the collection of such tax may be filed without assessment. That in a fraud assessment which has become final and executory. Any internal revenue tax. to a certain extent. c. There is a prima facie evidence of a false or fraudulent return when the taxpayer has willfully and knowingly filed it with intent to evade a part or all of the tax legally due from him [UNGAB v. A substantial underdeclaration of taxable sales. b. the tax may be assessed within the period agreed upon. Reason – Lifeblood theory. both the Commissioner and the taxpayer have agreed in writing to its assessment after such time. Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within 5 years following the assessment of the tax. That nothing in the immediately preceding Section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax return filed in accordance with the provisions of any tax amnesty law or decree. however. as determined by the Commissioner or his duly authorized representative pursuant to rules and regulations issued by the Sec. Actual. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. Provided. e. GATCHALIAN Prima Facie evidence of a false or fraudulent return 1. OLIVER R. 248 B] 4. constitute substantial underdeclaration of sales receipts. 3. or income. Entered before the expiration of the 3 year period for the assessment of the tax 2. In the case of a false or fraudulent return with intent to evade tax or of failure to file a return. CUSI] FALSE RETURN merely a deviation from the truth due to mistake not subject to 50% fraud penalty does not subject the taxpayer to criminal penalties Waiver It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date contained therein. fraud shall be the bench mark of liability. not presumed. and cannot be justified by mere speculation. may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the 5-year period. An act or omission which amounts to intentional wrongdoing with the sole object of avoiding the tax Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved in the court. at any time within 10 years after the discovery of the falsity. a. which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove. d. The waiver is defective if it does not specify a definite agreed date between the BIR and the taxpayer within which to formally assess and collect 2. provided that it is executed prior to the expiration of the first period agreed upon [PHIL. or a substantial overstatement of deductions. If before the expiration of the time prescribed in Sec.

his authorized representative.5] If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within 30 days from date of receipt thereof. For real property taxation. or a member of his household with sufficient discretion. When the taxpayer requests for a reinvestigation which is granted by the Commissioner 3. Protest under the NIRC Protest under the NIRC as well as under the LGC for local taxes does not require payment of the taxes being protested. 6. Two kinds of protest to an assessment 1. 3. the taxpayer shall respond to the same within 15 days from receipt 2. ask for a refund and when denied appeal to the CTA. OLIVER R. his protest shall be considered void and without force and effect [RR 12-99 SEC 3. The taxpayer shall state the facts. if the taxpayer informs the Commissioner of any change in address. 228] Upon the issuance of an assessment notice. that is open an assessment that has become final. 4 Sec. Even if the protest did not categorically state or use the words “reinvestigation and “reconsideration”. When the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for 60 days thereafter 2. the assessment shall become final. GATCHALIAN which is the period provided for by implementing rules and regulations [3rd par. Protest under the NIRC should be filed within 30 days from receipt of the assessment notice. the assessment shall become final [par. executor and collectible the taxpayer cannot pay the tax. also with the LGC for real property taxes. or jurisprudence on which his protest is based. what he could not do directly. and when the taxpayer is out of the Philippines. When the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected 4. executory and demandable [RR 1299 Sec. the same are to be treated as letters of reinvestigation and reconsideration. 203 and 222 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection. Suspension of Running of Statute of Limitations. payment of the protested custom duties is a requirement. When the warrant of distraint or levy is duly served upon the taxpayer. 228] Provisional assessment cannot supersede an earlier assessment which had become final and executor. rules and regulations.1. The running of the Statute of Limitations provided in Secs. where the issue is reasonableness and excessiveness of the tax being collected but not where the issue is validity or legality of the tax or solution indebeti. Upon receipt of a pre-assessment notice. There is no need to pay under protest. or a member of his household with sufficient discretion. Within 60 days from filing of the protest. shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for 60 days thereafter. 2.refers to a plea for a reevaluation of an assessment on the basis of newly 7 . Reason – He would be doing indirectly. Events that Suspend/Interrupt the prescriptive period to assess the tax 1. It may involve a question of fact or law or both. Remedies under the NIRC available to an aggrieved Taxpayer at the Administrative Level with respect to assessment of internal revenue taxes 1. the protest is to be filed at the time of the payment of the tax being protested SEC 223. That. when the warrant of distraint or levy is duly served upon the taxpayer. 3 3. 3. Where the assessment has become final. Request for reconsideration – refers to a plea for a reevaluation of an assessment on the basis of the existing records without evidence. in respect of any deficiency. otherwise. his authorized representative. The taxpayer could not immediately interposed an appeal to the CTA because there is no decision yet of the CIR that could be the subject of a review. when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided. the running of the Statute of Limitations will not be suspended. So.5] and the BIR could use its administrative and judicial remedies in collecting the tax. 5. and no property could be located. Protest under other Special Laws Under the TCC.1. the taxpayer shall protest administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment in such form and manner as may be prescribed by the implementing rules and regulations. When the taxpayer is out of the Philippines. the applicable law.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. THE TAXPAYER SHOULD THEN FILE AN ADMINISTRATIVE PROTEST BY FILING A REQUEST FOR RECONSIDERATION OR REINVESTIGATION WITHIN 30 DAYS FROM RECEIPT OF THE ASSESSMENT NOTICE. Request for reinvestigation . all relevant supporting documents shall have been submitted. Sec. and no property could be located. PROTEST – it is the act by the taxpayer of questioning the validity of the imposition of the corresponding delinquency increments for internal revenue taxes as shown in the notice of assessment and letter of demand. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. otherwise.

discovered or additional evidence that a taxpayers intends to presenting the reinvestigation. the applicable law. the taxpayer may appeal to the CTA within 30 days from date of receipt of the said decision. EXECUTORY AND DEMANDABLE. OR IS NOT ACTED UPON WITHIN 180 DAYS FROM SUBMISSION OF DOCUMENTS. Showing that the protest was seasonably filed within 30 days from receipt of the assessment notice 2.6] If the decision is void for failure of the BIR Commissioner to comply with the said requirements. otherwise the assessment shall become final. Formal Requirements for an administrative protest 1. the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues. OTHERWISE. OR FROM THE LAPSE OF THE 180-DAY PERIOD. That the same is his final decision [RR 12-99 Sec. filing a petition for review which was however filed out of time. the applicable law. petitioner can not successfully resort to the second option. WITHIN 60 DAYS FROM FILING OF THE PROTEST. and resort to one bars the application of the other [supra] After availing the first option. rules and regulations. Showing of the correct and just assessment. EXECUTORY AND DEMANDABLE. the assessment shall become final. A request for reinvestigation. The taxpayer shall submit the required documents in support of his protest within 60 days from the date of filing of his letter of protest. executor and demandable. ALL RELEVANT SUPPORTING DOCUMENTS SHALL HAVE The decision of the Commissioner or his duly authorized representative shall: 1. or jurisprudence on which such decision is based.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the CTA within 30 days after receipt of a copy of such decision [RCBC v. by the Commissioner or his duly authorized representative. Sate the facts. PHIL. 3 3. in whole or in part. Exceptions 1. GLOBAL COMMUNICATIONS 506 SCRA 427] Where a taxpayer demands a reinvestigation.5. in which case. and not a request for reconsideration. i. on the pretext that there is yet no final decision on the disputed 8 . executory and demandable [Sec. the decision shall be void. CIR 522 SCRA 144] However. his protest shall be considered void and without force and effect. No action shall be taken on the taxpayer’s disputed issues until the taxpayer has paid the deficiency tax or taxes attributable to the said undisputed issues. in which case. then it is as if there is no decision. otherwise. 3. a collection letter shall be issued to the taxpayer calling for payment of the said deficiency tax.1. THE DECISION SHALL BECOME FINAL. rules and jurisprudence on which his protest is based. otherwise.e. otherwise. interrupts the running of the statute of limitations on the collection of the assessed tax [CIR v. not even the BIR Commissioner could change the same. the same shall not be considered a decision on a disputed assessment. and the taxpayer must interpose an appeal within 30 days from the lapse of 180 days period from submission of the complete and supporting documents If the protest is denied. 2. THE TAXPAYER ADVERSELY AFFECTED BY THE DECISION OR INACTION MAY APPEAL TO THE CTA WITHIN 30 DAYS FROM RECEIPT OF THE SAID DECISION.e. the same shall be considered undisputed issue or issues.. Once the assessment has become final and collectible. OLIVER R. a taxpayer can either: 1. THE ASSESSMENT SHALL BECOME FINAL. in which case. Proof that the assessment is merely a presumption and not based on actual facts 5. 8. the applicable law. these options are mutually exclusive. dispute or reinvestigation 1.. i. inclusive of the applicable surcharge and/or interest. and 2. 2. IF THE PROTEST IS DENIED IN WHOLE OR IN PART. or 2. RR 12-99] In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents. awaiting the final decision of the Commissioner and appealing the same to the CTA. 7. If there are several issues involved in the formal letter or demand assessment notice but the taxpayer only disputes or protests against the validity of some of the issues raised. or jurisprudence in support of his protest against some of the several issues on which the assessment is based. GATCHALIAN BEEN SUBMITTED. Proof that the assessment is wrong 4. WITH AN APPLICATION FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION TO ENJOIN THE BIR FROM COLLECTING THE TAX SUBJECT OF THE APPEAL. the taxpayer shall be required to pay the corresponding deficiency tax or taxes attributable thereto. If there are several issues involved in the disputed assessment and the taxpayer fails to state the facts. rules and regulations. OTHERWISE.1. Compliance with the formal requirements for an administrative protest 3. The prescriptive period for assessment or collection of the tax or taxes attributable to the disputed issues shall be suspended. File a petition for review with the CTA within 30 days after the expiration of the 180-day period. The taxpayer shall state the facts. Requisites for grant of protest. 3. the time employed in reinvestigating should be deducted from the total period of limitation [supra] GR – No prior payment of the assessed internal revenue tax is required when protested or disputed.

ISABELA CULTURAL CORP. The appeal is to be heard by a division. reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made. HE COULD THEN FILE A MOTION FOR RECONSIDERATION OR NEW TRIAL WITH THE DIVISION WITHIN 15 DAYS FROM NOTICE. No. 3. or is not acted upon within 180 days from submission of documents. ASSESSMENT – 3 years computed from the time the tax return was filed or should be filed whichever is later.R. which period is extendible for 30 days GR . or of the failure the tax return UNDISPUTED ASSESSMENT 1. 2001] A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. 9 . However. COLLECTION – 5 years from the issuance of an assessment notice. Such letter amounts to a final decision on a disputed assessment and is thus appealable to the CTA [CIR v. GATCHALIAN If the assessment notice has become final. THE ADVERSE RULING OF THE CTA EN BANC IS APPEALABLE TO THE SC THROUGH A VERIFIED PETITION FOR REVIEW ON CERTIORARI WITHIN A PERIOD OF 15 DAYS FROM RECEIPT OF THE CTA ADVERSE DECISION. Errors of administrative officials. The adverse ruling of the CTA en banc is appealable to the SC through a verified petition for review on certiorari within a period of 15 days from receipt of the CTA adverse decision. WHICH PERIOD IS EXTENDIBLE FOR 30 DAYS 2. July 11. The CIR files an ordinary action for the collection of the tax before a regular court or the CTA. Two rules on Prescription 1. THE APPEAL IS TO BE HEARD BY A DIVISION. The motion for reconsideration need not conform to a particular form of procedure. If the Division’s decision is unfavorable to the taxpayer.New issues cannot be raised for the first time on appeal. The Division’s unfavorable action on the motion for new trial or reconsideration may file a petition for review with the CTA en banc. Filing by the BIR of a civil suit for the collection of the deficiency tax is considered a denial of the request for reconsideration 2. 4. otherwise. THE DIVISION’S UNFAVORABLE ACTION ON THE MOTION FOR NEW TRIAL OR RECONSIDERATION MAY FILE A PETITION FOR REVIEW WITH THE CTA EN BANC. Any decision of the CTA assessment because of the Commissioner’s inaction [supra] A final demand letter from the BIR. is tantamount to a denial of the taxpayer’s request for reconsideration. executory and collectible and the BIR files a collection suit in court. Final notice before seizure considered as Commissioner’s decision of taxpayer’s request for reconsideration who received no other response. the deficiency taxes may be collected even without assessment within 10 years from the discovery of the falsity or of the fraud.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. 9. IF THE DIVISION’S DECISION IS UNFAVORABLE TO THE TAXPAYER. or of the failure the tax return 2. the taxpayer may use affirmative defenses but not negative defenses which are deemed waived for failure to raise the same in the administrative proceedings. Defense of prescription 2. Remedies under the NIRC available to an aggrieved taxpayer at the judicial level with respect to assessment of internal revenue taxes 1. where there is no return filed or what was filed was a false and fraudulent return. An indication to the taxpayer by the Commissioner in “clear and unequivocal language” of his final denial not the issuance of the warrant of distraint and levy. Only Commissioner’s final decision denying the dispute is subject of appeal. If the protest is denied in whole or in part. Estoppel could not be raised as a defense because the government is not estopped by the acts of its agents. the decision shall become final. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer [OCEANIC WIRELESS NETWORK v. CIR 477 SCRA 205] The authority to make tax assessments may be delegated to subordinate officers. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. OLIVER R. then the prescriptive period is 10 years computed from the discovery of the falsity or of the fraud. G. Exceptions 1. or from the lapse of the 180-day period. Said assessment has the same force and effect as that issued by the Commissioner himself. executory and demandable. Where the return is false or fraudulent. 2. Motion for reconsideration is essential to file petition for review with CTA. the taxpayer adversely affected by the decision or inaction may appeal to the CTA within 30 days from receipt of the said decision. or no return was filed. What is the subject of the appeal is the final decision not the warrant of distraint. he could then file a motion for reconsideration or new trial with the Division within 15 days from notice. 135210. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the CTA 5. depending upon the jurisdictional amount Any decision of the trial court sustaining an undisputed assessment would be appealable to the CTA then to the SC in accordance with the ROC. if not reviewed or revised by the latter such as in this case [supra] Acts of the CIR considered as denial of a protest which serve as basis for appeal to the CTA 1.

