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Q: What are the aspects of taxation ? A: The aspects of taxation are as follows: 1. levy & imposition which is exercised by the legislature and which includes the power to determine the persons & property subject to tax, the amount & rate of tax, the type of tax, the situs of taxation and the method of collection . collection & enforcement which is exercised by the executive, specifically the !"#, $%& and $"' Q: What is the lifebloo theor! of taxation? A: The lifeblood theory states that the assessment of a tax is enforceable despite its being contested because of the urgency to collect taxes, this being the government(s primary source of revenue. "therwise, if the payment of taxes could be postponed by )uestioning their validity, government would be paraly*ed. [CIR v. Cebu Portland]. Q: Where is the application of the lifebloo theor! ill"strate ? A: %t is illustrated in the prohibition against set+off of taxes and in the rule that prohibits the issuance of an injunction to restrain the collection of taxes. ,owever, the latter admits of an exception which is provided both under the new -&A . / 0 and the old -&A 11 10 'TA laws wherein it is provided that 2when in the opinion of the 'ourt the collection may jeopardi*e the interest of the 3overnment and4or the taxpayer, the 'ourt at any stage of the proceeding may suspend the said collection and re)uire the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the 'ourt5. #or the prohibition against set+off of taxes, note that the payment of taxes with Tax 'redit 'ertificates is valid as this is expressly provided for in 6ection 78 -'0 of the Tax 'ode. Another illustration is in the principle of the presumption of correctness of assessments. Q: What are the non#re$en"e or S%&P'%AR( ob)ecti$es of taxation? A: a.0 Taxation can strengthen anemic enterprises or provide incentive to greater production through the grant of tax exemptions or the creation of conditions conducive to their growth. b.0 Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of slump to expand business and ward off depression. c.0 Taxes on imports may be increased to protect local industries against foreign competition or decreased to encourage foreign trade. d.0 Taxes on imported goods may also be used as a bargaining tool by a country by setting tariff rates first at a relatively high level before trade negotiations are entered into with another country to enhance its bargaining power. e.0 Taxes can discourage certain businesses such as in the case of the high taxes imposed on alcohol and tobacco products.

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Taxes can also minimi*e ine)uity.

Q: +o, o !o" istin-"ish bet,een tax fro. tolls/ penalties/ special assess.ents an license? 'A0 A demand of sovereignty ;aid for the support of the government 3enerally no limit on the Amount of tax that may be %mposed <ay be imposed only by the government '1LL A demand of proprietorship ;aid for the use of another(s property Amount of toll depends upon the cost of construction or maintenance of the public improvement used <ay be imposed by the government or private individuals or entities 'A0 9nforced contribution assessed by sovereign authority to defray public expenses :evied for revenue 9xercise of taxing power %mposed on persons, property, exercise of right or privilege 3enerally no limit on the amount of tax that may be imposed #ailure to pay does not necessarily ma=e an act or business illegal 'A0 :evied on persons, property, privileges, acts, etc ;ersonal liability $ased on necessity and benefits ,as general application SPECIAL ASSESS&EN' :evied only on land >ot a personal liability of the person involved, his liability is limited only to the land involved $ased wholly on benefits 9xceptional both as to the time and place 'A0 %ntended to raise revenue <ay be imposed only by the government LICENSE :egal compensation or &eward of an officer for specific services %mposed for regulation 9xercise of police power %mposed on the right to exercise a privilege only Amount should be limited to the necessary expenses of inspection and regulation #ailure to pay ma=es the act of business illegal PENAL'( !esignated to regulate conduct <ay be imposed by the government or private individuals or entities

Q: Is the %ni$ersal Char-e 23%C45 i.pose on electricit! en #"sers b! istrib"tors a tax or a fee? A: The ?' is a regulatory fee as it is levied to ensure viability of the country(s electric power industry. The declaration of policy in the 9;%&A law definitely focuses on the public welfare by 9>6?&%>3 T,9 @%A$%:%TA "# T,9 '"?>T&A(6 9:9'T&%' ;"B9& %>!?6T&A. The 6' also added that it has ruled time and again that taxing power may be used as an implement of police power. 3iven that it is a regulatory measure, the objection on it being levied not by 'ongress has no basis. %n addition, the 6' ruled that the 9nergy &egulatory 'ommission is guided by sufficient standards provided within the 9;%&A law itself to calculate how much to impose as ?' and, as such, there is no undue delegation. #inally, it was stated that the imposition redounds to the benefit of the power industry and not the public at

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large and that the rate is uniformly levied on electricity end+users unli=e a tax which is imposed based on a taxpayer(s ability to pay. [Gerochi vs. DOE, July 1 , !"" ] Q: Was the &otor 6ehicle Re-istration 7EE 28&6R745 i.pose a-ainst Philippine Airlines consi ere a tax or a re-"lator! fee? A: The <@&# was considered tax notwithstanding its designation as a fee. The 6' upheld the previous decision in the Calalan# case and based its ruling on the fact that -10 the legislative intent clearly showed that the imposition was primarily levied as a tax and - 0 more importantly, only 141 of the amount levied was reserved for the operating expenses of the collecting agency which is a clear indication that the main purpose of <@&# was for revenue. Q: +o, ,ere irect taxes an in irect taxes istin-"ishe in the recent case of CIR $s. PL9' ? A: !irect taxes were defined as 2those that are extracted from the very person who, it is intended or desired, should pay them5 while indirect taxes are defined as 2those that are demanded, in the first instance one person in expectation and intention that he can shift the burden to someone else5. Q: +o, are taxes classifie ? A: $s to sub%ect &atter a.0 ;ersonal C Tax of a fixed amount, imposed on persons within a specified territory, whether citi*ens or not, without regard to their property or the occupation or business in which they are engaged b.0 ;roperty C Tax imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable methods of apportionment c.0 9xcise C Any tax which does not fall within the classification of a personal or a property tax. %t is a charge imposed upon the performance of an act, the enjoyment of a privilege, or the engaging in an occupation, profession or business. $s to 'ho bears the burden a.0 !irect C !emanded from the person who also shoulders the burden of the taxD the taxpayer is directly or primarily liable, and he cannot shift the burden to another. %ncidence and burden of tax are on the same person. -9xample: income tax0 b.0 %ndirect C !emanded from one person in the expectation and intention that he shall indemnify himself at the expense of another, falling finally upon the ultimate purchaser or consumer. %ncidence is on one person but the burden is shifted to another. -9xample: @AT0 $s to sco(e a.0 >ational C Tax imposed by the national government b.0 :ocal C Tax imposed by municipal corporations or local government units $s to rate a.0 b.0 ;rogressive C The rate increases as the tax base of brac=et increases &egressive C The rate decreases as the tax base or brac=et increases

Q: Is a .ar-in fee consi ere as tax?


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A: >". A fee imposed to curb excessive demands on international reserve, such as the margin fee, is not a tax but a form of exchange control. As such, it may not be considered a deductible expense if it is being claimed as a 2tax5 under -now0 6ection E8 -'0. [Esso )tandard v. CIR] Q: What is the effect of this istinction? A: The margin fee will not be considered as a deductible expense as a tax paid since it is not even considered as a tax. >either is it deductible as a business expense because the expense merely pertained to the ability to remit profits and not the running of the business itself. [Esso )tandard v. CIR] Q: +o, o ,e istin-"ish a fee fro. a tax? A: "n the one hand, a fee is imposed for purposes of regulation and the amount imposed is related to cost of regulation. %t is also an exercise of police power. "n the other hand, a tax is imposed for revenue generation purposes and there is no relation of the amount imposed to the cost. Q: What are the basic principles of a so"n tax s!ste.? A: a.0 #iscal ade)uacy C 6ources of revenue should be sufficient to meet the demands of public expenditure in order to avoid fiscal deficit. %t also means that the revenues should be capable of expanding or contracting annually in response to variations in public expenditures. An example is raising taxes to avoid the current fiscal crisis. b.0 9)uality or theoretical justice C This is also called the ability+to+pay principle. The tax burden should be in proportion to the taxpayer(s ability to pay. An example is the schedular system of taxation applied in the ;hilippines. c.0 Administrative #easibility + Tax laws should be capable of convenient, just and effective administration. An example would be avoiding taxing the government to reduce collection costs. Q: What are the inherent li.itations on the po,er of taxation? A: public purpose, international comity, non+delegability, exemption of government, territoriality +++ PINE' Q: What principle relate to 8taxes bein- le$ie for a p"blic p"rpose4 ,as lai o,n in the case of Planters Pro "cts/ Inc. $s. 7ertiphil Corporation 2&arch :;/ <==>5? A: ;resident <arcos issued an :"% which provided the imposition of a capital recovery component -'&'0 on the domestic sales of all fertili*er grades. The same :"% provided that the '&' 2shall be collected until ade)uate capital is raised to ma=e ;etitioner ;;% -a private company0 viable5. Bhen <arcos left, #ertiphil sought a refund of the amounts it paid under the :"%. The 6' ruled that: -10 The :"% is an exercise of the power of taxation. Bhile it is true that the power of taxation can be used as an implement of police power, the primary purpose of the '&' is revenue generation given that the amounts collected were too excessive to serve a mere regulatory purpose given that it was collectible 2until ade)uate capital is raised to ma=e ;;% viable5. The case cited ;A: vs. 9du. - 0 3iven its nature as a tax imposition, the fact that the ultimate beneficiary is ;;%, a private company, ma=es the levy invalid for not serving a public purpose. Q: Can the po,er of taxation be ele-ate ? If so/ ,hat is the le-al basis for this?


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A: The power of taxation can be delegated to the local government units, which power to delegate is granted under Art. F, 6ec. 1 of the 'onstitution. The delegation is consistent with the recognition of the :3?s power to create its own sources of revenue. $?T the power is not inherent in the local government unli=e in the national government. Q: What is the octrine en"nciate in the case of ?ohn +a! Peoples Alternati$e ? A: %n the Gohn ,ay case, it was stated that the exemption granted under &A H H only refers to 6ubic entities, hence inapplicable to Gohn ,ay. The fact that an Administrative "rder was passed by ;resident &amos stating that the tax incentives available under &A H H should also apply to Gohn ,ay locators is a violation of the re)uirement that tax exemptions must be strictly and expressly provided for and that the power to grant tax exemption is only within powers of 'ongress. This same rule applied to the 'lar= locators in the case of 'oconut "il &efiners Association, %nc. vs. $'!A. *ote that R.$. +,"" 'as (assed in -arch !"" #rantin# incentives to locators in Clar., John /ay, Poro Point and -oron# econo&ic 0ones. Q: Are the lan an b"il in-s o,ne b! &anila International Airport A"thorit! s"b)ect to real propert! tax an le$iable ? A: >o. The recent case of <%AA vs. ;A&A>AI?9 -Guly 7, 77J0 ruled that since <%AA is not a 3"'' but a 2government instrumentality vested with corporate powers5 or a 3"@9&><9>T '"&;"&AT9 9>T%TA -li=e ;hilippine ;orts Authority, ?niversity of the ;hilippines, ;hilippine #isheries !evelopment Authority - 77H case0 and $ang=o 6entral ng ;ilipinas0, it is exempt from real property tax. :i=ewise, since the properties are owned by the government, they are outside the commerce of man and can(t be auctioned. ,owever, the portion of the property leased to private entities -such as the hangars0 are subject to real property tax. Q: Is the Expan e 6al"e A e 'ax La, "nconstit"tional for !in- a re-ressi$e s!ste. of taxation? A: 9ven if the @AT is regressive because it is an indirect tax, it is not prohibited since the 'onstitution does not prohibit regressive taxes. Bhat it simply provides is that 2'ongress shall evolve a progressive system of taxation5, which means that direct taxes are to be preferred and indirect taxes minimi*ed. [1olentino v. )ecretary o2 3inance] Q: What ,ere the points isc"sse in the 6A' case of A@AAA9A G%R1 PAR'( LIS' 6S. ER&I'A? A: The following points were discussed in this case -10 There is no undue delegation of legislative power on the provision allowing increase of the @AT rate to 1 K since what is delegated is simply 2the ascertainment of facts upon which the administration and enforcement of the increase rate under the law is contingent5. Also, the fact that no discretion is exercised by the ;resident is evident in the use of the term 2shall5. - 0 ;etitioners contention that the 1 K @AT rate is an 2unfair and unnecessary additional tax burden5 is beyond the scope of review of the 'ourt as it is a 2)uestion of wisdom of legislation5 -E0 The law is e)uitable as it imposes safeguards4limits in the form of @AT exemption granted to gross sales below ;1.1 million. Q: Was the 8classification freeBe4 pro$ision pro$i e "n er RA CDD; an isc"sse in the case of @ritish A.erican 'obacco $s. Ca.acho 2A"-"st <=/ <==>5 constit"tional? A: Aes. The 6' ruled that the provision passes the Lrational basis( test and addresses -i0 concerns on the delegation of too much power to the !"# and $%&D -ii0 simplification of tax administration of sin productsD -iii0 elimination of potential areas for abuse and corruption in tax collectionD -iv0 buoyant and stable revenue generationD and -v0 ease of projection of revenues. %t added that even if creates undue advantage to its competitors, it is not enough to declare the law unconstitutional since it does not show that 'ongress had this in mind but instead was moved by

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an earnest desire to improve tax administration. #inally, it was ruled that &A .EE8 does not violate 3ATT as it does not discriminate on just imported products. Q: Is the Attrition La, 2RA CDDE5 constit"tional? A: Aes. %n the case of Aba=ada 3uro ;arty :ist vs. ;urisima -August 18, 77/0, the 6' ruled that the law giving incentives to $%&4$"' employees if the exceeded their collections was valid as there are enough safeguard and penalties to ensure that the collectors do not become Lbounty hunters(. %t was also ruled that there was no une)ual protection since $%&4$"' are the only revenue collectors and are thus differentiated from other government agencies. :i=ewise, it was found that sufficient standards existed for the ;resident to determine revenue targets as basis for rewards4penalties and thus did not create any issue on undue delegation. #inally, the 6' said that the provision empowering the 'ongressional 'ommittee to review the law(s implementing rules is an invalid provision since this is a function of the 9xecutive -and review is by the Gudiciary and not :egislature0 and is thus a violation of separation of powers. Q: 'he (&CA is a non#stocF/ non#profit instit"tion ,ith reli-io"s/ charitable an e "cational ob)ecti$es. It lease part of its pre.ises to s.all canteen o,ners an char-e parFin- fees on the lots besi es its b"il in-. 'he CIR ,ante to tax (&CA for s"ch inco.eG ho,e$er the latter clai.e that it is fro. s"ch. Which si e is correct? A: The '%& is correct that A<'A is liable to pay income tax. The assessment here was for deficiency %>'"<9 tax on income derived from rental of real property and >"T ;&";9&TA tax. 6ection H of the >%&' provides that even if non+profitable clubs are exempted, the last paragraph expressly states that profits reali*ed from real property from whatever source and wherever used is taxable -%t is also taxable on income from profitable activities0. "n the other hand, the 'onstitutional exemption under Art. J 6ec. / -E0 of 'onstitution -2charitable institutions, churches, non+profit cemeteries, etc.0 refers to property taxes only. The 'onstitutional exemption under Art. 18 6ec. 8 -E0 which states that non+stoc= educational institution whose assets are used actually, directly and exclusively for educational purpose is exempt from tax applies to income tax $?T T,%6 !%! >"T A;;:A 6%>'9 A<'A BA6 ?>A$:9 T" ;&"@9 T,AT %T %6 A> 9!?'AT%">A: %>6T%T?T%">. Q: What is the ecision of the S"pre.e Co"rt in the recent case of L"n- Center +ospital $s. Q"eBon Cit! 2?"ne <C/ <==;5 A: The 'ourt ruled that even if the hospital leases out portions for commercial purposes and admits both paying and non+paying patients, it does not lose its character as a charitable institution as long as the proceeds are used to further charitable purposes. ,owever, even so, petitioner was deemed as not exempt from real property tax on the portions of its property not actually, directly and exclusively used for charitable purposes. Thus, portions leased out for commercial purposes are subject to real property tax while those used by hospital even if used for paying patients are still exempt from the same tax. Q: What is the effect of ."ltiplicit! of sit"s of taxation? A: !ue to the variance in the concept of 2domicile5 for tax purposes, and considering the multiple distinct relationships that may arise with respect to intangible personality and the use to which the property may have been devoted, all of which may receive the protection of the laws of jurisdiction other than the domicile of the owner thereto, the same income or intangible property &ay be sub%ect to ta4ation in several ta4in# %urisdictions. A simple example is an American decedent who died while residing in Gapan and who has properties in the ;hilippines. Q: +o, o ,e a ress ."ltiplicit! of sit"s? A: The taxing jurisdiction may:

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10 ;rovide for e4e&(tions or allowance of deduction or ta4 credit for foreign taxes andD 0 9nter into treaties with other states. Q: What are the ele.ents of o"ble taxation in its strict sense 2 irect "plicate taxation5? A: a.0 taxing twice, b.0 by the same taxing authority, c.0 within the same jurisdiction or taxing district, d.0 for the same purpose, e.0 in the same year -or taxing period0, f.0 some of the property in the territory. Q: What are so.e exa.ples of o"ble taxation in its broa sense 2in irect "plicate taxation5? A: -10 income of corporation which is both subject to income tax and then to withholding tax when declared as dividends to individual shareholders - 0 tax levied by two different states Q: If a tax i.pose is i.pose on a taxpa!erHs stora-e of copra 2b! the local -o$ern.ent5 an another tax is i.pose on the sale of taxpa!erHs pro "cts s"ch as soap/ oil/ .ar-arine/ etc. 2b! the national -o$ern.ent5/ is there a case of o"ble taxation ? A: >o. The activities being taxed and the taxing authority are different. [Procter 5 Ga&ble case] Q: What happene in the case of CIR $s. '19A 2Septe.ber :;/ <==;5 as to )"stif! the Co"rtHs fin in- that the taxpa!ers ,ere -"ilt! of tax e$asion ? A: '%' 'orp. sold 'ibeles building to <r. Altonaga for 177 million who, on the same day, sold the same building to &oyal <atch %nc. for 77 million. The assessment was based on the taxable gain not reported by virtue of the scheme adopted by the parties. The 'ourt ruled that the three factors in tax evasion are all present in this case, vi*: -10 end to be achieved -payment of less tax0 - 0 evil or deliberate state of mind -not merely accidental0 -E0 course of action which is unlawful. The 'ourt added that the two transfers were tainted with fraud since the intermediary transfer -from '%' to Altonaga0 was prompted only by the desire to mitigate tax liabilities and not for any business purpose. Q: What is the S%@S'ANCE 16ER 71R& octrine? A: Taxability is determined by the reality of the transaction rather than the appearance which may be contrived. Q: Pri$ate respon ents are locators ,ithin S"bic Econo.ic Ione an ha$e been -rante tax# an "t!#free incenti$es "n er R.A. J<<J. S"bseK"entl!/ R.A. CDD; ,as passe in <==E ,hich state that not,ithstan in- an! special contrar!/ 8i.portation of ci-arettes/ spirits/ liK"ors into the Philippines e$en if estine for tax an "t! free shops/ shall be s"b)ect to all applicable taxes4 an specific reference ,as .a e to -oo s estine for the S"bic Econo.ic Ione. Will the S"bic locators contin"e en)o!in- tax incenti$es e$en after R.A. CDD;? A: >o. The revocation of the tax+ and duty+free exemption of importation of cigarettes is valid because

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-10 There is no vested right in tax exemption and may thus be modified or withdrawn at will by the granting authority. - 0 Tax exemptions are strictly construed against claiming party. -E0 Bhile tax exemption may have been part of the inducement to carry on business within the *one, this exemption is not contractual and, as such, the non+impairment clause of the 'onstitution can not be rightly invo=ed. -80 Bhatever rights were granted in the certificates4licenses issued to the locators, the same must yield to exercise of police power -Ltaxation may be made the implement of police power(0. [Re(ublic o2 the Phili((ines vs. Ca#uioa, October 16, !"" ] Q: What is the LEGISLA'I6E GRACE concept an ho, oes it relate to the case of National 9e$elop.ent Co.pan!? A: The concept provides that 2any tax relief provided is the result of specific acts of 'ongress that may be applied and interpreted strictly5. %n the >!' case it was ruled that the fact the 6ecretary of #inance guaranteed the loans of >!', the payments of >!' to the Gapanese creditors can not be exempt from withholding since the fact that the loan was is not tantamount to waiver of collection of taxes which must must be express. Q: What are the reK"isites of a taxpa!erHs s"it? A: The two minimum re)uisites for taxpayer suit are that -10 public funds are disbursed and - 0 the law violated affects the petitioner. This is why in the case of 7o0ada vs. 8P, petitioner(s action mandamus to call election to fill up $; vacancies was not considered a taxpayer(s suit because the failure to call elections does not involve public expenditure and in fact see=s government to spend funds.


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Q: What are the feat"res of the Philippine tax s!ste. A: the ;hilippine tax system is -10 directD - 0 progressiveD and -E0 semi+schedular -varying taxes imposed on passive income0, semi+global -one rate for all types of gross income0 Q: What are the ele.ents of a taxable inco.e? A: :5 -ain or profit 2as oppose to .ere rei.b"rse.ents or ret"rn on capitalG note also that stocF i$i en s are -enerall! not consi ere as taxable inco.e -i$en that it is .erel! a ret"rn on capital as the sa.e oes not res"lt in the increase in the proportional interest of the sharehol er in the co.pan!5 <5 recei$e or realiBe "rin- taxable !ear 2as oppose to the co..on exa.ples of "nrealiBe forex -ains or .ere re$al"ation incre.ents5 ### REALIIA'I1N concept C1NS'R%C'I6E RECEIP' octrine ### An item is treated as income when it is credited to the account of the or made unconditionally available to the taxpayerD no physical possession is re)uired. D5 not fro. inco.e tax 2exa.ple of is e benefits an professional fees of -eneral professional partnerships5 E9$-P7E: <r. F figured in an accident and got paid for -a0 hospital cost -b0 lost income -c0 moral damages -compensatory only0 and -d0 #<@ of car wrec=ed "nly -b0 is taxable 6%>'9 T,9 &96T A&9 <9&9 &9T?&> "> 'A;%TA: Q: +o, oes inco.e iffer fro. capital? A: %ncome is any wealth that flows into the taxpayer other than a return of capital while capital constitutes the investment which is the source of income. Therefore, capital is fund while income is the flow. 'apital is wealth while income is the service of wealth. 'apital is the tree while income is the fruit. Q: +o, o !o" classif! taxpa!ers? A: Abbreviated A. According to source of income: Those taxed on B"&:!B%!9 income are only resident citi*ens and domestic corporationsD A:: "T,9& types of taxpayers are subject only to tax on ;hilippine sourced income $. According to tax base: Those taxed on 3&"66 income are only nonresident alien not engaged in trade or business in the ;hilippines and nonresident foreign corporationsD A:: "T,9& types of taxpayers are subject to tax on net income -i.e., may claim deductions0 Q: +o, is the resi enc! of an alien eter.ine ?

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A: An alien is considered a nonresident if he4she stays here for a !9#%>%T9 6,"&T ;9&%"! of time. An alien will be considered a resident if the stay here is either -a0 !9#%>%T9 A>! 9FT9>!9! or -b0 %>!9#%>%T9. "nce determined to be a nonresident alien, the test to determine whether the alien is a nonresident alien 9>3A39! in trade or business is whether his total aggregate stay for a taxable year exceeds 1/7 days. >onresident aliens not engaged in business are subject to tax of 1K on gross income earned from all sources 9F'9;T -10 interest from #'!?4"$? deposits -exempt0 and - 0 '3T on sale of shares -1K417K0 and real property -JK0 classified as capital asset. They are also not entitled to "ptional 6tandard !eduction. Q: What is the conseK"ence of an inco.e ite. bein- s"b)ecte to 7INAL tax? A: 6uch income is no longer 2&9T?&>A$:95, i.e.D it will no longer be declared as income in the %ncome Tax &eturn, hence will no longer be subject to the schedular rates on income tax -for individuals0 or to E7K -for corporations0. Q: What inco.e ite.s are consi ere as passi$e inco.e s"b)ect to final tax in the han s of an in i$i "al resi ent citiBen? A: These are -i0 interest from ban= depositsD -ii0 royaltiesD -iii0 pri*es exceeding ;17,777D and -iv0 dividends. Q: +o, are priBes taxe "n er the 'ax Co e? A: The tax imposable will depend on the amount of the pri*e. %f the pri*e is: <"&9 T,A> 17,777 M 7K #%>A: TAF 17,777 "& :966 M forms part of gross income which is subject to the 6',9!?:A& rate ,owever, winnings from the ;'6" and :"TT" are 9F9<;T from tax. Q: What is the taxabilit! of i$i en s recei$e b! in i$i "als? A: %t depends. %f the dividends are from a !"<96T%' '";&"&AT%">, the recipients will be taxed as follows: 'iti*ens and resident aliens M 17K >onresident aliens engaged in trade or business in the ;hilippines M 7K >onresident aliens engaged >"T in trade or business in the ;hilippines M 1K %f the dividends are from a #"&9%3> '"&;"&AT%">, then it will form part of the gross income of any type of taxpayer subject to scheduler rate -except >&A>9T$ which is still the 1K0 $?T note that the situs of the income becomes material except for a resident citi*en who is taxed on worldwide income. Q: What is the taxabilit! of i$i en s recei$e b! corporations fro. a o.estic corporation? A: %t depends. %f the dividends are from a !"<96T%' '"&;"&AT%">, the recipients will be taxed as follows: !omestic or &esident #oreign corporation M 7K -as inter+corporate dividends0 >onresident foreign corporation M Tax treaty rate, if any 11K if no tax treaty but satisfies tax+sparing provision E7K if no tax treaty and does not comply with tax+sparing provision %f the dividends are from a #"&9%3> '"&;"&AT%">, then it will form part of the gross income of any type of taxpayer $?T note that the situs of the income becomes material except for a domestic corporation which is taxed on worldwide income.

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Q: &a! parents an siblin-s be clai.e as A99I'I1NAL exe.ption? A: >". ;arents and siblings are considered dependents ">:A #"& ;?&;"696 "# I?A:%#A%>3 an individual to become a 2head of a family5 but they 'A>>"T be claimed as additional exemptions. Q: Are ille-iti.ate chil ren consi ere as a A: A96. itional exe.ption?

Q: Are SENI1R CI'IIENS s"pporte an li$in- ,ith a taxpa!er incl" e for p"rposes of a itional exe.ptions? A: According to a $%& &uling, senior citi*ens do not )ualify for purposes of claiming additional exemptions because such does not have basis in law. Q: What is the r"le on senior citiBen isco"nts -rante b! co..ercial establish.ents? A: %n 'arlos 6uperdrug 'orp. vs. !6B6 -Gune ., 77H0 and <.9. ,oldings 'orporation vs. '%& & 'TA, the 6upreme 'ourt ruled that the rule will be ++ -i0 prior to <arch 1, 778, the discounts are treated as tax creditD -ii0 after <arch 1, 778 the same is treated as deductions. The 'ourt distinguished tax credit vs. tax deduction by stating that a credit is a 2peso+for+peso deduction from the taxpayer(s tax liability5 or a 2full recovery5 while a tax deduction only benefits the taxpayer to the extent of E1K of the amount granted as discount. ,owever, the 'ourt ruled that 2the 6tate, in promoting the health and welfare of a special group of citi*ens, can impose upon private establishments the burden of partly subsidi*ing a government program5. The 'ourt recogni*ed that the law is a legitimate exercise of police power. ->ote that the 7K discount also applies to movie admission fees, transport fares, hotel services, restaurant bills, etc.0 Q: What is the effect of a chan-e in stat"s of the taxpa!er or the C+ANGE#IN#S'A'%S r"le? A: The rule of thumb is T,AT B,%', B%:: $9 $9>9#%'%A: T" TAF;AA9& -e.g., if taxpayer marries, thereby )ualifying him for a bigger personal exemption of E ,777 instead of ; 1,777, then the law will treat him as if he married at the beginning of the yearD but if a married person(s spouse dies, thereby ma=ing him either a head of the family or single, in either case he will be entitled to lower personal exemption, then the law will treat him as if he was widowed at the end of the year and still get his E ,777 personal exemption.0 Q: Is a nonresi ent alien entitle to personal an a itional exe.ption? A: %t depends. %f engaged in trade or business and country of residence allows exemptions to #ilipinos M allow the lower of two amounts -i.e., ;hilippines or foreign country0. %f >"T engaged, he will >"T be allowed the exemption. Q: Are e.plo!ees of R1+Qs/ 1@%s an 7C9%s entitle to personal an a itional exe.ptions: A: >o, these employees are subject to tax on gross income without the benefit of deduction4exemptions. Q: What are the chan-es intro "ce b! REP%@LIC AC' N1. CE=; 2'A0 E0E&P'I1N 17 &INI&%& WAGE EARNES AN9 INCREASING PERS1NALLA99I'I1NAL E0E&P'I1NS L C+ANGE IN 1S95 2?"ne :J/ <==>5? A:


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2<inimum wage earners5 shall be exempt from the payment of income tax on their taxable income. <oreover, the holiday pay, overtime, night shift differential pay, and ha*ard pay received by such minimum wage earners shall li=ewise be exempt from income tax. The term 2statutory minimum wage5 refers to the rate fixed by the &egional Tripartite Bage and ;roductivity $oard. %ncreases the amount of personal exemption for all individuals to a fixed amount of ;17,777.77, from the previous varying amounts of ; 7,777.77, ; 1,777.77 and ;E ,777.77. Also increases the additional exemption from ;/,777.77 to; 1,777.77 for each dependent, not exceeding four -80. Amends 6ection E8-:0 to +++ -10 %ncrease to 87K of gross sales or receipts the 17K "perational 6tandard !eduction -"6!0 previously allowed to individuals -except nonresident aliens0 engaged in business or earning income in the exercise of their professionD and - 0 >ow allow corporations -except nonresident foreign corporations0 to claim "6!, instead of itemi*ed deductions, in an amount not exceeding 87K of their gross income. %f the taxpayer did not indicate in his or her return his or her intention to elect the "6!, he or she shall be considered as having availed -irrevocable for that year0 of the itemi*ed deductions. ,ence, the election can be made on a yearly basis. An individual who opts for the "6! shall not be re)uired to submit financial statements but a corporation availing of the "6! is still re)uired to submit its financial statements.

Q: Who are the in i$i "als ,ho are N1' reK"ire to file an I'R? A: -10 A compensation earner whose income does not exceed the allowable exemptionsD 2<5 A co.pensation earner ,hose ,ithhol in- taxes ,ere correct E0CEP' if < e.plo!ers 1R excee s M='G -E0 Those whose only income is subject to #inal Bithholding TaxD -80 %ndividuals exempt from income taxD -10 Those whose total compensation is below J7T. ,owever, an individual who is engaged in business is A:BAA6 re)uired to file an %T& regardless of the amount of income generated Q: +o, o !o" ifferentiate bet,een Capital Gains 'ax on sale of shares of stocF not tra e in the local stocF exchan-e an Capital Gains'ax on sale of real propert! consi ere as capital asset? A: The sale of shares of stoc= not traded in the local stoc= exchange is subject to '3T at the rate of 1K for the first ;177,777 and 17K on the amount in excess of ;177,777. The tax base shall be only the 3A%> on the sale. 6uch sale will always be subject to '3T without any possibility of exemption. As for the sale of real property considered as capital asset, the rate is JK and the tax base is the 9>T%&9 69::%>3 ;&%'9, because under the law this is a ;&96?<9! 3A%> from the sale. ,owever, there is a possibility of exemption as when the proceeds of the sale will be utili*ed by the taxpayer to buy his principal residence, such purchase to be made within 1/ months from the sale. The money in this case shall be put in escrow. The sale of real property classified as capital asset to the government may be subject to either the JK '3T or form part of gross income of the taxpayer -in the latter case, only the gain forms part of the gross income0, subject to the taxpayer(s choice.


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>ote that 6,A&96 "# 6T"'N %6 !9#%>9! T" %>':?!9 warrants and4or options to purchase shares of stoc=, units of participation in a partnership -except general professional partnerships0, joint stoc= companies, joint accounts, joint ventures taxable as corporations, associations, and &9'&9AT%"> "& A<?69<9>T ':?$6 -6?', A6 3":#, ;":" "& 6%<%:A& ':?$60, and mutual fund certificates. TAF "> '"&;"&AT%">6 Q: What ,ere the factors in the case of A7ISC1 that le the Co"rt to consi er the reins"rance pool as a taxable entit! separate an istinct fro. the in i$i "al ins"rance co.panies that .a e "p the pool? A: The factors were: -10 the pool had common fund from which admin. expenses were paid - 0 the pool had an executive board -E0 even if pool did not reinsure, it was indispensable for group members to set+up the pool for them to get their premiums Bhat was crucial in this case was the fact that there was continuity of dealings. Q: Are professional fees pai to -eneral professional partnerships s"b)ect to ,ithhol in- tax? A: >o, since the 3;;s are exempt from tax, payments to them are also not subject to withholding tax. ,owever, payments made $A them -or any other tax exempt entity0 are subject to withholding tax if the payee4income recipient is not similarly exempt from income tax. Q: What is a ?1IN' 6EN'%RE an ,hat is its taxabilit!? A: %n a G@, there is: -10 contribution of capital, s=ill - 0 shared profits -E0 mutual control -80 single business transaction underta=en for the purpose A joint venture or consortium formed for the purpose of underta=ing construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the 3overnment is exempt from income tax. Q: In the cases of 1bilos an Gatchalian/ ,hat ,ere consi ere as the ele.ents to establish that a taxable "nre-istere partnership existe ? A: The elements that were deemed necessary for a taxable unregistered partnership were -10 mutual contribution of funds and - 0 joint interest in properties and gains. %n the Obilos case the fact that a father bought land which he then transferred to his children who then resold them without actually introducing improvements or subdividing was considered as >"T giving rise to a taxable unregistered partnership as opposed to the Gatchalian case where they agreed to contribute funds to buy lotto tic=ets and then showed clear intent to divide profits. Q: +o, are the r"les on the taxabilit! of schools "n er 'ax Co e s"..ariBe ? A: -10 9F9<;T +++ >onstoc= and no part of the income inures to the benefit of an individual. This is however subject to the last paragraph of 6ec. E7 which states that income from properties, real or personal, and activities conducted for profit are taxable. 96

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- 0 6?$G9'T T" 17K +++ private school registered w4 !9'6 -proprietary0 whose unrelated income does not exceed 17K -E0 6?$G9'T T" E7K M same re)uisite as that subject to 17K $?T unrelated income exceeds 17K -examples of unrelated income are dividends, rentals, interest on loans, gains on sale0 Q: What is the taxabilit! of non#stocF non profit associations an schools "n er R&C JM#=D? A: Associations are subject to: 7K #inal Bithholding Tax -#BT0 on interest on ban= deposits, royaltiesD H.1K #BT on #'!? deposits 6chools are: a. non+stoc=, non+profit educational institution 9xempt on revenues actually, directly and exclusively used for educational purposes, including the revenues of cafeterias and boo=storesD 9xempt also from 7K #BT on interest on ban= deposits, royaltiesD H.1K #BT on #'!? deposits provided there are -10 certification from ban= as to amountD - 0 certification of actual utili*ationD and -E0 $oard &esolution on proposed projects Q: What is the taxabilit! of the sale of realt! to the -o$ern.ent? A: %t will be subject to 9%T,9& the regular income tax "& JK '3T, at the option of the TAF;AA9& Q: 9oes the exe.ption on 8-ains fro. the sale of bon s/ ebent"res an other certificates of in ebte ness ,ith a .at"rit! of .ore than E !ears4 incl" e exe.ption of interest inco.e? A: >", it does >"T include interest income for the following reasons: 10 2gains derived from dealings in property5 and 2interest5 are separately indicated in 6ection E defining gross income 0 the provisions of the Tax 'ode applicable to individuals -except nonresident alien not engaged in business0 specifically exempt interest from long+term deposits4investments -thus, if a corporation was meant to be exempt as well, the Tax 'ode would have expressly provided so0 E0 ?.6. rules clearly distinguish interest and gain from sale Q: Are there exe.ptions fro. the &CI'? A: Aes. The following are exempt from the <'%T: 1. domestic corporations operating as proprietary educational institutions subject to tax at 17K on their taxable income . domestic corporations engaged in hospital operations which are non+profit subject to tax at 17K on their taxable income E. domestic corporations engaged in business as depositary ban=s under the expanded foreign currency deposit system 8. firms that are under a special income tax regime -e.g., ;9OA, $'!A0

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Q: When is the &CI' i.posable on a o.estic corporation? A: %t is imposable on the fourth year following the year of operation Q: %p to ,hat perio .a! the &CI' be carrie o$er? A: %t may be carried over up to the three -E0 immediately succeeding taxable years. Q: +o, is the &CI' i.pose ? A: %t is imposed if the computed K tax on gross -excludes passive income subject to final tax from gross income and with only direct costs as deductions0 is higher than the regular income tax -computed based on gross income less the deductions allowed under the Tax 'ode0 Q: Can the i.position of the &CI' be s"spen e ? A: Aes, in cases of force majeure, labor stri=e or legitimate business reverses $?T note that only the !epartment of #inance can grant the suspension. Q: +o, is a co.pan! consi ere as a resi ent forei-n corporation? A: The Tax 'ode defines such an entity as being engaged in trade or business or who, as defined in jurisprudence, 2underta=es continuous business transaction5. A @RANC+ corporation is a RESI9EN' 71REIGN C1RP1RA'I1N ,hile a S%@SI9IAR( is a 91&ES'IC C1RP1RA'I1N. Q: Are offline carriers 2i.e./ no lan in- ri-hts in the Philippines5 ,hich ha$e -eneral sales a-ent s"b)ect to Philippine tax? A: Aes, they may not be subject to the .1K gross ;hilippine billings but they are subject to tax on their tic=et sales as nonresident foreign corporations -the 'TA cases of 6outh African Airways has upheld the $"A' ruling0 Q: +o, is the @PR' co.p"te ? A: The $;&T is computed based on the profits earmar=ed for remittance and >"T on the actual remittance. Q: Are there corporations fro. the @PR'? A: A96. ;9OA companies are not subject to $;&T. Q: What is the ifference bet,een a Re-ionalLArea +ea K"arters an a Re-ional 1peratin- +ea K"arters? A: An &4A,I can only perform supervisory, communication, coordination functions while an &",I can do planning, logistics, &&!, financial advisory, etc. #or income tax purposes, an &4A,I is exempt from income tax primarily because it is not expected to generate any income while the &",I is subject to the preferential tax rate of 17K. #or @AT purposes, services by an &4A,I are @AT exempt while those of the &",I may be @AT+taxable or @AT *ero rated if, in the latter case, the services are performed for nonresidents and paid for in foreign currency. Q: Will the :EN preferential rate for 7ilipinos occ"p!in- .ana-erial an technical position in an R1+Q appl! e$en if the position is not conc"rrentl! hel b! expatriate ? A: Aes. Q: +o, is the inco.e of a hea office ,hich transacts b"siness in epen entl! of the branch taxe ?