Non-issuance of clearance for travel [PD 1183] 6. whichever was applicable. Authority of the Comm. within the 3-year period or the 10-year period. mailed or sent by the BIR [supra] upon the tax collection may be appealed to the SC through a verified petition for review. Deportation of aliens who violate any tax legislations of the Phil. not coming from excluded income. 219] 4. The BIR shall advance the amounts needed to defray costs of collection by means of civil or criminal action. 224] 5. and interest in and rights to personal property. Unit value method – The determination or verification of gross receipts may be computed by applying price and profit figures to known ascertainable quality of business of the taxpayer. Cash expenditure method – When during a taxable year. Distraint of personal Property either actual or constructive [Secs. The power of the Comm. and any increment thereto resulting from delinquency shall be: a. industry publications. including stocks and other securities. that the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than P100. 5. Methods that may be utilized by the commissioner to determine the correct taxable income of the taxpayer if the latter’s record or methods of accounting are not reflective of his true income [Known as best evidence obtainable rules] 1. 7. PHILIPPINE GLOBAL COMMUNICATION 506 SCRA 427] SEC. credits. Surcharges or penalties for the payment of tax 11. OLIVER R. a taxpayer incurs expenditures. excluded or tax exempt income] the amount of expenditures is presumed to be income for the taxable year subject to income tax 3. The giving of rewards to informers who gave information as to violations of tax laws 8. By civil or criminal action. Percentage method – It is the equivalent of ratio analysis of percentages considered typical of the business under investigation to indicate potential areas of revenue adjustment in examination where revenue records do not exist. 205. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided. Criminal proceedings as may be warranted by the circumstances filed before the regular court. including the preservation or transportation of personal property distrained and the advertisement and sale thereof. and other personal property of whatever character. or charges. The computed amount of revenues based on the percentage computation is compared to the amount of revenues reflected on the return. 6. raise the presumption that the increases are unreported income subject to tax. donations. and by levy upon real property and interest in or rights to real property. The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner. and b. fees. To compromise under Sec. the source of which could not be explained [such as from gifts. 204 7. FORMULA: ASSETS – LIABILITIES = NET WORTH 2. COLLECTION When the BIR validly issues an assessment. the law provided another 5 years after the assessment for the collection of the tax due thereon through the administrative process of distraint and/or levy or through judicial proceedings [CIR v. Government remedies for enforcement and collection of internal revenue taxes 1. GATCHALIAN The 5-year period for collection of the assessed tax began to run on the date the assessment notice had been released. Enforcement of tax lien [Sec. NET WORTH METHOD – A method of reconstructing income which is based on the theory that if the taxpayer’s net worth has increased in a given year in an amount larger that his reported income. II. The comparison will provide an indication of the possibility of revenue being understated. Administrative actions 1. Third party information or access to records method – The BIR inquires from third parties through access of records. Surveillance and assessment method 8. 206 & 207] 2.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Enforcement of forfeiture of real and personal properties [Sec. Levy on real estate [Sec 207 B] 3. Judicial actions before the regular courts b. debts. chattels. Any increase in net worth is presumed to be income not declared for tax purposes. he has understated his income for the year. This is usually done in order to verify gross receipts and non-availability of needed information through other methods. The net worth on a fixed starting date is compared with the net worth on a fixed ending date. or with the CTA 2. Remedies for the Collection of Delinquent Taxes. Civil Remedies which may judicial or administrative a. disposal of previously paid. The percentages used may be obtained from the taxpayer. Bank deposit method – Unexplained increases in bank deposits. The civil remedies for the collection of internal revenue taxes. bank accounts. prior years audit results or third parties. To effect arrest in certain cases 10 . Such method as in the opinion of the BIR Commissioner clearly reflect the income. income subject to final taxes. however. as well as of real property and improvements thereon. or effects. By distraint of goods. Filing of performance bond to assure compliance with certain tax laws or regulations 10. 4. 9.

222 c the warrant of distraint and/or levy need not be fully executed to suspend the prescriptive period for collection of the tax. Exclusive appellate jurisdiction in tax collection cases: a. Judicial Action Civil or Criminal 2. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes. Prescriptive periods for collection of internal revenue taxes 1. Under Sec. resolutions or orders of the RTCs in the exercise of their appellate jurisdiction over tax collection cases originally decided by the MTC in their respective jurisdiction. fees. Power of the Comm. Over petitions for review of the judgments. the captains thereof are required to file the return herein provided and pay the tax due thereon before their departure. if the 2 year period is about to expire RA 9282 SEC. GATCHALIAN 3. When the tax due is in excess of P2. information. examine. To obtain. fraud or omission in the filing of the tax return the prescriptive period is within 5 years following the assessment of the tax. Where the assessment was issued within a period agreed upon between the taxpayer and the BIR. It is enough that the proceedings have validly began or commenced and that their execution has not been suspended by reason of the voluntary desistance of the BIR Commissioner. claimed is less than One million pesos shall be tried by the proper MTC. exclusive of charges and penalties. 56 A] 5. in their respective territorial jurisdiction. Within 5 years from the issuance of an assessment notice where there was a return filed. this is an extended assessment which could be collected within a period of 5 years from issuance of the assessment. charges and penalties: Provided. b. debts. 56 A] Known as pay as you go system” or “pay as you file system” 2. OLIVER R. the first installment shall be paid at the time the return is filed and the second installment. the shipping agents and/or the husbanding agents. That collection cases where the principal amount of taxes and fees. Authority of tax officers to examine and inspect book of accounts and other accounting records of the taxpayer. In general. including stocks and other securities. on or before July 15 following the close of the calendar year 4. C. 2. chattels.000. or effects. Summary of governmental remedies for the collection of delinquent internal revenue taxes 1. For income derived from the sale or exchange of shares of stocks not traded through a local stock exchange a retrun shall be filed and the tax shall be paid within 30 days after each transaction. Jurisdiction over tax collection case as herein provided: 1. and the assessment is not an extended one issued after an agreement between the taxpayer and the BIR to suspend the running of the prescriptive period 2. the taxpayer other than a corporation may elect to pay the tax in 2 equal installments in which case. Estate Taxes Shall be paid at the time the return is filed which is within 6 months from the decedent’s death Donor’s Tax Shall be paid at the time the donor’s tax return is filed which is filed which is 30 days after the date the gift is made. Income from the sale or disposition of real property classified as capital the return shall be paid and the tax paid within 30 days following each sale or other disposition. 7. Distinction of Taxpayer’s Remedies Tax Assessments Taxpayer has a period of 30 days from receipt of an assessment within which to dispute the same The period to appeal from the denial of the taxpayer’s dispute is 30 days from receipt of BIR’s denial Generally the taxpayer has to wait for the BIR’s decision on the application for refund before he could appeal to the CTA Claim of Refund for Taxes the taxpayer is given a period of two years within which to apply for a refund counted from payment the taxpayer in refunds has likewise the same period but the said 30 days must be within 2 years from the payment of the tax There is no need for the taxpayer to wait for the BIR’s decision on the application for refund or credit. 52 D in relation to Sec. summon and take testimony from government officers or agencies and other persons 13. Civil or administrative remedies By distraint of goods. and in their absence. 3. and other personal property of whatever character. MeTC and RTC. Over appeals from the judgments. Various periods for payment of selected internal revenue taxes Income Taxes 1. bank accounts. credits. resolutions or orders of the RTCs in tax collection cases originally decided by them. .NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Where the internal revenue taxes has been assessed within the prescriptive period of 10 years after the discovery of the falsity. and interest in and rights to personal property and by 11 12. however. Income taxes shall be paid by the person thereof at the time the return is filed [sec. For an individual a final consolidated return shall be filed on or before April 15 of each year covering all stock transactions of the preceding taxable year [Sec. the return is not false and fraudulent. Where the income tax due from tramp vessels.

the revenue officer effecting the constructive distraint shall 1. In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to. OLIVER R. 208] The taking of personal properties usually cash or sum of money. Retiring from any business subject to tax. Hide or conceal his property or to 5. Note – while the assessment is still pending with the Commissioner of Internal Revenue it cannot serve as the basis for the collection by distraint or levy or by judicial action. 205] Conditions for the exercise of remedies 1. leave a copy thereof in the premises where the property distrained is located. not to dispose of the same in any manner whatever. 2.The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable 12 . GATCHALIAN the Revenue District Officer. or is 2. 207] 1. It may redeem by the taxpayer or anyone for him. The service of a notice upon the taxpayer that he could not dispose of his personal property until he has paid the tax deficiency. in the presence of 2 witnesses. Remove his property therefrom or to 4. if the amount involved is One million pesos or less 2. without the express authority of the Commissioner. in his opinion. The Commissioner or his duly authorized representative. Tax lien superior to judgment claim of private property. Summary Remedies [Sec.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. The unpaid tax constitutes as a burden upon all property and property rights belonging to the delinquent taxpayer. is 1. Reason . It is a warning to all potential buyers of that property that any proceeds of the sale should be applied to the tax deficiency. The constructive distraint of personal property shall be effected by 1. Conditions for the court action for collection of delinquent taxes a. extending even after the lapse of the statutory period of collections. to sign a receipt covering the property distrained and 4. together with interest on said purchase price at the rate of 15% per annum from the date of purchase to the date of redemption [Sec. owned by a delinquent taxpayer which is in the possession of a third party. The remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than P100. having possession or control of such property 3. only that the taxpayer is leaving the country or disposing of his property in fraud of creditors or is in the process of liquidation the personal property is merely held as security to answer for any future tax delinquencies The purpose is protection of government revenues and ensure that there are properties of the taxpayer which the government could proceed against after a determination of the amount of delinquency taxes ACTUAL DISTRAINT The personal property actually taken is The taxpayer is already delinquent in the payment of his taxes The personal property is taken to be sold in order to satisfy tax delinquencies The deficiency taxes are already determined The timely service of a warrant of distraint or levy suspends the running of the period to collect the tax deficiency in the sense that the disposition of the attached properties might well take time to accomplish. 214] Tax Lien A legal claim or charge on property either real or personal as security for the tax obligation.The physical taking of taxpayer’s personal property to answer for his tax liability. Levy on Real Property levy upon real property and interest in or rights to real property [SEC. Redemption shall be made by payment of the amount of the public taxes. requiring the taxpayer or any person 2. and interest thereon from the date of delinquency to the date of sale. penalties. Intending to leave the Philippines or to 3. after which the said property shall be deemed to have been placed under constructive distraint. preserve the same intact and unaltered and 6. Perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him. Grounds for effecting constructive distraint The Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who. proceed to prepare a list of such property and. CONSTRUCTIVE DISTRAINT the BIR does not take physical possession of the personal property there is no finding yet of a discrepancy. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: 2. if the amount involved is in excess of One million pesos Garnishment [Sec. obligate himself to 5. Actual distraint of personal property . No proceeding in court without assessment for the collection of internal revenue taxes shall be begun after the expiration of the 3 or 10 year period for assessment as the case may be. Redemption of property sold Period – within 1 year from the date of the sale. Constructive Distraint b.

Authority of the Commissioner Compromise. or 2. The tax or any portion thereof appears to be unjustly or excessively assessed. Value-added tax lien 4. Excise taxes lien 6. under Sec. OLIVER R. revoke or modify any existing ruling of the Bureau. The power to issue rulings of first impression or to reverse. The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. All criminal violations may be compromised except: (a) those already filed in court. SEIZURE Taxpayer retains ownership of property seized Reverse is true with seizure. A tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax become due and payable. Compromise requires mutual agreement between the BIR and the taxpayer. the Assistant Regional Director. 7. GATCHALIAN Tax Liens under the NIRC . when: 1. A compromise agreement must be strictly construed.There is no newspaper publication required for the sale of personal property distrained or garnished Levy Real property owned by and in the possession of the taxpayer. 13 . discovered by regional and district officials. Documentary stamp taxes lien 7. Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer. and minor criminal violations.000 or less. and the settlement offered is not less than the prescribed percentages. The Commissioner may delegate the powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division chief or higher. FORFIETURE ownership is transferred to the government In the disposition of the proceeds of forfeited properties the excess shall not return to the taxpayer ***SEC 204. Miscellaneous taxes fees and charges liens Taxes lien superior to judgment claim of private property. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax provided that the minimum compromise entered into is equivalent to 10% of the basic assessed tax In the above instances the Comm. Income tax lien 2. when: 1. Garnishment Personal property owned by the taxpayer but in the possession of a third party 2. Abate and Refund or Credit Taxes. Is allowed to enter into a compromise only if the basic tax involved does not exceed 1 million.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. b. Authority of the Commissioner to Delegate Power. then sold to meet the deficiency. Related Provision Sale of real property subject to levy is required to be published once a week for 3 weeks in a newspaper of general circulation in the municipality or city where the property is located. however. subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of Finance. Other percentage taxes lien 5. may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman. The Commissioner may compromise the payment of any internal revenue tax. and d. as may be determined by rules and regulations to be promulgated by the Secretary of Finance. any tax liability: Provided. Abate or cancel a tax liability. The power to compromise or abate. or (b) those involving fraud. A compromise being by its nature mutual in essence requires agreement. as members. The power to recommend the promulgation of rules and regulations by the Secretary of Finance. Real property subject to levy is forfeited to the Govt. however.Upon any internal revenue tax like 1. Estate and donor's taxes lien 3. Warrant of distraint Subject Matter personal property owned by and in the possession of the taxpayer As to disposition for want of bidders or bids inadequate to satisfy tax deficiency Personal property distraint or garnished are purchased by the government and resold to meet the deficiency. 204(A) and (B) of this Code. As to advertisement of Sale . c. That the following powers of the Commissioner shall not be delegated: a. B. The administration and collection costs involved do not justify the collection of the amount due. to A. the heads of the Legal. That assessments issued by the regional offices involving basic deficiency taxes of P500. upon recommendation of the Commissioner. upon recommendation of the Commissioner: Provided. A reasonable doubt as to the validity of the claim against the taxpayer exists provided that the minimum compromise entered into is equivalent to 40% of the basic tax or **SEC.

such payment appears clearly to have been erroneously paid. Withholding tax cases. void. Related Provision RRCTA R8 SEC. refund the value of internal revenue stamps when they are returned in good condition by the purchaser. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer [RR 302002] Abatement It is the diminution or decreased in the amount of tax imposed. In any case. 230 of this Code: Provided. therefore statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax. Who may appeal. or of any sum alleged to have been excessively or in any manner wrongfully collected. in his discretion. however. Delinquent accounts with duly approved schedule of installment payments. 5. III. That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis. further. That the original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided. or of any penalty claimed to have been collected without authority. In case of inaction of the CIR on claims for refund of internal revenue taxes erroneously or illegally collected. 3. period to file petition. but such suit or proceeding may be maintained. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose. however. where compromise is requested on the ground of doubtful validity of the assessment. or a RTC in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within 30 days after receipt of a copy of such decision or ruling. That a return filed showing an overpayment shall be considered as a written claim for credit or refund. ruling or the inaction of the CIR on disputed assessments or claims for refund of internal revenue taxes. Recovery of Tax Erroneously or Illegally Collected. or sum has been paid under protest or duress. Revenue District Office and other offices in the National Office 3. That the Commissioner may. a] A party adversely affected by a decision. no such suit or proceeding shall be filed after the expiration of 2 years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a 14 . No refund of documentary stamp taxes. Any request for conversion into refund of unutilized tax credits may be allowed. even without a written claim therefor. refund or credit any tax. Criminal tax fraud cases confirmed as such by the CIR or his duly authorized representative. Collection cases filed in courts 5. Criminal violations already filed in court. Delinquent accounts 2. whether or not such tax. the Secretary of Finance. On the other hand. the Secretary of Trade and Industry. subject to the provisions of Sec. and. GATCHALIAN ***Tax cases which may be the subject of a compromise 1. 204 C] Credit or refund taxes erroneously or illegally received or penalties imposed without authority. until a claim for refund or credit has been duly filed with the Commissioner.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. 4. Reason – Because they are levied upon the privilege. Civil tax cases being disputed before the courts 4. 6. Cases which become final and executory after final judgment of a court. irrespective of whether the contracts are subsequently declared rescissible. Cases under administrative protest after issuance of the FAN to the taxpayer which are still pending in the Regional offices. and 7. 3. excluding withholding taxes. ***SEC 229. or by a decision or ruling of the CoC. redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. unless the applicant-taxpayer invokes provisions of law that cast doubt on the taxpayer’s obligation to withhold 2. voidable or unenforceable. ***SEC. where on the face of the return upon which payment was made. the Secretary of Agriculture. He who claims a refund or exemption from taxes has the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted. or expiration of the period fixed by law for the CIR to act on the disputed assessments. Criminal violations other than those filed in court or those involving tax frauds [RR 30-2002] ***Taxes which could not be the subject of a compromise 1. penalty. opportunity or facility to execute certain instrument. the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected. claim for credit or refund within 2 years after the payment of the tax or penalty: Provided. OLIVER R. for which the taxpayer is directly liable. Taxes are the lifeblood of the nation. REFUND OF INTERNAL REVENUE TAXES They are in the nature of tax exemptions.