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A: The head office shall be treated as a nonresident foreign corporation with respect to the income it generated from the transaction carried out independently of the branch [-arubeni case]. An example is when a head office ac)uires shares of another company independently of its branch office in the ;hilippines, the dividends received by the head office is taxes as one received by a nonresident foreign corporation -i.e., -i0 treaty rate or -ii0 11K if w4 tax sparing or -iii0 E7K as part of gross income0 and not a resident foreign corporation -i.e., exempt as intercorporate dividends0. Q: +o, o !o" trace the o,nership for p"rposes of eter.inin- ,hether corporation is closel!#hel for p"rposes of eter.ininexe.ption fro. the IAE' ? A: Aou trace it all the way up to the ultimate parent. An example would be if 'ompany A improperly accumulates earnings and the company is owned 177K by 'ompany $ who is in turn owned by 'ompany ' who is in turn owned by 'ompany !. 9ven if only 'ompany ! is a public company, the same still inures to 'ompany A(s benefit thus exempting it from %A9T. Q: Are there entities fro. I.properl! Acc"."late Earnin-s 'ax? A: A96. 1. ban=s and other non+ban= financial intermediaries . insurance companies E. publicly+held corporations 8. taxable partnerships 1. general professional partnerships J. non+taxable joint ventures H. enterprises duly registered with the ;9OA, $'!A, and those under special income tax regimes Q: Are there ,a!s b! ,hich to a$oi liabilit! fro. the IAE'? A: A96, when the accumulation of earnings is justified by reasonable needs of the business such as: 1. accumulation up to 177K of the paid+up capital . for definite corporate expansion projects or programs E. for buildings, plants or e)uipment ac)uisitions 8. for compliance with a loan covenant or pre+existing obligation under a legitimate business agreement 1. when there is a legal prohibition for its distribution J. in the case of ;hil. subsidiaries of foreign corporations, undistributed earnings intended or reserved for investments within the ;hilippines Q: When i.properl! acc"."late earnin-s are s"b)ecte to the IAE'/ ,ill it still be s"b)ect to the tax on i$i en s ,hen e$ent"all! eclare as i$i en s? A: A96. Q: In )"stif!in- the reK"ire corporate liK"i it! to )"stif! exe.ption fro. IAE'/ is the @ar ahl for."la applicable to all corporations? A: >". The $ardahl formula may apply only to companies with shorter operating cycles. An operating cycle of //.E1 days does not justify a high li)uidity as opposed to companies with operating cycle of E.EE months P C(ANA&I9 2?AN%AR( <=/ <===5Q. Q: What is the tax benefit r"le? A: This rule states that the recovery of an amount previously written+off but which was subse)uently collected is a taxable event T" T,9 9FT9>T T,AT %T $9>9#%T9! T,9 TAF;AA9&, i.e., to the extent that the said deduction resulted in a lower taxable %>'"<9, hence a lower tax due.

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Thus, if the taxpayer was already in a taxable loss position before deducting the bad debts, then subse)uent recovery of the bad debt will not be taxable since the bad debt did not benefit him with a reduced tax due. Q: What is the r"le on the taxabilit! of S'1CA i$i en s? A: 3enerally, 6T"'N dividends are not taxable 9F'9;T when 1. it changes the proportionate interest of a shareholder after its receipt . the stoc= dividends are subse)uently sold 9is-"ise i$i en s M excessive payments by a corporation to shareholders which may be interpreted as ways to avoid tax on dividends -example: interest and loan payments0 LiK"i atin- i$i en M dividends declared by a dissolving company. The tax implication to the shareholder is as if he4she sold his4her shares to the li)uidating company -i.e., actual gain computed as li)uidating dividend less cost basis in the share subscription0. The li)uidating company is >"T subject to any tax. Q: 9efine transfer pricin-. A: It is the po,er of the Co..issioner to istrib"te/ apportion/ allocation an shift inco.e an expenses bet,een relate taxpa!ers to reflect their tr"e taxable inco.e or to pre$ent e$asion of taxes. Q: What is the tax i.plication of a for-i$eness of ebt? A: %f the forgiveness of debt is made: for services rendered, it shall be taxed as compensation income on the part of the recipient for no consideration, it is subject to donor(s tax by a corporation in favor or a debtor who is li=ewise a stoc=holder of the creditor+corporation, it will be treated as a dividend by a stoc=holder in favor of a corporation+debtor, it will be treated as additional capital of the stoc=holder+lender on the corporation+debtor P69'. 17 "# && Q Q: Are the inco.e of propert! onate liFe,ise excl" e fro. -ross inco.e if the onorHs tax is pai ? A: >o. "nly the property donated will be excluded but not the income -ex. !ividends on shares donated0 Q: What are consi ere as excl"sions fro. -ross inco.e: A: 10 life insurance paid to heirs of deceased 0 retirement pay if -i0 at least 17 and 17 and -ii0 plan registered w4 $%& and -iii0 benefit availed only once +++ R"lin- in SAN'1S 6S. SER6IER P+ILS. 2::L<>L=> O NAC+%RA5 E0 benefits received under 666436%6 80 gifts -bec. subject to donor(s tax already0 $?T income of property -ex. !ividends of shares0 is TAFA$:9 10 1Eth month pay A>! other benefits

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J0 income by foreign gov(t. from loans, bonds, stoc=s, deposits by foreign gov(t., financing institution owned, controlled or refinanced by gov(t., or international regional financial institution set+up by foreign gov(t. H0 income derived by the government or its political subdivisions from any public utility or from the exercise of any essential governmental function /0 pri*es and awards to recogni*e religious, charitable, scientific, educational, artistic, literary, or civic achievement but only if -i0 the recipient was selected without any action on his part to enter the contest or proceedingD and -ii0 the recipient is not re)uired to render substantial future services as a condition to receiving the pri*e or award. .0 all pri*es and awards granted to athletes in local and international sports competitions and tournaments whether held in the ;hilippines or abroad and sanctioned by their national sports associations. Q: What are the e benefits exe.pte fro. inco.e tax? A: -a0 -b0 -c0 -d0 -e0 -f0 -g0 -h0 -i0 -j0 <oneti*ed unused @: not exceeding ten -170 days during the year <edical cash allowance not exceeding 1,177 per year &ice subsidy of ;1,177.77 or one -10 sac= of 17+=g. rice per month ?niform and clothing allowance not exceeding ;E,777 per annumD Actual yearly medical benefits not exceeding ;17,777 per annumD :aundry allowance not exceeding ;E77 per monthD 9mployees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding ;17,777 3ifts given during 'hristmas and major anniversary celebrations not exceeding ;1,777 per employee per annumD #lowers, fruits, boo=s, or similar items given to employees under special circumstances, e.g., on account of illness, marriage, birth of a baby, etc., and !A%:Ameal allowance for overtime wor= not exceeding twenty+five percent - 1K0 of the basic minimum wage.R

Q: What is the taxabilit! of the ref"n of taxes? A: %f the tax was previously claimed as deduction then subse)uently refunded, it will form part of gross income at the year of refund. ,owever, if said tax was not claimed as deduction in the first place as they are non+deductible types of taxes-such as income tax, estate tax, etc.0, it will not constitute taxable income P&<' 1E+/7Q. Q: What is the taxabilit! of ter.inal pa!? A: Terminal leave pay is >"T subject to income tax because -10 %t is receive at the time when the taxpayer is A:&9A!A &96%3>9! and thus it is not considered as salary, and - 0 6eparation pay received for causes beyond the control of the employee is exempt from income tax and compulsory retirement is deemed a 2cause beyond the control5 of the employee P&9 &9I?96T "# O%A:'%TAQ. Q: Will separation pa! recei$e "e to re "n anc! be as ,ell? A: A96. &edundancy is also considered as a cause beyond the control of the employee.

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Q: What benefits are fro. the 7@'? A: 1. $enefits granted to ran= and file employees . $enefits re)uired by the business or for the convenience of the employer E. !e minimis benefits 8. $enefits exempted by law Q: When are loans -rante to e.plo!ees s"b)ect to 7rin-e @enefit 'ax? A: Bhen the interest on said loans are lower than the legal rate of 1 K. %n which case, the between 1 K and the stipulated interest rate shall be subject to #$T. Q: When is e "cational assistance fro. 7@'? A: Bhen the following conditions concur: -10 the education is related to employer(s business and - 0 6uch assistance is coupled with a service contract. %f granted to relatives of the employee M it is subject #$T except if there is a competitive scholarship scheme Q: Are transportation allo,ances taxable? A: %f they are part of the salary and are given as a fixed amount, it is taxable as compensation. %f it is re)uired by the nature of the wor= and the employee is re)uired to li)uidate, it is not taxable. Q: Can ho"sin- benefit be not s"b)ect to 7@'? A: Aes. %f the housing is -i0 less than 17 meters away from the wor=place or -ii0 the stay of the employee is less than E months. Q: 1nce an ite. is s"b)ecte to 7@' ,ill the sa.e still for. part of the taxable inco.e of the recipient#e.plo!ee? A: >o. The #$T is a final tax. Q: Who can a$ail of the e "ctions pro$i e "n er the la,? A: All types of taxpayers 9F'9;T: 1. nonresident aliens not engaged in business and . nonresident foreign corporations Q: What are exa.ples of capital expen it"res ,hich are consi ere as non# e "ctible are instea sprea o"t o$er the life of the asset? A: 6ome examples would be litigation expenses to protect the title of a property and advertising expense -see below0. The test to characteri*e a payment as a capital expense is if the benefit4s extends beyond the taxable year when payment was made. Q: What is the taxabilit! of a $ertisin- expense? A: %t depends. %f the advertising expense was incurred to stimulate current sales -tactical0, it is deductible in full. %f however it is incurred to stimulate future sale -thematic0, it will be treated as a capital expenditure and the cost thereof will be amorti*ed over the years benefited, with each

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year able to claim only the amount amorti*ed in such year. P GE*ER$7 3OOD) ;$PRI7 1,, !""<=] 2note also that in this case, the 6' held that the amount was not considered "&!%>A&A, thereby failing one of the re)uisites for deductibility of business expenses, since the ;. million cost of advertising was inordinately large as it constituted S of the company(s total mar=eting expense 5 Q: What are the reK"isites for b"siness expense to be e "ctible? A: -10 - 0 -E0 -80 -10 paid or incurred during the taxable year related to the taxpayer(s business +++ @%SINESS P%RP1SE concept supported by documents withholding taxes, if re)uired, were paid to the government

Q: Is .one! spent for briber! e "ctible? A: >"T Q: What is the ceilin- i.pose on representation expense for p"rposes of e "ction fro. -ross inco.e? A: for sale of goods: 7.17K of net sales 6ale of service: 1K of net revenue ,owever, when supporting documents reflect a lower amount, then such lower amount shall be used. >ote that the treatment of representation expense will apply if the taxpayer is able to show that it was in fact >"T a fringe benefit granted. An example would be the club memberships which, if used to entertain clients, would be part of representation expenses but if only used by the employee+officer, will be subject to #$T. Q: What is interest arbitra-e? A: %t results in the reduction of the interest expense by a percentage of the interest income subject to final tax. %t is also defined as a circumstance which is presumed to exist because by putting excess funds in deposits4securities subject to 7K withholding, taxpayers are able to avoid the E K tax which will happen if same funds are invested in revenue+generating activities -thus, margin is 1 K0. Another illustration of this is when a taxpayer borrows money from the ban= -interest payments on which can then be claimed as expense and thus a E K benefit0 then deposits it in a ban= -and subse)uently suffers only a 7K final withholding tax0, thus benefiting by 1 K representing the difference between the E K deduction and the 7K withholding tax. It oes not .atter if taxpa!er act"all! inten e to sa$e on taxes. Q: Will interest pa!.ents bet,een a parent co.pan! an its s"bsi iar! be isallo,e in $ie, of Section D; 2@52<52b5 in relation to Section DM 2@5 of the 'ax Co e? A: >o. The prohibition on non+deductibility of interest expense refers to a case where the creditor and debtor are commonly owned by at least 17K. The case of a parent and subsidiary loan does not refer to a case of commonly+owned entities but one where one entity owns the other. Q: What is the treat.ent of interest pai to acK"ire propert! "se for b"siness? A: %nterest incurred to ac)uire property used for business may either be claimed as a deduction or treated as capital expenditure Q: Who .a! a$ail of tax cre its for inco.e tax p"rposes?

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A: "nly those subject to tax on worldwide income -resident citi*en and domestic corporation0 because they pay taxes for foreign sourced income twice -in the ;hilippines and abroad0, and the tax credit is meant to lessen the impact of double taxation. Q: A: What are the non# e "ctible taxes?

-10 %ncome tax - 0 estate and donorUs taxesD and -E0 taxes assessed against local benefits of a =ind tending to increase the value of the property assessed -&;T0 Q: When is there a net operatin- loss carr!#o$er 2N1LC15? A: Bhen the allowable deductions exceed gross income. Q: 7or ho, lon- .a! the N1LC1 be carrie o$er? A: %t may be carried+over for E succeeding years. Any >":'" remaining beyond said period is forfeited. Q: Are there instances ,hen a net operatin- loss .a! not be carrie o$er? A: A96. Bhen the net operating loss is incurred at the time when company not taxable -e.g., registered under the $"%0, such net operating loss may >"T be carried+over. Q: A Corp. o,ns @ Corp. ,hich is the entit! ,ith the N1LC1. A Corp. then exchan-es its shares in @ Corp. for all of the shares in C Corp. so that after the exchan-e A Corp. o,ns C Corp. ,hich in t"rn o,ns @ Corp. Will @Hs N1LC1 still be a$ailable for e "ction after the exchan-e? A: Aes. >":'" carry+over is allowed if there is no substantial change in ownership -at least H1K of company still owned by same persons0 which was the case here since A 'orp.(s mode of ownership over $ 'orp. only changed from direct to indirect. Q: Can the epreciation expense excee the a.o"nt of acK"isition cost of the asset if the propert! is reappraise an it is sho,n that the reappraise $al"e is hi-her than the acK"isition cost? AD >o. Q: What properties are s"b)ect to epreciation? A: Tangible and intangible assets which are limited in diration such as copyright, patent, franchise. ;roperty not subject to depreciation would be inventories, :A>!, properties not used for business and intangibles with unlimited use. Q: %sin- the strai-ht#line .etho / ,hat is the ann"al epreciation of an eK"ip.ent ,hich ,as acK"ire for E& an an esti.ate "sef"l life of E !ears an a sal$a-e $al"e of Bero? A: The annual depreciation will be 1< pesos computed as follows: -1,777,777 less 70 divided by 1 years. Q: When are forex losses an re#appraisal a )"st.ents e "ctible?

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A: The same are deductible only when there is already a close and completed transaction because it is only at such point when the loss is reali*ed. An example is when a V177 loan incurred when the exchange rate was ;17:V1 is subse)uently paid when the exchange rate is already at ;J7:V1, the same will result in a deductible forex loss of ;1777 which represents the additional amount of peso the borrower has to come up to pay the same amount of dollar loan -1770. $efore actual payment, there is as yet no closed and completed transaction which may be claimed as a deductible expense. Q: When are ba ebts e "ctible? A: Bhen they are ascertained to be worthless and after having gone through the process of ascertainment such as by sending demand letters, etc. >ote that in the cases of ban=s claiming the expense, the $6; must approve. "n the other hand, if the bad debt being written off is from an insurance company, the insurance company must be proven as being insolvent Q: Philex entere into an a-ree.ent ,ith @a-"io Gol entitle 8Po,er of Attorne!4 ,hereb! Philex ,as .a e to .ana-e an operate @a-"io Gol Hs .inin- clai. in Sto. Nino/ @en-"et pro$ince. In ret"rn/ Philex ,as to recei$e as co.pensation E=N of the net profit of the Sto. Nino pro)ect. In the co"rse of the pro)ect/ Philex .a e a $ances of cash an propert! "ntil the .ine stoppe operatin- "e to losses. S"bseK"entl!/ Philex ,rote off the in ebte ness to @a-"io Gol . 'he @IR isallo,e the ,rite#off as the sa.e ,as consi ere as in$est.ent in a partnership rather than as a loan. Is Philex entitle to the ,rite#off of ba ebts? A: >o. The amount advanced by ;hilex was meant to be investments ->"T loan0 since -i0 17K share is too big to be interest -ii0 no re)uirement to repay for $aguio 3old -iii0 no collateral -iv0 sharing of profit and creation of common fund are indicators of joint venture. ;,%:9F <%>%>3 '"&;"&AT%"> vs. '%& -April 1J, 77/0. As such they are not bad debts that could be written off. Q: When are onations e "ctible in f"ll? A: Bhen the same are made to: -10 3overnment for ;&%"&%TA A'T%@%T%96 in education, health, youth & sports, human settlements, science, economic development - 0 #oreign institutions and int(l. "rgs. -E0 accredited >3"s, provided the following conditions are met: a. it utili*es the same w4in the 11th day after the Erd month from close of the year, b. the administrative expenses of such >3" does not exceed E7K, c. upon dissolution, the assets of such >3" are re)uired to be transferred to another >3", and d. its board members receive no compensation Q: When is the a.o"nt of onation e "ctible s"b)ect to li.itation? What is the li.itation? A: Bhen the donation is made to: -10 the government for public purposes - 0 accredited domestic corporations for religious, charitable, scientific, etc. purposes -E0 social welfare institutions -80 >3"s -not accredited according to conditions above0 'he li.itations are: 17K of net income for individual taxpayers 1K of net income for corporate taxpayers

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Q: Are interest an penalties pai on a eficienc! tax assess.ent e "ctible for tax p"rposes ? A: "nly interest is deductible, the penalties paid are not. Q: What ite.s are non e "ctible for inco.e tax p"rposes? A: -10 ;ersonal expenses - 0 Amounts to improve buildings -because the amounts spent thereon are capitali*ed, but which will subse)uently be deductible in the form of depreciation expense0 -E0 &estoration expenses for property subject to depreciation -because capitali*ed0 -80 ;remiums for life insurance on employee where taxpayer is beneficiary of insurance -10 :osses from sale or exchange between related parties Q: What are capital assets? A: 'apital assets are those property held by the taxpayer -whether or not connected with his trade or business0, $?T !"96 >"T %>':?!9 1. stoc= in trade of the taxpayer or other property of a =ind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or . property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or E. property used in the trade or business, of a character which is subject to the allowance for depreciation provided in 6ubsection -#0 of 6ection E8D or 8. &eal property used in trade or business of the taxpayer. These four items are considered as "&!%>A&A A669T6. Q: &r. A o,ns a ten# oor apart.ent ,ith a .onthl! rental of PE/=== each "nti. +e sells the entire co.plex to &r. @. Is the sale s"b)ect to capital -ains tax? A: >o. The apartment complex is definitely real property used in business and the gains derived from the sale is considered ordinary income. Q: When is the hol in- perio .aterial for p"rposes of i.posin- the capital -ains tax? A: "nly when the shares are sold by an individual such that if the same has been held for more than 1 months, only 17K of the gain or loss is ta=en into account. This does not apply to corporations. Q: A bo"-ht 0 Co. shares to a! an sol it after D .onths an s"ffere losses b"t after :E a!s also bo"-ht 0 Co. shares. Is the loss s"ffere in the pre$io"s sale allo,e ? A: >o. This is an example of a wash sale where the losses from sale of stoc=s or securities is disallowed if taxpayer ac)uired E7 days before and after stoc=s or securities substantially identical 9F'9;T if the taxpayer involved is a dealer in securities. Q: Are eK"it! in$est.ents consi ere as capital assets? A: A96. 9)uity investments are considered capital assets and not ordinary asset. The only instance when shares of stoc= are considered as ordinary assets is when the same is in the hands of a dealer in securities. Thus, loss in investments which become worthless is capital loss -deductible only from capital gains, if any0 and >"T deductible as a bad debt [C/I*$ 8$*>I*G CORP. ?). CIR ;J@7A 1+, !"""=].