5. including whenever applicable the income tax that is determined after applying the corresponding tax rates to taxable income Used only after the tax has been computed Tax Deduction Reduces the income that is subject to tax in order to arrive at taxable income. Examples of tax credits are withheld taxes. Reason – it is only upon the filing of the FAR that a corporation could ascertain whether it made profits or incurred losses in its business operations and determine whether it is liable or not for the payment of income tax. For corporations – the 2 year prescriptive period should be computed from the time of filing the Final Adjustment Return [FAR] or Annual Income Tax return and final payment of the tax for that year. Failure to use excess income tax credit against quarterly income taxes for the next taxable year. OLIVER R. Before Requisites for a judicial claim for refund of input vat 1. illegally or wrongfully collected [CIR v. PNB 474 SCRA 303] An availment of a tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period. The penalty have been collected without authority 3. Notice by the BIR that the refund is being processed and that the notice of the refund shall be mailed does not stop the running of the period 15 *Grounds for claiming refund or tax credit 1. A decision of the CTA En banc adverse to the taxpayer may be appealed to the SC through a petition for review on certiorari within 15 days from receipt of the adverse decision. extendible for a period of 30 days For indirect taxes like an excise tax the proper party who can question or seek a refund of the tax is the person on whom the tax is imposed by law and who paid the tax even when he shifts the burden thereof to another. Taxpayer files a claim for refund or credit with the CIR 2. and investment tax credits [CIR v. Tax Credit Reduces the tax due. It is an allowance against the tax itself or a deduction from what is owed by a taxpayer to the government. Sec. It must substantiate the input VAT paid by purchase invoices or official receipts *Procedure for recovery by taxpayers of internal revenue taxes 1. The decision of the CIR appealable to the CTA within 30 . surcharges and penalties should the amount of the tax withheld be finally found to be less than that required to be withheld by law. The 2 year period is computed regardless of any supervening cause that may arise after the payment 2. count the period from the last installment. CIR 518 SCRA 425] Tax credit Refers to an amount that is subtracted directly from one’s total tax liability. payments of estimated tax. **Withholding agent could file application for refund. Absent any specific provision in the Tax Code or special laws. Within 2 years from payment taxpayer may file a petition for review for recovery with the CTA Division. 3. The tax was paid by mistake 5. 229 is intended to apply to suits for the recovery of internal revenue taxes or sums erroneously.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. unsuccessful administrative claim [ATLAS CONSOLIDATED v. The taxpayer must not only prove that it is a VAT registered entity and that it filed its claim within the prescriptive period. The tax have been erroneously or illegally assessed or collected [one that is levied without statutory authority] 2. 34. while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer. If the tax is paid in installments. 4. 2. [supra] Tax credit from tax refund A tax refund requires a physical return of the sum erroneously paid by the taxpayer. Any sum which have been excessive or in any manner wrongfully collected 4. A judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous. Since the withholding agent who is required to deduct and withhold any tax is made personally liable for such tax. that period would be 10 years under Art. excessively. subject to and liable for deficiency assessments. 1144 CC [supra] **Rules for computation of 2 year period for filing suit 1. Period for claiming tax credit or refund of internal revenue taxes or penalties 1. Within 2 years after the payment of the tax or penalty 2. then he is a taxpayer. Central Luzon Drug 456 SCRA 414] Tax deduction A subtraction from income for tax purposes or an amount that is allowed by law to reduce income prior to [the] application of the tax rate to compute the amount of tax which is due. But for purposes of tax amnesty a withholding tax agent is not a taxpayer. Reason – It is only upon full payment where it could be determined whether there was an overpayment. An example of a tax deduction is any of the allowable deductions enumerated in Sec. 3. GATCHALIAN days from receipt but within 2 years from payment of the tax A decision of the CTA Division denying the petition may be the subject of a motion for reconsideration or new trial with the same division A decision of the CTA Division denying the motion for reconsideration or new trial may be the subject of a petition for review to be filed with the CTA en banc.

not of the time of the sale If the property was purchased by the government or forfeited in favor of the government. Reason – The taxpayer is estopped from further questioning the assessment that has attained a state of finality.from the last day of the month following the close of the quarter during which the withholding was made. Final withholding taxes – from the 25th day after the close of each calendar quarter 2. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid. When 2 year period is suspended 1. For payment effected through selling of the property levied. the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. If the 2 year period is about to expire but the BIR has not yet acted on the application for refund. such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. B] Time of Filing the Income Tax Return. otherwise government revenues shall suffer. or c. It is only after the filing of the quarterly VAT liability or refundability can be determined. Dates of filing FAR by corporation SEC. 5. The corporate quarterly declaration shall be filed within 60 days following the close of each of the first 3 quarters of the taxable year. Computation of 2 year period for withheld taxes 1. 76. GATCHALIAN 2. Taxpayer made to believe by Comm. Any national internal revenue tax erroneously or illegally assessed or collected 2. The 2 year period does not refer only to recovery of tax erroneously or illegally collected. Agreement exists between the taxpayer and the BIR to wait for a decision of the SC **Where assessment became final taxpayer cannot pay. seized or distraint at the time of the application proceeds to the tax deficiency. Pay the balance of tax still due. PERSONAL NOTES OF Atty. or on or before the 15th day of the 4th month following the close of the fiscal year. the 2 year period would be exceeded apply the 2 year period c. apply the 30 day period b. 6. Carry-over the excess credit. If the 30 day period does not go beyond the 2 year period. It also refers to: 1. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year. Computation of 2 year period for return of VAT on zero rated sales Counted from the date of filing of the quarterly VAT return which is within 25 days after the close of each taxable quarter. 77. 76 emphasizes that it is imperative to indicate in the tax return or the final adjustment return whether a tax credit or refund is sought by making the taxpayer’s choice irrevocable [PASEO REALTY v. It does not confer an absolute right on the taxpayer to avail of the tax credit scheme if it so chooses. that the overpayment would be credited for other tax liabilities SEC. as the case may be. Sec. at the time of the purchase or forfeiture In computing the 2 year period with respect to excise taxes particularly on petroleum. Even if the 2 year period had already lapsed the same is not jurisdictional and may be suspended for reasons of equity and other special circumstances such as when there is an erroneous interpretation of tax law that enabled the government to collect taxes. Any penalty claimed to have been collected without authority 3. Creditable withholding taxes . If in the application of the 30 day period. Neither does it impose a duty on the part of the government to sit back and allow an important facet of tax collection to be at the sole control and discretion of the taxpayer [supra] 16 . interpose a petition for review with the CTA within the 2 year period. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made. Computation of 2 year period for refund of gross receipts of percentage taxes Computed from the payment of the tax due which is 25 days after the end of each taxable quarter. Any sum alleged to have been excessive or in any manner wrongfully collected. CA 440 SCRA 235] The availment of the remedy of tax credit is not absolute and mandatory. as the case may be. the date of the payment is counted from the date of removal pursuant to Sec. OLIVER R. the corporation shall either: a. Fiscal Adjustment Return. The final adjustment return shall be filed on or before the 15th day of April. Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If using the calendar year The FAR shall be filed on or before the 15th day of April If using the fiscal year The FAR shall be filed on or before the 15th day of the 4th month following the close of the fiscal year.NOTES & CASES IN TAXATION 4. as the case may be ***Reconciliation between the 2 year period under the NIRC and the 30 day period under RA 9282 a. or b. 158. Be credited or refunded with the excess amount paid. ask for a refund then institute a suit for recovery.

Direct grant by the constitution – An act of congress could not remove that particular power. That the income tax deducted and withheld is declared as part of the gross income declared in the income tax return of the recipient 3. Such taxes. LOCAL GOVERNMENT TAXATION Constitutional Provision ***ART. Refund depends upon the validity of tax return. and charges subject to such guidelines and limitations as the Congress may provide. consistent with the basic policy of local autonomy. Taxpayer should prove 1. may claim for a refund. Interest is not to be awarded against a sovereign government. The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. Reason – taxpayer could not be held to suffer loss by his good intention to comply *SEC 281. To award such a refund despite the existence of a deficiency assessment is absurdity and polarity in conceptual effects. 76. The choice of one precludes the other. 229] 2. OLIVER R. Art. 204 C in relation to Sec. To afford the CIR an opportunity to correct the errors of subordinate officers 2. The fact of withholding is established by the copy of the statement duly issued by the payor [withholding agent] to the payee showing the amount paid and the amount of the tax withheld therefrom. particularly the self-assessment and collection aspects. The term of prescription shall not run when the offender is absent from the Philippines. A tax credit should be construed merely as an alternative remedy to a tax refund under Sec. within the 2 year periods after the payment of the tax or penalty. from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. and charges shall accrue exclusively to the local governments. tax credit [PHILAM ASSET Management v. Prescription shall begin to run from the day of the commission of the violation of the law. fees. cities. A taxpayer that makes a choice expresses certainty or preference and thus demonstrates clear diligence [supra] **Requisites for refund of excess withholding taxes. where such obligation does not really exist. **Exceptions – where there is no requirement for refund before resort may be had to the courts 1. That he filed a written claim for credit or refund with the Comm. **Reason for requiring claim for refund before resort made to court 1. fees. Such a claim would be in futility because the BIR already denied the protest. It has not been granted to the different administrative regions. Protest is not a requirement in order that a taxpayer who paid under a mistaken belief that it is required by law. should this option be chosen by the taxpayer later on [supra] Failure to signify one’s intention in the FAR does not mean outright barring of a valid request for a refund. GATCHALIAN with what he believes is his legal obligation. unless its consent has been manifested by an Act of its Legislature or by a lawful contract of its executive officers. To notify the government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue available for its expenditures. In protested assessment where after denial of the protest the taxpayer pays and goes directly to the CTA without a claim for refund or credit. In case of solution indebeti 2. tax refund or a 2. subject to prior verification and approval by respondent [supra] The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration. is not a self executing provision. X SEC. Local government unit are the political subdivisions. All violations of any provision of this Code shall prescribe after 5 years. 10 Sec. CIR 477 SCRA 761] These two options under Sec. Without the tax return it is error to grant a refund since it would be virtually impossible to determine whether the proper taxes have been assessed and paid. Under Sec. municipalities and barangays. 76 a taxable corporation with excess quarterly income tax payments may apply for either a 1. however. and if the same be not known at the time. should one still choose this option later on. Provided further that a refund filed showing an overpayment shall be considered as a written claim for credit or refund [Sec. Prescription for Violations of any Provision of this Code. 5 Each local government unit shall have the power to create its own sources of revenues and to levy taxes. 76 are alternative in nature. will not bar a valid request for a refund. It has to be by 17 . The power of taxation has been directly granted only to the provinces. Failure to indicate a choice. *A tax refund for a year should not be granted if there is a pending deficiency assessment for the same year Reason – A deficiency assessment is intimately related to and inextricably intertwined with the right of a taxpayer to claim a tax refund for the same year.

physically-handicapped. 5 does not change the doctrine that municipal corporations do not possess inherent powers of taxation. but pursuant to direct authority conferred by Sec. For example.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. service. post office personnel delivering mail. What it does is to confer municipal corporations a general power to levy taxes and otherwise create sources of revenue.subject to such guidelines and limitations as the Congress may provide. or user charges . no longer merely be virtue of a valid delegation as before. fees. The power is not absolute in character . However congress could not provide guidelines and limitations which would collide directly with the basic policy of local autonomy and that the taxes. 155] Concept of express authorization limitation/principle – A local government unit could exercise only the power allocated to it and could not exercise the other powers allocated to the different local government units. and charges Aside from the guidelines and limitations that congress may provide. the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions. Toll fees or charges . the legislature must still see to it that a. b. *Common revenue raising powers of LGU 1. and just. That the taxes. or wharf. Art. **SEC. pier. fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the NIRC. Fees. Congress is given the authority to limit the exercise of this power. 154] 3. Congress does not have the power to take away this power because this is a direct grant by the constitution. operated and maintained by them within their jurisdiction [Sec. The important legal effect of Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations [supra] The grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons. 186 Power to Levy Other Taxes. 10 [CITY GOVERNMENT OF QUEZON CITY v. consistent with the basic policy of local autonomy.Local government units may fix the rates for the operation of public utilities owned. ferry or telecommunication system funded and constructed by the local government unit concerned: Provided. It is a direct grant and not merely a delegated power 2. BAYAN 484 SCRA 169] Sec.The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road. To levy taxes. *Nature of local government taxation 1. The application of local government taxes is limited only in the territorial boundaries of the local government unit that has imposed this particular taxes. and d. 3. b. It must exercise only by the local legislative body – sanggunian of the local government unit concerned. however. To create their own sources of revenue – the revenue raising power 2. 5. as amended. or other applicable laws: Provided. Limitations upon congress when it provides guidelines and limitations on the LGU’s power of taxation The fundamental law did not intend the delegation to be absolute and unconditional. That no such toll fees or charges shall be collected from a.Local government units may impose and collect such reasonable fees and charges for services rendered [Sec. fees. it may be exercised by local legislative bodies. local taxation will be fair. Fees or Charges/ known as the Residual Taxing Power Local government units may exercise the power to levy taxes. OLIVER R. pursuant to a declared national policy [supra] Local government taxation – These are taxes that are imposed and collected by local government units in order to raise revenues to enable them to perform the function for which they have been organized. The power to tax is primarily vested in the Congress. these limitations must be consistent with the basic policy of local autonomy. disabled citizens who are 65 years or older [Sec. each local government unit will have its fair share of available resources. fees or charges shall not be enacted without any prior public hearing conducted for the purpose. constitutional amendment in order that particular power maybe removed. oppressive. the province could exercise the powers allocated to it and it could not exercise the powers that had been granted to the municipality or the barangay. while the local government units are being strengthened and made more autonomous. Moreover. and d. officers and enlisted men of the AFP and members of the PNP on mission. 18 . fees. That the ordinance levying such taxes. confiscatory or contrary to declared national policy: Provided. the constitutional objective obviously is to ensure that. Public utility Charges . c. GATCHALIAN 4. and charges shall accrue exclusively to the benefit of local governments unit concerned. or charges shall not be unjust. 153] 2. there are other kinds of limitations such as the inherent and the constitutional limitations. They no longer have to wait for a statutory grant of these powers. The power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. further. c. the resources of the national government will not be unduly disturbed. waterway. excessive. bridge. uniform. Powers that has been granted 1.

***Taxes on estates. Rule of reservation – Because the national government has reserved for it the exercise of these powers. ***SEC. . Exclusionary rules . ***SEC. 132. legacies and other acquisitions mortis causa. Documentary stamp tax. Within the range provided by the code b. fee. OLIVER R. or charge or to generate revenue under this Code shall be exercised by the sanggunian of the local government unit concerned through an appropriate ordinance. and charges and other impositions upon goods carried into or out of. Reason – it is violative of public purpose. levy and collection of local government taxes shall not be delegated by the Unless otherwise provided herein. *Requisites for the imposition of a fee or tax authorized by the LGC The rate should be a. tolls for bridges or otherwise. whatever collections that are collected by the city should accrue to the said city. excessive. The provisions of the LGC served as the guidelines and limitations. Fundamental Principles/known as the requisites of municipal taxation. the municipality could exercise the powers granted to it solely and could not exercise the powers granted to the province or to the barangay. It should not accrue to the other city. d By the same token. cities. then the common limitation do not apply. the local government unit levying the tax. Public purpose – As applied to local government taxation. Common limitations on the taxing powers of LGU’s /known as exclusionary rule/rule of preemption/rule of reservation. Except: Provinces and cities could impose a tax on transfer of real property ownership. gifts. charge or other imposition unless otherwise specifically provided herein. oppressive. So. fee. Each local government unit shall. These common limitations are for the purpose of limiting the exercise of revenue raising power as well as the power of taxation. b. registration fees of vessel and wharfage on wharves. because the city could exercise the powers that had been granted to the province and to the municipality but not that of the barangay. if the problem says that the imposition was made under police power.because the common limitations are the taxes that are authorize for the national government to be exercise to the exclusion of the local government units. Analyze the problem.A city or municipality may levy business taxes on banks and other financial institution. 2. Taxes. 4. The following fundamental principles shall govern the exercise of the taxing and other revenueraising powers of local government units: a. or in the restraint of trade. as far as practicable. public policy. national economic policy. not be unjust. Income tax. and. municipalities.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Taxation shall be uniform in each local government unit. charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned ***Taxes. not be contrary to law.known as the Let Principle d. b. *Customs duties. Uniform throughout the political subdivision c. GATCHALIAN local government units to private enterprises. or other taxes. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of. it is the benefit of the local government concerned solely. except when levied on banks and other financial institutions. and barangays shall not extend to the levy of the following: a. 3. So if any of the limitations had been violated since they are standard for the validity of the tax law. charges and other impositions shall in no case be let to any private person. fees or charges in any form whatsoever upon such goods or merchandise. It has not therefore find application in the instance where 19 . e. Without tax ordinance LGU could not collect. c. Par. be equitable and based as far as practicable on the taxpayer's ability to pay. c. and all other kinds of customs fee. be levied and collected only for public purposes. There has still to be a tax ordinance to be passed by the local government unit before the local government could collect taxes. Reason – the concept of police power it much more urgent than the power of taxation. However with respect to the city. 133. Exception . or confiscatory. The limitations are considered as standards that must be complied by the tax law. e. d. Fair and reasonable to the taxpayers. Let principle – The imposition. fees. or passing through the territorial jurisdictions of LGUs in the guise of charges for wharfage. then the tax law is invalid. ***The power of taxation does not limit the exercise of police power. charges and other impositions shall: 1. evolve a progressive system of taxation The power to impose a tax. inheritance. the exercise of the taxing powers of provinces. fees. and be subject to the disposition by. fee. The collection of local taxes. tonnage dues.

fees. Franchise Tax. For revenue only – The power of taxation to be exercised jointly with the police power. CA] f. *Tax on Transfer of Real Property Ownership [Sec. 151. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than 50% except the rates of professional and amusement taxes. Taxes on business enterprises certified by the BOI as pioneer or non-pioneer for a period of 6 and 4 years. sand. Reason – in order to discourage the proliferation of non-useful occupation. i. or charges. supervision and control that is with respect to the regulation of nonuseful occupations. and RA 6938. Percentage taxes – There should be a direct relations between the tax and the sale. sand. When it is not a percentage tax – tax of 1 centavo for 1 gallon produce. g. fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. Taxes. GATCHALIAN it is an exercise of police power. the city. Reason – The tax imposed by the province is an excise tax. Taxes. or exercise of an activity. however. Professional Tax [Sec. except as otherwise provided herein. Taxes on premiums paid by way of reinsurance or retrocession. 136] franchise tax [Sec. l. Taxes on the gross receipts of transportation contractors and persons engaged in the 20 . 136] 3. however. CA] 4. Taxing power of a City *SEC. 140] The legislative intent was to place professional basketball games within the ambit of national taxation. fees or charges of any kind on the National Government. carrying on. regulation or restriction of non-useful occupations or for revenue only. For the regulation of useful occupations and enterprises . except tricycles. *Taxes. It is not prohibited to impose a producers tax or manufacturer’s tax. k. barter. and LGUs. respectively. Taxes. The province can. or other charges on Philippine products actually exported. 140] at rates dependent upon certain percentage. Tax on Sand. the weakness of one power could be overcome by the strength of the other. and charges which the province or municipality may impose: Provided. Gravel and Other Quarry Resources [Sec. safety or morals then it is not subject to this limitation such as for example inspection fees. on countryside and barangay business enterprises and cooperatives duly registered under RA 6810. gravel. 137] and amusement tax [Sec. determine whether or not it is a regulation of useful occupations. The tax imposed must be a percentage or value added tax 2. fees. 135] 2. transportation of passengers or freight by hire and common carriers by air. n. or exchanges. The taxing power of a city is that which is exercise by the municipality or a province. fees. and taxes. h. OLIVER R. 5. Except as otherwise provided in this Code. Requisites 1. its agencies and instrumentalities. fees or charges on petroleum products. land or water. or exchanges or similar transactions on goods or services. For example 1 centavo per litter sold. 3. Taxing Power of Province 1. barters. If there is a joint exercise of these two powers. It must be on sale. earth and other quarry resources extracted from private lands. may levy the taxes. 138] Province has no authority to impose taxes on stones. *Excise taxes on articles enumerated under the NIRC. **Classes of licenses that may be imposed by the LGU’s 1. So if what is regulated is a nonuseful occupation then the amount collected could exceed the cost of special regulation. fees. That the taxes. Scope of Taxing Powers. earth and other quarry resources extracted from public land because it is expressly empowered to do so under the LGC [PROVINCE OF BULACAN v. from the date of registration. For the regulation or restriction of non-useful occupations and enterprises – The license fee collected could exceed the cost of special regulation. j. impose a tax on stones. o. Examples of exception The province may imposes taxes on the business of printing and publications [Sec. If the imposition is for the protection of health.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. or charges on agricultural and aquatic products when sold by marginal farmers or fishermen. supervision and control. Taxes. fee. supervision and control. Percentage or VAT on sales. being a tax upon the performance. m.In order for a license fee to be valid it should not exceed the cost of special regulation. Tax on Business of Printing and Publication [Sec. except on the operation and franchising of tricycles. 139 Amusement Tax [Sec. as is presently being taxed under the provision of NIRC [PBA v. gravel. or charges for the registration of motor vehicles and for the issuance of all kinds of licences or permits for the driving thereof. So if the issue is the validity of the license fee. 2.

c. What is being tax is the exercise of a profession. receipts. prescriptions. Any person subject to the professional tax shall write in deeds. 141] ***The taxing power of the province may also be exercised by a city but not by a municipality or barangay. Scope of the taxing power Tax on business A tax on business is distinct from a tax on the article itself. reports. or fee for the practice of such profession. Taxing power of a Municipality Annual fixed tax for every delivery truck or van of manufacturers or producers. PERSONAL NOTES OF Atty. d. The basis for local business tax is gross receipt and not gross revenue. The tax is to be paid only once. plans and designs. under whatever name. the payment of which is yet to be received. Gross receipts . on or before the 31st day of January. 142. **Whether or not a professional is engaged in the practice of his profession and therefore subject to the payment of a professional tax . surveys and maps. The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination at such amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed P300. The imposition of local business tax based on petitioner’s gross revenue will inevitably result in the constitutionally proscribed double taxation – taxing of the same person twice by the same jurisdiction for the same thing – inasmuch as petitioner’s revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid [ERICSSON TELECOM v. Professional Tax a. Likewise there should be no other professional tax to be collected under whatever guise. municipalities may levy taxes. Scope of Taxing Powers. and charges not otherwise levied by provinces. or retailers in. Professionals exclusively employed in the government shall be exempt from the payment of this tax. It includes gross receipts plus those that have not been paid for yet. or any board or other examination conducted by the PRC. That such person who has paid the corresponding professional tax shall be entitled to practice his profession in any part of the Philippines without being subjected to any other national or local tax. then the other province or cities are already precluded from making the collection. Situs of the Tax The tax is about the business tax. however. Every person legally authorized to practice his profession shall pay the professional tax to the province where he practices his profession or where he maintains his principal office in case he practices his profession in several places: Provided. OLIVER R. ***It is the concept of habituality and or compensation that makes a person in the practice of a profession. The importance of distinction between gross receipt and gross revenue is that if the local government unit would be taxing on the basis of gross revenue it would be stricken down because of double taxation. A line of profession does not become exempt even if conducted with some other profession for which the tax has been paid. Any person first beginning to practice a profession after the month of January must. ***SEC. Such that if the tax has already been paid in one city or province. fees. e. wholesalers of. GATCHALIAN The tax imposed is in accordance with the taxing ordinance but should not exceed P300. exchanged or leased.include money or its equivalent actually or constructively received in consideration of services rendered or articles sold. Reason – The gross receipts are part of gross revenues already previously tax and then when you report the gross revenues you will be subject to tax again on the same gross receipts. What city or municipality has the power to collect the business tax. b. Except as otherwise provided in this Code. as the case may be. SEC. certain products [Sec. 21 .NOTES & CASES IN TAXATION 6. however.Customarily or habitually holding himself out to the public as a professional and or demanding compensation as such. dealers. 139. CITY OF PASIG GR 176667 November 22. license. The professional tax shall be payable annually. 2007] **SEC. The professionals subject to the professional tax are only those who have passed the bar examinations. exchanged or leased. books of account. the number of the official receipt issued to him. pay the full tax before engaging therein. Any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter.covers money or its equivalent actually or constructively received including the value of services rendered or articles sold. whether actual or constructive Gross revenue . 150.

a. Taxing power of a barangay SEC. Branch or sales office or warehouse Sales must have been made from the branch sales office or warehouse and the products and the goods should have originated from the branch or sales office or warehouse. a. and 2. 60% . or in the place where the principal office of the juridical entity is located. 22 . In that case. claimed is One million pesos and above. 40% . fees. fees or charges assessed before the effectivity of this Code may be collected within a period of 3 years from the date of assessment. or charges. Principal office The place shown in the different documents that are reported to the government. Cities or municipalities may levy a community tax in accordance with the provisions of this Article. a factory. shall be instituted after the expiration of such period: Provided. That taxes. fees. SEC. fees. exclusive of charges and penalties. Local taxes. In case of fraud or intent to evade the payment of taxes. taxes. That. However the CTA Division may exercise an exclusive original jurisdiction where the principal amount of taxes and fees. LGC] Judicial Action for collection The LGU concerned may enforce the collection of delinquent taxes. 173 & 174. or charges. and charges. 70% of all gross sales shall be taxable by the city or municipality where the factory. SEC 160. 156. 4th A main office.NOTES & CASES IN TAXATION Scenarios 1st PERSONAL NOTES OF Atty. All sales throughout the Philippines other than where there is a branch or sales office would have to be reported still in the place where the main office is located. fees. It shall be reported in the Pasig. Civil remedies Distraint of personality Levy upon realty Compromise Judicial action [Sec. Transient visitors when their stay in the Philippines does not exceed 3 months. warehouse or factory. Exemptions. GATCHALIAN Community Tax A main office with no branch sales office. Any competent court – it is the MTC or the RTC depending upon the jurisdictional amount. project office. No such action shall be instituted after the expiration of said period: Provided. OLIVER R. Periods of Assessment and Collection. No action for the collection of such taxes. or plantation is located. 2nd A main office with branch or sales office or warehouse. Place of Payment. plant. as provided in this Article. what happens is that all sales that are made within the municipality or city where the branch or sales office or warehouse is located. 30% . 152. c. Local governments lien 2. 159. SEC.Principal Office 70% shall be divided as follows. charges or other revenues By civil action in any court of competent jurisdiction The civil action shall be filled within 5 years from the date taxes. or charges shall be assessed within 5 years from the date they became due. Other fees and Charges.to the city or municipality where the plantation is located. The amount of tax would have divided to the extent of 70-30. or plantation in different locations but no branch or sales office. all sales there should be reported in that municipality or city. b. a project office. The following are exempt from the community tax: 1. 3rd A main office with a factory. fees. however. the same may be assessed within 10 years from discovery of the fraud or intent to evade payment. fees. Taxes. b.To the city or municipality where the factory is located. Taxpayer’s remedies for Assessments ***SEC 194. 30% -Principal Office 70% -To the Factory If there are numerous factories. Scope of Taxing Powers. whether administrative or judicial. Service Fees or Charges c. plant. or charges may be collected within 5 years from the date of assessment by administrative or judicial action. or charges become due. 30% of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located. Civil remedies of LGU for collection of revenues 1. Ex. Local taxes. fees or charges which have accrued before the effectivity of this Code may be assessed within a period of 3 years from the date they became due. Barangay Clearance d. 70% shall be allocated pro rata depending upon the quantity of production. The community tax shall be paid in the place of residence of the individual. A main office in Pasig and no branch sales office throughout the Philippines and in that case. The barangays may levy taxes. all sales made throughout the Philippines shall be subject to tax in Pasig. which shall exclusively accrue to them. and a branch sale office. fees. Diplomatic and consular representatives.

claimed is One million pesos and above. otherwise. finally. The local treasurer shall decide the protest within 60 days from the time of its filing. the amount of deficiency. he shall issue a notice cancelling wholly or partially the assessment. If the local treasurer finds the protest to be wholly or partly meritorious. Mandatory Public Hearings. Within ten 10 days after their approval. fee. fee. fee. **SEC. ***SEC 196. city. the surcharges. further. certified true copies of all provincial. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided. exclusive of charges and penalties. fees. through ordinances duly approved. the taxpayer may file a written protest with the local treasurer contesting the assessment. and municipal tax ordinances or revenue measures shall be published in full for 3 consecutive days in a newspaper of local circulation: Provided. 188. The competent court referred to is the RTC or the MTC depending upon the jurisdictional amount. or charge. Illegally collected Procedure for Approval and Effectivity of Tax. However. however. grant tax exemptions. That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided. Local government units may. The treasurer is legally prevented from making the assessment of collection. Authority to Grant Tax Exemption Privileges. No case or proceeding shall be entertained in any court after the expiration of 2 years from the date of the payment of such tax. The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect. The taxpayer is out of the country or otherwise cannot be located. cities and municipalities where there are no newspapers of local circulation. Erroneously collected 2. and 3. The competent court – RTC Publication of Tax Ordinances and Revenue Measures.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. ***SEC. When the local treasurer or his duly authorized representative finds that correct taxes. Protest of Assessment ***SEC. No case or proceeding shall be maintained in any court for the recovery of any tax. however. or from the date the taxpayer is entitled to a refund or credit Grounds for refund 1. The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which: 1. or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. if the local treasurer finds the assessment to be wholly or partly correct. he shall deny the protest wholly or partly with notice to the taxpayer. or charge levied therein: Provided. That in provinces. An adverse decision of the RTC may be appealed to the CTA Division within 30 days from receipt of the RTC decision through a petition for review The adverse decision of the CTA Division may be the subject of a Motion for Reconsideration or a motion for a new trial directed to the CTA En banc within 15 days from receipt of the adverse decision The adverse decision of the CTA En banc may be the subject of a petition for review on certiorari directed to the SC within 15 days from receipt of the adverse decision of the CTA extendible for 30 days. fee. he shall issue a notice of assessment stating the nature of the tax. 192. SEC. The taxpayer shall have 30 days from the receipt of the denial of the protest or from the lapse of the 60 day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable. 187. 195. or charges have not been paid. That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax. Within 60 days from the receipt of the notice of assessment. incentives or reliefs under such terms and conditions as they may deem necessary. OLIVER R. or charge. That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within 30 days from the effectivity thereof to the Secretary of Justice who shall render a decision within 60 days from the date of receipt of the appeal: Provided. Ordinances and Revenue Measures. GATCHALIAN Claim for Refund of Tax Credit d. 2. the same may be posted in at least 2 conspicuous and publicly accessible places. 23 . That within 30 days after receipt of the decision or the lapse of the 60day period without the Secretary of Justice acting upon the appeal. the aggrieved party may file appropriate proceedings with a court of competent jurisdiction Local taxing power and authority – exercised by the Sanggunian through an appropriate ordinance. However the CTA Division may exercise an exclusive original jurisdiction where the principal amount of taxes and fees. interests and penalties. the assessment shall become final and executory.