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Q: 9escribe a si.ple tax#free transfer "n er Section ;= 2C52<5 of the 'ax Co e. A: F 'orp. transfers a parcel of land to A 'orp. in exchange for A 'orp. shares as a result of which transfer F 'orp. gains control of A 'orp. -i.e., shares transferred ma=es F 'orp. owner of at least 11K of A 'orp.0. 6ubse)uent to the exchange, the cost basis of the assets transferred will be as follows: -10 land in the hands of A 'orp. C same cost basis as in the hands of F 'orp. 4 A 'orp. shares C same cost basis as the land exchanged by F 'orp. Q: What is the p"rpose for the exe.ptionL eferral accor e "n er Section ;=? A: To encourage corporations in pooling, combination or expanding resources to spur economy Q: What is the sit"s of i$i en s? A: %t is considered as sourced within the ;hilippines if the dividends are declared by: 1. A domestic corporation . A foreign corporation, at least 17K of whose gross income for the three+year period ending with the close of its taxable year preceding the declaration of such dividends -or for such part of such period as the corporation has been in existence0 was derived from sources within the ;hilippines C but pro rated -i.e., only in an amount which bears the same ratio to such dividends as the gross income of the corporation for such period derived from sources within the ;hilippines bears to its gross income from all sources. %f the income derived from sources within the ;hilippines is less than 17K of the total gross income, the entire amount of income generated is >"T considered as ;hilippine+sourced. Q: What is the sit"s of ser$ices? A: %t is considered as sourced within the ;hilippines when performed in the ;hilippines Q: What is the sit"s of sale of personal propert!? A: %t situs is the place of sale 9F'9;T: -10 if what is sold are shares of a domestic corporation which is always considered as ;hilippine sourced income - 0 if such personal property is manufactured abroad and sold here or manufactured here and sold abroad C in which case the amount shall be allocated Q: What is the sit"s of rentals/ ro!alties/ an other intan-ibles? A: %t is considered as sourced within the ;hilippines when the same is used in the ;hilippines Q: What is the sit"s of ins"rance contracts? A: The situs of which is the place of activity -meaning the location of ris=0 and >"T the place of business -which reinsurers do not have in the ;hilippines0 [P/I7. G@$R$*1AQ. Q: 0 Corp./ a Philippine co.pan!/ en-a-e ( Corp./ a nonresi ent %S co.pan!/ to perfor. ser$ices abroa . Will 0 Corp.Hs pa!.ents be s"b)ect to ,ithhol in- tax? A: >o. 6ince A 'orp.(s income is not subject to ;hilippine tax as it is earned by a nonresident foreign corporation and is considered as non+ ;hilippine source income, the same is not subject to income tax and to the ;hilippine withholding taxes.

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Q: What is .eant b! &1@ILIA SEQ%%N'%R PERS1NA& as it relates to sit"s r"les? A: Taxation follows the property or person who shall be subject to tax. SALE 1N INS'ALL&EN'S - BANAS VS. C.A. (FEBRUARY 10, 2000) Petitioner sol lots to A!ala an ,as pai less than <EN/ the balance ,as co$ere b! ; checFs. 1n the sa.e a!/ the checFs ,ere isco"nte 2.eanin- exchan-e for cash at an a.o"nt lo,er than the face $al"e5 also to A!ala. Petitioner reporte as inco.e for the !ear of sale onl! the cash a.o"nt recei$e fro. sale an excl" e the a.o"nts recei$e fro. the isco"nte checFs. 'he balance ,as reporte as inco.e b! the petitioner onl! in the next ; !ears. Petitioner clai.s it ,as correct beca"se initial pa!.ent excl" es e$i ences of in ebte ness incl" in- Pro.issor! Notes. SC P 'he transaction re.ains to be an install.ent 2not cash5 sale as the la, expressl! excl" es 8e$i ence of in ebte ness4 in the eter.ination of ho, ."ch ,as pai for the !ear. +o,e$er/ e$en if the procee s of isco"nte note is not consi ere as part of initial pa!.ent/ the inco.e realiBe fro. the isco"ntin- itself is still a separate taxable inco.e in the !ear it ,as con$erte into cash beca"se it ,as at this !ear that there ,as act"al -ain on the isco"nte notes. Q: When a taxpa!er in icates in his I'R that the excess inco.e tax pai shall be carrie o$er to the s"ccee in- taxable !ears/ .a! he s"bseK"entl! appl! for a tax cre it or ref"n for the sa.e a.o"nt? A: >". The option to carry+over, once exercised, is irrevocable P6ection HJ of the Tax 'odeQ. The same rule will apply even if the taxpayer did not tic= the 2carry+over5 box in the year when the excess payment occurred but did indicate in the succeeding year that the excess amount was being treated as 2prior year(s excess credits5. -;hilam Asset <anagement vs. '%& C !ecember 18, 7710 Q: What are the ele.ents reK"ire to s"ccessf"ll! file a clai. for excess CW' pa!.ents? A: The elements re)uired are: a.0 b.0 c.0 filing a claim within years the income upon which the taxes were withheld were included in the return of the claimant the fact of withholding is established by certificate4s issued by the payor to the payee+claimant [3ilinvest Develo(&ent Cor(. vs. CIR ;$u#ust +, !"" = B *achura]

Q: &a! a ,ithhol in- a-ent file a clai. for a ref"n on its o$erpa!.ents .a e on ,ithhol in- tax for pa!.ents to nonresi ent forei-n corporations ? A: A96. 'onsidering that it will be the withholding agent who shall be liable for deficiency assessment and penalties in case of failure to withhold, it should li=ewise be given the authority to file the claim for refund. Q: Who are reK"ire b! la, to ,ithhol on inco.e pa!.ents? A: agents, employees of withholding agents persons having control of the payment and claiming the expense -ex. ?tility bills paid to 6< by concessionaires0

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payor having control of the payment where payment is made thru bro=ers -ex. Travel agents0 Q: When oes the obli-ation to ,ithhol arise? A: 9ither when: 1. it is paid . it becomes payable -i.e., it is legally due, demandable or enforceable0 or E. it is accrued as an asset or expense Q: 9istin-"ish cre itable ,ithhol in- tax 2CW'5 fro. final ,ithhol in- tax 27W'5. A: ;ayments under the 'BT merely approximate the tax due on the payee while those under the #BT constitute dull payment of the tax due. ?nder the 'BT system, the income recipient is still re)uired to report the income from which taxes were withheld although it may claim the 'BT as credit. ?nder the #BT, the payments subjected to the same are no longer reported as taxable income. Q: 0 Corp. pa!s ( Corp. re-"larl!. 'he pa!.ents are -enerall! s"b)ect to ,ithhol in- tax b"t 0 Corp. has ref"se to ,ithhol on the basis that it 20 Corp.5 is fro. tax. Is 0 Corp. correct? A: >o. The exemption has to pertain to the payee, in this case A 'orp., so that the withholding taxes would not be due. Q: When is a short perio ret"rn "e after a .er-er? A: Bithin E7 days from the effectivity of the merger based on the 69' approval


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Q: When is the propert! transferre ? A: 'ivil 'ode says property is transferred at time of death B%T,"?T interruption. Thus, the governing law is that which was existing at the time of death. Q: In case of a con itional transfer 2as ,hen the ,ill pro$i es that the propert! .a! not be sol ,ithin := !ears fro. the eath of the testator5/ ,hen oes the estate tax accr"e? A: The tax thereon accrues at the time of death notwithstanding the condition. [7oren0o v. Posadas]. Q: In the sa.e sit"ation/ ,hich $al"e is consi ere for p"rposes of co.p"tin- the estate tax? A: 6ince death is generating source from which the power of state to impose tax, tax should be measured by value at time of death regardless of -i0 postponement of actual possession or -ii0 subse)uent appreciation or depreciation. [7oren0o v. Posadas]. Q: What la, shall -o$ern in s"ch a sit"ation? A: %t will be governed by the law in force at the tine of death P:oren*o v. ;osadasQ. Q: What are the t,o -eneral classifications of properties that are co$ere b! the estate tax? A: 1. Those irectl! included: a. #or citi*ens and residents C property located B"&:!B%!9, whether i. realty, ii. personal property -tangible or intangible0 b. #or nonresident alien C property located in &; i. realty, ii. personal property -tangible or intangible0 ,owever, %>TA>3%$:9 ;9&6">A: property -such as shares of a foreign company /1K of whose business is located in the ;hilippines0 of nonresident aliens where there is reciprocity, meaning the country of residence of the decedent -a0 did not impose transfer tax or -b0 allowed similar exemption from transfer tax of property owned by #ilipino citi*ens >"T residing in that foreign country . Those in irectl! included: a. Transfers in contemplation b. &evocable transfers c. ;roperty under general power of appointment d. Transfers with retention of certain rights over income or enjoyment

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e. Transfers for insufficient consideration These are considered 2substitutes for testamentary dispositions5 C although inter vivos in form, they are &ortis causa in substance. Q: When is a transfer consi ere as one .a e in conte.plation of eath? A: Bhen the motivating factor for such transfer is the thought of death, or if given near the time of death C ex. old age, failing health, length of time between donation & death, concurrence with will+ma=ing. >ote: the E year presumption under ;!. 1H71 -which provides that transfers made within E years of death are presumed to have been done in contemplation of death0 >" longer applies. Q: Are there instances ,hich 9ISPR16E that the transfer ,as .a e in conte.plation of eath? A: A96. Bhen it is shown that the reason for the transfer was the decedent(s desire: 1. to see his children enjoy the property . to save income taxes E. to settle family disputes 8. to relieve donor from administrative burden 1. to reward services rendered Q: In eter.inin- ,hether a transfer is a onations inter viv ! or a onation " rti! #$%!$/ is a eter.ination of the t!pe of heir rele$ant? A: A96. Bhere there is a donation inter vivos to a person who is >"T a forced heir, the presumption is that such transfer was inter vivos. $ut is the recipient of the donated property is a forced heir, the transfer is presumed to be made merely to accelerate the inheritance, hence &ortis causa. ,owever, the presumption may be rebutted by evidence to the contrary [?D$. DE ROCE) v. PO)$D$)] Q: What e "ctions are not a$ailable to nonresi ent estates? A: >onresident estates can not deduct the 1 million standard deduction, medical expenses and family home. Q: What are the in ications of a onation inter viv !? A: Bhen: 1. ;roperty was donated 2out of love and affection5 . Bhen a reservation on the donation is made only with respect to the right of usufruct which denotes that na=ed ownership was already transferred -ratio: why reserve such right if one remains to be the owner thereofW0 E. Bhen the transferors retained sufficient property only for the purpose of maintaining their status in life, thereby implying that it was alright to part with the property even during the transferor(s lifetime 8. !onee accepted donation since in a donation &ortis causa acceptance is not re)uired [Gesto(a v. C$, October 6, !"""] Q: Ill"strate transfers for ins"fficient consi eration.

#<@, transfer Case A 1,777 Case @ 1,777

Case C 1,777

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#<@, death 'onsideration received at the time of transfer Amount included in estate

,777 H77 :/D==

,777 1,777 =

,777 7 </===

%n determining whether there was sufficient consideration, compare the #<@ of the property at the time of transfer with the amount of consideration received at the time of transfer. ,owever, the amount to be included in the estate is computed by ta=ing the difference between the #<@ of the property at the time of death and the amount of consideration received at the time of transfer. Q: What is the reason behin allo,in- as e "ction for estate tax p"rposes propert! ,hich ,as pre$io"sl! taxe 2$anishine "ction5? A: To mitigate the harshness of previous taxation. Q: What are the con itions for the e "ctibilit! of propert! pre$io"sl! taxe or 6ANIS+ING 9E9%C'I1N? A: 1. ;resent decedent must have ac)uired the property by inheritance or donation within 1 years prior to his death . ;roperty ac)uired formed part of gross estate of the prior decedent, or was a taxable gift of the donor E. 9state tax or donor(s tax due thereon must have been paid 8. The property must be identified as the one received from the prior decedent or from the donor 1. The estate of the prior decedent has not previously availed of the vanishing deduction Q: +o, o !o" co.p"te for the $anishin- e "ction? A: ;rocedure C 10 determine the #<@ of the ;;T at the time of the prior decedent(s death and the #<@ at the time of the present decedent(s death then get the lower of these two amounts 0 prorate M Pvalue in 1 above4gross estateQ F deductions -except family home, medical expenses, standard deduction, &.A. 8.1H $?T includes transfer for public use0 E0 subtract from 1 80 Apply rate of vanishing deduction to E above - 7K to 177K0 9xample: %n 777, A inherits a land at ;177T. %n 77E, A died with the said land having a #<@ of ;J77T. ,is gross estate amounted to ; <. ,is allowable deductions amounted to ;877T. @anishing deduction M -177T0 C -177T4 < x 877T0 M 877T 877T x J7K M 87T

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Q: 'here ,ere clai.s a-ainst the estate of the ecease ,hich alle-e l! excee e the -ross estate ,hich res"lte in the a .inistrator reportin- a NIL estate tax liabilit!. 'he @IR conteste the a.o"nts of the clai.s a-ainst the estate e "ctions statin- that lo,er a.o"nts ,ere pai as pa!.ents "rin- the settle.ent of the estate an these a.o"nts sho"l be ,hat ,ill be consi ere in arri$in- at the net estate. Will the a.o"nts be the a.o"nts consi ere as e "ctions to the -ross estate? A: >", the deduction allowable is that amount determined at the time of death. ;ost+death developments are not material in determining the amount of deduction, specially for the claims against the estate deduction. Thus, the 'ourt applied the 8 ate#of# eath $al"ation r"le4 which is the ?6 rule on deductions and which is applicable also in the ;hilippines given no apparent reason to disregard the same. The amount deductible is the debt which could have been enforced against the deceased in his lifetime, nothing more and nothing less. P DICO* in his ca(acity as $d&inistrator o2 deceased 3ernande0 vs. CIR ;$(ril <", !""D= B *achura] Q: Are a.o"nts in excess of the PE==/=== .e ical expenses e "ctible still as clai.s a-ainst the estate? A: >o. Q: Are notarial fees an attorne!Hs fees on -"ar ianship procee in-s e "ctible fro. -ross estate? A: %t depends. %f the attorney(s fees pertain to the collection of assets, payment of debts, or distribution of the property to the heirs then they are deductible. Q: When ,ill the sa.e be isallo,e as e "ctions for. -ross estate? A: Bhen the same pertains to: payments are made to the trustee who was charged with the administration of the decedent(s assets for the benefit of an just an heir and the bond filed by the administrator since it is in the nature of a )ualification for the office and not necessary for the settlement of the assets of the estate [CIR ?). P$JO*$R ;-$RC/ !!, !"""=] Q: Sho"l the @IR isco$er "npai taxes "e fro. the ece ent alrea ! after the propert! has been istrib"te to the heirs/ ho, can the @IR reco$er s"ch "npai tax liabilities? A: The $%& can recover in two ways: -10 it may recover said liability from all the heirs who shall share proportionately "& - 0 it may go against the property held by an heir if the same is sufficient to cover the whole tax liability -in which case, the heir who paid can see= reimbursement from his4her co+heirs0 $?T in both instances, the respective heirs may not be held accountable for more that the share he4she inherited Q: Who are consi ere as personsLofficers ,ho sho"l reK"ire proof of pa!.ent of estate tax before actin- "pon a reK"est b! an heir? A: These would be the &egister of !eeds, debtors, lawyers and ban=s C all on transactions relating to their business. Q: 7or p"rposes of i.posin- the onorHs tax/ is onati$e intent al,a!s necessar!? A: >", as in the case of transfers for less than ade)uate consideration. ,owever, for the donor(s tax to be imposed in this case, the following re)uirements must concur: 1. ;roperty donated is >"T realty that is capital asset -otherwise it will be subject to JK '3T on the entire gross selling price or #<@, whichever is higher0

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. the transfer is for less than ade)uate consideration E. the transfer is inter vivos Q: &r. A sol his lot not "se for b"siness to his brother &r. @ for E==/=== ,hen at that ti.e the lot ,as $al"e in the .arFet at P:&. &r. A bo"-ht it for P:==/===. In a ition/ A sol so.e of the shares of his co.pan!/ 0 Corp./ to his senior exec"ti$es. +e sol the 0 Corp. shares for PD==/=== ,hen the .arFet $al"e ,as at PE==/===. +is ori-inal cost in the shares is P:==/===. Are the sales s"b)ect to onorHs tax? A: The sale of the lot is not subject to donor(s tax as it is a real property classified as a capital asset and as such is subject to the JK capital gains tax. The sale of the shares are, however, subject to the donor(s tax of E7K based on the difference between the selling price and the mar=et value. Q: Are there e "ctions fro. the -ross -ift? A: Actually, there are really no deductions, only exemptions which are as follows: 1. dowries up to a maximum amount of ;17,7777, subject to the following conditions: a. the donation is made before marriage or w4in 1 yr. thereafter b. it is made by parents to their children, whether legitimate, illegitimate, or adopted . gifts to the national gov(t. or to other created entities not made for profit E. gifts to religious, charitable, etc. provided that not more than E7K of the value of the gifts are used for admin. purposes 8. encumbrance on the property if assumed by the donee 1. those specifically provided as diminution on property donated Q: Are non#resi ent aliens entitle to all these e "ctions? A: >". "nly to 1 are allowable Q: Which is a .ore tax efficient .o e of transferrin- propert! O $ia onation .ortis ca"sa or inter $i$os ? A: Bhile the rates for donor(s tax are lower - K to 11K0 compared to those imposed for estate tax -1K to 7K0, payment of donor(s tax are necessarily earlier than estate tax.


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Q: Who is the c"rrent Co..issioner of Internal Re$en"e? A: 6ixto 6. 9s)uivias %@ Q: What is the basic co.position of the @"rea" of Internal Re$en"e? A: The $%& is headed by the 'ommissioner and 8 deputy commissioners. There are Assistant 'ommissioners and division chiefs reporting to the respective departments. Q: What are the po,ers of the Co..issioner of Internal Re$en"e? A: The '%& has the power: 1. to interpret tax laws and decide tax cases a. interpretation of laws exclusive and original subject to review by the 6ec. "f #inance b. decide tax cases exclusive appellate jurisdiction of the 'TA . to obtain information, to summon, examine and ta=e testimony of persons but these powers do not empower the '%& to in)uire into ban= deposits except as provided under 6ection J-#0 of the >%&' The 'ommissioner is hereby authori*ed to in)uire into the ban= deposits of: -10 a decedent to determine his gross estateD and - 0 any taxpayer who has filed an application for compromise of his tax liability under 6ec. 78-A0 - 0 of this 'ode by reason of financial incapacity to pay his tax liability. This re)uires a signed Baiver of the 6ecrecy of $an= !eposits. E. to ma=e assessments and prescribe additional re)uirements for tax administration and enforcement a. examination of returns and determination of tax due once file / the taxpa!er .a! no lon-er ,ith ra, itG b"t he .a! a.en it/ s"b)ect to the follo,in- reK"ire.ents: :. it is .a e ,ithin D !ears fro. filin-/ an <. no notice for a" it or in$esti-ation has been act"all! ser$e to hi.