Special levy is not a tax but an imposition to recover at least 6% of the public works expenditures of a local government. including mobile equipment which are essential to an industry. and to encourage utilization of land resources in order to contribute to national development. 232. and ad valorem tax on idle land but they are authorized to impose special levy. 235 3.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Basic Real Property Tax REAL PROPERTY TAXATION These are direct taxes imposed on the privilege to use real property such as land. Furthermore. Additional Levy on Real Property for the Special Education Fund. Who may levy real property tax a. building. Real property shall be classified. 232 & 233 2. valued and assessed on the basis of its actual use regardless of where located. ***They are imposed on use and not ownership. In the case of a city or a municipality within the Metropolitan Manila Area. Rates of Levy. ***For purposes of real property taxation real properties may be 1. Actual Use of Real Property as Basis for Assessment. 233. Ad valorem tax on idle land . at the rate not exceeding 2% of the assessed value of real property. ***SEC. City c. may levy and collect an annual tax of 1% on the assessed value of real property which shall be in addition to the 24 . and b. Personal property that are attached to an immovable parcel of land or a building by one who is not the owner of the parcel of land or building. That defines as immovables under Art. and whoever uses it. municipality within the Metropolitan Manila Area Municipalities outside Metro Manila are not authorized to levy basic real property tax. building. hence. the term real property may include things which should generally be SEC. ***Gasoline station equipment and machinery necessary to the operation of a gas station and which are attached or affixed permanently thereto or embedded therein are taxable improvements and machinery. The basic real property tax under sec. exemptions are all premised upon use not ownership 5. A province or city. Special Education Fund/SEF SEC. 4. which are personal property are essential and principal elements of the business being conducted in said land or building 3. A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows: a. whoever owns it. However property which are merely incidentals acquired and used only for expediency or improve services are not part of real property. Domondon – There are only 3 real property tax. OLIVER R. Reason – They are immobilized by destination because they are essential and principal elements of the business of operating a gasoline station. 415 CC. Province b. *Doctrine of essentiality . Real property taxes are local taxes not national taxes 4. at the rate not exceeding 1% of the assessed value of real property. The additional levy on real property for the special education fund under Sec. A province or city or a municipality within the Metropolitan Manila Area my levy an annual ad valorem tax on real property such as land. SEC. CBAA] Power barges are categorized as immovable property by destination. 217. Ad valorem tax based on the assessed value of a property 3. Power to Levy Real Property Tax. Province of Batangas 516 SCRA 187] 4 real property taxes/Kinds of imposition in real property 1. Special Levy According to Prof.the property to be considered immobilized for real property taxes must be essential and principal elements of an industry without which such industry or works would be unable to function or carry on the principal industrial purpose for which it was established. GATCHALIAN regarded as personalty under the Civil Law [CALTEX v. In the case of a province. machinery. special education fund. Machinery. machinery and other improvements unless specifically exempted Nature of real property taxes 1.Purpose of imposing ad valorem taxes on idle land – To penalize property owners who do not use their property productively. 235. for purposes of taxation. 2. *For real property tax purposes such personal properties may be considered as real property. They are progressive in character depending to a certain extent on the use and value of the property. or a municipality within the Metropolitan Manila Area. and other improvement not hereinafter specifically exempted. being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work [FELS ENERGY v. Direct taxes whose burden cannot be shifted by the one who pays to the other person 2. if they are essential and principal elements of the business being conducted in said land or building and must have been placed by one who is not the owner of the land or building.

other than agricultural. state the estimated cost thereof. Ordinance Imposing a Special Levy SEC. That. to establish a uniform percentage of all lands subject to the payment of the tax for the entire district. may levy an annual tax on idle lands at the rate not exceeding 5% of the assessed value of the property which shall be in addition to the basic real property tax. the proceeds shall be divided equally between the provincial and municipal school boards: Provided. That the special levy shall not exceed 60% of the actual cost of such projects and improvements. however. The proceeds thereof shall exclusively accrue to the SEF. 4. The sanggunian concerned shall not be obliged. construction and repair of school buildings. projects and other improvements shall accrue to the general fund of the local government unit which financed such public works. That the proceeds shall be allocated for the operation and maintenance of public schools. educational research. notify in writing the owners of the real property to be affected or the persons having legal interest therein as to the date and place thereof and afford the latter the opportunity to express their positions or objections relative to the proposed ordinance. more than 1 hectare in area. GATCHALIAN basic real property tax. For purposes of real property taxation. inland fishery. or a municipality within the Metropolitan Manila Area. Ad Valorem Tax on Idle Lands 3. Special Levy by LGUs. projects or other improvements. but it may fix different rates for different parts or sections thereof. purchase of books and periodicals. Lands actually used for grazing purposes shall likewise not be considered idle lands [Art. residential lots in subdivisions duly approved by proper authorities. and other agricultural uses. 237 except for minor changes for review purposes] municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: Provided. suitable for cultivation. and sports development as determined and approved by the Local School Board. m. 2. Municipalities even if outside the Metropolitan Manila Area may impose the special levy since Sec. Agricultural lands. 2. **Idle Lands. Idle Lands Exempt from Tax. extent. in case of provinces. facilities and equipment. natural calamity or any cause or circumstance which physically or legally prevents the owner of the property or person having legal interest therein from improving. A province or city or a municipality within the Metropolitan Manila Area may exempt idle lands from the additional levy by reason of 1. in area ½ of which remain unutilized or unimproved by the owner of the property or person having legal interest therein. Lands. 274. unlike Sec. Publication of Proposed Ordinance Imposing a Special Levy **Lands not considered idle and therefore exempted 1. Special Levy/Special Assessments SEC. the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision. A tax ordinance imposing a special levy shall describe with reasonable accuracy the nature. the ownership of which has been transferred to individual owners. The proceeds from the additional 1% tax on real property accruing to the SEF shall be automatically released to the local school boards: Provided. Regardless of land area. SEC. 3. dairying. SEC.000 sq. 242. located in a city or municipality. and shall be subject to the additional tax payable by subdivision owner or operator [Art. 236. OLIVER R. 232 which contains the qualification. utilizing or cultivating the same. depending on whether such land is more or less benefited by proposed work. however. Coverage. 237] **SEC. however. further. the sanggunian concerned shall conduct a public hearing thereon. 240 does not qualify municipalities into within Metropolitan Manila. A province. who shall be liable for the additional tax: Provided. That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of which have been donated to the local government unit concerned for the construction of such projects or improvements. city or SEC. civil disturbance.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. 240. Proceeds of the Special Levy. That individual lots of such subdivisions. Application of Proceeds of the Additional One Percent SEF Tax. idle lands shall include the following: 1. including the costs of acquiring land and such other real property in connection therewith: Provided. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare shall not be considered idle lands. Before the enactment of an ordinance imposing a special levy. The proceeds of the special levy on lands benefited by public works. specify the metes and bounds by monuments and lines and the number of annual installments for the payment of the special levy which in no case shall be less than 5 nor more than 10 years. 272. and location of the public works projects or improvements to be undertaken. more than one 1. force majeure. SEC. Taxpayer's Remedies against Special Levy 25 . 241. 238. 2. ½ of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. A province or city. in the apportionment and computation of the special levy.

When any person. The appraisal. refuses or fails for any reason to make such declaration within the time prescribed. 202. city or municipal assessor. 198] 5. d. natural or juridical. through their respective sanggunian. The appraisal. ***Taxpayer’s remedies in classification & assessments 1. 226 – 231. agricultural. including the improvements therein. 215. and file with the provincial. OLIVER R. Within 30 days from receipt of the CBAA’s adverse decision. real property shall be classified as residential. SEC. and shall assess the property for taxation in accordance with the provision of this Title. assessor. levy and collection of real property tax shall not be let to any private person. c. Actual Use . All real property. 217. Real property shall be assessed on the basis of a uniform classification within each local government unit. the LBAA decides. natural or juridical. 244. 204. assessment. if known. SEC. b. Real property shall be classified for assessment purposes on the basis of its actual use. Actual Use of Real Property as Basis for Assessment. 4. a sworn statement declaring the true value of subject property. 202 hereof. mineral. An adverse decision of the CTA may appeal to the SC within 15 days from receipt of the judgment through a 26 . which shall be the current and fair market value of the property. and file with the provincial. the provincial. or special in accordance with their zoning ordinances. 198. 203.is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy Fair Market Value declared by the owner subject to final determination by the assessor supposed to be the actual value of the real property in the open market Assessed Value determined by the application of the assessment level to the FMV Merely percentage of the FMV depending on the assessment level of the property in question SEC. Fundamental Principles. owning or administering real property. Appraisal of Real Property. taxable or exempt. to prepare. city or municipal assessor. Real property shall be appraised at its current and fair market value. mineral. The authorize limitation under the RA 7160 4. levy and collection of real property tax shall be guided by the following fundamental principles: a. whether previously declared or undeclared. whoever owns it. Within 30 days from revision of the assessment. SEC. Real property shall be classified. whether taxable or exempt. Constitutional limitations 3. It shall also be the duty of any person. industrial. assessment. as the case may be. appraise. within 60 days after the acquisition of such property or upon completion or occupancy of the improvement. assessment. whichever comes earlier. a sworn statement declaring the true value of their property. and whoever uses it. Fundamental principles of appraisal. the assessor furnishes the declarant of copy of the new or revised assessment [Sec. agricultural. shall be appraised at the current and fair market value prevailing in the locality where the property is situated. Within30 days from receipt of the LBAA’s adverse decision. Owners can appeal to the LBAA and to CBAA as provided in Secs. For purposes of assessment. by whom real property is required to be declared under Sec. Classes of Real Property for Assessment Purposes. within a city or municipality. and e. Declaration of Real Property by the Assessor. levy and collection of real property tax [Sec. or cause to be prepared. GATCHALIAN SEC. commercial. Such declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes.refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof [Sec. The appraisal and assessment of real property shall be equitable. levy and collect real property taxes 1. Inherent limitations 2. timberland. or cause to be prepared. The city or municipality within the Metropolitan Manila Area. ***SEC. dissatisfied property owner appeals to the CBAA whose decision are final and executory 5.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. The real property taxes collected shall accrue exclusively to the benefit of the LGU concerned. industrial. Limitations on the power of the local government to administer. shall have the power to classify lands as residential. Declaration of real Property by the Owner or Administrator. No oath shall be required of a declaration thus made by the provincial. acquiring at any time real property in any municipality or city or making any improvement on real property. or against an unknown owner. the dissatisfied property owner may appeal to the CTA En banc by filing a verified petition for review 6. LGC. Fair Market Value . The purpose of a tax declaration is to determine the assessment levels and does not bind the assessor. 201. Duty of Person Acquiring Real Property or Making Improvement Thereon. city or municipal SEC. or his authorized representative. Within 120 days from receipt. Within 60 days from the receipt of the new or revised assessment the dissatisfied owner or person having legal interest in the property appeals to the LBAA under oath with copies of tax declaration and evidence 3. timberland or special. or their duly authorized representative. as determined by the declarant. commercial. valued and assessed on the basis of its actual use regardless of where located. to prepare. 223] 2. It shall be the duty of all persons. 199 b] ***SEC. city or municipal assessor shall himself declare the property in the name of the defaulting owner.

directly and exclusively used for religious. mosques. charitable. What is exempted is not the institution itself but the lands. 270 in relation to Sec. the property shall be listed as taxable in the assessment roll. to a taxable person. Exercise of lien on the property subject to tax [Sec. for consideration or otherwise. city or municipal assessor within 30 days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters. 256] Inadequacy of sale price does not invalidate a tax sale upon the theory that the lesser the price. But the imposition of special levy requires public hearing under Sec. and exclusively used for religious. Remedies for collection of real property tax 1. The Local Government Code 3. Proof of Exemption of Real Property from Taxation. directly and exclusively used for religious. charitable or educational purposes [LUNG CENTER v. 3] Charitable institutions. What is exempted is not the institution itself those exempted from real estate taxes are lands. OLIVER R. VI SEC. buildings and improvements actually. or educational purposes shall be exempt from taxation. INC. without prejudice to subsequent adjustment depending upon the final outcome of the appeal. affidavits. actually.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. 223 to give written notice within 30 days of such assessment to the person in whose name the property is declared. Sources or basis of exemptions from the payment of real property taxes 1. and similar documents. contracts. Administrative Action a. churches and parsonages or convents appurtenant thereto. certifications and mortgage deeds. and all lands. The principle of comity in international law 5. The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial. 246 & 258] c. ASSOC. buildings and improvements actually. Tax Legislation No public hearing shall be required before the enactment of a local tax ordinance levying the basic real property tax. OF BENEVOLA 524 SCRA 128] 27 . Distraint of personal property [Sec. direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized [supra] If real property is used for one or more commercial purposes. v. 242. Related Provision SEC. and improvements. executory and demandable [supra] ***ART. GATCHALIAN verified petition for review on certiorari raising only questions of law. 231. An assessment fixes and determines the tax liability of a taxpayer. This exemption applies only to property taxes. If the required evidence is not submitted within the period herein prescribed. articles of incorporation. 254 b] b. city or municipal assessor in the assessment of the property [FELS ENERGY. Judicial Action – The LGU may enforce the collection of real property tax by civil action in any court of competent jurisdiction filed by Local treasurer within 5 years from the date real property taxes and special levies becomes due [Sec. As soon as the notice is duly served. the easier it is for the owner to effect redemption. Local Tax exemptions ordinance Constitutional Provision Every person by or for whom real property is declared. 28. non-profit cemeteries. the same shall be dropped from the assessment roll. Provisions of special law 4. Levy on the real property subject of the tax [Sec. an obligation arises on the part of the taxpayer to pay the amount assessed and demandable. then the property is subject to tax. it is not exclusively used for the exempted purposes but is subject to taxation [supra] The exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore. Effect of Appeal on the Payment of Real Property Tax. 206. QUEZON CITY] What is meant by actual. title of ownership.. Conversely even if the property is owned by the government if the beneficial use has been granted. by-laws. The test of exemption from taxation is the use of the property for purposes mentioned in the constitution. The 1987 Constitution 2. 256 & 258] 2. SEC. who shall claim tax exemption for such property under this Title shall file with the provincial. Appeal on assessments of real property made under the provisions of this Code shall. The assessor is mandated under Sec. directly. if the property shall be proven to be tax exempt. suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor. in no case. but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes [CITY ASSESSOR OF CEBU v. However. charitable and educational purposes. buildings. PROVINCE OF BATANGAS 516 SCRA 186] The taxpayer’s failure to question the assessment in the LBAA renders the assessment of the local assessor final.