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b. failure to submit re)uired returns, statements, reports, and other documents assessment to be based on best obtainable evidence c. authority to conduct inventory+ta=ing, surveillance, and to prescribe presumptive gross sales and receipts d. authority to terminate taxable period when the taxpayer is i. retiring from business ii. intending to leave the country iii. removing his property iv. obstructing tax collection e. authority to prescribe real property values f. authority to in)uire into ban= deposits of -10 a decedent to determine his gross estateD and - 0 any taxpayer who has filed an application for compromise of his tax liability under 6ec. 78-A0- 0 of this 'ode by reason of financial incapacity to pay his tax liability g. authority to accredit and register tax agents h. authority to prescribe additional procedural or documentary re)uirements Q: Are all the po,ers of the Co..issioner ele-able? A: >o. The following may not be delegated: -10 - 0 -E0 -80 ;romulgation of rules & regulations %ssuance of first impression rulings 'ompromise or abate if the amount is over ;177,777 Assign officers in charge of excisable articles

Q: &a! the CIR be co.pelle to .aFe an assess.ent? A: >". <andamus lies only to perform ministerial functionsD assessment is discretionary on the '%&. Absent showing of grave abuse, '%&(s right to interpret tax laws and enforce them is discretionary [-ER$7CO )EC@RI1IE) CORP.] Q: When is the ci$il penalt! of <EN i.posable? A: %t is imposable in case of: 1. failure to file return and pay tax due thereon . filing with unauthori*ed revenue officer E. failure to pay within time prescribed in assessment notice 8. failure to pay part of the amount shown in %T& >ote: All the above simultaneously attract the 7K interest except n".ber <. Q: If a taxpa!er ,ho files a ret"rn s"bseK"entl! realiBes that the ret"rn file ,as ins"fficient/ ,ill his a.en e ret"rn be s"b)ect to the <EN s"rchar-e?

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A: As long as the taxpayer files the amended return before the lapse of any demand by the $%& to pay his4her deficiency assessment, the taxpayer is not liable for any surcharge. Q: 'axpa!er A file an pai taxes on April :E/ <==C ,orth E&. 1n &a! :E/ <==C/ he realiBe he sho"l ha$e pai PM& an th"s pa!s the a itional P:&. Is he s"b)ect to the <EN s"rchar-e? A: >o. >one of the violations mentioned was committed by the taxpayer. Q: 'axpa!er @ file an pai taxes on April :E/ <==C ,orth E&. 1n &a! :E/ <==C/ the @IR iss"e an assess.ent an reK"ire that 'axpa!er pa! an a itional P:& on or before ?"ne :E/ <==C. If he pa!s before ?"ne :E/ <==C is he s"b)ect to the <EN s"rchar-e? A: >o. >one of the violations mentioned was committed by the taxpayer. Q: 'axpa!er C i not file an! ret"rn nor pa! an! taxes on April :E/ <==C. 1n &a! :E/ <==C/ he realiBe he sho"l ha$e pai PM& an th"s pa!s the ,hole M&. Is he s"b)ect to the <EN s"rchar-e? A: Aes. Taxpayer ' failed to file return and pay tax due thereon which is the first type of act which re)uires a 1K surcharge imposition. Q: 'axpa!er 9 file an pai taxes on April :E/ <==C ,orth :=&. 1n &a! :E/ <==C/ the @IR iss"e an assess.ent an reK"ire that 'axpa!er pa! an a itional PE& on or before ?"ne :E/ <==C. If he pa!s after ?"ne :E/ <==C is he s"b)ect to an! s"rchar-e? A: Aes. Taxpayer ! will be subject to the 17K surcharge since -a0 he failed to pay within the time prescribed in the notice of assessment and -b0 the underdeclaration is 17K or in excess of the E7K threshold which raises the prima facie presumption of a false or fraudulent return. As such allegation is only prima facie, it may be rebutted. Q: Can the offer of a taxpa!er be lo,er the prescribe rates 2:=N for financial incapacit! an ;=N for o"btf"l $ali it!5 in the 'ax Co e? A: Aes, but the approval by the 9valuation $oard which is composed of the '%& plus 8 !eputy 'ommissioners is re)uired Q: When .a! the interest on eficienc! tax be ,ai$e ? A: Bhen the assessment is highly controversial as in the case of C$G$A$* E7EC1RIC POEER 5 7IG/1 where there was a withdrawal of its exemption from income tax and a subse)uent reinstatement of such exemption. Thus, non+payment during the short time when the taxpayer was exempt was not subjected to interest payment. Q: What re.e ies are a$ailable for the collection of taxes? A: 1. . E. 8. 1. J. H. tax lien -6ec. 1.0 compromise -6ec. 780 distraint of goods -shares, debts, ect.0 levy of real property civil or criminal action forfeiture suspension of business operations

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/. enforcement of admin. fines The remedies may be resorted to all at the same time but E and 8 not available if less than 177 pesos. Q: &a! an assess.ent for eficienc! estate tax attain finalit! ,hen there is a pen in- case in the probate co"rt? A: A96, when such assessment was not protested by the taxpayer administratively [-$RCO) II v. C$] Q: Will ser$ice of an assess.ent notice .a e to the a-ent of the ece ent after the ece entHs eath be effecti$e? A: >". 6ervice of assessment notice on the trust officer4agent of the decedent made after the death is invalid since at that time the legal relationship between the principal and his agent had been automatically severed by the death of the principal even if the agent continued to act as such by filing the decedent(s %T&. The fact of failure to file a notice of death will not alter this effect but will only expose the estate to penalties and will not continue the relationship with the agent [E)1$1E O3 7$1E J@7I$* DIEC ?). CIR ;J$*@$RA ! , !"",=] Q: What is the si-nificance of the taxpa!erHs in icatin- in the pre$io"s !earHs I'R its ne, a ress? A: Any service of assessment notice on the old address subse)uent to such previous year invalidates the assessment. 'CIR VS. B(I AS )I*UI&ATOR OF (ARAMOUNT ACCE(TANCE COR(. (SE(TEMBER 2+, 200+), Q: 9oes the is.issal of a ci$il action carr! ,ith it the is.issal of the ci$il aspect of tax collection? A: >o, proceedings in tax cases are different since the tax liability not deemed included in criminal cases filed. Q: Sho"l the filin- of a cri.inal co.plaint be prece e b! assess.ent ? A: >". %n case of a false or fraudulent return, proceedings in court may be commenced without an assessment since under the Tax 'ode, civil and criminal aspects may be pursued simultaneously Q: When oes the -o$ern.entHs ri-ht to assess prescribe? A: The general rule is that the government(s right to assess prescribes in E yrs. from the date of the last day of filing. ,owever: 1. %f the return is filed after such date, the E+yr. period is rec=oned from the date of actual filing . %f return filed before last day, then considered as filed on the last day. Q: &a! there be a procee in- in co"rt ,hen no assess.ent is .a e ,ithin s"ch D#!ear perio ? A: >". 9xcept under 6ec. which provides for the following instances: a5 %f +++ a. A false or fraudulent return is filed with intent to evade tax b. There is a failure to file return Then +++ a. tax may be assessed "& b. proceeding in court for collection may be filed without assessment +++ at any time within 17 years from discovery of falsity, fraud or omission

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2b5 Baiver of ;9&%"! T" A66966 is allowed before the end of period ->ote: waivers must be consented to by the $%& and is not a unilateral act0 Q: When is the r"nnin- of the perio of prescription s"spen e ? A: %t is suspended when +++ 1. the '%& was prohibited from ma=ing the assessment or beginning distraint4levy and for J7 days thereafter -example: when injunction allowed under the 'TA law is availed of0 . taxpayer re)uests reinvestigation which is granted by '%& E. taxpayer cannot be located in address 8. a warrant of distraint or levy is served -not only issued0 and no property could be found 1. taxpayer is out of the ;hilippines &egular %T& Collection 'F (rior assess&ent Assess within E yrs. from actual filing or last day to file -if the filing was done prior to said last day0 'ollection within 1 yrs. 2ro& date o2 assess&ent by summary "& judicial 17 yrs. from discovery of falsity, fraud, omission >o %T&, or false or fraudulent %T& Collection 'F (rior assess&ent Assess within

Collection 'Fo (rior assess&ent 'an not be done anymore in view of clear provision that there has to be assessment before collection

'ollection within 1 yrs. from date of assessment by summary "& judicial ->ote: ">'9 T,9&9 %6 A> A66966<9>T, T,9 ;9&%"! T" '"::9'T %6 A:BAA6 1 A9A&6 9@9> %# T,9 &9T?&> %6 #&A?!?:9>T, #A:69 "& BA6 >"T #%:9!0 Collection 'Fo (rior assess&ent 'ollection within 17 yrs. from date of discovery of falsity, fraud, omission by )" icial procee in-s onl! an not b! s"! procee in-s 2this li.itation on .o e of enforcin- collection is the istinction if the -o$ern.ent procee s to collection ,itho"t assess.ent5

Q: Is there a nee to pro$e that the taxpa!er act"all! recei$e the assess.ent notice ,ithin the prescripti$e perio ? A: >o. As a general rule, the assessment is deemed made once the notice is mailed. ,owever, if the receipt is disputed and for this presumption of receipt of mail to apply, '%& must prove that -10 letter was properly addressed and - 0 that it was mailedD otherwise, presumption of receipt cant apply. Q: When .a! the collection of taxes be .a e? A: %t may be made within 1 years from assessment or within the period agreed in the waiver. +o,e$er, if the waiver refers to both assessment and collection and interpreting it as such will in effect shorten the collection period, then it is deemed to refer to assessment only and not to collection [RP v. 7I- DE A@] Q: What is the effect of a rein$esti-ation on the perio to collect ?

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A: The period utili*ed for reinvestigation is deducted from the period within which to collect. Thus, if the assessment was made on 1414 777 and the collection was made on 1414 77J but it was shown that from 1414 771 to 1414 77E, or a period of years, the assessment was being reinvestigated, the action to collect has not yet prescribed since deducting the year period when reinvestigation was made will only amount to 8 years -J years total minus years of reinvestigation0 and is thus still within the 1 year period to collect. Q: What is the ifference bet,een a reK"est for rein$esti-ation an a reK"est for reconsi eration for p"rposes of tollin- the r"nnin- of the prescripti$e perio to collect? A: A re)uest for reconsideration is a reevaluation on the basis of existing records while a reinvestigation is a reevaluation on the basis of newly+ discovered or additional evidence. It is a reK"est for rein$esti-ation acte "pon ,hich s"spen s the prescripti$e perio to collect. -$A>N "# T,9 ;,%:. %6:A>!6 @6. '%& -"'T"$9& 1H, 7710 Q: What are the reK"ire.ents of a $ali ,ai$er? A: -a0 specified period -b0 signed by proper authority -for 1< or above M '%& must sign0 and -c0 taxpayer must be furnished a copy of the waiver in order to perfect agreement since waiver is not a mere unilateral act -;hilippine Gournalists %nc. vs. '%& -!ecember 1J, 7780 Q: An file a case ,ith the C'A a-ainst the taxpa!er an the @IR. 'he ,as seeFin- to 2:5 eclare the taxpa!er as ha$in- an assess.ent an 2<5 as a conseK"ence of 2:5/ to collect his infor.erHs re,ar . 'his case ,as file b! the ,ithin D !ears fro. the ti.e that the taxpa!er file its ret"rn. +o,e$er/ apart fro. this action initiate b! the no other action ,as file b! the -o$ern.ent seeFin- to collect a-ainst the taxpa!er. +as the ri-ht to collect alrea ! prescribe ? A: >o, this is a uni)ue case but the $%& is deemed to be compliant with the re)uirement 2collection within 1 years from time of assessment5 since if the ;etitioner+informant won, the 'TA would have ordered the erring parties to pay the tax. At the very least, the filing by the informer of the case would have suspended the running of the period because the $%& is prohibited from ma=ing collection because there was a pending case. [P*OC vs. C$, $(ril !G, !""6] Q: Is there a ifference bet,een a false ret"rn an a fra" "lent ret"rn? A: A96. A false return merely implies deviation from truth, whether intentional or not, while a fraudulent return refers to an intentional evasion of tax [$C*$R v. C1$] Q: Where there is an assess.ent/ ,hen oes the ri-ht to collect prescribe? A: Bhere there is an assessment, the right to collect prescribes in 1 years. The 17 year period to collect from discovery of falsity, fraud, etc. is >"T A;;:%'A$:9 [RP. v. RE1]. >ote that in this case the 'ourt ruled that the pendency of a criminal case against the taxpayer did not prevent the '%& from proceeding to collect so any action that was lodged after 1 years from the assessment can no longer be valid as being barred by prescription. Q: When oes the perio of prescription ,ith respect to the -o$ern.entHs ri-ht to file a cri.inal action be-in to r"n? A: ;rescription begins to run from the date of commission, or if not =nown, from discovery A>! actual filing of judicial proceeding P69'. /1 Tax 'odeQ. Q: When is the prescripti$e perio interr"pte ? A: %t is interrupted whenD

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1. .

proceedings are instituted and when the taxpayer is out of the country P69'. /1 Tax 'odeQ

Q: When K"arterl! tax ret"rns are reK"ire to be file / fro. ,here is the D#!ear prescripti$e perio recFone ? A: %t is rec=oned from the date of filing of the final A>>?A: return even for percentage taxes . [PRO1EC1ORH) )ER?ICE) I*C. v. C$ ;$PRI7 1!, !"""=] Note that K"arterl! 6A' ret"rns are final ret"rns so the <#!ear perio to file the clai. for ref"n is recFone fro. their filin-. 7or inco.e taxes/ the recFonin- of the < !ear perio is the filin- of the final a )"st.ent ret"rn an not the K"arterl! inco.e tax ret"rns. Q: What is the nat"re of the reK"ire.ent that the assess.ent ."st 8state the facts an the la, on ,hich the assess.ent is base 4? A: 6uch is not merely a procedural re)uirement but a substantive re)uirement which determines taxpayer(s ability to protest. Thus, the same must be complied with otherwise the assessment is void. Thus, assessment notices which only have computations are invalid. This is the reason why the new Tax 'ode provides that the taxpayer be 2informed5 and not merely 2notified5. 3iven that this new rule benefits the taxpayer, the same may be applied retroactively. -'%& vs. A*ucena &eyes, Ganuary H, 77J upheld in '%& vs. 9nron 6ubic ;ower 'orporation C Ganuary 1., 77.0 Q: Is the R&C statin- that the <#!ear perio to file a clai. for ref"n is exten e to .aFe it := !ears correct? A: >". The &<' cannot go beyond what is provided by lawD and the 6tate cannot be put in estoppel. [P8CO- v. CIR ] Q: 7or ref"n case/ .a! the taxpa!er ele$ate its clai. ,ith the C'A e$en before a ecision is .a e b! the @IR? A: A96, similar to assessments, taxpayers may appeal the inaction of the $%& to the 'TA even for refund cases. ,owever, the period is different since the $%& is given 1 7 days to act on a refundD otherwise, the taxpayer may already appeal the inaction. ,owever, if the +year period is about to lapse and no decision has as yet been given, the taxpayer may already appeal to the 'TA even if the 1 7 day period to decide has not expired. Q: In ,hat instance is the Preli.inar! Assess.ent Notice not reK"ire ? A: 10 assessment is purely mathematical error 0 discrepancy between tax withheld and remitted E0 section HJ C claim for refund is filed when it was previously carried+over 80 excise tax on excisable article not paid 10 goods imported by tax+exempt is sold not taxable entity Q: &a! interest on the tax ref"n be a,ar e ? A: >". %nterest on the tax refund cannot be awarded unless -10 authori*ed by law or - 0 the collection of the tax was attended by arbitrariness -inexcusable or obstinate disregard of legal provisions0. $ut there is no arbitrariness when there is room for two opinions [P/I7E9 -I*I*G CORP. ?). CIR ;$PRI7 !1, 1+++=] Q: Will the filin- of the S"pple.ental Petition be s"fficient to toll the prescripti$e perio for the clai. for ref"n ?

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A: >", the claim for refund has been barred by prescription since the 6upplemental ;etition was not admitted. Bhile retirement funds4employee trusts are still absolutely exempt from income tax regardless of the nature of tax, ;etitioner(s claim was barred by prescription since the filing of 6upplemental ;etition -and not an original action0 was not granted and therefore 2it did not have any judicial effect5 to toll the running of the +year period. %t was only when a subse)uent ;etition for &eview was filed did the prescriptive period toll. Also, this is not a case where +year period can be considered non+jurisdictional since there are no 2exceptional circumstances5 to spea= of such as that prevailing in the ;anay 9lectric 'o. case -1.1/0 where the taxpayer and '%& agreed to await the result of another analogous case prior to having the taxpayer file an action for refund. #A& 9A6T $A>N A>! T&?6T '"<;A>A vs. '%& -<ay , 77J0 + T%>3A 9FT9>6%"> "# +A9A& ;9&%"! W C ;>$ @6. '%& -"'T"$9& 18, 77E C '.A. 'A690 TB" A9A& ;9&%"! T" #%:9 G?!%'%A: ':A%< #"& &9#?>! 2%6 >"T G?&%6!%'T%">A: A>! <AA $9 6?6;9>!9! "& &9A6">6 "# 9I?%TA A>! "T,9& 6;9'%A: '%&'?<6TA>'965 6?', A6 10 B,9> TAF;AA9& <A!9 A!@A>'9 %>'"<9 TAF ;AA<9>T -,99!%>3 ;&96. AI?%>"(6 'A::0 A>! BA6 <A!9 T" $9:%9@9 T,AT %T6 &9I?96T #"& TAF '&9!%T B%:: $9 A'T9! ?;"> #A@"&A$:A '">6%!9&%>3 T,AT %T6 'A&&A+"@9& BA6 ?>?T%:%O9! 6%>'9 T,9 '"<;A>A 6?##9&9! :"6696 #"& T,9 >9FT 8 A9A&6 -;>$ 'A690 0 B,9> T,9 TAF;AA9& A>! T,9 '%& A3&99! T" BA%T #"& T,9 &96?:T %> A>"T,9& 'A69 ,A@%>3 T,9 6A<9 %66?9 -;A>AA 9:9'T&%' '". 'A690 E0 B,9> T,9 '%& %>%T%A::A A3&99! T" 3&A>T T,9 &9#?>! A>! :AT9& !9>%9! T,9 6A<9 ->A3?%AT 'A690 Q: Petitioner/ an online international air carrier/ file ,ith the @IR a clai. for ref"n of excise taxes it pai on its p"rchases of )et f"el fro. Petron Corporation. 'he C'A enie the clai. an r"le that since the excise tax ,as i.pose on Petron as the .an"fact"rer of petrole". pro "cts/ an! clai. for ref"n sho"l be file b! Petron. It a e that ,hen the b"r en of the tax ,as shifte to the p"rchaser/ the a.o"nt passe #on to the latter is no lon-er a tax b"t an a e cost of the -oo s p"rchaser as eci e in the (-i.i//ine A#et0.ene case. Petitioner co"l not be consi ere a taxpa!er beca"se it .erel! sho"l ere the b"r en of the excise tax 2,hich is an in irect tax5 an not the excise tax itself as Petron/ bein- the .an"fact"rer/ still re.ains pri.aril! liable. Petitioner sai that to ha$e Petron be the clai.ant is to .aFe their ri-ht to reco$er! epen ent solel! on PetronHs acts o$er ,hich it has no control. Is SilFair the proper part! to clai. a tax cre it for the excise taxes it pai on its p"rchases of )et f"el fro. Petron Corporation? A: >", the proper party to see= a refund of an indirect tax is the statutory taxpayer, who is the person on whom the tax is imposed by law and who paid the same, even if that person shifted the tax to another. Thus, ;etron 'orporation being the statutory taxpayer -excise taxes being levied on manufacturers and producers0 is the entity that may claim a refund. Bhen ;etron passed on the burden of the tax to petitioner, the additional amount can no longer be considered a tax but as part of the purchase price which ;etitioner had to pay as purchaser. ;etitioner(s argument that it is entitled to the refund since it is exempt from paying indirect taxes by virtue of the Air Transport Agreement between the ;hilippines and 6ingapore is unavailing considering that, unli=e the situation of >;' in the -aceda case, there is in this case an absence of clear legislative intent of an exemption from indirect taxes based on 6ection 1E1-b0 of the Tax 'ode and Article 8- 0 of the Air Transport Agreement. [)I7>$IR ;)I*G$PORE= P1E, 71D. vs. CO--I))IO*ER O3 I*1ER*$7 RE?E*@E ;3ebruary G, !""D 5 *ove&ber 1,, !""D=] Q: Is a final letter iss"e b! the @IR reiteratin- the for i..e iate pa!.ent consi ere as a final ecision appealable to the C'A? A: A96. The letter is deemed as the '%&(s final act since failure to comply therewith exposes property to distraint and levy [CIR ?). I)$8E7$ C@71@R$7 CORP. ;J@7A 11, !""1=]. <ore importantly, section / allows direct appeal to the 'TA if protest is not acted upon within 1/7 days.