133(o) LGC [supra] d. the Airport Lands and Buildings are outside the commerce of man [supra] The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. directly. Procedure for refund of real property taxes based on the validity of the tax measure or solution indebeti 1. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not [supra] User’s tax . directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and SEC. mosques. or any other tax levied. owner can appeal to the LBAA and to the CBAA as provided in Sec. If not paid under protest. e. In case of a general failure of crops or substantial decrease in the price of agricultural or agribased products. claim must be direct to the local treasurer. 276. The real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax [MIAA v. c. The following are exempted from payment of the real property tax: a. Reduction and refund of real property taxes ***Payment under Protest a. protest is to be made in writing and within 30 days from payment d. 3. or presently enjoyed by. the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within 2 years from the date the taxpayer is entitled to such reduction or adjustment. b. The decision of the CTA Division may be the subject of a review by the CTA En banc 5. is found to be illegal or erroneous and the tax is accordingly reduced or adjusted. 234 Exemptions from Real Property Tax. SEC. non-profit or religious cemeteries and all lands. Condonation or Reduction of Real Property Tax and Interest. GATCHALIAN MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. b. but whether it is a national government instrumentality under Sec. 226 -231 LGC. e.this means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility [supra] MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic [supra] The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. All real property owned by duly registered cooperatives as provided for under RA 6938. Machinery and equipment used for pollution control and environmental protection.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. and improvements actually. Charitable institutions. All machineries and equipment that are actually. charitable or educational purposes. c. Except as provided herein. churches. parsonages or convents appurtenant thereto. 28 . Such arrangement does not result in the loss of the tax exemption [supra] However. Payment under protest is not required. When an assessment of basic real property tax. 253. There shall be annotated on the tax receipts the words "paid under protest". Real property owned by the RP or any of its political subdivisions except when the beneficial use thereof has been granted. The provincial or city treasurer shall decide the claim for tax refund or credit within 60 days from receipt thereof. portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax [supra] The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person. all persons. for consideration or otherwise. buildings. In case the claim for refund or credit is denied. CA 495 SCRA 591] The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion. the review being the initial cognizance of the matter. OLIVER R. any exemption from payment of real property tax previously granted to. The denial by the local treasurer of the protest would fall within the RTC’s original jurisdiction. The decision of the CTA En banc] may be the subject of a petition for review on certiorari on pre questions of law directed to the SC. 226 -231 LGC. If decision is adverse or no decision within the prescribed 60 days. The treasurer shall decide within 60 days from receipt of protest. and exclusively used for religious. whether natural or juridical. The decision of the RTC should be appealed by means of a petition for review directed to the CTA Division 4. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. who must decide within 60 days from receipt 2. to a taxable person. Refund/Repayment of Excessive Collections ***SEC. the taxpayer can appeal to the LBAA and the CBAA as provided in Sec. distribution of water and/or generation and transmission of electric power. No protest shall be entertained unless the taxpayer first pays the tax.

Condonation or Reduction of Tax by the President of the Philippines. Violation of the tariff and customs laws refers to the act of failure to pay the duties. Customs and tariffs are synonymous with one another because they both refer to the taxes imposed on imported or exported wares.Dumping Duty – refers to a special duty imposed on the importation of a product. the sanggunian concerned. *Regular tariffs or customs duties – These are the taxes that are imposed or assessed upon merchandise from or exported to. Normal value refers to a comparable price at the date of sale of the like product. OLIVER R. commodity or article after formal investigation and affirmative finding of the Tariff Commission 3. articles. The Sec. They may be also imposed to serve as protective barriers which would prevent the entry of merchandise that would compete with locally manufactured items [referred as tariff barriers or protective barriers] 2. commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting country. commodity or article has caused or threatens to cause material injury to a domestic industry or has 29 . 277. Kinds of tariff or customs duties 1. of Trade and Industry in the case of nonagricultural product. at a price less than its normal value when destined for domestic consumption and such exportation 2. taxes. Requisites for the Imposition 1. may condone or reduce. Custom duties. The Sec. or merchandise. by ordinance passed prior to the 1st day of January of any year and upon recommendation of the Local Disaster Coordinating Council. commodity or article of commerce is exported to the Phil. TARRIF & CUSTOMS TAXATION Tariff **Means taxes and customs refer to the required procedure for importation to. ***Kinds of special custom duties under the TCC 1. **Countervailing duty – Additional customs duties imposed on any product. products from undue competition posed by foreign made products. or materially retarding the establishment of a domestic industry producing the like product. commodity or article destined for consumption in the exporting country. commodity or article or 2. They are imposed for the protection of consumers and manufacturers as well as the Phil. commodity or article. the taxes and interest thereon for the succeeding year or years in the city or municipality affected by the calamity. Even when all the requirements for the imposition have been fulfilled. when public interest so requires. commodity or article. The present basis is the transaction value of the imported articles. commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation any kind or form of specific subsidy upon the production. and exportation from the Philippines of articles. manufacture or exportation of such product commodity or article and the importation of such subsidized product. and other charges due from imported or exported articles or that the proper customs procedures were not followed. 3. *Special tariffs or customs duties – are additional import duties imposed on specific kinds of imported articles under certain conditions. toll or tribute payable upon merchandise to the general government or rate of customs or list of articles liable to duties Custom duties Taxes on the importation and exportation of commodities or tariff or taxed assessed upon merchandise from or exported to. a foreign country. Imposing authority for anti-dumping duty 1. Kinds of regular custom duties 1. Ad valorem custom duties – These are the custom duties that are computed on the basis of the value. The President of the Philippines may. or calamity in any province. which is causing or is threatening to cause material injury to a domestic industry. Specific custom duties – Custom duties that are computed on the basis of a unit of measure Mixed or compound custom duties – Custom duties that impose both ad valorem and specific custom duties. commodity or article in the ordinary course of trade when destined for consumption in the country of export. *Dumped import/product Refers to any product commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade. GATCHALIAN 2. a foreign country for the purpose of raising revenues. SEC. The anti-dumping duty is imposed where a product. It is the difference between the export price and the normal value of such product. the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission 2. for the like product. city or municipality. which is the difference between the export price and the normal value of such product.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. condone or reduce the real property tax and interest for any year in any province or city or a municipality within the Metropolitan Manila Area. wholly or partially. Anti . of Agriculture in the case of agricultural product. Is causing or is threatening to cause material injury to a domestic industry or materially retarding the establishment of a domestic industry producing the like product.

The authorization granted to the President must be embodied in a law 3. 401 TCC] The imposition under the flexible tariff clause fall within the realm of the power of taxation. GATCHALIAN is nonagricultural product materially retarded the growth or prevents the establishment of a domestic industry. Countervailing duty Imposed on imported items granted a specific subsidy upon their production. of DTI if it Shall be equivalent to the subsidy and discriminatory duty shall not exceed 100% ad valorem of the articles Should not exceed 5% ad valorem of the articles. tonnage and wharfage dues. a power which is within the sole province of the legislature under the Constitution. imposed by the President of the Phil. CEMENT MANUFACTURERS ASSOC. Subvention – Any assistance other than a bounty or subsidy given by a government for the manufacturer and/or exportation of an article 3. tonnage and wharfage dues. The imposing authority is the same Kinds of specific subsidies 1. Without Sec. Provided that the increase should not be higher 100% ad valorem 2. reduce or remove existing protective rates of import duty. The duty shall be 5% ad valorem of the articles. the name of the country of origin. Imposing authority is the Comm. including tariffs to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. the President.Shall be equal to the difference between the actual price and the normal value of the article. import and export quotas. v. of Agriculture if the article in question is an agricultural product or the Sec. authorize the President to fix within specified limits. and subject to such limitations and restrictions as it may impose. **Discriminatory duty – are special duties collected in an amount not exceeding 100% ad valorem. The additional tariff rates that may be imposed by the Pres. **Marking duty – Additional customs duties imposed on foreign articles [or its article if the article itself cannot be marked] not marked in any official language of the Phil. and shipped to a foreign country. Imposing authority is the Secretary of Agriculture. 2. 1. 2] In the interest of national economy.The authority that determines the imposition of duty is the Sec. of Customs. at a disadvantage compared with the commerce of any foreign country Marking duty The failure to mark the article of the container Additional tariff imposed as a safeguard measure under the safeguard measures act [SMA] Safeguard measures – These are the emergency measures. upon recommendation of the NEDA is empowered. Bounty – Cash reward paid to an exporter or manufacturer 2. commerce or against goods coming from the Phil. manufacture or exportation Discriminatory duty Imposed on articles of or imported in a vessel of any foreign country which in any manner places the commerce of the Phil. to increase. To impose an additional duty on all imports not exceeding 10% ad valorem 4.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Other safeguard measures may include tariff rate quotas or quantitative restrictions on the importation of a product into the country. by law. Anti –dumping duty Basis premised on importation and sale of imported item and below their normal value causing or likely to cause injury to local industry ***The Congress may. of Trade and Industry if the article is a nonagricultural product who shall apply a general safeguard measure upon a positive final determination of the Tariff Commission ***Basic postulates on the grant of tariff powers to the President 1. Subsidy – Fiscal incentives not in the form of direct cash award to encourage manufacturers or exporters 3. tariff rates. To establish import quota or to ban imports to any commodity 3. against goods of a foreign country which discriminates against Phil. It is Congress which authorizes the President to impose tariff rates. The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations and restrictions which Congress may impose [SOUTHERN CROSS CEMENT CORP. and subject to the limitations herein prescribed. general welfare and/or national security. 465 SCRA 532] Flexible tariff clause 4. import and export quotas. OLIVER R. 28(2). VI Sec. Imposing authority . whether ad valoren or specific [Sec. the executive branch has no authority to impose tariffs and other similar tax levies involving the importation of foreign goods [SOUTHERN 30 Rates . 28 par. To modify the forms of duty. Article VI. indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Phil. if the article in questioned is an agricultural products or the Sec. same The President Commissioner Customs of . and other duties or imposts within the framework of the national development program of the Government [Art. in a conspicuous place as legibly. and other duties or imposts.

has 30 days from receipt of the decision to appeal to the CTA. 3. Deductive value 4. associations or organization entitled to exemption pursuant to agreements or special laws. 4.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. buy. freight. If the transaction value could be so determined then the dutiable value shall be determined using the following values one after the other 1. which shall be the price actually paid or payable for the goods when sold for export to the Phil. Checks. A lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the govt. v.wharfage dues partake of the nature of a tax which is collected by the Government to support its operation of the custom service.The procedure is a general procedure and is basically the same for seizure proceedings except that no protest is required The requirement of a prior protest as an exclusive remedy in protestable cases applies only to a situation. 2. CEMENT MANUFACTURERS ASSOC. No protest shall be considered unless payment of the amount due has first been made and the corresponding docket fee paid. and fees and other charges are determined. and other charges illegally accruing 2. If provided under the TCC – the conditionally freeimportation 2. ***Protest and payment under protest in civil matters 1. A written protest setting forth his objection to the ruling together with the reasons therefore. Customs Seizure & Forfeiture Contraband Articles of prohibited importation or exportation. “whereby liability for duties. transportation. sell. Those that may be granted by the Pres. A personal debt due from the importer to the govt. agreements or obligations [requiring such exemptions] with foreign countries 3. taxes. money orders and dollar bills properly fall within the concept of merchandise. Transaction value of similar goods 3. 4. All imported articles subject to custom duties. the Collector shall render a decision within 30 days If the protest is sustained the entry is made If the Collector renders a decision adverse to the government such decisions together with the entire records of the case shall be automatically elevated to the Commissioner of Customs for automatic review If the protest is denied. concealment or sale of such article knowing its illegal importation. Export in any manner contrary to law. which can be discharged only by payment in full of all duties. ***No protest no refund rule The claim for refund of customs duties in protestable cases may be foreclosed by failure to file a written protest. conceal. 31 CROSS CEMENT CORP. Upon termination of the hearing. Those granted to government agencies. Note . When Importation Begins and Deemed Terminated Importation begins from the time the carrying vessel or aircraft enters Philippine territorial jurisdiction with the intention to unload therein and ends at the time the goods are released or withdrawn from the customhouse upon payment of the custom duties or with legal permit to withdraw. Reason . **The basis of dutiable value is the transaction value. except in the imposition of additional duty not exceeding 10% ad valorem which shall take effect at the discretion of the President. GR – No exemption from custom duties Exceptions 1. Adverse ruling of the Collector of Customs imposing custom duties and taxes may be protested By presenting to the collector at the time when payment of the amount claimed to be due the government is made or within 15 days thereafter. insurance and others. The person aggrieved by the decision of the Comm. 465 SCRA 532] When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions. Computed value 5. fees. Articles – goods wares and merchandise and in general anything that may be made the subject of importation or exportation. taxes. adjusted by . GATCHALIAN adding certain cost elements such as cost of containers and packing. *Wharfage fees are collectible even if a private wharf was used or even if the loading or unloading took place at shipside. Fallback value. Smuggling An act of any person who shall fraudulently import any article contrary to law or assist in so doing or receive. commitments. Transaction value of identical goods 2. instrumentalities or GOCC with existing contract. Upon recommendation of NEDA in the interest of national economic development. the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature [supra] *Any order issued by the President pursuant to the flexible tariff clause shall take effect 30 days after promulgation. Known as smuggled goods. to appeal to the Comm. *Liability of importer for custom duties 1. International institutions. facilitate. the aggrieved party has 15 days after notification in writing. OLIVER R.