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Q: When is a ecision appealable to C'A ? A: 6o long as the tenor of the decision is that the dispute of ;etitioner is denied, it is appealable. To let the ;etitioner defer the period is to unduly put in his hand the collection of taxes. The '%& should always indicate in clear language the decision of the $%& P6?&%3A" 9:9'T&%' v. 'TAQ Q: Is the enial b! the @IR of the protest on the PAN 2not the 7AN5 appealable to the C'A ? A: >o. The denial of the '%& must be on a protest of the #A>. Q: PSPC acK"ire so.e 'CCs thro"-h the 1ne Stop Shop Inter#A-enc! 'ax Cre it an 9"t! 9ra,bacF Center 2co.pose of 917/ @IR/ @1C an @1I5 fro. other @1I#re-istere entities. PSPC then "tiliBe the sai 'CCs for its excise taxes an ,ere then iss"e '9&s b! the Center an A'APs iss"e b! the @IR. +o,e$er/ the @IR assesse PSPC for elinK"enc! excise taxes alle-in- that PSPC is not a K"alifie transferee of the 'CCs. CA r"le that PSPC ,as not entitle to the benefit of the 'CCs an th"s "phel the assess.ent. Were the "se of PSPC of the 'CCs $ali ? A: Aes. There is no suspensive condition for the validity of T''s as they are effective immediately and only computational errors are allowed as basis to invalidate T''s. Also, even if the source is defective, it does not affect ;6;'(s right as it acted in good faith and the agencies approved of the use of T''s [PI7IPI*$) )/E77 PE1RO7E@- CORPOR$1IO* vs. CO--I))IO*ER O3 I*1ER*$7 RE?E*@E ;Dece&ber !1, !"" =] PLEASE RE&E&@ER '+E PERI19S IN AN ASSESS&EN' PR1CEE9INGS 91C%&EN'S D= 9A(S '1 APPEAL '1 '+E C'A 7R1& 9ENIAL 1R INAC'I1N D= 9A(S '1 PR1'ES' 7R1& RECEIP' 17 7AN M= 9A(S '1 S%@&I' C1&PLE'E SE' 17 91C%&EN'S :>= 9A(S 71R '+E CIR '1 AC' 7R1& '+E S%@&ISSI1N 17 C1&PLE'E


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R.A. C<>< ELE6A'ES C'A '1 CA LE6EL 'W1 9I6ISI1NS AN9 EN @ANC 61'ES 17 < I7 9I6ISI1N AN9 ; I7 EN @ANC E0#?%S'ICES CAN' APPEAR @E71RE C1%R' WI'+IN : (EAR ?%RIS9IC'I1N ### A. E0CL%SI6E APPELLA'E ?%RIS9IC'I1N :. 9ECISI1NS 17 CIR <. INAC'I1N 17 CIR D. 9ECISI1NS 17 R'C 1N L1CAL 'A0 CASES ;. 9ECISI1NS 17 C1C E. 9ECISI1NS 17 C@AA 21N E0ERCISE 17 APPEAL 16ER RP' 'A0 CASES 9ECI9E9 @( L@AA5 M. 9ECISI1NS 17 917 1N C%S'1&S CASES ELE6A'E9 '1 +I& 1N A%'1&A'IC RE6IEW 9%E '1 A96ERSE 9ECISI1N 6S. G16ERN&EN' J. 9ECISI1NS 17 9'I 21N N1N#AGRI. PR19%C'S5 AN9 9A 21N AGRI. PR19%C'S5 IN61L6ING 9%&PING AN9 C1%N'ER6AILING 9%'IES @. 16ER CRI&INAL 177ENSES :. 1RIGINAL # 71R CRI&INAL AC'S %N9ER NIRC AN9 C%S'1&S C19E :& 1R A@16E <. APPELLA'E O LESS '+AN :& 1R N1 SPECI7IE9 A&1%N' 2REG%LAR C1%R'S/ I7 7R1& R'C P APPEAL '1 C'A L I7 7R1& &'C '+EN R'C P PE'I'I1N 71R RE6IEW '1 C'A5 16ER 'A0 C1LLEC'I1N CASES :. 1RIGINAL O :& 1R A@16E <. APPELLA'E O LESS '+AN :& 2REG%LAR C1%R'S/ I7 7R1& R'C P APPEAL '1 C'A L I7 7R1& &'C '+EN R'C P PE'I'I1N 71R RE6IEW '1 C'A5


PERI19 O D= 9A(S 7R1& RECEIP' 1R INAC'I1N &19E ### A. PE'I'I1N 71R RE6IEW P R%LE ;< 2+EAR9 @( 9I6ISI1N5 @. I7 7R1& C@AA 1R R'C 2IN APPELLA'E ?%RIS9IC'I1N5 P R%LE ;D 2+EAR9 EN @ANC5 &A( 7ILE &R 1R NEW 'RIAL WI'+IN :E 9A(S 7R1& RECEIP' 17 9ENIAL 7R1& 9I6ISI1N '1 EN @ANC O PE'I'I1N 71R RE6IEW 7R1& EN @ANC '1 SC O PE'I'I1N 71R RE6IEW 1N CER'I1RARI 2R%LE ;E5


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8,hen in the opinion of the Co"rt the collection .a! )eopar iBe the interest of the Go$ern.ent an Lor the taxpa!er the Co"rt at an! sta-e of the procee in- .a! s"spen the sai collection an reK"ire the taxpa!er either to eposit the a.o"nt clai.e or to file a s"ret! bon for not .ore than o"ble the a.o"nt ,ith the Co"rt4. 2Section :: in ol / Section C in ne,5 Q: In <==E/ the Co..issioner of Internal Re$en"e referre to the 9epart.ent of ?"stice 291?5 Secretar!/ for preli.inar! in$esti-ation an filin- of an Infor.ation in co"rt/ the case a-ainst Petitioner for alle-e $iolation of the 'ax Co e. 'he CIR alle-e that Petitioner s"bstantiall! "n er eclare her inco.e for the !ear <==<. 'he 91? file an Infor.ation a-ainst Petitioner ,ho then file ,ith the C'A i$ision a &otion to Q"ash the Infor.ation file a-ainst her on the -ro"n s of 2a5 lacF of a"thorit! of the prosec"tin- attorne! to file the Infor.ation/ an 2b5 $iolation of PetitionerHs constit"tional ri-hts to "e process an eK"al protection of the la,s/ ,hen si.ilar char-es a-ainst Re-ina Encarnacion 6elasK"eB ,ere is.isse b! the 91? on the -ro"n that 6elasK"eBHs tax liabilit! ,as not !et f"ll! eter.ine ,hen the char-es ,ere file a-ainst her. 'he C'A enie the &otion to Q"ash an sche "le arrai-n.ent. Petitioner file ,ith the C'A en 1$n# a &otion for Extension of 'i.e to 7ile a Petition for Re$ie, to appeal the enial of her &otion to Q"ash. Petitioner s"bseK"entl! file the Petition for Re$ie, ,ith the C'A en 1$n#. Is the resol"tion of the C'A 7irst 9i$ision en!in- PetitionerHs &otion to Q"ash a proper s"b)ect of an appeal to the C'A en 1$n#? A: >", the denial of a <otion to Iuash is an interlocutory order which is not the proper subject of an appeal or a petition for certiorari. The &evised &ules of 'ourt provide that only final judgments or orders shall be subject to appeal to avoid multiplicity of suits. The test to determine whether an order or judgment is interlocutory or final is whether the order or judgment leaves something to be done in the trial court with respect to the merits of the case. %f it does, it is interlocutoryD if it does not, it is final. The remedy of the accused from the denial of her <otion to Iuash is to proceed with the trial of the case in court, and if final judgment is rendered against her, she could then appeal, and upon such appeal, present the )uestions which she sought to be decided by the appellate court in a petition for certiorari. Certiorari is an appropriate remedy to assail an interlocutory order only when: -a0 the tribunal issued such order without or in excess of jurisdiction or with grave abuse of discretionD and -b0 the assailed interlocutory order is patently erroneous, and the remedy of appeal would not afford ade)uate and expeditious relief. The 'ourt ruled that none of these circumstances were present in the case. The 'ourt also upheld the 'TA(s findings on the two points raised by the ;etitioner, vi*: -10 the filing of the %nformation was approved by the 'ommissioner -which is the only re)uirement as the law does not prescribe the form of approval0 as indicated in his letter to the !"G 6ecretary and - 0 the more appropriate recourse ;etitioner should have ta=en, given the dismissal of similar charges against @elas)ue*, was to appeal to the !"G 6ecretary the &esolution of the "ffice of the 6tate ;rosecutor recommending the filing of an %nformation against her. ;etitioner cannot claim denial of due process because she was given the opportunity to file her affidavits and other pleadings and submit evidence before the !"G during the preliminary investigation of her case and before the %nformation was filed against her. [J@DA $**E 7. )$*1O) vs. PEOP7E O3 1/E P/I7IPPI*E) and 8@RE$@ O3 I*1ER*$7 RE?E*@E ;$u#ust !G, !""D=] Q: Are the re.e ies of 2:5 filin- an appeal on the @IRHs inaction an 2<5 filin- an appeal on the CIRHs ecision excl"si$e or alternati$e re.e ies? A: the options are mutually exclusive and resort to one bars the other. %n the case of &'$' vs. '%& -A;&%: 8, 77H0, '%& failed to act on the disputed assessment within 1/7 days from date of submission of documents. Thus, petitioner opted to file a ;etition for &eview before the 'ourt of Tax Appeals $?T #%:9! T,9 6A<9 <"&9 T,A> E7 !AA6 A#T9& :A;69 "# 1/7+!AA ;9&%"!. After availing the first option, i.e., filing a ;etition for &eview which was however filed out of time, ;etitioner can not successfully resort to the second option, i.e., awaiting the final decision of the 'ommissioner and appealing the same to the 'ourt of Tax Appeals, on the pretext that there is yet no final decision on the disputed assessment because of the 'ommissioner(s inaction.


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Q: What is the c"rrent 6A' rate? A: 1 K Q: What is the nat"re of the 6A' an ,hat are the ele.ents of a 6A'#taxable sale? A: @AT is an indirect tax that may be shifted. The elements of a @AT+taxable sale are as follows: 10 6ale of goods and services, lease of property including 2deemed sale5 transaction such as -10 transfer of goods not in the course of business - 0 property dividends -E0 consignment and without the sale being made within J7 days 0 %n the course of trade or business -except if importation0 and including %>'%!9>TA: transactions -as opposed to isolated transactions except if service by nonresident0 E0 The transaction is not a @AT *ero+rated or a @AT exempt transaction Q: A: -a0 -b0 -c0 -d0 -e0 What are consi ere as 8-oo s or properties4 for 6A' p"rposes? All tangible and intangible objects which are capable of pecuniary estimation and shall include: &eal properties held primarily for sale to customers or held for lease in the ordinary course of trade or businessD The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademar=, trade brand or other li=e property or rightD The right or the privilege to use in the ;hilippines of any industrial, commercial or scientific e)uipmentD The right or the privilege to use motion picture films, films, tapes and discsD and &adio, television, satellite transmission and cable television time.

Q: Is a profit ele.ent reK"ire for 6A' to be i.pose ? A: >o. The case of '"<A69&'" held that even if the arrangement is just a reimbursement of cost, the payments are still subject to @AT Q: National 9e$elop.ent Corporation 2N9C5/ in p"rs"ance of the -o$ ate plan of pri$atiBation/ sol to Respon ent E of its ships. Is the sale of the ships s"b)ect to 6A'? A: >", the sale is exempt for being an isolated transaction. The re)uirement of the sale being 2in the course of trade or business5 of the seller is indispensable and the seller must be treated as having done so 2not just from time to time but all the time5. The 'ourt added that if the @AT is imposed on isolated transactions, there would be less chance of being able to recover the @AT on its sale since no input @AT may have been passed+on to the seller given the nature of the transaction as not 2doing business5. :i=ewise, the 'ourt clarified that the enumeration of what are 2deemed sale5 does not modify the re)uirement of the sale being in the 2ordinary course of trade or business5 and is thus irrelevant. [CIR vs. -$G)$A)$A 7I*E), I*C. ;July !D, !""G=] Q: What is 8technical i.portation4 as it relates to 6A'?

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A: %t is the subse)uent sale, transfer or exchange of imported goods by @AT+exempt persons to non+exempt persons or entities. %n these cases, the latter shall be considered the importers thereof and shall be liable for @AT due on such importation. Q: 9istin-"ish 6A' Bero#rate an 6A' transactions. A: They both do not yield any output @AT. ,owever, the input @AT treatment is different such that -i0 for a *ero+rated transaction, the attributable input @AT may be credited and4or refunded and -ii0 for an exempt transaction, the input @AT can not be credited4refunded. %n addition, a @AT *ero+rated taxpayer is re)uired to @AT register while an exempt taxpayer should not @AT+register. Q: What are the notable 6A' transactions? A: -10 6ale of agricultural food products in their original state -such as free*ing, drying, broiling, roasting, etc.0 - 0 6ervices provided by an &4A,I but note that services by &",I are not @AT exempt but may be *ero rated if the services are performed for a nonresident and paid for in foreign currency -E0 <edical services -by hospitals, etc.0 except that services rendered by professionals -individuals0 are already @AT+taxable -80 6ervices from an employer+employee relationship -10 9xport sales of non+@AT registered taxpayers ->ote: if they were @AT+registered these would be *ero+rated0 -J0 &eal property not held for sale to customers "& sales within the low+cost cap of below ;1.1< for a lot and ; .1< for a house and lot, and ;17T per month for leases -H0 $an=s and non+ban= financial intermediaries -/0 6ervices subject to percentage tax -.0 6ervices by T96!A+accredited entities 2:=5 Sales N1' en".erate in :=C 2A5 to 265 an N1' excee in- :.E& ann"all! 2Note: if the ser$icesLsales are co$ere "n er 2A5 to 265/ the a.o"nt is irrele$ant5 Re.e.ber that the en".eration "n er the 'ax Co e is excl"si$e. Q: What are notable 6A'#taxable transactions "n er the ne, la,? A: 6ale of electricity 4 6ale of non+food agricultural products 4 6ervices by doctors and lawyers Q: What are notable Bero#rate transactions alrea !? A: 6ale of goods & services to international shipping companies 4 6ale of power thru renewable sources -biomass, solar, wind, etc.0 4 Transport of passengers and cargo by air and sea from the ;hilippines to a foreign country Q: +o, is inp"t 6A' treate if the sa.e relate to p"rchase of assets s"b)ect to epreciation 2or or inar! assets5? A: %f the cost -excluding @AT0 is more than 1<, the input @AT is also spread over life of the asset if the life of the asset is less than 1 years, or over 1 years if the life of the asset is more than 1 years

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Q: What are the onl! bases c"rrentl! existin- to ref"n "n"tiliBe inp"t 6A'? A: "nly the input @AT relating to *ero+rated transactions, those erroneously paid and those which remain unutili*ed at the close of the business may be refunded. Q: &irant -enerates po,er ,hich it sells to the National Po,er Corporation 2NPC5 in ,hich connection it sec"re the ser$ices of &its"bishi Corporation of ?apan 2&its"bishi5. In the belief that its sale of po,er -eneration ser$ices to NPC is 6A' Bero#rate beca"se of NPCHs tax stat"s/ &irant file an Application for Effecti$e Iero#Ratin-. 'he @IR iss"e a r"lin- statin- that the s"ppl! of electricit! b! Respon ent to NPC shall be s"b)ect to =N 6A'. 1n April :;/ :CC>/ &irant pai &its"bishi the 6A' co.ponent bille b! the latter for ser$ices ren ere . &irant file its K"arterl! 6A' ret"rn for the secon K"arter of :CC>/ ,here it reflecte the inp"t 6A' pai to &its"bishi for pro-ress billin-s of the latter for the perio April :CCD to Septe.ber :CCM. S"bseK"entl!/ on 9ece.ber <=/ :CCC/ &irant file an a .inistrati$e clai. for ref"n of "n"tiliBe inp"t 6A' arisin- fro. 2a5 its p"rchase of capital -oo s fro. &its"bishi/ an 2b5 its o.estic p"rchases of -oo s an ser$ices attrib"table to its Bero#rate sales of po,er -eneration ser$ices to the NPC. +as &irantHs clai. for inp"t 6A' ref"n prescribe ? A: Aes, it has prescribed. 'laims for @AT refund must be filed within years from the time sales were made even if payment for the @AT was made some )uarters after that. The fact that there was a pending re)uest for *ero+rating was not recogni*ed as basis for late filing of return and payment of taxes -i.e., two years after sales were made0. Also, the 'ourt ruled that the provision on erroneous payment can not be applied as it is not the case here. [CO--I))IO*ER O3 I*1ER*$7 RE?E*@E vs. -IR$*1 P$G8I7$O CORPOR$1IO* ;)e(te&ber 1!, !""D=] Q: @ein- a PEIA exporter/ can a taxpa!er clai. its "n"tiliBe inp"t 6A'? A: A96, 6e=isui is entitled to tax refund. ;9OA entities can avail of two alternative or subse)uent incentives of %T, and 1K 3%9. %t is only in the latter where the @AT is not imposed on the ;9OA entity on its sales. $eing under %T,, it will be subject to @AT and should @AT+register. ,owever, -10 sales to the ;9OA entity, re-ar less of incenti$e a$aile , is *ero+rated on the part of the seller since ;9OA is considered 2foreign soil5 and thus sales to them are considered as 2export sales5 and - 0 if the ;9OA entity is an exporter, its input @AT are subject to refund not by virtue of its ;9OA status -and thus regardless of whether it(s at 1K 3%9 or %T,0 but due to the nature of its transactions -i.e., export sales0. [CIR vs. )E>I)@I J@)/I P/I7IPPI*E), I*C. ;July !1, !""G=] Note that ser$ices ren ere o"tsi e PEIA Bone are not accor e the sa.e 6A' Bero#rate treat.ent e$en if perfor.e for PEIA co.panies/ as the principle that the! are ren ere in 3forei-n soilH oes not appl!. 'he .ost co..on exa.ples ,o"l be the hotel acco..o ations 2o"tsi e PEIA Bone5 of PEIA e.plo!ees. Q: @en-"et treate its sale of -ol to @SP as Bero#rate on the basis of the then 'ax Co e ,hich -a$e Bero#rate stat"s to export sales. @en-"et -ot a r"lin- that sale of -ol to @SP are export sales. @IR then isallo,e ref"n of inp"t 6A' statin- that a s"bseK"ent r"lin- ,as iss"e re$oFin- the Bero#rate stat"s an that this co"l retroact since no pre)" ice ,o"l res"lt to @en-"et since 2:5 @en-"et can offset it a-ainst its o"tp"t or 2<5 it can clai. the sa.e as cost. Is the @IR correct? A: >o. -10 $enguet didn(t have enough output to offset the input @AT it accumulated -precisely because believing it was *ero+rated it did not pass+ on "?T;?T @AT0 - 0 Assuming that the right to refund overpaid income tax -which would be the result if additional cost is ta=en up0, it does not solve $enguet(s other disadvantageous situations. Also, only E K of the amount is recovered. Thus, retroactive application of ruling was denied [CIR vs. 8E*G@E1 CORPOR$1IO* ;July D, !""6=] Q: Are Phil+ealthHs ser$ices consi ere 8.e ical ser$ices4 to entitle it to 6A' exe.ption?