***Search of dwelling house 1. District Collector’s Renders his decision 9. Determination of the probable cause and issuance of warrant 2. Tax Remedies NIRC TCC Discrepancies in the form of Payment must first be effected additional taxes are not paid if contested There is no need for payment Payment under protest in the under protest before resort to TCC is required CTA is made The Comm. The Regional Trial courts are precluded from assuming cognizance over such matters even through petitions of certiorari. adverse to the government is the subject of an automatic review by the Sec. pass through. prohibition or mandamus. Evidence for conviction in smuggling cases – mere possession of the article in question unless defendant could explain that his possession is lawful to the satisfaction of the court. Listing of descriptions. The specific mandate of Sec. Requisites of smuggling 1. concealed. without satisfactory explanation. days thereafter The Comm. is given a period of No time period is given within 180 days from receipt of the which the Collector must complete supporting decide the protest documents There is no automatic review A decision of the Customs Doctrine of hot pursuit 1. takes action It is the collector who takes action before the Commissioner Protest shall be filed within a Protest shall be made at the period of 30 days from receipt time of payment or within 15 of the assessment notice. That the defendant if he is not the importer himself. such possession shall be sufficient to authorize conviction. must have received. Automatic Review by the Commissioner of Customs While a judicial warrant is not necessary for the actual seizure. water or air and such jurisdiction exerted over them at any place therein as may be necessary for the due enforcement of the law. Issuance by the Collector of a Warrant of detention 6. 602g TCC –the general powers and jurisdiction of the BOC shall include “Exercise exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws”. not being a dwelling house 2. That the defendant must have shown to have knowledge that the merchandise had been illegally imported. Upon sworn application showing probable cause and particularly describing the placed to be searched and person or thing to be seized. Outline of administrative and judicial remedies relative to custom search. Notification to owner or importer 7. ****The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. store. A warehouse. Only upon a warrant issued by a judge of the court. appraisal and classification of seized property 4. a warrant of seizure and detention should be issued in order to justify the continued possession by the BOC of the articles that were without a warrant. bought sold. Report of seizure to the Comm. of Finance. 2. Actual seizure of the articles 3. If the defendant however is shown to have had possession of the illegally imported merchandise. or search any land or enclosure or any warehouse. by land. concealment or sale of the merchandise 3. Formal Hearing 8. ***Reasons for vesting exclusive jurisdiction upon Collector of Customs 1. GATCHALIAN process should the Comm. or other building or enclosure used for the keeping and storage of articles does not become a dwelling house by reason of the fact that a person employed as a watchman lives in the place or his family stays with him. of Customs and the Chairman of COA 5.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Over imported articles Imported articles which may subject to seizure for violations of the tariff and customs laws may be pursued in their transportation in the Phil. 32 . in violations of the tariff and custom laws a pursuit of such vessel began within the jurisdictional waters may continue beyond the maritime zone and the vessel nay be seized on the high seas. decide a protest adversely against the government Comm. Over vessels When a vessel becomes subject to seizure by reason to an act done in the Phil. or in any manner facilitated the transportation. OLIVER R. 3. That the merchandise must have been fraudulently or knowingly imported contrary to law 2. To render effective and efficient the collection of import and export duties due the state. Payment of the tax due after the apprehension is not a valid defense. which enables the government to carry out the functions it has been instituted to perform. 2. Appeal by the Aggrieved owner or importer 10. There should be no unnecessary hindrance on the governments drive to prevent smuggling and other frauds upon the Customs. May enter. store or other building. The doctrine of primary jurisdiction 4. seizure and forfeiture 1. ***Right of customs police officer to enter inclosure 1. 2.

It is in the nature of a proceeding in rem. 2. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the CoC which are adverse to the Government under Section 2315 of the TCC. ***Remedies of an importer during the pendency of the seizure proceedings If the owner or importer desires the release of the property under seizure for legitimate use. Estate tax 2. v. Decisions of the Secretary of Trade and Industry. Reason – The owner of the goods cannot be expected to appeal the Collector’s decision when it is favorable to him and adverse to the government. Forfeiture retroacts to the date of the commission of the offense. That the release under cash bond has been approved by the Commissioner. letter or paper . Customs compromise does not extinguish the criminal liability. That there is no prima facie evidence of fraud attendant to the importation 3. where either party may appeal the decision to impose or not to impose said duties. of the Tariff and Customs Code. CA 302 SCRA 57] In this proceeding. detention or release of property affected. The amount of the cash bond shall not in any case be less than the appraised value of the article plus fine. Estate Tax Is an excise tax on the right of transmitting property at the time of death and on the privilege that a person is given in controlling to a certain extent the disposition of his property to take effect upon death. and that is the power to transmit from the death to the living on which the tax is more immediately based. invoice. Esate tax laws rest in their essence upon the principle that death of an individual is the generating source from which the taxing power takes its being. we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon. INC. without reference whatsoever to the character or conduct of the owner. An intention on the part of the importer/consignee to evade the payment of the duties due Fraud must be prove to justify forfeiture. That the importation of the article is not prohibited by law 4. forfeitures or other penalties in relation thereto. 3. Reason – forfeiture proceedings does not result in the conviction of the wrongdoer or in the imposition upon him of a penalty.e. importer. On the other hand.. the Collector shall with the approval of the Commissioner of Customs in writing release the same upon the filing of the sufficient bond to be fixed by the collector subject to the following conditions 1. or the wrongful making or delivery by the same person of any invoice. or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. it shall automatically be reviewed by the Commissioner of Customs. 8800.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. The issue here is limited to whether the imported goods should 33 . it is in legal contemplation the property itself which commits the violation and is treated as the offender. directed against the res or imported articles and entails a determination of the legality of their importation [TRANSGLOBE INT. The wrongful making by the owner. fines. expenses and costs that may be adjudge in the case 2. involving dumping and countervailing duties under Section 301 and 302. the Collector cannot be expected to appeal his own decision. and the Secretary of Agriculture in the case of agricultural product. letter or paper. respectively. Kinds of transfer taxes 1. ***Where a decision of the collector of customs in seizure and protest cases is adverse to the government. Even if the seizure by the Collector of Customs were illegal.all touching on the importation or exportation of merchandise. proof beyond reasonable doubt is not required in order to justify the forfeiture of the goods. which has yet to be proven. fees or other money charges. seizure. Requisites for customs forfeiture 1. in the case of nonagricultural product. Forfeiture of seized goods is a proceeding against the goods and not against the owner. i. Donor’s Tax *Estate and donor’s taxes are excise or privilege taxes that are imposed on the act of passing ownership of property and not taxes on the property transferred. commodity or article. commodity or article. affidavit. Good faith is not a defense in forfeiture. exporter or consignee of any declaration or affidavit. GATCHALIAN be forfeited and disposed of in accordance with law for violation of the TCC [supra] Forfeiture proceedings under the Tariff and custom laws are not criminal in nature. ESTATE TAX Transfer Tax A tax imposed upon the privilege of passing ownership of property without any valuable consideration. OLIVER R. and safeguard measures under Republic Act No. The falsity of such declaration. Exclusive appellate jurisdiction of the CTA Decisions of the CoC in cases involving liability for customs duties.

To the extent of the interest therein of the decedent at the time of his death. obligations or bonds have acquired a business situs in the Philippines. ***Gross Estate for Purposes of Estate Taxation of a Non-Resident Alien Decedent The gross estate of the decedent shall be determined by including the value at the time of his death of his: 1. To generate additional revenue for the government 2. Personal property whether tangible. ***Transfer in Contemplation of Death. Reciprocity provision exempting from estate taxation intangible personal property situated in the Phil. To reduce the concentration of wealth 3. shares. Upon the death of the decedent. 1. or the right to the income from the property. 3 is a general rule because there are certain instances where the decedent does not have any interest in a property at the time of his death but the same is still included as part of his gross estate. in respect of intangible personal property of citizens of the Philippines not residing in that foreign country. 34 . tangible or intangible. Real property situated in the Phil. only that part of the entire gross estate which is situated in the Philippines shall be included in his taxable estate. 2. by trust or otherwise. 2. shares. Decedent's Interest. real or personal. Personal property whether tangible or intangible or mixed. intangible or mixed situated in the Phil. wherever situated 3. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property. wherever situated: Provided. To the extent of any interest therein of which the decedent has at any time made a transfer. succession takes place and the right of the State to tax the privilege to transmit the estate vests instantly upon death. Purpose of imposing the estate tax 1. either alone or in conjunction with any person. by trust or otherwise. that in the case of a nonresident decedent who at the time of his death was not a citizen of the Philippines. shares. or b. To the extent of the interest therein of the decedent at the time of his death Note . or of which he has at any time made a transfer. Estate tax A tax on the privilege to transfer property upon one’s death paid by the estate represented by the administrator or executor Inheritance tax Tax on the privilege to receive property from the deceased Paid by the recipients of the properties of the estate 2.No. or ii. obligations or bonds issued by any corporation organized or constituted in the Philippines in accordance with its laws. OLIVER R. to designate the person who shall possess or enjoy the property or the income therefrom. except in case of a bona fide sale for an adequate and full consideration in money or money's worth. There is no inheritance tax imposed by law. Shares or rights in any partnership. owned by a nonresident alien decedent No tax shall be collected under this Title in respect of intangible personal property: a. 3. the possession or enjoyment of. obligations or SEC 85. however. 1. real property wherever situated 2.000 it is exempt. ***Intangible property of a non-resident alien decedent considered as situated in the Phil. If the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character. the right. 104] Gross Estate ***Gross Este for Purposes of Estate Taxation of Filipino Citizens whether Residents or Nonresident/ Alien who is a Philippine resident at the time of death Value at the time of death of all 1. Note – If the net estate is below P200. If the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country [Sec.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. Franchise which must be exercised in the Philippines. business or industry established in the Philippines [Sec. under which he has retained for his life or for any period which does not in fact end before his death i. To the extent of the interest therein of the decedent at the time of his death. in contemplation of or intended to take effect in possession or enjoyment at or after death. Provide for an equal distribution of wealth Inheritance tax An imposition created by law on the privilege to receive property. GATCHALIAN bonds issued by any foreign corporation if such shares. 104] The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. The estate tax accrues as of the death of the decedent and the accrual of the tax is distinct from the obligation to pay the same. obligations or bonds by any foreign corporation 85% of the business of which is located in the Philippines. Reason of the Law To reach ingenious schemes to evade the estate tax liability by the use of other forms of conveyances rather than by succession.

Revocable Transfer. 2. 3. on the date of his death. proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived. 3. Meaning a person has been appointed to take over the property but in the meantime. GATCHALIAN Death must be contemplated. the possession or enjoyment of. revoke or terminate. or b. OLIVER R. the property. or intended to take effect in possession or enjoyment at. Age and state of health of the decedent at the time of gift especially where he was aware of serious illness. If the one who took out the life insurance on his own life is the deceased himself and the designated beneficiary is his estate. To the extent of any property who took out the life insurance – a. They are more for compensation for loss of life. or to the extent of the amount receivable by any beneficiary designated in the policy of insurance. to designate the persons who shall possess or enjoy the property or the income therefrom. the condition is that at any point in time the transfer could be revoked by the person who gave the property. Length of time between the gift and the death. to alter. In such cases. To the extent of the amount receivable by the estate of the deceased. Property Passing Under General Power of Appointment. Analyze passing under a general power of appointment exercised by the decedent: i. Reason – they are not income. even if there is a provision for the revocation it would not form part of the gross estate. or the right to the income from. or administrator. the right. by deed executed in contemplation of. by will. To the extent of any interest therein. or ii. by deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death a. ***Proceeds of Life Insurance. 5. However if the sale was for sufficient and full consideration. such notice shall be considered to have been given. his executor. except when it is expressly stipulated that the designation of the beneficiary is irrevocable Life insurance proceeds that are received upon the death of natural person – it is always excluded from gross income irrespective of the designation of the beneficiary. amend. and for such purpose if the notice has not been given or the power has not been exercised on or before the date of his death. and the thought of death must be the impelling cause of transfer. amend or revoke shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration. or iii. Whether life insurance proceeds are formed part of the gross estate that is were have to look at the revocability or irrevocability of the designation of the beneficiary. where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power). whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. Property Passing Under General Power of Appointment – it is exercised by the decedent or intended in contemplation of death to take effect in possession or enjoyment at or after death. Except In case of bona fide sale for an adequate and full consideration in money or money's worth Revocable transfer – In the condition for the transfer. as insurance under policies taken out by the decedent upon his own life. And therefore if there was no actual transfer at the time of death then that property becomes part of gross estate. or where any such power is relinquished in contemplation of the decedent's death.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. irrespective of whether or not the insured retained the power of revocation. the person who transferred it while still alive enjoys the possession or enjoyment of the fruits. Concurrent making of a will or making a will within a short time after the transfer. 4. his executor or administrator irrespective of the designation of 35 . amendment or revocation takes effect only on the expiration of a stated period after the exercise of the power. or after his death. Circumstances taken into account 1. The power to alter. like donation or sale. either alone or in conjunction with any person. of which the decedent has at any time made a transfer by trust or otherwise. or the power exercised. except in case of a bona fide sale for an adequate and full consideration in money or money's worth.

but not including any income tax upon income received after the death of the decedent.the same rules apply with respect to Valuation of Gifts Made in Property under the donor’s tax. or 2. and Taxes – a. or of a resident alien decedent 1. whichever is the higher of — 1. look into the nature of the designation. whether a resident or not. for the filing of the estate tax return. *For actual funeral expenses or in an amount equal to 5% of the gross estate.. It may arise out of out of : (1) Contract. be deemed a part of his or her gross estate. or the extension thereof. Capital – means the property of the spouses brought into the marriage. It was not the decedent who took out the life insurance on his own life –like the corporation. when such losses are not compensated for by insurance or otherwise. or any estate tax. property where the value of decedent's interest therein. Transfers for Insufficient Consideration. Losses. undiminished by such mortgage or indebtedness. or from robbery. be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth. 6. Note. If the designation of the beneficiary is revocable – proceeds form part of the gross estate. The fair market value as determined by the Commissioner. If the designated beneficiary is the estate of the deceased. For claims against the estate. Actual funeral expenses those which are actually incurred in connection with the interment or burial of the deceased. b. or property taxes not accrued before his death. Items deductable from gross estate of a Filipino decedent. not the executor but somebody else for example the wife. revocable transfer or pass under the general power of appointment for a consideration in money or money’s worth but is not a bona fide sale for an adequate and full consideration in money or money's worth the amount includible as part of the decedent’s gross estate should be the difference between the fair market value at the time of the decedent’s death and the actual consideration received by the decedent. Indebtedness. when founded upon a promise or agreement. The deduction herein allowed in the case of claims against the estate. “Claims” means debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime and could have been reduced to simple money judgements. Look for the beneficiary the designation does not matter. There shall also be deducted losses incurred during the settlement of the estate arising from fires. For judicial expenses of the testamentary or intestate proceedings. d. i. the appraised value of real property as of the time of death shall be. The beneficiary is not deprived of his right to the insurance proceeds except that the insurance proceeds will form part of gross estate for purposes of estate taxation. not the administrator. nor the executor or administrator then it does not matter whether the designation is revocable or irrevocable – not form part of the gross estate. or any indebtedness in respect to. If the one who took out the life insurance is the decedent himself and the designated beneficiary is not the estate. but in no case to exceed P200. the children etc. Example – Property worth 10M was sold only for 2M in case of death 8M will form part of the gross estate. ii. or (3) Operation of Law c. b. SEC. theft or embezzlement. and if at the time of the filing of the return such 36 . or administrator would be if it was the decedent who took out the life insurance on his own life. Note – the only time you look into the revocability or irrevocability of the designation of the heir or the beneficiary other than the estate. or other casualties. is included in the value of the gross estate. whichever is lower. (2) Tort. Where the e. shipwreck. 88 B] The estate shall be appraised at its fair market value as of the time of death. The designated beneficiary is not the estate of the deceased. OLIVER R. the beneficiary always forms part of the gross estate. Expenses. storms. However. i. GATCHALIAN SEC.000. decedent’s property is transferred in contemplation of death.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. If the designation of the beneficiary is irrevocable – it will not form part of the gross estate. his executor or administrator – forms part of the gross estate ii. These deductible items are expenses incurred during the settlement of the estate but not beyond the last day prescribed by law. the executor. The fair market value as shown in the schedule of values fixed by the Provincial and City Assessors. 85 H] Capital of the Surviving Spouse The capital of the surviving spouse of a decedent shall not. *Determination of the Value of the Estate For claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate For unpaid mortgages upon. unpaid mortgages or any indebtedness shall.

The tax shall be credited with the 2. includes in the return required to be filed the value at the time of his death of that part of the gross estate of the nonresident not situated in the Philippines [Sec. Amount Received by Heirs under RA 4917 . 5. Transfers for Public Use . Transfer for public use 4. or the donor’s tax on the gift must have been finally determined and paid by the prior decedent or by the donor. Identity of the Property – The property with respect to which deduction is sought can be identified as one received from prior decedent or from the donor or as the property acquired in exchange for the original property so received. 86 E] Tax Credit for Estate Taxes Paid to a Foreign Country. An amount equivalent to the current fair market value of the decedent's family home: Provided. The Family Home.Medical expenses incurred by the decedent within 1 year prior to his death which shall be duly substantiated with receipts: Provided.An amount equivalent to One million pesos. the excess shall be subject to estate tax. devises or transfers to or for the use of the Government of the Republic of the Philippines.000. 4917: Provided. losses.000. 4. It is designed to mitigate the harshness of successive taxation. That in no case shall the deductible medical expenses exceed P500. indebtedness and taxes bears to the total value of the entire gross estate wherever situated. at the rate of 20% over a period of 5 years until it is lost after the fifth year. Requisites for deductibility of claims against the estate 1. 86 D. The liability represents of a personal obligation of the deceased existing at the time of his death except unpaid obligations incurred incident to his death such as unpaid funeral expenses and unpaid medical expenses which are classified under different category of deductions 2. Requisites 1. 3. Limitations on Credit. of the prior decedent or have been included in the total amount of the gifts of the donor within 5 years prior to the present decedent’s death. 2. 1. Property previously taxed/vanishing deductions 3. 5. No previous vanishing deduction of the property – No such deduction on the property or the property given in exchanged therefore. Death – The present decedent died within 5 years from date of death of the prior decedent or date of gift. Property Previously Taxed/vanishing deductions 3. As a sine qua non condition for the exemption or deduction.The amount of all bequests. 2. It is called vanishing deductions because the deductions allowed diminishes over a period of 5 years. 4. Standard Deduction . In General. amounts of any estate tax imposed by the authority of a foreign country. The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such 37 . *Vanishing Deductions Refers to the diminishing deducibility/ exemption.000. as the case may be. unless the executor. and provided that such losses were incurred not later than the last day for the payment of the estate tax. or any political subdivision thereof. The amount of the credit taken under this Section shall be subject to each of the following limitations: a. OLIVER R. 86] Requirements for the estate of a nonresident alien decdent to avail of deductions No deduction shall be allowed in the case of a nonresident not a citizen of the Philippines. said family home must have been the decedent's family home as certified by the barangay captain of the locality. Medical Expenses . administrator. however. Previous taxation of the property – The estate tax on the prior succession. Net share of the surviving spouse in the conjugal partnership [Sec. GATCHALIAN losses have not been claimed as a deduction for income tax purposes in an income tax return. The proportion which expenses. 7. Items deductable from the gross estate of a non-resident alien decedent 1. Net share of the surviving spouse in the conjugal partnership 8. was allowed in determining the value of the net estate of the prior decedent. as the case may be. The indebtedness must not have been condoned by the creditor or the action to collect from the decedent must not have been prescribed.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. The liability was contracted in good faith and for adequate and full consideration in money or money’s worth 3. legacies. 6.] *SEC. This limitation is intended to preclude the application of vanishing deduction on the same property more than once. That if the said current fair market value exceeds P1. That such amount is included in the gross estate of the decedent. of any property (situated in the Philippines) forming part of the gross estate. The claim must be a debt or claim which is valid in law and enforceable in court 4. or anyone of the heirs.Any amount received by the heirs from the decedent's employer as a consequence of the death of the decedent-employee in accordance with Republic Act No. 2. for exclusively public purposes. acquired by the decedent from a prior decedent who died within a period of 5 years from the decedent's death. Inclusion of the property –The property must have been formed part of the gross estate situated in the Phil.

Time of Payment. or duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the time of his death or if there be no legal residence in the Philippines. Except in cases where the Commissioner otherwise permits. If an extension is granted. which the decedent's net estate situated within such country taxable under this Title bears to his entire net estate. as the case may be. all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors. or where.000 without the said certification. In all cases of transfers subject to tax. or where. though exempt from tax. The Commissioner shall have authority to grant. it shall not allow any withdrawal from the said deposit account. credit is taken. the Commissioner may require the executor. as the case may be. SEC. and the running of the Statute of Limitations for assessment [Section 203] shall be suspended for the period of any such extension. Instances where estate tax return is required to be filed In all cases of transfers subject to the tax imposed herein. to the extent of his distributive share of the estate. The estate tax shall be paid at the time the return is filed by the executor. in meritorious cases. or if there is no executor or administrator appointed. where the said estate consists of registered or registrable property such as real property.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. which the decedent's net estate situated outside the Philippines taxable under this Title bears to his entire net estate. who maintained a bank deposit account alone. Where the taxes are assessed by reason of negligence. b. 2 If a bank has knowledge of the death of a person. administrator or the heirs. however. 97 par. conditioned upon the payment of the said tax in accordance with the terms of the extension. the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension. or within a like period after qualifying as such executor or administrator. or fraud on the part of the taxpayer. though exempt from tax. shall give a written notice thereof to the Commissioner. or administrator. the estate tax return required shall be filed within 6 months from the decedent's death. 89. c. to furnish a bond in such amount. Payment of Tax a. Such beneficiary shall. be subsidiarily liable for the payment of such portion of the estate tax as his distributive share bears to the value of the total net estate. then any person in 38 . 90 A] B] Time for Filing. and acting within the Philippines. the return required shall be filed with an authorized agent bank. For this purpose. the gross value of the estate exceeds P20. Collection Officer. he may extend the time for payment of such tax or any part thereof not to exceed 5 years. The estate tax shall be paid by the executor or administrator before delivery to any beneficiary of his distributive share of the estate. or regardless of the gross value of the estate. intentional disregard of rules and regulations. ***Liability for Payment. That the administrator of the estate or any one of the heirs of the decedent may. as the case may be. C] Extension of Time. D] Place of Filing. Prohibition on withdrawal of bank deposits upon depositor’s death ***SEC. with the Office of the Commissioner.000. shall file a return under oath [Sec. or 2 years in case the estate is settled extrajudicially. shares of stock or other similar property for which a clearance from the Bureau of Internal Revenue is required as a condition precedent for the transfer of ownership thereof in the name of the transferee. motor vehicle. in case the estate is settled through the courts. withdraw an amount not exceeding P20. OLIVER R. a reasonable extension not exceeding 30 days for filing the return. or beneficiary. 91. For the purpose of determining the estate tax. or Revenue District Officer. Notice of Death to be Filed SEC. upon authorization by the Commissioner. qualified. When the Commissioner finds that the payment on the due date of the estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs. Provided. and The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken. administrator or any of the legal heirs. the executor. Extension of Time. not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary. A certified copy of the schedule of partition and the order of the court approving the same shall be furnished the Commissioner within 30 days after the promulgation of such order. 'executor' or 'administrator' means the executor or administrator of the decedent. within 2 months after the decedent's death.000. unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid. GATCHALIAN b. no extension will be granted by the Commissioner. or jointly with another. or the administrator. or any of the legal heirs. the gross value of the estate exceeds P200. the executor. In such case.

A] In General. To tax the wealthy and reduce certain other excise tax 3. or 2. OLIVER R. of the donated property to the donee. 219 upon all property and rights to property of the estate and subjecting such part which is in the hands of an heir or transferee to the payment of the tax due the estate. becomes complete when either: 1. In favor of another 5. The donor’s tax is not a property tax. whether the gift is direct or indirect. 94] Estate planning The manner by which a person takes steps to conserve the property to be transmitted to his heirs by decreasing the amount of estate taxes to be paid upon his death. Gratuitous disposal of property or for less than adequate consideration 4. unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate. The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them. cannot be doubted. ***SEC. Act of liberality on the part of the donor 2. either actually or onstructively. it is completed by the SEC. The donor’s tax shall not apply unless and until there is a completed gift.NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. DONOR’S TAX Donor’s Tax A tax on a donation or gift. To raise revenue 2. The tax shall apply whether the transfer is in trust or otherwise. ***Elements of a donation subject to donor’s tax 1. unless it is shown a Certification by the CIR that the estate taxes have been paid [MARCOS II v. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s is subject to donor’s tax whereas general renunciation by an heir. To discourage inter vivos transfers of property which could reduce the mortis causa transfer on which a higher tax. It shall apply whether the transfer is in trust or otherwise. tangible or intangible. other than because of the donor’s death. of the property by gift. Pursuant to the lien created under Sec. Effects of failure to pay the estate tax 1. The tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year. 98. whether the gift is direct or indirect and whether the property is real or personal. but is a tax imposed on the transfer of property by way of gift inter vivos. collected and paid upon the transfer by any person. CA] Two ways of collecting estate taxes 1. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the donee. ***Collection of estate taxes does not require court approval since there is nothing in the Tax Code and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court’s approval of the state’s claim for the estate taxes before the same can be enforced or collected. There shall be levied. the estate tax would be collected actual or constructive possession of any property of the decedent. 92] 2. of his/her share in the hereditary estate left by the decedent is not subject to donor’s tax. The executor or administrator shall not be discharged from personal liability for the payment of the estate tax [Sec. and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. Inter vivos in its effects 3. His right to exercise the reserved power ceases because of the happening of some event or contingency or the fulfilment of some condition. Rates of Tax Payable by Donor. 99. No judge shall authorize the executor or administrator to delver a distributive share to any partly interested in the estate unless a certification from the Commissioner that the estate tax has been paid is shown [Sec. under Sec 94. resident or nonresident. a donor’s tax. Going after all the heirs and collecting from each one of them the amount of tax proportionate to the estate received. Purpose of donor’s tax 1. and whether the property is real or personal. by means which the law permits. tangible or intangible. assessed. Thus. Imposition of Tax a. The donor’s tax shall not apply unless and until there is a completed gift. Net gifts The net economic benefit from the transfer that accrues to the donee. including the surviving spouse. A gift that is incomplete because of reserved powers. GATCHALIAN delivery. it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate. 2. Who accepts it without any legal compulsion to give. The donor renounces the power. the law in force at the time of the perfection/completion of the donation shall govern the imposition of the donor’s tax. b. On the contrary. *Donor’s tax is a tax on the privilege to transfer property during one’s lifetime while Estate Tax is a tax on the privilege to transfer property upon one’s death. The basis for the computation of the net gifts is the totality of the gifts that have been given during a 39 .

For example – You have an intention to donate P200. accredited nongovernment organization.a . and shall be included in computing the amount of gifts made during the calendar year.000 on January 1 and both would be exempt because the basis is calendar year. Not more than 30% of said gifts shall be used by such donee for administration purposes. Related Provision … “Any contribution in cash or in kind to any candidate or political party or coalition of parties for campaign purposes. political party or coalition of parties for campaign purposes shall be governed by the Election Code. Donations for purposes of political campaign 2. 101. Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate. to the accomplishment and promotion of the purposes enumerated in its Articles of 40 ***C] Any contribution in cash or in kind to any candidate. is transferred for less than an adequate and full consideration in money or money's worth.] Donations exempt from the payment of donor’s taxes 1. institution. The excess of the fair market value of the property over the actual value of the consideration shall be subject to donor’s tax. other than real property referred to in Sec. as amended. and 5. duly reported to the COMELEC shall not be subject to the payment of any gift tax”[RA 7166 Sec. you could donate the first 100. **Stranger is a person who is not a: 1. governed by trustees who receive no compensation. donations. paying no dividends. 2. B] Tax Payable by Donor if Donee is a Stranger. OLIVER R. recognized natural. Technically speaking it is a straight of 30% of the net gifts. 6.000 and above it is exempt from donor’s tax. sister (whether by whole or half-blood). A legally adopted child is entitled to all the rights and obligations provided by law to legitimate children. religious. if what was donated is a conjugal or community property and only the husband signed the deed of donation. Certain gifts made by a nonresident aliens . 13 last par. spouse. whether students' fees or gifts.000 on Dec. ***SEC. Exemption of Certain Gifts. ***Elements of onerous donations subject to donor’s tax 1. Certain gifts made by a resident 3.000 2. devoting all its income. Brother. cultural or social welfare corporation. Transfer for Less Than Adequate and full Consideration. A person gives to another a thing or right 2. 4. the tax payable by the donor shall be 30% of the net gifts. As a result of which there is now a concept of donation splitting. or the gift imposes upon the done a burden which is less than the value of the thing given. The educational institution is incorporated as a nonstock entity. then the amount by which the fair market value of the property exceeded the value of the consideration shall. Donation by a stranger .school” program calendar year – meaning from January 1 up to December 31. there is only one donor for donor’s tax purposes. 4. GATCHALIAN 4. Donation/Gift splitting Spreading the gift over numerous calendar years in order to avail of lower donor’s taxes. Gifts in favor of an educational and/or charitable. or adopted children to the extent of the first P10. and therefore. 3. however. SEC 100. Other than real property 3.000 worth of property. 1. be deemed a gift. However. trust or philanthropic organization or research institution or organization: Provided. 31 and then donate the remaining 100. Donations of intangibles subject to reciprocity Donations for athletes prizes and rewards Donations under “adopt .NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. The totality of the gift given during the calendar year. Requisites in order that all grants. The transfer is for less than an adequate or full consideration in money’s worth.The scale does not anymore apply. Where property. non-profit private educational institutions may be exempt from the donor's tax 1. Husband and wife are considered separate and distinct taxpayer’s for the purpose of donor’s tax. 5. When the donee or beneficiary is a stranger. Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger. *Note – if the total net gifts made during the calendar year is not P100. 000 as an exemption. donation to him shall not be considered as donation made to stranger. and 3. ancestor and lineal descendant. 24(D) [Capital Gains from Sale of Real Property]. donations and contributions to non-stock. That not more than 30% of said gifts shall be used by such donee for administration purposes. subsidies or other forms of philanthropy. Relative by consanguinity in the collateral line within the fourth degree of relationship. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit. and since you don’t use the scale you don’t also have the 100. The following gifts or donations shall be exempt from the tax provided for in this Chapter: A] In the Case of Gifts Made by a Resident. or 2. or to any political subdivision of the said Government.

Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit.NOTES & CASES IN TAXATION Incorporation. There was no obligation on the part of the employer corporation to make further payments to the deceased 3. foundation. Gifts in favor of an educational and/or charitable. The gift was made to the widow rather than to the estate 2. The corporation received no economic benefit for the payment 5. OLIVER R. *Requirements in order to consider the giving as a gift and not as income 1. 2. The deceased had been full compensated for his service. religious. 41 . however. The widow had never worked for the corporation 4. trust or philanthropic organization or research institution or organization: Provided. GATCHALIAN B] In the Case of Gifts made by a Nonresident not a Citizen of the Philippines. institution. cultural or social welfare corporation. 1. or to any political subdivision of the said Government. That not more than 30% of said gifts shall be used by such donee for administration purposes. PERSONAL NOTES OF Atty.