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A: >", but ;hil,ealth may exempt from @AT due only to a previously issued ruling. -10 The @AT+exempt transaction involved is 2medical, dental, hospital and veterinary services except those rendered by professionals5. 3iven that ;etitioner is not the entity providing medical services and only -i0 acts as a conduitD -ii0 arranges for the provision of health careD -iii0 contracts services of doctors, etc.D and -iv0 contracts and negotiates with hospitals, its services are not @AT+exempt. - 0 ,owever, the 'ourt ruled that the revocation of the 1.// ruling can not be applied retroactively since it will prejudice the taxpayer who has not committed any of the acts -i.e., bad faith, omission of facts, etc.0 to merit retroactivity of rulings. The fact that the term 2health maintenance organi*ation5 only too= on a technical definition in 1..1 upon the passage of the >ational ,ealth %nsurance Act supports ;hil,ealth(s good faith contention. [CIR vs. P/I7IPPI*E /E$71/ C$RE PRO?IDER), I*C. ;$(ril !,, !"" =] Q: A forei-n consorti"./ parent co.pan! of @"r.eister/ entere into an 1Q& contract ,ith NPC. 'he forei-n entit! then s"bcontracte the act"al 1Q& to the @"r.eister. NPC pai the forei-n consorti". a .ixt"re of c"rrencies ,hile the consorti"./ in t"rn/ pai @"r.eister forei-n c"rrenc! in,ar l! re.itte into the Philippines. @IR i not ,ant to -rant ref"n since the ser$ices are 8not estine for cons".ption abroa 4 2or the estination principle5. Are the receipts of @"r.eister entitle to 6A' Bero#rate stat"s? A: &espondent is entitled to the refund prayed for $?T ">:A for the period covered prior to the filing of '%&(s Answer in the 'TA. The substantial basis of the petition has no merit since the consortium, which was the recipient of services rendered by $urmeister, ,as ee.e oin- b"siness ,ithin the Philippines since its 11+year "&< with >;' can not be interpreted as an isolated transaction. %n addition, the 'ourt interpreted 6ections -10 -referring to Lprocessing, manufacturing, repac=ing(0 and - 0 -Lservices other than those in -10(0 of 6ec. 17 -b0 as both re)uiring -i0 payment in foreign currencyD -ii0 inward remittanceD -iii0 accounted for by the $6;D A>! -iv0 that the service recipient is doing business outside the ;hilippines. The 'ourt ruled that if this is not the case, taxpayers can circumvent just by stipulating payment in foreign currency. The refund was allowed since &espondent secured a ruling from the $%& allowing *ero+rating of its sales to foreign consortium. ,owever, the ruling is only valid until the time that '%& filed its Answer in the 'TA which is deemed revocation of the previously+issued ruling. The 'ourt said the revocation can not retroact since none of the instances in 6ection 8J -bad faith, omission of facts, etc.0 are present. [CIR vs. 8@R-EI)1ER $*D E$I* )C$*DI*$?I$* CO*1R$C1OR -I*D$*$O, I*C. ;January !!, !"" =] Q: +o, is the 6A' i.pose on real propert! transactions? A: @AT is imposed on real properties held for sale or lease as follows: a.0 %f cash or deferred payment -i.e., payment is more than 1K0, then the @AT on the whole amount is already imposed b.0 %f installment -less than 1K for year0, then the @AT is imposed on each payment c.0 There is no @AT imposed on 6ection 87 -'0- 0 exchanges -tax+free0 Q: Ass".in- a 6A'#taxable transaction/ is the a $ance pa!.ent in a real estate transaction s"b)ect to 6A'? A: "f the amounts typically covering an advance payment, only pre+paid rent is subject to @AT. "ther forms of advance payment such as option money, security deposit, etc., are not subject to @AT. Q: 0 Corporation ha the follo,in- sales "rin- the .onth: Sale to pri$ate entities s"b)ect to :<N Sale to pri$ate entities s"b)ect to =N Sale of -oo s P:==/===.== :==/===.== :==/===.==

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Sale to -o$Rt. s"b)ecte to EN final 6A' Withhol in- :==/===.== 'otal sales for the .onth P;==/===.== 'he follo,in- inp"t taxes ,ere passe on b! its 6A' s"ppliers: Inp"t tax on taxable -oo s 2:<N5 PE/===.== Inp"t tax on Bero#rate sales D/===.== Inp"t tax on sale of -oo s </===.== Inp"t tax on sale to -o$ern.ent ;/===.== Inp"t tax on epreciable capital -oo not attrib"table to an! specific acti$it! P<=/===.== 2.onthl! a.ortiBation for M= .onths5 +o, ."ch cre itable inp"t 6A' is a$ailable for each of the respecti$e t!pe of transactions entere into b! 0 Corp.? A: 10 0 E0 80 Q: A: #or sales subject to 1 K @AT +++ -i0 actual input @AT of ;1,777 and -ii0 ratable portion of ;1,777 #or sales subject to 7K @AT +++ -i0 actual input @AT of ;E,777 and -ii0 ratable portion of ;1,777 #or sale of exempt goods +++ no input @AT is creditable as the transactions are @AT exempt #or sales to government +++ no input @AT is creditable as the law imposes a 1K final withholding @AT obligation on the government agency+payor In the abo$e proble./ ho, ,as the ratable portion of cre itable inp"t 6A' 2for 6A'#taxable an Bero#rate sales5 co.p"te ?

-10 2or in(ut ?$1 creditable on ?$1Ita4able sales Taxable sales XXXXXXXXXXXX Total 6ales 177,777 XXXXXXX 877,777 - 0 2or in(ut ?$1 creditable on ?$1 0eroIrated sales

Amount of input tax not directly attributable

7,777 M 1,777

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Oero+rated sales XXXXXXXXXXXX x Total 6ales 177,777 XXXXXXX 877,777 x

Amount of input tax not directly attributable

7,777 M 1,777

Q: When oes the ,ithhol in- 6A' appl!? A: The withholding @AT applies in cases where -10 payments are made to a nonresident whose services are considered as @AT+taxable -ex. royalties0 in which case the 1 K @AT will be withheld by the payor or - 0 payments by government agencies, in which case the government entity will withhold 1K on its payments. These are all considered as final @AT payments. Q: Is a part! ealin- ,ith a -o$ern.ent entit! epri$e of its entitle.ent to the inp"t 6A' it acc"."late consi erin- the 6A' ,ithhol in- tax .echanis.? A: The HK difference -1 K+1K0 is the presumed input @AT cost of the entity dealing with the government agency. %f the actual input @AT is below HK, then the taxpayer will reali*e additional income. ,owever if the if the actual input @AT is above HK, then the difference between the actual input @AT and HK is considered as additional cost. Q: What are the effects of the fail"re to re-ister for 6A' if s"ch re-istration is reK"ire ? A: The taxpayer will be -10 re)uired to pay @AT even if it did not registerD - 0 prohibited from availing of input @AT on its purchases and -E0 will be imposed administrative penalties of 17K surcharge. Q: What are the effects of iss"in- 6A' receipts is the taxpa!er is a 6A' seller? A: The taxpayer will be -10 subject to other business taxes -ex. percentage0 plus the @ATD - 0 prohibited from availing of input @AT on its purchases and -E0 will be imposed administrative penalties of 17K surcharge. >ote that the buyer can avail of the input @AT in the transaction.


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Q: What is the basis of the Local Go$ern.entHs 'A0ING P1WER? 2SEC'I1N :<C5 A: %t is only granted by the 'onstitution -6ec. 1 Art. F, 'onstitution0 and is not inherent in the :ocal 3overnment Q: Who exercises the po,er of taxation for LG%s? A: %t is exercised by the 6anggunian through the passage of local ordinances Q: What are the li.itations on the taxin- po,er of LG%s? A: :3?s can not impose: 10 0 E0 80 10 J0 H0 /0 .0 170 110 income tax -except on ban=s and financial entities0 !6T 9state and donor(s taxes 'ustoms duties Taxes on goods passing through the :3? Taxes on $"%+registered enterprises 9xcise taxes on articles under the Tax 'ode ;ercentage tax and @AT Taxes on gross receipts of transportation contractors <otor vehicle taxes and fees Taxes and fees on the >ational government, its agencies and instrumentalities

Q: Is a ."nicipal or inance i.posin- fees on -oo s 2corn5 that pass thro"-h a ."nicipalit!Hs territor! $ali ? A: >o, it is void. Bhile the :3? can tax the vehicles using the roads it can not tax the goods even in the guise of 2police surveillance5 fees. PP$7-$ DE?E7OP-E*1 CORP. ?). C$-8O$*G$ DE7 )@R ;OC1O8ER 1G, !""<=] Q: Petron .aintains a epot or b"lF plant at the Na$otas 7ishport Co.plex ,here it en-a-es in the sellin- of iesel f"els to $essels "se in co..ercial fishin-. Na$otas Cit! thereafter le$ie b"siness taxes on its sale of petrole". pro "cts. Can LG%s le$! local taxes on sale of petrole".? A: >o, :3?s can not impose any type of local tax on petroleum products. The :3' provision provides two possible bases for exemption when it states the :3's can not impose +++ -i0 2excise taxes on articles enumerated under the Tax 'ode5 and -ii0 2taxes, fees or charges on petroleum products5. -10 The reference to excise taxes in the :3' is not for 2the performance, carrying on or exercise of an activity5. &ather it refers to those subjected to specific or ad valorem taxes under the Tax 'ode.


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- 0 The nd basis for exemption refers not only to direct or excise taxes to be levied by :3?s on petroleum products but on all types of taxes on petroleum products including business taxes. The 'ourt said that this could not refer again to the non+imposition of excise taxes on petroleum products because otherwise it would be a redundancy. [PE1RO* CORPOR$1IO* vs. 1I$*GCO ;$(ril 1G, !""D=] Q: @"lacan passe an or inance i.posin- tax on .inerals extracte fro. p"blic lan s @%' ,ent on to collect tax on .inerals extracte fro. pri$ate lan s. Since the LGC onl! pro$i es for tax on p"blic lan s/ is the action of @"lacan $ali ? A: 3enerally, :3' can impose even if not in :3' since 6ec. 1/J is sweeping. ,owever, $ulacan can(t levy on minerals from private lands because it is an excise tax on an article already covered by the Tax 'ode. This applies the PREE&P'I1N 1R E0CL%SI1NAR( R%LE wherein national government elects to tax a particular area, impliedly withholding from :3? the delegated power to tax the same field [PRO?I*CE O3 8@7$C$* v. C.$.] Q: Who is co$ere b! the Local @"siness 'ax? A: -10 manufacturers, assemblers, processors - 0 wholesalers, dealers, distributors -E0 exporters, manufacturers of essential commodities -80 retailers -if both wholesale and retail, then pay both taxes0 -10 contractors -J0 ban=s and other #inancial %nstitutions -income subject to :$T are enumerated in the section0 -H0 peddlers -/0 other business not specified +++ T,"69 A:&9A!A 6?$G9'T T" TAF ?>!9& -10 T" -H0 'A> >" :">39& $9 6?$G9'T T" TAF ?>!9& -/0 otherwise it will be deemed as double taxation Q: Can an LG% tax a con o.ini". corporation? A: %n AA<A>9 @6. $A :9;A>T" '">!". '"&;. -"'T"$9& 1, 7710, it was ruled that condominium corporations are not 2businesses5 as the same is defined under the :3' w4c is a 2commercial activity regularly engaged with a view to profit5. 9ven if a condominium corporation can levy fees, these are used merely to finance expenses of the condominium and nothing more. Q: 1n ,hat is the local b"siness tax i.pose ? A: 3ross receipts Q: Ericsson ,as assesse for eficienc! L@' b"t co"ntere that the assess.ent ,as erroneo"s for ha$in- been base on its -ross re$en"es 2,hich/ on top of -ross receipts/ incl" es "ncollecte earnin-s5 rather than )"st its -ross receipts. Can LGCs $ali l! i.pose the L@' on the -ross re$en"es rather than the -ross receipts? A: >", the :$T should be assessed based only on gross receipts. The :3' clearly provides that the :$T is based on gross receipts which include money or its e)uivalent actually or constructively received, the latter being defined to include deposit in ban=s, issuance of notice to offset any debt4obligation, etc. %n contrast, gross revenue includes receivables which are 2payments yet to be received5 but are just 2expected to be received5. 6ince 9ricsson employs the accrual method of accounting, it does boo= its receivables as part of gross revenue which exposes it to potential double taxation on these amounts since a taxpayers( gross revenue will definitely include its gross receipts to be reported in a

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subse)uent year -i.e., when it is already paid actually or constructively0 and for which :$T will be paid again. [ERIC))O* 1E7ECO--@*IC$1IO*), I*C. vs. CI1A O3 P$)IG ;*ove&ber !!, !"" =] Q: Gi$e the r"le on SI'%S as state in SECTION :E= of the LGC A: The rule applies if a company has several offices -head office, branch, sales office, warehouse0 and is summari*ed as follows: -A0 6ec. 117 -a0 EF branchFsales o22iceJ Aes >o -$0 6ec. 117 -b0 Plantation 5 2actory In sa&e location J Aes >o allocation to (rinci(al E7K E7K allocation to 2actory, etc. H7K factory C J7K ;lantation C 87K -if recorded at branch4sales office principal allocation none none

or more factories, etc. M H7K is prorated

Re.e.ber that Section :E= 2b5 Sor 2@5 abo$eT is onl! resorte to if there is no branch or sales office Q: +o, are the sales of ro"te tr"cFs an $ans taxe ? A: %f the sale is made in a place with a branch office, the sale is reported in the :3? where the branch office is located. ,owever, if the sale is made in a place without a branch office, the sale is reported in the :3? where the goods are withdrawn. Q: A: Q: A: When oes the tax accr"e? Ganuary 1 except new taxes which will accrue on 1 st day of )uarter next following effectivity of ordinance What penalties are i.posable on fail"re to pa! local b"siness taxes? The penalty of 1K and K interest per month not to exceed EJ months -or a maximum of H K0 may be imposed.

Q: Are the local b"siness tax pa!.ents pai for pri$ile-e of carr!in- on b"siness in the !ear pai or for ha$in- en-a-e in b"siness the pre$io"s !ear? A: %t is paid for privilege of carrying on business in the year paid. #or example, a corporation whose gross sales was 17< in 77/ and 7< in 77., the :$T payable in Ganuary 77. is based on ;17< -gross receipts for 77/0 but the same is payment for the right to do business in 77.. Thus, on the year of retirement, the company will only be liable if the actual :$T on the basis of current year sales is more than :$T paid based on

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previous year(s sales. To continue the example, if the sales of the company are also ;17< as of the date of retirement in 717, this means that the payment made in Ganuary 717 based on the 77. gross receipts is sufficient to cover the :$T due upon retirement. [-obil Phils. Inc. vs. 1reasurer o2 -a.ati ;July 1,, !""6=] Q: What are the re.e ies a$ailable to the local -o$ern.ent? A: 'ivil remedies are distraint and levy A>! collection and the same may be proceeded simultaneously. 'ertain personal properties, however, are exempt from distraint or levy -sec. 1/10 C ex. one horse, tools, clothing, libraries, etc. Q: Gi$e the process on ho, an appeal in$ol$in- K"estions on or inance is .a e? A: Iuestions on ordinance are appealed to the 6ecretary of Gustice within E7 days from effectivity which must be decided within J7 days $?T an appeal does not suspend effectivity of the ordinance. Bithin E7 days from the 6ec. of Gustice(s decision or after J7 day inaction, an appeal may be filed with the &T'. Q: In relation to the r"le on appeals on or inance/ ,hat is the octrine in &RI)ON v. )IM? A: The 6ecretary can declare an ordinance void for not having followed re)uirements -procedural and substantive0 but he cannot replace it with his own law or he cannot say that it is unwise. Q: Can an or inance ,hich has been eclare $oi for fail"re to p"blish for D ,eeFs be 8re.e ie 4 b! passin- another or inance ,hich p"rports to a.en the or inance that has been eclare $oi ? A: >o, the new ordinance is still void since it can not cure something which had never existed in the first place as the same was void ab initio. [COC$ICO7$ ?). -$*I7$ ;J@*E ! , !""G=] Q: Gi$e the reK"ire.ents for the San--"nian 2not the .a!or5 to -rant exe.ptions fro. local b"siness tax? A: -10 natural calamities, civil disturbance, failure of crops - 0 through an ordinance -E0 shall similarly apply to all businesses similarly situated -80 shall only ta=e effect for the next calendar year and not to exceed 1 months Q: Is the M#!ear exe.ption fro. L@' for @1I#re-istere enterprises recFone fro. ate of @1I re-istration or fro. start of co..ercial operations? A: As the law is clear on the matter, the exemption starts from registration with the $"% even if the actual operations started some time after due to force majeure [8$1$*G$) POEER CORP. ?). *PC ;$PRI7 !D, !"",=] Q: A@S#C@N ,as -rante a franchise ,hich pro$i es that it 8shall pa! a DN franchise tax an the sai percenta-e tax shall be 8in lie" of all taxes on this franchise or earnin-s thereof4. It th"s file a co.plaint a-ainst the i.position of local franchise tax. Petitioner ar-"e that the 8in lie" of all taxes4 pro$ision in Respon entHs franchise co"l not ha$e been inten e to pre$ail o$er the constit"tional .an ate ,hich ens"res the $iabilit! an self#s"fficienc! of local -o$ern.ent "nits. 9oes the 8in lie" of all taxes4 pro$ision in A@S# C@NHs franchise it fro. pa!.ent of the local franchise tax?

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A: >o, the right to exemption from local franchise tax must be clearly established beyond reasonable doubt and cannot be made out of inference or implications. The uncertainty over whether the 2in lieu of all taxes5 provision pertains to exemption from local or national taxes, or both, should be construed against &espondent. &espondent has the burden to prove that it is in fact covered by the exemption claimed, but it failed to discharge this burden. #urthermore, the 2in lieu of all taxes5 clause in &espondent(s franchise has become ineffective with the abolition of the franchise tax on broadcasting companies with yearly gross receipts exceeding ;17 million as they are now subject to the @AT. [K@ECO* CI1A vs. $8)IC8* 8RO$DC$)1I*G CORPOR$1IO* ;October G, !""D=] Q: Petitioner ,as -rante a le-islati$e franchise "n er RA No. J<C; an on that basis file a case statin- that it ,as not liable for the franchise tax of JEN of :N of -ross ann"al receipts since its franchise states that it is onl! s"b)ect to franchise tax "n er the 'ax Co e 2no,/ the 6A'5/ inco.e tax an real propert! tax. 'he sa.e franchise referre to pro$i es that Petitioner 8shall be liable to pa! the sa.e taxes on their real estate b"il in-s an personal propert!/ excl"si$e of this franchise x x x 8 Is Petitioner liable to pa! the franchise tax to 9a$ao Cit!? A: Aes, &.A. H .8 does not expressly provide what taxes ;etitioner is exempt from and whether its exemption covers national or local taxes, or both. The uncertainty of the 2in lieu of all taxes5 clause must be construed strictly against ;etitioner as it is in the form of a tax exemption. %n which case, 6mart(s exemption is interpreted to refer only to national and not local taxes. The 'ourt noted that the 2in lieu of all taxes5 provision has become 2unctus o22icio with the abolition of franchise tax on telecommunication companies and its replacement with the @AT. %t also discarded 6mart(s argument that what it enjoys is tax exclusion -as it pays other taxes0 and not tax exemption and stated that either situation re)uires a strict interpretation against the taxpayer claiming the same. The findings of the $ureau of :ocal 3overnment #inance -$:3#0 which ;etitioner relies upon to support its exemption from local franchise taxes are not conclusive on the courts. The $:3# is an administrative agency whose findings on )uestions of fact are given weight and deference in the courts. The )uestion raised in this case is a legal issue, which is not within the jurisdiction of the $:3# to decide. #inally, ;etitioner(s interpretation of the ;ublic Telecommunications ;olicy Act provision 2that any advantage, favor, privilege, exemption, or immunity granted to 3lobe Telecommunications should li=ewise apply to ;etitioner5 is misplaced as the 'ourt ruled that these advantages, etc. necessarily refer to exemption from certain regulations and re)uirements since to sustain ;etitioner(s theory would leave the 3overnment with the burden of having to =eep trac= of all granted telecommunications franchises, lest some companies be treated une)ually. [)-$R1 CO--@*IC$1IO*), I*C. vs. 1/E CI1A O3 D$?$O ;)e(te&ber 1G, !""D=] ;*ote: 1he sa&e decision 'as reached in the 3ebruary ! , !""+ case o2 Iloilo City vs. )&art Co&&unications.= Q: What are the r"les on assess.ents? A: a0 Assessment must be made within 1 years fro. the ate the! beco.e "e b0 %f there is fraud or intent to evade payment of tax, assessment may be made within 17 years from discovery of fraud or intent to evade Q: +o, oes the taxpa!er contest a local b"siness tax assess.ent? A: After the treasurer issues assessment, the taxpayer has J7 days to protest ->" ;&"T96T ?>!9& ;AA<9>T &9I?%&9!0. The taxpayer has J7 days to decide. An appeal to the &T' is then available upon denial or J7+day inaction by the treasurer. &T'(s decision is then appealable to the 'TA. Q: What is the r"le on collection? A: 'ollection must be within 1 yrs. from assessment.

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Q: &a! the r"nnin- of prescripti$e perio be s"spen e ? A: Aes, in the following instances: 1. Treasurer is legally prevented from assessing4collecting . Taxpayer re)uests for reinvestigation and executes waiver E. Taxpayer is out of the country or can not be located Q: What is the r"le on ref"n s? A: <ust file written claim within yrs. from the date of payment of tax "& fro. the ate ,hen the taxpa!er is entitle to ref"n . Thus, the S%PER6ENING CA%SE doctrine applies.


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Q: 9o all t!pe of LG%s ha$e the po,er to i.pose RP' ? A: >o. <unicipalities outside <etro <anila and baranggays can not impose &;T Q: What t!pes of .achiner! are s"b)ect to RP'? A: :ocal #inance 'ircular 1+ 77 defines that machinery is subject to &;T 2if it is an essential and principal element of an industry without which the business could not function5. Q: What t!pes of real propert! are s"b)ect to i le lan tax? A: The 1K tax on idle land is imposed on agricultural lands which are at least one -10 hectare or bigger or, - 0 if non+agricultural and at least 1,777s)m. +++ in both cases where at least 17K of the land is unutili*ed Q: What real properties are fro. RP' A: Those enumerated under 6ection E8 of the :3'. -a0 realty owned by government or political subdivision -excludes 3"'' except if E. below0 except if beneficial use is granted to a taxable person even if w4o consideration -b0 charitable, church, etc. and all lands and buildings actually directly exclusively used for religious, charitable or educational purposes -c0 all machineries actually directly exclusively used by local water districts and 3"'' engaged in supply of water and electricity -T,?6, ">:A <A',%>9&%96 A&9 9F9<;T, %# T,9A A&9 :A>!6 "& $?%:!%>36 C %T B%:: $9 !99<9! A6 26;9'%A: ':A6650 C it has to be a 3"'' such as >;', etc. -d0 realty owned by registered cooperatives -e0 machinery for pollution control and environment protection The local sanggunian can not add to the list of exempt properties but may allow condonation in cases of general failure of crops or decrease in agricultural products. Q: 7irst Pri$ate Po,er Corporation 27PPC5 entere into a @"il #1perate#'ransfer 2@1'5 A-ree.ent ,ith Petitioner National Po,er Corporation 2NPC5 for the constr"ction of a po,er plant. %n er the a-ree.ent/ @a"an- Pri$ate Po,er Corporation 2@PPC5 ,as create to o,n/ .ana-e an operate the po,er plant an ass".e an perfor. 7PPCHs obli-ations "n er the contract. @PPC ,ill con$ert NPCHs s"pplie iesel f"el into electricit! for a fee an eli$er the po,er to NPC. After an a-ree perio of ti.e/ the po,er station shall be transferre b! @PCC to NPC ,itho"t pa!.ent of an! co.pensation. 'he @1' A-ree.ent also pro$i es that NPC shall be responsible for the pa!.ent of all real propert! taxes 2RP'5 in respect of the po,er plant/ b"il in-s an$e.ents thereon. After @PPC ,as assesse for RP'/ NPC file a petition ,ith the Local @oar of Assess.ent Appeals 2L@AA5 to eclare the .achineries as fro. RP' "n er Section <D;2c5 of the Local Go$ern.ent Co e 2LGC5/ ,hich pro$i es for the RP' exe.ption of/ a.on- others/ 8all .achineries an eK"ip.ent that are act"all!/ irectl! an excl"si$el! "se b! local ,ater istricts an -o$ern.ent#o,ne or O controlle corporations en-a-e in the s"ppl! an istrib"tion of ,ater an Lor -eneration an trans.ission of electric po,er.4

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'he L@AA enie the Petition for Exe.ption an r"le that the exe.ption pro$i e b! the LGC applies onl! ,hen a -o$ern.ent#o,ne or Ocontrolle corporation 2G1CC5 s"ch as Petitioner o,ns an Lor act"all! "ses the .achineries an eK"ip.ent for the -eneration an trans.ission of electric po,er. NPC appeale to the Central @oar of Assess.ent Appeals 2C@AA5. 'he C@AA affir.e the ecision of the L@AA an r"le f"rther that the lo,er :=N assess.ent le$el for the $al"ation of the s"b)ect properties a$ailable to G1CCs for RP' p"rposes/ cannot be a$aile of b! @PPC since it is not a G1CC. Is Petitioner NPC fro. RP' on the .achineries an eK"ip.ent? A: >o, because it does not actually, directly and exclusively use the machineries and e)uipment in the generation and transmission of electric power. >;'(s basis for its claimed exemption, 6ection E8-c0 of the :3', clearly provides that the &;T exemption shall apply to: -a0 all machineries and e)uipmentD -b0 that are actually, directly, and exclusively used byD -c0 local water districts and 3"''s engaged in the supply and distribution of water and4or generation and transmission of electric power. The machineries and e)uipment are owned by $;;', subject only to the transfer of these properties to >;' after the lapse of the 11+year period agreed upon. <oreover, $;;'(s use of the machineries and e)uipment are actual, direct and immediate, while >;'(s is contingent and, at this stage of the $"T Agreement, not sufficient to support its claim for tax exemption. %n the same manner, the application of the lower 17K assessment level for the properties cannot be used by $;;', since it is not a 3"'' engaged in the generation and transmission of electric power, but a private entity. [*$1IO*$7 POEER CORPOR$1IO* vs. CE*1R$7 8O$RD O3 $))E))-E*1 $PPE$7), E1.$7. ;January <", !""+=] Q: Petitioner ,as -rante a <E#!ear franchise to install/ operate an .aintain teleco.."nications s!ste.s thro"-ho"t the Philippines "n er a la, ,hich states that 8'he -rantee shall be liable to pa! the sa.e taxes on its real estate/ b"il in-s/ an personal propert! excl"si$e of this franchise x x x.4 As the! ,ere not bein- iss"e a &a!orHs Petitioner pai the RP' "n er protest. Petitioner ar-"e that the phrase 8excl"si$e of this franchise4 .eans that onl! the real properties not "se in f"rtherance of its franchise are s"b)ect to RP' ,hile those real properties ,hich are "se in its teleco.."nications b"siness are fro. RP'. Are PetitionerHs real properties "se in its teleco.."nications b"siness fro. RP'? A: >o, ;etitioner(s real properties, whether or not used in its telecommunications business, are subject to &;T. 6ection 1 of &A >o. HJH/ categorically states that ;etitioner is liable to pay the same taxes on its real estate, buildings, and personal property 2exclusive of this franchise5 as other persons or corporations. The phrase 2exclusive of this franchise5 )ualifies the term 2personal property.5 This means that ;etitioner(s legislative franchise, which is an intangible personal property, shall not be subject to taxes. This is to put franchise grantees in parity with non+ franchisees as the latter obviously do not have franchises which may potentially be subject to realty tax. There is nothing in the first sentence of 6ection 1 which expressly or even impliedly exempts ;etitioner from &;T. #inally, ;etitioner(s reliance on the $:3#(s opinion stating that real properties owned by telecommunications companies are exempt from &;T is without basis as the $:3# has no authority to rule on claims for exemption from &;T. [DIGI1$7 1E7ECO--@*IC$1IO*) P/I7IPPI*E), I*C. vs. CI1A GO?ER*-E*1 O3 8$1$*G$) ;Dece&ber 11, !""D=] Q: 7ELS entere into a lease contract ,ith NAP1C1R o$er t,o en-ine po,er bar-es at @ala!an @a!/ @atan-as. 'he lease contract stip"late that NAP1C1R shall be responsible for all taxes 2incl" in- RP' on the bar-es5/ fees an char-es that 7ELS .a! be liable to except 2i5 inco.e tax of 7ELS an its e.plo!eesG an 2ii5 constr"ction an en$iron.ental fees. 7ELS ,as assesse for RP' an the L@AA "phel the assess.ent b! statin- that ,hile the bar-es 8.a! be classifie as .o$ableLpersonal propert!/ the! are consi ere as real propert! for tax p"rposes beca"se the! are installe at a specific location ,ith a character of per.anenc!4. Are the po,er bar-es consi ere as realt! for RP' p"rposes? A: Aes, the barges are real property subject to &;T. -10 The remedy from the decision of the ;rovincial Assessor is an appeal to the :$AA and not a <otion for &econsideration. #ailure to file the appeal to the :$AA within the J7+day period provided by law ma=es the assessment final and unappealable.

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- 0 #urther basis to consider power barges as real property is Article 811-.0 of the 'ivil 'ode which provides that 2doc=s and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, la=e or coast5. As such they are categori*ed as immovable property by destination. -E0 >either can #9:6 claim exemption under 6ection E8 of the :3' given that the re)uirement is that to be exempt the machineries and e)uipment must be actually, directly and exclusively used by 3"''s engaged in the generation of power. 6ince the agreement between #9:6 and >A;"'"& is that #9:6 will own and operate the barges and not >A;"'"&, the condition is not met. The mere underta=ing to pay real estate taxes does not infect the transaction with >A;"'"&(s tax exemption since, at best, it will be considered only as an arrangement between the parties not binding E rd parties. [3E7) E*ERGA, I*C. vs. PRO?I*CE O3 8$1$*G$) ;3ebruary 1G, !"" =] Q: Are eK"ip.entL.achineries in ce.ent or ,oo en platfor. an ,hich 8,ere ne$er "se as in "strial eK"ip.ents to pro "ce finishe pro "cts for sale nor to repair .achineries offere to the -eneral p"blic for b"siness or co..ercial p"rposes4 consi ere as realt! s"b)ect to RP'? A: >o. #or e)uipment to be real property, they must be 9669>T%A: A>! ;&%>'%;A: 9:9<9>T6 -ex. machineries for production of soft drin=s in breweries0. %n addition, the machinery should be essential to carry on business in a building or piece of land and this was not the case since it was proven that the e)uipment was not essential because it is used only for repairs which could actually be done elsewhere. [-I*D$*$O 8@) CO-P$*A v. CI1A $))E))OR O3 C$G$A$* DE ORO] Q: Are tanFs/ p".ps/ etc. installe b! Caltex in -as stations on lease lan consi ere as realt! s"b)ect to RP' e$en if the lessor oes not beco.e the o,ner of the sai assets? A: Aes, because they are essential to the business of the taxpayer. The issue of whether the property was installed by owner -!avao 6awmill case0 does >"T apply since there the issue was on execution of judgment against the lessee. [RP1 I C$71E9 P/I7). vs. C8$$ o2 P$)$A] Q: +o, is a RP' tax assess.ent isp"te ? A: 1. "wner pays tax . Annotation of 2paid under protest5 in receipt E. ;rotest filed with the treasurer of the :3? within E7 days from payment 8. Treasurer to decide within J7 days 1. Treasurer decision or inaction within J7 days appealable to :$AA within J7 days J. :$AA to decided within 1 7 days H. :$AA decision appealable to '$AA within E7 days /. '$AA appealable to 'TA >"B ?>!9& &A . / -9@9> %# T,9 :AB 6TAT96 T,AT %T %6 #%>A: A>! 9F9'?T"&A0 Q: What are the r"les on assess.ents? A: a0 Assessment must be made within 1 years fro. the ate the! beco.e "e b0 %f there is fraud or intent to evade payment of tax, assessment may be made within 17 years from discovery of fraud or intent to evade Q: What is the r"le on collection?

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A: 'ollection must be within 1 yrs. from assessment. Q: &a! the r"nnin- of prescripti$e perio be s"spen e ? A: Aes, in the following instances: 1. Treasurer is legally prevented from assessing4collecting . Taxpayer re)uests for reinvestigation and executes waiver E. Taxpayer is out of the country or can not be located Q: What is the r"le on ref"n s? A: <ust file written claim within yrs. from the date of payment of tax "& fro. the ate ,hen the taxpa!er is entitle to re "ction or a )"st.ent. Thus, the S%PER6ENING CA%SE doctrine also applies. Q: What ,ere the proce "ral iss"es a resse in the case of LopeB $s. Cit! of &anila 27ebr"ar! :C/ :CCC5 A: 10 &emedies on legality of tax ordinance +++ 1. 6ec. 1/H C constitutionality or legality of ordinance C E7 days from effecitvity C !"G . 6ec. J C assessment of realty C J7 days from notice of assessment C :$AA 0 6teps for revision of &eal ;roperty assessments +++ 1. preparation of schedule of #<@s . enactment of ordinance which -a0 levies &;T and 69# -b0 fix assessment levels and -c0 adopts schedules of #<@s in 1. above E0 ;rocedural steps in computing &;T +++ 1. ascertain assessment level . multiply <ar=et @alue with assessment level M assessed value E. multiply tax rate with assessed value Q: Can the petitioner file a case irect to the R'C if it clai.s that it ,as K"estionin- the a"thorit! of the treas"rer to assess an not onl! the a.o"nt of assess.ent? A: >o, it was found that petitioner raised issues on prescription, double taxation, tax exemption. %n which case, the correctness of the tax assessment has to be dealt with and the treasurer has initial jurisdiction and his decision is appealable to the :$AA. [Olivares vs. Joey -arLue0 ;)e(te&ber !!, !"",=]


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1. . E. 8.

%mportation begins when goods enter &; jurisdiction with intention to unlade and terminates upon payment of taxes or legal permit to withdraw has been granted. All articles subject to duty even if previously exported from &; except if specifically exempted by law. ;&",%$%T9! %<;"&TAT%">6 are those vs. policy, morals, law, etc. '">!%T%">A::A+#&99 %<;"&TAT%">6 %f thereafter sold for purposes other than original intention M subject to forfeiture and importation shall constitute a fraudulent practice 9xamples o Articles for repair, re+conditioning to be re+exported w4in J mos. -re)uires bond0 o ;ersonal effects for bali=bayans excluding cars, and must >"T be commercial )uantity and >"T exceed ; 777 C can be brought in .7 days after arrival o Articles to be donated to relief organi*ations -certified by !6B!, !9'60 o 6amples not for commercial sales, including medicines -but should not be available in &;0 o 9conomical, technical, vocational, scientific, philosophical, historical, cultural boo=s4publications and bibles %> !9T9&<%>%>3 !?T%96 T" $9 ;A%!, TB" 9:9<9>T6 &9I?%&9! C -10 type of good to determine duty rate and - 0 dutiable value !?T%A$:9 @A:?9 J methods +++ Transaction @alue 4 Transaction @alue of %dentical 3oods 4 Transaction @alue of 6imilar 3oods 4 !eductive @alue 4 'omputed @alue -methods 8 and 1 may be reversed0 4 #allbac= @alue ">9 C Transaction @alue o ;rice actually ;A%!4;AAA$:9 when exported to &; adjusted by adding +++ 'ommissions 4 cost of containers 4 pac=ing cost 4 cost of tools, engineering, artwor= if supplied free of charge 4 royalties @alue of subse)uent resale accruing to the seller 'ost of transport & loading4unloading charges from port of exportation to port of entry in &; -costs within &; already excluded0 %nsurance o <ethod one is not to be used %# $uyer imposes restrictions on sale or use of goods except if imposed by law, geographical limits, not affect value of goods

1. H.

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/. 6pecial duties

6ale is subject to some condition4consideration which can not be valued ;art of subse)uent resale accrues to seller and amount indeterminable $?A9& A>! 69::9& &9:AT9! C business partnersD holds 1K e)uityD common controlD relatives up to 8 th degree

Anti+dumping o !uty imposed on foreign article imported into the ;hilippines at a price less than the fair value, the importation of which might injure the establishment of an industry producing li=e goods in the ;hilippines -ex. T%:96, '9<9>T0 o Action initiated by filing complaint alleging a0 dumping, b0 injury, and c0 causal lin= between the dumped imports and the alleged injury 'ountervailing o !uty imposed on articles, upon the production, manufacture or export of which any bounty or subsidy is directly or indirectly granted in the country of origin, and the exportation into the ;hilippines will li=ely injure an industry in the ;hilippines. $ounty is the cash award paid to an exporter while subsidy refers to fiscal incentives, not in the form of cash award, to encourage manufacturers or exporters. The duty is e)ual to the ascertained or estimated amount of the bounty or subsidy. o There is deemed to be subsidy if there(s grant, foregone revenue, provision of goods4services

<ar=ing o o !uty imposed on imported articles or containers which have not been properly mar=ed in any official language of the ;hilippines as to indicate the name of the country or origin of the article. The purpose is to prevent the deception of consumers. 'ertain exceptions C if goods cant be mar=et without injury, crude substance, importer necessarily =nows origin !iscriminatory !uty imposed upon articles of a foreign country which discriminates against ;hilippine commerce in such a manner as to place it at a disadvantage compared with the commerce of another foreign country. -BT"0 Amount not to exceed 177K ad valorem

17. 3"@9&><9>T &9<9!%96 C enforcement of tax lien on unpaid duties A>! sei*ure & forfeiture 6ei*ure rules %f vessel becomes subject to sei*ure, the pursuit may be continued even beyond &; seas 9octrine of! )"ris iction C 'o' has exclusive jurisdiction on sei*ure cases to the exclusion of regular courts

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9ven vehicles used for transporting sei*able articles may be sei*ed except if owner has no =nowledge of its use 11. ;9>A:T%96 -a0 >egligence Y Bhen a deficiency results from an offenders failureto exercise reasonable care and competence to ensure that a statement made is correct, it shall be determined to be negligent M fine e)uivalent to S to times the revenue loss. -b0 3ross >egligence Y Bhen a deficiency results from an act or acts of omission or commission done with actual =nowledge or wanton disregard for the relevant facts it shall be determined to be grossly negligent M fine of S to 1 times revenue loss. -c0 #raud Y Bhen the material false statement or act in connection with the transaction was committed or omitted =nowingly, voluntarily and intentionally, as established by clear and convincing evidence, it shall be determined to be fraudulent M fine of 1 to / times revenue loss and imprisonment of to / years. 1 . TAF;AA9& &9<9!%96 C collector -within 11 days0 C 'ommissioner of 'ustoms -within 11 days0 C 6ecretary of #inance -if adverse to government0 C 'TA C 6' 'ommissioner of 'ustoms and 6ecretary of #inance have E7 day to rule on appeal to them ;ayment under protest is re)uired


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